What are my Duties as an Agent?

by Thom Vaughan
E.A.D. Solicitors L.L.P.

C o m m e r c i a l a g e n t s , q u i t e
understandably, often tend to focus
on the question, “what’s in it for
me?” However, any responsible
agent will realise that they must also
keep in mind the strict obligations
owed to their principals.

The obligations owed in this context are
known as fiduciary duties and are helpfully
outlined in the Court of Appeal case of
Mothew (t/a Stapley & Co) v. Bristol and
West Building Society [1996], where the
judge pointed out,
“A fiduciary is someone who has undertaken
to act for or on behalf of another in a
particular matter in circumstances which
give rise to a relationship of trust and
confidence. The distinguishing obligation of
a fiduciary is the obligation of loyalty. The
principal is entitled to the single-minded
loyalty of his fiduciary. This core liability has
several facets. A fiduciary must act in good
faith; he must not make a profit out of his
trust; he must not place himself in a position
where his duty and his interest may conflict;
he may not act for his own benefit or the
benefit of a third person without the
informed consent of his principal. This is not
intended to be an exhaustive list, but it is
sufficient to indicate the nature of fiduciary
obligations. They are the defining
characteristics of the fiduciary.”

An agent must therefore ask himself at each
turn whether the decisions he takes in
conducting his agency are in the best
interests of his principal in order to satisfy his
fiduciary duties. If not, he may well be
placing himself in breach of the agreement
between the parties and be vulnerable to
termination with no claim to compensation
where the circumstances of breach are
serious.
This issue arises most often when an agent
decides to take on another agency to
complement an existing one. This can
obviously be greatly disturbing to a principal,
particularly where the agent is receiving
substantial commission on a monthly basis,
but is it contrary to the agent’s duty of single
minded loyalty? The answer is that if the new
agency competes with the existing agency
or takes up so much time that the original
agency suffers then it probably is a breach
and the principal may ask the agent to
reconsider.
A classic argument between agent and
principal in this regard is whether the new
agency truly competes and where there is
no clear evidence of this it will come down
to a question of fact. For instance, can an
agent carry two furniture ranges for
different principals? The obvious answer is
no but the less obvious (and potentially
correct) answer is yes, if the furniture is
composed of different materials, styles,
price points and will therefore appeal to
mutually exclusive customers.
In this case an agent can sustain an
argument that there is no detriment to the
principal and he can act for both ranges
whilst fulfilling his fiduciary duties. However,
he may still fall foul of the provisions clarified
above if he has failed to obtain valid consent
from his principal, which, for obvious
reasons may well be withheld.

Further, if the time commitment of the new
agency would impact adversely on the first
agency, and this can be proven, then he is
arguably in breach once more.
A practical answer to this problem for an
agent is to steer well clear of any new
agencies if there is a hint that a new agency
may compete as to move forward will leave
him open to future problems; for instance, a
principal may choose to quietly tolerate the
situation in the good times and then seize
on it as evidence of breach in the bad times.
A principal may also argue that it is entitled
to recover an agent’s “secret profits”, i.e.
those profits made for another competing
agency without its knowledge. In this regard
an agent is at risk of having to account to the
first principal for profits made with the
second later agency.
The upshot of all of this is that an agent must
give careful thought to taking on new
agencies and closely analyse whether it will
in any way interrupt his existing operations.

Thom Vaughan is a solicitor
with E.A.D Solicitors LLP and
specialises in commercial
agency matters.

Head Office: Prospect House,
Columbus Quay, Liverpool L3 4DB
Tel: 0151 735 1000
www.eadsolicitors.co.uk

Disclaimer: This column does not contain legal advice and is for general
guidance only. Agentbase, E.A.D. Solicitors and the writer accept no
liability in connection with the general guidance given in this column.

 

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