Agency Agreements May Not Be Created by

Agency Agreements May Not Be Created By: Understanding the Limits of Agency Relationships

An agency agreement is a legal contract that establishes a relationship between two parties, whereby one party (the agent) acts on behalf of the other party (the principal). Agency relationships are common in business and can take many forms, including employment agreements, sales agreements, and power of attorney agreements. However, there are limitations to the types of agency agreements that can be created.

One limitation to agency relationships is that they cannot be created by parties who lack the capacity to enter into a contract. For example, minors (individuals under the age of 18) and individuals who are mentally incompetent may not create agency relationships. This means that if a minor signs a contract with an agent, the contract may be voidable at the option of the minor.

Another limitation to agency relationships is that they cannot be created for an illegal purpose. If the principal intends for the agent to perform an illegal act, the agency agreement will be unenforceable. For example, if a principal hires an agent to engage in insider trading, the agency agreement will be invalid.

Additionally, agency relationships cannot be created by parties who lack the capacity to perform the obligations of the contract. For example, if the principal hires an agent to sell a product that the agent is not licensed to sell, the agency agreement may be unenforceable.

It is also important to note that agency relationships may not be created by parties who lack the intent to create such a relationship. For example, if a principal hires an independent contractor to complete a specific task, the independent contractor may not be considered an agent of the principal, as the relationship is not one of principal and agent.

Finally, agency relationships may not be created by agencies of the government. Although the government may act through its employees, contractors, and representatives, it may not enter into agency relationships in the same manner as private parties.

In conclusion, agency relationships are a common tool utilized in business. However, there are limitations to the types of agency relationships that can be created. Agency relationships may not be created by parties who lack the capacity to enter into a contract, parties who lack the capacity to perform the obligations of the contract, parties who lack the intent to create such a relationship, or government agencies. Additionally, agency relationships may not be created for an illegal purpose. Understanding these limitations is essential in creating enforceable and effective agency agreements.