A mutual agency relationship is just like a marriage, it binds each partner to one another, for better or worse. If one fails, everyone fails.

Mutual agency is the right of all partners to represent the company’s normal business operations and the authority to bind it to mutual contracts and agreements. In leman’s terms, it is the authority given to a person doing business on behalf of the company, usually a business owner or partner. Each partner is responsible for one another in a basic sense however; each acts as individuals in the business operations and has such authority.

So how do partners ensure a mutual agency in their business? Put everything in writing from the very beginning so as to lessen the confusion later down the road when things begin to get hectic as the company grows. A partnership agreement should be established that will guarantee each position in the partnership and the benefits of the partnership.

For example, typical characteristics of a partnership agreement would state that two or more persons were entering in the agreement. The agreement, a legally binding contract, would also stipulate how profits will be shared and split or who will hold the majority of financial gain. Finally, that there is a mutual agency or how the company will be ran.

Though there are different levels of mutual agency in various professional sectors, the standards are the same. There has to be a clear understanding of the duties performed and who is responsible for implementing or managing those duties in order to maximize profits and the business relationship.

A good example of mutual agency is when you select an insurance representative. You are authorizing the insurance representative to act on your behalf when dealing with agency underwriting and insurance companies. An insurance representative is there to walk you through the process and explain in detail your options; they do not make the sole decision. They know agency underwriters are there to make paperwork more difficult so they are there to make it easier to understand. You have a mutual agency.

Mutual agency is mutually beneficial to all parties involved, pun intended. Establishing roles and benefits of the partnership, again, will keep confusion down and the legalities legal. Waiting until the business has established to implement a mutual agency leaves room for error, misunderstanding and possible lawsuits; and in the end can ruin a business relationship or even worse, negatively affect the company.