This Article suggests a fundamental shift in how we think about agency. The essential function of agency law lies not only in enabling the delegation of authority, as is widely suggested, but as significantly in its effect on creditors’ rights through asset partitioning. There is an increasing temptation in legal scholarship to treat agency law as a sideshow confined to the first day of corporations class. This is because much of what agency law does in commerce could simply be accomplished through standard-form contracts that provide default terms for the relationships among firms, their managers, and third parties. Even agency’s much-vaunted fiduciary duties can easily be altered or waived by contract—and often are. This Article identifies the essential roles of agency law, which parties could not contractually replicate, and the important efficiencies that flow from them.

Agency’s essential roles in commercial enterprise are twofold: first, to permit one person to attribute the legal significance of his or her acts to another, and second, to facilitate asset partitioning. Just as limited liability partitions off the assets of a firm’s owners from the assets of the firm itself, agency law partitions off the assets of a firm’s managers from the firm’s own assets. Recognizing this function reframes the usual staging of contractual disputes in agency as a zero-sum balancing act between the interests of third parties and of principals. Whether owners or managers should be liable for a firm’s unpaid contracts is not just a win-lose distributional question—pitting the firm’s creditors against insiders—but rather can be socially efficient. Through simplifying and specializing asset pools, asset partitioning lowers the cost of monitoring the firm’s assets and thus the cost of credit. To illustrate the asset partitioning role of agency law, I unearth two doctrines ignored by scholarship—the “veil piercing” doctrines of agency.

Understanding agency’s asset partitioning role has extensive implications for theory and practice. In addition to providing a unifying account of agency law, the analysis resolves current disputes in the interpretation of its doctrine. Most importantly, recognizing the essential roles of agency demonstrates its ongoing significance to commercial and corporate law.