Duties of an Agent

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An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship. This duty supplements the duties created by an agency contract. A fiduciary duty exists because agency is a relationship of trust and confidence. The principal’s many remedies for an agent’s breach of her fiduciary duty include termination of the agency and recovery of damages from the agent.

Who may employ an agent? Any person who is at the age of majority according to the law to which he is subject and who is of sound mind. In the case of Sherpherd v Cartwright[1]  it was observed an infant cannot appoint an agent to act for him neither by means of power of attorney, nor by any other means.

  1. Duties to execute mandate

The first and the foremost duty of every agent is to carry out the mandate of the principal. He should perform the work which he has been appointed. Any failure in this respect would make the agent absolutely liable for the principal’s loss. In Pannalal Jankidas v. Mohanla,[2] commission agent purchased goods for his principal and stored them in a godown pending their dispatch. The agent was under instruction to insure them. He actually charged the premium for insurance, but failed to insure the goods. The goods were lost in an explosion in the Bombay harbor. The agent was held liable to compensate the principal for his loss in as much as the amount received under the Bombay Explosion Ordinance,1944, under which the Government paid compensation up to fifty per cent in respect of the uninsured merchandise lost in the explosion.

  1. Duties to follow instructions or customs.

When an agent is appointed to facilitate or negotiate a transaction on behalf of the principal, the agent owes a duty to the principal to act in the principal’s best interests within the authority of them. In Liley v.Doubleday, [3]an agent was instructed to warehouse his principal’s goods at a particular place. He placed part of them at a different warehouse which was equally safe. But the goods were destroyed without negligence. The agent was held liable for the loss. Any disobedience or departure from the instructions make the agent absolutely liable for the loss.

  1. Duty of reasonable care and skill

Common law requires an agent to act with due care and skill in performing his duties. Agents who fail to meet this standard are prima facie negligent. In Keppel v.Wheeler,[4] an agent was appointed to sell a house. He received an offer which he promptly communicated to his principal. The latter accepted it provisionally “subject to contract.” Subsequently the agent received a higher offer which he failed to pass on to the principal. This resulted in final acceptance of the first offer in ignorance of the second. The agent was held liable to make good the principal’s loss in terms of the difference in the two in prices.

In Brutton v Alfred Savill, Curtis & Henson (1971),[5] an office junior employed by the agents allowed a prospective tenant to take possession of premises without payment of a deposit or any rent in advance because he said that he had forgotten his cheque book. The tenant subsequently defaulted on rent payments and legal proceedings were required to regain possession. The landlady lost some £770 in unpaid rent and the cost of legal proceedings. It was held that, since the normal worldly estate agent would not have been taken in by this simple confidence trick, the young employee’s gullibility amounted to negligence, and the defendants were therefore liable to their client for this loss.

In Hellings v Parker Breslin Estates (1994),[6] the landlords wished to let a flat until such time as it could be resold. They were concerned that possession could be obtained at the end of the granted term. The landlords then proceeded to let the flat through the agents having explained the situation in full. In 1982, the agent granted a tenancy to a Miss B but later became dissatisfied with the tenant who had fallen in arrears with the rent. When possession proceedings were brought, it became clear to the owners that it was not going to be possible to recover the flat with vacant possession; Case 11 of the Rent Act did not apply unless the dwelling-house was originally occupied by the landlord as his residence and “is required as a residence for the owner-occupier … “. The judge in this case held that failure by the agent to explain the circumstances under which possession could have been obtained under Case 11 amounted to a failure of skill in their duty of care to their clients.

  1. Duty to avoid conflict of interest.

An agent whose interest’s conflict with the principal’s interests may be unable to represent his principal effectively. For example, an agent authorized to sell property cannot sell that property to himself. Unless the principal agrees otherwise, an agent also may not compete with the principal regarding the agency business and not assist the principal’s competitors, so long as he remains an agent. Thus, an agent employed to purchase specific property may not buy it himself if the principal desires it. Finally, an agent who is authorized to make a certain transaction may not act on behalf of the other party to the transaction unless the principal knowingly consents.

  1. Duty not to make secret profit.

Common law requires that an agent should not make any profit or acquire any benefit in the course and in the matter of his agency without the knowledge and consent of his principal. Such profit is generally known as secret profit. The following situations are some examples of secret profit:

  1. i) Use of property-An agent who uses property entrusted to him by the principal to make a profit for himself and without the principal’s consent is in breach of his duty not to make secret profit.
  2. ii) Use of position- An agent who, without lawful authority or reasonable excuse, solicits or accepts any advantage in relation to his principal’s affairs or business in the course of his agency shall be guilty of an offence under Section 9 of the Prevention of Bribery Ordinance, Cap. 201.

iii) Use of information or knowledge-An agent who acquires information or knowledge which he has been employed by the principal to collect or discover, or which he has otherwise acquired for the use of his principal should not make use of the same for his personal .

