What document is commonly used to outline the terms of agency?

A written agency agreement is commonly utilized to clearly outline the terms of agency because it provides a formal and legally binding record of the relationship between the principal and the agent. This document specifies the scope of authority granted to the agent, the obligations of both parties, and any relevant compensation or term conditions involved.

Written agreements are essential in agency relationships as they help prevent misunderstandings and provide evidence in case of disputes. The clarity and specificity of a written document reduce ambiguity that can arise from informal communication methods. Therefore, when establishing an agency relationship, a written agreement is preferred to ensure all parties are fully informed of their rights and responsibilities.

In contrast, verbal agreements, email confirmations, and mutual understandings lack the formal structure needed for clear legal enforcement, which can lead to complications if disagreements arise or if the terms need to be verified.