DAWILL Law Academy & Consultancy Services Limited

The Duties of an Agent

When an agent agrees to perform services for his principal for reward there
is a contract between them. But even if the agent undertakes his duties
without reward he has obligations to his principal. The agents duties are
listed below.
(a)

Performance the agent who agrees to act as agent for reward has a
contractual obligation to perform his agreed task. Thus agent must
obey the principals reasonable instructions and act within actual
authority.

Case: Turpin v Bilton 1943

A broker agreed to arrange insurance of his principals ships but failed to do
so. A ship was lost at sea.
Held: the broker was liable to make good the loss.
But an unpaid agent is not bound to carry out his agreed duties (there is no
consideration). Any agent may refuse to perform an illegal act.
(b)

Skill paid agent undertakes to maintain the standard of skill and care
to be expected of a person in his profession. For example, an
accountant has a duty to his client to show the skill and care of a
competent accountant. Thus an agent is expected to exercise proper
care and skill associated or expected in his line of business.

(c)

Personal Performance the agent is presumably selected because of

his personal qualities and owes a duty to perform his task himself and
not to delegate it to another. But he may delegate in a few special
circumstances, if delegation is necessary, such as a solicitor acting for
a client would be obliged to instruct a stock broker to buy or sell listed
securities on the Stock Exchange.
The general rule is that an agent should not delegate unless expressly
or implicitly authorised to do so. This was the position held in:

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De Bussche v Alt (1878)

In this case an agent was appointed to sell his principals ship and was given
express actual authority to appoint a sub-agent in Japan to make a sale
there.
Court of Appeal held that default of the sub-agent was a matter between the
principal and did not leave the first agent liable.
There are other instances in which an agent can delegate his authority to a
sub-agent namely:
(i)
(ii)
(iii)
(iv)

where there is a trade custom to delegate.

Where the principal knows to the sub-delegation and does not question
it e.g. where he employs a builder to build a house.
where there is a statutory authority to delegate.
where delegation is necessary for proper performance e.g. a bank
employing a stockbroker to sell its customers shares.

If the appointment of a delegate is not authorised, then the agent himself

will be in breach of his contract with the principal. Thus an agent cannot
delegate his authority to another person or appoint a sub agent to do some
of the acts which he himself has to do, unless the agent has the express of
implied consent of his principal to do so.
(d)

Accountability an agent must both provide full information to the

principal of his agency transactions and account to him for all monies
etc. arising from them.

(e)

No conflict of interest the agent owes his principal a duty not to put
himself in a situation where his own interests conflict with those of the
principal; for example, he must not sell his own property to the
principal (even if the sale is at a fair price). That is the agent is a
fiduciary, requiring the agent to perform with honesty and good faith
for the benefit of the principal. This is a strict duty.
Case: Armstrong v Jackson 1917

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A client instructed his stockbroker to buy for him 600 shares of X Limited.
The broker sold to his client 600 shares which he himself owned.
Held: the sale was made in breach of the brokers duty and would be set
aside.
An agent must avoid conflicts between the interests of different principals for
whom the agent is acting, must not use the agency as a means of furthering
the agents own interests and must render accounts of dealings on behalf of
the principal.
As Millett LJ said in Bristol and West Building Society v Mothew
(1998):A fiduciary is someone who has undertaken to act
for or on behalf of another in a particular matter in
circumstances which give rise to a relationship of
trust and confidence. The distinguishing obligation of
a fiduciary is the obligation of loyalty. The principal is
entitled to the single-minded loyalty of the fiduciary.
This core liability has several facets. A fiduciary must
act in good faith: he must not make a profit out of his
trust; he must not place himself in a position where
his duty and his interest may conflict; he may not act
for his own benefit or for the benefit of a third person
without the informed consent of his principal. This is
not intended to be an exhaustive list, but it is
sufficient to indicate the nature of fiduciary
obligations. They are the defining characteristics of
the fiduciary.
Fiduciary duties are prospective in nature: they tell the fiduciary what he
must not do, they do not tell him what he ought to do. A fiduciary may be
subject to positive duties at common law and in equity, eg company
directors must act with care and skill, but these are not fiduciary duties. Even
the simple duty to account, central though it is, is not a fiduciary duty. As
Millet LJ said in the Mothew case (at 16) not every breach of a duty by a
fiduciary is a breach of fiduciary duty.
Despite the fact that most agents are fiduciaries, some are not, and those
that are may not act in a fiduciary capacity for all purposes. As Professor
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Dowrick had noted: if P appoints A to be his agent merely to sign a

