What is an agency relationship in business transactions?
An agency relationship in business transactions is an arrangement where one person, known as the principal, consents to another person, known as the agent, to act on their behalf in making decisions and completing tasks related to the transaction. In Texas, an agency relationship is governed by the Texas Business and Commerce Code and requires a written agreement between the principal and the agent. The written agreement should identify the duties of the agent and the authority they have to make decisions on behalf of the principal. The agreement should also outline the specific tasks to be performed by the agent and how they will be compensated for their services. The agreement may also include details about the length of the relationship, how to end it, and whether the principal will have the right to cancel the agreement. The principal is responsible for any decisions and actions taken by the agent on their behalf. If any losses occur as a result of the agent’s actions, the principal will be held responsible. In addition, the principal should provide the agent with any information or documents they require in order to fulfill their duties. Agency relationships can be beneficial for business transactions as they allow one person to represent the interests of another in the decision-making process. As a result, it is important to make sure that any agreement is clearly outlined and reflects the intentions of all parties involved.
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