An agency relationship is a type of legal relationship in which one person grants another person authority to act on their behalf.  In an agency relationship, the “principal” is the person who is granting the authority.  This is the party that is usually making the important decisions regarding the task to be accomplished.  The person who executes the principal’s decisions is called the “agent”. 

The agent may be granted authority to do different things for the principal, such as signing documents in their name or making purchases with money entrusted to them.  The agent can sometimes make certain decisions on behalf of the principal.  Agency relationships can be formed for many different purposes, including: company purchases; signing healthcare or medical documents; executing various business plans; and various other projects.

What is Lapse of Time in an Agency Relationship?

Lapse of time refers to one of the methods in which an agency relationship can be terminated.  In most cases, agency formation occurs according to a contract between the parties.  The contract might state a specific date when the agency relationship will end.  However, the relationship can also terminate due to a lapse of time. 

A lapse of time in an agency relationship may terminate the relationship in situations such as:

  • The termination date set in the contract has passed
  • The parties have not moved forward with the project, and an excessive amount of time has passed to indicate intent to continue
  • Enough time has lapsed to imply that the agency relationship has ended (for example, according to standard business practice or custom)

Thus, one party may be able to avoid liability to the other if they can prove that the relationship has terminated due to lapse of time.  For instance, if someone is suing the principal due to the agent’s actions, the principal may be able to avoid liability if lapse of time is applicable. 

When Can a Principal-Agent Relationship Be Terminated?

Besides lapse of time, principal-agent relationships can also be terminated in other ways.  For instance, most agency relationships are set to terminate automatically once the desired goal has been accomplished (for instance, the number of sales have been reached, etc.).  Agency relationships can also be terminated if one party commits a breach or if they commit an illegal violation.

Specific events can also trigger a termination of an agency relationship.  Common events that trigger termination may include the incapacitation of an agent or if the company files for bankruptcy.  Lastly, regardless of other provisions in the agency contract, the parties can usually terminate the relationship at any time, provided there is a mutual agreement regarding the termination.

Do I Need a Lawyer for Help With an Agency Relationship?

Specific legal issues such as lapse of time in an agency relationship can be complicated, and may require the help of a lawyer.  You may wish to hire a employment lawyer if you need help filing a lawsuit due to an agency relationship issue.  Your attorney can assist you with the filing of your case, and can review any contracts, documents, or forms that might be needed for your claim.  Your lawyer can also provide you with representation during the hearings.