The Gazette 1986

sepTemBER

1986

GAZETTE

The Duties of An Agent to a Principal Parti by Vincent J. G. Power, B.C.L (N.U.I.), LL.M. (Camb.), Faculty of Law, University College Cork & Kieran H. Hughes, Barrister-at-Law

The fundamental duty of a paid agent is to act: the agent is obliged to perform the agreed undertaking 5 or, at the very least, to inform the principal that the agreed undertaking will not be performed because of a change of mind by the agent. Thus, if the principal suffers any loss due to the agent's non-feasance, then the principal can recover that loss from the agent. 6 A case in point is Turpin -v- Bilton. 1 The Plaintiff shipowner retained the Defendant insurance broker to effect a marine insurance policy on a ship. The broker failed to do so. After the ship was lost, the Court held that the ship- owner was entitled to recover damages from the agent to compensate for this loss. A paid agent who decides not to act is obliged to inform the principal immediately of this change of mind. 8 (b) gratuitous agents The position of gratuitous agents has always been more complex than paid or contractual agents. There is a considerable body of early case-law which held that a gratuitous agent is under no obligation to do any positive act on behalf of the principal. 9 In more recent times, it has however been suggested that a gratuitous agent who decides not to act should be obliged to inform the principal of this change of mind. This would allow the principal to make "alternative arrangements." 10 Murdoch comments": "Whether such an obligation would be imposed by the courts is a matter of conjecture for, while a duty not negligently to misinform someone is fairly easy to establish 12 , the law requires rather stronger reasons before imposing a positive duty to inform. " 13 It is beyond any doubt that a gratuitous agent who decides to act will be liable for any work done negligently or badly. In Wilkinson -v- CoverdaleJ 4 the Defendant gratuitous agent renewed a fire insurance policy for the Plaintiff principal. The policy was in the agent's name and he failed to have it endorsed to the principal. The premises were burnt down and the principal was unable to recover on the policy. The court was adamant that if the Defendant had been shown to have undertaken to effect the insurance then he would have been liable for his negligent performance of the undertaking. (c) agents in general An agent will not be held liable for a failure to act where that act would be either illegal 15 or null and void. 16 In Cohen -v- KittellJ 1 a turf commission agent who agreed to place bets for the principal (at a commission of two and a half per cent) failed to place bets for his principal but was held not liable to the principal for the "winnings" because those "winnings" would in any event have been irrecoverable at law. 18 299

The aim of this article is to enumerate and elaborate upon the duties of an agent. (a) Sources of Duties The duties of an agent (1) arise from three principal sources: first, the agency agreement itself; secondly, the nature of the agency relationship; and, thirdly, the area of business (e.g. estate agency). In respect of the first source, there are various duties which might be expressly stated in the agency agreement and then there are others which are implied into the agreement by law (in the absence of any permissible express exclusion). These implied duties are often dependent on whether the agency is for consideration or merely gratuitous. In regard to the second source, since agency is a fiduciary relationship (i.e. a relationship of the utmost good faith 2 , an agent has a number of fiduciary duties (often described as "duties of good faith" or "duties of fidelity"). Finally, both statute and common law provide rules on specific types of agency — one prominent example being estate agency. 3 (b) Scope of this article Although the starting point for determining the duties of an agent in a particular agency is the instant agreement itself, there are certain duties which can be implied into all agency agreements (in the absence of any express permissible exclusion). It is these implied duties, as well as the fiduciary ones, which are the subject-matter of this article. Thus the article deals with the duty to act, duty of obedience, duty of exercising care and skill, duty not to delegate (i.e., duty of personal performance), duty to respect the principal's title, duty to account, duty not to make secret profits and duty not to accept bribes or secret commission. By way of conclusion, the article will look at the remedies open to a principal where there has been a breach of these duties by an agent. Duty to Act It has often been written that the fundamental duty of an agent is to perform the agreed undertaking. But the nature and extent of this duty depends on whether or not the agent is a contractual (paid) agent, or a non- contractual (gratuitous) agent. 4 (a) paid agents A person is a paid agent not only where he or she has already been paid by the principal, but also where the agent acts in expectation or contemplation of a commission. DUTIES