An agency agreement is a legal contract in which one person (the agent) is authorized to act on behalf of another person or company (the principal).

Simple Meaning:

It is an agreement that allows someone to represent and act for another party.

Key Features:

The agent acts on behalf of the principal

The agent earns commission or fee

The principal is responsible for the agent’s authorized actions

Example:

A company appoints a sales agent to sell its products in a particular area under an agency agreement.

Purpose:

Expand business reach

Delegate authority

Define rights and responsibilities

In short, an agency agreement gives legal authority to one party to act for another.