The Common Law definition of an agent-principal relationship is a fiduciary relationship that comes into existence when an individual called a principal gives assent to another called the agent to perform tasks for him. What the agent does under Common Law is subject to the control of the principal (DeMott 2006, p.1050). One of the remarkable attributes of the common law agency is the ability of the principal to issue interim instructions to his agent. This is notwithstanding, a previous indication by the principal that he would not give the agent the same instructions. The reason why this power is crucial is because it gives rise to the agent’s ability to subject his principal to third party liability (DeMott 2006, p.1051). The formation of the agent-principal relationship is usually by mutual and manifest agreement. This is normally done by way of written contract.
Accordingly, since most of the relationships between an agent and his principal are formed by way of contract, the duties of these parties are usually defined under the contract. However, agency law has provisions that detail the duties of an agent to his principal unless a contract varies or excludes them. Therefore, the agent-principal relationship creates rights, duties and obligations under agency law owing from both parties.
Agents are created since most sellers are corporations and companies who employ agents to carry on their business. In this case they are referred to as the Principal. Therefore, agents make contracts which they are authorized to make thus binding the Principal on the things they are authorized to do. On the other hand, the Principal can also be bound on the actions that the Agent appear to be authorized to do. In the circumstance, the agent is supposed to act in the best interest and in good faith for the principal. Therefore anything done not in light of the foregoing circumstance would not be approved by the principal. The next section contains a brief summary of the duties of an agent towards the principal.
The agent can only act according to the instructions given by the principal and he is not supposed to go beyond what he is permitted to do. In conducting the affairs tasked, the agent should only do what the principal has authorized and must also obey what is lawfully instructed to him. The general rule in company law is that an agent owes the principal a duty of obedience (Palmiter 2010 p.464). This means that a director, as an agent of the company, must act within the scope of what the company and the law authorize. However as held in Weigall and Co. v Runciman and Co. (1916) it was held that where the instructions by the principal are ambiguous, the agent is exempted from liability if he does what can be implied to be an instruction therein. However, a duty is imposed on the agent to ensure that he seeks clarification from the Principal before acting.
In line with this duty, the agent has a duty to his principal not to delegate. The general rule is that an agent is prohibited from delegating his mandate either partially or wholly unless the principal gives express consent.
The agent must act reasonably with care and skill at any given time. Care at any given time is interpreted in light with circumstance at hand. If an agent in the course of his duties presents himself to be a professional in a certain field, then he is supposed to act in such a professional way even if he does not possess those skills that he pretends to have. Where an agent fails to meet this standard, he is regarded as prima facie negligent (Eaa.org.hk, 2017). The general rule is that where an agent operates within a particular profession, he is required to exercise skill and care that a reasonable counterpart in the field would exercise.
In the case of Chaudry v Prabhakar (1988) the appellant asked the Respondent to buy him a car as they were friends. However, the car to be bought as per the instructions given to the respondent was supposed not to have had an accident notwithstanding the fact that respondent was not a mechanic. Later, it came to the appellant’s knowledge that the car purchased subject to his instructions had been involved in an accident and was severely damaged. This matter finally ended up in court and it held that the Respondent was liable since he pretended to possess such skill that he did not have.
An agent who has agreed to represent the interests of principal A must not accept instructions from principal B if the two interests are conflicting. This duty is paramount because it is in relation to the duty of acting in good faith. The condition precedent in this instance is that the agent cannot act for both principals with conflicting interests unless the two principles are fully aware and they have agreed thereto. In other words, if an agent fully discloses the fact of the double representations to the principals and obtains their consent, such agent is not precluded from representing both of their interests since there is no conflict of interest. A good example is where an estate agent acts for both the purchaser and the vendor. For there not to be a conflict of interest, the agent must disclose this fact to both parties, after which he will not be precluded from acting for both of them.
In the case of Boardman v Phipps (1966) the above duty of no conflict of interest was applied. In this case, a solicitor had acted as an agent in relation to the value of shares. However, he used the information acquired to his benefit. The Principal declined to use the shares for his own use so the Agent used the information for his own benefit. The court held that the agent is answerable to the principle in relation to any benefits derived from their agreement. This is because the agent is not supposed to act on his behalf but on behalf of the principal.
