Duties of the Agent and Principal to Each Other

Question 1

Agent’s Duty of Care

Answer 1

• agent owes duty to principal to carry out their agency w/ reasonable care
• degree = “sliding scale” depending on any special skills agent may have
• measure of reasonableness may vary based on compensation (courts probs expect gratuitous agent to put less effort into being careful than paid agent, though could theoretically be the same)

Question 1

Agent’s Duties to the Principal - Basic Concept

Answer 1

• agent = fiduciary of principal (even if unpaid)
  -> owes fiduciary duties of loyalty, obedience to lawful instructions, and reasonable care under the circumstances
• may also owe express contractual duties (if part of agreement)

Question 2

Agent’s Duty of Loyalty

Answer 2

Agent owes undivided loyalty to principal -> includes following obs:
- can’t use position as agent to profit for self
-> if you do, those profits need to go to the principal
- must act solely for benefit of principal (not self or third party)
- must refrain from dealing w/ principal as an adverse party or from acting on behalf of an adverse party
- may not compete w/ principal concerning subject matter of agency
- may not use principal’s property for own purposes or third party’s purposes

Question 3

Agent’s Duty of Obedience

Answer 3

• must obey all reasonable directions of principal
• if disobeys a reasonable direction, will be liable to principal for any loss principal suffers

Question 4

Principal’s Remedies for Agent’s Breach of Duties

Answer 4

Include:
- contract actions
- tort actions
- actions for secret profits
- equitable qactions for accounting
- imposition of a constructive trust
- withholding of compensation for intentional torts or intentional breaches of fiduciary duty

Question 5

Reminders Re Principal’s Remedies

Answer 5

• may recover the actual profits or properties held by agent regardless of whether agent’s profit has caused principal any loss
• may also terminate the agency prior to any termination date in a contract
• wide range of equitable remedies available for breach of fiduciary duties -> court can basically do whatever it wants to “do justice”

Question 6

Subagents

Answer 6

• person appointed by agent to perform functions agent has consented to perform on behalf of principal
  -> watch out for coagents though (no delegation) -> employees of same org presumed coagents rather than subagents of each other (even if hierarchical difference in job)

Question 7

Subagents - Duties+ Liabilities of Agent

Answer 7

• agent has absolute liability to principal for breaches by a subagent
• if principal authorized agent to appoint subagent, subagent owes principal same duties as agent owes the principal
• if agent was not authorized to appoint subagent, subagent doesn’t owe duties to principal but does owe duties to agent

Question 8

Principal’s Duties to Agent - List

Answer 8

• compensation
• cooperation
• indemnity/ reimbursement (especially for expenses)
• express contractual duties

Question 9

Principal’s Duties to Agent - Core Concepts

Answer 9

• NOT fiduciary in nature
• if agent incurs expenses or suffers other losses in carrying out principal’s instructions, principal has duty to indemnify
• principal also should generally cooperate w/ agent + not unreasonably interfere w/ agent’s performance

Question 10

Agent’s Remedies

Answer 10

• a COMPENSATED agent has usual contract remedies against principal (but has duty to mitigate damages)

Question 11

Real Estate Brokers’ Contracts

Answer 11

• in typical real estate brokers’ contract, broker is entitled to compensation when there is a buyer ready, willing, and able to purchase the property
• if seller/principal refuses buyer’s offer that was w/in the terms agreed by broker/agent and seller/principal, seller/principal will be found to be breaching the duty not to interfere w/ agent’s duties + will owe agent their agreed compensation