memorandum and places no particular trust in A, the doctrine of fiduciary
relations and the incidents of agency which derive from this equitable
doctrine would not apply.
Kelly v Cooper (1993), Privy Council
Kelly instructed Coopers, a firm of estates agents, to sell his house
(Caliban). Brant, who was the owner of an adjacent house (Vertigo), also
instructed Coopers to sell his house. Coopers showed Perot, a prospective
purchaser, around both houses and Perot made an offer for Vertigo, which
was accepted by Brant. Perot then offered to buy Caliban. Coopers did not
inform Kelly of the agreement to buy Vertigo. In ignorance of the agreement
made between Perot and Brant, Kelly accepted Perots offer and the sales of
both houses were completed. Kelly later brought an action against Coopers
claiming that they were in breach of their duties in (1) failing to disclose
material information to him and (2) placing themselves in a position where
there was a conflict between their duty of disclosure to Kelly and their own
interest in ensuring they obtained commission on both houses.
Lord Browne-Wilkinson, delivering the advice of the Privy Council held that
Perots interest in buying both houses was a material factor which could have
influenced the negotiations for the price at which Caliban was sold. He
continued:
In the view of the Board the resolution of this case depends
upon two fundamental propositions: first, agency is a
contract made between principal and agent; second,
like every other contract, the rights and duties of the
principal and agent are dependent upon the terms of
the contract between them, whether express or
implied. It is not possible to say that all agents owe
the same duties to their principals: it is always
necessary to have regard to the express or implied
terms of the contract....
In a case where a principal instructs as a selling
agent for his property or goods a person who to his
knowledge acts and intends to act for other
principals selling property of goods of the same
description, the terms to be implied into such agency
contract may differ from those to be implied where
an agent is not carrying on such general agency
business. In the case of estate agents, it is their
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business to act for numerous principals: where

properties are of a similar description, there will be a
conflict of interest between the principals each of
whom will be concerned to attract potential
purchasers to their property rather than that of
another. Yet, despite this conflict of interest, estate
agents must be free to act for several competing
principals otherwise they will be unable to perform
their function. Yet is it normally said that it is a
breach of an agents duty to act for competing
principals. In the course of acting for each of their
principals, estate agents will acquire information
confidential to that principal. It cannot be sensibly
suggested that an estate agent is contractually
bound to disclose to any one of his principals
information which is confidential to another of his
principals. The position as to confidentially is even
clearer in the case of the stockbrokers who cannot be
contractually bound to disclose to their private
clients inside information disclosed to the brokers in
confidence by a company for which they also act.
Accordingly in such cases there must be an implied
term of the contract with such an agent that he is
entitled to act for other principals selling competing
properties and to keep confidential the information
obtained from each of his principals.
Applying those considerations to the present case, their Lordships are of the
view that since the plaintiff was well aware that the defendants would be
acting also for other vendors of comparable properties and in so doing would
receive confidential information from those other vendors, the agency
contract between the plaintiff and the defendants cannot have included
either (a) a term requiring the defendants to disclose such confidential
information to the plaintiff or (b) a term precluding the defendants acting for
rival vendors or (c) a term precluding the defendants from seeking to earn
commission on the sale of property of a rival vendor.
Their Lordships are therefore of opinion that the defendants committed no
breach of duty, whether contractual or fiduciary, by failing to reveal to P Mr.
Perots interest in buying Vertigo, since such information was confidential to
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Mr. Brant. Nor did the fact that Ds had a direct financial interest in securing a
sale of vertigo constitute a breach of fiduciary duty since the contract of
agency envisaged that they might have such conflict of interest.
(f)

Any benefit must be handed over to the principal unless he agrees

that the agent may retain it. An agent is not required to take a secret
profit or bribe.
Although an agent is entitled to his agreed remuneration, he must
account to the principal for any other benefits. If he accepts from the
other party any commission or reward as an inducement to make the
contract with him, that is a bribe and the contract is fraudulent. The
agent may be dismissed.