An agent in whatsoever circumstance is precluded from making secret profits. Good faith is not a defence in this instance. The general rule is that no secret profits should be made by an agent at any particular instance. As a company’s faithful agents, directors are required not to make secret profits. The Company laws of different countries contain provisions that safeguard against directors using their position as an unfair advantage of making secret profits. Some of these provisions come in the form of requirements of disclosure (Tewari 2015, p.3). Under Common law, an agent is precluded from making profits or acquiring benefits during the course of his agency without the consent and the knowledge of the principal. Such profits, commonly defined as secret profits, do not necessarily have to be monetary. They may come in the form of anything that is valuable. Good examples include free memberships and loans that are interest-free. An agent who makes such secrets profits becomes liable for accounting of the same to his principal and the principal also has the right of claiming remedies available to him for breach of the agent’s duties.
In Turnbull v Garden (1869) the agent was supposed to buy clothes for principles son. The seller gave a discount; however, he sought to claim the full price of the items purchased from the principal. The court however held that the agent is accountable for the discount received on principal’s behalf.
An agent should accurately account for every transaction involving money that he undertakes in the course of his acting for the principal. This duty requires the agent to take precaution against mingling the properties. The agent has a duty in relation to the property of the Principal during the termination of the agency. The Agent is regarded as a trustee of the property and should keep the property assigned separate from any other that belongs to him. In addition, the Agent is supposed to maintain an accurate record in relation to the principal’s property and after which present to the Principal.
In Lupton v White (1808) it was held that where in light of the circumstances of the case the property of the principal cannot be ascertained in relation to the property of the agent, then the principal is empowered to charge on both property. In a nutshell, an agent is understood to be a legal trustee of the property received from a principal. The duty of an agent to account to his principal may continue being in existence even after termination of the relationship. Therefore, an agent has a legal obligation of returning to the principal all property and documents initially given to him by the principal.
Generally, an agent executes or performs his task on behalf of the Principal. The agent cannot delegate duties without the authority of the Principal. This is in accordance to the maxim delegatus non potest delegare (Dobson & Reddy 2004, p.144).
There are exceptions to the rule especially where there was an apparent authority to delegate. In such an instance the Principal is estopped from alleging otherwise. In De Bussche v Alt (1897) an Agent had received express authority to appoint a sub-agent who subsequently sold the ship according to the Principal’s instructions. The Court held that the delegation herein is proper and in consonance to principal’s authority.
Also in Solley v Wood (1852), the court was of the view that where there is a custom in a particular field then the agent is impliedly authorised to appoint a sub-agent. The court held that a solicitor practicing in a given jurisdiction can appoint another solicitor who is in another jurisdiction that he intends to litigate in.
The agent has a duty to his principal against disclosure of any information regarding the principal. Also, private information entrusted to the agent. Such information must not be disclosed to whoever person unless the principal consents accordingly. The above duty stems from the fiduciary nature of the agent-principal relationship.
Conclusion
There are other duties that an agent owes to his principal such as the duty to confidentiality. However the breadth of the present paper does not suffice to undertake an in-depth and expansive discourse into all the duties an agent owes to a principal. From the foregoing, it is essential for the agent to act in accordance to the instructions given. The agent is supposed to reasonably follow the instructions in accordance to the agreement in place. The principal at any given moment should endeavour to give instruction in a timely manner so as not to disadvantage the agent. We also learn the agent has a form of independence while conducting his duties. The Agent can come up with a schedule on how he will discharge his duties.
Rules Related To the Duration of an Offer under English Contract Law
An offer is defined as an expression to contract on such terms contained in the offer (Law Cards Series 2004, p.2). A valid offer must therefore have the following tenets:
In view of the foregoing, an offer has duration and the same is governed by three major rules. However, it is general law that for an offer that is set to last for a certain duration of time, the same lapses when that time expires.
Before an offer has been accepted, the offeror may withdraw at any time. However, such a withdrawal ought to be communicated before acceptance of the offer. In Byrne v Van Tienhoven (1880) the court held that where a telegram was used to communicate a withdrawal, such a withdrawal would only be deemed communicated upon receipt of the sent telegram
In addition, communication made through a third party will suffice. It need not necessarily come from the offeror. In Dickinson v Dodds (1876) a third party had communicated that a land that had been offered had been sold. The court held that such a communication by a third party was valid and hence the offer stood revoked.
On unilateral offers, communication of revocation seems difficult since it was made to the whole world. In Shuey v USA (1875) an American case, the court stated that an offerer has to take reasonable steps to communicate a withdrawal of an offer which had been communicated to the public, for instance through advertisement in the dailies.
