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An agency relationship is where one party (the agent) has the authority to enter contracts with a third party (the customer) on behalf of the second party (the principal).
An Agency Agreement occurs when the agent transacts on behalf of the principal, and the actual sales contract is between the principal and the customer. A supplier usually imposes few restrictions on agents and these normally relate to the agent’s powers to bind the supplier.
The agent is accountable for everything they do. If they incur debt, they are the debts of the principal. If they break the law, the vicarious responsibility is that of the principal.
Agency Agreements often concern agents or principals overseas. Such Agency Agreements or contracts may include terms from Incoterms. ‘Incoterms’ refers to the collection of essential international commercial and trade terms. The terms were devised in recognition of non-uniform standard trade usages between various States.
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