Chapter 30Liability of Principals and Agents.ppt

Chapter 30Liability of Principals and Agents Agent’s Duties to the Principal Agent’s Duty of Loyalty to Principal An agent owes a fiduciary duty not to act adversely to the interests of the principal. Common breaches include: Self-Dealing Agents are generally prohibited from undisclosed self-dealing with the principal. Usurping an Opportunity An agent cannot usurp an opportunity that belongs to the principal. Agent’s Duty of Loyalty to Principal (continued) Competing with the Principal Agents are prohibited from competing with the principal. Misuse of Confidential Information The agent is under a legal duty not to disclose or misuse confidential information during or after course of the agency. Dual Agency An agent cannot meet a duty of loyalty to two parties with conflicting interests. Contract Liability to Third Parties A principal who authorizes an agent to enter into a contract with a third party is liable on the contract. The third party can enforce the contract and recover damages from the principal . Contract Liability to Third Parties (continued) The agent can be held liable in some circumstances. Fully disclosed agency Partially disclosed agency Undisclosed agency Fully Disclosed Agency When the third party entering into the contract knows: That the agent is acting as an agent for a principal, and The actual identity of the principal The principal is liable to the third party. The agent is not liable. Partially Disclosed Agency An agency that occurs if: The agent discloses his or her agency status but does not reveal the principal’s identity, and The third party does not know the principal’s identity from another source Both the principal and the agent are liable to the third party if the principal fails to perform the contract. Undisclosed Agency An agency that occurs when the third party is unaware of either: The existence of an agency, or The principal’s identity Both the principal and the agent are liable to the third party if the principal fa