Duties Owed by Agent to Principal

These may be summarised as follows:

(a) Obedience: The agent has to follow all lawful instructions of his principal, strictly or as best as is reasonably possible.

(b) Personal performance: The agent is not allowed to delegate his authority and responsibilities to others (subagents) unless he has authority to do so.

(c) Due care and skill: The law does not demand perfection, and an agent is normally only required to display all reasonably expected skills and diligence in performing his duties. Whilst his principal may be bound by his lack of care, the principal may in turn reclaim from the agent in respect of a loss caused by the lack of care.

(d) Loyalty and good faith: The agent’s obligations of loyalty and good faith are governed by several strict rules of law, the no conflict rule being one of them.

(e) Accountability: The agent has to account for all moneys or other things he receives on behalf of his principal. He also has to keep adequate records relating to the agency activities.

Duties Owed by Principal to Agent

These may be summarised as follows:

(a) Remuneration: The agent is entitled to receive commission or other remuneration (such as bonus) as agreed. This the principal has to pay within a reasonable time or any specified time limit, as the case may be.

(b) Expenses, etc.: The principal, subject to any express terms in the agency agreement, has to reimburse the agent for costs and expenses properly and reasonably incurred by the agent on behalf of the principal; e.g. legal defence expenses paid by a claims settling agent.

(c) Breach of duty: The agent may take action against the principal for the latter’s breach of obligations to him.

Termination of Agency

There are a number of ways in which an agency agreement can be brought to an end. These include:

(a) Mutual Agreement: Generally speaking, all agreements may be terminated by mutual agreement, on terms agreed between the parties.

(b) Revocation: Subject to any contract terms as to notice and/or compensation, either the principal or the agent may revoke (i.e. cancel) the agreement during its currency.

(c) Breach: If either the principal or the agent commits a fundamental breach of contract, the other party may treat the contract as ended (with a possible right of compensation). For example, an exclusive agent, upon discovering that the principal, in breach of a contract condition, has appointed a second agent before the expiry of the agency agreement, may terminate performance immediately and sue the principal for any loss of the profit expected from performing the agreement during the remainder period.

(d) Death: Because an agency relationship is a personal one, the death of either the principal or the agent will end the agreement. Should either party be a corporate body (company), its liquidation will have the same effect.

(e) Insanity: If either the principal or the agent becomes insane so that he no longer can perform the agreement, the agreement will automatically come to an end.

(f) Illegality: If it happens that the agency relationship or the performance of the agreement is no longer permitted by law, this will automatically end the agreement. Suppose a British company (buying agent) has a contract with a company (principal) incorporated and domiciled in another country whereby the buying agent will purchase in the United Kingdom stuffs like wheat, steel, sulphur and other chemicals on behalf of the principal. On the outbreak of a war between the two countries, this agreement will, in the English law, automatically end for illegality.

(g) Time: If the agreement is for a determined period, it will terminate at the end of such period.