What does the Law of Agency state about agents in contracts?

The Law of Agency establishes the relationship between agents and their principals, emphasizing that agents have the authority to act on behalf of their principals in business dealings. When an agent enters into a contract within the scope of their authority, the principal is legally bound by that contract. This is a fundamental principle in agency law, as it ensures that principals are held accountable for the actions taken by their agents when acting within the bounds of given authority.

This binding effect underscores the importance of the agent operating within the scope of their authority and indicates that principals must be diligent in selecting and supervising their agents. The relationship is a fiduciary one, meaning that agents must act in the best interests of their principals. This concept also conveys the responsibility of agents in managing the obligations that arise from the contracts they execute on behalf of their principals, thus reinforcing the relationship of accountability in agency matters.