Creation of Agency Relationship

An agency is a legal relationship between two parties: the principal and the agent.
- The principal assents for the agent to act on their behalf.
- The agent consents to act on behalf of the principal.
- Responsibilities include negotiating with third parties and handling the principal's affairs.

Principal: The party who grants authority to the agent.
Agent: The party who acts on behalf of the principal.
Third Party: The person or entity with whom the agent interacts on behalf of the principal.

A principal must meet specific criteria to form an agency relationship:
- Must have capacity (e.g., cannot be a minor or mentally incompetent).
- Must give consent to the agreement.
Only the principal must be competent; the agent can be a minor or mentally incompetent.
Writing not required:
- There is generally no necessity for a written document, except for certain circumstances (e.g., agents dealing with interests in land).
- Consideration is also not required to form an agency relationship, and agents may work without pay.
Consent and Capacity:
- As a general rule, creation of agency requires a principal with contractual capacity and mutual consent.

Writing is mandatory in some arrangements:
- Required when the agent is buying or selling real estate deals for the principal.
- Required if the agency agreement cannot be fulfilled within one year.
- Oral agreements are valid for contracts regarding services.

A Power of Attorney allows an agent to act on the principal's behalf via formal written authorization.
- The individual appointed as the agent is termed attorney in fact.
- Notably, the agent does not need to be a lawyer.
- Typically, only the principal signs the power of attorney document; the agent's signature is not necessary.
- The authority given to agents is often limited to specific transactions outlined within the document.

The agent must act in the principal's best interest.
- Breach occurs when the agent has conflicting interests or fails to disclose relevant information.
Essential duties include:
- Duty of Loyalty: To avoid self-dealing, conflicts of interest, and kickbacks.
- Duty of Obedience: To follow the reasonable instructions of the principal.
- Duty of Reasonable Care: Conduct affairs with due diligence and skill.
- Duty to Account: Account for all property and funds received and ensure no commingling of property.

Duty of Loyalty Example: If an agent earns kickbacks from a third party while representing the principal, they must disclose such payments and may be required to return profits to the principal.
Duty of Obedience Example: An agent failing to follow specific instructions from the principal is liable for damages caused by such failure.

Agents are permitted to hire subagents to assist them in fulfilling their obligations.
- Yes, the agent can appoint subagents when authorized.
- Subagents owe duties to both the primary agent and the principal.

If an agent breaches duties, the principal has several remedies:
- Sue for tort damages: If the agent commits a tort.
- Sue for contract damages: If a breach of contract occurred (provided there is a legally enforceable agreement).
Recovery of secret profits: Principals can recover profits obtained by agents through secret arrangements.
Withholding compensation: If the agent commits intentional torts or breaches duties, the principal may refuse to compensate them.

The principal has obligations toward the agent, which include:
- Compensation: Reasonable remuneration for services rendered unless agreed otherwise.
- Reimbursement/Indemnification: Duty to cover all expenses incurred by the agent while conducting agency business.
Agents may have a right to sue principals for damages resulting from breaches of these duties.

Both agents and principals have the power to terminate agency relationships at will, but not always the right.
- Wrongful