#8796 - Rights And Duties Between Principal And Agent - Agency and Other Unincorporated Businesses

RIGHTS AND DUTIES BETWEEN PRINCIPAL AND AGENT

1. Duties of Principal to Agent

It is the agent who is the active party in the relationship, the party in whom the trust is placed.

An Agent is a fiduciary

1. Duty of Exoneration and Idemnification

ADMIRAL ORIENTAL LINE V. UNITED STATES (very important)

Admiral was employed by Altantic Gulf which was an agent of the U.S. in operation of a ship.

Admiral was sued by Elkton’s Cargo owners & won but spent a lot & claims that was paid as an expense of operating as Atlantics Agent.

Atlantic tried bring in U.S. claiming U.S. Principal of whole deal & thus had to pay Atlantic for any expenses it had in defending suit but also any expenses lobbied against it by a “sub-agent”

Rule:

The Venture Is The Principals, and that, as the profits will be his, so should the expenses!

An agent, compelled to defend a baseless suit, grounded upon facts performed in his principals business, may recover from the principal the expense of his defense.

The general doctrine is that an agent may recover any expenditures necessarily incurred in the transaction of his principal’s affairs.

Rest. 3^rd §8.14 comment B, recognizes a limitation on the indemnity principle:

“a principal’s duty to indemnify doesn’t extend to losses that result from an agents own negligence, illegal acts, or other wrongful conduct”

-The principal bears the burdens (of indemnity) to the extent that the ct believes to be just, considering the customs of the business & the nature of the particular relation”

A subagent is entitled to indemnity against either the immediate or the remote principal for appropriate expenses or losses.

2. Duty to Pay Compensation

1. Implied-in-Fact Contract

MCCOLLUM v. CLOTHIER

Rule: except where the relationship of the parties, the triviality of the services, or other circumstances indicate that the parties have agreed otherwise, it is inferred that one who requests or permits another to perform services for him as his agent promises to pay for them.

Test: under all the evidence, were the circumstances such that the Plaintiff could reasonably assume he was to be paid and that the defendant should have reasonably expected to pay for such services?

MCKNIGHT v. PEOPLES-PITTSBURGH TRUST CO.

Action for breach of contract

Subagent is an agent of the agent. A person to whom the agent delegates his own performance of an act for the principal which the agent has been empowered to perform through his own representative. (principal has to have consented)

But compensation to the subagent is based on contract and so a contract between the P and the subA must be shown ( or is must be shown to be the custom of the industry)

There are expenses that the agent himself has to pay, “the expenses of being an agent”

2. Duties of Agent to Principal

1. Duty of Good Conduct and to Obey

2. Duty to Indemnify Principal for Loss Caused by Misconduct

3. Fiduciary Duties of Agents

1. Duty of Care

CARRIER V. McLLARKY

Duty of care: must perform to a level of competence of those engage in a standard of like business. Look to what kind of agent you hired, not what they’re hired to do.

DUTY OF CARE IS DILIGENCE, SKILL AND COMPETENCE. STANDARD IS REASONABLENESS.

1. HYPO: if you hire a plumber to do plumbing, you hired a reasonable plumber.

2. Duty of Disclosure

OLSEN v. VAIL. ASSOC. REAL ESTATE

1. Dude sold farm and didn’t know that buyers were going to put up a power plant

2. Duty to disclose material facts

3. Materiality depends on whether it would make a difference if the fact were known

4. Material fact is information that bears upon the transaction in question

5. Must give any info that reasonable people would consider important

6. MUST DISCLOSE ALL FACTS WHICH AGENT KNOWS OR SHOULD KNOW WOULD REASONABLY AFFECT THE P’S JUDGMENT, unless P has manifested that he knows such facts or that he doesn’t care about them...