Note on Agents by Legum


An agent is a person or entity who is empowered to act on behalf of another or represent another in relation to third parties. When an agent acts on behalf of a principal, it is as if the principal had acted on his own behalf.

The agent can be an individual like in the case of Agbemashior and Others v State Insurance Corporation and Others , a firm like in the case of E Sfeir & Co v National Insurance Company of New Zealand, Ltd Per Glyndova , or the director of a company like in the case of Commodore v Fruit Supply (Ghana) Ltd where Lassey J. A submitted that a company as an artificial person “can only act normally through human agents. These agents are usually the directors."

Categorization of Agents:

Based on the duties and scope of authority of an agent, agents can be categorized as follows:

1. Special Agent:

A special agent is authorized to perform a very special or specific task. The authority of a special agent is often confined to a particular or individual instance, outside of which he has no authority to act. Essentially, a special agent is specifically told the acts to perform on behalf of the principal and has no discretion to do otherwise.

In the case of E Sfeir & Co v National Insurance Company of New Zealand, Ltd Per Glyndova (Ghana) Ltd , and for the purpose of determining if Glyndova, as agents of the National Insurance Company of New Zealand, could be sued on behalf of their principal, the court had to decide whether Glyndova was a special agent or a general agent. Per Ollennu J, the determination of the above issue rested on the authority Glyndova was given to act on behalf of their principal, and this authority could be found in the letters exchanged between Glyndova and the insurance company. A letter from the insurance company to Glyndova requesting the latter to act as the former’s agents, read:

We should appreciate it if you would act as our claims settling agents should the necessity arise...
In the event of your being called upon to act on our behalf, your survey report, accompanied by a settlement of claim, insurance policy, letter of subrogation, where necessary, and any other relative documents together with a debit note for your fees, should be forwarded by airmail to our branch which issued the policy concerned . That branch would then make arrangements for settlement of the claim and your fees.
Would you kindly let us have your confirmation that you are willing to act for us under the conditions outlined above.

In paragraph one above, Glyndova was offered the role of a claims-settling agent. Essentially in paragraph two, the exact acts Glyndova should perform when acting for the National Insurance Company of New Zealand are specifically stated. Paragraph two gives no discretion to Glyndova on the acts it can do when acting on behalf of the principal. Paragraph three further constrains Glyndova to act under the conditions outlined in paragraph two. The lack of discretion makes Glyndova a special agent, and they were accordingly held to be such by the court. Further, they could also not be sued on behalf of their principal because they were only authorized to act as claim settling agents and not as agents that could represent the principal in a lawsuit.

2. General Agent:

A general agent has a wider range of authority than a special agent. Usually, a general agent is given authority to act on behalf of the principal within the principal’s scope of business and has the discretion to act in ways for the attainment of the principal’s objectives. Usually, a general agent is given a goal without specific instructions on how to achieve said goal. For example, an agent may be contracted to act on behalf of the principal to recover debts from the principal’s customers. If the agent is told specifically what to do, for example, to sue all the customers for the recovery of the debt, the agent becomes a special agent because he can only bind the principal if he sues. However, if the agent is given discretion over how he can recover the debts, he is said to be a general agent. The agent in the exercise of such discretion may decide to sue the debtors, arrange payment plans with them, negotiate with them, inter alia, to enable him to fulfil his principal’s instructions.

3. Universal Agent:

A universal agent has the widest mandate or authorization to act on behalf of the principal. A universal agent often has power of attorney and can do all the acts the principal can personally do and can delegate. The element of “can delegate” is crucial in understanding universal agency. For instance, a principal who is a judge cannot delegate the hearing of a case to an agent, even if the agent has power of attorney.

Other Types of Agents:

1. Del Credere Agent: This is an agent who agrees to sell goods or services on behalf of the principal but will be liable to pay for the goods or services if the buyers fail to pay. Essentially, a del credere agent acts as a broker of the principal but also as a guarantor of credit extended to the buyer. For this added risk, a del credere agent is usually paid an extra commission.

2. Gratuitous Agent: Agents are usually paid for acting on behalf of the principal. When an agent is not paid for acting on behalf of the principal, he is referred to as a gratuitous agent.

