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What Is an Agent? Definition, Types of Agents, and Examples

Photo: Agent Photo: Agent

What Is an Agent? Definition, Types of Agents, and Examples

A legal agent is someone authorized to act on behalf of another. Agents can represent clients in negotiations and other third-party activities. The agent may make decisions.

Attorneys defend their customers in legal problems, and stockbrokers help investors make investment decisions. The agent represents the principal in these cases. A fiduciary relationship in finance allows an agent to operate on behalf of the client and in their best interest.

Understanding Agents

An agent is someone authorized to act on behalf of another in various capacities. Selling a property, executing a will, managing a sports or acting career, being a company representative, etc.

Agents generally know more about a particular business than the ordinary person. If you started becoming noticed as a musician, you would hire a music agent to assist you in acquiring a record deal, signing contracts, and organizing tours.

Because you have no record industry expertise, you would need an agent to watch out for your best interests and do a lot of the job you couldn’t do yourself. This would also free up time for music-making.

Agent kinds vary based on their purpose and business. There are three sorts of agents: universal, general, and special.

Universal Agents
Universal agents have broad client representation duties. These agents often have power of attorney, giving them significant legal representation ability. They may also authorize client financial transactions.

Agents general
General agents are hired to represent clients in certain transactions or cases for a specified time. Their jurisdiction is vast but limited. A talent agent for an actor fits here.

Special Agents
Special agents can make one or more deals in a limited time. This is the agent most people occasionally use. Real estate, securities, insurance, and travel agents are special agents.

Agent Uses

People hire agents to execute things they don’t have time or competence for. Stockbrokers connect investors to the stock market. Agents negotiate contracts for athletes and performers because they know industry norms and how to represent their clients. Prospective homeowners often utilize brokers as middlemen, taking advantage of their negotiation abilities.

Businesses hire agents to negotiate or finish deals based on their expertise, contacts, or background.

Agent Duty of Loyalty

Agents may profit from the business. This is especially true when an agent is compensated to represent the principal. A real estate agent usually gets a commission for selling a home.

Agents must not unfairly gain from their agency status. This includes gaining substantial benefits from the relationship or using their position to get benefits they wouldn’t otherwise get.

Non-Usurpation Duty

When acting for a principal, an agent may get the knowledge it can use for personal gain. An agent may learn of an investing opportunity. The agent must not steal or replace the principal’s transaction ability. In this scenario, the principal decides whether to invest; the agent cannot act on their behalf without the principal explicitly rejecting.

Duty to Not Compete

Similarly, agents cannot compete with principals. The principle is disadvantaged because the agent may obtain trade or commercial secrets during the business relationship. Imagine if an agent had to ship items to their manufacturing warehouse. The agent could exploit principal operations information for its profit.

Transparency duty

Formal agent-principal agreements frequently require agents to declare any other principals they represent. This solemnly states that the agent will treat all principals fairly and in good faith.

Information Protection Duty

Agents must not divulge sensitive information to unrelated parties while engaging with principals. Confidentiality agreements may or may not specify this. In each situation, the agent must assess information sensitivity and the need for others to receive it. This includes avoiding exploiting confidential information for the agent’s gain (exchanging it with an independent third party).

Agent Performance Duties

Contract duty

All written agreements between agents and principals outline their relationship. Many agent-principal contracts are not expressly defined. Custom or purposeful agreements may require highly explicit language that specifies what’s acceptable and what’s not.

Duty of Care
Agents must always handle primary matters with care and expertise. Many believe the agent must act as the principal would, employing prudence as if it would incur personal gain or loss. Whether explicitly stated or not, the level of care should be comparable to local requirements.

When considering the agent’s benefit, the duty of care may be difficult. Consider a broker who receives commissions for selling investment goods. Some clients may not benefit from buying those investments. Thus, the broker must sacrifice personal income to protect the connection by not selling such products to those individuals.

Duty to obey
Agents must follow reasonable orders. Sometimes, acting on one’s behalf and following one’s direction is unreasonable or illegal, but the agent can refuse. Otherwise, the agent must conduct agreement-based duties. The principal may be disadvantaged but has instructed the agent to act a certain way.

Duty to Disclose
As the agent gains sensitive information that may affect a principal’s decision-making, the agent must communicate it accurately and promptly. Example: Los Angeles Dodgers’ Freddie Freeman. Freeman’s agency reportedly didn’t tell him the Atlanta Braves wanted to re-sign him. By hiding such facts, Freeman unwillingly joined another team.

Separation duty
An agent must also separate the agent’s and principal’s affairs. This involves making sure the principal owns any transactions made on their behalf. This also keeps transacted resources and capital in distinct bank accounts and reporting ledgers.

Agent Risk
If an agent violates their obligation or deviates from a reasonable, expected activity on behalf of their principal, they may be responsible. Exceeding their power, behaving in misconduct, being unreasonably negligent, or any other situation where the principal could have avoided a loss may cause this.

When an agent performs a duty for another without disclosing their role, they may be responsible since they were thought to be a principal. If an agent voluntarily assumes personal liability by signing an agreement, they are usually accountable.

Need-based agency
In “agency by necessity,” an agent represents a client who cannot decide. It’s not necessarily incapacitation. Business owners may appoint agents to address unanticipated situations in their absence. Agency by necessity may be utilized to make an emergency business decision if a CEO is unreachable on a flight.

Agency by necessity is usually used when the major party cannot decide. If the primary party gave a third party power to decide, courts would recognize it. The third-party would serve the major party’s best interests.

The agency is typically required in estate planning. Despite having a will, a person may become incapacitated before making necessary changes. Trusted parties may utilize agency here.

Enrolled agents represent taxpayers before the IRS. To become an enrolled agent, one must pass an IRS test on individual and corporate tax returns or have IRS experience. Enrolled agents can represent any taxpayer in any IRS tax department.

A Registered Agent?

LLC registered agents can accept legal documents on behalf of the LLC. All LLCs need a registered agent and can accept tax, legal, government, compliance, and other LLC documents. An LLC registered agent is an “agent for service of processes.” An LLC without a registered agent may be punished, refused financing, unable to sue, and unable to expand out of state.

How do you become a realtor?

Licenses are required to become real estate agents. States have different requirements for this. A person must be 18 years old, a U.S. resident, complete the relicense education, and pass the real estate exam. Before the real estate exam, people can take relicensing classes.

How to Become an Insurance Agent?

Determine what kind of insurance agent you want to be, as it depends on your road to becoming one. Insurance agents might be captive or independent. You must then pick what insurance products to market them.

Next, get your state license. The things you sell rely on the license you need. After the licensing exam, you must submit a background check and license application to your state’s licensing department. After this, find an insurance company.

How to Become a Sports Agent?

A sports license and state registration are required to become a sports agent. Not all states require it. The sport or league you want to join requires certification. A bachelor’s degree is usually required to become a sports agent, while advanced degrees like law assist you in grasping your clients’ contracts’ legal terminology. After getting your license and certification, join a sports agency and create a clientele.

The Verdict

Any person authorized to represent another is an agent. People hire agents when they need more expertise or don’t have time.

Agents are utilized in banking, law, real estate, insurance, acting, and music, but they can be used anywhere sophisticated knowledge is needed. Agents may save time, money, and stress on crucial duties.


  • Agents, like attorneys and stockbrokers, can act on behalf of others.
  • People hire agents to execute things they don’t have time or competence for.
  • Universal agents can act on behalf of others, whereas general and special agents have fewer powers.
  • Agencies, by necessity, represent clients who are physically or intellectually unable to make decisions.
  • Most agent jobs require state licensing and registration.

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