Monwar's Dissertaion

Agency law: an analysis of the liabilities of an agent
under common law.
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Table of contents:
Table of cases . 3-5
Chapter 1
Introductory, research objective ......... 6-11
Chapter 2
Contractual obligations of an agent 12-21
Chapter 3
Fiduciary duties of the agent ...21-38
Chapter 4
Agents legal position....39-40
Chapter 5
The common law on agency: an unequal relationship 40-44
Chapter 6
Conclusion 45
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Table of cases:
1.
2.
3.
4.
5.
6.
7.
Aberdeen railway v blaikie bros (1853) 15 D (HL) 20, (1854) 1 Macq 461.
A-G v Blake [1998] Ch 439 at 455.
Allam v Europa Poster Services [1968] 1 ALL ER 286.
Andrew v Master Hones Ltd v Cruisckhank and Fairweather [1971] FSR 268.
Attorney General v London Corpn (1850) 19 LJ Ch 314.
Attorney General for Hong Kong v Reid (1994) AC 324 Bailii.
Attorney General for New South Wales v Perpetual Trustee Co Ltd [1955] 1
ALL ER 846.
8. Angel Atlas Compania Naveira SA Ishikawajima-Harima Heavy Industries
Co Ltd [1990] 1 Lloyds rep 167, 171.
9. Blaustein v Maltz, Mitchel & Co [1937] 2 KB 142
10. Bertram, Armstrong & co v Hugh Godfray [1830] UKPC 1
11. Barrett McKenzie & Co Ltd Escada (UK) Ltd [2001] Eu LR 567
12. Betterley v Reed (1843) 4 QB 511; Sheridan v New Quay Co (1858) 4 CBNS
618.
13. Biggor v Rock Life Insurance co. [1902] 1 KB 516.
14. Boden v French (1851) 10 CB 886.
15. Boston Deep Sea Fishing and ice co v Ansel, (1888) 39 Ch D 339, Court
ofAppeal
16. Bousefield v Wilson (1846) 16 LJ Ex 44.
17. Barings plc v Coopers & Lybrands [2001] PNLR 22, esp at [42]
18. Brutton v Alfred Savil, Curties and Henson (1971) 218 Estate Gazette 1417.
19. Boardman v Phipps [1967] 2 AC 46.
20. Bolkiah v KPMG (a firm) [1999] 2 WLR 215.
21. Bristol & West BS v Mathew [1998] Ch 1, 18.
22. Brutton v Alfred Savil, Curtis and Henson (1971) 418 Estate Gazette 1417
23. Calico Printers Associations Ltd. v Barclays Bank Ltd (1931) 145 LT 51 (CA)
24. Catlin v Bell (1815) 4 Camp 183.
25. Chaudry v Prabhakar [1989] 1 WLR 29, [1988] 3 All ER 718.
26. Chand Sabo v Sabo bros realty ltd (1979) 96 DLR (3d) 445.
27. Cohen v kittel (1889) 22 QBD 680
28.
29.
30.
31.
32.
Clark Boyce v Mouat [1993] ALL ER 268 at 273.

Closes v Trecotrick (1804) 9 Ves 234.
Cybron Corporation v Rochem [1983] 2 ALL ER. 706, [1983] Ch 112.
Dalton v Irvin (1830) 4 C & P 289.
David Lee & Co (Lincoln) Ltd v Coward Chance [1991] Ch 259, [1990] 3
WLR 1278
33. De Bussche v Alt case (1878) 8 Ch D 286, Court of Appeal.
34. Dufresne v Hutchinson (1810) 3 Taunt 117.
35. Dixon v Hamond (1819) 2 B & Ald 310.
36. Duffen v FRA Bo Spa [2000] 1 Lloyds Rep 180.
37. European Asian Bank AG v Punjab & Sind Bank (No 2) [1983] 1 WLR 642,
656
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38. FHR European Ventures LLP v Mankarious [2011] EWHC 2308 (Ch), [2012]
2 B.C.L.C. 39
39. Fyffes Group Ltd v Templeman [2000] 2 Lloyds rep 643.
40. Fray v Voules (1859) 1 E & F 839, 847.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
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General v Goddard [1929] 98 LJKB 743.

Gibson v Jeyes [1801] 6 Ves 266.
Gillet v Peppercorne (1840) 3 Beav 78.
Gledhill v Bentley [2010] EWHC 1965 (QB); [2011] 1 Lloyds rep 270.
Global Energy Horizons Corp v Gray [2015] EWHC 2232 (Ch)
Gray v Haig [1855] 20 Beau 219.
Harrods v Lemon [1931] 2 KB 157 (CA)
Harry Parker Ltd v Mason [1940] 2 KB 590, 1940 ALL ER 199.
Henderson v Merrett Syndictes Ltd [1995] 2 AC 145 (HL)
Hospital products Ltd v United States Surgical Corpn (1986) 156, CLR 41,
97.
Hopkins v TL Dallas Group Ltd, [2005] 1 BCLC 543 at [88]
Hurstanger Ltd Wilson [2007] EWCA Civ 299, [2007] 1 WLR 2351.
Industries and General Mortgage Co Ltd v Lewis (1949) 2 ALL ER 573.
Industrial Development Company Ltd v Cooley [1972] 2 ALL ER 162.
Ireland v Livingstone (1872), LR 5 HL 395.
Island Export Finance Ltd v Umunna and Another [1986] BCLC 460.
John McCan & Co v Pow [1975] 1 ALL ER 129.
Kelly v cooper [1993] AC 205, 213-4
Keppel v Wheeler [1925] 1 KB 577, 592 per Lord Atkin.
Koch Shipping Inc v Richard Butler (a firm) [2002] 2 All ER 957.
Lamb v Evans [1893] 1 Ch 218.
Lambert v Heath (1846) 15 M&W 486.
Lee cooper v C H Jenkins & Sons Ltd [1984] 2 ALL ER 304.
Logicrose Ltd v Southend United Football Club Ltd [1998] 1 WLR 1256.
Lucifero v Castel [1887] 3 TLR 371.
Lupton v White (1808) 15 Ves 432.
Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 421, 439
Mahesan v Malaysia govt. officers Co-Operative Housing Society Ltd [1979]
AC 374.
McDonnel v Barton Realty Ltd [1992] 2 NZLR 418.
McPherson v Watt (1877) 3 App Cas 254 (HL)
Midland Bank Ltd v Seymour [1995] 2 Lloyds rep. 147, 153.
Murrey v Mann [1848] 2 Exch 538.
National Employers Mutual General Insurance Association Ltd v Elphinstone
(1929) WN 135.
New Zealand Netherlands society Oranje Inc v Kuys 1 WLR 1126, 1131-2.
Nigel Fryer Joinery v Ian firth Hardware [2008] EWHC 767, (Ch).
North and South Trust Co v Berkeley [1971] 1 WLR 470 at (484-85
Ocean city reality limited v A & M Holdings Ltd (1987) 36 DLR 4th 96.
Overend & Gurney Co v Gibb (1871-72) LR 5 HL 480.
Park v Esso Petroleum co Ltd [1999] 1 CMLR 455.
Parker v McKenna (1874) 10 Ch App 96, 118.
Parker v Rolls [1854] 14 CB 691, 695
Club Specialty (Overseas) Inc. v United Marine Ltd [1971] 1 Lloyds rep 482.
Rhodes v Macalister (1923) 29 com Cas 18, 28.
84.
85.
86.
87.
88.
89.
90.
Rossetti Marketing Ltd v Diamond Sofa Co Ltd [2011] EWHC 2482 (QB)
Reading v Attorney General (1951) [1951] AC 507, [1951] UKHL 1.
Sagal v Atelier Bunz GmbH case [2009] EWCA Civ 700.
Spector v Ageda [1973] Ch 30 at P. 48.
Solly v Rathbone (1814) 2 M& S 298.
Supasave retail Ltd v Coward Chance (a firm), [1991] 1 All ER 668
Turpin v Bilton (1843) 5 Man & G 455.
91.
92.
93.
94.
Turner v Burkinshaw, [1867] LR 2 Ch. App. 488.

Williams v Evans, (1866) LR 1 QB 680.
Wilson v Tumman [1843] 6 Man & G 236 at 242.
Woodhouse AC Israel Cocoa Ltd SA v Nigerian produce marketing Co Ltd (1972) AC

741, 772 per Lord Salmon of Sandwich.
95. Youell v Bland Welch & Co Ltd Lloyds rep 431, 446
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Statues/legal enactments
1. Commercial Agents (Council Directive) Regulations 1993
2. Law commission no 236, 1995, HMSO
3.
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Chapter 1
1. Introduction
Agency plays a vital role in case of commercial transactions. The use of agent is
indispensable to commercial transactions, but the established principles of common law
secure the interest of the principal more than the agents rights. In 1986 the council of
ministers enacted the directive, aims at the reinforcing the protection of commercial agent
as well as harmonizing the national laws regulating the relationship between the
commercial agent and the principals. The directive based on the assumption that
commercial agents are weaker party in the commercial relationship.
In common law countries like UK the assumption are that the principal is need of
protection. Even the commercial agent was not recognized as separate category forms the
other commercial intermediaries. Under common law due to the fiduciary nature of
relationship, principal is regarded as deserving protection. This assumption marks the
clear unfairness of judicial minds. Both the parties rights need to be secured for the sake
of business friendly environment. If the law doesnt secure the interest of both the parties,
it will carry bad impact on the whole financial system. The agents will be discouraged to
get involved with any kind of business transactions.
Agency relationship concerns with the situation where a person employs another person
to act on behalf of him. The application of the authority by agent sometimes attributes to
the principal sometimes not. The agency relationship is very important in case of business
transaction. The legal remedy motivates an agent to act in a trustworthy way and the
principals to place trust in agents. It is very difficult to specify principal-agent
relationship on the basis of explicit incentives only, rather the relationship needs to
recognize implicit and exogenous incentives for trustworthy behavior which derive from
legal, social and market context. These exogenous relationships create a situation where a
principal need not to rely on explicit incentives, which allows both the parties to
minimize transaction costs by using implicit terms. What drives the principal to rely on
the agents and the agents act to secure the interests of the principals?
The economic model of agency emphasizes on the explicit incentives for the
performance. Because the asymmetric information brings imperfect contracts and that
creates the situation for moral hazard and adverse selection. On the other hand, the law
emphasizes on the fiduciary kind of relationship which imposes some implicit
responsibilities on the agent. In agency there is a formal kind of relationship between the
parties which is characterized merely as housekeeping1.
The fiduciary kind of relationship is kind of unlimited responsibility for an agent; thereby
he is bound to discharge implicit duty alongside his contractual duty. An agent works for
his employer as principals extended hand; thereby he discharges the duty of the
1Roscoe T. Stefen, Agency-Partnership, [1977], St. Paul, MN: West Publishing.
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principal. In spite of explicit terms there are some duties which cant be mentioned in the
contract, in that case trust can fill-up the vacuum and can emerge as equilibrium.
Although there may have contract, a principal is ignorant about the productivity and true
skill of an agent. In case of agency relationship trust is in important position, the things
motivate the principal to work in a trustworthy fashion those are, legal duties, social
norms and market networks. Principals rely on their agents performance and the agent
behaves in a trustworthy fashion. Although an agent has lots of liabilities under common
law but he has no fundamental legal position neither in employment nor statutory
provisions which regulate conduct of employment agency and employment business.
In my research I will try to discus about the;
Liabilities of an agent towards the principal. Here I will discuss contractual
responsibility alongside fiduciary duties.
Investigate on cases where an agent held responsible after using due diligence.
Therefore, under common law an agent has liabilities to the principal beside
contractual responsibilities.
Standing of the court on the disputes arises from agency relationships.
Prevailing statutory remedies for both the parties.
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2. Aim and objective of the research

