Ch. 26 Operation and Termination of an Agency

Agent's Duties to Principal

Responsibilities that an agent owes to their principal, including loyalty, obedience, reasonable skill and diligence, accounting, and providing information.

Loyalty and Good Faith

The duty of the agent to act in the best interests of the principal, maintaining trust and confidentiality.

What happens when the agent is not loyal to the principal?

The agent may breach their fiduciary duty, leading to potential legal consequences and loss of trust.

Obedience

The agent must carry out all lawful instructions given by the principal.

Reasonable Skill and Diligence

The agent is expected to perform their duties with the competence and care that a reasonable person would exercise in similar circumstances.

Accounting

Duties of an agent include keeping a detailed record of financial transactions and managing funds on behalf of the principal.

Information

The agent must provide the principal with all relevant information regarding the agency relationship.

Principal's Duties to Agent

Responsibilities that the principal owes to their agent, including compensation, reimbursement, indemnification, and adherence to contract terms.

Compensation

The provision for payment to the agent, which can be expressed or implied.

The courts will typically fix a reasonable rate if there are disputes arising from agency relationship

 People cannot get work or things for free!

 Concept of unjust enrichment What is unjust enrichment

An example of this is an executor of a will. (reimbursement)

Can be on contingency (if sale happens)

What can the provision for payment be?

The provision for payment can be expressed or implied.

Reimbursement

The principal must reimburse the agent for expenses incurred in the course of performing their duties, excluding negligent behavior.

Indemnification

To secure the agent against hurt, loss, or damage incurred while acting on behalf of the principal.

Compensation for incurred hurt, loss or damage

Adherence to Terms of the Contract

The principal must abide by the terms of the contract made by the agent in all respects.

Cooperation is expected through the end of the agreement. (Agent must be employed for the term of the contract)

Termination of an Agency by Acts of the Parties

Agency relationships can be terminated through original or subsequent agreements, revocation, or renunciation by the agent.

Termination by Operation of the Law

Agency relationships may also terminate due to subsequent illegality of the subject matter, death or incapacity of either party, destruction of subject matter, bankruptcy of the principal, dissolution of a corporation, or war.

Original Agreement

Date expires; or execution of work

Subsequent Agreement

Forming of a new agreement with a new agent often terminates the old one

Revocation

 Refers to revoking the authority of the agent, terminating the agency

  Exception: agency coupled with interest

Agency coupled with interest: agency in which the agent has financial stake in the performance of agency

The agent has a lien on the principals property to ensure payment

Renunciation by the agent

Formal rejection by the agent; still responsible for work undone

Termination by Operation of the Law

• Subsequent Illegality of subject matter

• Death or incapacity of either party

• Destruction of subject matter

• Bankruptcy of principal

• Dissolution of corporation

• War