Explanation

Agent is a person who acts on behalf of his master, called principal on delegating some work and authority.
 
Principal is the person who hires someone else, that is, an agent to work on his behalf, he is the master to his agent.
 
An agency relationship exists when a person, called principal, hires another person, that is, an agent, to work on his behalf and delegates him some authority and responsibility. The agent is supposed to work under the guidance of his principal and should not make any personal benefits out of the relationship.

Verified Answer

An agent is a person who works for his master in lieu of a fixed compensation. An agent works for the principal.
 
A principal is a person who employs another person to work on principal's behalf for a fixed compensation. This person is the agent to the principal.
 
Agency relationship is the relationship between a principal and his agent where the former employs the latter to work on his behalf after delegating some required authority and paying the required compensation.