Which law governs relationships where one party acts on behalf of another?

Agency law governs the relationships where one party acts on behalf of another. This legal framework allows an agent to make decisions and take actions on behalf of a principal, establishing a fiduciary relationship between the two. Such a relationship involves trust, where the agent must act in the best interest of the principal. The principal often grants the agent certain authority, ranging from limited to broad, enabling the agent to engage in transactions or make representations that legally bind the principal.

In contexts such as business, agency law is crucial because it facilitates operations and agreements without necessitating direct involvement of the principal in every transaction. This allows businesses to delegate responsibilities efficiently, supporting effective management and operational flow. Understanding agency law is essential for navigating contractual obligations and liability issues that may arise when an agent engages in activities on behalf of a principal.