2nd installment of this limited series – Definitions
First – A few DEFINITIONS of legal and business terms that have helped me to understand better my thoughts and opinions on the subject:
(Legal) Principle Defined
“A fundamental, well-settled Rule of Law. A basic truth or undisputed legal doctrine; a given legal proposition that is clear and does not need to be proved. A principle provides a foundation for the development of other laws and regulations”. https://legal-dictionary.thefreedictionary.com/principle
“As it relates to business, a principal can range from a company’s representative dealing with a contractor to the company’s leader. Some companies have a specific position identified as the principal, and these positions often represent key members of the leadership team”.
“Anyone can serve as an agent, as long as they’re mentally capable of understanding the duties the principal assigns them. An agent can serve for free – the principal’s adult child, acting under a power of attorney, for example – but in most cases, the principal pays the agent for her service.
An agent’s authority to act comes in three ways:
- Express authority. The principal says what they want the agent to do.
- Implied authority. These are actions necessary to carry out the principal’s express orders.
- Apparent authority. This is when the agent deals with a third party and appears to be acting for the principal. Even if the agent exceeds his authority, the third party may be able to hold the principal to the deal.
The principal has the authority to revoke the agent’s power, subject to any contract between them”.
“The principal has three main duties:
- To honor any contract she makes with the agent.
- To deal fairly with the agent.
- To indemnify the agent if following the principal’s directions gets the agent in trouble.
Definition of Indemnify
“to pay or promise to pay someone an amount of money if they suffer damage or loss”.
DUTIES ON BOTHS SIDES
Agents have to act in the best interests of the principal. They can’t use their authority to line their own pockets or injure the principal in other ways. An agent managing a business under a PoA can’t transfer ownership to himself, for instance. Agents also have to act with competence and care. Hurting the principal’s interests through negligence is as unacceptable as doing it deliberately”. https://work.chron.com/definition-principal-vs-agent-14381.html