Business Law CH 32 (agency formation and duties)

Principal's Duties to the Agent

-Compensation (Express or Implied). when a principal requests certain services from an agent, the agent reasonably expects payment -Reimbursement and Indemnification. The principal has a duty to reimburse the agent for any funds disbursed at the principal's request. -Cooperation. A principal has a duty to cooperate with the agent and to assist the agent in performing his or her duties. The principal must do nothing to prevent that performance. -Safe Working Conditions. The common law requires the principal to provide safe working premises, equipment, and conditions for all agents and employees

Duties of agents & principals

-performance: An implied condition in every agency contract is the agent's agreement to use reasonable diligence and skill in performing the work. When an agent fails to perform his or her duties, liability for breach of contract may result. -notification: An agent is required to notify the principal of all matters that come to her or his attention concerning the subject matter of the agency. This is the duty of notification, or the duty to inform. -loyalty: Loyalty is one of the most fundamental duties in a fiduciary relationship. Basically, the agent has the duty to act solely for the benefit of his or her principal and not in the interest of the agent or a third party. For instance, an agent cannot represent two principals in the same transaction unless both know of the dual capacity and consent to it. -accounting: Unless the agent and principal agree otherwise, the agent must keep and make available to the principal an account of all property and funds received and paid out on the principal's behalf. This includes gifts from third parties in connection with the agency. For instance, a gift from a customer to a salesperson for prompt deliveries made by the salesperson's firm, in the absence of a company policy to the contrary, belongs to the firm. -obedience: when acting on behalf of the principal, an agent has a duty to follow all lawful and clearly stated instructions of the principal. Any deviation from such instructions is a violation of this duty.

agency

A relationship between two parties in which one party (the agent) agrees to represent or act for the other (the principal). ex. A familiar example of an agent is a corporate officer who serves in a representative capacity for the owners of the corporation. ex. Most employees are also considered to be agents of their employers.

exclusive agency

An agency in which a principal grants an agent an exclusive territory and does not allow another agent to compete in that territory.

independent contractor

One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer. An independent contractor is not an employee but may be an agent.

Agency By Operation of Law

The agency relationship is based on a social or legal duty (such as the need to support family members) or formed in emergency situations when the agent is unable to contact the principal and failure to act outside the scope of the agent's authority would cause the principal substantial loss.

Agency By Agreement

The agency relationship is formed through express consent (oral or written) or implied by conduct.

agents rights & remedies

The agent has the right to be compensated, to be reimbursed and indemnified, and to have a safe working environment. An agent also has the right to perform agency duties without interference by the principal. Demand for an Accounting An agent can also withhold further performance and demand that the principal give an accounting. For instance, a sales agent may demand an accounting if the agent and principal disagree on the amount of commissions the agent should have received for sales made during a specific period of time. No Right to Specific Performance When the principal-agent relationship is not contractual, the agent has no right to specific performance. An agent can recover for past services and future damages but cannot force the principal to allow him or her to continue acting as an agent. Constructive Trust Anything that an agent obtains by virtue of the employment or agency relationship belongs to the principal. An agent commits a breach of fiduciary duty if he or she secretly retains benefits or profits that, by right, belong to the principal. Avoidance When an agent breaches the agency agreement or agency duties under a contract, the principal has a right to avoid any contract entered into with the agent. This right of avoidance is at the election of the principal. Indemnification In certain situations, when a principal is sued by a third party for an agent's negligent conduct, the principal can sue the agent for indemnification—that is, for an equal amount of damages. The same holds true if the agent violates the principal's instructions.

Agency By Estoppel

The principal causes a third person to believe that another person is the principal's agent, and the third person acts to his or her detriment in reasonable reliance on that belief.

Agency By Ratification

The principal either by act or by agreement ratifies the conduct of a person who is not in fact an agent.

fiduciary

The term fiduciary is at the heart of agency law. This term can be used both as a noun and as an adjective. When used as a noun, it refers to a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking. When used as an adjective, as in the phrase fiduciary relationship, it means that the relationship involves trust and confidence. Agency is a "fiduciary" relationship based on trust and confidence.