In this video, I explain the principal and agent contractual liability to perform under the agency relationship.
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When an agent violates the duties owed to their principal, there are several ways the principal can seek redress and recover damages. Here's an explanation of each type with a simple example:
Tort Damages: If the agent causes harm to the principal through negligence or intentional actions, the principal can seek tort damages.
Example: If an agent carelessly mishandles a client's confidential information, leading to a data breach, the principal can claim tort damages for the harm caused by this negligence.
Contract Damages: These are applicable if there was a financial agreement between the agent and the principal. If the agent was paid, the principal can recover damages for any breach of contract.
Example: Suppose an agent was hired for marketing and paid upfront, but they fail to deliver the agreed services. The principal can claim contract damages for the unfulfilled agreement.
Recovery of Secret Profits: If the agent makes any undisclosed profits at the expense of the principal, these can be reclaimed. This often involves imposing a constructive trust on the profit.
Example: An agent buys property for the principal but secretly negotiates a lower price and keeps the difference. The principal can recover this secret profit.
Withhold Compensation: If the agent commits an intentional wrong or breaches their duty deliberately, the principal may refuse to pay them.
Example: If an agent intentionally misrepresents a deal, causing financial loss to the principal, the principal can withhold any compensation that was due to the agent.
In a principal-agent relationship, the principal also has certain obligations towards the agent. These include:
Compensation: The principal is generally expected to pay the agent unless the agent has agreed to work without payment. This compensation should be reasonable and in line with what was agreed upon or what is customary.
Example: A real estate agent sells a property for the principal. The principal must pay the agent the agreed commission, which is typically a percentage of the sale price.
Reimbursement/Indemnification: The principal should cover the agent's expenses incurred while performing their duties. This includes any costs that were necessary for the agent to carry out their tasks.
Example: If an agent travels to meet clients or purchase supplies on behalf of the principal, the principal is expected to reimburse these travel expenses and the cost of supplies.
Remedies of the Agent: If the principal fails to uphold their duties, the agent has the right to seek compensation for any resulting damages. However, if the relationship isn't based on a contract, the agent can't demand specific performance as a remedy. The agent is also expected to mitigate damages, such as by seeking alternative employment if wrongfully terminated.
Example: If an agent is fired without cause and without notice, they can seek damages for lost wages. However, they must also make an effort to find new employment to replace the lost income.
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