Agency

Question 1

How is an agency relationship created?

Answer 1

An agency relationship is created when one person (the principal) manifests an intent that another person (the agent) act on his behalf and both parties consent to the agreement.

Question 2

When is a principal bound by the contractual acts of an agent?

Answer 2

The principal is contractually bound to the acts of the agent if the agent acted with actual or apparent authority.

Question 3

Actual Authority

Answer 3

Actual authority is authority that the agent reasonably believes that they possess based on the principal’s dealings with them. It may be express or implied from the actions of the principal.

Question 4

What is apparent authority?

Answer 4

Apparent authority arises when the principal “holds out” the agent as having certain authority, causing third parties to reasonably believe the agent has such authority.