Agency Agreements: An Explainer

Sometimes you undergo business transactions that you have insufficient experience or legal authority to undertake. In these situations, you may want to hire someone to act on your behalf and have your authority to sign agreements. However, at the same time you may want them to act in your best interests. An agency agreement is the solution, as it will allow another person to act on your behalf in commercial transactions.

What Are Agency Agreements?

An agency agreement is a contract between you and another individual, for them to act on your behalf in commercial transactions. Fundamentally, you, known as the principal, agrees to let the agent have the authority to enter into legal relationships on your behalf. Legal relationships that are entered by your agent will be treated as if they were signed by you. Importantly, you will be able to specify exactly what authority your agent has. This means that you determine what scope and type of relationships that can enter into as your representative.

How Can I Create An Agency Agreement?

There are several avenues which will create an agency agreement between you and an agent. Firstly, an express contract between the parties will lead to the creation of an agency agreement. This arrangement will include the scope of authority, the timeframe of authority and where the authority can be exercised. Secondly, ratification may create an agency agreement. Ratification means the post-facto authorisation of an act by an individual acting as an agent by another. This means that you can consent to acts done that were initially outside the scope of your agreement. Finally, statute or common law, may automatically create one given the situation.  For example, sometimes a power of attorney may give rise to an agency agreement.

What Obligations Does My Agent Owe Me?

There are several duties that an agent will owe you in an agency agreement. Firstly, agents have to act in your ‘best interests’ and not in their own interest. Furthermore, they are required to avoid any conflict of interest that may interfere with their capacity to act in your best interests. Moreover, an agent is not allowed to disclose confidential information about you, unless you authorise them to do so. Finally, they must not misuse your property or money that they possess as an agent.

When Would I Use an Agency Agreement?

Typically, these agreements are most common in property transactions. Usually when you contract a real estate agent to assist you in the selling of your house, you will form an agency agreement with them. Another circumstance, is if you are selling produce, you may contract an agent to sell your goods to the market. Fundamentally, they are appropriate for when you want another party to be able to act on your authority and in your interests.


Therefore, agency agreements are a good way to ensure that an individual can legally act on your behalf. If you need help to determine the scope or content of your agency agreements, get in touch with a contract lawyer who can help create an agreement that is adapted to your needs.

Unsure where to start? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

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