Fiduciary Duties on the Temporal Edges of Agency Relationships
Arthur B. Laby & Jacob Hall Russell, eds., Fiduciary Obligations in Business (Cambridge Univ. Press, Forthcoming)
37 Pages Posted: 12 Dec 2019
Date Written: December 2, 2019
The duties that principals and agents owe each other are typically coterminous with the agency relationship itself. But sometimes temporal lines of clean demarcation do less work. The Chapter identifies situations in which an agent may owe duties-including fiduciary duties-to the principal prior to the formal start of their relationship, including any enforceable contract between the parties. Likewise, not all duties principals and agents owe each other end with the relationship. The Chapter identifies the rationales for duties at the temporal peripheries for an agency relationship and the extent to which they are derived from doctrines distinct from agency law. Issues in some contexts are amenable to resolution through bright-line determinations; others require nuanced and fact-specific inquiry.
Issues that arise at the periphery of termination are complicated as a consequence of a distinct feature of agency relationships: both principal and agent hold ongoing power to terminate the relationship, albeit in breach of contract. Neither owes the other a duty of disclosure to the other concerning plans to terminate, including in most instances the agent's preparations to compete with the principal post-termination. And in the midst of agency relationships, agents, like principals, may negotiate to further their own interests, whether to continue the relationship under modified terms or bring it to an end.
These structural consequences of agency require tempering either the claims to generality or the content of some theoretical accounts of fiduciary relationships more broadly, particularly those stressing the cognitive dimensions of agents' loyalty and demanding robust commitment from the agent. Agency law, which tolerates both preparations to compete post-termination as well as unilateral and undisclosed strategizing over exit, accommodates relationships between competent parties who may bargain on an interim basis to adjust the terms of their relationship. In this respect, as in others, agency relationships do not much resemble donative trusts, the assumed prototypes of many theoretical accounts of fiduciary relationships. Additionally, the quotidian and ubiquitous character of agency relationships lends these issues practical significance.
Keywords: agency, formation, termination, de facto officer, fiduciary duty, competition, brokers, lawyers, irrevocable power
JEL Classification: K10, K19, K20, K22, K39
Suggested Citation: Suggested Citation