Eight (8) Duties Of An Agent To His Principal

Duties Of An Agent To His Principal: An agent is a person who is employed by another known as the principal, to act on his behalf in dealing with the third parties. According to commercial law, an agent is someone who has been authorized by another to act on their behalf in creating a legal relationship with a third party. The principal on the other hand has his own duties to perform, such duties are paying the agent or where necessary indemnify him for the services which he or she has rendered or all expensive incurred respectively.

There are different kinds of agent out there, there are advocate, banker, factor, etc., and there may also be special agent, universal agent, and general agent. On the other hand, there are rights in which agents enjoy but, these rights are not absolute as they could be sued on those grounds. However, to identify whether a person is an agent or not, the law would have to consider his or her functions. The law has to see the substance of the transaction and not the party’s terminology.

Duties and Rights of Agent and Principal
Duties and Rights of Agent and Principal

In this article, we would be discussing the duties of an agent to the principal.

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Top 8 Major Duties Of An Agent To The Principal

1. Duties to execute mandate: The first and the most important duty of an agent is to carry out its principal’s mandate. He only has to perform the work he was appointed to do, failure to do so, would make him liable to the principal on the occasion of loss. This has been evident in many cases, and the rule of equity itself provides that, that if an order is sent by a principal to a factor to make an insurance, and he charges his principal, as if it was made, if he never in fact made that insurance, he is considered as the insurer himself.

2. Duties to follow Instructions or Customs: When an agent is delegated with the duty of negotiating a transaction on behalf of his principal, he is to do so diligently while acting according to the principal’s best interest within his powers as an agent. Acting in the best interest of the principal requires that the agent uses his skill to negotiate the terms of the transaction on behalf of his principal with another party in a way that it would be to the principal’s greatest advantage in such circumstances.

In a situation where the principal has given instructions of ambiguous nature to the agent, he is not in any way allowed to argue against the agent that he should have read, done, or carried out the instruction in another way than he actually did.  Most principal’s instructions are always clear but at some point, they may be ambiguous or unclear because of one reason or the other, at this point, the agent is to ask the principal to clarify the instructions in other for him to carry out his activities effectively.

In a situation where the business is void of instruction, the normal and standard business transactions must be followed. For example, where the standard practice is that goods must not be sold on credit and the agent defaults, he would be liable to the principal for any loss incurred by him as a result of the transaction.

important duties of an agent towards the principal
important duties of an agent towards the principal

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3. Duty of reasonable care and skill: Having been empowered by all these powers, an agent is not allowed to abuse such, he is bound to act with reasonable care and diligence in using the skills which he possesses, and he is to compensate the principal in the occasion where there is direct consequences for his actions, neglect, and want of skill or misconduct. On the other hand, he is not allowed to compensate the principal in an occasion where the loss or damage which occurred was indirectly not caused by his negligence or misconduct.

which of the following is not a duty of an agent to a principal?
which of the following is not a duty of an agent to a principal?

A paid agent is always held in a higher standard of performance than an unpaid agent, therefore a paid agent must act with great competence, care and diligence with the task assigned to him.

4. Agent is also under the duty to communicate with the principal: It is the duty of an agent to always communicate with his principal especially in cases of difficulty, he is to use all reasonable means of communication in getting through to him. Unless it is agreed upon, an agent is not allowed to use or to communicate confidential information of the principal for the agent’s own purpose or that of a third party.

A confidential information is an information entrusted to the agent by the principal which would enable the agent carry out his duties smoothly. In the absence of any contrary agreement, once the agency agreement ends or is terminated, all fiduciary duties will be terminated.

Agent's duties to principal under common law
Agent’s duties to principal under common law

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5. Duty to Avoid Conflict Of Interest: Any agent whose interest conflicts with that of the principal would be unable to represent such principal in any transaction. On that note, an agent is not allowed to acquire a material benefit from a third party which is in connection with the agency transaction. An agent is also not allowed to deal with himself when conducting a principals business.

For example; an agent who has the power to sell a property cannot sell it to himself, but he can do so if the principal consents. An agent is not also allowed to compete with the principal with regards to agency business and not assist him with his competitors for as long as he remains an agent, however, he can do so if the principal agrees otherwise.

6. Duty not to make secret profit: An agent should not in any way make any profit or take any form of benefit during the time of his agency without the consent of the principal. This form of profit is not just restricted to money alone but to anything which has value or monetary values such as a club membership, an interest free loan, a free building, and many more.

Fiduciary duties of an agent
Fiduciary duties of an agent

On the occasion where an agent has made a secret profit, he is liable to inform and account to the principal for such profit and in addition to that, he is to pay other remedies available to the principal for his breach of duty.

Examples of where an agent can make secret profit is; where he uses the property entrusted to him to make profit, using his position as an agent to obtain benefits meant for his principal, using information or knowledge which he acquired from his principal for his personal gain.

Duties of Agents and Principals
Duties of Agents and Principals

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7. Duty to remit sums: An agent has the duty to remit all sum repay to his principal, and that is all sums received by him. The remittance of this money must be done even if it was received for the pursuance of a void or an illegal contract.

If the money received by the agent from his principal was gotten through an illegal contract or a void contract, the agent is under the obligations to account to the principal for such money, and in no way shall he use the illegality of the contract to justify his withholding of the money so received.

8. Duty to maintain Accounts: An agent is bound to keep any property or money which he has received from his principal or for his principal apart from his own personal transaction as he is only but a trustee of the property. Even at the point where the agency has been terminated, the agent’s duty to account to the principal may still continue. The agent also has the duty to return to the principal all the documents and properties given to him by the principal on his position of being an agent.

The agent is also obliged to return all documents and property originally given to him by the principal and documents prepared by the agent on the instruction and at the expense of his principal to his principal. They also must have to keep accurate records and accounts of all transactions mind and at the same time disclose such to the principal upon the principal’s request.

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Conclusively, agency is a creation of a contract between the principal and the agent, granting authority to the agent to act on behalf of the principal. Therefore, an agent is to carry out said business without bias as if it were his.

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