Duties and Rights in an Agency

Generally, there are six (6) duties that an agent owes the principal

DUTY TO PERFORM THE UNDERTAKING: If an agent is employed to perform a particular function, if the fails to do such, he may be liable for damages. The general/basic rule of a contract of agency is that the agent must perform his obligations under the agency.

A gratuitous agent is usually not being paid thus the general principle is that he is not liable if he fails to perform the function. However, if a gratuitous agent decides to perform and starts the performance, he is under the same undertaking as a paid agent. See Coggs v. Bernard

N.B: If an agent is employed to perform an illegal act, he cannot be held liable if he fails to perform it, whether or not he was paid

DUTY OF OBEDIENCE: The agent, in the performance of the undertaking, must act in accordance with the authority which has been given him. This principle is that an agent must comply strictly with the instructions of the principal. He must obey the instructions contained in his express authority (as long as they are lawful).

An agent is meant to obey the express instructions he has been given even if it is to the detriment of the principal. If it is ambiguous, the agent can go ahead and do what is best for the principal. See Fray v. Voules.

If there are no express instructions given to the agent, he may go ahead and compromise it in the best interest of the principal. But in this modern time, a prudent agent should try and get in touch with his principal and get clearer instructions.

An agent is under a duty to obey express instructions provided the instructions are lawful. In order to determine whether the agent has complied with the instructions given, one would have to look at the literal meaning of the instructions. The court will have to look at the instructions and interprete them in their ordinary meaning

N.B: Where an authority is given by general words, those words are limited by special words describing that which the agent ought to perform. See Jacob v. Morris

The principal will not be bound by the agents act if the instructions has been withdrawn or varied before it was performed and it is purportedly carried out by the agent, and it does not matter that the third party knows the original instructions. See the cases of Michelle v. Charaf and Nigerian Craft Bags Ltd v. Express Clearing and Shipping Nigeria Ltd

If the agent is a professional person, such a person would be bound by the rules and ethics of his profession. Such an agent would not be required to perform an act which is contrary to those rules.

3) DUTY OF CARE AND SKILL: In addition to performing his duty, an agent is also required to exercise the requisite skill and diligence in the performance of his duties. All agents whether contractual or gratuitous owe this duty to their principals.

However, a distinction is often made between the standard of care to be observed by contractual and gratuitous agents. In the case of contractual agency, the standard of care to be observed by the agent is the skill which an agent in his position would usually possess and exercise.

Thus, as long as he has behaved with normal care and skill, having regard to the nature of his business, and has acted in as reasonable a manner as could be expected from an agent employed in such an undertaking, the agent will not be liable for negligence even if his efforts were not successful.

In this connection, the Privy Council in Omotayo v. Ojikutu held these two rules:

• A principal who appoints an agent knowing his skill and experience, is not entitled to expect or require from that agent, a higher measure of skill or knowledge than one of his position and experience could reasonably be expected to possess
• The agent does not guarantee the successful outcome of transactions undertaken by him on behalf of his principal, and provided he acts honestly, no more can be demanded of him than that he should show a measure of skill and diligence which could be expected of one of his position and experience.

Thus, if an agent is employed to sell, it is his duty to obtain the best price reasonably obtainable. It has been held that this duty to obtain the best price obtainable does not cease when the agent had procured an offer which has been conditionally accepted by the principal

N.B: A gratuitous agent as seen earlier is under no obligation to act. But if he does act, the degree of care and skill required of him is that which a reasonable man would exercise in respect of his own affairs. Where the agent has expressly or impliedly held himself out to his principal as possessing skill adequate to the performance of a particular undertaking, he must show such skill and care as would normally be shown by one possessing the skill.

NON-DELEGATION: The agent may not, as a general rule delegate to another person to another person that which he has undertaken to do. This is usually expressed in the latin maxim “delegatus non potest delegare” (a delegate cannot delegate). The origin of the rule is to be found in the assumption (or in the fact) tht the relayionship between the principal and agent is a confidential one in which the principal imposes trust in the agent of his choice. Hence the obligation of the agent is to act personally, in conformity with the maxim.

