Rights and Obligations
The terms of appointment should specify the agent’s authority, remuneration, rights and duties. The duties and obligations of the agent are implied by the general law in the absence of contractual provision for them. The default duties and obligations may be varied, modified or set out in more detail by the terms of the contract of appointment.
There are limits on the extent to which some basic rights and obligations may be modified. Most of the duties implied at common law are in the interests of the parties and are unlikely to be substantially modified in the contract of appointment. Clear language would be required to displace the basic rights and duties of the parties, as the parties will not be readily presumed to displace them.
EU Commercial Agents
The EU Commercial Agents Regulations apply to certain types of agency relationships, and where they apply, they are for the most part, mandatory. The Regulations require that the agency contract must be in writing. The regulations codify the obligations and duties, rights and duties of the principal and agent.
The Regulations apply to self-employed intermediaries with continuing authority to negotiate the sale and purchase of goods on behalf of another. There are exclusions for partners, directors of companies and unpaid agents.
There is an exemption for persons whose activities as agents are secondary. Certain activities are presumed to be secondary under the Regulations. An activity may be secondary where the consumer selects the goods and places an order through the agent.
An agent will usually be obliged to follow his principal’s lawful instructions, by the terms of his contract of appointment. The agent must not exceed the terms of his appointment and the scope of the authority granted by it. If he does so, then he may be liable to compensate the principal for breach of contract.
An agent need not necessarily be appointed under a contract. He may act as agent in a particular role, without any agreement or remuneration, with authority to bind his principal. In this case, he is not liable for breach of contract, for the failure to follow an instruction.
An agent may incur liability to his principal and others by acting outside the terms of his authority, even in the absence of a contract of appointment as an agent. He may, for example, incur liability in tort or in equity to his principal for breach of his duty of care or his fiduciary duties.
The agent’s duty of care in negligence will depend on the circumstances and in particular whether the relationship of the principal and agent is sufficiently close in the circumstances, such that a duty of care arises. See generally the sections on the law of negligence.
The agent may incur liability to third parties on unauthorised contracts and for breach of his warranty of authority.
Duty of Care
Where the agent is appointed under a contract, the obligation to exercise due care and skill may be specified or implied. The duty may be expressed in more onerous and unconditional terms. Where there is no contract, the agent may be liable under principles of negligence.
An agent may limit, exclude or reduce the obligations and liability which he would otherwise have, by the terms of his contract. The general principles applicable to exclusion and limitation clauses in contracts, apply in this context. The Unfair Contract Regulations may apply in consumer cases.
Contracts made by the agent for the principal must be entered in the ordinary course in accordance with his instructions. He must exercise reasonable care to protect the principal, in negotiating the terms of the contract. The contract should be effective and enforceable.
An agent must exercise proper care, skill, and diligence in carrying out his functions. He must exercise the level of reasonable care and skill required of a person who usually undertakes the activity concerned.
The standard of care required of the agent will depend on the circumstances. The standard required is that deemed reasonable in the circumstances. The agent is not usually responsible for matters outside the scope of his duty or employment, even if he could by reasonable skill have avoided a loss to the principal.
If the agent is engaged in a particular profession, he is required to demonstrate the degree of skill and care of a reasonably competent practitioner. He must meet the ordinary standards of competent practitioners in that trade or profession.
If the agent does not profess a particular business or profession, the standard required may be lower. The level of skill required will be usually that which would be exercised by a person in the ordinary course of his own affairs. However, if he represents himself as having more skill than he, in fact, possesses, then he must exercise that higher level of skill.
An agent who acts without reward is bound to exercise, at least the level of skill that he in fact has. An agent who is paid must exercise a higher standard of skill, care, and diligence, than an unpaid agent. It must be the requisite level and degree of skill, care and diligence, reasonably necessary for the performance of the obligations and functions for which he is retained.
The agent must exhibit due skill care and diligence in exercising his principal’s business. Where delegation is permitted, the agent may appoint or employ a subagent. The agent’s right to delegate, if any, will affect the extent to which the agent retains duties to the principal in respect of the acts or omissions of the sub-agent.
Where the agent cannot delegate the performance of his functions, then he remains liable for the breach of his obligations, irrespective of how they occur. Even if, he can delegate the performance of functions, he will commonly retain an overall responsibility and potential liability to the principal, for breach of his obligations.
It is a matter of the interpretation of the terms of the agency contract, as to whether the agent may create a contract between the sub-agent and principal. Where the agent has this authority, the terms of the contract made between the principal and sub-agent will govern their respective rights, duties and liabilities.
