Agency 1 of 1 (44)

Question 1

Agency

Answer 1

A relationship in which one party, an agent, represents the interests of, and is authorized to obligate, another party, the principal. The agent has a fiduciary duty to be loyal to the principal in an agency relationship and to look out for the principal’s best interests in all matters where the agent is acting on behalf of the principal.

Question 2

Fully Disclosed Principal

Answer 2

An arrangement under which third parties dealing with an agent know both that they are dealing with an agent on behalf of a principal as well as the identity of the principal, as a result of which, the third party may hold the principal liable for all authorized actions of the agent, but may not hold the agent liable.

Question 3

Partially Disclosed Principal

Answer 3

An arrangement under which third parties dealing with an agent are aware that they are dealing with an agent on behalf of the principal but are not aware of the principal’s identity, as a result of which, the third party may hold the agent liable, or may hold the principal liable if they become aware of the principal’s identity, giving the agent recourse against the principal for any losses resulting from authorized actions.

Question 4

Undisclosed Principal

Answer 4

An arrangement under which third parties dealing with an agent are unaware of the fact that they are dealing with an agent and are operating under the assumption that the agent is acting in the capacity of a principal, as a result of which, the agent is liable to the third party but has recourse against the principal for any losses resulting from authorized actions.