Agency is generally defined as a relationship between a principal and an agent. In the agency relationship, the agent is authorized to act for and on behalf of the principal, who hires the agent to represent him or her. One of the most important relationships in the business world is the agency relationship, in which the employee may be an agent of the employer and have the ability to bind that employer legally.

CONCEPT REVIEW:

Before beginning this activity, review the information contained within LO $20-3$ in Chapter $20.$ These Learning Objectives explore the nature and creation of the different types of agency relationships. Recall that agency relationships can be created on the basis of any of the following four forms of authority: by expressed agency, by implied authority, by apparent agency, or by ratification.