Duties of Agents and Principals

What must an agent do in accordance with their duties?

Which of the following is NOT a duty of the principal?

What does good faith require of an agent?

What consequence may arise from an agent acting outside of their authority?

What is one obligation of an agent regarding the principal’s funds?

In which situation can an agent be liable regarding misrepresentation?

What happens if the principal decides to 'forgive' the agent for unauthorized acts?

What is the relationship between the agent's lien and the principal's property?

Duties of the Agent

An agent must act in accordance with the instructions given by the principal.
The agent must act with due care and skill.
The agent must act with good faith, honestly and openly.
The agent may not profit secretly or have a conflict of interest.
The agent can appoint a sub-agent unless it requires personal discretion or the tasks were entrusted to the agent personally.
The agent must keep proper accounts.
The agent should not mix the principal’s money with their own.

When an Agent Acts Outside of Authority

The principal may still be bound if the third party can prove the agent had ostensible authority to act in the way they did.
The principal can pursue the agent for breaching their duties.
The principal may actively choose to be bound by the agent's unauthorized acts. However, they must act quickly and notify the third party.

Duties of the Principal

The principal must pay the agreed fee or customary fee for the agent's services when the tasks have been properly performed or when agreed upon.
The principal must reimburse the agent for properly incurred expenses.
The principal must indemnify the agent for losses or liabilities incurred.
The agent has a lien over the principal’s property if they possess it, in order to secure payment for what is due.

Other Liability Situations

An agent who misrepresents that they have authority to represent a principal may be liable for misrepresentation or misleading conduct.

This quiz covers the essential duties of both agents and principals within a contractual relationship. Explore the specific obligations agents must adhere to, including good faith and accountability, as well as the rights and responsibilities of principals. Test your understanding of how actions outside an agent's authority can affect the contractual relationship.