What does agency by necessity refer to in legal terms?

Agency by necessity is a legal concept that applies in situations where an agent is required to act on behalf of a principal in order to protect the principal's interests, particularly in emergencies. This type of agency arises when an unforeseen circumstance or urgent situation prevents the agent from obtaining prior approval from the principal. For example, if a principal is incapacitated and it is critical to act quickly to preserve their property or financial interests, the agent has the authority to make decisions on behalf of the principal without prior consent. This authority is recognized because it is essential to protect the principal's welfare and avoid loss or harm.

The other options do not accurately capture the essence of agency by necessity. The idea that agents operate without guidelines overlooks the fact that their actions must still align with the best interest of the principal. Similarly, agency by necessity specifically involves emergency situations rather than lengthy procedures, which are more characteristic of other types of agency arrangements. Lastly, while formal contracts can establish agency relationships, agency by necessity does not rely on a formal agreement; it is based instead on the urgent and necessary actions needed to safeguard the principal's interests in critical circumstances.