Question

Assignment Questions: (2 marks each)  

1. What does it mean when we say that an agent is the fiduciary of his principal?     

2. How is the scope of an agent's authority to enter into contracts for a principal extended  so as to permit the agent to do the job which the principal hired him or her to do?     

3. How is the agency relationship used in a corporation and a partnership?      

4. Give reasons why a company would expand through franchising rather than through the  setting up of its own branches.     

5. Does the franchisor have a fiduciary duty towards the franchisee? How about the other  way around?

Answer 1

1. Agent can act on behalf of the principal and can represent him. Actions taken by agent are binding on principal and hence agent is called as fiduciary of the principal.

2. Agreement with the agent clearly defines his scope of work.

3. Agency relationship exists between partners of a partnership firm. All partners are agents of partnership and can act on behalf of partnership.

Corporation can take different forms.

4. Reasons:

a. Focus on core competency

b. Professional Management

c. Better accountability and control

d. Easier decision making

5. Yes both have fiduciary duty against each other.