Quiz 32: Agency Formation and Duties

Business

An agency exists when an agent agrees to act on the behalf of the principal, in the principal's best interest, and there is a manifestation of intent for both parties. In addition, the principal is always ultimately in control. In this case, PG never consented to an agency relationship with AW. He did not know AW was pretending to act on his behalf. AW did not act in the principal's best interest, because PG had no knowledge of these deals and AW disappeared when the contract was completed. There was no agency relationship.

Agency relationship Since B hired S to assist in sales, B is the principal and S is his agent. Both represent M Mutual Life, but that part of the relationship matters little here. Since B hired Scott to assist in sales, B is the principal and S is his agent. Both represent M Mutual Life, but that part of the relationship matters little here.

An agent owes a fiduciary duty to his principal once an agency relationship is formed. This duty is made up of a duty of loyalty and a duty to inform. The duty of loyalty means the agent must act in the principal's best interest, not his own or for a third party. The duty to inform requires that the agent inform the principle of material information regarding his duties as an agent. In this case, A did not inform P about the shopping mall or the increased value of the property. This constitutes a a failure of her duty. When there is a breach of duty, the contract is voidable by the principal. Thus, P can cancel his agency relationship with his agent A.

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