Description: The concept of agency is fundamental to all business structures and
ID: 2439907 • Letter: D
Question
Description: The concept of agency is fundamental to all business structures and operations. The relationship between the principal and the agent are clearly defined by law. It is important to understand and appreciate this relationship as we move forward into the discussion of various ways to do business (partnerships, LLCs, corporations, etc). Discuss the relevance the duties of an agent to the principal mentioned in this chapter. Cite examples of their practical application. Description: The concept of agency is fundamental to all business structures and operations. The relationship between the principal and the agent are clearly defined by law. It is important to understand and appreciate this relationship as we move forward into the discussion of various ways to do business (partnerships, LLCs, corporations, etc). Discuss the relevance the duties of an agent to the principal mentioned in this chapter. Cite examples of their practical application. Description: The concept of agency is fundamental to all business structures and operations. The relationship between the principal and the agent are clearly defined by law. It is important to understand and appreciate this relationship as we move forward into the discussion of various ways to do business (partnerships, LLCs, corporations, etc). Discuss the relevance the duties of an agent to the principal mentioned in this chapter. Cite examples of their practical application.Explanation / Answer
Agent is a person employed to do any act for another in dealing with third parties.in commercial law agent is a person who acts on behalf of principal.
Duties of agent to the principal are as follows:-
Duty in conducting principal's business: the agent should conduct the business of the principal as per directions of the principal or in the absence of any direction as per the custom prevalent in the business.
Duty of requirements as to skill and diligence:agent must act always as a person to diligence and skill normally exercised in the trade.he would otherwise be responsible to compensate the principal for any loss suffered by the principal for want of his skills.for instance where A acts as an agent for B and sells wheat to C in the usual course of business without verification of C’s solvency and if C goes insolvent,then A is responsible for losses arising to B.
Agents duty to accounts:the agent has to maintain and render proper accounts to principal whenever demanded.He is bound to pay the principal all sums received.He is bound to maintain accounts even if the contract is illegal or void.
Duty to communicate:the agent must in order to obtain instructions,communicate and contact the principal as a man of ordinary diligence.
Duty to avoid conflict of interest:An agent whose interests conflict with the principal’s interests may be unable to represent his principal effectively. Therefore, an agent may not acquire a material benefit from a third party in connection with an agency transaction. When conducting the principal’s business, an agent may not deal with himself. For example, an agent authorized to sell property cannot sell that property to himself.