Duties of Agents to Principals

Duties of Agents to Principals

• Fiduciary Relationship: Principals and agents owe duties to each other; these duties are fiduciary, involving trust and loyalty. The principal is entitled to expect the agent's best interests.

• Scope of Duties: Agent's duties depend on their authority. All agents owe fiduciary duties, but the extent of duties varies based on the agent's authority (e.g., limited tasks). Commercial agents have more extensive duties defined by legislation (Commercial Agents (Council Directive) Regulations 1993).

• Duty to Follow Instructions: Agents must follow their principal's instructions (which must be clear). The principal has a duty to ensure instructions are clear. The agent is liable for losses if they do not follow clear instructions.

• No Instructions: Agents still have a duty to follow usual industry practices in the absence of specific instructions.

• Conflict of Interest: Agents must avoid conflicts of interest (e.g., self-dealing). Full disclosure is key. The principal can consent to certain conflicts.

• Secret Profit: Agents cannot earn secret profits at the principal's expense. Agents must account for benefits received. This includes commissions, bribes, and undisclosed self-dealing. Agents may not work for two competing principals without explicit agreement.

• Full Disclosure: Agents must disclose all material facts of a transaction (including profits, relationships, and interests) to the principal. This is a higher standard than ordinary contractual relationships. If the agent fails to disclose, it is a breach of duty, and the principal can void the transaction.

• Confidentiality: Agents must protect confidential information obtained during the agency relationship.

• Communication of Benefits: Agents must disclose any benefits derived from the agency relationship, unless those are part of their agreed-upon remuneration.

• Duty to Account: Agents must account for all benefits received during the agency. This includes keeping records and providing accounts for principal inspection.

• Reasonable Care and Skill: Agents must exercise reasonable care and skill in their duties, as appropriate to their profession

• Non-Delegation: Agents generally cannot delegate their duties to others. Exceptions exist for tasks outside the agent's skillset (e.g. tasks requiring specialized skills or industry customs).

• Preservation of Principal's Property: Agents must treat the principal's property and funds with the same care as their own. Accounts and documents must be promptly handed over, subject to the agent's right of lien.

Principal's Duties (Under Regulations)

• Principal's Duty to Act in Good Faith: Under the Commercial Agents Regulations (1993), the principal must act dutifully and honestly.

• Documentation and Information: The principal must provide the agent with necessary documentation (e.g., contracts) for the agency relationship and keep the agent informed.

• Notification of Transaction Outcomes: Principal must inform the agent quickly about accepted or refused transactions.

Agent's Rights

• Remuneration: Agents are entitled to legally agreed remuneration (commission or percentage). Default rules apply if remuneration is not specified in the contract (customary, reasonable rates).

• Commission: Regulations outline circumstances for commission payments. Commissions due for concluded transactions, even after termination if within a reasonable timeframe and the transaction was initiated before the termination (Reg. 8).

• Indemnity and Reimbursement: Agents are entitled to indemnification (compensation) or reimbursement of expenses incurred while acting lawfully within their authority.

• Lien: If the principal fails to pay, the agent can retain principal's property (lien) until payment is received (subject to certain conditions and rules).

Termination of Agency

• Specified Contract Terms: Agreements sometimes have fixed durations that end the relationship.

• Indefinite Contract: Agency relationships without fixed term require notice—regulations specify notice lengths based on the duration of the relationship and the severity of a breach.

• Payment on Termination: Generally, the agent is entitled to payment even if the agreement ends, excluding cases of termination due to a material breach by the agent, transfer of duties to another, or the agent's termination of the contract (e.g. illness or age).

• Indemnity vs. Compensation: Upon termination, the agent can be compensated (Reg 18) for damages incurred from the termination (loss of commission, expenses). Alternatively, indemnity is based on the agent's expected contribution (Reg 17). Indemnity is usually calculated from completed transactions.

Liability

• Agent Liability: Agents can be liable for losses incurred by the principal due to negligence, following instructions, or the use of confidential information.

Other Details

• Difference Commercial Agents & Common Law: The Commercial Agents Regulations (1993) offer specific rules that agents are entitled to written consent for contracts or other key details.

• Dual Representation and Conflicts: Representing multiple principals in competing or interconnected transactions necessitates disclosure and careful consideration of interest conflicts.

• Ratification and Compensation: A principal can ratify an agent's act, still seeking compensation from the agent for exceeding authority. Clear communication is essential when ratifying, making it clear that the right to compensation is reserved.