However, there are a number of occasions when because of exigencies of business, the above rule is relaxed in order to enable the agent to delegate his powers. This may be so in the following cases (exceptions):

• Where the duties to be performed are purely ministerial acts, which do not involve any special care and still they can be normally delegated
• Where the usage or custom of the trade or nature of the business permits delegation
• Where unforeseen circumstances arise which necessitates the agent delegating
• Where the principal expressly sanctions or consents to delegation

The employment by the agent of a sub-agent does not normally bring into being any privity of contract between the principal and the sub-agent. In this case, the sub-agent is responsible to the agent alone and cannot be sued directly by the principal.

In the case of Calico Printers Association v. Barclays Bank, it was held that where an agent has power to appoint a delegate or a sub-agent, the sub-agent becomes the agent of the agent and not of the principal, unless the principal has given authority to his agent not merely to appoint a delegate or sub-agent but to appoint someone to act as agent for the principal.

Thus, where the principal expressly or impliedly authorizes the delegation or where he ratifies a delegation which has already taken place, privity of contract is established. The sub-agent becomes responsible to the principal for the due discharge of the duties which his employment casts upon him, and a fiduciary relationship arises between them. See also the cases of Kahler v. Midland Bank and De Bushe v. Alt.

DUTIES ARISING FROM THE FIDUCIARY NATURE OF THE AGENCY – (DUTY OF GOOD FAITH): Besides those ordinary duties which are implied by law into an agency relationship, there are certain other duties that are owed by the agent to the principal which arise from the fiduciary nature of the relationship between them. Those duties/principles are as follows:

1. The agent must not make a ‘secret profit’: any secret profit made undisclosed would be refunded. Such profit may include rebates, bribe or payment of a secret commission. The agent will be laible for the profit received, because the contract between the principal and the agent is one of utmost good faith. See Palmer Nig. Ltd v. Fonsela
2. The agent must not accept ‘bribe’: an element of criminality is involved here. The agent may not be entitled to remuneration. The collection of bribe here by the agent is too detrimental to the principal. The third party giving the bribe has acted corruptly and the principal will suffer damage as a result of it.
3. An agent must not put himself in a position where his interest conflict with the interest of the principal. In other words,where the agent is in a position in which hisown interest may affect the performance of his duty to the principal, the agent is obliged to make a full disclosure of all the material circumstances, so that the principal with such knowledge can choose whether to consent to the agents acting.
4. An agent must not compete against the principal in the same business as they will definitely be in a position of conflict. The agent being a fiduciary of the principal must act in utmost fidelity, honesty and transparency. See the case of Igben & Oke v. Etaware

DUTY TO ACCOUNT: Money or property entrusted to the agent must be accounted for to the principal. Because of this fact, the agent is prompted or required to keep proper records showing receipts and expenditures in order that a complete accounting may be rendered. Any money collected by an agent for his principal should not be mingled with the funds of the agent.

Rights of the Agent against the Principal

RIGHT TO INDEMNITY: the principal is obliged to indemnify the agent against all losses and liabilities and to be reimbursed for all expenses incurred in the lawful execution of his duties. Accordingly, the right of indemnity exists whether the agency is contractual or quasi contractual. Where it is contractual, the right may be express, but even if it is not, it would be implied as regards payments made within the authority of the agent. The normal limit on this right is that it is lost if the loss was caused by the agents own default or breach of the duty or if he knowingly acted illegally or outside the scope of his authority.

RIGHT OF LIEN: the general rule is that every agent has a general or particular possessory lien on the goods or chattels of his principal in respect of all lawful claims he may have as such agent against the principal, for remuneration earned, or advances made, or losses and liabilities incurred in the course of the agency or otherwise arising in the course of the agency provided;

• That the possession of the goods or articles was lawfully obtained by him in the course of the agency, and in the same capacity as that in which he claims the lien.
• That there is no agreement inconsistent with the right of the lien; and
• That the goods and chattels were not delivered to him with express directions or for a special purpose inconsistent with the right of lien.

The agent’s lien will be lost where;

1. The agent waives the lien
2. The agent voluntarily parts with both actual and constructive possession of the goods or chattels. This is so because possession is of the essence of the right of lien.
3. The agent enters into any agreement or acts in any capacity which is inconsistent with the continuance of the lien.

