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WHAT IS SOLE SELLING AGENCY AGREEMENT?

An agency agreement is formed when one person, called the agent, is authorized by another person, called the principal, to act on the principal's behalf. A principal who assigns agency to an agent is creating a legal relationship with the agent. Agency agreements are important for businesses to understand. Contracts establishing a relationship of the agency are very common in business law. These can be express or implied. An agency is created when a person delegates his authority to another person, that is, appoints them to do some specific job or a number of them in specified areas of work. Establishment of a Principal-Agent relationship confers rights and duties upon both the parties.

Agency agreements are generally limited in scope in order to best serve the needs of the principal. As an agent, or as a principal, you are entitled to alter or limit the agreement in anymanner that you see fit before signing. Agents owe a duty of loyalty, care and obedience to their principal, also known as a fiduciary duty.

WHY IS IT NEEDED?

Agency agreements can have many benefits for the principal, especially when that principal happens to be a small-business owner. Few people have all of the specialized skills needed to run a business, so asking a professional to act on your behalf as an agent saves you time and helps you conduct business in a more efficient way. Using an advertising agency is one example, or outsourcing human resources functions. The main risk in the legal relationship between the principal and the agent is that the principal can be held liable for misconduct on the part of the agent. If an agent makes a mistake or performs an illegal activity while representing the principal, the principal may be technically considered to have committed the act, since the agent was essentially acting as the principal.

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