The agent – principal dynamic is very much a two way street. This note focuses on duties of the agent. Whilst this website is certainly “pro – agent”, it is important to recognise that agent duties are of supreme importance and not to be overlooked.
The starting point is that both parties are required to act dutifully and in good faith in their dealings with the other. This is specifically provided for by Regulations 3 and 4.
It is perhaps inevitable, however, that from time to time, one or other, or indeed both, of the parties let down their side of the bargain. Occasionally such breaches are ignored, particularly if they are minor or if both parties are earning good money from the agency. Minor indiscretions tend to be overlooked in the good times.
However, where the principal tires of the agent (or wants to remove him from the bottom line), such breaches assume greater significant and can lead to a conflagration and, perhaps, a series of terse email exchanges between the parties, sometimes culminating in a total breakdown of the relationship and ultimately termination by one or the other (most likely the principal). Sometimes it is “death by a thousand cuts”.
So what are the duties of an agent and how can you ensure that you keep on the right side of your principal?
Your duties as agent derive from:
The agency agreement itself. Study this and check whether you are obliged to, for instance, visit customers on a particular call cycle, transmit orders only by email, attend a twice yearly trade show.
The Regulations. Your duties are set out in regulation 3, namely:
to look after the interests of the principal and act dutifully and in good faith;
to “make proper efforts” to negotiate and (where appropriate) conclude those transactions he is instructed to take care of;
to communicate to his principal all the necessary information available to him; and
to comply with his principal’s reasonable instructions.
The common law.
Neither “good faith” or “dutifully” are defined in the Regulations and are unfamiliar concepts to English lawyers; however, it has been held that:
Good faith means fair and open dealing.
To act dutifully means to act loyally.
As an agent’s fiduciary duties at common law can be defined by the terms of the contract, so too can the agent’s obligation to act dutifully and in good faith, although it cannot be contracted out.
One of the features of an agency that most regularly raises issues such as this is the question of carrying competing agencies. The appeal court has given a very clear line on this topic in the case of Rossetti Marketing Ltd & Anor v Diamond Sofa Company Ltd , where it found:
“An agent can act for two principals with conflicting interests in two types of case. The first is, as already indicated, where both principals agree. In such a case, it is for the agent to show that the principal not merely consented, but that the consent was given on a fully informed basis – i.e. that the agent had made full disclosure to the principal …
The second type of case where an agent can act for competing principals is where… the principal must have appreciated that the nature of the agent’s business (in that case a residential estate agent) is ‘to act for numerous principals’. In that particular case, a commercial agency was found not to fall within the exception.
It is not uncommon to hear agents raise all sorts of specious arguments about how the agencies they carry do not compete; however, what is really required is an unstintingly objective assessment of whether, on balance, a buyer with a fixed sum of money in his wallet could plausibly consider buying one of your products over the other. Further, the court has provided clear guidance that if you are carrying conflicting products for more than one principal, then each principal has has to consent on a fully informed basis, i.e. when appraised of all relevant factors.
Need more advice, contact our Agency Solicitors today on 0151 735 1000
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