In the principal/agent relationship, who acts on behalf of whom?

In a principal/agent relationship, the agent acts on behalf of the principal. This dynamic establishes the agent as a representative who undertakes tasks and makes decisions under the authority granted by the principal. The key aspect of this relationship is that the agent is empowered to execute specific duties, usually in a business context, where the principal seeks to delegate certain responsibilities.

For example, in financial transactions, a company may hire an agent to negotiate deals or manage investments on its behalf. The agent’s actions reflect the interests and directives of the principal, effectively making decisions and engaging with third parties that are legally binding on the principal.

This definition clarifies the roles within the relationship and underscores the trust involved; the principal relies on the agent’s expertise and judgment to advance their interests. Therefore, the identification of the agent as the party that acts on behalf of the principal is essential in understanding the structure and function of such partnerships.