Video: Rights and Remedies for a Principal

In this lesson, Nick Palazzolo, CPA, navigates the landscape of agency rights and remedies, detailing the various entitlements a principal holds within the bounds of an agency relationship. Nick breaks down the principal's rights, which include instructing agents, exerting control, terminating the relationship, and demanding indemnification for an agent's missteps. He further elucidates the avenues available for principals to recover damages from agents, covering tort damages, contract damages, recovery of secret profits, and the right to withhold compensation. Whether it's setting performance expectations or addressing an agent's failure to act in the principal's best interests, this lesson provides clear insights into the protective measures and recourse available to a principal when faced with agency dilemmas.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Here we go. What are the rights of a principal? What does the principal have the right to do? The principal has the right to provide instructions and guidance to the agents on how to carry out their duties, but you have the right to tell them what to do. I mean, you're hiring them for something. For example, a business owner can instruct their marketing agent on the target audience they want to go for and their preferred marketing channels, whether that's email or Facebook or physical billboards. You have the right to control. The principal has the right to exercise control over the agent within the bounds of the agency relationship. If you hire someone to work for you and work in an office, you can tell them you have to wear a tie. I mean, that's just kind of how it goes, right? That's something we're familiar with. I mean, hey, maybe you've only ever worked from home, but even with that, your employer has the right to tell you you need to be online between nine and six. Hopefully, not too much logging in that, get some good hours. For example, a principal can set performance expectations and guidelines for the sales agent, but the principal has the right to terminate the agency relationship subject to the terms of their agreement. We're not going to get into Department of Labor laws and regulations and all that, but generally speaking, yeah, you have the right to terminate. A principal can terminate an agency relationship with an agent who consistently fails to meet performance targets. We've got the right to indemnification by an agent. If the principal suffers losses due to the agent's wrongful actions, the principal may have the right to seek indemnification from the agent. Now,

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Agency & Contract Law

Module: 2 Concepts, 34 Videos

Principals & Agents: Authority, Duties, and Liabilities Overview

2:02

Introduction to Principals and Agents

3:30

Formation of Agency

5:58

Terms Related to Principals and Agents