What is a key requirement of an agency agreement?

A key requirement of an agency agreement is to clearly define and allocate the responsibilities and rights of each party involved—the agent and the principal. This mutual understanding is crucial because it establishes the framework for the relationship, outlining what the agent is authorized to do on behalf of the principal, as well as the obligations the principal has to the agent.

By explicitly stating the rights and responsibilities, the agency agreement helps prevent misunderstandings and conflicts that may arise in the relationship. For instance, it might specify the extent of the agent's authority, any commissions or fees payable, and the duration of the agency. This clarity is essential for maintaining effective business operations, ensuring accountability, and protecting the interests of both parties involved in the agency relationship.