Chapter 19 - Relationship of Principal and Agent
DUTY TO INDEMNIFICATION
A principal has an obligation to indemnify (compensate for a loss) an agent whenever the agent makes a payment or incus an expense or other loss while acting as authorized on behalf of the principal. A principal also has a duty to indemnify the agent when the agent suffers a loss that fairly should be borne by the principal in light of their relationship.
DUTY TO REIMBURSE
a principal has a duty to reimburse the agent when the agent makes a payment within the scope of the agent's actual authority.
Power of Attorney
is an instrument that states an agent's authority. A principal may, for example, appoint an agent not only to execute a contract for sale of the principal's real estate, but also to execute the deed conveying title to the real estate to the third party.
DUTY TO INFORM
An agent has a duty to use reasonable effort to provide the principal with facts the agent knows, has reason to know, or should know if (1) the agent knows, or has reason to know, that the principal would wish to have the facts; or (2) the facts are material to the agent's duties to the principal. Example: selling something at a higher price than authorized by the principal.
TERMINATION OF AGENCY
A. LAPSE OF TIME B. MUTUAL AGREEMENT OF THE PARTIES C. REVOCATION OF AUTHORITY - a principal may revoke an agent's authority at any time by notifying the agent. D. RENUNCIATION BY THE AGENT - the agent also has the power to end the agency by notifying the principal that she renounces the authority given her. E. DEATH
Duty to Account for Financial Benefits
An agent has a duty not to acquire any financial or other material benefits in connection with transactions conducted on behalf of the principal.
DUTY OF DILIGENCE
Exercise reasonable care, making sure everything is done properly. An agent has a duty to the principal to act with the care, competence, and diligence normally exercised by agents in similar circumstances. Special skills or knowledge possessed by an agent are circumstances to be taken into account in determining whether the agent acted with due care and diligence. Moreover, if the agent claims to possess special skills or knowledge, the agent has a duty to act with the care, competence, and diligence normally exercised by agents with such skill or knowledge.
DUTY TO OBEDIENCE
Obey, act according to the principal's wishes and desires. The duty to obedience requires the agent to act in the principal's affairs only as actually authorized by the principal and to obey all lawful instructions and directions of the principal. Liable for losses
FIDUCIARY DUTY
A fiduciary duty arises out of a relationship of trust and confidence and requires the utmost loyalty and good faith. An agent has a fiduciary duty to act loyally for the principal's benefit in all matters connected with the agency relationship.
DUTY TO COMPENSATE
A principal has a duty to compensate her agent unless the agent has agreed to serve gratuitously.
NATURE OF AGENCY
Agency is a consensual relationship in which one person (the agent) acts as a representative of or otherwise acts on behalf of another person (the principal) with power to affect the legal rights and duties of the principal. Example: partnership and partners.
Independent Contractors
Although the principal has the right of control over the agent, the principal does not control the manner and means of the agent's performance. Although all employees are agents to the principal, not all agents are employees. Finally, not all independent contracts are agents because the person hiring the independent contractor has no right of control over the independent contractor.
Self-Dealing
An agent has a duty not to deal with the principal as an adverse party in a transaction connected with the agency relationship. Thus, an agent who is employed to buy may not buy from himself with the principal's consent.
DUTY TO ACCOUNT
An agent has a duty to keep and render accounts to the principal of money or other property received or paid out on the principal's account. the agent may not mingle the principal's property with any other person's property.
Conflict of Interest
An agent has a duty to not deal with the principal as, or on behalf of, an adverse party in a transaction connected with the agency relationship. An agent must act solely in the interest of his principal, not in his own interest or in the interest of another.
Confidential Information
An agent may not use or disclose confidential information obtained in the course of the agency for his own benefit or those of a third party. Even if the person dies.
Employment Relationship
An employee is an agent whose principal controls or has the right to control the manner and means of the agent's performance of work. All employees are agents.