Fiduciary Duties and Corporate Separate Personality in UK

Running head: FIDUCIARY DUTIES
Fiduciary Duties
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1FIDUCIARY DUTIES
Task 1:
Agency forms a tri-parte relationship between an agent, principal and a third party. In
such relationship certain duties are owed by the agent to the principal. The nature of these duties
may be general or fiduciary. The concept of agency is such that it has been misrepresented in
modern context. Therefore, mention can be made about the contractual duties of the agents and
the fiduciary duties owed to the principal. These duties can be categorized as-
I. The duty to follow the lawful and reasonable instructions of the Principal:
There is a right on the part of a principal to appoint an agent for the purpose of negotiating
and facilitating a transaction on his behalf. In this case, the agent owes a lawful duty to the
principal and follows the reasonable instructions accordingly. However, in practice, the duty to
act in lawful and reasonable instructions of the principal requires to act in due care and diligence
while negotiating the terms of a transaction with a third party. In Ireland v Livingston (1872),
the agent must act according to the instructions provided by the principal.
Agents are at the duty to obey the lawful and reasonable instructions of the principal.
However, the nature of the instructions is such that, it must be clear and unambiguous. It is
noteworthy to mention here that, there is no discretion on the part of the agent to follow the
instructions unless and until such agent is professional and the principal is dependent upon such
agent for exercising his professional skills and experiences. In cases when the instructions on the
part of the principal are not clear and ambiguous, then, the agent must clarify the instructions
prior acting.
II. The duty of care and skill:

2FIDUCIARY DUTIES
Under the provisions of common law, it is important on the part of the agent to act in due
care and skill while performing his duties on the behalf of the principal. However, in this regard,
if the agents fail to meet the standard of duty and skill; then in such cases the acts of the agents
are considered to be negligent. In general, agents belonging to certain profession or trade should
perform their duties with a degree of care and skill that is reasonably expected. In Fray v Voules
(1859), the agent shall be held liable if he failed to act according to standard of duty and skill.
III. The duty to avoid conflict of interest:
The duty to avoid conflict of interest has been established in the case Parker v McKenna
(1874–75) LR 10 Ch App 96. In this case, a rule of agency was established which emphasized on
the fact that, an individual cannot be allowed to put himself in such a position in which there will
be conflict in his duties and interests. In this case, it was held that if an agent is involved in
conflict of interests by accepting payments from third parties without prior consent of the
principal, then conflict of interest is strict.
An agent who has been appointed by a principal to act on his behalf should not act on the
behalf of any other principal on appointment. In this regard, it is worth mentioning that, if such
agent fully discloses his interests to both the principals without their prior consent, then in such
cases, it gives rise to conflict of interests. However, the nature of conflict of interests on the part
of the agent is such that on full disclosure of the interests by obtaining consent of the principal, it
gives rise to dual agency. In such cases, there develops no conflict of interests. If the agent fails
to disclose information to the principal regarding the breach of his fiduciary duties; the agent
shall be accountable for any profit made by him from the transactions including other available
remedies on the part of the principal for the breach of the duty of the agent.

3FIDUCIARY DUTIES
IV. The duty not to act for his own benefit or the benefit of a third person without
the informed consent of the principal:
The agent should not make any profit o acquire any benefit from any third party without
receiving prior consent from his principal. This kind of profit is generally termed as secret profit.
In this context, mention can be made about certain situations in which an agent may act for his
own benefit without informing the principal. There situations are-
 Use of property:
An agent may use any property entrusted to him by his principal for his personal benefit
without receiving prior consent of the principal. For instance, if the principal of a real estate has
entrusted the keys of property to the agent and in such process if the agent rents such property to
a third part without the consent of the principal, then there is a breach of secret profit.
 Use of position:
In most of the cases, agents can obtain the benefits of agents simply from their position as an
agent. For instance, an agent was appointed by the principal to purchase goods in his behalf. In
such process, the agent can make monetary benefits from the supplier without informing his
principal.
 Use of information or knowledge:
A principal may appoint an agent to obtain relevant information for the benefit of the
principal. In this regard, the agent may use such information for gaining personal benefits. In
such way, the agent will cause breach of his fiduciary duties.