Agency relationship comes into existence when a person or party employs anyone to act
for him. The principal prescribes terms for his agent to manage the business. An agent has
two different types of responsibilities, one is concerned with business relationship as a
representative of his principal another one is to maintain internal relationship between
principal and agent.
The agency is an intermediary who deals with third party and the principal. The concept
of agency has grown up in different way as it is prevailing today. The principal could
transact business through his slave or defendant son those were termed as agent but they
were counted as long arm of his master or his father under Roman law.Anglo-Norman
law created two legal positions ballivus and attornatus. Ballivus was endowed by his
master to do commercial transaction as a representative of his master. The attornatus was
legal representative in litigations. In 17th century Hugo Grotius in his famous De Jure
Belli ac Pacis (On the law of war and peace) explained that a Procurator can acquires
right directly for his principal. The relationship between an agent and the principal has
been dominated by the doctrine of master servant relationship. The phrase of qui facit
per alium, est parinde ac si facit per se ipsum (whoever does something by anyone acts
as if he himself is doing it) was emphasizing on the liability of the principal. So long as
the principal was responsible for the act or omission of his agent, the agent had no
liability therefore, the necessity of the presence of agents identification had not been
realized. On the other hand, in 18th century commercial law which at the end of the
Anglo-Saxon period had split off from the main body of common law and had been
allowed to develop under less stringent controls, modified numerous feudal common law
concept. This split off brought legal flexibility allowing the law of agency, which had
grown three independent common law roots, action of debt and assumpsit, another is
related to action of account, and the third one is deriving from deeds to adapt itself to the
peculiar problems and requirements of an individual case.
Agency was viewed solely in terms of the relationship binding the principal, the person
being presented, and the agent, the person representing; that is agency was equated with
the relationship created by the mandate given to the agent. Rudolf von Jhering and
specially Paul Laband were the first to erect a sharp line between the agents power to
create legal rights and obligations for his principal and the internal contractual
relationship governing the personal rights and duties between principal and agent.2
In 19th century legal theory emphasized on the disclosure principle, which prescribes that
an agent has direct implications for the principal only when the agent discloses to the
third parties by acting in the name if the principal that he acts for the principal not for
himself. Only in such case can there be direct representation where the principal is the
party to the contract, in contrast to indirect representation. This distinction of power and
2 Boris Kozolchyk, Comparative Contracts, Law culture and economic development,
West Academic Publishing [2014] P 174
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liability became, to a varying degrees, a common element in the civil law based legal
systems.
The common law standing on different dogmatic grounds, which is not influenced by the
disclosure principles, there is doctrinal distinctions, such as distinction between general
and special agents, with whom a third party can deal with moderate safety, at this stage of
development the relationship between an agent and the principal still remains feudal in
the English law of agency, whose prototype remains as servant and the steward of a lord
were largely eliminated. In modern commercial transactions the importance of agency is
very high. The position of an agent is come to be seen as an instrument of the principal
with having no personal responsibility, a perception which developed still further the
responsibility of the principal for any misconduct of his agent.
A large portion of the English common law of agency is formulated at the time in 19 th
century when Britain was the empire and British economic presence in the world was
strong. Moreover, many agents of that time were overseas agents, the interests of the
principal needed to be protected.3
In modern times the concern for third partys rights led to recognition of power of an
agent, whereby making an agent less defendant upon the will of his principal, a better
view of private autonomy as expressed in the act of authorization, which is a fundamental
connector between the act of an agent and the will of the principal in the legal transaction
as a whole. The act of authorization and the implementation of the agent are not two
different transactions carried out in isolation from each other. Rather the will of the
principal and agents act are two different parts of an extended legal event, which would
be a single act if there is no agency get involved. In common law, when a principal uses
the help of an agent, the whole business activity in divisible into two different parts
(authorization and the action). Beside contractual obligations an agent has fiduciary
duties towards his principal.
In my research I will have an endeavor to describe the duties of an agent under common
law, where my focus will be on the existing legal position of an agent, duties towards his
principal, liabilities in case of business transactions. While discussing about the liabilities
I will strive to find out the legal position of the agent. In my mind it appears that, a
principal appoints an agent to secure his property. But, if the legal position of an agent is
not ascertained he cant get proper remedy. As the principal have the legal position to
take some measures to secure his property, the agent deserves a legal position therefore;
he can defend for his own. Both the parties rights need to be secured. If the right of the
agent is not secured in the same way, as it is for the employer, it may affect the whole
business world.
3 Severine Saintier , Commercial Agency, a comparative analysis. Ashgate Publishing,
(2002).
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The agency relationship is based on the agreed terms of the contract between the agent
and the principal. Those agreed terms are contractual duties of an agent. In the next
chapter I discussed the contractual duties of the agent towards the principal.
In the next chapter I have discussed the extent of duty of agent towards his principal.
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Chapter 2
Contractual duties of an agent
If there is any explicit contract between the principal and the agent, the duty and responsibility of
both the parties are regulated by the agreement. Where there is a contract the agent will act
according to the agreement as if he is working for his own. It is expected that an agent will
discharge by himself and wont delegate the duty to anybody else without his principals
concern.4 The duty to perform contractual undertaking includes not exceeding the authority. But
the agent is not bound to follow any unlawful instruction. He is not bound to carry out any
transaction which is null and void under any statute or law.5
Whenever an agent makes any contract with his principal, he becomes bound to act in
accordance with his principals instruction, becomes bound to carry out those instructions with
reasonable care and due diligence. It is fundamental duty of an agent to perform his duty with
reasonable skill and skill
In this chapter I will discuss about the contractual obligations of an agent upon the basis of
agency agreement.
2.1 Principals instructions
The agent must not exceed the instruction provided by his principal; he is contractually liable to
solicit an action in which his client is engaged. The agent is required to follow the instruction
provided by the principal and he must not exceed the instruction. Under common law legal
system the agent is bound to follow the instructions of the contract and failure to comply with the
agreed terms will be amounted as breach of contract.6 The extent of the duty of an agent has been
instructed by the court in the case of Turpin v Bolton7 where the agent was responsible to manage
insurance for the ship of the principal. The defendant failed to do so and subsequently the ship
was lost. The court held the agent, who was an insurance broker, liable for not following the
instruction of the principal8. The agent need to follow the instructions provided by the principal
4 Nicholas Ryder, Margaret Griffith and Laschmi Singh, Commercial law , principle
and policy, , Cambridge university press, 2012. P 31-32.
5 G.H.L Friedman the Law of Agency, Butterworth, 1996 7 th ed 155-156.
6 R. Munday Agency law and principles (Oxford University Press, 2010) P. 157
7 [1843] 5 Man. & G 455.
8 Markesinis and Mundy, outline of the law of agency, Butterworth 1998 4 th ed
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and must not go beyond instruction beyond authority. In Bertam, Armstrong & co v Godfrey9 the
claimant instructed his agent to sell certain stocks when they reach a certain price, but the agent
failed to sell the stocks, believing the price would continue to increase in value, and those were
sold at a lower price. It was held in the court that the broker has purchased those stocks himself,
and he owed the claimant the difference in price along with interest. If the instructions are
ambiguous, the court will look whether the agent acted reasonably, even though incorrectly.
2.1.1 Gratuitous agent
An agent owes duty of care towards his principal. It is immaterial whether paid or gratuitous. If
the relationship is not contractual the agent has no responsibility to perform the undertaking but,
he will be liable for negligence. It was held in the case of Wilkinson v Coverdale the agent agreed
to obtain insurance for the principals premise for free of charge. The agreement was gratuitous.
The agent failed to comply with the agreement eventually, the premise was burned down. The
court made the agent liable for negligence. It was stated that, where a gratuitous agent
voluntarily chooses to act but does so negligently, liability can be imposed there on the side of
the agent.10 He also owes a duty of duty of care to the third party with whom he is in negotiation
on behalf of the principal.11In the case of Chaudry v Prabhakar12 the agent had been asked to
exercise his expert capacity and get a car had been in no accident. The agent had no skill and he
was gratuitous agent, he recommended the principal to buy the car and the principal bought it.
The agent said the car had no accident. The principal later on discovered the car had in an
accident and sued the agent and the seller. The agent held liable for not exercising reasonable
care in the light of all circumstances regardless having any contractual relationship or not. A duty
of skill and care arose when the agent knew that the employer to be relying on the skill and
judgment of the agent. In this case Stuart Smith LJ stated that, logically the standard of care or
the nature and extent of duty should be the same as the required of an unpaid agent. And to take
care as is reasonably expected from the agent in all circumstances.13
2.1.2 Comply with lawful instructions
9 [1830] 1 knapp 381.

10 Markesinis and Mundy, Butterworth, Outline of the law of agency, 1998 4 th ed P
113
11 Chand Sabo v Sabo bros realty ltd (1979) 96 DLR (3d) 445.
12 [1989] 1 WLR 29 (CA)
13 Ibid, Page 35 of the Stuart Smiths Judgment.
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If the principal instructs the agent to perform any duty does the agent has any discretions to go
beyond that? The answer to this question related to the issue whether the agent is gratuitous or
paid. If the agent is gratuitous he is not bound to obey the principals instructions but he is under
the responsibility to take due care and he can be liable for the exceeding the duty. On the other
hand if the agency relationship is contractual the agent is liable to follow his principals
instruction. In Dufresne v Hutchinson case, the agent was instructed not to sell the goods below
certain prices but he sold those at a certain inferior price, the agent held liable 14. In another case
an agent was instructed to insist that purchasers of malt that he was entrusted to sell 25% of the
value of the malt in advance and settled the remainder of the price prior to delivery, was held not
to have had authority to receive payment by way of bill of exchange and was therefore liable to
his principal for failing to comply with his instructions. 15An agent is not obliged to perform an
illegal or void act on behalf of his principal. In Cohen v kittell16a turf commissioner was
instructed to place bets on horses on commission at Sandwon Park and Newmarket races. The
principal sued the agent for not performing his instruction, the agent was not held liable for not
following the instruction, the reason behind that the agent was asked to perform an illegal
wagering transaction.17
2.1.3 Not to go beyond his authority
The agent must act accorded with his lawful authority and he should follow the instructions. His
will comply with the general nature of the business, and expected to perform his duty accorded
with trade or other customs or usages. An agent required by law not to go beyond authority
conferred by his principal.
As Lord Campbell, CJ explained, An attorney retained to conduct a case is entitled, in the exercise of
his discretion, to enter into a compromise, if he does so skillfully and bona fide, provided always that his
clients has given him no express directions to the contrary. 18
A solicitor should not go beyond the instruction even if he thinks the action is in the interest of his client.
2.1.4 Principals imprudent instruction
14 (1810) 3 Taunt 117.

15 Williams v Evans, (1866) LR 1 QB 680.
16 (1889) 22 QBD 680.
17
18 Fray v Voules (1859) 1 E & F 839, 847.
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If the agent instructed to carry out any instruction which is commercially imprudent, he may not be liable
if those instructions are express, even if the agency proves calamitous. 19 In Overend & Gurney Co v
Gibb20the directors of a company, formed with the express purpose of acquiring another business that had
sustained heavily loss, were sued for having acquired the company as they just followed the instruction to
do so. The House of Lords held that, the directors of the company were aware of the business liability
which exceeded its assets before they put the company to the deeds in question. The directors were
expressly instructed to undertake the transaction on behalf of the principal. The agents were not held
liable for the consequence of doing what they had been instructed to follow. Lord Chelmsford stated that,
an agent is being authorized to do an act, which is imprudent one in itself, and which the principal ought
never to have authorized to be done, is when the loss is occasioned by his having done the act, to be made
responsible for it. That is certainly a startling proposition, and one which it would require a great deal of
argument to lead me to adopt.21
2.1.5Ambiguous instructions
Where the agent gets any ambiguous instructions which carry more than one meaning and the
agent follows one of those interpretations with bona fide intention, the principal cant repudiate
the act as unauthorized for the agent.22 The agent will not breach duty if the instruction carries
more than one meaning and the agent and fairly acts in accordance with one of those
interpretations.23 The cases where an agent receives any vague instructions which carry several
meaning and the agent acts according to one of those interpretations will not be held liable. As it
was stated in the case of Ireland v Livingstone, the instructions were badly framed that their
meaning was obscure and the agent had no time to seek further instructions was not held liable
for breach of instructions.24 Delvin J, pointed out that, it is not enough to say afterwards that if
he had construed the documents properly he would on the whole have arrived at the conclusion
that in an ambiguous document the meaning which he did not give to it could be better supported
then the meaning which he did give to it.25
2.1.6 Time limit for carrying out instructions
19 R. Mundy, Agency law and principles (Oxford University Press, 2010) P 154.
20 (1871-72) LR 5 HL 480.
21 R. Mundy Agency law and principles (Oxford University Press, 2010) P 156.
22 G.H.L Friedman the Law of Agency, Butterworth, 1996 7 th ed 116
23 European Asian Bank AG v Punjab & Sind Bank (No 2) [1983] 1 WLR 642 (CA)
656.
24 Ireland v Livingstone (1872) LR 5HL 395
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The agent must carry out the instructions within the specific time or if there is no time limit
prescribed within a reasonable time period, having regard to the circumstances of the cases. 26 In
Barber v Taylor a principal instructed the agent to buy 150 bales of cotton on behalf of him. The
instruction was upon executing the above and forwarding a bill of lading the principal would
accept the agents draft at 60 days sight after receipt the bill of lading. The court held the agent
for breach of his contract in failing to pass the bill of lading on to his principal within a
reasonable time period, which the court determined meant within 24 hours of the goods arrival.
However, the agent must comply with the time prescribed to perform his task, if he is unable to
perform his duty as instructed or if not instructed within a reasonable time period, he is under a
further duty to inform the principal of his inability to comply. As Philips, J said in Youell v Bland
Welch & Co Ltd, where brokers were instructed to place various insurance policies: the brokers
were at fault to inform the insurers of the 48-month cut-off when inviting them to write the
original insurance and to order reinsurance. Then the brokers proceeded to obtained for the
insurers reinsurance which not in accordance with the insurance cover ordered. Subject to the
further duty to inform the insurers of what they had done in effect to draw attention to their prior
shortcomings.27
2.1.7 Duty of loyalty
The fiduciary duty an agent owes to the principal relates to perform his duty of agency, which
can exert an impact on termination of agency. In Temple Legal Protection Ltd v QBE Insurance
(Europe) Ltd, after the principal terminated the agency, the agent claimed to be entitled to
continue to handle the principals run-off business. Moore-Bick, LJ not only observed that such a
claim by the agent might appear a little surprise at first sight, but also pointed out that in view
of the duty of loyalty by the agent uncommercial claim by the agent. It makes no sense for an
employer to who employed someone to manage some aspect of his business to be obliged to
allow that agent to continue to act on his behalf one the necessary degree of trust and confidence
reposed in the agent had, for whatever reason, been lost.28The commercial agents (Council
Directive) Regulations 1993 prescribes that, an agent must in performing his activities look after
the interests of his principal and act dutifully and in good faith. 29 Regulation 3(2) (c) provides
25 Midland Bank Ltd v Seymour [1995] 2 Lloyds rep. 147, 153.
26 G.H.L Friedman the Law of Agency, Butterworth, 1996 7 th ed 116-117.
27 Lloyds rep 431, 446.
28 [2009] 1 CLC 553, Lloyds rep IR 544.
29 Regulation 3(1)
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that, the obligation to act in good faith includes the duty to comply with reasonable instruction of
the principal.
2.1.8 Legislative provision

