AGENCY RELATIONSHIP

 

An agency relationship can be defined as a relationship between two parties where one party is the principal delegate while the other is the agent.  The agency relationship is fiduciary. In an agency relationship, the principal confers his rights on an agent who acts on his behalf.   The principal and agent may either be an entity or the person. The principal may be liable for agent criminal acts.  An agent’s  authority can be terminated in accordance with the agency. Bankruptcy, insanity, and death are the main causes that can cause the termination of agent contract. In an agency relationship, dual agency is permitted with voluntary consent of both the buyer and the seller. In an agency relationship, the agent represents both the buyer and the seller in a transaction.  In addition, agent carries responsibilities of both principals. The words that are exchanged by the agent and the third party in the agency relationship bind the principal. Sale’s agency, buyer’s agency and dual agency are types of the agency relationship. In the buyer’s type of agency, the buyer is considered as the client. The buyer must be loyal, obedient, must practice due diligence and must maintain confidentiality.   Similarly, the seller represents the client in the seller’s type of agency. In the seller’s type of agency, the relationship is established in form of agreement listing.  Small businesses normally hire the services of the contractor to a principal-agency relationship.  The main element which binds a relationship in agency relationship is trust. The parties in an agency relationship should avoid conflict as much as possible as it leads to a principal-agent problem.  The law of agency allows one to use the other for the specific work.

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