When an employer hires an employee to enter into contracts on behalf of the employer, an agency relationship typically exists.
An agency relationship exists between an employer and the employee, when the former authorizes the latter to act on his behalf, including to enter into contracts and agreements.
The employer is called the principal, and the employee is called the agent. These arrangements are made with the consent of both parties, and the principal is bound by what his agent does.
Agency relationships are essential for firms that do business globally. This is because the principal, through the agent, is able to be in more than one place at a time, thereby expanding the scope of their business.
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