The basic principles of the law relating to agency are extremely important in the shipping world; very many of the tasks carried out by those in shipping business involve the relationship between agent and principal. It is, therefore vital that the rights, duties and liabilities that are a consequence of this relationship are fully understood. One word of caution must be made at the outset about the legal and non-legal uses of the term ‘agent’. In the legal sense an agent is someone who does not act on his own account, but only as a legal representative of another person. In ordinary usage the term ‘agent’ may loosely be used to describe someone who buys and sells goods or services on his own account; such a person is a principal regardless of the term used to describe the situation. Agency is the legal device by which one person (the agent) may act on behalf of another (the principal). An agent is one who brings his principal into contractual relationships with third parties. The contractual parties to the contract as arranged by the agent will be the principal and the third party. The agent will not be a party to the contract and thus will have no contractual liability to the third party under the contract. Throughout this lesson it must be borne in mind that the words broker and agent should be taken as having the same meaning. The tendency is to use the word ‘broker’ when considering negotiations where the principal gives authority for a firm offer (or an eventual acceptance) to be transmitted to representatives of the other party, whereas the word ‘agent’ is more commonly used when a function such as port agency is involved.