The Principal-Agent Relationship Law Essay Research (Essay Sample)

The Principal and Agent Relationship
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The Principal and Agent Relationship
Agency law provides specific guidelines that govern the relationship between the principal and an agent. Although some of the duties of each party resemble those of a normal business contract, the agency law includes a fiduciary clause that sets it apart from other ordinary business transactions. Unlike other contracts, the agent-principal relationship does not end at the termination of a contract. The fiduciary rule places a higher duty on the agent to make sure that the interests of the principal are not compromised after the contract is over by the agent using the information acquired from the transactions for his benefits. According to Rotman (2017), the fiduciary law preserves the integrity of the relationship between the involved persons and not the rights of the individuals. In such a situation, the agent subordinates his or her interests in favor of the principle’s needs. The fiduciary nature of the relationship between an agent and a principal is superior to other business relationships because it eliminates the threats of conflict of interest and mistrust, which could undermine trade.
Both the agent and the principal have certain responsibilities to each other to ensure the smooth running of each business transaction. According to Thompson (2019), the agent owes the principal loyalty, care, competence, diligence, good conduct, and faith. On the other hand, the principal must provide compensation, indemnity, and fair treatment of the agent (Thompson, 2019). In addition to the normal duties of a subordinate to the superior, namely duty of skill, good conduct, obedience, acting as authorized, not to attempt the impossible, and information provision, an agent further owes the principal a fiduciary duty, meaning he or she is supposed to preserve the confidentiality of the principal even after the contract is terminated and avoid self-dealings when handling the business processes. Rotman (2017) stipulates that the fiduciary requirement accommodates the broader principles of fairness and justice, which are not found in the common law, thus making the relationship between an agent and a primary special.