The Duty of Loyalty

Abstract

A. between agent and principal B. between agent, principals and third parties II. Creation of Agency Relationship A. Agency arises when agent agrees to act on behalf of principal and principal is willing to enter this relationship. The characteristics are 1. a principal 2. an agent 3. mutual consent 4. principal controls agent 5. a fiduciary relationship B. Consent 1. Both agent and principal must consent to existence of relationship C. Control – A principal is liable because he or she exercises control over the agent. If no control exists, the principal should not be liable for the agent's acts. D. Fiduciary relationship E. What is not required for an agency 1. In most cases, no writing is necessary unless the equal dignities rule applies. 2. In general, a formal agreement is not necessary. If the parties act as agent and principal they will be treated as such under the law. 3. A gratuitous agency is possible. III. Duties of Agents to Principals Note that agents are fiduciaries but principals are not. That means that different duties are owed by an agent to a principal as compared to the duties owed a principal by an agent.