agency

Fiduciary relationship between two parties in which one (the 'agent') is under the control of (is obligated to) the other (the 'principal') . The agent is authorized by the principal to perform certain acts, for and on behalf of the principal. The principal is bound by the acts of the agent, performed in carrying out entrusted duties and within the scope of agent's authority. An agency can be created by (1) express agreement, whether oral or written, (2) implication, based on the custom or practice of the trade, or (3) conduct of the principal. Under the legal doctrine of estoppel, the principal is prohibited from denying the existence of a properly constituted agency. Creation of agency is essential to commercial and financial transactions, because an organization (as a legal entity) can function only through its agents.