By: Martin M. Shenkman, CPA, MBA, JD
An "agent" is someone who acts on behalf of or represents another person called the "principal". The principal appoints or designates another to act as his or her agent. That designation can be accomplished in a number of different legal documents and for a myriad of purposes. The relationship can be created verbally, although there are limitations. The courts may even infer in certain circumstances that an agency relationship exists even when the parties involved did not formally create one (e.g., implied contract). In some instances the relationship of principal and agent is referred to as "master" and "servant". An example would be an employer for whom an employee serves as an agent. An agency relationship is a "fiduciary" relationship, a position of trust. This is important for an agent to consider as it affects the level and degree of responsibility that the agent has. An agent can be appointed in a commercial context. For example, a wholesale distributor appoints someone as his agent in a particular geographic region to sell. An agent relationship is commonly created in a personal estate planning context by signing a power of attorney. There are a host of different types of agencies. For example, you can designate someone as your "exclusive agent" so that they have the exclusive right to handle a particular transaction. You can designate a A"general agent" who has broad authority to transact business or other matters for you. You can create an "implied agency" by your actions that create the impression that a particular person is your agent.
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