Commercial Agent (Council Directive) regulations 1993 imposes some duties for a legal
representative
(a) While performing the duties the agent must look after the interest of his employer, act
dutifully and good faith.
(b) In particular, a commercial agent must make proper effort to negotiate and where
appropriate, conclude the transactions he has instructed to care of;
(c) Communicate all necessary information available to him;
(d) An agent must comply with all reasonable instructions given by his principal.30
2.1.9 Carry out wishes of the principal according to the agreement
As the essence of the agency is a contract, an agent must perform his side of the contractual
obligations as agreed under the contract. This can be seen in Bertram, Armstrong & co v Hugh
Godfray (1830)31 it was held that when an agent acts under a general authority he is bound to act
for his principal as he would do the same for his own; when he acts under a particular authority,
and for a special purpose, he has no discretion outside of the contract. This principal is also can
be seen in the regulation 3 of the Commercial Agents (Council Directive) Reglations 1993. In
Cureton v Mark Industrial Ltd (2006), the claimant sued the company for commission following
the termination of his agreement with the employer. However, a conflict of interest arose by
claimants practice of going to the defendants customers to sell insulation and deemed that the
claimant was firm breach of his duty towards his principal, under regulation 3(1) and 2(b) of
the1993 Regulations.
2.2 Show proper skill and care
The agent is bound not only to act according to the instruction of the principal but also to
perform undertaking with due care and skill. Every agent owes duty of care to his principal,
whether the agency is paid or gratuitous that is immaterial.
In the case of contractual agency the agent owes duty to perform for which he is agreed. The
agency might be gratuitous but the agent still under responsibility to posses and exercise care and
skill. If the agent follows the instruction and the act is not successful he wont be liable unless he
had any responsibility to make the principal aware of any potential loss, by virtue of his position.
30 Regulation 3.
31 [1830] 1 Knapp P 381.
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In common law an agent needs to show proper skill and care. 32The degree of skill and care are
defendant upon several factors, thus include expertise in any specific area for what the principal
employed him, which the agent has expressly or impliedly claimed to have. If the principal
employs any professional person, that expert needs to show the degree of care and skill which
one can reasonably expect from him. If an agent performs his duty with normal care and skill,
having regard to the nature of the business, and has acted in as reasonable manner as could be
expected from an agent in such an undertaking, the agent will not be held liable for negligence,
even if his effort is not successful. But the agent can be liable if his servant was negligent. 33 In
Solomon v Barker (1862), when considering the price of the goods, it was stated by Justice
Blackburn that the question as to whether the agent performed his duty depends on:
The terms, on which they were employed, if there had no special stipulation or direction, then it
must be taken that they are employed to sell upon the ordinary terms of the employment contract.
In that view they would be bound to employ due care and diligence, but would not be liable for
mere mistake without negligence, but it is the part of the duty of an agent to fix price before sale,
if they do not do so they would be liable. But even in that case an agent is bound to use ordinary
care and diligence the agent would be liable if he sold the goods at a sacrifice and throw them
away. Hence the agent is bound make some estimates of the price or value for their guidance in
the sale. And if the agent does not do so, and thus sold under fair price he will be liable. The
question is whether the agent used due care and diligence when he sold the goods for the price he
took. This is not a question for the price or value, but the question is of negligence in not getting
a better price, and not using the ordinary care while performing the duty.34
2.2.1 Reasonable amount of skill
The brokers are bound to exercise reasonable skill and care in drafting the documents so as to
ensure that they gave clear expression to the terms that had been agreed. For failure to
demonstrate proper skill the brokers held liable in Superhulls Cover case. 35 In parker v Rolls
solicitors have been held bound to bring a fair and reasonable amount of skill to the
performance of their professional duty.36 In Club Specialty (Overseas) Inc. v United Marine Ltd
32 S. 13 the supply of goods and services act 1982.
33 Brutton v Alfred Savil, Curties and Henson (1971) 218 Estaclo9te Gazette 1417.
34 Nicholas Ryder, Margaret Griffith and Lachmi Singh, Commercial law , principle
and policy, Cambridge university press, 2012. P 30
35 [1990] Lloyds, Rep 431, P 446.
36 [1854] 14 CB 691, 695 per Talfoured, J.
18 | P a g e
case, forwarding agent held liable for not warning customers that goods were uninsured when the
latter led them to understand that the goods were already uninsured. In order to determine
whether an agent is measured up to the accepted standards of his profession in a particular
transaction, expert evidence may be received under s 3 of the Civil Evidence Act 1972, Which
states that an expert evidence may be admitted on any relevant matter, relevant in the context
being taken to mean helpful to the court. In Barings plc v Coopers & Lybrands37the employee
was engaged in increasingly crazed derivatives trading, which eventually led to the collapse of
that financial institute. In admitting testimony addressing the question, whether the competent
derivative manager, examining the size and profitability of agents reported trading, should have
realized that the pattern of risk and reward observed were incredible or, at the very least, so
unusual as to merit extensive and detailed examination, Evan-Lombes J pointed out that, there
were a body of expertise with recognized standards in relation to the managers of investment
banks conducting the highly technical and specialized business of future and derivative trading.
The court emphasized on the fact that derivatives are required to be licensed by a regulator and
may be answerable before a disciplinary tribunal for failure to comply with ordained professional
standard of conduct.
2.2.2 Determination of expert skill
In order to determine whether an agent is measured up to the accepted standards of his profession
in a particular transaction, expert evidence may be received under s 3 of the Civil Evidence Act
1972. The act states that an expert evidence may be may be admitted on any relevant matter,
relevant in the context being taken to mean helpful to the court. In Barings plc v Coopers &
Lybrands38the employee was engaged in increasingly crazed derivatives trading, which
eventually led to the collapse of that financial institute. In admitting testimony addressing the
question, whether the competent derivative manager, examining the size and profitability of
agents reported trading, should have realized that the pattern of risk and reward observed were
incredible or, at the very least, so unusual as to merit extensive and detailed examination, EvanLombes J pointed out that, there were a body of expertise with recognized standards in relation
to the managers of investment banks conducting the highly technical and specialized business of
future and derivative trading. The court emphasized on the fact that derivatives are required to be
licensed by a regulator and may be answerable before a disciplinary tribunal for failure to
comply with ordained professional standard of conduct.
2.2.3 Work with expected skill
37[2001] PNLR 22, esp at [42]

38[2001] PNLR 22, esp at [42]
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A paid agent is expected to display reasonable skill while carrying out his instructions and also,
where appropriate, such skill may be expected from a member of his profession. 39 For example, a
solicitor acting as agent should acquaint himself with such relevant related legislation as a
competent accountant solicitor would do, as well as exercise proper care in his employers
instructions. The standard of skill and care can be expected from a gratuitous agent is similar,
namely to exercise such care and skill as could reasonably expect from in circumstances.40
2.2.4 To perform duty with honesty
The authority conferred upon an agent, whether express or implied, must be taken as subject to a
condition that the authority is to be exercised honestly and on behalf of the principal. That is a
condition precedent to the right of exercising it. If the condition is not fulfilled then, there is no
authority, and the act purporting to have been done under it unless in dealing with the innocent
parties is void.41An agent owes a duty of loyalty, including a duty to act bona fide for the benefit
of his agent. In Parker v McKenna Lord42 Cairns pointed out that:
Now the rule of this court as to agents is not a technical or arbitrary. It is the rule founded on
highest and truest principle of morality. No man under this court is to be allowed to put himself
in a position in which his interest and his duty will be in conflict.
As it was held in the case of Andrews v Ramsay43 the court stated that,
A principal is entitled to have honest agent, who is entitled to any commission. In my opinion, if
the agent directly or indirectly colludes with the other side, and so acts in opposition to the
interest of the principal, he is not entitled to any commission.44
2.2.5 Duty not to do fraud
39 Boden v French, (1851), 10 CB 886.

40Severine Saintier, Commercial law a comparative analysis, Ashgate (2002). P
157.
41 Lysaght Bros & Co Ltd v Falk, (1905) 2 CLR 421, 439 per OConnor, J.
42 (1874) 10 Ch App 96, 118.
43 {1903} 2, KB 635
44 Nicholas Ryder, Margaret Griffith and Lachmi Singh, Commercial law , principle
and policy Cambridge university press, [2012] P. 34
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The agent must pay over what he has possessed or received to the use of principal this duty exists
even if there is an adverse claim by someone else. 45 It exist even if the transaction in respect of
which the transaction in respect of which the money is received by the agent, to whom the principal
debtor may owe money. It exists even if the transaction is respect of which the money received by the
agent was void or illegal, as long the contract of agency itself is illegal. 46In Harry Parker Ltd v Mason47 In
the case case of Murrey v Mann48 .there was an arrangement between the agent and backer to deprive
another backer. The backer was held no remedy under against the agent. No duty to pay over money
received for the principal arises if in fact the agent had to repay the money to the person from whom he
obtained it, for example if there was any mistake of fact, failure of consideration or fraud even it is on the
part of the agent himself as in the case of Murrey v Mann.49
2.3 Performing agency duty personally

An agent is not allowed to discharge his duty by delegation unless the principal express or
impliedly permits that or if the duty delegated requires no skill or care. This rule is derived from
general rule of administrative law expressed by the maxim delegatus non potest delegare which
means an agent must perform personally and not delegate to another. In the case of De Bussche
v Alt it was held that, Sub-delegation is permitted where the principal authorizes it
expressly.50Even where the agent is permitted to appoint sub-agent is to be presumed that the
person appointed is merely an agent of the agent. The sub-agent is not agent of the principal
unless there is clear evidence.51As the sub-agent is not employed by the principal he has no claim
against the principal for remuneration or indemnity, nor does he owe the principal any duty to act
or to obey instructions. Conversely, if the sub-agent knows both the existence and identity of the
45 Blaustein v Maltz, Mitchel & Co [1937] 2 KB 142.

