BUSINESS LAW 101
More on Agency
When a person has made another his agent, the agency ends upon the death of either the principal or agent. While it makes sense that it ends upon the death of the agent, some people don’t understand that it applies to the death of the principal as well.
Powers of Attorneys expire upon the death of the person who made them. Similarly, agency agreements generally end when either party dies, becomes insane or files for bankruptcy. If the purpose of the agency becomes impossible, there is a termination, and if the parties are from different countries, war between their respective countries can be a termination until peace is restored.
What if the principal is in an accident and goes into a coma? Is there still an agency relationship? It depends. If the agency was created by a standard Power of Attorney, then it would expire when the principal became incapacitated. However, there is a document called a Durable Power of Attorney which authorizes the agent to continue working even though the principal is incapacitated.
Today, agency is big business, especially with sports, entertainment and literature. Exclusivity is a big issue. An agent does not want to represent a principal if someone else is representing her as well. This creates confusion and can lead to a splitting of incomes and duplication of efforts.
What are the duties of the agent and principal? There is a duty of loyalty between them. The agent must be loyal to the principal. He cannot make any secret benefit from the agency; he cannot take advantage of his position to make a profit. He must disclose ownership interests in property that may be involved in the agency relationship. For example, in real estate contracts, the real estate brokers must disclose their status if they intend to purchase a property. The agent cannot represent both parties unless he discloses it and the parties agree to it.
The agent has a duty of obedience and performance to his principal. If he is instructed to do something, he must do it exactly as instructed. This is an absolute duty. Even if the agent is acting in the way he thinks is best, that will not be a defense for failing to follow instructions.
The agent owes a duty to make an accounting for the principal. If the agent errs and commingles his money with the principal’s, the principal gets it all. As an example, if the agent commingles funds and then buys various stocks with it, he cannot later say which stocks were bought with whose money. The agent cannot simply give the principal a percentage of the stock because the stocks will not stay equal. If the agent’s stock goes up and the principal’s goes down, then the agent has made a profit at the principal’s expense.
Finally, the agent has a duty to provide the principal with information. Even after the agency relationship is over, the agent still has a responsibility to the principal to perform his prior obligations and wind down the agency relationship.
Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is also the author of “Basics of Business Law” and “Basics of Florida’s Small Claims Court” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.
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