In California, an agency relationship is typically formed when a principal grants authority to another person, known as the agent, to act on their behalf in business or legal matters. The agency relationship can be established through an agreement, either expressed or implied, between the principal and the agent. Express authority is when the principal clearly and explicitly communicates the scope of the agent’s power, often in writing or verbally. Implied authority, on the other hand, arises when the actions of the principal and agent demonstrate a mutual understanding that the agent has the authority to carry out specific tasks necessary to fulfill the principal’s goals. An agency can also arise through the conduct of the parties, even in the absence of a formal agreement, as long as the agent is acting with the principal’s consent.
An agency relationship can be formed without the need for a written document, although certain types of agency agreements, such as those involving real estate or contracts over a certain monetary threshold, may require written documentation under California law. Additionally, in some cases, an agency relationship can be created by estoppel if the principal’s actions or representations lead a third party to reasonably believe that an agency relationship exists, even if no formal agreement is made. For example, if a principal acts in such a way that a third party believes an agent has authority, and the third party relies on that belief, the principal may be estopped from denying the agency relationship. Regardless of how the agency relationship is formed, the agent must act within the scope of the authority granted by the principal, and the principal remains legally responsible for the actions of the agent within that scope.
