In the world of business, the term “agency” refers to a legal relationship between two parties where one party (the principal) grants authority to the other party (the agent) to act on their behalf. This relationship is established through an agreement between the two parties, and in the majority of cases, agency is the result of agreement between the principal and the agent.
The principal is the party that grants authority to the agent to act on their behalf. The principal can be an individual, a company, or any other legal entity that has the capacity to enter into an agreement. The agent, on the other hand, is the party that is authorized by the principal to perform certain tasks or functions on behalf of the principal.
The agreement between the principal and the agent is typically in the form of a contract that outlines the scope of the agency relationship, the duties and responsibilities of the agent, and the compensation that the agent will receive for their services. The contract may also include other terms and conditions, such as the duration of the agency relationship, the termination clauses, and any exclusivity clauses.
In some cases, the agency relationship may be established without a formal contract. For example, an agency relationship may be implied when a person acts on behalf of another person without express authorization but with the knowledge and consent of the other person.
The agency relationship is a fiduciary relationship, which means that the agent is obligated to act in the best interests of the principal. The agent must exercise their authority in good faith, with loyalty and honesty, and must avoid any conflicts of interest that may arise.
In conclusion, agency is the result of agreement between the principal and the agent. The agreement may be in the form of a formal contract or may be implied by the actions of the parties. Regardless of the form of the agreement, the agency relationship is a fiduciary relationship that requires the agent to act in the best interests of the principal. As a professional, it`s important to understand the legal and business terminology surrounding agency relationships, as they are often used in various industries and contexts.
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