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  The rights of an agent would usually cover the corresponding duties of the principal and vice versa. For instance, if the agent has the right to be paid a certain sum of money, then the principal may have a duty to pay such money.
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Since the relationship between a principal and an agent is usually based on an agreement between the parties, they may regulate their rights and duties under such agreement, but there are some generally recognized rights and duties of the parties to an agency agreement which may apply whether or not the parties make express provisions to that effect.

Rights Of An Agent

The scope of an agent’s duty to the principal is determined by the terms of the agreement between the parties, the extent of the authority conferred, and the obligations of loyalty to the interests of the principal. The following are the rights of an agent:
  1. Right to Remuneration: the agent acts on behalf of the principal under certain terms and conditions and is usually appointed by the principal to so act. Therefore, the agent usually has the right to receive remuneration for the work done on behalf of the principal. This may be in the form of a commission or some other kind of agreed payment arrangement.
  2. Right of Indemnity: to indemnify means to compensate someone for some loss that they have suffered. One of the recognized rights of the agent is to receive compensation for any loss incurred as a result of carrying on the agency. This is different from remuneration, which is based on the work done by the agent in accordance with the agreement of the parties. Indemnity, on the other hand, will cover the expenses or liabilities incurred by the agent in the course of doing his/her job as an agent. Indemnity can only be claimed by the agent for losses incurred as a result of regular business activities and not for losses incurred due to the fault of the agent.
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Duties Of An Agent

  1. Duty to act with care and skill: the agent must exercise reasonable care and skill in executing the terms of the agency. Where the agent acts in a way that does not provide the best option to the principal, then the agent may be liable for breach of this duty.
  2. Duty not to Sub-Delegate: as the acts of the agent are considered the acts of the principal, the agent is under a duty not to sub-delegate the agency tasks or transactions. This means that the agent cannot employ someone else to carry on the agency tasks or transactions. This also means that the agent cannot employ someone else to carry on the agency on his behalf, because this would mean that the principal would become liable for the acts of a third party with whom he has no relationship or agreement.
  3. Duty of Uberrimae Fidel: the term “Uberrimae fidel” means “utmost good faith”, and the agent is under a duty to act with utmost good faith in executing the functions of an agent. This means that he/she must ensure that there is no conflict of interest between him/her and the principal. The agent is expected to act in the best interest of the principal under every circumstance.
  4. Duty not to make a secret profit: closely tied to the duty not to collect bribes is the duty not to make a secret profit. The agent must not make undisclosed profit from the transaction which is the subject of the agency.

Duties Of A Principal

A principal owes certain contractual duties to his/her agent. The principal’s duties are correlative with the duties of an agent to serve a principal loyally and obediently. A principal’s primary duties to his/her agent include:
  1. To compensate the agent as agreed.
  2. To indemnify and protect the agent against claims, liabilities, and expenses incurred in discharging the duties assigned by the principal.
  3. Because of the fiduciary relationship, a principal owes his/her agent a duty of good faith and fair dealing. However, a principal can be relieved of contractual obligations by an agent’s prior breach of contract.
  4. A principal has a duty to act in accordance with the express and implied terms of any contract between a principal and an agent.
  5. When an agent acts within the scope of actual authority, the principal is liable to indemnify the agent for payments made during the course of the relationship irrespective of whether the expenditure was expressly authorized or merely necessary in promoting the principal’s business.
Conclusion It is important for the parties to understand their rights and duties under agency relationships, as well as, those of third parties who do business with them. The parties to an agency relationship have rights and duties which must be respected and fulfilled or else the other party would be entitled to rescind the agency agreement or to damages. Featured Image Source: Aziz Yellin LLP
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This article was first published on 30th April 2021

foluke-akinmoladun

Foluke Akinmoladun is the Managing Solicitor of Trizon Law Chambers. She has been a legal practitioner for 13 years and has experience in a wide range of commercial matters. She is a certified mediator, a member of the Chartered Institute of Arbitrators(UK), holds an Advanced Diploma in Accounting from the Association of Chartered Certified Accountants (UK) and is also a tax consultant. She is a dispute resolution expert, handling commercial disputes from negotiations all the way to litigation (if need be).

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