Explain the following ways in which an agency can arise

Question

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Answer 1

Agency relationships are generally formed by the mutual consent of a principal and an agent, although not always. An agency can arise in any of the following ways: express agency; implied agency; apparent agency, and agency by ratification. The most common form of agency is express agency. In an express agency, the agent has the authority to contract or otherwise act on the principal's behalf as expressly stated in the agency agreement. Additionally, the agent may possess certain implied or apparent authority to act on the principal's behalf. Express agency occurs when a principal and an agent expressly agree to enter into an agency agreement with each other. Express agency contracts can be oral or written unless the Statute of Frauds stipulates that they must be written. A power of attorney is an example of an express agency. An implied agency is an agency that occurs from the conduct of the parties, rather than from a prior agreement between them. The extent of the agent's authority is determined from the facts and circumstances of the particular situation. Implied authority can be conferred by industry custom, prior dealing between the parties, the agent's position, and the acts deemed necessary to carry out the agent's duties. Apparent agency (or agency by estoppel) arises when a principal creates the appearance of an agency that in actuality does not exist. Where an apparent agency is established, the principal is estopped from denying the agency relationship and is bound to contracts entered into by the apparent agent while acting within the scope of the apparent agency. In this type of agency, the principal's actions—not the agent's—creates an apparent agency. An agency by ratification occurs when a person misrepresents him- or herself as another's agent when in fact he or she is not, and the purported principal ratifies (accepts) the unauthorized act. In such cases, the principal is bound to perform and the agent is relieved on any liability for misrepresentation.