The Duties of an Agent Towards His/Her Principal

Topics: Contract, Legal terms, Contract law Pages: 2 (883 words) Published: June 28, 2011
Explain, with reference to the relevant sections in the Contract Act 1950 and example of case law, the duties of an Agent towards his/her Principal.
Normally, an agreement creating an agency relationship may be arises out by express or implied and as such, their rights and duties will depend on the terms of the contract of agency. When the contract of agency is silent on the terms, the rights and duties of an agent to his principal are governed by sections 164 to 174.

The main duties of an agent are as follows:
1.Section 164: Agent’s duty in conducting principal’s business. An agent has to obey his or her principal’s instructions when conducting the business of the principal. Failure to obey may be treated as a breach of contract and the agent is liable for any loss sustained by the principal an account of the breach. For example, in Turpin v Bilton (1843), the agent failed to insure a ship when instructed to do so and the ship was lost, therefore the agent was held liable. Another example is Bostock v Jardine (1865), where the agent was liable when he bought more than he was directed to buy. However, an agent has no duty to obey the unlawful instructions of his or her principal. In Cohen v Kittel (1889), the agent was held not liable for failing to place bets. In the absence of instructions from the principal, the agent has to act according to the customs which prevail, in doing business of the same kind, at the place where he or she carries on his or her work. Otherwise he or she has to make good any loss sustained by the principal. As an example, N is a broker, in whose business it is not the custom to sell on credit. N sells goods of M on credit to Q and the credit at that time was very high. But before payment, Q becomes insolvent. Hence, N must make good the loss to his or her principal, M. 2.Section 165: Skill and diligence required from agent.

An agent has to exercise care and diligence when carrying out his or her work and to use such skill as...
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