In a typical principal-agent relationship, who owes fiduciary duties, and to whom?

• A. The principal owes fiduciary duties to the agent.
• B. The agent owes fiduciary duties of loyalty and care to the principal.
• C. The agent owes fiduciary duties to third parties only.
• D. Both owe to themselves primarily.

Answer: (B)

In a principal-agent relationship, the agent occupies a position of trust and must act in the principal's best interests. Because of that trust, the agent owes fiduciary duties to the principal, notably loyalty and care. Loyalty means putting the principal’s interests ahead of the agent’s own, avoiding conflicts, and not profiting from opportunities related to the principal’s affairs without permission. Care means performing tasks competently, diligently, and with prudent judgment, and disclosing relevant information or conflicts. The principal, conversely, does not typically owe fiduciary duties to the agent; any duties are usually contractual (like paying for services and reimbursing expenses). The focus of fiduciary duties in this relationship is therefore the agent’s duties to the principal.