The duties of the principal to his agent!

[Mellorando]

Sometimes an entity instructs another to conduct its business transactions. This is common in business and is known as an agency relationship. Agency is a business relationship where a principal gives legal authority to an agent to act on the principal's behalf when dealing with a third party.
An agency relationship requires two parties. The first is the principal, which is the party who gives legal authority to another to act on his or her behalf in a business transaction. The second party is an agent, which is the party who is legally authorized to act on behalf of the principal in the principal's business transaction. Agency relationships are known as fiduciary relationships because the agent owes a fiduciary duty to the principal. This means the agent is obligated to act in the best interests of the principal. But the principal owes certain obligations to the agent, too. Let's take a look at the principal's obligations.
A principal can be a person, corporation, partnership, not-for-profit organization, or even a government agency. In any case, once a principal engages an agent, the principal owes four main duties to that agent. If a principal fails to fulfill these duties, it can result in a lawsuit based on breach of contract or tort liability. These duties are:

*Compensation
*Indemnification
*Good faith and fair dealing
*Acting according to contract

Let's separately examine two of these four obligations.

1. Compensation :
The principal's first duty to the agent is compensation. This means the principal must compensate the agent as agreed. Keep in mind that a principal hires an agent, similar to an employer employing an employee.B The principal must therefore pay the agent a reasonable fee. The fee doesn't have to be money, but it has to be something that is of value to the agent, such as stock shares or tangible goods. The reasonableness of the fee is judged according to the facts and circumstances of the agency relationship and agreement.

2. Indemnification:
This means the principal must reimburse the agent for any claims, liabilities, and expenses incurred while performing agency duties. The principal must indemnify the agent for duties performed under the principal's authority and also for duties performed in the reasonable furtherance of agency duties. For example, let's say P. tells A. to pay C. $50. This payment is expressly authorized by P., and P. must reimburse A. Now let's say P. hires A. to handle a business event, and A. finds it necessary to purchase certain supplies for the event. Even though P. didn't expressly authorize a particular purchase, A. made the purchase in the fulfillment of his agency duties. Therefore, P. must still reimburse A.

 

[Kingsley]

Most times we get to consider the duties of the agent and we unconsciously put aside the roles of the principal because we don't really get to see the principal in action most times since he knows the agent is already acting on his behalf. The agent truly plays a major role in business transactions because some times he uses his discretions and act spontaneously based on his personal value system or judgment and he later ratifies his action with his principal. But when we look carefully tompin point out the roles or duties of the principal to his agent then we will begin to realise that the whole instructions itself comes from the principal. First the principal is the original owner of the business and he is the one set out the agenda of the business and ensures that he funds the business.

He also makes sure he reimburses the agent in a situation where he or she has carried out expenses from personal pocket to manage the daily activities. He also makes sure he or she pays the agent his commission as at when due, he also covers the agent in case there are issues with the agent and the third party.