What is required for an agency relationship to be legally recognized?

For an agency relationship to be legally recognized, mutual consent and a lawful purpose are essential. This means that both parties—the principal and the agent—must agree to the relationship and the terms of the agency. Additionally, the objectives of the agency must be legal. If the purpose of the agency is unlawful, the agency cannot be valid, regardless of any agreements made between the parties.

Mutual consent indicates that both the agent and the principal have acknowledged and accepted the significance of their relationship. It doesn’t necessarily require a written contract, as an agency can be established through verbal agreements as well, as long as there is clear understanding and acceptance from both sides regarding their roles.

Moreover, the lawful purpose ensures that the activities conducted by the agent on behalf of the principal are within the bounds of the law, further legitimizing the agency relationship. Thus, mutual consent alongside a lawful purpose effectively lays the foundation for a recognized agency relationship.