Principal Agent relationship

Question 1

Fiduciary duties generally

Answer 1

1. applies to all agents, even unpaid agents 2. includes duty of loyalty and care (including good faith)

Question 2

duty of loyalty

Answer 2

i. the duty to treat the principal fairly a. must not keep profits made while carrying out agency b. must act solely for principal’s benefit c. must not deal with principal as an adverse party, or act on behalf of an adverse party d. must not compete with principal concerning the subject matter of the agency e. must not use P’s property (including information) for own or another’s purposes ii. for breach of loyalty, P may sue for damages and disgorgement of profits (equitable)

Question 3

Duty of care

Answer 3

i. agents must carry out agency with reasonable care ii. i.e. cannot be negligent (ex. consult charts, etc.) iii. sliding scale depending on any special skills that the agent may have

Question 4

Duty to report to principal

Answer 4

5. duty to report to principal

Question 5

Duty of obedience

Answer 5

1. agents must obey all reasonable directions of principal i. principal may be liable for the agent’s acts in violation of directions (apparent or inherent authority), but may seek indemnification 2. can be subsumed under duty of loyalty

Question 6

Principals’ duties to agents

Answer 6

1. duty to indemnify agent for losses and expenses suffered in carrying out principal’s instructions 2. duty to to compensate agent for services, unless specified otherwise 3. principal may not unilaterally end agency relationship if agent has an interest in the subject matter of the agency or an agency power is given for security