Agent-principal Relationships some info on this important subject

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In the relationship between an agent and a principal, both parties consent to the agent having the ability to act on behalf of the principal. This is known as a form of principal-agent relationship called power of attorney. Such a relationship plays an important role in business, whether it be in the workplace, a partnership, or a corporation.There are three types of authority in a principal-agent relationship: express, implied, and apparent authority. Express authority is what the principal directly tells the agent his duties and responsibilities are. This cannot cover every detail though, so the authority extends to what is necessary for the agent to carry out the principal?s instructions. Such authority is known as implied authority. There is also apparent authority in which the principal leads another to believe that a certain person is his agent. This is also known as agency by estoppel.The relationship is said to be fiduciary, meaning that there is a degree of trust and obedience on the agent?s part. The agent owes various duties to his principal. One of these is the duty of loyalty; the agent must act for the principal?s benefit and not his own. He cannot be on both sides of a transaction unless both parties are aware of it and agree to it. The agent also cannot disclose trade secrets about the principal?s business after the term of employment is up. He must obey all of the principal?s orders, provided they are reasonable. If any of the instructions go against the law, he will be held responsible for performing illegal actions. He is also required to carry out the actions of his principal as if he were doing it for himself.Within the workplace, this relationship plays a very important role. The association between employer and employee can be described as being principal-agent. This is also a master-servant relationship since the principal has a good amount of control over the agent. The employer controls the activities of the employee and is responsible for any injuries that might be caused by the employee?s activities, provided the employee is acting within the scope of employment. The principal-agent relationship can also be seen with independent contractors. These people are hired to perform a certain task; however, the person who hires them is not the one who controls them. The principal does not have as much control over the independent contractor as he would in a master-servant relationship.The agent-principal relationship is very important in a business partnership as well. A partnership is created when two parties consent to be ?co-owners of a business for profit." The business becomes an extension of the partners? personal liability, and the profits or losses are passed through to the partners? tax return. The partners are said to be agents of each other; therefore, they owe the duties mentioned above to each other. In addition to this, the partners must both work to manage the partnership. They can appoint these duties to specific partners, in accordance with the agency rules of express, implied, and apparent authority. Other times they may vote on certain matters and let the majority rule. Larger decisions in which no apparent authority can be claimed, such as settling a lawsuit or selling the partnership?s assets or goodwill require a unanimous vote.The principal-agent relationship is also important in a corporation. Such a business is a legal entity in itself and is treated as a person under the law. It is run by a board of directors whom its shareholders elect. These directors make the policies of the corporation and look after it. They are agents of the corporation and owe a fiduciary duty to it; they must look out for the best interest of the corporation. They are held to the business judgment rule where they must show that their actions were made after carefully studying the situation. To benefit the corporation, they may choose to hire other agents, such as attorneys, accountants, or financial analysts. Directors also may not take for themselves an opportunity that their corporation may want.The principal-agent relationship can end for several reasons; the contract might reach its end date, the purpose for the agency may be accomplished, or the principal may die or become incapacitated. Even if the agent is fired or if he quits, the agreement does not automatically end. The agent can still have lingering apparent authority since various third parties may remain unaware of the termination of the relationship. To ensure that the agent does not act beyond his authority at the end of the relationship, the principal must be sure to give notice that the person is no longer his agent. There are two kinds of notice. The first is actual notice in which the principal informs everyone with whom the agent is dealt. He must also give constructive notice to the general public to ensure that they are aware as well. He can do this through trade magazines or newspapers.The relationship between a principal and his agent is one which is vital in the workplace and to many businesses, especially partnerships or corporations. Such a relationship ensures that the best interests of the business are looked out for and helps it to prosper in the long run.