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Unformatted text preview: TEST 3 REVIEW CHAPTER 28 Agency: The Inside Relationship Creating An Agency Relationship To create an agency relationship, there must be: Consent- the principal must ask the agent to do something and the agent must agree Control- principals liable for actions of agents b/c they exercise control over agents (ex: companies and employees) Fiduciary Relationship- high standards Beneficiary has special confidence that fiduciary who is obligated to act in good faith putting his own needs second Agents have a fiduciary duty to their principals Elements not required for an agency relationship: In most cases a writing is not required (exception: The equal dignities rule: if an agent is allowed to enter into a contract that must be in writing, then the appointment of the agent must also be in writing) Duties of Agents to Principals Agents owe a fiduciary duty to their principals Duty of loyalty Agent must act solely for benefit of principal in all matters Agent may not receive profit unless principal knows and approves Confidential information Agents can neither disclose nor use their own benefit any confidential info they acquire during agency Duty continues even after agency relationship ends Competition with the principal Agents are not allowed to compete with principal in any matter within scope of agency business Conflict of interest: agent may not act for 2 principals whose interests conflict Secretly dealing with principal: if principal hires an agent to arrange transaction agent may not become party to transaction without principals permission Appropriate behavior: agent may not engage in inappropriate behavior that reflects badly on principal Duty of due care Remember professionals (accountants, lawyers, doctors, etc.) are held to a standard higher than ordinary negligence Gratuitous agent (not paid) held to lower standard- liable if they commit gross negligence but not ordinary negligence Principals remedies when the agent breaches a duty Damages If the agent breaches the duty of loyalty, he must turn over to the principal any profits he has earned as a result of his wrongdoing If the agent has violated the duty of loyalty, the principal may rescind the transaction Duties of Principals to Agents Indemnification (reimburse) agent for any expenses reasonably incurred Duty to cooperate principal cant impede agents effort principal must give agent opportunity to work principal is allowed to compete with agent principal must perform her part of contract Terminating an Agency Relationship: both agent and principal can terminate relationship Term agreement Principal and agent can agree in advance how long their relationship will last Achieving a purpose Principal and agent can agree that the agency relationship will terminate when the...
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This note was uploaded on 04/30/2008 for the course BA 2301 taught by Professor Mattpolze during the Spring '08 term at University of Texas at Dallas, Richardson.
- Spring '08