Duties of Agent to Principal

Question 1

Duty of Good Conduct and to Obey

Answer 1

An agent is subject to a duty not to act in a manner that makes continued friendly relations with the principal impossible or to bring disrepute to the principal.

An agent must obey all reasonable directions from the principal but has no duty to perform acts which are illegal, unethical, or unreasonable.

Question 2

Duty to Indemnify Principal for Loss Caused by Misconduct

Answer 2

A principal has an act in tort or contract against an agent who wrongfully causes it loss, as where the agent negligently damages the property of the principal, or exceeds his authority, or by negligence or fraud causes the principal to be liable to a third person, or violates a duty of loyalty owed the principal.

Question 3

Duty to Account

Answer 3

Unless otherwise agreed, an agent is subject to a duty to keep and render to his principal, an account of money or other things which he has received or paid out on behalf of the principal.

Question 4

Scope of Fiduciary Duties

Answer 4

An agent’s fiduciary duty is limited to actions occurring within the scope of his agency; the creation of the agency relationship is not itself within that scope.

Question 5

Duty of Care

Answer 5

Agents have a duty to conduct the affairs of the principal with a certain level of diligence, skill, and competence.

(1) The degree of skill required by an agent in pursuit of the principal’s objective is limited to the level of competence which is common among those engaged in like businesses or pursuits.
(2) An agent cannot be held liable to the principal simply because he failed to procure for him something to which the latter is not entitled.

Question 6

Duty of Disclosure

Answer 6

A breach of fiduciary duty occurs if the agent conceals from the principal material information (information that bears upon the transaction in question).

(1) An agent is thus required to disclose to the principal any facts which might reasonably affect the principal’s decision.

(2) The burden is on the principal to demonstrate that the agent was aware of the non-disclosed fact, that the non-disclosed fact was material, and that the agent breached his or her fiduciary duty.
(3) Materiality is determined by whether a reasonable person would attach importance to its existence or nonexistence in determining his choice of action.

Question 7

Duty of Loyalty - During the Relationship

Answer 7

When an agent places his own interests above those of the principal there is a breach of the duty of loyalty to the principal.

Where an agent seeks to recover compensation growing out of the same transaction in which he was guilty of being disloyal to the principal, the court is justified in denying the compensation.

Question 8

Duty of Loyalty - Post-termination Competition

Answer 8

RUPA: Unless otherwise agreed, after the termination of the agency, the agent:

(1) has no duty not to compete with the principal
(2) has a duty to the principal not to use or to disclose to third persons in competition with the principal or his injury, trade secrets, written lists of names, or other similar confidential matters only meant for the principal’s use
(3) the agent is entitled to use general information concerning the method of business of the principal.

Question 9

Duty of Loyalty - Covenants Not to Compete

Answer 9

The reaosnableness of a covenant depends upon several factors, including:

(1) its geographical extent
(2) the duration of the limitation
(3) the nature of the employee’s duties
(4) and the nature of the interest which the employer seeks to protect

Question 10

Duty of Loyalty - Self-dealing

Answer 10

There is a direct conflict of interest if the agent is both the buyer for the principal and the seller.