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The relationship between an agent and a principal is fundamental in many business and legal transactions. Called “Agency Relationship,” it grants agents the authority to act and make decisions on behalf of the principals. But how exactly is this relationship established? There are mainly three ways through which agency relationships can be created: Express Agency, Implied Agency and Ostensible Agency. Let's explore each one in detail.
Express Agency
A Express Agency It is a relationship where all parties involved clearly define and express their intentions, usually in writing.
Key Features:
- Explicit agreement: This type of agency is typically formalized through written contracts or agreements that list the duties, responsibilities, and powers of the agent.
- Clarity: Both agent and principal are aware of the parameters of the relationship, ensuring transparency and clarity from the beginning.
Implied Agency
A Implied Agency arises from the behavior or actions of the parties involved, even if not explicitly stated.
Key Features:
- Driven by behavior: Even without a formal written agreement, if the parties' actions suggest an agency relationship, there could be a Implied Agency.
- Subtlety: It can sometimes be difficult to discern as it is based on the interpretation of actions and not written statements.
Ostensible Agency
Also known as “Agency by Estoppel”, a Ostensible Agency It emerges when a relationship is perceived to exist due to the behavior or recognition of the principal.
Key Features:
- Perception of reality: Even if an official agency relationship does not exist, if a third party perceives that one exists due to the actions or statements of the principal, an agreement can be established. Ostensible Agency.
- Possible liability: Principals must be careful, as they may be held responsible for an agent's actions if a perceived Ostensible Agency.
Conclusion
Establishing an agency relationship can be both explicit and nuanced. Whether formally defined through a Express Agency or subtly understood through a Implied either Ostensible Agency, understanding the subtleties of these relationships is essential. This ensures that parties are aware of their roles, rights and obligations, leading to smoother and more transparent transactions.
