Restatement (Third) of Agency · Section § 7-05
This section outlines the rules concerning the creation and termination of agency relationships.
Source: Restatement Restatement (Third) of Agency § § 7-05
An agency relationship is created through the manifestation of consent by the principal to the agent, and the agent's acceptance of the relationship. Such relationships can be terminated by either the principal or the agent pursuant to the terms of the agreement or the circumstances surrounding it.
This section explains how an agency relationship is formed and how it can be ended. An agency is established when the principal agrees to have the agent act on their behalf, and either party can end the relationship based on their agreement or specific situations.
The manifestations of consent need not be formal but must be clear enough to show that both parties understand their roles.
Termination can occur through mutual agreement, performance, expiration of a specified term, or unilaterally by either party under certain conditions.
Illustration 1
An example where a business owner verbally authorizes an employee to manage sales; this establishes an agency relationship.
Illustration 2
A scenario where a principal decides to terminate the agency after a specified time or if the agent fails to perform their duties.
This case illustrated the creation of an agency relationship through informal consent and how termination rights apply.
Understanding the principles of § 7-05 is crucial for both principals and agents as it clarifies their rights and responsibilities in the relationship. This knowledge assists parties in effectively managing the formation and termination processes of agency relationships.