46 Bousefield v Wilson (1846) 16 LJ Ex 44.
47 [1940] 2 KB 590, 1940 ALL ER P 199.
48 [1848] 2 Exch P.538.
49 G.H.L Friedman the Law of Agency, Butterworth, 1996 7 th ed P.173.
50 De Bussche v Alt (1878) 8 Ch D 286 (CA)
51 Calico Printers Associations Ltd. v Barclays Bank Ltd (1931) 145 LT 51 (CA)
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principal could owe a duty of care towards the principal under the general principles of
negligence52 and might owe the principal fiduciary duties.53
2.3.1 Agents liability for sub-agents negligence
The agent can be liable for the negligence of the sub-agent. 54 In lee cooper v C H Jenkins & Sons
Ltd it was held that the agent had duty of care not only to the bailer but also to the bailers
principal. But the court always does not make the sub-agent liable for sub-agents fault. In
Balsamo v Medici55 the court refused to allow an action in tort claim by a principal against a subagent in respect of money received by the sub-agent. In another case the court held that, it was
possible to delegate the authority to serve notice terminating existing license for advertisement
sites to the defendants solicitor since it was a purely ministerial act involving no delegation of
confidence.56But in another case57 the court refused to recognize that an estate agent has authority
to delegate the finding of a buyer had an implied authority to delegate the finding of a buyer for a
clients property to another firm of estate agents, and the estate employed by the principal could
not claim commission in respect of the sale of the property by another agency to whom delegated
the sale of property.58
Chapter 3
Fiduciary duties
Along with the contractual terms agreed with the principal, an agent is also treated as fiduciary.
A fiduciary is someone who has undertaken to act for another person in particular matter in
52 Henderson v Merrett Syndictes Ltd [1995] 2 AC 145 (HL)
53 G.H.L Friedman the Law of Agency, Butterworth, 1996 7 th ed P 166.
54 Calico Printers Associations Ltd. v Barclays Bank Ltd (1931) 145 LT 51 (CA)
55 [1984] 2 ALL ER P. 304.
56 Allam v Europa Poster Services [1968] 1 ALL ER 286.
57 John McCan & Co v Pow [1975] 1 ALL ER 129.
58 G.H.L Friedman the Law of Agency, Butterworth, 1996 7 th ed P 168, 169.
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circumstances which give rise to a relationship of trust and faith. The distinguishing liability of
agent is loyalty. The employer is entitled to get single minded loyalty of the agents duty. The
core liability of an agent has several facets. Millet, LJ defined fiduciary as someone who
undertaken to act for or on behalf of another in a particular matter or circumstances which give
rise to a relationship of trust and confidence59. In Bristol & West BS v Mathew case he amplified
that, a fiduciary relationship entails:
The distinguishing obligation of a fiduciary is the obligation of loyalty. The employer has
entitlement to the single minded loyalty of the fiduciary. This liability includes to act in good
faith; which binds an agent to act in good faith; he must not make any profit out of his position
where his duty and his interest conflict; he may not act for his own benefit o for the benefit of the
of a third party without prior consent of his principal. This is not exhaustive list they are
defining characteristics if fiduciary.60
Fiduciary duties are proscriptive in nature; they tell the fiduciary what he must do, they do not
tell the agent what he ought to do. 61 Despite the fact that most of the agents are fiduciaries, some
are not, and those that are may not act in a fiduciary capacity in all purposes. As professor
Dowrick has noted that, if the principal appoints an agent to sign a memorandum and places no
particular trust upon the agent, the doctrine of fiduciary relations and incidents of agency which
derive from this equitable doctrine would not apply.62 The extent of the fiduciary may vary from
case to case. As Lord Upjohn stated in Boardman v Phipps case rule of equity have to applied to
all such great diversity of cases that they can be stated only in most general terms and applied
with particular attentions to the exact circumstances of all the cases.
3.1 Breach of fiduciary obligation
Breach of an agents fiduciary obligation, therefore, connotes disloyalty or infidelity. Mere
incompetence is not enough to demonstrate any breach. An employee who loyally does his
incompetent best for his master is not unfaithful and is not guilty of a breach of a fiduciary
duty.63A fiduciarys conduct need not to be dishonest, but he must act intentionally which involve
59 R. Munday Agency law and principles (Oxford University Press, 2010) P 161
60 [1998] Ch 1, 18.
61 A-G v Blake [1998] Ch 439 at 455.
62 F. E. Dowrick M.A. the relationship of Principal and Agent [1954] MLR 24 at pp 3132.
63 Kelly v cooper [1993] AC 205, 213-4 per Lord Browne-Wilkinson.
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some elements of disloyalty. An unconscious omission on the part of a fiduciary may amount to a
breach of his duty to exercise reasonable skill and care; it will not amount to breach of fiduciary
duties.64
3.1.1 Extent of fiduciary duties
The phrase fiduciary is a dangerous one, giving rise to a mistaken assumption that all
fiduciaries owe same duties in all circumstances. That is not the case. Although, it is true that,
every fiduciary is under a duty not to make any secret profit from his position unless, that is
permitted by the principal. For example, fiduciary owed by an express trustee are not the same as
those owed in any particular case fall to be determined by reference to any underlying
contractual relationship between the parties. Thus, in the case where an agent employed under
contract the scope of fiduciary duties to be determined by the terms of the underlying contract. In
Hospital Products Ltd V United States Surgical Crop65 case Mason J in the High and Court of
Australia said that, the fiduciary relationship may co-exist between the same parties never have
doubted. Indeed, the existence of a basic contractual relationship has in relationship if, if it is to
exist at all, must accommodate itself to the terms of the contract so that it is he any situations
provided a foundation for the erection of the fiduciary duties. In these situations, it is the
contractual foundations which are all important because the contract is the basis of all right and
liabilities.66
3.1.2 Standard of conduct
The person who is in a position of places himself in a situation which he has opportunity to of
taking advantage of his employer, by placing himself in such a position whether acting fairly or
not, he must suffer the consequences of his situation. The position of principal and agent give
rise to a particular and onerous duty on part of the agent and high standard of conduct from him
springs from the fiduciary relationship in between the agent and his principal. The position of an
agent is confidential, which readily lends itself to abuse. A strict and salutary rule is required to
meet the special situation. The rules of common law as they are existing spring from the
strictness originally required from strictness originally required by the courts of equity in cases
where the fiduciary relationship exists. Those requirements are superseded to the common law
64 Agency Law and Principles, Roderick Mundey, Oxford University Press, P 157.
65 (1986) 156, CLR P. 41, 97.
66 Commercial law, L S Sealy and Hooley, Oxford University Press, 4 th edn. P 208
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rules of due diligence and skill.67 In Aberdeen Railway Co v Blaikie Bros the court set a classic
description of the no conflict rule:
It is a rule of universal application that no one having fiduciary duty to discharge shall be allowed to enter
into engagement in which he has or may have a potential personal interest conflicting, or which may
possibly conflict, with the interest of those who are bound to protect. The agent must be deterred from
the temptation to place his own interests above those of his principals interest.
The fiduciary has various social norms correspond to the duties of the agent. Among them that
encourage hard work, loyalty and honesty reinforce the duties of an agent to act in the interest of
the principal.68The presence of social norms have two main effects one is, those norms ensure
that parties have proper incentives to perform even if there are no explicit incentives, the other
one is, those norms contribute to the efficiency of the relationship because it reduces reliance on
the explicit terms, reduces the risk that is being shifted to the agent. These implicit terms are
beneficiary for the principal on one side, on the other side the agent become liable to observe
some duties outside of his explicit duties.69
3.2 Act in good faith and to avoid conflict of interest
An agent must act in good faith and must not allow the possibility of personal interest to conflict
with the other interest of his/her principal without disclosure. Where an agent in a position in
which his own interest may affect the performance of the duty towards the principal, the agent is
under legal obligation to make full disclosure of all materials circumstances, so that the principal
can get full knowledge of such transactions. Upon full disclosure, it is up to principals
consideration whether or not to proceed with any particular transaction. Without permission of
the principal if there is any breach of duty, the principal has the right to set aside the contract so
affected and claim any profit which has been made by the agent.70
An agent cant purchase any property or cant nominate anyone to purchase that property which
he was engaged to sell. In McPherson v Watt (1877) a solicitor appointed his brother as a
nominee to purchase the property which he was engaged to sell. The solicitor was supposed not
to allow a conflict of interest to arise; the sale could be set aside. It was not matter of fact that,
since the solicitor offered fair price for that property. An agent cant sell his own property to the
67 Lord Cornworth, Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461 ff. Oliver
v court (1820) 8 price 127 at 161.
68 Agency revisited, Ramon Casadesus-Masanell, Daniel F. Spulber, Working paper
10-82, Harvard business school.
69 Markesinis and Mundy, An outline of the law of agency, Butterworth, 1998, 4 th ed
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principal, if he wants to sell. In such cases it is also important to disclose the fact fully before the
principal.71The cases where an agent in which his own interest may be affected by the
performance of the duty to the principal, the agent is obliged to disclose the fact fully, as the
principal can have full knowledge, and give permission to make or not to make that profit. 72The
agent who acts for numerous principals, among those several might be competing and whose
interest will be affected in that case an agent owes fiduciary duty towards his principals for
whom he is working. Estate agents belong to the category of those who carries business of acting
for several principals where properties were of similar descriptions and there is possibility to
arise conflict of interest among principals each of them would be concerned to attract potential
purchasers to buy their property rather than to that of another. For that reason, estate agents need
to avoid working for several competing principals. If an agent works for more than one
competing principals he will not be able to perform his duties properly. An estate agent cant say
he is contractually bound to disclose information of to one agent which is confidential for other
agent.73
3.2.1 To work for the benefit of the principal
An agent must not let his own interest conflicts with his duty to his principal. It is irrelevant
whether the contract was made with no intension to defraud. The purpose of the rule is to prevent
the agent from being tempted not to do the best for his principal. In Armstrong v Jackson (1917)
the principal appointed an agent to buy some shares for him. The agent sold his own share to the
principal. It was held that the employer can rescind the contract. In that transaction the agents
interest was to sell at the highest possible price, whereas he had duty to buy at the lowest
possible price is clearly a conflict of interest and duty.74
3.2.2 Using disinterested skill and diligence
It is usual that, a principal can expect that his agent will exercise a disinterested skill, diligence
and zeal for exclusive benefit of the principal.75The agents duty is stern to ensure proper
71 Harrods ltd. v Lemon 1931 2 KB 157.
72 Ocean city reality limited v A & M Holdings Ltd (1987) 36 DLR 4 th 96.
73 G.H.L Friedman the Law of Agency, Butterworth, 1996 7 th ed 179.
P 126-127
75 Story on agency, Joseph story, commentaries on the law of agency. (1851)
Boston, Little, Browne & co 4th ed. P 262.
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conduct of amongst that class of commercial man and women. In Rhodes v Macalister76 case
Scrutton LJ stated that, the more that principle is enforced the better for the honesty of
commercial transaction. it cant be too often to commercial men and women- that in matter of
agency they must act with strict honesty.77
3.2.3 Securing confidential information
It is the duty of the person who works for his client to secure confidential information of his
client. In Supasave retail Ltd v Coward Chance (a firm), David Lee & Co (Lincoln) Ltd v
Coward Chance, there were separate actions bought by the liquidators of the two claimants. In
the preliminary stage of these actions there was a merger between the firm acting for the
liquidators and the firm that had acted for some of the principal defendants. The liquidators
wanted the newly merged firm to continue to act on their behalf but the defendant objected, they
had the grounds that confidential information about their defense might be leaked to the
solicitors acting for the liquidators. The firm assured that they had established an effective
Chinese wall between those members who acted for the defendants and those who acted for the
liquidators. It was rejected in the court of appeal the claim that the Chinese wall would prevent
seepage of information within the firm. 78 In Bolkiah v KPMG (a firm)79 Prince Jefrei of Brunei
had retained KPMG between 1996 and 1998, in respect of some private litigation, during the
course of which the agent acquired some confidential knowledge of the clients affairs assets.
Later on KPMG was appointed auditors of the Brunei Investment agency (BIA) tracing money
transformed from BIA during prince Jefris period as chairman. KPMG thought that they are
legally capable of accepting the work since they had ceased to work for Jefri two months before,
but they erected a Chinese wall around the department while carrying out the investigation. A
high court order restraining the KPMG from acting was thrown out by the court of appeal but the
House of Lords upheld the decision of the high court.
3.2.4 Seepage of information
In Koch Shipping Inc v Richard Butler (a firm) case,80a lawyer acting for the claimant in a
proceeding moved to the defendant firm acting for the other party. The claimant sought for the
76 (1923) 29 com Cas 18,28.
78[1991] Ch 259
79 [1999] 2 WLR 215.
80 [2002] 2 All ER 957.
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injunction against the defendant firm to restrain them from acting for the other party. The court
of appeal overturned the decision on appeal and accepted that the solicitor, who worked in a
different floor from those engaged in the arbitration, was responsible and conscientious and
could be relied on not to pass on any information by any means when acting for the claimant.
3.3 Can an agent work for both the parties?
The agent cant work for the principal and a third party contracting with the principal unless he
has made full disclosure to both the parties for whom he was acting and they both
consented.81Even a solicitor can act for both parties in a litigation, who has obtained informed
consent from both the parties to his acting. Informed knowledge in this case meant that the agent
disclosed the facts before the clients and they were informing about their conflict of interest.
After full disclosure of the fact if the parties permit the agent to act he may proceed. 82 After being
informed about the agents act the principal must have appreciated that the nature of the agents
business was to act for numerous principals, for example an estate agent, he can work for both
the parties. In Rossetti Marketing Ltd V. Diamond Sofa Co Ltd 83 case a Thai manufacturer and R
was a company which helped Asian furniture manufacturers to penetrate the UK market. The
claimed informed that the defendant was working for two of its competitors but the principal had
been led to believe that their products did not clash with its own. In the court it was held that the
agent cant work for other than this principal in so far as their products ranges clashed. It is the
duty of an agent to negotiate and conclude transactions. The duty requires to work with due
diligence, to be more provocative then the law requires.84
3.5 Duty of good faith
The duties of an agent are very strict since an agent is in breach of his duty can be held liable
even if s/he acts in good faith. 85 The agency regulations do not impose such duties but impose a
general duty upon the agent to act in good faith 86 which essentially requires loyalty from the
commercial agent. The duties under agency regulations are quite similar to the fiduciary duties.
81 McDonnel v Barton Realty Ltd [1992] 2 NZLR 418.
82 Clark Boyce v Mouat [1993] ALL ER 268 at 273.
83 [2013] 1 ALL ER (Comm) 308.
84 R. Munday Agency law and principles (Oxford University Press, 2010) P 169.
85 Boardman v Phipps [1967] 2 AC 46.
86 Regulation 3(1).
28 | P a g e
Although the agency regulations do not require fiduciary duties but they require the commercial
agent to look after the interest of the principal and act dutifully and in good faith. 87 This, in
particular, requires the agent to make proper effort to negotiate and conclude transactions; to
communicate the information and to comply with the instruction provided by the principal.88
3.5.1 Not to do any misconduct
At common law, no remuneration is due in cases if there is any misconduct or breach of duty
found on the agents part. Similarly, no remuneration is due if there is any negligence found in
performance of the contractual duty. if s/he makes any secret profit or otherwise fails to perform
the fiduciary duty89 the agency regulations provide specific rules stating that commission only
lost if the contract between and the third party will not be performed and in such deprivation the
principal is not be blamed.90 This cant be derogated from the commercial agents detriment. It
means that the principal will only avoid paying commission when he has proven that the nonperformance is due to a misconduct or fault of the agent or a case of force majeure. The principal
will still have to pay when s/he acted in breach of the contract with the third party. The duty of
not doing any misconduct may be viewed as a part of loyalty and the duty to promote the best
interests of his principal. Antagonizing customers are not good way to generate business and the
agent needs to be careful in his treatment of them. However, the relationship between the
customer and the agent is line to promote the business. In the end the agent owes the duty to his
principal not to the customers. And thereby the behavior of the agent may affect the interest of
the principal. For example, failure to do proper marketing, failing to deal properly with customer
complaints or perhaps most awkward of all failing to pay promptly for goods supplied. An agent
who is asked to chase payment of outstanding invoices is likely to find himself into an invidious
position.91In case of the agency relations there may have exchange of some strong words
exchanged in Gledhill v Bentley92 the agent did misconduct and has been asked to do apology but
he refused to do. The judges view was that the position would have been if the apology had been
87 Regulations 3(1).
88 Ibid 3(2).
89 Dalton v Irvin (1830) 4 C & P 289.
90 Regulation 11(1).
91 Legislative comment; Relations between a commercial agent and his principal,
Andrew McGee, Journal of Business Law, 2013.
92 [2010] EWHC 1965 (QB); [2011] 1 Lloyds rep 270.
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properly phrased. The principle has asked him to do apology, with the implication that an
adequate apology would have been accepted and the agency would not have been terminated.
3.5.1 Duty not to allow conflict of interest:
An agent should not put himself in a position which may give rise any conflict of interest with
those of his principal unless the principal allows him with full knowledge of the conflict and has
consented to it. The duty to avoid conflict of interest is a strict responsibility for the agent. It is
immaterial whether the agent acted with good faith or not. If there is any accusation of putting
himself in a position which creates any conflict of interest with the principals interest the burden
of proof lies on the side of the agent.93
In the case of Aberdeen railway Co. v Blaikie Bros94, it was held that,
It is a rule of universal application that no one having fiduciary duties to discharge, shall be
allowed to enter into engagement in which he has or can have, a personal interest conflicting, or
which possibly may conflict, with the interest of those he is bound to protect.95
3.5.2 Not to make a secret profit
Most of the agents are paid agents. The law does not permit any agent to make any secret profit
if it has not been permitted by the principal. Where an agent uses his position as an agent to
secure for himself without full disclosure to the principal he is in breach of fiduciary duties.
Upon disclosure it is up to the principal to permit or not to authorize the agents profit, but full
disclosure is precondition.96The law is very strict regarding secret profit from his position even if
it is beneficiary for the principal. In Boardman v Phipps an agent was a solicitor acting for a
trust, the principal. The agent repeatedly advised the principals trustee to buy more shares in the
company. If they buy more shares they can control it and make more profit but the trustee
refused to consider that. Later on the agent bought extra share himself. The agent and the
principal became into controlling position of the company along with the trustee. The principal
then sued the agent for making profit without consent of the agent. And the court ordered the
agent to hand over the profit to the principal. The agent was in a breach of fiduciary duty because
P 127.
94 [1854] 1Macq. 461, 471.
95 Commercial law , principle and policy, Nicholas Ryder, Margaret Griffith and
Lachmi Singh, Cambridge university press, 2012 P 32
96 Hippisley v Knee Bros (1905) 1 KB 1.
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he used the information what he gained while working as agent to make secret profit for his own.
In the court of appeal Lord Denning MR stated that an agent would have to account to the
principal for any benefit either by using the principals property or by using his position of in the
company as an agent or by using information or knowledge gained as an agent. 97
3.5.3 Principal is the owner of the secret profit
The principal is the owner of the secret profit made by the agent even if he could not have earned
the profit by himself. In Reading v Attorney General (1951) a sergeant in the British army agreed
to accompany the vehicles which were carrying illicit spirit. He was paid 20,000 so that his
presence can make sure that the vehicles will not be searched. It was held that the sergeant made
that secret profit by using his position; he had to account to the Crown as his principal. In this
case the sergeant was not appointed as agent, but he was held to have a fiduciary relationship
with his employer similar to a principal/agent relationship. 98In FHR European Ventures LLP v
Mankarious99 the distinguishing obligation of a fiduciary obligations was that of the loyalty as
per Bristol & West Building Society v Mothew. An agent in negotiating memorandum of
understanding for the acquisition of a hotel, who received secret profit from the sellers of the
hotel in breach of duty, had no account for the entire sum to his principal was entitled to refuse to
pay any contractual commission and summarily termination of the agency contract.100
3.5.4 The agent must pay his profit to his principal
The agent must pay the profit to his principal even if his principal could not earn the profit by his
own. In Lucifero v Castel a principal appointed an agent to buy a yacht for his principal. The
agent bought a yacht by himself and sold that to the principal at a profit. The principal was
unaware that he is buying his agents property. It was held that the agent had to pay the profit to
his principal for that secret profit.101
3.5.6 An agent will not receive any secret commission

