The principles of contract and principles of agency? OK, sounds boring but don't switch off! You should know about both if you are into buying or selling a property in the UK, or have used or maybe intend to use the services and skills of an estate agent, or are looking at taking out a mortgage.

You know full well what a mortgage is, right? A mortgage has at least two sides to it - you, the borrower looking for cash to purchase a property, and the lender, providing the money by which you can buy the home of your dreams.

However, purchasing a house and getting a mortgage are in fact contracts, involving you and the seller and lender.

Hence, the contract in its most simple form requires two sides, with each of the parties bound by legal requirements and rules.

Enter the principles of contract and the principles of agency. Do not fall asleep now.

Let us get down to the nitty gritty of what a contract is. In its very simplest form, it can be best described as a legal arrangement, entered by two or more people. The principles of contract flesh this arrangement out.

One side offers something and the other accepts it, offer and acceptance placing legal obligations on both sides.

Something tangible must be given - a consideration. In terms of property, a buyer hands over money and the seller parts with his or her property.

However there are several other aspects to any legally binding contract.

There are several more bits and pieces that must be complied with - even before both of the parties gets involved. It's called the capacity to enter into a contract in the first place.

To enter into a contract in the United Kingdom, both sides must be 18 or older. They must both be legally able to sell property, or to buy property. And either side must be of sound mind.

Then there's truthfulness. Both sides have got to be honest in the dealings with one another. It is known as utmost good faith.

In other words, truthful answers when either side asks a question.

Yes, truth is extremely important when it comes to the buying and selling of property. If you are selling a property then why wouldn't you expect some searching questions or queries from the buyer's solicitor, for example? There are lots of areas, such as disputes, environmental and other issues which can easily have an impact on property.

A less-than-truthful answer could, at a future date, result in some kind of legal action. Truthfulness truly is the best way to go.

Now let's take a peek at the principles of agency because often an estate agent is employed by the property seller. The task of the estate agent is to advertise the property and bring in a stream of potential buyers.

The principles of agency implies a relationship between an agent and a principal. An agent is someone 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.

Thus in law, what is done by the agent is deemed to have been carried out by the principal.

Of course, that may be a rather simplisitc explanation and in the real world the situation is likely to be a little more complicated. However, in terms of our estate agent, his or her job is usually nothing more than passing on interested offers to the seller.

Compare this to other types of agency where the agent may enjoy more authority to act on behalf of the principal, within certain agreed and predefined margins.

A good example of this is the relationship that often exists between IFAs (independent financial advisers) and their clients. Sometimes IFAs will make independent investment decisions, within agreed parameters, but without seeking permission of the client.

However, no matter what the depth of the relationship between agent and principal, conditions of the agency should always be set out in writing prior to any action is taken by the agent.

So, when an agent takes action on behalf of a client, he or she knows exactly what the limits are right from the start.

Even although care is taken, things can go a little awry, even with the best of the best plans.

For example, actions taken by the principal may appear to give the agent authority far beyond what has been already agreed.

This is called aparent authority. The agents actions have become ligitimised through the actions of the principal.

Agents unfortunately do step across the boundaries set down. In such a situation, legal action often may be taken by the principal if required.

Or the client might just simply ratify the agent's actions instead, agreeing after the event that the actions are indeed acceptable.

In this extremely short article, we've highlighted some of the important issues surrounding the buying and selling of property. We've also looked at the principles of contract and the principles of agency. Both are important areas to understand.Take a look at Mortgage Advice 4 Free, a website owned and run by John Donaldson. There you'll find reviews of other mortgage loan sites in the UK. It's a first class starting point for anybody looking for a mortgage.