Agency Relationships

Question 1

Agency is…

Answer 1

Agency is the fiduciary relationship that exists between an agent and principal where
the agent acts on the principal’s behalf and is subject to the principal’s control.

Question 2

How is an agency relationship formed?

Answer 2

An agency relationship is created when:

1. The parties voluntarily consent (express or implied) to enter into an agency relationship;

AND

2. The agent is subject to the principal’s control (e.g., supervision is sufficient – the amount of control may be limited).

Question 3

How may A be terminated?

Answer 3

The agency relationship may be terminated by the parties or by operation of law.

Question 4

The agency relationship may be terminated by the parties if:

Answer 4

1. The agent or principal manifests to the other the desire to cease the agency relationship (termination is effective when the other party receives notice of the termination);
2. The express terms of the agency expire (e.g., principal expressly hires agent for 6 months);

OR

3. The purpose of the agency relationship is fulfilled.

Question 5

How does A termination by operation of law work?

Answer 5

The agency relationship may be terminated by operation of law if:

1. The agent or principal dies (some jurisdictions require that the party receive notice of the other’s death);
2. The agent or principal loses capacity (some jurisdictions require that the party receive notice of the other’s incapacity);

OR

3. The agent materially breaches a fiduciary duty owed to the principal.