  1. Duty to remit sums.

Agent is under the duty to remit sum repay to his principal all sums received on his account. The agent is, however, entitled to deduce his lawful charges, but subject only to this right, the principal’s money must be remitted to him even if it has been received in pursuance to a void or illegal contract.

  1. Duty to maintain Accounts:

An agent who receives any property for his principal or from his principal is bound to keep such property separate from his own and he is to be treated as a trustee of such property. In Ram All v.Asian Commrex, [7]the High Court observed:“The right to claim a statement of accounts is an unusual form of relief, only granted in certain specific cases and is only to be claimed when the relationship between the parties is such that this is the only relief which will enable the claimant to satisfactorily assert his legal rights”.                     

  1. Duty of confidentiality

Owing to the fiduciary relationship between a principal and his agent, the agent shall not disclose any information concerning the principal or any confidential information entrusted to him by the principal to any third party in the absence of the principal’s consent.[8]

Confidential information entrusted to an agent includes any information which is not readily available to the public. Information readily available to the public will usually include information which is kept at government departments and is open for inspection by the public, such as the land registry, companies registered, birth and deaths.

Even if the agent has ceased to act for the principal, the agent should continue to keep confidential any information concerning the principal or any confidential information entrusted to him by the principal, unless the principal consents to disclosure or unless the information has ceased to be confidential.

However, an agent has implied authority to disclose information concerning the principal if to do so is necessary for the agent to carry out the duties entrusted to him by the principal. For example, an estate agent may disclose to the appointed solicitors of the purchaser (the estate agent’s principal) such information relating to the purchase as will enable the solicitors to handle the transaction on behalf of the purchaser.
  1. Duty not to delegate.

The general rule is that an agent may not delegate his authority or duty in whole or in part except with the authority of the principal. In the case of John McCain and Co. v. pow[9] it was noted that unless so authorized by the principal, an estate agent has no right to appoint a sub-agent and delegate to him his powers which require special skill and care. No implied authority could be pleaded. In this case the sub-agent affected a sale on his account. The agent had sued for his commission. The court negatived the claim as the contract of agency did not permit appointment of sub-agent. But there are exceptions in the following cases when the agent can delegate[10];

  1. Nature of work: Sometimes the very nature of work makes it necessary for the agent to appoint a sub- agent .For example, an agent managing estates.
  2. Trade Custom-A sub-agent may be appointed and the work delegated to him if there is ordinary custom of trade to that effect. Thus architect generally appoints surveyors.
  3. Ministerial action-An Agent cannot delegate acts which he has expressly or impliedly undertaken to perform personally,eg.acts requiring personal or professional skill. But the agent may delegate acts which are purely ministerial in nature,e.g. authority to sign.
  4. Principal Consent. The principal may expressly allow his agent to appoint a sub-agent. His consent may also be implied from the conduct of the parties. The principal may ratify his agent’s unauthorized delegation.

Conclusion

An agency is the creation of a contract entered into by mutual consent between a principal and an agent. By agency, a principal grants authority to an agent to act on behalf of and under the control of the principal. The relation between a principal and an agent is fiduciary and an agent’s actions bind the principal. An agent is liable to a principal when he/she acts without actual authority, but with apparent authority. An agent is liable to indemnify a principal for loss or damage resulting from his/her act. A principal owes certain contractual duties to his/her agent. Correlative with the duties of an agent to serve a principal loyally and obediently, a principal’s primary duties to his/her agent include, to compensate the agent as agreed and to indemnify and protect the agent against claims, liabilities, and expenses incurred in discharging the duties assigned by the principal.

       

 

[1] 1935 ch 728,755

[2] 1951 AIR 144 1950 SCR 979

[3] 1881(7QBD)510

[4] 1927 1KB 577

[5] 218 EC 1417

[6] 402 F. App’x 582

[7] AIR 1933 IaH 453

[8] https://www.eaa.org.hk/en-us/Information-Centre/Publications/Agency-Law/-5-Agents-duties-to-principal

[9] 1975 ALL ER 129

[10] Indian contracts and specific reliefs act 780-785 8TH edition 2008

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