DUTIES OF THE AGENT AND THE PRINCIPAL TO EACH OTHER Flashcards
What fiduciary duties does the agent owe to its principal?
- Duty of care
- Duty of loyalty
- Duty of obediance
An agent is a _______ to it’s principal?
Fiduciary
What is the duty of care?
An agent owes a duty to her principal to carry out her agency with reasonable care (a “sliding scale” depending on any special skills that the agent may have).
What is basically the duty of care from the agent to it’s principal?
Basically act as a reasonable agent under the circumstances.
What is the duty of loyalty?
The agent owes a duty of undivided loyalty to the principal.
What five obligations does the agent owe the principal under the duty of loyalty?
(1) an agent must account to the principal for any profits made while carrying out the principal’s instructions;
(2) an agent must act solely for the benefit of the principal and not to benefit himself or a third party;
(3) an agent must refrain from dealing with his principal as an adverse party or from acting on behalf of an adverse party;
(4) an agent may not compete with his principal concerning the subject matter of the agency; and
(5) an agent may not use the principal’s property (including confidential information) for the agent’s own purposes or a third party’s purposes.
Priscilla authorizes Agnes to buy diamonds. Agnes spots choice diamonds and secretly buys them for herself for $1 million. Agnes then resells the diamonds to Priscilla for $2 million. Has Agnes done anything wrong? If so, under what duty?
Yes, breach of the duty of loyalty, she acted to benefit herself, she dealt with the principal as an adverse party
Priscilla authorizes Agnes to buy diamonds. Agnes spots choice diamonds and secretly buys them for herself for $1 million. Agnes then resells the diamonds to Priscilla for $2 million. What remedies does Priscilla have against Agnes?
Principal may sue for damages as well as disgorgement of the profits made by the agent
What is the duty of obedience?
An agent must obey all reasonable directions of his principal.
Under the duty of obedience, if the principal is liable for the agent’s acts in violation of directions (apparent authority), can the agent be liable to the principal for those losses?
the agent will be liable to the principal for any loss that the principal suffers.
If the agent does not have actual authority can the agent be liable for the losses suffered by the principal in any deal the agent made on the principal’s behalf? If so, under what duty?
Yes, under the duty of obedience.
When Beavis, in violation of Butthead’s instructions, bought more supplies from KMart, Butthead was liable for the price of the supplies on apparent authority grounds. Does Butthead have an action against Beavis for the price of the supplies? If so, under what duty?
Yes. Beavis acted without actual authority and hurt butthead. Duty of obedience breached.
Are a principal’s duties to an agent fiduciary in nature? Why or why not?
No, A principal’s duties to an agent are not fiduciary in nature as fiduciary responsibilities run only from the agent to the principal.
What obligations does the principal owe to the agent?
The principal has a duty to
- indemnify the agent and to
- Compensate the agent (if they are did not agree to act gratuitously)
What does the duty to indemnify mean?
if an agent incurs expenses or suffers other losses in carrying out the principal’s instructions, the principal has a duty pay back the agent.
