Explain The Formation Of The Agency Relationship

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Agency relationships can be formed in different ways:

  1. By Express agreement – between the Principal and Agent

  2. By Ratification – here a supposed 'agent' acts makes a contract with a 3 rd party without the Principal's authority to do so - however the Principal then ratifies (agrees) the contract afterwards

  3. By Implication – here it is the position of the person that implies they are an agent (have the power to bind)

    An example is partners in a partnership

  4. By Necessity – here - there's an emergency, the Principal cannot be contacted

    So, an 'agent' appoints themselves 

    They can only bind the principal if it's a genuine emergency and they're acting in the best interests of the Principal

  5. By Estoppel – here a person 'holds themselves out' (pretends) to be a genuine agent

    However if the Principal then seems to go along with this then they are 'estopped' from denying the agency relationship existed

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