However, the offerer is estopped from withdrawal if performance had begun. In Errinton v Errington (1952), a promise herein was made in relation to mortgage payment. The father promised to give his house to the offeree provided they helped him in paying off the mortgage. The father sought to withdraw the offer when the offerees were on course with paying off the mortgage. However, the court held that the offer could not be withdrawn since performance had begun.
This is usually by the offeree. The rejection may be express or implied. Where the offeree presents another offer as he wishes then there is an implied rejection on his part because an acceptance must exactly in relation to the terms specified under the offer. Any addition or modification to the offer becomes a counter offer and will terminate it. In Brogden v Metropolitan Railway (1877) the offeree in this instance having received a negotiated contract did not only sign the agreement but he also entered the name of the arbitrator on the document. The Court held that the agreement is a counter offer.
It is important to note that seeking of more information concerning the offer does not amount to a counter offer as stated in Stevenson v McLean (1880), the Defendant herein offered the Plaintiff iron at 40 Shillings per ton. The Plaintiff later sought to know whether payment could be made by instalments. The court held that the original offer was still valid since the inquiry was only to seek for more information.
There are different ways upon which an offer may be deemed to have lapsed.
An offer lapses where an offeror made an offer of a personal nature and dies. An offer also lapses where the offeree dies because there shall be no acceptance.
Where an offer is given and the time is stipulated, the same lapses at the end of that duration. However, if no time is stipulated, the courts have held that an offer terminates after a lapse of a reasonable time. In Ramsgate Victoria Hotel Co v Montefiore (1866) the court held that an attempt to accept an offer involving shares after five months cannot suffice. The court was of the view that the offer had lapsed.
Conditions on an offer are either express or implied. When parties fail to adhere to the preceding conditions by the offeree, the offer lapses. In the case of Financings Ltd v Stimson (1962), the court held that where the conditioned attached to the car to be bought has failed, the offer would as well be deemed to have lapsed. The condition herein was that the car should remain in the same condition as when the offer was made, however the car later was damaged and the court held that the offer had consequently lapsed.
In the circumstance an offeror fails to specify the exact time an offer must last, it lapses after passage of a reasonable length of time. The exact length of time depends upon factors such as the subject matter speed of communications of the offer. For instance, an offer to purchase shares on the stock market may only last for several seconds due to the fast nature of the transactions in this field. The case of Ramsgate Victoria Hotel v Montefiore (1866) involved the application for shares in the company belonging to the Plaintiff by the Defendant. After lack of correspondence for five months, the Defendant was informed of the allotment of the shares to him and he was required to pay. The Defendant refused. The Honourable Court agreed with the Defendant and upheld the decision. The Court noted that in the shares market, five months was too long a period to be adjudged as reasonable. This was due to the rapid fluctuation of prices in the shares industry.
Conclusion
From the fore going, we find that an Offer is a crucial and important element in the law of contract, without it acceptance and consideration can never arise hence the need to understand it. Simply put, an offer is an expression by an offerer to contract with anyone who might might be willing on such terms contained in the offer.
References
Boardman v Phipps [1966] 3 All ER 721
Brogden v Metropolitan Rly (1877) 2 App Cas 666
Byrne v Van Tienhoven (1880)
Chaudry v Prabhakar [1988] 3 All ER 718
De Bussche v Alt [1878] 8 Ch D 286
DeMott, D.A., 2006. Disloyal agents. Ala. L. Rev., 58, p.1049.
Dickinson v Dodds (1876) 2 Ch D 463
Dobson, P & Reddy, J, Commercial Law, 3rd edn, Cavendish Publishing, 2003-2004.
Errinton v Errington (1952)
Financings Ltd v Stimson [1962] 1 WLR 1184
Law Cards Series, Contract Law,4th edn, 2004,Cavendish Publishing, p 2
Lupton v White (1808) 15 Ves 432
Palmiter, A.R., 2010. Duty of Obedience: The Forgotten Duty. NYL Sch. L. Rev., 55, p.457.
Ramsgate Victoria Hotel Co v Montefiore (1866)
Shuey v USA (1875)
Solley v Wood (1852) 16 Beav 370
Stevenson v McLean (1880)
Tewari, S.P., 2015. Directors Fiduciary Duty not to make Secret Gains.
Turnbull v Garden [1869] 20 LT 218
Weigall & Co v Runciman & Co (1916) 85 LJ KB 1187
Eaa.org.hk. (2017). (5) Agent’s duties to principal under common law. [online] Available at: https://www.eaa.org.hk/en-us/Information-Centre/Publications/Agency-Law/-5-Agents-duties-to-principal-under-common-law [Accessed 11 Apr. 2017].
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