Legal Aspects of Business (MOD003379): Agent's Duties and Case Studies

This report delves into the legal aspects of business, specifically focusing on the crucial duties of agents within the principal-agent relationship. It begins with an introduction to agency relationships, defining key terms such as implied and express terms, and fiduciary relationships. The main body of the report meticulously examines both general duties, including obedience to instructions, reasonable care and skill, and personal performance, as well as financial duties, such as avoiding conflicts of interest, refraining from secret profits, and maintaining confidentiality. Each duty is illustrated with relevant case examples, demonstrating instances where the duty was either upheld or breached, providing a practical understanding of the legal implications. The report also explores how these fiduciary duties can be modified through express agreements between parties. The conclusion synthesizes the findings, offering a direct answer to the question of agent's duties based on the preceding analysis. This report is designed to provide a clear understanding of the legal obligations and responsibilities of agents in a business context.

LEGAL ASPECT OF
BUSINESS

INTRODUCTION
Legal aspect of a business are those rules and regulations which are formed by an
government of a country for smooth running of business and company. These aspects are their in
order to give an framework and a concrete structure which are formed by those authorities who
are specialised in legal field. In a sense it can be understood in simple way that is supreme most
authority in a country forms legal aspects. The rules and laws prescribed in it are mandatory to
follow by those persons doing business. These concept is also applicable towards formation of a
company of any type. Agency means an business or an organisation which is formed for the
purpose of giving services towards a specific thing.
They are formed because of fiduciary relationship between two partners. It is an
representative of a group and business which means that functions performed by agencies is for
an organisation, business or a person who is running a business. In context to law it is an
important part of business law which is dealing with contractual and quasi-contractual
relationships which includes an agent who performs an act on behalf of a principal for a third
party. An principal and agent relationship is interrelated with each other in a manner that work
performed by an agent is directed by principal to him. Nature of agencies is to perform those
functions which helps in strengthening relationships of an employer and employee. An agency is
of contractual nature which means it acts according to a contract which is signed by it. These
contract can be revoked if there is any complain against agency and also services provided by it
is not satisfactory towards customer. Scope of agency is very dynamic as it helps both private
and public sector to connect with there customers in more effective manner.
An tripartite relationship are those kinds of relationship that takes place between an
employer and employee. These relationships are formed to create a strong bond between an
person working and person who higher him for purpose of work. This is better understood
through relationships of labour which is of very dynamic nature . Rules and regulation which
governs these kind of relationship and creates an environment for building of such kind of
relationship between principal and agent comes under tripartite relationship. This project is going
to cover concept of duties of agents in details with relevant cases.
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MAIN BODY
Definition: Agency is that kind of mediator which comes in contract with another
company or an organisation to provide goods and services on behalf of the company that has
ordered an agency to do so. Theses are performed by two parties that is principal and agent.
Agency relationship means an agreement in which an legal entity hires another legal entity to
perform an activity on his behalf. Key features of an agency relationship are it helps in gaining
sustainability in generation of revenue, technology is helpful in increasing easiness in agency .
Scalability of business is maintained and creativity in an agency is enhanced.
There are various duties that are required to be followed by these agencies (Duties of
Agent 2015). These are there only till the time contract between the parties is in existence legally
under the eyes of law. The duties are very important from the point of view of principal as they
are their in order for safe guard of principal from any kind of problem which can occur legally.
The duties are not followed properly by the agencies then the principal company has to face
consequences of it because of existence of tripartite relationship and strict liability of tort. If
these duties are followed properly by agencies then the principal is not going to face these
consequences. Duties also covers aspect, concept and major points of smooth working of an
agency according to law and are very essential to be followed by agency to maintain legal
stability.
The very first duty required to be followed by agent towards principal is 'Duty to
delegate authority'. This duty tells about appointment of an agent to preform a particular
transaction by acting as an representative of a company. An agent has a duty to perform for the
principal which is to act as per interest of principal (Bahli and Rivard, 2017). This interest
should be within the limits of an agent performing it. It is achieved by an agent through his or
her skills and intelligence of doing negotiation. An agent has to come to a best conclusion over
an negotiation which creates advantages for principal under hardest circumstances. In a simple
manner the main aim of this duty is to create those circumstances which create higher amount of
interest and value for principal. This duty helps in boosting of relationship of an agent with
principal in order to full fill the goal of achieving interest for the principal. In a simple manner
this can be understood as if any mistake is done on behalf of agent them all the consequences of
it is to be faced by principal who has appointed agent to perform the task. Relevant case law for
this is Chaudry v Prabhakar in this case the facts are claimant has passed her driving test and
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does not know anything about the car (Coman-Kund, 2018). So she has asked first defendant to
help her out in finding car. Despite of the fact that defendant does has knowledge about car but is
not a professional. Claimant has made it clear that no car which has met with an accident should
be shown to her. First defendant founded a car whose bonnet was damaged but is in good
condition and this car is sold by second defendant. Seeing the condition the car was brought by
claimant for four thousand five hundred euros. Later on it was discovered by the claimant that
car has met with an accident and is repaired badly. In this case the judge held that first defendant
is liable for the breach of his duty of not taking reasonable care of the interest of principal. It is
the duty of agent to take care of interest of principal as per this duty only first defendant is held
liable. The breach has been done under the Sales of Goods act 1979 of UK (Singer, 2018). The
first defendant is held liable for not performing his duty and has failed to protect interest of
principal.
