The Law & You: The Duties of an Agent

Since most agency relationship are established by contract, the agent’s duties and obligation are largely defined by the terms of the contract but additional duties are established by agency  law, unless the contract specifically excludes or modifies them. These duties arise from the trust and confidence that forms the foundation of an agency relationship and are termed fiduciary duties. The status of agency result in a number of duties and obligations between the principal and the agent. Such duties and obligation are normally spelt out in the agency agreement but they can also be implied into the agency agreement.

Duties of an agent to his principal:

• To obey or follow the principal’s instruction: provided they are lawful, the terms of the agent’s authority must be strictly pursued. He or she cannot deviate from positive instructions even if there was a reasonable belief that to do so might be beneficial to the principal. Whether the agent has obeyed the instructions will depend on interpretation of his or her authority. The agent is obligated to seek clarification when the principal’s instructions are ambiguous, unclear, or otherwise misleading. If because the agent’s instructions are ambiguous he or she does an unauthorized act, he or she will be protected provided it is shown that the agent acted reasonably and in good faith.

• Duty to Exercise Reasonable Diligence, Care and Skill: The standard of care that an agent must exercise in acting for his principal is that which is normally expected of a person is engaged in such work. As long as the agent has acted with normal care and skill having regards to the nature of the transaction and has acted in a reasonable manner as would be expected from an agent employed in such undertaking, the agent will not be liable for negligence, even if the agent’s effort were unsuccessful. If an agent professes a calling he or she must demonstrate the care required of a reasonable member of that calling.
• The Agent must act in person and not delegate his duties: The principal in appointing an agent expects the agent to act personally and not through others. Accordingly, unless when appointing the agents, the principal had permitted a delegation of duties, it is a well-established rule of agency that an agent cannot delegate his duties to others, the rule delegate non potest delegare applies.  It is based on the theory that agent is appointed on the basis of his own personal qualities or exclusive personal trust and confidence reposed in him. An agent is liable for breach of this duty and the principal cannot be bound by the act of the sub-agent. However there are exceptions to this general rule such as
  • Where there is an express or implied authority to delegate such as by professional or trade usage.
  • Where the delegates is engaged in purely ministerial acts such as the signing of a letter or the giving of a notice
  • Or where such acts requires no personal skills or confidence. Lastly if the delegation is ratified or approved by the principal, then it will be obliviously valid. 
• Delegation, where it is permitted, does not create privity of contract between the principal and the sub-agent. The latter is the agent of his employer

• Duty not to divulge confidential information: To act in the principal’s interest necessarily implies that the agent is also under a duty of confidentiality. Not only must the agent not tell others of the principal’s business and affairs but he most not make use of such information for his personal benefit or interest. This duty of confidentiality (also called a duty of secrecy) is a well- known rule between the banker and his customer. A bank is the agent for its customer’s account to others.

• Duty to Account; A fundamental rule of law of agency is that the agent must maintain proper accounts relating to his or her work as an agent. This impose a primary duty to keep proper account of the property and monies received on behalf of the principal.

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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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