What duties are owed to the Principal by the Agent on the UBE / MEE? - Agency Law

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 Duties Owed to the Principal by an Agent - An Undervalued Section of Agency Law on the UBE

Duties Owed
In return for reasonable compensation and reimbursement of any expenses, an agent (hereinafter “A”) owes a principal (hereinafter “P”) the following duties:

1 – Duty of Reasonable Care.  In other words, an A must exercise reasonable care in carrying out his or her functions including keeping the P informed of progress with respect to the status of the P-A responsibilities.

2 – Duty to Obey Reasonable Instructions.  This is not the case, however, if the instruction(s) is/are to break the law or to lie. Otherwise, the A must be obedient with regards to instructions provided to him or her by the P.

3 – Duty of Loyalty.  The following are things that an A can NEVER do:
(a) – Self Dealing – A can’t receive a benefit to the detriment of the P; and/or
(b) – Usurp the P’s opportunity (corporate or otherwise); and/or
(c) – Secret Profits – making a profit at the P’s expense without full disclosure of same.

4 – Duty to Preserve Confidential Information. A principal will usually need to reveal a number of secrets to his agent, for example, how much he is willing to sell or pay for property, marketing strategies, and the like. Such information could easily be turned to the disadvantage of the principal if the agent were to compete with the principal or were to sell the information to those who do. The law therefore prohibits an agent from using for his own purposes or in ways that would injure the interests of the principal, information confidentially given or acquired. 

5 – Duty to Avoid Self-Dealing.  A fiduciary may not lawfully profit from a conflict between his personal interest in a transaction and his principal’s interest in that same transaction. A broker hired as a purchasing agent, for instance, may not sell to his principal through a company in which he or his family has a financial interest. The penalty for breach of fiduciary duty is loss of compensation and profit and possible damages for breach of trust.

These duties can be remembered as five categories: (1) Care, (2) Obey Instructions, (3) Loyalty, (4) Preserve Info, (5) Avoid Self-Dealing.

Remedies if a Breach Occurs

There are remedies available for a P if the A has breached a duty and they include (1) P can recover losses cause by the breach AND/OR (b) can also cause the A to disgorge the profits made by the A due to the breach.

 Should you have any additional questions about the duties owed to a P by an A, duties owed to an A by a P, Agency law in general or another area of the UBE, please do not hesitate to contact us at PassYourBarExam@gmail.com


GOOD LUCK!

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