98 [1951] AC 507, [1951] UKHL 1.
99 [2011]
100R. Munday Agency law and principles (Oxford University Press, 2010) P 182
101 [1887] 3 TLR 371.
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The managing director of a company will not receive any secret commission while he is dealing
with third party. In Boston Deep Sea fishing v Ansell102 the managing director of the company
secretly agreed to receive a commission from the shipbuilder with whom he was in dealing on
behalf of the company. Cotton LJ opined about that transaction if people have an idea that such
transaction can be entered into properly by an agent, the sooner they are disabused of that idea
the better. In cases where an agent takes secret commission, he puts himself in a position that he
has temptation not faithfully to perform his duty to his employer.103 In Industries and General
Mortgage Co Ltd v Lewis (1949)104 it was stated that, once the bribe is established, there is an
irrefutable presumption that is was given with the intention to induce the agent to get favor from
the receiver of the bribe, and therefore it is unfavorable for the principal. In another case 105 it was
held that the where a fiduciary accepted bribe in breach of duty cannot be allowed to retain any
gain, or any further gain of profits, that he has made.106
3.5.7Secret commission is never allowed
Fearful that any secret commission may become commonplace of commerce, Bowen LJ felt that
there never was a time in history of our law when it was more essential that courts of justice
should draw with precision and firmness the line of demarcation which prevails between
commissions which may be honestly received and kept, and the commission received behind the
masters back, and in fraud of the master.107 Further the court stated that, it is true that the agent
employed by his employer to deal with third party, who is unknown to the principal, takes from
that third party a profit arising out of the business which he is employed to transact, is doing
wrongful act which is not consistent with his duty towards his principal, and continuation of trust
between them. It is wrongful act whether such profit be given to him in return for services which
he actually performs for the third party, or whether it be given to him for his supposed influence,
or whether he will get it on any other ground at all. If any agent gets any profit out of his
business transaction, it belongs to his employer. An employee does not have any right to take it
102 (1888) 39 ChD 339.

103 Ibid, P 357.
104
105 Attorney General for Hong Kong v Reid (1994)
106 R. Munday, Agency law and principles, (Oxford University Press, (2010) P 167.
107 Ibid, P. 362.
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or if he takes it is, take it or bargain for it or receive without bargain, unless his employer is
informed about that transaction.108
3.5.8 Principal is the owner of the secret transaction
Making any secret commission is breach of fiduciary duty. In Imageview Management Ltd v
Jack109 a football agent has entered into a contract with Jacob, under which the agent undertook
to find Jacobs employment with a UK club, to provide advice and representation and to use its
endeavors to promote Jacob and act in his best interest. The agent later on entered into a contract
with Dundee United FC whereby the later will pay 3000 fee to secure a work permit for the said
footballer. Jacob signed an agreement for Dundee, but one later it has been transpired that the
agent had side deal with the football club. The court of appeal held that the agent has taken secret
profit from the third party, without prior consent of the employer. The incident of secret profit
amounted breach of fiduciary duty owing to the real conflict of interest. As has often been laid
down, once a conflict of interest shown, the agents all rights to remuneration is automatically
forfeited.110 Any benefit from the breach of duty not only accountable for the original amount but
also for the value of the bribe. As soon as the bribe has been received it should be handed over to
the principal who suffered from the breach of duty. When a bribe is accepted in breach of
fiduciary duty then the agent holds that bribe in trust for the person to whom the duty was owed.
If the property representing the bribe decreases in value, the fiduciary must pay the difference
between that value and the initial amount of the bribe because the fiduciary should not have
accepted the bribe or incurred the loss. If the property increases in value, the fiduciary is not
entitled to any surplus in excess of the initial value of the property because the he is not allowed
to make any profit out of a breach of duty.111
3.6 Not to use his position
The duty to avoid conflict of interest prevents an agent, in the absence of disclosure, from selling
his own property to the principal, 112 purchasing the principals property himself, 113acting as an
108 Ibid, P 363.
109 [2009] 1 Lloyds rep 436 at [50]
110 Keppel v Wheeler [1925] 1 KB 577, 592 per Lord Atkin.
112 Gillet v Peppercorne (1840) 3 Beav 78.
113 McPherson v Watt (1877) 3 App Cas 254 (HL)
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agent for both the parties to a transaction,114 or receiving any secret commission from a third.115In
the case oflamb v Evans116 the proprietor of a trade directory appointed employer to obtain
advertisement from the traders to be inserted to the directory. Lamb discovered that some of the
canvassers are proposing to assist a rival publication after their agreement with lamb had come to
an end. The court of appeal held that the canvassers were not entitled to use for the purpose of
any other publications except this principal the material which, while in the plaintiffs
employment, they had obtained for the purpose of his publication. Where the agent breaches his
duty not to make a secret profit, he must account to the principal for that illicit income.117
3.6.1 Not to take bribe
An agent is not allowed to take any bribe. In context of agency relationship bribe does not
always mean corruption. Any secret payment by third party to an agent while dealing from his
position is likely to be counted as bribe. This type transaction takes place when any third party
gives anything with a view to get favor from the person who is in the position to deal with that
third party as an agent, it is immaterial that the agent does that expected favor or not to that
particular party. This type of duty of an agent goes so much root of the agency relationship that it
is usually treated as a distinct heading in its own right. In Boston Deep Fishing & Ice co Ltd v
Ansell, where the managing director of the was held liable to have breached his fiduciary duties
as an agent by receiving bribe in return for orders. An agent has no right to permit a third party to
make profit at his principals expense. In Mahesan v Malaysian Government Officers Cooperative Housing Society case a plaintiff received bribe to permit a third party to profit at his
principals expense. Where it is found that an agent has taken bribe without consent of the
principal, the principal gets the right to do following things as a civil remedy;
To repudiate the contract with the third party;
He can dismiss the agent without notice,
He can refuse to pay any money owed to the agent or to recover such money already paid,
He can claim damages in the tort of deceit for any loss taken place as a result of the payment of
the bribe.
114 Harrods v Lemon [1931] 2 KB 157 (CA)
115 Hurstanger Ltd Wilson [2007] EWCA Civ 299, [2007] 1 WLR 2351.
116 [1893] 1 Ch 218.
117 Markesinis and Mundy, An outline of the law of agency, Butterworth, 1998, 4 th
ed P 131.
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The payment of the bribe may also be counted as a criminal offence.118

