Mutual Agreement in an Agency Relationship

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What Is a Principal-Agent Relationship?

A principal-agent relationship may be formed when one partie's wishes to have another act or make decisions on their behalf. Here, the agent is the party that is being authorized to execute the action. The principal is the party that is granting the other party the authority.  An example of this type of relationship is in a power of attorney arrangement; some employment arrangements involve principal-agent aspects.

Principal agency relationships (or simply, “agency relationships) are usually created for very specific purposes. That is, the agent does not have unlimited powers to perform every action for the agent. The scope of an agent’s authority will often be limited by the principal, as indicated in a written contract agreement. 

What Is “Mutual Agreement” in an Agency Relationship?

The phrase “mutual agreement” typically refers to the way in which an agency relationship can be terminated. That is, the relationship can often be terminated at any time upon the mutual agreement of the parties. This means that both parties are clear on the fact that they wish to terminate the relationship.  In order for the termination to take effect, the parties may be required to take action, such as creating a termination agreement. 

If the parties had a valid agency relationship contract in place, it may be difficult to terminate the relationship if there is no mutual agreement. For instance, if only one party is seeking to terminate the relationship, they may not be able to do so unless they can prove their claim on a valid cause of action, such as a breach of contract. 

How Is Mutual Agreement Proven?

Mutual agreement is best proven through the direct conduct of the parties. The clearest example of this would be if the parties wrote and signed a document stating that they wished to terminate their existing principal agent relationship. An oral agreement can also provide proof of mutual agreement, though it is not a strong as a written agreement. 

In some cases, mutual agreement can be inferred from the parties’ actions. For instance, if both of them stop performing their duties as principal and agent, it may be implied that they mutually wished to terminate the relationship. However, as in the case with oral agreements, a written agreement will be better evidence. 

Do I Need a Lawyer for Help with a Mutual Agreement in an Agency Relationship?

Terminating an agency relationship should be done as clearly as possible in order to prevent any misunderstandings or errors. You may wish to hire a lawyer if you need assistance with any agency relationship issues. Your attorney can help you file lawsuit in a court of law if necessary, and can provide you with the legal advice needed to succeed on your claim. 

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Last Modified: 04-23-2015 09:50 AM PDT

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