How To Draw Up an Agency Agreement

All There Is To Know About an Agency Agreement

When overwhelmed with responsibilities and chores, people often authorize another party to act on their behalf and take over certain duties. The smart move would be to sign a legal document to avoid any unpleasantries. An agency agreement is commonly used in such situations. It’s a valid legal document regulating the duties of the party acting as an agent.

When Should I Use an Agency Agreement?

An agency agreement is a legally binding contract between an agent and a principal. The principal authorizes another party to make legal decisions and act on his/her behalf. This party is the agent, performing the tasks the principal delegates.

Agency agreements are common in the following situations:

  • Outsourcing vendors
  • Hiring an accountant
  • Working with real estate agents
  • Hiring legal representation
  • Using marketing services
  • Working with investment brokers
  • Making decisions for the employer

What Should an Agency Agreement Contain?

Whenever you are drafting an agency agreement, include the following:

  1. The names of the principal and agent
  2. Description of the agency’s purpose
  3. Duration of the agreement
  4. Agent’s duties
  5. The geographic area where the agent acts
  6. Agent’s compensation
  7. A clause that the agent is not an employee of the principal, but an independent party
  8. Termination policy
  9. The dispute resolution process
  10. A clause stating no oral agreement can change the written one
  11. Signatures of both parties

What Is an Undisclosed Principal Agency Agreement?

In an undisclosed principal agency agreement, the agent acts on the principal’s behalf but does not reveal his/her identity. The agent does not mention the principal’s name, but the principal is bound by the agreement the agent signs.

The Risks of an Agency Agreement

The biggest risk of an agency agreement is liability. By authorizing the agent to act on his/her behalf, the principal also faces the consequences of their actions. If the agent participates in some illegal activity, the principal will be liable.

To avoid any unpleasant situations, make sure to:

  • Read the contract thoroughly
  • Consider and list the goals of the agreement
  • Include the liability policy
  • Notarize the agreement
  • Include the breaching policy

Are Agency Agreements the Same as Employment Agreements?

Although these two legal documents share certain features, they are not the same. With an agency agreement, there is no full employment. An employment agreement comes with benefits such as:

  • Paid time off
  • Health care benefits
  • Retirement benefits
  • Life insurance

Agency agreements don’t offer such benefits and usually last shorter than employment agreements.

What Are Ratification and Fiduciary Responsibilities in Agency Agreements?

If an agent goes beyond the scope of the agreement or is still not officially the agent to the principal in question, ratification can take place. It is the process of giving consent to an action that has already happened. The principal can also sign the agency agreement later, thus accepting the actions of the agent.

Fiduciary responsibility is a legal responsibility to act in the best possible interest of the principal. When signing, the agent agrees to always act with the principal’s best interest in mind. This responsibility presupposes that the agent must:

  • Avoid dual relationships if possible
  • Keep the principal’s information confidential
  • Avoid prioritizing personal benefits

What Happens if an Agency Agreement Is Violated? How Can I Terminate It?

If a principal or an agent violates the agency agreement, the other party can file a lawsuit. The principal can lose business profits because of the agent. The agent could sue the principal if he/she did not uphold the agreement. Other parties can sue either the principal or the agent.

Apart from the lawsuit, which can result in the termination of the contract, you can cancel an agency agreement by giving notice. The agreement should state the required period.

The agreement can also end when a specific action is complete if the principal and the agent agreed on this.

DoNotPay Helps You Create a Legal Document Easily

Getting a lawyer to draft an agreement for you can be expensive. Doing it yourself may be time-consuming if you are not familiar with the law. You can and solve your problems in a moment! Follow the steps:

  1. Search for DoNotPay using your
  2. Input the name of the agreement you’d like to have
  3. Provide the necessary information to our chatbot

DoNotPay will draw up the desired agreement in no time! Always sign or notarize it to make it official.

Our database offers various customizable templates, and we are working diligently to include more. For now, we can assist you with the:

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