Sources of an Agent’s Authority:

An agent only has the authority to act on behalf of another, the principal, under any of the following circumstances:

1. An agreement with the principal or a contract (express authority).

2. The principal represents to third parties that the agent has the authority to act on their behalf, and this representation is relied on by the third parties.

3. When the law allows a person to act on behalf of another (agency by necessity).

4. When the principal subsequently ratifies an agent’s unauthorized acts (meaning at the time of the act, the agent did not have the authority to act on behalf of the principal.)

Duties of Agents

The duties of an agent may be broadly divided into two, fiduciary duties and general duties.

Fiduciary duties are those set of duties which when fulfilled, ensures that the agent’s acts benefit the principal. It can also be seen as the obligation the agent has to act in the best interest of the principal. This set of duties also ensures that the agent acts on behalf of the principal as if it was the principal acting on his own behalf.

The case of Bristol and West Building Society v Mothew is famous for its characterization of what fiduciary duties entail. Per Millet LJ, the most essential fiduciary duty is that the agent must be loyal to the principal. This duty of loyalty has several facets: the agent must act in good faith, must not profit out of his trust or position, must not place himself in a position where his duty and interest may conflict, and must not act for his own benefit or for the benefit of a third person without the informed consent of his principal. These fiduciary duties are briefly explained below:

1. Agent must act in good faith: an agent acts in good faith when he puts in honest efforts when acting on behalf of the principal. He must not have any intention to defraud the principal or negatively affect the interests of the principal.

2. An agent must not profit out of his trust: by virtue of acting on behalf of the principal, agents may gain beneficial commercial knowledge that they otherwise would not have gained. The use of such knowledge to the benefit of the agent, and without the full informed consent of the principal, is known as secret profit. An agent who secretly profits from the agency would be required to account to the principal. In the case of Lupton v White, it was held that if the agent mixes the principal’s property with his own, then the principal can exert a charge on the whole mixture. See the case of Boardman v Phipps.

3. An agent must not place himself in a position where his duty and interest may conflict: When an agent’s interests conflict with the interest of the principal, the agent may fail to maintain his loyalty to the principal.

When an agent breaches any of the fiduciary duties, the courts will intervene to restore the principal to a position before the breach, to prevent the agent from profiting from the breach, inter alia. For instance, in the case of A-G for Hong Kong v Reid, Reid, a Crown Prosecutor who collected bribes to not prosecute some criminals, was found to have breached his fiduciary duty. The Privy Council held that properties he acquired with bribe monies are not personal properties and are deemed to be held in trust for the Crown. Thus, Reid was not allowed to profit from his breach of the fiduciary duty of loyalty.

In the case of Armstrong v Jackson, the plaintiff employed the defendant, a stockbroker, to assist him to purchase some shares in a certain company. The defendant had some shares in that company and instead sold his shares to the plaintiff without the knowledge of the plaintiff. When the plaintiff eventually found out, he sued the defendant for breach of duty and the court held that the defendant had breached his duty by placing himself in a position where his interest and duty to the plaintiff may conflict. The plaintiff principal was given the option of terminating the contract due to the breach.

In the case of Boston Deep Sea Fishing and Ice Co v Ansell, a director of a fishing company was asked to enter a contract with a third party for the purchase of a fishing vessel. The third party gave the director a commission, which he failed to report to his company. Later, he was asked to order some ice and he ordered it from an ice company in which was a member. The ice company, pursuant to its company policy, also gave bonuses to members who ordered ice from them. The director again received the bonus, and this was later found out by the fishing company. The court held that these were secret profits and must be returned. The breach of the duty to not make secret profits also entitled the company to dismiss such an employee (in essence terminate the agency relationship). In the opinion of the court,

If a servant, or a managing director, or any person who is authorized to act, and is acting, for another in the matter of any contract, receives, as regards the contract, any sum, whether by way of percentage or otherwise, from the person with whom he is dealing on behalf of his principal, he is committing a breach of duty…He puts himself in such a position that he has a temptation not faithfully to perform his duty to his employer… where an agent entering into a contract on behalf of his principal, and without the knowledge or assent of that principal, receives money from the person with whom he is dealing, he is doing a wrongful act, he is misconducting himself as regards his agency, and, in my opinion, that gives to his employer, whether a company or an individual, and whether the agent be a servant, or a managing director, power and authority to dismiss him from his employment as a person who by that act is shown to be incompetent of faithfully discharging his duty to his principal.

