Agency: Internal Governance

Question 1

What are the Fiduciary Duties owed by Principals to Agents?

Answer 1

§ 8.14: Reimburse agent promised payments made by agent within scope

§ 8.15: Deal with agent fairly & in good faith

Question 2

What are the Fiduciary Duties owed by Agents to Principals?

Answer 2

Duty of LOYALTY

Duty not to acquire MATERIAL BENEFIT from third party transaction

Duty not to DEAL ADVERSELY to principal

Duty not to COMPETE (but may prepare to compete)

Duty not to use/disclose CONFIDENTIAL INFORMATION

Duty of CARE normally exercised in similar circumstances

Duty to PROVIDE INFORMATION to principal

Duty to keep ACCOUNT of principal’s property

Question 3

Can an Agent’s Duties of Loyalty by Modified?

Answer 3

Yes. Conduct by A that would otherwise breach the listed duties does not constitute a breach if principal consents, provided that Agent acts in good faith and discloses all material facts in obtaining the consent.

Question 4

Duty of Care

Answer 4

Fiduciary duty Agent has to Principal

If an agent claims to have special skills or knowledge, then the agent has a duty to act with the care normally exercised by agents with such skills or knowledge.

Otherwise, the standard is simply the ordinary care that an agent would use in similar circumstances, if the agent is paid, or gross negligence for unpaid agents.

Question 5

Duty of Loyalty

Answer 5

Fiduciary duty Agent has to Principal

The agent must not put his or her own interests ahead of those of the principal.

For example, the agent must not:
- Compete with the principal,
- Act adversely to the principal,
- Take a business opportunity that belongs to the principal, or
- Abuse the agent position to earn unauthorized side profits, bribes, or tips.

Question 6

Duties Related to Information

Answer 6

An agent has a duty to provide information to the principal that the agent knows or has reason to know the principal would wish to have, as well as to provide the facts that are material to the agent’s duties to the principal.

Question 7

Duty of Confidentiality

Answer 7

The duty of confidentiality means that the agent must not disclose or misuse confidential information. The duty of confidentiality notably remains in force even after the agency relationship has terminated.

Question 8

What Happens if an Agent Breaches their Fiduciary Duties to the Principal

Answer 8

If an agent breaches any of their fiduciary duties without the consent of the fully informed principal, the agent could be liable to the principal for any resulting damages.

The agent could also be liable to disgorge to the principal any profit made by the agent in breach of a duty.