An agency contract creates a relationship where one person (the agent) acts on behalf of another person (the principal). Both the principal and the agent have certain rights and duties. Here’s an explanation in simple terms:
Duties of Principal
1. Pay the Agent:
The principal must pay the agent the agreed salary, commission, or fees for their work.
2. Reimburse Expenses:
If the agent spends money while doing the principal’s work (e.g., travel costs), the principal must repay those expenses.
3. Protect the Agent:
The principal must protect the agent from losses or damages that happen while they are doing their job legally.
4. Act Honestly:
The principal should be fair and not create unnecessary problems for the agent.
Rights of the Principal
1. Loyalty from the Agent:
The principal has the right to expect the agent to act honestly and in the principal’s best interest.
2. Accountability:
The principal can ask the agent for records or reports about the work they have done.
3. Compensation for Damages:
If the agent does something wrong or breaches the contract, the principal can ask for compensation or cancel the agreement.
Duties of the Agent
1. Follow Instructions:
The agent must obey the principal’s lawful orders and do the work as instructed.
2. Act in the Principal’s Interest:
The agent must put the principal’s interest first and avoid conflicts of interest.
3. Work Carefully:
The agent must perform their tasks with care, skill, and honesty.
4. Keep Records:
The agent must keep accurate accounts of all financial and other transactions made on behalf of the principal.
5. No Delegation:
The agent cannot transfer their duties to someone else unless the principal allows it.
Rights of the Agent
1. Right to Payment:
The agent has the right to be paid for their work, as agreed in the contract.
2. Reimbursement for Expenses:
The agent can ask the principal to pay back any money they spent while doing their duties.
3. Protection from Losses:
If the agent faces losses while working legally, the principal must compensate them.
4. Hold Goods or Money:
If the principal does not pay the agent, the agent can keep the principal’s goods or money until they are paid.
In simple words, the principal and agent must work together fairly and follow the rules of the contract. Both should act in good faith and protect each other’s interests.