1. Contract of Agency

2. PARTIES
 Principal – The party who employs another person to act on his or her behalf.
 Agent – The party who agrees to act on behalf of another.
.

3. THE PRINCIPAL-AGENT RELATIONSHIP
Principal
Agent Third Party
Agency
Contract
Contract with third party on
behalf of principal
Principal’s obligation
to perform the
contract

4. CREATION
 Any person who has the capacity to contract can appoint an agent to act on his or her
behalf.
 Persons who lack contractual capacity cannot appoint an agent.
 e.g., insane persons and minors
 An agency can be created only to accomplish a lawful purpose.
 Agency contracts that are created for illegal purposes or are against public policy are
void and unenforceable

5. FORMATION OF THE AGENCY RELATIONSHIP
Express
Agency
Implied
Agency
Apparent
Agency
Agency by
Ratification

6. EXPRESS AGENCY
 An agency that occurs when a principal and an agent expressly
agree to enter into an agency agreement with each other.
 Exclusive agency contract
 Power of attorney
 Express agency contracts can be either oral or written unless the
Statute of Frauds stipulates that they must be written.
.

7. IMPLIED AGENCY
 An agency that occurs when a principal and an agent do not
expressly create an agency.
 The agency is implied from the conduct of the parties.
 The extent of the agent’s authority is determined from the
particular facts and circumstances of the particular situation.

8. APPARENT AGENCY
 Agency that arises when a principal creates the appearance of an
agency that in actuality does not exist.
 When an apparent agency is established, the principal is estopped
from denying the agency relationship.
 It is the principal’s actions that create an apparent agency.

9. AGENCY BY RATIFICATION
An agency that occurs when:
1. A person misrepresents himself or herself as another’s agent when in fact he or
she is not, and
2. The purported principal ratifies (accepts) the unauthorized act.

10. TERMINATION OF AGENCY CONTRACT BY ACT OF
PARTIES
An agency may be terminated by the following acts of the parties:
1. Mutual agreement
2. Lapse of time
3. Purpose achieved
4. Occurrence of a specified event

11. TERMINATION BY OPERATION OF LAW
An agency is terminated by operation of law, including:
1. Death of the principal or agent
2. Insanity of the principal or agent
3. Bankruptcy of the principal
4. Impossibility of performance
5. Changed circumstances
6. War between the principal’s and agent’s countries