Final answer:
When a principal and an agent enter into a representation relationship, an agency relationship is established. The agent acts on behalf of the principal and has a fiduciary duty to act in their best interests.
Step-by-step explanation:
When a principal and an agent enter into a representation relationship, an agency relationship is established. In this relationship, the principal grants the agent authority to act on their behalf in certain matters. The agent has a fiduciary duty to act in the best interests of the principal and follow their instructions.
For example, when a person hires a real estate agent to sell their property, an agency relationship is formed. The agent has the authority to negotiate offers, advertise the property, and complete paperwork on behalf of the principal. The agent is bound by a duty of loyalty, confidentiality, and obedience to the principal.
Therefore, the correct answer is B) Agency relationship is established.