In organizational contracts there is a legitimate link between two individuals whereby one individual acts on behalf of the other. The principal-agent relationship is a course of action in which one element legitimately chooses another to follow it for its own benefit. In this relationship, the agent acts for the benefit of the principal and should have no conflicting circumstances in performing the act. Any individual following the other cannot be an agent for another until there is an implicit or explicit agreement between them, which induces a legitimate connection between them. The principal-agent relationship may be entered into by any willing and able party for the purposes of any legal transaction. In simple cases, the principal within the relationship is a single individual who assigns an agent to perform a task, however other relationships under this guise have a principal who is a corporation, non-profit organization, government agency, or a partnership. The agent is most often an individual capable of understanding and ultimately carrying out the task assigned by the principal. Common examples of a principal-agent relationship include hiring a contractor to complete a home repair, hiring an attorney to do legal work, or hiring an investment advisor to diversify a stock portfolio. In each scenario, the principal is the individual requesting the service or advice of a professional, while the agent is the professional who performs the work. The agent undertakes to act to the maximum advantage of the principal in light of the fact that the agents' activities will entail legitimate commitments for the principal. The agency relationship authorizes the agent to work for the principal as if the principal were accessible and acting alone. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay There are distinctive types for creating agency relationships, in light of necessity, namely actual authority and apparent authority. Actual authority blends express authority and implied authority. An agent is said to have apparent or apparent (not actual) authority if: The third party has actually depended on that representation to manage the agent. Third parties also benefit from extensive insurance, the cost of which is borne by the principal. Without warning of the agents' bad behavior, the third party can invoke the principle of apparent authority and force the principal to accept contract terms that he may not have approved and which are unfavorable to his interests. It gives the impression that agency law is fraught with difficult decisions to adjust the conflicting interests of all parties. It strives to ensure that the agency idea is useful in practice and promotes financial development without imposing undue burdens on the innocent party. An agency can be dissolved in the following two ways: by act of the parties and by operation of law. The agency may be terminated by act of the parties in any of the following ways: By mutual consent. (ii). for breach of contract. (iii). for revocation of the power of attorney by the principal, (iv) for renunciation of the agency by the agent. An agency terminates by operation of law in the following ways (i) upon completion of the business. (ii) Upon the death of the principal or agent. Madness on both sides. (iv) Insolvency of the principal. (v) Flow of time (VI) Destruction or loss of object. (vii). Change in law. (viii). War.