Case: Boston Deep Sea Fishing & Ice Co. v Ansell 1888
A, who was managing director of the plaintiff company, accepted
commissions from suppliers on orders which he placed with them for goods
supplied to the company. He was dismissed and the company sued to
recover from him the commissions.
Held: the company was justified in dismissing A and he must account to it
for the commissions.

The principal who discovers that his agent has accepted a bribe may:
(a)

dismiss the agent, recover the amount of the bribe from him and
refuse to pay him his agreed remuneration;

(b)

repudiate the contract and sue the third party who paid the bribe to
recover damages for any loss.

The agent is entitled to be repaid his expenses and to be indemnified by his

principal against losses and liabilities (Hichens, Harrison, Woolson & Co.
v Jackson & Sons [1943]). These rights are limited to acts of the agent
done properly within the limits of his authority. If he acts in an unauthorised
manner or negligently he loses his entitlement. He may recover expenses
properly paid even if he was not legally bound to pay, for example, a solicitor
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who pays counsels fees which the counsel cannot recover at law) may
reclaim this expense from his client.
(g)

Agent has a duty to keep his principals affairs secret.

Rights of the Agent Duties owed by Principal to Agent

(i)
The agent is also entitled to be paid any agreed remuneration for his
services by his principal. The amount may have been expressly agreed or be
implied, for example by
trade or professional practice. If it is agreed
that the agent is to be remunerated but the amount has not been fixed, the
agent is entitled to a reasonable amount.

Case: Way v Latilla (1937)

An agent undertook to provide information on gold mines in West Africa. No
remuneration had been agreed.
Held: in the circumstances agreement that there should be remuneration
was inferred and 5,000 was a reasonable sum to award. (NB it does not
follow that every agent is entitled to reward: it must be implied if it is not
expressed.
(ii)

An agent has a right to lien.

This is the right to retain property
belonging to P, until a debt due from the lodger or title holder of the
property, to the person looking after the property has been paid.

(iii)

Agent is entitled to be indemnified against losses and liabilities

properly incurred in the execution of his duty e.g. bank as agent must
be compensated by customer, ie the principal, if during the course of
business on the customer behalf it incurs expenses.

Duties of Principal
(i)
To pay any agreed commission on completion of the contract or to pay
reasonable remuneration which is customary if no fixed rate has been
agreed.
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(ii)

To indemnify agent against losses, costs and liabilities properly

incurred in the execution of his agency.

Note: The duties of a principal are the rights of an agent.

(iii)

To give a clear and precise mandate where this is necessary for the
agent to perform his agency,

Termination of Agency
Agency is terminated by acts of the parties in any of the following ways:
(a)

If an agent is employed for a particular transaction, such as sale of a

house he ceases to be agent when the transaction is completed. In the
same way, agency for a fixed period ends with the expiry of the period.

(b)

Either party may give notice to the other or they may mutually agree
to terminate the agency. But certain types of agency are irrevocable:

(c)

(i)

where the agent has authority coupled with an interest and the
agency has been created to protect his interests; for instance,
where a debtor appoints his creditor as agent to sell the debtors
property and recover the debt from the proceeds, he cannot
withdraw his authority.

(ii)

where the agent has begun to perform his duties and has
incurred liability:

(iii)

where statute declares the agency to be irrevocable, as when it

is a power of attorney for a limited period expressed to be
irrevocable.

Agency is terminated by operation of law (with some exceptions for

irrevocable agencies) in any of the following circumstances.
(a)

death of principal or agent;

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(b)

insanity of principal or agent;

(c)

bankruptcy of the principal, and also bankruptcy of the agent if,

as is likely it renders him incapable of performing his duties;

(d)

frustration e.g. by the agency becoming unlawful because the

principal has become an enemy alien. This makes the agency
contract impossible to be performed.