Agency & Partnership Professor Donald J. Kochan

1. Agency & PartnershipProfessor Donald J. Kochan Class 7

2. Today’s Materials • Pages 101-136 • Principal/Agent Rights and Duties

3. Introduction to Fiduciary Duties Examine this material in terms of the following broad categories: • Care • Disclosure • Loyalty

4. Fiduciary Duties (cont.) From the text: “[An agent] has the duty to account for money or property received on account from the principal [and to keep his principal’s assets separate from his own]. In his dealings with the principal, he has the duty of full disclosure; in acting for the principal he must not prefer his own [or others’] interests, he cannot compete with the principal nor, without disclosure of his interest, sell his own property to the principal. In carrying out the directions of the principal, he has the duty to use normal care.” Warren A. Seavy, The Law of Agency 236 (1964).

5. Duty of Good Conduct and to Obey • Uniqueness of Agency Duty – Generally the Principal Calls the Shots/Guides the Action • Master/Servant Comparison • Protection for Agents Aginst Orders to Perform Acts that are Illegal, Unethical or Unreasonable

6. Duty to Indemnify Principal for Loss Caused by Misconduct • Tort and Contract Liabilities Exist for Agent Misconduct or Otherwise Violations of Fiduciary Duties • Should an Agent Violate Duties, They are Generally Responsible for Losses to the Principal, including the Principal’s Liability to Third Parties • Consent of Principal for Actions of Agent is a Defense

7. Duty to Account • An agent must generally account for the use of a principal’s funds • Commingling of funds generally prohibited • Types of accounting

8. Commencement Issues • When and How is an Agency Relationship Created? • When and How is an Agency Relationship Terminated? • Before your client enters an agency relationship, what would you counsel them to ask? (whether an A or a P)

9. A Return to Carrier v. McLlarkey • Water heater case • Agent duty of “diligence, skill, and competence” What do these mean? – Expectations of parties and claims of expertise and knowledge of skill set all play a role • Standard of Care Issues: Agent must exercise “reasonable efforts to accomplish the directed result” • “’[t]he duties of an agent toward his principal are always to be determined by the scope of the authority conferred’” – Can I hammer home the importance of scope and authority more? 3 Am. Jur. 2d, Agency sec 209

10. Duty of Disclosure • Olsen v. Vail Associates Real Estate, Inc. • An agent must disclose material information which might reasonably affect the principal’s decision • What constitutes “material information”?

11. Duty of Loyalty and Fidelity • Gelfand v. Horizon Corp. • Bilateral loyalty relationship • Disclosure obligations • Remedies issues – what should the agent who breached be on the line for? • Gelfand clearly demonstrates the importance of specificity that should be employed in drafting

12. Trade Secrets, Non-Compete Clauses, etc. We will very briefly discuss these issues: • Post-termination Competition • Trade Secrets • Covenants Not to Compete • Town & Country House & Home Service v. Newberry • Robbins v. Finley

13. Concluding Thoughts For Today, Commit The Basic Doctrines Behind These Concepts to Your Memory: • Fiduciary Duties • Scope of Relationship • Scope and Limitations of Authority • Actual v. Apparent v. Non-Authority of Agents • Powers Granted, Explicitly or Implicitly • Breach • Liabilities to Third Parties