Agency relationship is a consensual relationship between two parties. where one party. the principal. gives authorization to another party. the agent. to move on behalf of and under the control of the principal to cover with a 3rd party. thereby making a fiducial relationship. The jurisprudence of bureau allows one individual to use another to make his/her work. sell his/her goods. and get belongings on his/her ain behalf. Although a principal-agent relationship can be created by a contract between the parties. a contract is non necessary if it is obvious that the two parties intended to move as chief and agent. The purpose of the parties can be expressed with words or implied by their actions. The principal can authorise the agent to execute a assortment of undertakings or curtail the agent to specific maps. but no affair how much authorization is given to the agent. the agent represents the principal and is capable to the principal’s control at all times. More of import. the principal is apt for the effects of the actions that the agent performed. and the actions and words exchanged between an agent and a 3rd party are adhering to the principal.

This is known as vicarious liability and it is the ground concern proprietors must be highly careful of who they hire to stand for his/her company. Agency theory is the thought that the agent does non ever have the principal’s best involvements in head. A voluntary. good religion relationship of trust. known as a fiducial relationship. exists between a principal and an agent. and there are four chief elements of fiducial responsibility that the agent has toward the principal for the principal’s protection. The first requires the agent to exert a responsibility of trueness to the principal. An agent can non have outside benefits without the permission of the principal. portion confidential information. fraternize with the competition of the principal. work for the principals competition. cover in secret with his/her principal. and must exert appropriate behaviour while stand foring the principals involvements. An agent who acts in his/her ain involvement violates the fiducial responsibility and will be financially apt to the principal for any losingss the chief suffers due to the breach of the fiducial responsibility.

The second of these responsibilities is the responsibility to obey instructions. This states that an agent must follow the waies of the principal unless by making so. the agent would interrupt the jurisprudence or set himself/herself or others in danger. The 3rd fiducial responsibility is the responsibility of attention. which states that an agent must utilize sensible attention to protect the involvements of the principal. And the 3rd of these responsibilities is the responsibility to supply information. This responsibility says that an agent must give any and all information to a principal if that information concerns the principal. The responsibilities that a principal has to an agent are the responsibility to reimburse the agent. and the responsibility to collaborate with the agent.