An agent is a legal person who acts on behalf of another, often negotiating and concluding contracts on behalf of that other. Agency, which describes the relationships created by the use of an agent, is much more common than you might first think. In the commercial world, one bank might act as an agent for several others in a syndicated loan agreement; the master of a vessel acts as an agent for all of the owners of cargo on a ship; insurance brokers are agents for the assured (not insurance companies in the commercial world) and auctioneers act as agents for owners of goods. On a more local level, estate agents act as agents for landlords and directors act as agents for their companies, as the legal person (the company) has no ability to communicate.

Key concepts

The parties

The person who the agent acts on behalf of is known as the principal. The relationship between the agent and the principal is often called the internal relationship. The person with whom the agent negotiates or concludes contracts with (on behalf of the principal) is known as the third party. The relationship between the principal and agent on one hand, and the third party on the other, is known as the external relationship.


Agency is created by agreement. It is usually (but not always) non-gratuitous, so there is a contract in place. This agreement will confer authority on the agent; this limits the scenarios in which the agent is permitted to act on the principal’s behalf...

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