The other duty of agent which he needs to follow is ' Duty to avoid conflict of interest'
in this the agent should not act for another principal when he is assigned to perform task of an
principal already. This is to be done in order to avoid conflict of interest with both the principals.
If the interest of an agent is disclosed to both the principal the he can perform his duty for both
the principal at same time. Main aim of this duty is to avoid conflict over an interest that is to be
gained by the agent. If the discloser is not done by the agent about his interest then he is going to
be liable for breach of fiduciary duty. Also has to pay all the profit that has been gained by him.
Condition that is required for this is purchase or rent from principal which means that agent
cannot purchase and can neither rent a property without proper disclosure of all facts to an
principal. Also he can not sale a property without properly telling about it to an principal. In a
simple manner this can be understood as discloser of all the facts to both the principal so that
conflict is avoided in gaining any kind of interest. Case law regarding this duty is Imageview
Management Ltd v Jack in this case Mr Jack is an professional football player and played as
goalkeeper for Trinidad and Tobago. He is willing to come into a contract with Dundee United
football club to play for them. This purpose he asked Mr Berry to act as an agent for purpose of
negotiation. After this Jack come into an contract of two years with imageview which is Berry's
company. According to this agreement the company wants jack to represent in any contract that
is in relation to a football club in UK (Yi, Teng and Meng, 2018). In return to this the company
gets 10 percent from Jacks income. Berry successfully negotiated a contract of two years with
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Dudee United for Jack and it is agreed by the party to pay three thousand euros to Imageview for
work permit which I needed by him to play in United Kingdom. The court held that Imageview
has clear interest of conflict and is more interested in gaining profit for itself and less for Jack.
The company also has personal interest for singing of contract. No conflict would have taken
place if deal of three thousand euro has been disclosed to Jack. In this case duty of conflict of
interest is applied when three thousand euro deal has not been disclosed.
Other duty that has to be followed by an agent is 'No secret profit' in this the agent has
no right to gain any secret profit without making it in knowledge of principal and consent of
principal should be there. Secret profit does not amount only to money it amounts to any of thing
or commodity that has value like interest of loan and a club membership. There are certain
situation which comes under secret profit that is use of position this means that if an agent is
going to misuse his position to gain extra money then he is going to be liable for secret gains.
These types of profits can be made through various means such as not paying tax, earning
commission out of any deals for personal use. The main objective that is to be covered under this
duty is secret profit is going to lead to breach of duty at any time it is committed (Caulfield and
Laufer, 2019). The case law related to this duty is Boardman v Phipps in this case the defendant
acted as an solicitor for a trust. Shares are held by the trust of various companies, solicitor
advised them to buy more shares from other company. After the repeated advice from the
solicitor trust is not willing to purchase any kind of shares. On realising this solicitor himself
brought shares from a company. From this it is clear that the trust and solicitor is not able to
gain more profit. Solicitor is being sued by solicitor for profit claiming. In this case it is held by
the court that solicitor is liable because he has used his knowledge that he knows to use agency
to make secret profit. Also that accountability of solicitor is there to disclose the profit he is
going to made. The duty is applicable here because solicitor has tried to gain secret profit from
the shares of the company and did not disclosed to anything to trust. SO, he is amounted for
breach of duty on his part for not sharing consent towards other party.
Other duty to be performed by the agent is 'Duty of confidentiality' which means that no
discloser of any kind of information that is shared to him by the principal in front of third party
in his absence. This information can contain any kind of personal information and also that
information which has not been disclosed in public. If principal has told to disclose anything then
it is the duty of agent to follow instruction given by the principal (Akman, 2019). These
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confidentiality is generally maintained in government departments. Relevant case law related to
this is Bolkiah v KPMG in this case it is held by the court that duty cannot be continued when
an agency has been terminated. In this case bolkiah is the agency that is hired by KPMG to
perform certain work for them but terminated the contract because a company disclosed
something in public which is confidential effected there relations. So duty of confidentiality has
been breached over here.
