Definition of Agency
Agency is a legal relationship formed when a principal engages an agent to perform specific duties on the principal’s behalf, usually through a contractual agreement. This relationship entails that the agent acts in the best interests of the principal and remains loyal while conducting the necessary activities.
Real-Life Example
Jane, a seasoned real estate agent, is hired by Alan, a homeowner, to sell his property. Under the agency agreement, Jane must present all prospective purchase offers to Alan. This obligation illustrates the fiduciary duty that agents, like Jane, owe their principals, ensuring Alan remains informed and advised regarding the property sale.
Roles and Obligations of Agents
- Duty of Loyalty: Agents must prioritize their principal’s interests above their own and avoid conflicts of interest.
- Duty of Obedience: Agents are obligated to follow lawful instructions provided by the principal.
- Duty of Care: Agents must perform their tasks with appropriate diligence and competence.
Questions and Answers about Agency
Q: What is an agency relationship?
A: An agency relationship is a legal connection in which an agent is authorized to act on behalf of the principal in various capacities or transactions.
Q: How is an agency relationship formed?
A: Typically, an agency relationship is established through a contractual agreement where terms for the agent’s activities, responsibilities, and compensation are outlined.
Q: What are the primary duties of an agent to a principal?
A: An agent owes the principal duties of loyalty, obedience, care, disclosure, and accounting.
Q: Can a principal be held liable for the actions of an agent?
A: Yes, a principal can be held liable for the actions of an agent if those actions occur within the scope of the agent’s authority.
Related Terms: fiduciary duty, contract law, principal-agent relationship, broker, employer-agent relationship.
