Question

In a principal-agent relationship, the parties have agreed that the agent will act...

on behalf of a customer.

in the agent's best interest.

as a fiduciary for the government.

as a fiduciary of the principal subject to the principal's control and consent.

Answer 1

The principal is the party who gives legal authority to another to act on his or her behalf in a business transaction. The agent is the party who is legally authorized to act on behalf of the principal in the principal's business transaction. The agent owes the principal a fiduciary duty.

All agency relationships are fiduciary relationships. This means the relationship involves a high level of trust and confidence between the principal and the agent. Because the principal has trusted the agent to supervise or protect the principal's property, the agent owes a fiduciary duty to the principal. This means the agent is obligated to act in the best interests of the principal. Agency allows the agent to work on behalf of the principal as if the principal was present and acting alone. In an agency relationship, the agent's actions create legal obligations for the principal. Therefore, the agent is obliged to make business decisions that are conducive to how the principal would act.

The two key fiduciary duties an agent owes to its principal are as follows:

• it must not place itself in a position where its own interests conflict with those of the principal or whether there is a real possibility that will happen (the 'no conflict' rule);
• it must not profit from its position at the expense of the principal (the 'no profit' rule).

An agent may avoid breaching these duties if, before doing anything that would otherwise constitute a breach of duty, it obtains the informed consent of the principal. An agent in breach of a fiduciary duty may be liable to account to the principal for any profit made from the breach.

Therefore correct answer to the question posed will be “ as a fiduciary of the principal subject to the principal’s control and consent”

ANSWER : AS A FIDUCIARY OF THE PRINCIPAL SUBJECT TO PRINCIPAL’S CONTROL AND CONSENT