An agent is a third party that has been given the legal right to represent a business (the "principal") and enter into contracts on that business' behalf.

What Is an Agent?

A person or organization acting on behalf of another party is known as an agent. It has the authority to sign contracts on behalf of its principal. When operating in accordance with its obligations to that party, the agent may expose the principal to responsibility.

Without the legal structure that permits agents to represent firms, how we conduct business would be radically different. Every individual who represents a corporation as an employee in order to conclude a discussion or close a deal is functioning as the company's agent since corporations are themselves legal entities and lack the ability to represent themselves by nature.

There are three crucial aspects to the agent-principal relationship:

1. Through a written, verbal or even tacit agency agreement, the principal and agent agree to the existence of an agency relationship between them.

2. The agent has the same power as the principal to make decisions that affect the principal's legal standing, such as signing contracts that provide the principal with new rights and duties.

3. To guarantee that the agent acts properly and honorably on the principal's behalf, the principal exerts some control over the agent's behavior.

Types of Agents

Depending on their level of power, agents are categorized into four types: 

general agent is someone who is hired to handle all commercial or employment-related transactions, like a company manager. Such an agent may bind the principal by performing any act that is within the normal course of that business or employment. Third parties linked to the business may believe that such an agent is authorized to carry out the typical tasks of a manager.
special agent is someone who is authorized to carry out a specific action or represent their principal in a specific transaction, such as an agent hired to sell computers. The moment the special agent completes the task, the authority expires. Third parties should properly investigate the scope of their power before entering into a contract with these agents because if they perform something that is out of the scope of their authority, the principal is not obligated to cover the loss.
universal agent is able to carry out any task that the principal is legally permitted to do and delegate. They have extensive authority to do any type of business on their principal's behalf.
A sub-agent would be defined as a person engaged and acting under the direction of the original agent in the business. Sub-agents are, to put it simply, the original agent's agents. In some circumstances, such as fraud, the principal may be liable to a third party for the actions of a sub-agent. However, in most cases, the agent is accountable to the principal for the actions of a sub-agent.