If an individual or company (''agent'') agrees to act upon behalf of another organization or person (''the principal''), then an agency agreement is typically used. This document gives the agent the authority to act in the principal's interests. It also covers the nature of the relationship between the two parties, including information on when the agency agreement is terminated and responsibilities of the agent, plus compensation for the action.
Additional information that may be present in the document can include territory the agent may represent, trademark information, insurance protection and indemnification. If the agent were to incur expenses while acting as an agent, the agreement typically includes how they should be handled and other terms. Other topics one may include in the document are terms concerning records, taxes, warranties and state of governing law.
An agency agreement is a document that clearly states and defines the relationship between the parties, and protects both of their interests. Without drawing up the agreement, the agent may not be aware of the scope of their abilities. It is often used in the medical field, such as between a drug representative and the medication manufacturer.