The principles of contract and principles of agency - what? I know, It sounds boring but do not click off! You should know about both if you are into buying or selling a property in the UK, have used or maybe intend to use the services of an estate agent, or are looking at taking out a mortgage.

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

Yes, no problems there. But the process of buying a property and obtaining a mortgage loan both involve contracts. Yes indeed they do. You, my friend, and the seller of the property. You and the mortgage loan provider.

So, from the above, it can be seen that a contract must have two sides, at the very least. And in order for the contract to have teeth, legal obligations are put on either side.

And underpinning the legalities and rules are the principles of contract and the principles of agency. It really is worth understanding both of these.

First off, the basic concept of a contract - a legal arrangement entered into by two or more persons - is clearly understood by most of us. The principles of contract are slightly more involved.

As well as involving two persons, a contract implies something is given by one party and accepted by the other. Legal obligations are put on both as a consequence.

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

But there's so much more to a legally binding contract than simply the numbers involved or the exchange of a consideration.

We are talking about the capacity to enter into a contract by either side. And it is not as difficult as it appears.

The rules are fairly simple. Firstly you've got to be 18 or older. You've got to be legally able to buy, or sell, the property. You, and of course the other side to the deal, must be both of sound mind.

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

So if one party asks a question of the other party a completely truthful answer is expected.

No doubts at all, this is particularly important when it comes to any dealings in property. The buyer's solicitor will certainly ask more than one or two probing questions as a matter of routine. So many issues can have an impact on a property's value - disputes with neighbouring property owners, for example, or environmental factors.

Any less-than-honest answer may, at a date in the future, result in some kind of legal action. The Truth really is the best policy.

Having looked at the principles of contract, it is now 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 likely to grab the services of an estate agent, whose job is to bring both buyer and seller together.

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 usually 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 simple explanation and in reality the situation is very likely to be a little more complicated. However, in terms of our estate agent, his or her job may be nothing more than passing on any offers to the seller.

Other types of agency are often more complex because the agent has been given powers, i.e. authority, to take decisions without consulting first with the client.

This is often the case when it comes to IFAs (independent financial advisers), for example, who may make some investment decisions without consulting the client on every single occassion.

Thus, whether straightforward, or more complex, all conditions of an agency should be set down in writing before any action is taken - independently or not - by the agent.

That way, agent and principal know where the lines are in the relationship right from the start.

Of course, as in many other aspects of everyday life, the principles of agency can become a little bit more complicated.

There may be situations where the actions of the principal appear to give the agent authority beyond any agreed limits.

This apparent authority only serves to legitimise the actions taken by the agent, despite those actions being far outside the parameters agreed at the start of the relationship.

Agents are human and sometimes they go a little bit too far, acting outside their remit either intentionally or accidentally. The principal might then decide to take legal course of action.

Or he or she might just simply ratify the actions of the agent instead, agreeing after the event the actions are indeed acceptable.

In this very short article, we've highlighted some of the important areas surrounding the buying and selling of property. We've looked at the principles of contract and the principles of agency. Both are important areas to understand.