The Fiduciary Character of Agency and the Interpretation of Instructions

Abstract

This chapter in a forthcoming book justifies the conventional characterization of common-law agency as a fiduciary relationship. An agent serves as the principal's representative in dealings with third parties and facts about the world, situating the agent as an extension of the principal for legally-salient purposes. A principal's power to furnish instructions to the agent is the fundamental mechanism through which the principal exercises control over the agent, a requisite for an agency relationship. The agent's fiduciary duty to the principal provides a benchmark for the agent's interpretation of those instructions. The chapter draws on philosophical literature on the identity of the self over time to address related characteristics of agency doctrine, including the agent's duty to interpret instructions and statements of authority in light of the principal's present wishes as the agent reasonably understands them as well as the principal's ongoing power to revoke the agent's authority even when the revocation constitutes a breach of contract.

Keywords: Agency, authority, interpretation, fiduciary, revocation

JEL Classification: K10, K20