The more common position is that there is no such authority and the sub-agent is the agent of the agent, but not of the principal. Therefore, the agent remains accountable to the principal. In this case, common law duties of care and fiduciary duties will apply as within the sub-agent and principal.
Where the circumstances are such that the agent is not responsible to the principal for the sub-agent’s negligence, there remains the possibility that he may be liable for negligence in selecting the sub-agent.
The agent as a fiduciary, owes duties of loyalty and fidelity to the principal. As fiduciary duties are based on equitable principles, flexible equitable remedies may be available. An agent who obtains the informed consent of his principal may do that which would otherwise constitute a breach of fiduciary duty. Informed consent may require independent legal advice for the principal.
In addition to the standard common law remedies such as compensation by way of damages, the court may grant an order for an account of profits and for tracing of the proceeds of wrongdoing into funds and assets from which they are derived. The flexible remedies of injunction and declaration may also be available.
Where an agent makes a secret profit based on information or assets coming into his possession while acting as agent, he is obliged to account for any assets received and profits earned. The agent must account for the monies received and/or pay compensation for loss incurred by the principal. The secret profit effectively belongs to the principal and can be claimed as his property.
The proceeds of a breach of fiduciary duty can be traced, even in the event of the agent’s insolvency into the hands of third parties, other than persons who have acquired the monies or proceeds in good faith and for value.
Duty to Account
The agent must account to the principal. He must keep an account of monies paid and received. He must keep the principal’s money, and assets separate from his own. It is a question of interpretation as to whether the agent holds the principal’s assets as fiduciary / quasi-trustee or is obliged to account for it personally.
In the former case, the assets and proceeds belong to the principal at all times. In the latter case, the agent will be a creditor of the principal only, who may lose out in the event of the agent’s insolvency.
On completion of agency the agent must give over books, accounts, and documents created in the course of the agency. He may have a lien where commissioned is due under the contract or by custom and practice. Some agents are entitled to a general lien for all sums owed to his by the principal, by custom and practice.More commonly the lien is limited to the papers etc. associated with the particular transaction, from which thie principal’s agency arises.
The agent’s entitlement to an indemnity from his principal extends to civil wrongs and breaches of a contract undertaken in the course of his authority. The agent must be acting in the course of his agency and must be actually authorised. The indemnity does not extend to liabilities and expenses incurred unnecessary or through his fault.
Responsibility for Wrongdoing
An agent who commits a civil wrong in the course of his agency is liable personally, to persons who thereby suffer damage, even if he acts under the express authority of his principal or if the act is later ratified by the principal. He will commonly be entitled to an indemnity from his principal.
In some cases, the authorisation may deprive the acts of its wrongful character, in which event liability does not arise. However, absent this, the agent is liable.
An agent can make his principal liable for his civil wrongs. Where a principal authorises an agent to do an act which constitutes a civil wrong, the principal is jointly and severally liable to third-parties who thereby suffer loss and damage.
Responsibility for Wrongdoing II
Liability may arise under the principles of vicarious liability and in some cases under general principles of agency. Even where the act is outside of the scope of his authority, the principal may be vicariously liable for acts in the course of the agency or within the ostensible scope of the agent’s authority.
The misrepresentation of either principal or agent binds the principal and the principal may be liable for the consequences. This may arise,even where the principal knows something to be false which the agent believes to be true and vice versa.
Generally, an agent does not make his principal criminally liable unless the principal is liable as an accessory or authorises or connives at the offence or default concerned. In some cases, the very offence itself may be capable of being committed by or through an agent. This is specifically provided for in the case of many statutory offences.
Admission and Notice
Where an agent is authorised to make admissions, the principal is bound by them. Where he makes an admission without express or implied authority or in excess of authority, the principal is not bound.
Notice to an agent in the course of a transaction in which he acts for the principal will be deemed notice to the principal. Notice may be of facts which come to the agent’s knowledge in the transaction or matters notified to him in circumstances where there is a duty to communicate to the principal. The principal will be deemed to have notice in these cases, even if he has no actual notice.
It is presumed that notice will be given to the principal in the ordinary course of business. Matters coming to the agent’s notice while acting for another principal or for himself are not binding on the principal in the absence of a duty to transmit the same to the principal.
References and Sources
Commercial Law, Fidelma White 2nd Ed. Thomson Round Hall, Dublin, 2015.
Commercial Law Michael Forde, 3rd Ed Tottel, Haywards Heath, 2005
Principles of the Law of Agency Howard Bennett 2013,
Agency 3e: Law & Principles (3rd Revised Ed) Munday, Roderick;
Bowstead & Reynolds on Agency, 20th Ed. Professor Peter G. Watts
The Law of Agency Friedman