Can an agency relationship exist without a formal contract?

An agency relationship can indeed exist without a formal contract, provided that the essential elements of agency are present. An agency relationship is typically defined by the concept of one party (the agent) acting on behalf of another party (the principal) in dealings with third parties. The key elements that characterize an agency relationship include the mutual consent of both parties, the intention to create the agency, and the capacity of the parties to enter into such a relationship.

The relationship can arise through various means, including informal agreements or even implied conduct, which indicates that the agent is authorized to act for the principal. For example, if a person regularly allows another to negotiate on their behalf, an agency relationship could be established based on those actions, even without a formal written contract or specific verbal agreement.

Thus, while a formal contract can clarify roles and responsibilities and is often recommended for legal protection, it is not strictly necessary for the formation of an agency relationship. The presence of the essential elements—consent, intention, and capacity—can suffice for the agency to be valid.