An individual legally empowered to make transactions on behalf of another or a corporation. While endowed with decision-making authority, an individual can also employ an agent to represent clients in negotiations with third parties.
An agent acts in the name of another individual or company who has surrendered or given up a measure of authority. Many commercial activities are performed through agents. Agents work on behalf of a business, company, or individual, representing them to third parties and offering intermediary services without taking title. An agent may also have the legal authority to provide related business functions such as conducting marketing surveys.
Common types of agents in the business scenario include stockbrokers and attorneys representing clients in investment decisions or legal matters. An agent is hired to perform duties that either represented party can't, won't, or doesn't have time to accomplish. In finance, companies hire agents or agency firms to represent their interests in venture negotiations and other third-party interactions.
Businesses can rely on the agent's superior contacts, background, or skills to close deals. In some industry segments, such as the stock markets, agents are an essential part of everyday trade, acting as middlemen between investors and the market. Real estate agents help prospective renters or homeowners negotiate rates, while an absent or incapacitated entrepreneur will rely on a designated agent of necessity. Both the principal and an agent must enter into a fiduciary agreement, often governed by contracts, torts, and other fiscal bylaws.
Example of an Agent
All corporations and their transactions, particularly those involving public organizations, must be conducted through an agent. Since a company like General Motors is an entity, they cannot shake the manufacturers, vendors, and dealers' hands to complete a deal. Whether implied, expressed, or apparent, an agent is by law having a scope of authority to perform their duties on behalf of the principal party.
A common type of agent is a real estate agent who can represent someone buying and selling a home. Andy, a property seller, hires Bertha, a real estate agent. Bertha earns her commission dependent upon the closing price of the property.
Bertha locates Ben, a buyer who agrees to pay $10,000 above Andy's asking price, but she, as an agent, can't close on this deal without a binding signature from all parties. She was contracted to find a buyer and collect her commission when Ben or his financier settles with Andy, the property seller.
Types of Agents
An agent must render an account of all transactions to the principals or their legally authorized representatives. According to the capacity of the type of business or the parties involved, an agent's authority is created using a written agreement, a contract, or by merely being employed.
Agents are classified legally as;
- Universal Agents: These agents act on behalf of their clients, and their mandate is often broad. Some universal agents have a power of attorney to make transactions or be signatories for their principal.
- General Agents: Principals contract a general agent to represent them in a specific transaction for a set period. A general agent's work scope is limited within a specified sphere while having a broad proceeding authority.
- Special Agents: A single agent has the authority to perform a single transaction or a chain of deals within a specified period. As the most common type of agent, special agents are involved in securities, insurance, travel, and real estate.
- An Agent with an Interest: This agent is interested in the business or property, and their commission depends on the continuity of authority to act on behalf of the entity. For example, a literary agent has a vested interest in the author's product, as their contract will stipulate what percentage they earn on the work sold to publishers. As an agent coupled with an interest, the literary agent might also act as a collecting agent on the commission, to not have the interest terminated.