An agency relationship is fundamentally based on what principle?

An agency relationship is fundamentally based on the consent of the parties involved. This principle signifies that both the principal (the person granting authority) and the agent (the person executing tasks on behalf of the principal) agree to the relationship and its terms. Consent can be expressed clearly, through a written agreement or verbally, or it can be implied through the actions of the parties involved in the transaction.

When parties consent to an agency relationship, it establishes the foundation for various responsibilities and rights, such as the agent’s obligation to act in the best interests of the principal and the principal’s responsibility to honor the agent's actions within the agreed scope of authority. This mutual acknowledgment is essential for the agency relationship to be valid and effective, ensuring that both parties understand their roles and responsibilities.

While trust, written agreements, and mutual benefits can enhance and clarify the agency relationship, they are not the core principle that establishes it. Trust is often a byproduct of a well-functioning agency relationship, a written agreement provides evidence of consent, and mutual benefits can be an outcome of effective agency. However, without the foundational consent, an agency relationship cannot exist.