What is typically necessary for an agency relationship to be legally binding?

For an agency relationship to be legally binding, mutual consent is essential. This means that both the principal and the agent must agree on the terms of the relationship and clearly understand their respective roles and responsibilities. The agreement sets forth the authority of the agent to act on behalf of the principal, and without this mutual agreement, the agency relationship cannot be fully established or enforceable.

While written and verbal agreements can be methods of establishing mutual consent, neither is strictly necessary for the relationship to exist. It is the understanding and agreement between the parties about their roles that forms the foundation of the agency relationship. Financial compensation may reinforce the relationship but is not a requirement for its legal validity. Thus, what truly matters is that both parties have reached an understanding about their obligations and expectations. This concept is fundamental in the context of agency law and governs how principles and agents interact and operate within legal frameworks.