- Duty of loyalty
- Duty to obey Instructions
- Duty to exercise care & skill
- Duty to communicate
- Duty to account for funds and property
Duty Of Loyalty: The Fiduciary duty of an agent to principal
When we talk about an agent’s duty of loyalty to the principal, the main word that should come to mind is “Fiduciary”. Fiduciary means that one is trusted to act in the best interest of others. What this signifies is that the agent should always act in the best interest of the principal.
Conflict of interest is another duty of loyalty the agent owes to the principal along with the appearance of impropriety. The presence of impropriety is when a layperson, someone not qualified in a profession or doesn’t have knowledge of a specific subject, who is not knowledgeable of the circumstances in business might think something being done is ethically wrong.
Example: Becky who works the register at a grocery store is putting the money she is receiving inside her pockets but will put it inside the machine later that day. Becky placing the money in her pocket may appear improper, and that is why it in the business world it is best to avoid the appearance of impropriety.
Moonlighting may be allowed (ability to have a second job in addition to his/her regular job). Lastly, the agent owes the duty of confidentiality.
Duty to Obey Instructions
The agent cannot replace personal ideas and judgment for the lawful instructions of the principal. If an employee thinks that allowing pets to go inside the pet store is okay, but the employer has a no pets allowed policy, then the employee is breaking his duty to obey instructions.
Duty to Exercise Care & Skill
The agent has to act with reasonable care and ordinary skills. Remember that gratuitous agents have a lower standard of care. Gratuitous means that a free service will never be as excellent as a paid service since the free service won’t put forth as much effort into it than the paid service.
Duty to Communicate
The agent has the duty to communicate to the principal every important piece of information. The information must be shared in a timely manner. This is important because the principal must always be informed if something is wrong so the principal can fix it.
Duty to Account for Funds or Property
The agent has expressed or implied duties to deliver accurate records of receipts and expenditures. Commingling is also prohibited. Agents are usually liable for losses caused by commingling. Commingling is when the agent mixes his or her own funds with the principal’s funds. Finally, agents who take property from the principal are liable for embezzlement or conversion.