Agency - Rules

Question 1

Rule: Agency

Answer 1

Agency is the fiduciary relationship that arises when one person, a principal, manifests assent to another person, an agent, that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests asset or consents to act.

Question 2

Rule: Agency - Master-Servant

Answer 2

A master is the principal who employs an agent over whom he maintains control of the right to control physical conduct.

A servant is an agent employed by a master and is subject to the master’s physical control.

A master is liable for his servants’ tortious conduct while acting within the scope of their employment.

Question 3

Rule: Agency - Independent Contractor

Answer 3

An independent contractor is a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking.

He may or may not be an agent.

Question 4

Rule: Fiduciary Obligations of Agents

Answer 4

An agent owes a duty to his principal to act with the care, competence, and diligence, which a similarly-situated agent would act.

Question 5

An Agent MUST:

Answer 5

1. Be fully devoted to the interests of his P + act solely for P’s benefit.
2. Refrain from using confidential information during period of agency + refrain from using or disclosing confidential information and trade secrets acquired during agency after termination.

Question 6

An Agent MAY:

Answer 6

1. Act in a manner that would otherwise constitute a breach of duty, yet does not breach that duty, IF:
   
   • Acts in good faith
   • Discloses all material facts
   • Deals fairly
   • Obtains principal consent for the act/transaction
2. Compete with P after termination of relationship.

Question 7

An Agent must NOT:

Answer 7

1. Acquire a material benefit from a third party in connection with actions taken either on behalf of the principal or through the agent’s position.
2. Use the P’s property for his own (or a 3P’s) purpose, and may not communicate or use the principal’s confidential information for the agent’s (or a 3P’s) purpose.

Profits earned unjustly must be disgorged to principal, even if windfall.

Question 8

Rule: Duty of Loyalty

Answer 8

• Agents under the duty of loyalty may not use resources, reputation, or property of the principal to benefit himself.
  
  • The agent is given these resources in the first place because he is acting on behalf of for the benefit of the principal.
• The agent also had a duty of loyalty to refrain to refrain from competing with the principal during the relationship.
• Lastly, the agent has a duty to refrain from making secret profits conferred because of the relationship.
  
  • If the agent breaches this duty, disgorgement is the remedy.