30 Questions
What is the consequence of an agent breaching the duty of obedience?
The agent is liable for breach of contract
What happens to the right to a lien when the goods pass out of the agent's possession?
The right to a lien is lost
What is the duty of personal performance?
The duty to personally perform the tasks
What is the consequence of an agent failing to follow instructions, as illustrated in the case of Turpin v Bilton?
The agent is liable for breach of contract
What is the consequence of an agent failing to sell stocks at the instructed price, as illustrated in the case of Armstrong & Co v Godfrey?
The agent is liable for the difference in cost with interest
How does the court handle ambiguous instructions from the principal?
The court looks to see whether the agent has acted reasonably
What is the standard of care that an agent is expected to exercise in their duties?
The same degree of care and skill as required in their own affairs
In what circumstances can an agent delegate their duties?
With express or implied authority, in cases of necessity, and in respect of delegation of purely ministerial tasks
What is the consequence of an agent delegating their duties to a sub-agent?
The sub-agent becomes accountable to the agent, who will in turn be accountable to the principal
In the case of Chaudhry v Prabhakar, what was the individual held liable for?
Giving negligent advice to a friend in choosing a second-hand car
Why does the law require personal performance in agency relationships?
Because of the personal nature of agency relationships
What was the outcome of the case of Prentis Donegan v Leeds?
The plaintiffs applied for summary judgement against the defendants to be paid for the insurance premiums
What is the primary factor that determines the external relationship between the principal and the third party?
Scope of the agent's power to act on the principal's behalf
Which of the following is NOT a way the law recognizes an agent's power to bind the principal?
Express Refusal of the principal
What is the primary characteristic of Express Actual Authority?
It is expressed through verbal or written agreement
What happens if an agent exceeds their Express Actual Authority?
The agent is personally liable to the third party
How many main types of authority can an agent have in the exercise of their duties?
3
What is the purpose of a formal contract in an agency relationship?
To provide a basis for renumeration
What is the principle established in the United Bank of Kuwait v Ali Soubhi case?
Undertakings issued by a solicitor or clerk are enforceable
What is the type of authority that looks at what is reasonably incidental to the usage of trades?
Customary authority
In the case of Dingle v Hare, what was the custom in the trade of manure?
It was to be sold with a warranty
What is the result of a solicitor or clerk signing forms of guarantee and undertaking without actual authority?
The firm is liable
What is the requirement for a custom to be considered valid?
It must be certain, known by all, and reasonable
Why can the defence of lack of knowledge of a custom not be used by the principal?
Because the principal is liable for the agent's actions
What is the basis of the court's decision in the case of Robinson v Mollet?
Unreasonable custom
What type of authority arises when a third party reasonably infers from the principal's conduct that the principal granted power to the agent?
Apparent authority
In the case of Freeman v Lockyer, what did the managing director have the express actual authority to do?
Sell land
Why did the court hold the principal liable in the case of Freeman v Lockyer?
The principal had represented to the third party that the agent had the requisite authority
What is the difference between apparent authority and actual authority according to Lord Diplock?
Apparent authority is what the agent seems to have, while actual authority is what the agent has
What is the result when a principal represents to a third party that the agent has the requisite authority?
The third party need not enquire whether the agent was properly appointed
Study Notes
Duties of Agents
- An agent has a duty to obey instructions, and failure to do so can result in liability for breach of contract.
- The duty of obedience is illustrated in the case of Turpin v Bilton, where an insurance broker failed to obtain insurance for a ship, resulting in its loss at sea.
- The duty of obedience is also illustrated in the case of Armstrong & Co v Godfrey, where a stockbroker failed to sell stocks at a specified price, resulting in a financial loss.
The Duty to Exercise Reasonable Care
- An agent has a duty to exercise reasonable care in the execution of their duties, whether contractual or gratuitous.
- The duty of care and skill is of the same degree as that required in the exercise of their own affairs.
- This principle was established in the case of Chaudhry v Prabhakar, where an individual was held liable for giving negligent advice to a friend in choosing a second-hand car.
The Duty of Personal Performance
- An agent has a duty to perform their duties personally and is not allowed to delegate their duties unless permitted by the principal.
- The agent can delegate their authority only if they have express or implied authority, in cases of necessity, or in respect of delegation of purely ministerial tasks.
- The sub-agent becomes accountable to the agent, who is in turn accountable to the principal.
Fiduciary Duties
- An agent has fiduciary duties to the principal, which include the duty to act in the best interests of the principal.
- The duty of loyalty is a key aspect of fiduciary duties.
Types of Authority
- Express Actual Authority: where the agent is expressly appointed and the scope of their authority is in writing, orally, or by deed.
- Implied Actual Authority: where the agent's authority is implied from the circumstances of the agency.
- Apparent (Ostensible) Authority: where the agent has the power to act on behalf of the principal due to the principal's conduct, even if they have not been expressly or impliedly granted authority.
Apparent (Ostensible) Authority
- Apparent authority arises only if a third party reasonably infers from the principal's conduct that the principal granted the agent authority.
- The case of Freeman v Lockyer illustrates the distinction between apparent authority and actual authority.
- An agent may also have additional incidental authority to do certain tasks that are reasonably necessary to carry out their authorized tasks.
Customary Authority
- Customary authority arises from the customs of trade, which can be reasonably incidental to the usage of trades.
- The custom should be certain, known by all, and reasonable.
- The defence of lack of knowledge of a custom is often prevented from being used by the principal to absolve themselves of liability.
Test your understanding of the duties of an agent, including obedience, reasonable care, personal performance, and fiduciary duties. This quiz covers the key responsibilities of an agent and their liabilities for breach of contract.
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