The Gazette 1986

GAZETTE

sepTemBER

1986

Duty of Obedience (a) introduction

(d) consequences of disobedience If the agent fails to obey lawful instructions then the agent loses the right to remuneration for the unperformed acts or tasks 32 and is liable to the principal for any loss caused by the disobedience. 33 An agent is not obliged to follow instructions which contemplate an illegal 34 or null and void act. 35 Consequently, the principal is not entitled to recover damages on account of the agent's failure to act on such instructions. What if there are no instructions (either express or implied) from the principal to guide the agent? Then the agent must use discretion and act to the principal's benefit. 36 Duty of Care and Skill (a) introduction Agents are under a duty to exercise due care and skill in the execution of the agreed undertaking. While the duty to obey instructions 37 is superior to the duty to exercise care and skill, this latter duty is nonetheless important. 38 For example, an agent appointed with general authority (especially a professional agent) cannot blindly follow foolish instructions without advising the principal of the latter's folly. 39 In the absence of a contractual agency relationship, 40 this duty will arise in tort. 41 The degree of care and skill varies among different types of agent. The courts have traditionally drawn a distinction between the standard or degree of care and skill expected from an unpaid (gratuitous) and a paid (commission) agent. This distinction may be discerned from comments of Crompton J. in Beal -v- South Devon Rly. Co. : "What is reasonable varies in the case of a gratuitous bailee and that of a bailee for hire. From the former is reasonably expected such care and diligence as persons ordinarily use in their own affairs, and such skill as he has. From the latter is reasonably expected care and diligence, such as are exercised in the ordinary and proper course of similar business, and such skill as he ought to have, namely, the skill usual and requisite in the business for which he receives payment." 42 (b) professional agents A professional agent must display the standards of care and skill expected from a professional in that field of activity 43 The test is objective. For example, a paid estate agent who is appointed to sell property is expected to obtain the best price that is reasonably available. 44 (c) gratuitous agents A gratuitous agent must act with due care and skill but need only "display such skill as he actually possesses and exercise such care as he would in his own affairs." 45 (d) gratuitous v. paid: the debate It has been suggested that no real importance should be attached to the distinction between gratuitous or paid agents. 46 The case for a higher duty to be exacted from the paid agent is essentially two-fold. First, the paid agent should display a higher standard of care and skill

An agent must obey all lawful 19 express and implied instructions given by the principal. 20 This rule 21 may be analysed in the following manner. First, if the principal gives express lawful instructions then the agent must obey them. Secondly, if express instructions are not given (for example, on a particular point) then the agent must act in accordance with whatever instructions can be implied by reason of business or trade customs and practices. 22 Thirdly, if no express instructions are given and no implied instructions are discernible (as, for example, might happen in a novel situation) then the agent must use discretion 23 and act to the principal's benefit. (b) express instructions The agent must meticulously obey any express lawful instructions. The agent has no discretion in respect of matters on which the principal has given such instructions. 24 This means, for example, that there is no defence for the agent who believes that it would improve the principal's lot by departing from the principal's express instructions. 25 Fray -v- Voules 26 is a case in point. A solicitor was told by his client not to enter a compromise. But the solicitor, following the advice of counsel, did enter a compromise. The solicitor (agent) was held liable for disobeying the instructions of his client (principal). Another example is Bertram -v- Godfray 21 The agent stockbroker was expressly instructed to sell shares at a particular price. The agent waited because he expected that the share prices would rise, thereby increasing the principal's profit. Even though such a belief was reasonable in the circum- stances, the agent was still held liable because he did not obey the instructions given to him by the principal. The case-law is clear on this point: there is no defence for the agent who departs from express instructions in an effort to better the principal's position. 28 It is clear that the agent must comply with the instructions given by the principal, but what if those instructions are ambiguous? No liability attaches to an agent who genuinely ( bona fide) follows a reasonable interpretation of those instructions, even if there are adverse consequences for the principal. 29 The agent should interpret the instructions in the light of any trade custom or practice. 30 (c) implied instructions In the absence of express instructions, the agent must act honestly within any instructions which can be implied from the relationship. Similarly, if the instructions given by the principal allow the agent some discretion, then the agent is also under a similar duty to honestly exercise his or her judgment so as to meet the interests of the principal. Chown -v- Parrott 31 is instructive. A solicitor had not been given express instructions as to settling an action but decided that the compromise offered was reasonable and in the interests of his client. The solicitor was held not to be liable to the client. The solicitor had acted in accordance with whatever instructions could be discerned in the specific case. One might summarise this by saying that there is a duty of reasonable care.

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