The Duties of an Agent to Principal

Topics: Contract, Real estate, Contract law Pages: 6 (2072 words) Published: November 25, 2012
The duties of an agent depend primarily on the contract of agency if there is one. Subject to any such express terms, the agent owes a number of implied duties or obligations to his principal. It is the agency relationship as such that gives rise to these obligations so that, as a general rule, they fall as much on the gratuitous agent as on the paid agent. 1.Obey the Principal’s instructions

Section 164 states,
The agent must obey the instructions given to him by his principal even if he thinks the instructions are wrong. Sometimes of course the principal may expect the agent to advise him and indeed he may be employing an agent to use skill and care. The agent must not delegate his duty to another person unless such delegation has been agreed with the principal, or is the custom of the trade, or the delegation merely takes pace in relation to purely administrative matters. Case Example :

In Turpin v. Bilton (1843), an insurance broker agreed for consideration to obtain a contract of insurance on the plaintiff’s ship. But he failed to do so. The ship was lost and the broker was held liable to the plaintiff. In Fraser v. B. N. Furman (Production) Ltd (1967), insurance brokers agreed for consideration to effect an employer’s liability policy and failed to do so. The employer was held liable for $3000 damages in an action brought against him by an employee for breach of the Factories Act, and the Court of Appeal held that the brokers must indemnify the employer in that sum for breach of contract. Betram Armstrong & Co. V. Godefray (1830) 1 Knapp 381

Facts : The agent was a stockbroker. The principal told the agent to sell stock when the market price reached a certain figure per unit of stock. The agent did not heed these instructions and held on to the stock. When the market dropped the agent was forced to sell at a loss. Decision : The principal successfully sued the agent to recover the difference between the price at which he was instructed to sell the stock and the price at which the stock was eventually sold. 2.A duty to exercise reasonable skill and diligence

Section 165 states,
The degree of skill and diligence required of an agent depends on whether the person is a gratuitous agent or a non-gratuitous agent. A gratuitous agent is not paid for their services whereas a non-gratuitous agent is paid. A non-gratuitous agent is required to exercise a degree of skill equal to that which a reasonable person would expect an agent of that type to exercise. For example, a real estate agent is expected to display the qualities and expertise of a competent real estate agent. If the agent fails to meet this standard, the agent will be liable to the principle for any loss caused by this breach of duty. A gratuitous agent is not expected to exercise any special degree of skill. The agent must exercise the same degree of care and diligence as they would use in attending to their own affairs. If that person has some special knowledge, they are expected to use that knowledge. Case Example :

In Keppel v. Wheeler (1927), agents were employed to sell a block of flats and received an offer from one party which was accepted “subject to contract”. The agents later received a higher offer but, instead of telling the owners, arranged a resale from the earlier party to the later after the original sale to the earlier party was effected. It was ruled that the agents had acted in breach of their duty to obtain the best price available, and that duty included passing on details of better offers until a binding contract was concluded.

3.To render proper accounts when required
Section 166 states,
An agents owes a duty to the principal to keep proper accounts and make them available for inspection. For example, travel agents and real estate agents are required by statute to keep accurate and proper accounts. This duty imposes an obligation on agents to keep their property and money separate...
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