Cotton LJ set the point that, if a servant or a managing director of a company, or any other
person who is authorized to act, and is acting for another in the matter of any contract receives
any sum, whether by way of percentage or otherwise, from the person with whom he is on behalf
the employer, the agent commits breach of his duty. The act of taking secret benefit is against
honesty and in the opinion of Cotton LJ, it is sufficient to show himself in such a position that he
cant be trusted to perform the duty which he has undertaken as an agent or servant. After taking
secret profit an agent put himself in a position that he is not faithful to perform his duty to his
employment. He has temptation where he is getting a percentage. Specially, where the agent is
getting any amount on expenditure but he lets it to be increased, so that the percentage may be
larger. Where an agent is entering into a contract on behalf of his principal, and without
knowledge or assent of that principal, receives any payment from the person with whom he is
dealing, he is doing wrongful act and misconduct himself as regards his agency.119Bowen LJ held
that, described secret profit in the way, when large portion of the commercial world makes its
livelihood by earning, and by earning honestly by earning honestly agency commission on sales
or other transactions, but it is also a time when a large portion who move within the ambit of the
commercial world, earn, I am afraid, commission dishonestly not merely from their masters, but
from the other parties with whom their master is negotiating, taking such commission without
the knowledge of the principal .120
3.6.2 Taking bribe is an offence
An agent who accepts bribes is guilty of conspiracy under common law, and both the parties
engaged to any bribe is are offender under s.1 Prevention of Corruption Act 1916 if it is proven
that they acted corruptly. The agent is under the duty of good faith even he is even after the
termination of the agency contract.121The court sometimes goes to prevent the bribe by civil
procedure, Hovenden and sons v Millhoff122Romer LJ proceed if a bribe be once established to
the courts satisfaction, then certain rule should be applied. Amongst them the following are now
118 Business law, David Kelly, Ann Holmes, Ruth Hayward; 5 th ed. 2005, Cavendish
publishing. P 268.
119 Boston Deep Sea Fishing and ice co v Ansel, (1888) 39 Ch D 339, Court of
Appeal; Cotton LJ.
120Ibid, Bowen LJ.
121 Island Export Finance Ltd v Umunna and Another [1986] BCLC 460.
122 [1900] 83 LT 41.
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established, and in my opinion rightly established in the interest of morality with the view of
discouraging the practice of bribery. First the court will not enquire the motive of the donor in
giving the bribe, nor allow evidence to be gone into as to the motive. And the court will presume
in favor of the principal, and as against the person who makes bribe and the agent bribed, the
agent was influenced by bribe. The court will presume against the briber and will think he acted
corruptly, that he is influenced by the payment to the detriment of the principal. In the other
case123 the court held that the payment constitutes bribe even though it does not induce a contract
between the principal of the recipient and the donor; it is making of the payment that gives rise to
a conflict of interest on the part of the recipient.
The real evil is not the payment of money, but the secrecy attending it. The burden of proving
full disclosure of the agent will be held to have received a secret commission. In some cases,
there may have been partial or inadequate disclosure that is sufficient disclosure to negate
secrecy, and so an agent needs to avoid consequences of the payment being treated as bribe.
When a bribe is offered and accepted in money or in kind, the money or property constituting the
bribe belongs to the recipient. Equity insists that it is unconscionable for a fiduciary to obtain and
retain a benefit in breach of duty.124Taking any bribe by the agent is a tort as well, the principal
may claim damages for any fraud against his agent bribed and the briber (both the briber and the
receiver and jointly and severely liable) for any loss caused as a result of entering into the illicit
transaction in receipt of which bribe occurred. The briber had dishonestly assisted the agent
agents breach of fiduciary duty.125 The principal may recover the money and rescind any
contract he made with the third party as a consequence of the bribe being paid to his agent.126
3.7 Duty of accountability

The general conception is that, an agent is responsible to account what he received from his
position. In the case of Bristol and west BS v Mothew it is was stated that, this duty goes to the
heart of the concept of fiduciary duties and the availability of remedies. In the case of Coulthard
v Dico mix Club127 limited the court stated that the simple duty to account arises at common law
123 Angel Atlas Compania Naveira SA Ishikawajima-Harima Heavy Industries Co Ltd
[1990] 1 Lloyds rep 167, 171.
124 A-G for Hong kong v Reid [1994] 1 AC 324.
125 Fyffes Group Ltd v Templeman [2000] 2 Lloyds rep 643.
126 Logicrose Ltd v Southzxsend United Football Club Ltd [1998] 1 WLR 1256.
127 [2000] 1 WLR 707, 728.
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or is meant to wear a fiduciary character. If the agent found to mix his money with principals
money will not be required to account as a fiduciary but as a simple debtor at common law.128
Some commentator argues that, the duty to account arises due to the due to the fiduciary
position. An agent is always not under fiduciary responsibility. In terms of his duty an agent who
receives money or goods for his principal must keep separate from agents own property. In
Foley v Hill the court held that,
So it is with regard to an agent dealing with an property; he obtains no interest himself in the
subject matter beyond his remuneration; he is dealing throughout for another, and though he is
not a trustee according to the strict technical meaning of the word, he is qusai a trustee for that
particular transaction for which he is engaged; and therefore in these cases the courts of equity
have assumed jurisdiction129
3.8 Employees fiduciary duties
In some cases, employees owe fiduciary duties towards their employer, for example the
managing director of a company owes that kind of duty. Sometimes senior managers are also
regarded as having an agency type of relationship with their employer. Those people are in a duty
to disclose their own breaches of duty and breaches by other employees. 130 In Cybron
Corporation v Rochem case a European Zone controller received on retirement a generous
package of benefits. Later on it has been discovered that he had, along with other employees, set
up rival business and engaged in large scale commercial fraud. The company sued to recover the
money paid to him on his retirement. The court held that, even if that employee was not bound to
disclose his own breaches (this was not made clear) he had a duty to disclose breaches by other
employees. This kind of duty is not applicable for all kind of employees in all circumstances, it
depends on the particular employees and circumstances in general. However, this is applicable
for a zone controller who is responsible for a large section of his employers business. It was
held that, the payments on retirement were voidable for non-disclosure.131
.
129 Commercial law, principle and policy, Nicholas Ryder, Margaret Griffith and
Laschmi Singh, Cambridge university press, 2012. P 42
130 Business Law, Keith Abbot, Norman Pendleburry, Kevin Wardman, 8 th edition,
Thompson pub. P 253.
131 [1983] 2 ALL ER. 706, [1983] Ch 112.
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3.9 Duty of full disclosure

If the agent wishes to receive any kind of remuneration from the third party, he has simply to
disclose the matter to his employer and rest upon the consequence of that. If the employer gives
consent for that then he has performed everything that is required of an upright and responsible
agent.132The House of Lords held that agents for trustees who acquired extra shares in a
company, thereby both the trust and themselves, are obliged to make account for the profit they
made because there existed a possibility of a conflict of interest. 133The fiduciary can only defeat
the principals claim by showing that he made profits with the consent and knowledge of the
principal.134An agent may only act contrary to his duty of loyalty to the principal with the latters
full knowledge. As lord Wilberforce explained in New Zealand Netherlands society Oranje Inc
v Kuys135, if an arrangement is to stand, whereby a particular transaction, which would otherwise
come within a persons fiduciary duty, is to be exempted from it, there must be full and frank
disclosure of all material facts. The agent bears the burden of proof that, he has disclosed the fact
before his employer.
3.10 Working solely for the principal
The grant of actual authority doesnt include acting for the agents own benefit; rather it requires
his principals consent. Therefore, without consent of the principal the actual authority does not
permit an agent to make benefit for his own.136An agents personal interest comes entirely second
to the interest of his client. If an agent undertakes to act for a man must 100%, body and soul, for
his client. He must not allow his own interest to get in the way without his knowledge. An
undisclosed transaction creates the possibility of a conflict of interest which is a breach of duty
of good faith to the client.137
3.11 Separate account
Agents must account for all money and property he has attained from their position. They need to
keep their own money or property from the companys property and if their property and the
132Ibid, P 29.
133 Boardman v Phipps [1967] 2 AC 46, 111 per Lord Hodson.
135 1 WLR 1126, 1131-2
136 Hopkins v TL Dallas Group Ltd, [2005] 1 BCLC 543 at [88], Mundy, 165
137 [2009] 1 Lloyds rep 436 a [6]
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companys property are mixed, there is a presumption that everything in the account belongs to
the principal if the agent cant distinguish by proper evidence.138
The decision of the House of Lords is capable of can be used to extend the scope of an agents
liability for secret profit beyond the boundaries of prior authority. The rationale of this case is to
be found not in the law off agency but in the general law of equity or even the doctrine of unjust
enrichment.139 The doctrine of unjust enrichment or restitution is applicable also applicable to
those who are not agent in strict sense, but are similarly fiduciary relationship. Thus it is applied
in the case of policeman and soldiers who used their position to make any secret profit which is
illegal. In Attorney General vs. Goddard140 a police sergeant by using position received bribe to
conceal criminal offences. In Reading v Attorney General 141a solider used his uniform to get
drugs and other goods illegally through the police barrier. For doing this crime the solider
received large amount of money as bribe. In these cases, it has been held that the persons
involved with these crimes had to hand over the profit to the Crown, despite the persons engaged
with those crimes were not servants or agent of the Crown in the strict sense 142, nor they are in
any fiduciary relationship, moreover they were working outside the scope of their authority. The
rationale for these decisions was improperly making use of any special position to gain profit
secretly or illicitly. The agent must account for all the money received in the performance of the
duty.143
The court is strict to the application of the rule of account. In Gray v Haig144 Romilly MR held
that when the agent is failed to keep an accurate account of all transactions, the court will feel
bound to presume everything most unfavorable to him. 145 If the agent fails to keep principals
138 Law for Business Students, Stephen Judge, Palgrave McMillan, P 249.
139 Jones Unjust Enrichment and the fiduciarys duty of loyalty (1968) 84 LQR 472.
140 [1929] 98 LJKB 743.
141 [1951] AC 503, [1951] ALL ER 617.
142 Attorney General for New South Wales v Perpetual Trustee Co Ltd [1955] 1 ALL
ER 846.
143 G.H.L Friedman the Law of Agency, Butterworth, 1996, 7 th ed P 184.
144 [1855] 20 Beau 219.
145 Ibid.
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property separate from his own, the principal will be entitled to the entire mixed fund, unless the
agent can established any part of it his own property.146 The duty to have a separate account only
arises when money or property is beneficially owned by the principal, so that the agent is treated
as if he were a trustee of it. In cases where the agent will not hold money as qua trustee he will
simply be liable to account qua debtor.147
3.12Preservation of confidentiality
An agent owes the duty of confidentiality in respect of information he has attained as result of
being agent. The duty to preserve that confidentiality continues even after the agency duty has
expired. If the agent uses confidential information to acquire benefit, the principal may seek
injunction order to restrain the agent from making further use of the information and in the case
of contractual agency, claim damages for breach of contract, or seek an account of profit from
the agent. It is to be noted that the agents duty not to use confidential information acquired in
the course of his/her agency duty may extend beyond the termination of the agency contract, and
the duty will not be applicable if the information enters the public domain.148
3.12.1 Anton Piller principle
An agent must not use confidential information regarding his principals affairs. If there is any
reason the principal fears that representative may destroy or dispose any confidential information
may apply for Anton Piller injunction, to authorize the principals representative to enter the
agents premise to remove the secure confidential information/material. In Anton Piller KG v
Manufacturing Process case, Lord Denning stated that, let me say once that no court in this land
ha any power to issue a search warrant to enter into mans house so as to see if there are papers
or documents there which are of an incriminating nature, whether libels or infringements of
copyright or anything else of the kind. No constable or bailiff can knock the door and demand
entry so as to inspect papers or documents. The householder can shut the door in his face and say
Get out. The principle was established in the case of Entick v Carrington. None of us would
wish to whittle down that principle in the slightest. But the order in this case is not a search
warrant. This judgment does not authorize the plaintiff or his solicitors to enter into the
defendants premises against his will. It does not authorize the breaking of any doors, nor the
slipping in by back door or window. This decision only authorizes the entry and inspection by the
permission of the defendant. The plaintiff must get the defendants permission. But it brings
pressure on the defendant to give permission. It does more. It actually orders the defendant to
give permission with, I suppose, the result that if he does not give permission he is guilty of
146 Lupton v White (1808) 15 Ves 432.
147 R. Munday Agency law and principles, Oxford University Press, [2010] P.192.
148 A-G v Blake [2001] 1 AC 268, HL.
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contempt of court. We can take the meaning simply the court permits the principal to enter into
the premises of the defendant. To secure the confidential information or document of the
principal.Ormond LJ set out three steps test for attainment such an order:
1
2
3
There are extremely strong prima facie case against the respondent,
The damage, potential or actual must be very serious for the applicant, and
There must be clear evidence that the respondent has in his possession relevant
documents or things and that there is a real possibility that he may destroy such material
before inter partes application made.
3.12.2 Secret information

