What type of relationship does agency create between the principal and the agent?

In the context of agency, a fiduciary duty is established between the principal and the agent. This duty is characterized by a relationship of trust and confidence in which the agent is expected to act in the best interests of the principal. The fiduciary obligation requires the agent to be loyal and to disclose any potential conflicts of interest, ensuring that the principal's interests are prioritized above the agent's personal interests.

This relationship is paramount in various fields, including funeral service, where professionals must advocate for their clients with honesty and integrity. The agent must handle the principal’s affairs responsibly, making decisions that are in line with the principal’s wishes and best interests.

In contrast, other types of relationships, such as partnerships or seller-buyer dynamics, do not inherently carry the same level of fiduciary responsibility. While a partnership involves mutual responsibilities among partners, and a seller-buyer relationship involves commercial transactions, they do not bind the parties in the same way that agency does through fiduciary duties. Furthermore, a non-disclosure agreement’s primary role is to protect confidential information rather than govern the ethical and operational conduct that defines a fiduciary relationship. Thus, the establishment of a fiduciary duty underlines the significance of trust and ethical behavior inherent in agency relationships.