When an agency agreement is concluded, a tri-partite relationship is established between the principal, the agent, and the third party. This relationship is essential to understand as it determines the rights and obligations of each party involved.
In simple terms, an agency agreement is a contract between two parties: the principal who hires an agent to act on their behalf and the agent who agrees to perform certain tasks on behalf of the principal.
The third party comes into the picture when the agent conducts transactions or negotiations with them on behalf of the principal. The tri-partite relationship is formed between the principal, agent, and third party when the agent acts on behalf of the principal in dealings with the third party.
Let`s take a closer look at each party`s role and responsibilities.
The Principal
The principal is the person or organization who hires the agent to act on their behalf. They are the ones who have the authority to instruct the agent and give direction to the agent`s activities. The principal is responsible for providing the necessary resources and information to the agent to carry out their duties.
In terms of the tri-partite relationship, the principal is responsible for fulfilling its obligations to the third party, which includes honoring any contracts or agreements made by the agent with the third party. The principal is also responsible for providing the necessary funds to the agent to carry out their duties.
The Agent
The agent is the person or organization who is hired by the principal to act on their behalf. They act as a representative of the principal and are responsible for carrying out their tasks as per the principal`s instructions.
In the tri-partite relationship, the agent is responsible for acting in the best interests of the principal and completing their tasks with due diligence. The agent is also responsible for ensuring that the third party is aware that they are acting on behalf of the principal. This includes ensuring that any contracts or agreements are made in the name of the principal.
The Third Party
The third party is the person or organization that the agent interacts with on behalf of the principal. The third party is not a party to the agency agreement, but they are affected by it. This is because the third party is entering into contracts or agreements with the principal through the agent.
In the tri-partite relationship, the third party can hold the principal responsible for any actions taken by the agent. This means that the principal must ensure that the agent is acting in accordance with their instructions and is not exceeding their authority.
Conclusion
In conclusion, the tri-partite relationship that exists when an agency agreement is concluded is essential to understand. It determines the rights and obligations of each party involved and can have legal implications that need to be taken into consideration. By understanding the roles and responsibilities of each party, you can help ensure that the agency agreement runs smoothly and that all parties involved are aware of their obligations.