Future Business Leaders of America (FBLA) Business Law Practice Exam

What is defined as a relationship where one person acts on behalf of another in business transactions?

1. Partnership

2. Agency

3. Trust

4. Corporation

The correct answer is: Agency

The term that describes a relationship where one person acts on behalf of another in business transactions is agency. In an agency relationship, the agent is authorized to perform certain acts or make decisions that legally bind the principal (the person they represent) in various transactions. This relationship is instrumental in business as it allows for effective management and delegation of responsibilities, enabling agents to negotiate contracts, make purchases, or take legal action on behalf of the principal. In contrast, a partnership refers to a business arrangement where two or more individuals share ownership and operate a business together, but it does not specifically highlight the aspect of one person acting on behalf of another. A trust is a legal arrangement where one person holds property for the benefit of another, differing fundamentally from agency, as it involves the management of assets rather than the representation in transactions. A corporation is a legal entity that is separate from its owners, providing limited liability protection, but again, it does not encapsulate the concept of one person acting on behalf of another as agency does. Thus, agency is the most accurate term for the relationship described in the question.