Agent Definition Business

The agent definition business is important to be aware of, particularly if you have an agent legally acting on you or your company’s behalf. Specifically, an agent is someone who has the legal right to act on behalf of another person or business, referred to as the principal. Such agents might be hired to negotiate or deal with third parties. As such, the agent is under a duty to act strictly on behalf of the principal, and has a specific scope of authority with which to act.

However, some agents might have what is referred to as apparent authority, meaning that he can take action on behalf of the principal as he sees fit. An example of this would be an attorney acting as an agent.  An example of someone that wouldn’t be considered an agent is an advertising agency. Such agencies are not agents of their clients because they are acting as principals for the purchased servicing bought on behalf of the client.  

What is an Agent: An Overview

Anyone can serve as an agent so long as they are mentally able to understand what is expected of them. An agent can serve for free and need not charge a fee to the principal. An example of when an agent would serve for free is if a senior citizen, acting as principal, allows his adult child to act as power of attorney. In this case, the adult child is the agent acting on behalf of the elderly parent.

The duties of the agent can vary depending on the relationship between the parties, and what type of duties the principal is seeking from the agent. Some examples include:

  1. An agent selling the principal’s home
  2. An agent acting on behalf of a company in a business vendor agreement
  3. An agent acting as an attorney for the principal
  4. An agent who is a family member of the principal
  5. An agent having direct managerial control over a business

Implied vs. Express Authority

Authority can be implied or expressly given by the agent. If the authority is expressly stated, then the principal is telling the agent what he can and cannot do. However, implied authority occurs when the principal tells the agent what needs to be done, and the agent needs to take additional measures to complete the job. The additional actions taken are appropriate under the implied authority theory, as a principal could reasonably expect such additional actions might be needed in order to carry out the express authority.

Can an Agent Enter Into Other Contracts?

An agent cannot enter into any other contract that would cause a conflict of interest with the outstanding contractual duties identified in the ongoing principal-agent contract. If this does in fact occur, the principal can revoke any authority previously given to the agent. This might cause contractual issues, particularly if a contract is in place that prohibits revocation. But such contracts will likely indicate that the agent cannot enter into another contract that would cause a conflict.

Certain terms and provisions should be included in the contract to protect both the principal and agent. For example, a principal might include a provision to the effect of prohibiting the agent to enter into another contract that would otherwise cause a conflict of interest; if the agent fails to abide by the requirement, then the principal has the option of voiding the contract or suing for breach of contract.

What is a Principal?

A principal is the person or business seeking an agent to carry out the work on their behalf. Some examples of principal-agent relationships include the attorney/client, company/officer, and employer/employee relationship.

Duties of a Principal and Agent

The principal has 3 duties, including:

  1. A duty to honor the contract
  2. A duty to deal fairly
  3. A duty to indemnify the agent

The agent has his own duties, including:

  1. A duty to act in the best interest of the principal
  2. A duty not to engage in self-dealing
  3. A duty to act competently, i.e., the agent must fully understand his rights and responsibilities under the contract
  4. A duty of care, i.e., agent cannot act negligently

If you need help learning more about the agent definition in business, or how to draft a principal-agent contract, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.