Agent definition

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

Examples of agents are sales representatives and shipping agents. Another example is someone who enters into negotiations on behalf of a client.

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.