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The principles of contract and the principles of agency - the what? Sounds boring but don't switch off! You should know about both if you are into buying or selling a property in the UK, have used or intend to use the services and skills of an estate agent, or are thinking about taking out a mortgage loan. We all know borrowers are one half of the mortgage equation with lenders being the other side. Simple enough. Easy to understand. However, geting a mortgage loan and purchasing a property, both very common occurences, are in fact contracts, involving you and the seller, and you and the mortgage loan provider. At its simplest, a contract requires two sides, with each side bound by a string of legal checks and balances in order to function. Thus the principles of contract, and the principles of agency, underpin the whole process. The principles of contract are fairly easy to grasp. At its simplest, a contract is a legal arrangement which two or more persons agree to enter into. A contract implies that something is given by one party and accepted by the other. Doing so immediately places legal obligations on both parties. Something must be given - a consideration. In terms of property, a buyer hands over cash and the seller hands over property. But there's more to a legally binding contract than the numbers involved and the exchange of a consideration. For one, both parties must have the capacity to enter the contract from the word go. To enter into a contract in the United Kingdom, both parties must be 18 or over. They must both be legally able to sell property, or to buy property. And both must be mentally sound. Honesty is another consideration, hence the idea of utmost good faith. In other words, truthful replies when either party asks any question. And let's face it, this is extremely important when it comes to any dealings in property. The buyer's solicitor will almost certainly ask at least one or two probing questions as a matter of course. So many issues can have an effect on a property's value - disputes with neighbouring property owners, for example, or environmental factors. Any less-than-truthful answer could, at a future date, result in some sort of legal repercussions. Telling the truth really is the best way to go. Having dealt with the principles of contract, it is time to consider the principles of agency, something you should at least think about and understand, too, if possible. That's because, in all probability, you are going to have to grab the expertise of an estate agent, whose job is to bring together buyer and seller. The principles of agency involves a relationship between an agent and a principal. An agent is a person who acts for someone else, the principal. In our property scenario, the principal is normally the seller of the property and the agent is the estate agent. Now this is extremely important. It is at the very heart of the principles of agency. The law says the actions of the agent are in fact the actions of the principal. No ifs, buts or whatevers! Of course, that may be a rather simplisitc explanation and in the real world the situation is very likely to be much more complicated. However, in terms of our estate agent, his or her job is usually nothing more than passing on any offers to the seller. Compare this to other more complex types of agency where the agent may enjoy much more authority to act on behalf of the principal, within, of course, certain agreed and predefined parameters. This is often the case with regard to IFAs (independent financial advisers), for example, who might make a number of investment decisions without actually consulting the client on every single occassion. So, whether simple, or much more complex, all conditions of an agency should be set down in writing before any action is taken - independently or otherwise - by the agent. That way, both agent and principal know exactly where the lines are in the relationship from the start. Of course, as in many other areas of everyday life, the principles of agency may become slightly more complex. Sadly, such can be the situation when actions taken by the principal appear to give the agent authority way above and beyond the agreed limits set out. This apparent authority serves to legitimise the agent's actions, despite those actions being way outside the limits agreed at the beginning of the relationship. Agents are only human after all and sometimes they can go a little bit too far, acting well outside their remit either intentionally or accidentally. The principal might then go for legal action. Or the client might simply ratify the agent's actions instead, agreeing after the event the actions taken are indeed acceptable. In this extremely short article, we've highlighted some of the issues surrounding the buying and selling of property. We've looked at the principles of contract and the principles of agency. Both are important parts to understand.
Article Source: http://www.deeparticles.com
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