In agency relationships, who is considered the principal?

In an agency relationship, the principal is the individual or entity that authorizes the agent to act on their behalf. This often involves making decisions or entering into contracts related to specific transactions. The principal is not simply anyone involved in the transaction; instead, it is specifically the client who hires the agent to represent them.

In real estate or business transactions, this distinction is crucial because the agent has a fiduciary duty to act in the best interests of the principal. The agent must also keep the principal informed and conduct transactions according to the principal's instructions. Therefore, understanding the role of the principal is essential for recognizing the dynamics of agency relationships and the responsibilities that arise from them.

The other options represent various roles in a transaction but do not embody the definition of the principal as it pertains to the agency relationship. The agent acts on behalf of the principal, the third party is typically someone with whom the agent transacts, and the real estate office may provide support but does not hold the principal’s role unless explicitly defined in an agency agreement.