Principals and Agents Flashcards
What is the primary duty owed by agents to principals?
Duty of Care
Agents must follow reasonable instructions, perform duties with care, and indemnify the principal against losses from wrongful behavior.
What are the key components of the Duty of Care?
- Follow the principal’s reasonable instructions
- Perform duties with reasonable care
- Indemnify the principal against loss caused by wrongful behavior
What is the Duty of Loyalty in agency law?
The agent must prefer the interests of the principal over their own or others’ interests
It includes avoiding self-dealing and not competing with the principal.
What is the Duty to Account?
An agent must account for money or property received for the principal and keep the principal’s assets separate from their own assets.
What does the Duty of Candor require of an agent?
An agent must fully disclose any facts relevant to a transaction that the principal might want to know.
What is the principal’s Duty of Compensation?
The principal has a quasi-contract duty to pay the agent the reasonable value of services rendered, unless agreed otherwise.
What happens if a principal fails to meet the Duty of Compensation?
The agent can seek restitutionary damages.
What is the Duty of Reimbursement?
The principal is obligated to reimburse the agent for all reasonable expenses incurred in the scope of the agency.
What is the Power to Bind in agency law?
An agent can bind the principal to contracts entered into on the principal’s behalf within the scope of authorized powers.
What is Actual Authority?
Created by the principal’s manifestation to the agent to act for their benefit, agreeing to be bound by the agent’s actions.
What is Express Authority?
The authority granted through direct oral or written communication from the principal to the agent.
What is Implied Authority?
The authority to do anything necessary to accomplish the principal’s express request or based on the agent’s reasonable understanding of the principal’s wishes.
What is Apparent Authority?
Arises from the principal’s representations to a third party, leading them to believe the agent is acting with the principal’s authority.
True or False: A principal is accountable for third-party beliefs about an agent’s authority.
True
This accountability exists when the belief is reasonable and traceable to the principal’s manifestation.
What does it mean for a principal to ratify an unauthorized act of an agent?
By ratifying, the principal retroactively grants the agent authority and agrees to be bound by the contract.
How can a principal ratify an unauthorized transaction?
- Manifesting assent that the act shall affect the principal’s legal relations
- Conduct that implies consent to be bound
