Duties of Agent/Principal Flashcards
Agency Definition
Agency is a fiduciary relationship that arises when one person (the principal) appoints another (an agent) to act on the principal’s behalf and the agent consents to act. The agent must also act subject to the principal’s control.
Consent - both P & A must consent (can express or implied)
On Behalf Of - A must act primarily for P’s benefit
Control - A acts subject to P’s control
Capacity Requirements
Principal = contractual capacity
Agent = minimal capacity (anything OK unless there’s literally zero mental capacity)
General rule: unincorporated companies can’t be Ps; however, most jurisdictions allow Pships and other business entitites to be P’s
Formalities
- Consent (both parties)
- Writing (agency law doesn’t actally require writing; however, if K or relationship falls within SoF, then writing req)
- No consideration needed
Modes of Creating Agency Relationship
- Act of the Parties (actual authority, apparent authority, or ratification)
- Operation of Law (estoppel, or statute)
Creation of Agency - Elements
- Capacity (P = contractual; A = minimal)
- Consent (both parties)
- Writing required if SoF applies (equal dignities rule)
Consideration never required
Agent’s Duties to Principal
Agent has a fiduciary relationship with principal. They owe P:
1. Duties expressly contained in contract
2. Fiduciary Duty (loyalty, obedience, and care)
Agent’s Duty of Care
Must carry out agency with reasonable care.
The degree of care = “sliding scale” (depends on special skills agent has)
Agent acting without compensation versus agent acting with compensation may still owe the same duty of care. however, courts will probably expect a gratuitous agent to put less effort into being careful than a paid agent.
Agent’s Duty of Loyalty
Owes undivided loyalty to the principal. Includes:
1. Can’t profit for themselves (if they do, they need to account)
2. Must act solely for the benefit of the principal (cannot benefit a third party)
3. Can’t treat principal as an adverse party or act on behalf of an adverse party
4. Can’t compete with principal
5. Can’t use principal’s property for own or third party purposes
Agent’s Duty of Obedience
Agent must obey all reasonable directions of the principal. If they disobey, agent liable to principal for any loss
Principal’s Remedies for Agent Breach
- Contract Actions
- Tort Actions
- Actions for Secret Profits
- Equitable Actions for Accounting
- Imposition of a Constructive Trust
- Withholding compensation for intentional torts or intentional breaches of fiduciary duty
Principal’s Recovery Options
P may recover by:
1. receiving actual profits/properties held by agent (regardless of loss)
2. terminating the agency
3. whatever “justice” so requires as determined by court of law
Subagent
Person appointed by an agent to perform functions that the agent has consented to perform on behalf of the agent’s principal
Not every person appointed by an agent will be a subagent (they could be a co-agent, which is another agent of the principal). Employees of a single organizations are presumed to be co-agents, not subs.
Liability for Subagents
Agent = absolute liability to principal for sub’s breaches
Duties owed by subagent
If sub was authorized by principal = sub owes same duties as agent owes to the principal
if sub wasn’t authorized = doesn’t owe any duties to principal, but rather the agent
Principal’s Duties
Only agent owes fiduciary duties to the principal; principal does not owe them to the agent. However, principal owes: (1) duties imposed in K; (2) reasonable compensation; and (3) reimbursement for expenses.
P should also cooperate w agent and not unreasonably interfere with agent’s performance.
Note that if the agency agreement is silent regarding compensation, agent is entitled to reasonable compensation. Also remember that a princnipal generally owes no compensation to a subagent (even if agent had authority to hire the subagent).
