What is the nature of the agency relationship?

The agency relationship is fundamentally consensual, meaning that it is established through an agreement between the principal and the agent. This agreement can be explicitly documented or implied through actions and conduct. The essence of this consensual relationship is that the principal grants the agent authority to act on their behalf, and the agent accepts this authority, thereby creating a fiduciary relationship where the agent must act in the best interests of the principal.

In legal terms, this consent is vital because it forms the basis of the agent's authority to bind the principal in transactions. Without this mutual agreement, there would be no agency relationship. The mutual consent also underlines the duties and obligations that arise within the agency, including the agent's duty to act loyally and in good faith towards the principal.

In contrast, non-consensual, discretionary, and involuntary options do not accurately describe the nature of an agency relationship since they do not involve the requisite agreement between the parties. A non-consensual relationship would imply that one party imposes authority without the other’s agreement, while discretionary or involuntary aspects do not capture the essential characteristic of mutual consent that defines agency.