What is the primary purpose of an agency relationship?

The primary purpose of an agency relationship is to represent one party in business transactions. In an agency framework, one party (the agent) is authorized to act on behalf of another party (the principal) to create legal obligations between the principal and third parties. This dynamic is essential in various business contexts, as it allows the agent to negotiate, make decisions, and enter into contracts that bind the principal.

The agency relationship fosters trust and responsibility, making it possible for individuals or organizations to rely on agents to handle specific affairs, thereby ensuring a more efficient and effective execution of business operations. By having designated agents, principals can focus on other critical aspects of their business while delegating authority to someone skilled in handling the negotiations or transactions at hand.