RIGHT TO REMUNERATION: the primary right of every agent is to receive a remuneration for the services that he rendered to the principal. The remuneration of an agent is usually in the form of commission and represents his reward in respect of the duties performed by him. The obligation the pay the agents remuneration and the amount to be paid is usually found in a contract express of implied between the principal and the agent

N.B: It is important to note that a gratuitous agent is not entitled to remuneration.

Remuneration is determined on the basis of quantum meruit. The quantum meruit is only taken by the court when the agent ought to be remunerated. If there is an express agreement, the principle of quantum meruit will not apply.

In Bryant v. Flight, the agent left the amount of payment he is to receive entirely to the principal, it was held that there was an implied term for some remuneration and that the agent counld recover on a quantum meruit basis.

In Badawi v. Elder Dempster Agencies Ltd, it was held that where an estate agent is employed to sell property, he is entitled to commission at the standard rate charged by the profession if that is known to the principal.

Even where it is expressly or implied agreed by the principal that he will pay the remuneration, another problem which arises is to determine at what stage remuneration is payable. It is immaterial to the payment of remuneration that the principal has derived no benefit from the agent’s acts. As long as the agent has performed what he was employed to do, and has not been at fault in failing to benefit his principal, the latter will be bound to pay the agreed commission. See Fisher v. Drewett

N.B: Can a principal prevent the agent from earning his commission?

This was the central issued raised in Luxor Ltd v. Cooper. In that case, L had engaged C, to negotiate the sale of property. 10,000 pounds commission was to be paid to C, ‘on completion of the purchase’. Offers were secured for the properties but agreement made with the purchasers was expressed to be “subject to contract”. A binding agreement between L and the purchaser was not complete because L decided not to sell. C sued L claiming damages for an implied term that L would not, without just cause, do anything to prevent him earning the commission. It was held that C would not succeed because no sale has been effected and there was no implied term in the contract that L should not act as to prevent C from earning his commission.

The Principal and the third party

Whether the principal or agent can sue or be sued upon the agreement made by an agent depends upon the circumstance of the case.

In general, the right and liabilities of the principal and agent depend upon whether agency was disclosed when the contract was made. Three situations usually arise

Where a principal is named

This is the case where the agent contracts as agent and reveals the name of the principal to the third party. In this case, the third party knows the agent is contracting as agent and knows also the person for whom the agent is acting.

The general rule is that only the principal acquires rights or assume liabilities. The agent having made the contract on behalf of a named principal drops out of the contract.

However, an agent would incur personal liability in the following cases

1. If he signs a bill of exchange in his own name, he is liable on the bill
2. Where he executes a deed in his own name, he liable on the deed
3. If though purporting to act as an agent, he is shown to be the real principal
4. Where the particular custom of the trade makes the agent liable.

Where the agent acts for an unamed principal

In this case, the agent discloses the existence of the principal to the 3rd party but does not disclose the name of his principal. The position here is like the case of the named principal and the presumption is that the principal alone incurs obligations and takes the benefits under the contract.

However, the presumption will be more readily rebutted where it is shown that it was the intention of the parties that the agent should be bound by the contract. In such a case, he and not the principal would be bound by it. In those cases where an agent would incur personal liability when contracting for a named principal, he will also incur liability when contracting for an unnamed principal.

Where neither the exitence nor the name of the principal is disclosed

This is the situation whereby neither the identity of the principal nor the fact that the agent is acting on behalf of someone else is revealed to the third party with whom the agent contracts. In such a case the 3rd party believes that he is contracting personally with the agent and only after the contract has been made does the 3rd party become aware that there was an agency relationship in existence.

The third party when he discovers the true state of affairs is entitled to enforce the contract against the agent with whom he actually contracted. The rule is that the third party must make his election of the party he wants to sue within a reasonable time of discovering the principal. Once the 3rd party elects to hold either principal or the agent liable he cannot afterwards change his mind and sue the other. This is because the liability of the principal is not a joint liability with that of the agent but an alternative liability.

On the other hand, the undisclosed principal can seek to enforce the contract against the 3rd party, by so doing however; he also renders himself personally liable to the 3rd party.

An undisclosed principal cannot however enforce a contract against the 3rd party under the following circumstances:

1. Where the principal could not have been a party to the contract at the time it was made
2. Where the identity of the principal was so important to the third party that he could not have entered into the contract had he known the principals real identity.