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¶ … fiduciary" affect the law of agency?
The Business Dictionary website defines a fiduciary relationship as one that is "special" and that is between two parties. Examples of such relationships include agent and principal, testator and trustee, testator and executor, ward and guardian, customer and bank, client and attorney, patient and doctor, two partners, stockholders (or shareholders) and a director, and so on. Regardless of the actual example or arrangement, the law requires a higher level of care and decorum as compared to more casual or less official relationships. Former United States Supreme Court judge Nathan Cardozo was quoted as saying that it is "something more than the ordinary honor of the marketplace ... the very punctilio of honesty and forthrightness" (Business Dictionary, 2016).
When it comes to an agent/fiduciary situation, there is a finer level of detail that should be answered to. A principal in an agent/principal relationship is someone who has the "legal capacity" to perform a given act and can in turn empower an agent to do the same thing. The person doing the empowering of the agent must be of sound mind. They cannot be insane or otherwise lacking in judgement....
The agent is a person who is comprehending what the principal wants and is then able to carry out the act as asked for by the principal. The institution in question is otherwise known as agency. The overall purpose of the institution is to allow for people to act on the behalf and in the interests of others. The agent generally assumes a loyalty to the best interests and desires of the principal. The agent is to follow the principal's instructions and cannot intentionally or negligently when it comes to what is supposed to be done. The agent is obligated to follow "reasonable" instructions as given and ordered by the principal. Agents must further avoid situations where conflicts of interest exist or could exist given certain actions on the part of the agent.
2) Is a principal for whom the agent is acting on behalf always responsible for the agent's actions? What type of actions should or shouldn't the principal be responsible for?
As indicated by the Rice citation for the first question, the principal is not always responsible for the actions or inactions of the agent. However, it really does depend on the situation. An easy and obvious example of a situation where a principal would not…
References
Business Dictionary. (2016). What is fiduciary relationship? definition and meaning. BusinessDictionary.com. Retrieved 14 March 2016, from http://www.businessdictionary.com/definition/fiduciary-relationship.html
FWK. (2016). Flat World Knowledge -- Business Law and the Legal Environment. Catalog.flatworldknowledge.com. Retrieved 14 March 2016, from http://catalog.flatworldknowledge.com/catalog/editions/mayerbuslebemba-business-law-and-the-legal-environment-executive-mba-edition-1-0
Rice. (2016). Principal-Agent Relationship. ruf.rice.edu. Retrieved 14 March 2016, from http://www.ruf.rice.edu/~schuler/principal-agent.html
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