In Attorney general v Blake149 case the court held that a former employee of the secret agency
owes a continuous duty of loyalty to the employer after he left the job. The further set the rule
that the former employee would continue to be subject to a different fiduciary obligation to
maintain the confidentiality of the information imparted from him imparted in confidence, as
long as the information not become the public knowledge. Which it had in this case the House of
Lords held in this issue that the former employee is liable to account for profit made in breach of
his expressing not in divulge any official information attained as a result of his employment. 150
The former employee will also continue to owe fiduciary to the former principal where he
continues to influence over the principal which he exploits for his own benefit. This is a different
category of fiduciary duty than one stemming from trust and confidence or from confidentiality:
this relationship of ascendency and dependency.151
3.12.3 Duty to disclose
There is a duty of full disclosure of all material information of which they are aware. When an
agent does any transaction on behalf of the principal, all efforts must be disclosed to the
principal, and the agent has a duty to obtain the best possible price. 152 The duty of disclosure is
absolute one, an agent must put at his clients disposal not only his skill but also his knowledge,
so far it is relevant; and if the agent is not willing to disclose his knowledge to his client he
should not act for him. What he cant do for his client and at the same time withhold from him
relevant knowledge as the agent has.153 A firm must utilize all the information available to it
when acting for a client. Due to attribution of knowledge within a firm, all parts of the firm must
149 [1998] Ch 439.
150 [2001] 1 AC 268.
151 (1998) 114 LQR 214 at PP 219-220.
152 Ibid.
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act in the light of all information possessed by it. 154 Although in the final report, the law
commission adopted a more relaxed view (Law com no 236, 1995, HMSO). The report reflected
in a contemporary decision of the House of Lords.
3.12.4 An agent should not make any profit without disclosure
The importance of disclosure by the agent for any profit made from his position when he is
working for someone is explained by Lord Denning. In Boardman v Phipps he pointed out that,
once it is found that the agent has used his principals property or position so as to make any
profit for his own, it matters not that the principal has lost no profits or suffered no damage. The
simple reason is because it is the profit which is not to be allowed to keep. The agent attained an
unjust profit by using his principals property or his position and must account for the
profit.155When the case came before the House of Lords the decision was upheld by the house on
the ground that the information of the value of the share was property belonged to the principal,
the misuse of which by an agent, albeit not a dishonest misuse, rendered the agent liable to
account to his principal for any profit. In Industrial Development Consultant Ltd v Cooley, an
agent was managing director of a company in the construction industry. The man was also an
architect. He was offered by the Eastern Gas Board to work for them although at the time the
agent the company of which he was the employee were interested in a project for the Gas Board.
While he was an employee had obtained knowledge which should have been passed to the
company. Concealing this information, he obtained his release from the company, basing his
request on alleged ill health condition. The former company would never have released him if
they had the real information. The agent who has been former director of the company joined the
Gas Board who gained the advantage of his knowledge. It was held by the court that the director
was under a fiduciary obligation in the circumstances.156
Joining another company without disclosure to the former employer is the breach of duty, thus
his interest and duty conflicted, and therefore he is under liability to account to the company of
which is was a former employee for all profits made by his transfer of services.157
153 Spector v Ageda [1973] Ch 30 at P. 48.

154 Fiduciary duties and regulatory rules Consultation papers 124 (1992, HMSO) at
para s.4.12 (v).
155 [1967] 2 AC 46.
157 [1972] 2 ALL ER 162.
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3.13 Tortious liability of the agent

If the principal incurs loss as a result of the agents dishonest conduct, the principal may hold the
agent liable in the tort of deceit for any losses incurs. Given that the principal is already entitled
to claim the amount of the bribe from the agent. The issue comes whether the remedy in tort is
additional to, or alternative to his restitution claim against the agent of the sum of the bribe. The
Privy Council addressed the issue in Mahesan v Malaysia govt. officers Co-Operative Housing
Society Ltd158 case the society bought an action against the corrupt agent who in exchange of
bribe, had connived with third party to make profit from a land transaction at the expense of the
principal. The society claimed both the amount of the bribe and the loss it had suffered as a result
of such illegal transaction. The federal of Malaysia held that both sums were recoverable. The
Privy Council reversed the decision stating that, at common law a principal can recover either the
bribe as money received or compensation the actual loss suffered by the illicit transaction. The
housing society was not entitled to make double recovery from the agent but was bound to elect,
when the judgment was to be entered, between the claim for the amount of the bribe and its
claim for damages. Lord Diplock stated that:
This extension to the briber of liability t account to the principal for the amount of the bribes as
money had received, whatever the conceptual difficulties may arise, is now was by 1956 too well
established in English law to be questioned.
In the 2nd and 3rd chapters I have discussed about the contractual and fiduciary duties of the agent.
In case of business system, the importance of an agent is vital. But the prevailing common law
legal system cant protect the interest of the agent. In my view the agent is unfairly treated under
the existing common law. In the next chapter I will describe how an agent is deprived of his right
of fair remedy.159
158 [1979] AC 374.

159 G.H.L Friedman the Law of Agency, Butterworth, [1996] 7 th ed P 187
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Chapter 4
An agents legal position
Under common law rules an agent is under wide ranges of fiduciary duties. These fiduciary duties were
developed with a view to protect the principal form the agents misusing their power to affect the
principals legal position. The council directives implemented by the agency regulations create this
categorization. The text adopts the civil law approach whereby the commercial agents are the weaker
party in the relationship seriously enhances with their right vis--vis their principals. As a consequence,
the implementation of the directive does not introduce detailed regulation in an area in which it did not
exist in the UK.
However, the agency regulations are not applicable to all agency contracts, it is only applicable to the
contracts in between commercial agent and the principal as it is prescribed in the regulations. The agency
regulation does not regulate the whole contents of the commercial agency contracts. 160There is some
uncertainty as to the nature of agents liability towards the principle where he exceeds his authority. It,
therefore, remains a matter to be determined on ordinary principles whether that individual is employed
by the employment agency the employment business or the hirer or is self-employed or whether he is
subject to an arrangement which is neither employment nor self-employment Equally, it is possible for the
individual to be under two contracts of employment, namely a general engagement with
the agency (through being 'on the books') and a specific engagement with the hirers, if the facts show
such an arrangement. The court should also consider the possibility of an implied contract of employment
arising between an individual and a client of the agency to which the individual has been posted over a
long period of time although recent case law seems to be against this.
4.1 Identification of an agent
Under commercial agents regulation a person will be treated as an agent who is self-employed
intermediary has capacity to negotiate the sale or purchase the goods on behalf of the other party. The
precondition to be an agent is the person must be self-employed in order to fall within the regulations.
That means an agent must not be an employee or a company officer although a company or partnership
can be a commercial agent as long as it acts as an independent contractor. Where an agent buys and sells
in his own right rather than his having legal authority to negotiate on behalf of the principal he is not an
agent rather he is a distributor and thus not protected under the regulations. In Raoul Sagal v Atelier Bunz
GmbH case161a jewelry agent invoiced in his name, later a dispute arose, the court of appeal expressed the
view that where an agent represents an undisclosed principal, he cant be agent in the meaning of the
regulations since the regulation requires an agent to have continuing authority to negotiate the sale or
purchase the good on behalf of another person. If an agent works for an undisclosed principal and makes
contract in his own name (not in the name of the principal) such agent does not fall under the commercial
agents regulations 1993.
4.2 Continuing authority
160 51st Report by the Select committee on the EC, session 76/77.
161 [2009] EWCA Civ 700.
44 | P a g e
The agent must have the capacity on behalf of his employer. If an agent is appointed for one-off
transaction, the agency agreement falls outside the regulations. The procedure to show continuing
authority is prescribed in the Nigel Fryer Joinery v Ian firth Hardware 162 case, it was held all that was
needed was that the agent negotiated, persuaded the customer to buy, deal with and managed sale. The
power to negotiate of the agent is sufficient. An agent does not need to have authority to conclude
contract in order to be a commercial agent.
4.3 Impact of the commercial agency regulations
Prior to the implementation of the directive, commercial agents in the UK were not recognized a separate
from the other commercial representatives and did not benefit from the have any special protection. The
law commission said that it was unable to identify such a social group in England. 163Thats why when the
directive was enacted the UK was given additional time to implement it. The directive has been the object
of numerous comments by both practicing lawyers and jurists. The reason behind critics was the Agency
Regulation was almost word by word the civilian-based as such bring significant change to the traditional
common law rules of agency. The agency regulations brought some changes. First, the commercial agent
is recognized as having a proper legal status regulated by its own text. Second, the performance of
commercial agency contract is more balanced since the parties are bound by a compulsory mutual duty of
good faith. Finally, the agents protection on the termination of agency contract is substantially improved.
Despite a generally positive appearance, the commercial agency regulations (directives) have some
drawbacks. The territorial rules whereby only commercial agents whose activities are performed in the
UK are protected were criticized for being vague and unclear incomplete, and even the regulation is
inconsistent with the Rome Conventions applicable to the contractual obligations. Whilst most of them
are related to one of the two aims of the directive, there is a more serious one, which could undermine at
once harmonization and the protection of the commercial agents. That is the silence of the directive on the
question what good faith entails and this must therefore be reviewed on its own before the other
drawbacks. The existence of the duty of good faith highlights one aspect of the influence in civil law
tradition in the Directive.
162 [2008] EWHC 767, (Ch).

