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Questions and Answers
An agency involves a fiduciary relationship between an agent, a principal, and a fourth party.
An agency involves a fiduciary relationship between an agent, a principal, and a fourth party.
False (B)
The principal in an agency relationship is the individual who delegates authority to the agent.
The principal in an agency relationship is the individual who delegates authority to the agent.
True (A)
The agent is the party who is involved in the transaction with the principal.
The agent is the party who is involved in the transaction with the principal.
True (A)
In an agency relationship, the agent does not owe any duties to the principal.
In an agency relationship, the agent does not owe any duties to the principal.
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A third party in an agency relationship can be anyone not directly involved between the agent and the principal.
A third party in an agency relationship can be anyone not directly involved between the agent and the principal.
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Study Notes
Agency Relationships
- Agency involves a fiduciary relationship encompassing three main entities: the agent, the principal, and a third-party entity.
- The principal is the individual who grants authority to the agent, empowering the agent to act on their behalf.
- The agent is the individual engaged in transactions or actions in representation of the principal.
- Contrary to common assumptions, the agent does not owe any legal duties to the principal during the agency relationship.
- The third party refers to any individual or entity not directly involved in the interaction between the agent and the principal, potentially impacting the agency dynamics.
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