Agent definition

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What is an Agent?

An agent is an individual or business that acts on behalf of another party. This authority may be express (via an agreement) or implied. An agent may enter into contractual relationships on behalf of its principal. The agent may trigger a liability for the principal when acting within the scope of its responsibilities for that party.

Examples of Agents

Here are several examples of agents:

  • Real estate agent. A real estate agent represents a buyer or seller in property transactions, negotiating deals and handling paperwork on their behalf. If a homeowner hires an agent to sell their house, the agent has the express authority (through a contract) to market the property, find buyers, and negotiate terms. The agent earns a commission based on the final sale price.

  • Insurance agent. An insurance agent acts on behalf of an insurance company to sell policies and assist customers in selecting coverage. For example, if a customer wants auto insurance, the agent provides policy options, explains terms, and processes applications. The agent has the express authority to bind policies within certain limits and earns commissions from policy sales.

  • Sports agent. A sports agent represents athletes in contract negotiations, endorsements, and career management. For example, a professional basketball player may hire an agent to negotiate a multimillion-dollar contract with a team. The agent has the express authority to act in the athlete’s best interest, ensuring they receive fair compensation and sponsorship opportunities.

  • Travel agent. A travel agent arranges flights, hotels, and vacation packages for clients, often acting as an intermediary between customers and travel providers. If a family wants to book an international trip, the agent selects the best travel options, makes reservations, and handles itinerary details. The agent has implied authority to book services on behalf of clients, ensuring a smooth travel experience.

  • Stockbroker. A stockbroker acts as an agent for investors by buying and selling stocks on their behalf. If an investor instructs their broker to purchase shares in a company, the broker executes the trade using the investor’s funds. The stockbroker operates under express authority granted by the investor through a brokerage agreement.

Advantages of Agents

There are several significant advantages associated with using agents, which are as follows:

  • Low cost. Agents are quite cost-effective, since there are rarely any fixed costs associated with them. Instead, agents are only paid if they perform a specific service for the principal.

  • Good local knowledge. Agents tend to have significant knowledge of local conditions, which makes them ideal for handling transactions in geographically dispersed areas.

Disadvantages of Agents

There are several disadvantages to using agents, which may them a good choice only under very specific circumstances. These disadvantages are as follows:

  • Fewer resources. Agents tend to be smaller, under-capitalized entities, and so cannot invest significant funds on your behalf.

  • Not loyal. Agents work on commission, and so will spend more time selling the goods and services of those parties willing to pay them larger commissions.

  • Requires support. You may have to provide agents with significant marketing support in order to generate sales in the markets that they are supporting.

  • Liability for unauthorized actions. You may find that an agent commits you to an unauthorized liability, for which you may be found liable in a court of law.