Agency

© Daniel Atkinson 1999

An employer may delegate certain responsibilities to managers and to outside consultants. If the Consultant has a contract with the Employer then the express terms will dictate the obligations of the consultant agent to his principal the Employer. In the absence of any express contractual terms, the agent as a matter of law holds certain explicit duties to his principal. The liability of the company or its managers or consultants depends not only on the terms of appointment but also on the law of agency. It is not proposed to deal here with the special situation of a Director of a company.

It is important that the Manager or Consultant clearly establishes the extent of his authority and ensures that the other party is aware that he is acting as agent of the Employer, that is acting on behalf of the Employer. Letters of invitation to tender to construction contractors or any other type of contractor should clearly state this to be the case.

The purpose and rationale of agency is that a direct contractual relationship is created between the principal and a third party by the acts of the agent. The agent is not himself a party to that relationship. Where the principal is known to the third party the agent is not liable to the third party Spittle -v- Lavender (1821). If the fact of agency is not disclosed to the third party, then the agent contracts personally and both the agent as well as the undisclosed principal may be sued under the contract. This simple rule is however subject to many qualifications.

The agent must obey his principal's instructions Turpin - v - Bilton. He owes a duty of care to the principal to act with due care and skill. The standard of care will depend upon all the circumstances. A paid agent in a profession is required to exercise the degree of skill and diligence reasonably to be expected of a person exercising such profession irrespective of the degree of skill he may possess.

The relationship of principal and agent gives rise to a fiduciary duty on the part of the agent. This arises because the relationship is one of trust, even though not a relationship of trustee and beneficiary. The general principle is that the agent must not let his own personal interest conflict with the obligations he owes to his principal. This is an equitable duty, and is variously described eg - conflict of interest must be avoided eg - unless the agent has the consent of the principal, he must not make use for his own personal benefit of information acquired in the course of his employment as agent Boardman - v - Phipps (1967), IDC - v - Cooley (1972).

Confidence in the person employed is at the root of the contract of agency De Bussche - v - Alt (1878). The agent must personally perform all the parts of his function which involve any confidence conferred on him, but he may employ others in carrying out ministerial acts, but not acts involving the exercise of discretion.

The principal and agent are jointly and severally liable for torts committed by the agent. If either is released by the third party then both are released. An agent who commits a tort is personally liable. If a principal has contracted to exclude his tortious liability the agent cannot benefit from the immunity provided in the principal's contract Scruttons - v - Midland Silicones Ltd (1962).

A distinction needs to be made between the Employer`s liability for independent contractor and agent. Unless the Employer is under a duty to act, and he has employed an independent the contractor to act for him, he is not liable for the acts of that contractor. On the other hand the Employer is liable for the torts of his agent as long as the agent is acting within the scope of his authority.