BCOR 320 1nd Edition Lecture 29Chapter 16: Agency LawCreating Agency Relationship:  Agency is a relationship in which the agent agrees to perform a task for, and under the control of, the principal To create an agency, there must be: ◦ Principal: Person who has someone else acting on him ◦ Agent: Person who acts for someone else◦ Who mutually consent that the agent will act on behalf of the principal◦ Be subject to the principal’s control◦ Creating a fiduciary relationship Consent – Principal must ask the agent to do something:◦ Agent must agree Control – Principals are liable for the acts of their agents ◦ They exercise control over the agents Fiduciary relationship – Trustee acts for the benefit of the beneficiary◦ Agents have a fiduciary duty to their principals Elements not required for an agency relationship include:◦ A written agreement Equal dignities rule: If an agent is empowered to enter into a contract that must be in writing,then: The appointment of the agent must also be written◦ Formal agreement◦ CompensationDuties of Agents to Principal: Duty of loyalty - The agent:◦ Must act for the benefit of the principal◦ May not receive outside benefits without approval of the principalThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.◦ Can neither disclose nor use for her own benefit any confidential information◦ Is not allowed to compete with his principal within the scope of the agency business Duty of loyalty - The agent:◦ May not act for two principals whose interests conflict◦ May not become a party to a transaction without the principal’s permission◦ May not engage in inappropriate behavior that reflects badly on the principal An agent must obey the principal’s instructions, unless illegal or unethical Agent must act with reasonable care◦ An agent with special skills is held to a higher standard because he/she is expected to use those skills Agent must provide information◦ An agent has a duty to provide the principal with all information in her possession that: She has reason to believe the principal wants to knowPrincipal’s Remedies when the Agent Breaches a Duty: The principal can recover damages caused by the agent’s breach The agent must refund any profits made from the agency, if he breaches his duty of loyalty The principal may rescind a transaction with a disloyal agentDuties of Principal to Agent: Duty to reimburse the agent for reasonable expenses – Three categories◦ Principal must indemnify an agent for expenses reasonably incurred in carrying out his agency responsibilities◦ Principal must indemnify an agent for tort claims brought by a third party if: Principal authorized the agent’s behavior and the agent did not realize he was committing a tort Duty to reimburse the agent for reasonable expenses – Three categories◦ Principal must indemnify the agent for any liability she incurs from third parties as a result of: Entering into a contract on the principal’s behalf, including attorney’s fees and reasonable settlements Duty to cooperate◦ Principal must furnish the agent with the opportunity to work◦ Principal cannot reasonably interfere with the agent’s ability to accomplish his task◦ Principal must perform his/her part of the contractTerminating Agency Relationships: Termination by agent or principal◦ Three choices in terminating the relationship Term agreement Time Achieving a purpose Mutual agreement Agency at will Wrongful termination Principal or agent can no longer perform required duties◦ Failure to obtain license◦ Bankruptcy ◦ Death or incapacity of the principal or agent◦ Disloyalty of agent Change in circumstances◦ Change of law ◦ Loss or destruction of subject matter Termination of the agency ends the agent’s power to act on behalf of the principal Principal’s duty to reimburse expenses of the agent ends with the end of the agency Confidential information remains confidential and unusable, even after the end of the