What defines an Agency agreement?

An Agency agreement is defined as a binding contract that establishes a fiduciary relationship between the principal and the agent. In this context, fiduciary means that the agent has the authority to act on behalf of the principal, and must do so with loyalty and in the best interests of the principal. This relationship is characterized by trust and a legal obligation for the agent to act according to the directions of the principal, making the agreement enforceable by law.

The significance of this definition lies in the legal responsibilities that come with an Agency agreement. It is not simply a casual arrangement or an informal promise; rather, it is a structured agreement that creates obligations and rights for both parties involved. This structure allows for accountability and ensures that both the principal and the agent understand their roles and responsibilities within the arrangement. The other options do not accurately reflect the legal seriousness or the nature of the relationship defined by an Agency agreement, underscoring the unique aspects of such contractual arrangements.