Types of Agency Relationships & Creation

Question 1

Principal

Answer 1

The party who delegates authority to another in order to accomplish a task or consummate a transaction.

Question 2

Agent

Answer 2

One who acts on a principal’s behalf to accomplish a task or consummate a transaction for the principal.

Question 3

Special agent

Answer 3

One authorized to conduct a single transaction or series of related transactions on the principal’s behalf.

Question 4

general agent

Answer 4

One authorized to conduct all necessary personal or business transactions for the principal.

Question 5

universal agent

Answer 5

One authorized to do all acts that can be legally delegated to an agent.

Question 6

Subagent

Answer 6

A subagent is an agent hired by another agent on behalf of the principal.

Question 7

Requirements for creation of an express agency relationship

Answer 7

A writing or record is not generally required for a valid agency relationship, except when the contract that the agent is entering into is under the Statute of Frauds. (See the “Contracts” lessons for more information on the Statute of Frauds.)
The contract the agent is authorized to enter into must be in writing under the Statute of Frauds, such as a real estate contract.
The agency relationship cannot reasonably be completed within one year.

Question 8

Consideration

Answer 8

An agency relationship can be created with or without consideration and is called a gratuitous agency relationship. However, an agent who serves without consideration in a gratuitous agency can quit at any time.

Question 9

Accompanying Implied Authority that Goes with Express Authority

Answer 9

When a principal creates an express agency relationship, the agent holds whatever authority is provided for in the agreement.
In addition, the agent has whatever authority is customary for his or her position—whatever authority can be implied because of the position.

Question 10

Creation of an Agency Relationship by Ratification

Answer 10

In this situation, the agent does not have express, implied, or apparent authority, but he or she enters into a contract on behalf of an assumed principal. The principal is not bound, but ratification gives the principal a choice.
If your agent or someone else enters into a contract for you without authority, you, as the principal, can choose to be bound by the agreement.