Thus, an employer (as the principal), was deemed entitled to dismiss an agent whether the agent be a servant or a managing director.

Beyond Fiduciary Duties:

In addition to the fiduciary duties discussed above, agents have the duties of care and skill, the duty to not delegate, and the duty to perform.

1. Duty of Care and Skill:

When an agent acts for the principal, it is expected that he exercises due care and diligence and does not act negligently. In the case of Omotayo v A.Y Ojikutu, it was held that “ a principal who appoints an agent knowing his skill and experience is not entitled to expect or require from that agent a lighter measure of skill or knowledge than one of his position and experience could reasonably be expected to possess .”

In the case of Chaudhry v Prabhakar, the plaintiff asked her friend, the defendant, to assist her in buying a car since he claimed to be knowledgeable about cars. On the defendant’s recommendations, the plaintiff bought a car which later turned out to be unroadworthy due to a previous accident. Upon a suit by the plaintiff that the defendant owed her a duty of care, the court held that the defendant as an agent of the plaintiff, though a gratuitous agent, ought to have exercised reasonable care in recommending a car for the plaintiff since the plaintiff relied on his recommendations. Per Stuart L.J,

Where the agent is unpaid, any duty of care arises in tort. Relevant circumstances would be the actual skill and experience that the agent had, though, if he has represented such skill and experience to be greater than it in fact is and the principal has relied on such representation, it seems to me to be reasonable to expect him to show that standard of skill and experience which he claims he possesses.

2. Duty to not Delegate:

This duty is embodied by the maxim ‘delegatus non potest delegare ’, which means that a person to whom power is delegated cannot further delegate that power. In terms of agency, an agent, a person to whom power is delegated to act on behalf of the principal, cannot further delegate the power that was delegated to him. The idea behind this maxim is that the principal chose a particular person to act on his behalf, and not the sub-agent to whom the agent may delegate.

As an exception to this rule, an agent may delegate if the principal consents to such. In the case of De Bussche v Alt, the plaintiff requested G & Co to assist him to sell a ship. G & Co, after having trouble in selling the ship, and with the consent of the plaintiff, gave out the ship to the defendant to sell. When the defendant made secret profits and contended that he was not an agent of the plaintiff but an agent of the G & Co, the court held that whilst there is a legal maxim that “a delegate cannot delegate”, contemporary business exigencies may allow an agent to delegate to a sub-agent with the consent of the principal. The sub-agent then becomes an agent of the principal as if the principal had appointed him. See the case of Calico Printers v Barclays Bankon the relationship that may exist between a principal and a sub-agent.

3. Duty to Perform:

Essentially, the agent owes the principal a duty to obey the lawful instructions of the principal. During the formation of an agency relationship, the principal may specify what acts he requires the agent to perform. The principle is that an agent owes a duty to perform (lawful) acts required by the principal.

In the case of Turpin v Bilton, the defendant, an agent, was requested by the plaintiff, the principal, to insure a ship against “the perils of the sea”. The defendant failed to perform this instruction and the ship was lost to the sea during a storm. The plaintiff sued for damages and it was held that Bilton, the agent, was liable for the losses because he breached this duty. Usually, the idea of following the lawful instructions of the principal is based on the agent’s understanding of those instructions (see the case of Ireland v Livingston).

Note that some duties of the agent may even survive the termination of the agency relationship. See the case of Yasuda Fire and Marine Insurance Company Europe Ltd v Orion Marine Insurance Underwriters Ltd where it was held that the defendants, who acted as underwriting agents for the plaintiffs, still had the duty to render accounts even after the termination of the agency relationship.

Rights of Agents

An agent has the following rights:

1. Right to remuneration: Generally, agents have the right to be paid for acting on behalf of the principal, unless he is a gratuitous agent. The right to remuneration is either provided for in the agency agreement or found upon examination of the facts of the case in cases of disagreement. The right to remuneration may be lost when an agent breaches his duty, exceeds his authority inter alia.

2. Right of reimbursement and indemnity: When an agent incurs expenses whilst acting on behalf of the principal, the agent is entitled to reimbursement. See the case of Adams v Morgan.

3. Right of lien: an agent has the right to retain goods in his possession if the principal fails to remunerate him. When the agent retains the property of the principal, he is said to have exercised a lien over the property.