Duties and rights of agents, delegation and termination of agency
An agent must obey, take care, act in good faith and account, and generally cannot delegate. Agency ends by act of the parties or by operation of law.
Duties of an agent
| Duty | Meaning |
|---|---|
| Obey lawful instructions | Follow the principal's instructions; the agent is liable for loss caused by departing from them |
| Reasonable care and skill | Work with the care and skill normal for that kind of agent; professionals must show professional skill |
| Personal performance | Do the work himself; he may delegate only where allowed |
| Good faith | Avoid any conflict between his own interest and the principal's; disclose any personal interest |
| No secret profit or bribe | Any secret commission belongs to the principal; the agent may be dismissed and lose his commission |
| Account | Keep proper accounts, hand over money received, and keep the principal's money separate |
| Confidentiality | Not misuse the principal's confidential information |
Rights of an agent (duties of the principal)
- Remuneration: the agreed commission or fee, or a reasonable amount; usually earned only when the task is completed.
- Indemnity: repayment of expenses and losses properly incurred while acting within his authority.
- Lien: the right to keep the principal's goods or papers in his possession until paid what is due for the agency.
- No indemnity for unlawful acts or for losses caused by the agent's own negligence.
Delegation of authority
The general rule is delegatus non potest delegare: an agent chosen for his personal skill or trustworthiness cannot hand the work over to someone else, because the principal chose him. Delegation is allowed where the principal expressly or impliedly agrees; where trade custom permits it; where the act is purely ministerial (clerical work needing no judgement, such as posting a letter); in an emergency; or where the nature of the work requires it. A sub-agent appointed by the agent normally answers to the agent, who stays responsible to the principal. If the principal authorises the agent to appoint someone to act directly for the principal, that person becomes the principal's own agent.
Liability to third parties
| Situation | Who is liable |
|---|---|
| Agent acts within authority for a disclosed principal | The principal; the agent is not personally liable |
| Principal is undisclosed | The third party may sue the agent, or the principal once discovered |
| Agent exceeds his authority | The agent, for breach of warranty of authority, unless the principal ratifies |
| Principal does not exist | The agent personally (Kelner v Baxter) |
| Agent contracts in his own name or agrees to be liable | The agent |
Termination of agency
Irrevocable agency: where the agent's authority is coupled with an interest, such as a lender authorised to sell goods to recover his loan, the principal cannot revoke it. Third parties who do not know of the termination may still rely on the agent's apparent authority, so the principal should give notice.
A sales agent for a Sri Lankan pharmaceutical distributor who secretly takes a commission from a supplier breaks his duty of good faith: the secret profit belongs to the principal and he can be dismissed. When the distributor ends the agency, it should notify its customers, or they may still rely on his apparent authority.
Short answer: “What is meant by delegatus non potest delegare?” A delegate cannot delegate: an agent must perform personally and cannot hand his authority to another without permission.
Structured question: “State the rights of an agent against the principal.” Remuneration, indemnity for expenses and losses properly incurred, and lien over the principal's goods; no indemnity for unlawful or negligent acts.
Essay: “Explain the duties of an agent and the ways in which an agency may be terminated.” List and explain the duties (obey, care and skill, personal performance, good faith, no secret profit, account, confidentiality); then termination by act of parties and by operation of law; irrevocable agency; notice to third parties.
Duties: O-C-P-G-S-A: Obey, Care, Personal performance, Good faith, no Secret profit, Account. Rights: R-I-L: Remuneration, Indemnity, Lien.