WHAT ARE THE DUTIES OF PARTIES TO AN AGENCY AGREEMENT?

'The agent is perceived as a ‘conduit pipe’ through which the principal acts after which, he the agent drops out of arrangement after accomplishing the transaction between the principal and a third party'.

CHAMAN LAW FIRM

6/3/2022 2 min read

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WHAT ARE THE DUTIES OF PARTIES TO AN AGENCY AGREEMENT INTRODUCTION

Agency has been defined by Fridman as the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal's legal position in respect of strangers to the relationship by the making of contracts or the disposition of property.

In this definition, Fridman stresses that the effect of someone being an agent is that he affects the legal rights of his principal in relation to third parties, that is the agent’s representation of the principal is in such a way as to be able to affect the principal’s legal position in respect of strangers on the relationship by the making of contracts on the disposition of property. From this definition, the agent is perceived as a ‘conduit pipe’ through which the principal acts after which, he the agent drops out of arrangement after accomplishing the transaction between the principal and a third party.

AGENT’S DUTIES TO THE PRINCIPAL

Under the agency relationship, the agent is bound to conduct the business of the principal according to the directions of the principal, and to conduct such business with as much skill as a person on his position ordinarily holds. An agent is supposed to show the relevant accounts to the principal as and when the principal demands. An agent has the duty to communicate any difficulty whatsoever he may come across while doing the principal’s business. He is supposed to perform due diligence in this regard. If any material fact has been concealed or the business is not carried out in the manner that the principal directed, the principal can repudiate the contract between them. If the agent carries out the business in the manner, he wanted to perform it, rather than on the directions of the Principal, the Principal may claim from the agent any benefit he may have achieved through doing so.

PRINCIPAL’S DUTIES TO AGENT

The principal is bound to indemnify the agent against any lawful acts done by him in the exercise of his authority as an agent, as well as indemnify the agent against any act done by him in good faith, even if it ended up violating the rights of third parties. The principal is not liable to the agent if the act that is delegated is criminal in nature. The agent will also in no circumstances be indemnified against criminal acts. The principal must make compensation to his agent if he causes any injury to him because of his own competence or lack of skill.

In conclusion, it must always be remembered that agency is a triangular relationship between principal, agent, and third party. The law of agency is as much concerned with the relationship between the principal and agent as it is concerned with the relationship between the principal and third party. Consequently, an encompassing working definition of Agency is a relationship which exists between three parties namely the agent, the principal and the third party, whereby the agent has undertaken to act for and on behalf of the principal and has authority or is presumed in law to have one to create legal relations between the principal and the third party.

NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com

WRITTEN BY CHAMAN LAW FIRM TEAM

EMAIL: chamanlawfirm@gmail.com

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