163 Law Commission, No 84.
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Chapter 5
The common law on agency: an unequal relationship

The purpose of the law of agency is clear, but its legal characteristics is not easy to explain 164likewise
whilst agents play an essential role in commercial activity it is difficult to identify who the agent is. 165 The
term agent is misused since some agents such as brokers and factors are not called agents and some
professionals who called agents, but they are not agent in the law at all. 166In this chapter I will have an
endeavor to discuss about the drawbacks of the prevailing legal system.
5.1Who the agent is?
The concept of agency under common law is broad and flexible since it is derived from wide range of
legal techniques such as contract, tort, equity etc. 167 the common law rules of agency apply to many types
of representatives some of them would not be regarded on the continent as an agent at all. in relation to
the UK it has been asserted that the traditional common law rules are based on the rationale that
principals are the parties need of protection because fiduciary nature of relationship.
It is therefore now time to review the English traditional common law rules of agency in details in order
to see how the two systems compare one to another are working prior to implementation of the Council
Directive.168Providing a definition of an agent has always been notoriously difficult 169 even there will be
no attempt to provide a definition. Because the law of agency does not only apply when there is an
agreement. In fact, some of the agency consequences can arise when there is agency relationship at all in
164 Markesinis and Mundy, An outline of the law of agency, Butterworth 1998, 4 th
edn, p.5.
165 Severine Saintier, Commercial Agency, a comparative analysis.. Ashgate
(2002). P 49.
166 Ibid PP 12-14.
167 F.B.M. Reynolds, Bowstead and Reynolds on agency, Sweet and Maxwell, 1996,
16th ed, article I and associate comment, pp. 1-29.
168 F. M.B Reynolds, op cit, paragraph 11.001 p. 689.
169 G.H.L Fridmans Law of Agency, Butterworth, [1996] 7 th ed.
46 | P a g e
the case of apparent authority. Even professor Friedman claimed that agency is a purely legal concept
employed by the court as and when it is necessary to explain and resolve the problems created by certain
fact situations.170
The agency law requires adequate definition, which could cover all the legal uses of the agency concept.
However, the debate over a specific legal definition of agency tends to concentrate on the external
relationships, e.g. that between the principal and the third party to the exclusion of the internal
relationship, e.g. that between the agent and the principal. Although my intension is not to get a definition
about agency, rather the legal position of the agent needs to be determined.
5.2 Uncertainty of the agreement

When the relationship is created by the contractual agreement, normal rules of contract must be complied
with e.g. the consent must be freely given and must not be vitiated in any way by fraud, mistake or
misrepresentation.171
The parties to the contract must have capacity to make a contract as agent and principal and the purposes
of the agency contract must be lawful and attainable. If there is any specific contract the doctrine of
frustration or impossibility can be used by the parties in cases when necessary. But in common law there
are no specific formal requirement for the conclusion of the relationship of the relationship since the
agency contract is not be entered into in written nor it is required to comply with any particular form. In
fact,the contract can be created by deed, in writing or by word of mouth 172 even the relationship may exist
despite the absence of an express agreement. The existence of the relationship can be implied by deduced
from the conduct of the parties. The notion of implied agency has been interpreted by the widely by the
court since an implied agency may exist even though the principal is unaware of the situation. 173 Under
the Agency Regulations conclusion of the commercial agency contract is subject to no formality.
5.3 Remedies under new regulations
The new rule does not bring much change to the common law rules at this stage of the relationship,
although, the agency regulations mostly concentrate on the cases where the agents are paid in return of
their service. Because the agency regulations are applicable for paid agents and the duties of a gratuitous
170 G.H. L Fridman Establishing agency, (1968) 24 LQR 224 at 231.
171 G.H. Treitel, the law of contract, Sweet and Maxwell, 1999, 10 th edn.
172 Closes v Trecotrick (1804) 9 Ves 234.
173 Biggor v Rock Life Insurance co. [1902] 1 KB 516.
47 | P a g e
agent are viewed differently.174In essence, the commercial agent must behave loyally towards the
employer, which, it has been said does not seem to add contents of the duties fiduciary in nature. 175Yet
clarification is necessary in relation to the precise scope of and compatibility between the two different
sets of duties.
In relation to the contents of duties, it has been established that the fiduciary duty of the commercial
agents requires them not to be in a position where the duties towards the principal might conflict with
their own interests. Although the agency regulations require the commercial agent to secure the
principals interests in good faith, they remain silent on the question whether the commercial agent can
work for competing principals. The first draft of they did require the commercial agent to work in the
interest of the principal and didnt allow the agent to work in a way which allows his personal interest to
conflict with the duties owed to the principal. In recent case of Park v Esso Petroleum co Ltd176 case the
court held that provision is the agreement requires the agent not to be involved in competing business, did
not breach what is now Article 81 of the Treaty of Amsterdam. The Commercial Agent Regulation
remains silent on the matter; the question remains to be solved by the member states. At Common Law,
the duty of loyalty traditionally prohibits the agent for working for two competing principals under the
fidelity duty.
5.4 Working for two principals
However, the decision in Kelly v Cooper the court allows the agent to work for two principals where the
contract permits it expressly or impliedly. In that case the court had the view to prevent the agent from
working for two principals would be contrary to commercial exceptions. 177 The court implied a term
whereby the agent was entitled to act for other principals selling competing parties and to keep
confidential information obtained from each of his principals. The fiduciary duties were therefore treated
as regulated not by the express terms of the contract, but by an implied term what they did not apply. 178
It is arguable that in the light of the reciprocal obligation of good faith, the commercial agent should be
prevented from working for two competing principals. This would seem to be indirectly confirmed by the
schedule of the agency Regulations179 which prescribes that the agency activity is a primary activity when
174 Regulation 2(2) (a); Coggs v Bernard (1703) 2 Ld Raym. 909.
175 R. Bradgate, Commercial Law Butterworth, 2000, 3 rd edn, p 186.
176 [1999] 1 CMLR 455.
177 Severine Saintier, Commercial Agency, a comparative analysis.. Ashgate, 2002,
P 62 footnotes.
178 F.M.B Reynolds [1994] JBL P 147.
179 Para 3c.
48 | P a g e
the agent devotes the whole of his time to representative activities, whether for one principal or more than
one whose interests are not conflicting.
The principal however should not prevent the agent from working for non-competing principals during
the time span of relationship since it would be against commercial freedom. An agent may be liable for
breach of fiduciary duty though s/he acted in good faith and produced benefit for the principal. Under the
duty of good faith, the commercial agent may be held liable for a proven breach or fault. The agency
regulations cant be derogated from, 180 which departs from the common law position. That mean the
agency regulations prevail over the common law rules. The fiduciary rules still applicable as legal
incident of the relationship unless incompatible with the agency regulations. In relation to the UK, when
looking at the then rules form the civil-law aspect that, commercial agents need more protection.
5.5 Drawbacks of the present legal system
The main drawbacks of the current legal system are the absence of statutory recognition of the
commercial agents as other professionals and inadequacies of the common law rules in answering the
needs of the agent. In most of the cases the principals interest is protected but the interest of an agent is
not protected in the same way. An agent is not permitted to act beyond the authority but if the principal
ratifies the agents act with third party. The agent in fact has no authority to do what he does at the time he
does it. Subsequently, however the principal, though without whose authority, the agent has acted, accepts
the agents act, and adopts it, as if there had been prior authority by the principal. While the principal
authorizes and adopt any act of the agent, accepted as there had been a prior approval to do what exactly
what the agent has done. By the approval the principal does not merely approves the agents unauthorized
act as from the date of ratification: it is attended so as to take effect from the time of the agents act. The
difficulty for the agent lies here; the ratification by the principal is equivalent to an antecedent authority.
But if the principal does not approve the act of the agent, for example the principal thinks the of the agent
is not beneficiary for him so denies to take the liability of the agents act, the agent will be in jeopardy,
even if he does with good intension the act will be unauthorized even the agent might have to pay
compensation for any loss suffered by his act.
As it was held in Tindals judgement in Wilson v Tumman181that an act done for another, by a person, not
assuming to act for himself, but for such other person, though without any precedent authority whatever,
becomes the act of the principal if subsequently ratified by the principal, is the long established principal
of law. If the principal ratifies the act has been done by the agent in that case the principal only can be
held liable.
5.6 Dilemma about the authority of the agent
in case of contractual agency, the standard of care to be observed by the agent is put in terms of the skill
and care of the agent in his position would usually possess and exercise 182as long as the agent behaved
with normal care and skill, having regard to the nature of the business, and the agent acted in a reasonable
manner as could be expected from an agent employed in such undertaking, the agent will no liability for
180 Regulation 5.
181 [1843] 6 Man & G 236 at 242.
49 | P a g e
negligence, even if his efforts were not successful. 183Thus where a broker was employed to buy stock and
did so in the normal course of business, bought what was usually sold as scrip, was not held liable for
misfeasance when it was transpired that what he had bought was not genuine. 184Where the agent follows
the instruction he will not be liable even if the performance of them is not in the principals interest 185
182 Andrew v Master Hones Ltd v Cruisckhank and Fairweather [1971] FSR 268.
183 Brutton v Alfred Savil, Curtis and Henson (1971) 418 Estate Gazette 1417.
184 Lambert v Heath (1846) 15 M&W 486.
185 Bertram v Godfrey
50 | P a g e
Chapter 6
Conclusion
In context of business world agency relationship is very important for trade and commerce. In my view
the law related to agency in not fairly treating the agent. If the interest of the agent is not protected in the
same as it is protecting the principal in the long future, it may have negatively affect the business. In some
cases, like Duffen v FRA Bo Spa186 and Barrett McKenzie & Co Ltd Escada (UK) Ltd 187 certain courts are
still reluctant to look at the wider European context when applying the termination rights under the
Agency Regulations. In fact, English courts are in doubt as to the meaning of the Agency Regulations. In
contrast to the numerous obligations owed by the agent, the agent has comparatively few rights under
common law. They are related to the remunerations, indemnity none of these correlative obligations of the
principal are fiduciary. In modern time, much day to day commercial transactions are facilitated by
intermediaries acting within the scope of the authority that has been conferred on them whether expressly
or by implication. The prevailing legal provisions need to be more business friendly. The agent needs
more recognition and need to be treated more liberally. The current legal system should enact legal
provisions to recognize the commercial agents as other professionals and inadequacies of the common
law rules in answering the needs of the agent.
186[2000] 1 Lloyds Rep 180.

187[2001] Eu LR 567.
51 | P a g e
Bibliography
Article/journal
1. F.B.M. Reynolds, Bowstead and Reynolds on agency, Sweet and Maxwell, 1996,
16th ed, article I and associate comment
2. F.M.B Reynolds [1994] JBL
3. Jones Unjust Enrichment and the fiduciarys duty of loyalty (1968) 84 LQR
472.
4. Agency revisited, Ramon Casadesus-Masanell, Daniel F. Spulber, Working paper
10-82, Harvard business school
5. F. E. Dowrick M.A. the relationship of Principal and Agent [1954] Modern Law
Review.
Books
1. Severine Saintier , Commercial Agency, a comparative analysis. Ashgate
publishing 2002.
2. R. Bradgate, Commercial Law Butterworth, 2000, 3 rd edition
3. G.H. Treitel, the law of contract, Sweet and Maxwell, 1999, 10 th edn.
4. G.H.L Fridmans Law of Agency, Butterworth, [1996] 7 th ed.
5. Markesinis and Mundy, An outline of the law of agency, Butterworth 1998, 4 th
edn
6. Mundy Agency law and principles, Oxford University Press, [2010]
7. Stephen Judge, Law for Business Students, Palgrave McMillan.
8. Story on agency, Joseph story, commentaries on the law of agency. (1851)
Boston, Little, Browne & co 4th ed
9. Keith Abbot, Norman Pendleburry, Kevin Wardman, Business Law, 8 th edition,
Thompson publications.
10. Roscoe T. Stefen, Agency-Partnership, [1977], St. Paul, MN: West Publishing.
52 | P a g e

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Agency law: an analysis of the liabilities of an agent

under common law.

Clark Boyce v Mouat [1993] ALL ER 268 at 273.

General v Goddard [1929] 98 LJKB 743.

Turner v Burkinshaw, [1867] LR 2 Ch. App. 488.

Wilson v Tumman [1843] 6 Man & G 236 at 242.

Woodhouse AC Israel Cocoa Ltd SA v Nigerian produce marketing Co Ltd (1972) AC

2. Aim and objective of the research

9 [1830] 1 knapp 381.

14 (1810) 3 Taunt 117.

2.1.8 Legislative provision

37[2001] PNLR 22, esp at [42]

39 Boden v French, (1851), 10 CB 886.

2.3 Performing agency duty personally

45 Blaustein v Maltz, Mitchel & Co [1937] 2 KB 142.

97 G.H.L Friedman the Law of Agency, Butterworth, 1996 7 th ed 185.

102 (1888) 39 ChD 339.

The payment of the bribe may also be counted as a criminal offence.118

3.7 Duty of accountability

3.9 Duty of full disclosure

3.12.2 Secret information

153 Spector v Ageda [1973] Ch 30 at P. 48.

3.13 Tortious liability of the agent

158 [1979] AC 374.

162 [2008] EWHC 767, (Ch).

The common law on agency: an unequal relationship

5.2 Uncertainty of the agreement

186[2000] 1 Lloyds Rep 180.

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