Agency in Contract Law Notes

Agency in Contract Law Notes: Understanding the Basics

Agency is an essential element of contract law, and it refers to the legal relationship established between two parties, where one party (the principal) authorizes another party (the agent) to act on their behalf. Understanding agency is crucial in contract law as it helps to determine the rights and obligations of the parties involved in a transaction.

In this article, we will delve deeper into the basics of agency in contract law notes.

Types of Agency

The two primary forms of agency are actual and apparent agency.

Actual Agency: This type of agency is created when the principal authorizes the agent to act on their behalf explicitly. An actual agency relationship may be created through a written or oral agreement between the parties.

Apparent Agency: Apparent agency arises when a third party reasonably assumes that the agent is acting on behalf of the principal. This assumption may arise when the principal has not explicitly authorized the agent to act on their behalf, but the agent’s actions imply authority.

Elements of Agency

The following three elements are essential for the creation of agency in contract law:

Consent: There must be mutual consent between the principal and the agent for agency to exist. The principal must authorize the agent to act on their behalf, and the agent must accept the authority.

Control: The principal retains control over the agent’s actions. The principal has the right to set the terms of the agency relationship and may revoke the authority given to the agent at any time.

Fiduciary Duty: The agent owes a fiduciary duty to the principal. This means that the agent must act in the best interests of the principal and avoid any conflict of interest.

Rights and Obligations of the Parties

The principal and the agent in an agency relationship have specific rights and obligations.

Principal’s Rights and Obligations: The principal has the right to control the agent’s actions and may restrict the agent’s authority as they see fit. The principal must compensate the agent for their services, and they are liable for any damages caused by the agent’s actions within the scope of their authority.

Agent’s Rights and Obligations: The agent has the right to act on the principal’s behalf and receive compensation for their services. The agent must act within the scope of their authority and follow the principal’s instructions. The agent is liable for any damages caused by their actions, whether or not the principal authorized those actions.


In summary, agency is an essential aspect of contract law, and understanding its basics is crucial for any legal professional. By understanding the types and elements of agency, as well as the rights and obligations of the parties involved, legal professionals can effectively navigate agency relationships with their clients.

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