The other duty that is to be performed by agent is 'Duty of showing skills and taking care' in
this an agent has to use his specific skills and knowledge to perform a task. He should perform
his duty by using his skills and with utmost care. The agent who fails to do his duty amounts to
negligence. Negligence is an wrong that comes under law of tort in which the person who has not
perform his work or has failed to do it with carefulness then he is considered liable for
negligence. It is connected to this duty because in this the agent has to show his skills and has to
take care no negligence is done on his part. This is going to be more cleared with this case law
Crocs Europe BV v Spectrum Agencies in this the court of appeal held that there is breach of
duty and in English law is an breach of fiduciary duty may effect the root cause of an contract
(Brito, 2014). Breach of these duty completely depends upon nature of it, manner in which
breach accrued and intention of the parties plays an important role. This is an important from
point of view that misconduct by employee would seriously lead to justify its dismissal.
The other duty that is to be performed by agent is 'Duty to account'. It is one of the main
duty of an agent because maintaining of account is necessary. An agent has to keep proper record
of property that has been given to him and when principal ask for it he should immediately give
it to him.
Another duty is of 'Vicarious liability' in these basic relationship is explained between
an principal and agent which means that an principal is going to be held responsible for the
wrong committed by his agent. As this liability believes over principal of ' let the master answer'.
Relevant case law
Fiduciary duties are those duties that come into existence when the interest of a person
is put forward before the companies interest. These duties arises because of reasonable
expectation of a party. It can also occur in an when there is obligation to full fill other persons
interest. The breach of these duties takes place when a director tries to full fill interest of his
family members before companies interest and shares brought by a person for personal gain
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(Dharmapala, Garoupa and McAdams, 2016). It also occurs when a fiduciary took advantage of
a opportunity occurred in business. These duties are 'Duty of Loyalty' in these types of duties an
agent is required to act in benefit of principal. Agent cannot represent both the parties in until it
is known to them. He has to follow standards and instructions. Duties of Obedience an agent has
to follow all the instructions that has been given by an principal and cannot hide any personal
interest gained by him. These duties are mandatory to be followed by agent in order to maintain
strong bound and relationship with its principal.
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CONCLUSION
From the above file the concept of legal aspect which means rules and regulation set up
for performance of a company is formed by government. The further in the file fiduciary
relationship has been explained which mean when an individual or director of the company tries
to gin or satisfy his personal relationship. Then various duties of agent is also explained that
covers various concept of not gaining secret profit by not doing any discloser about it, failed to
fulfil interest of an principal which is done by not giving appropriate satisfaction to the
customers from its produced product and services which spoils the name of the company and
role of agent in maintaining confidentiality towards the task for which he has been appointed to
perform. Also concept of negligence in context of duty performing with sheer skill and
performance with care has been explained. This is going to effect in smoothing formation of
contract and is going to stop unnecessary problems of an agency. That ultimalety is going to
increase the creditability of an agency.
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REFERENCES
Books & Journals
Bahli, B. and Rivard, S., 2017. The information technology outsourcing risk: A transaction cost
and agency theory-based perspective. In Outsourcing and Offshoring Business
Services (pp. 53-77). Palgrave Macmillan, Cham.
Singer, A. E., 2018. 1.2 Moral agency and stakeholder engagement. Engaging With
Stakeholders: A Relational Perspective on Responsible Business.
Yi, J., Teng, D. and Meng, S., 2018. Foreign ownership and bribery: Agency and institutional
perspectives. International Business Review. 27(1). pp.34-45.
Caulfield, M. and Laufer, W. S., 2019. Corporate Moral Agency at the Convenience of Ethics
and Law. Geo. JL & Pub. Pol'y. 17. p.953.
Akman, P., 2019. Online Platforms, Agency, and Competition Law: Mind the Gap. Fordham
International Law Journal, Forthcoming.
Brito, J., 2014. Agency Threats and the Rule of the Law: An Offer You Can't Refuse. Harv. JL
& Pub. Pol'y. 37. p.553.
Dharmapala, D., Garoupa, N. and McAdams, R. H., 2016. Punitive police? Agency costs, law
enforcement, and criminal procedure. The Journal of Legal Studies. 45(1). pp.105-141.
Coman-Kund, F., 2018. European Union agencies as global actors: a legal study of the
European Aviation Safety Agency, Frontex and Europol. Routledge.
Online
Duties of Agent. 2015. [Online]. Available Through:
<https://www.lawctopus.com/academike/duties-agent/>
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