Legal Aspects of Business (MOD003379): Agency Duties and Cases Report

This report provides a detailed overview of the legal aspects of agency, focusing on the duties and responsibilities of agents within a business context. It explores key duties such as following lawful instructions, maintaining a duty of care and skills, avoiding conflicts of interest, providing accurate accounts, not delegating authority without permission, and refraining from accepting bribes or secret profits. The report examines the relationship between the principal and agent, emphasizing the importance of honesty, good faith, and adherence to the terms of the agency agreement. Furthermore, the report analyzes relevant case studies to illustrate the practical application of agency law principles, including Tigana v Decoro, Lawlor v Sandwick Mining & Construction Mobile Crushers and screens Ltd, Barret Mckenzie V Escada Ltd, and Centrosteel Srl V Adipol GmbH, providing insights into real-world scenarios and legal outcomes. The report highlights the importance of understanding agency law for effective business operations and ethical conduct.

LEGAL ASPECTS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................4
1)Duty to follow the lawful and reasonable instruction of the principal:...................................4
2)Duty of care and skills:............................................................................................................5
3) Duty to avoid conflict of interest:...........................................................................................6
4) Duty of account:.....................................................................................................................6
5) Duty not to delegate authority:...............................................................................................7
6) Duty not to accept bribe or secret profits:...............................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Agency refers to the business or organization which mainly deal in providing services on
behalf of the person to attain the particular task or activity. It carries two parties one is agent and
other one is principle. In this, agent carry the fiduciary relationship between the principle and
also attain the task as per the set instructions (Lees, 2018). Thus, there are various principles
which the agency had to carried by attaining the task is relating to working under the direction
given by the principle and also disclosing all the accurate information which is relevant in
managing the company in better manner.
It is stated that agencies can be created in various forms firstly on the bases of the
Tripartite relationship in which the deal is made between the principle, agent and third party. In
this agency is worked in respect of principle and agents but in certain cases, principle appoint
agent to deal with the third person to complete the contract on behalf of principle. Secondly, it
links up with the connection between the principal and agents (Ridley-Duff, 2018). In this case
the principle had the authority to do or order to commit such act and in return, agents duty is to
fulfil such order which is committed by the principle.
The main characteristic of the agent is that they carry the authority to conferred about the
obligation which they had to carries against the principle regarding working under the fair terms
and conditions. In case of understanding the matters relating to actual authority, it is stated that
the specific power which is given by the principle to his agent to act on his behalf. In respect of
expressed authority, it is mainly based on written or oral statement which is given to the agents
to work in the set directions (Koh, 2017). In context of implied authority, it is stated that such
power which is given to the agents which is necessary to be performed or demanded by the
situation to be performed in better way.
In respect of modern day commerce or business, the relevancy of agency is important as
due to changes in time. The major issues which is faced by company is relating to the trust and
honesty. Thus, in respect of adapting the fiduciary relationship between the principle and agent,
it is necessary for the agents to work in the best interest and also principle duty is to present the
accurate information which they had to attained while performing their duty (Worthington,
2017).

MAIN BODY
In relation to understanding the relationship between the principle and agent in the
agency law, it is stated that the principle are such person who carries the right to assign the
particular task or activity to the agents (Burt and Mansell, 2019). In return the agents are such
person who is liable to act on behalf of the principle to work as per the set instructions.
Agency can be arrived in the employment law in terms of managing the interest of the
employers and employees relationship. Usually, the company appoint the agents in respect of
building the strong connectivity between the person. The reason behind that is, settling the
matters or resolving any matter which results in raising disparities in business. In context of
understanding the matters between the directors and company, the agency raises as principle and
agents in which the company or owner are the principle or directors are the agents which are
working under the terms imposed by the principle. In respect of partnership or partner, the
agency arises in context of partners (Li, Jones and de Gioia Carabellese, 2019). As they are
working as the agents or principles of the company who are guiding each other and also working
as per each other directions.
There are various situations which had to undertaken by the agents in respect of attaining
the following situation in right manner and such situation are relevant to the principles such as:
1)Duty to follow the lawful and reasonable instruction of the principal:
When the principle appoints the agents to attain the task on his behalf, agents carry the
duty to follow the instruction and order which is guided to them. Agents carry the right that such
instruction and order are lawful and not violating any of the terms (Low, 2016). In context of
principles, their duty is to be provided accurate information about the task and also guide them to
be followed in such manner (Tosato, 2016). The reason behind appointing the agent is that they
work in the set direction which is guided to them and also disclose all the information which is
happening during attaining such work.
In return, it is stated that the instruction which is given by the principle are clear and
understandable and also not varies under the breach in any of the terms. If at any point, the
agents feel that the instruction are not clear, they communicate with the principle and understand
the matter properly before attaining it in wrong direction. In respect of attaining the task by the
agent, they must check that the task which is assigned to them must not affects the right of the
parties. (Busch, Macgregor and Watts, 2016). If they feel that the third person not agreeing to

enter into the contract, they must report to the principle within the stipulated time period. It is
supported with the case relating to the Tigana V Decoro [2003], in which the cases stated that the
Tigana is the agent of the Decoro who is appointed to sell the goods on his behalf. Thus, after
knowing the facts that the goods merged in context of fire, he instructs to the principle, to
provide safety to procure the goods (Tigana v Decoro [2003], 2020). The judgement is raised in
favour of the Tigana regarding working under the set instruction which is guided to them by the
Decoro.
2)Duty of care and skills:
In this care is to be maintained by the agents regarding working or act on the bases of
honesty or deal in such activity which provide benefits to the company. Care I to b undertaken in
respect of not disclosing any such information which carries the reputation and integrity of the
business. As in respect of appointing the agents to attain the task on behalf of him, they share all
the information which is relevant to the company or through which the business is gaining profits
(Dal Pont, 2018). Thus, care is to be maintained regarding providing necessary information to
the third party if needed.
If the agent feel that by dealing in any such resulting in committing losses to the business,
they itself reject such work and file the suit against the third person in respect of breach
committed through undertaking any of the activity. By these aspects, they not only play the
active role in business but also works under self-interest to provide honesty and good faith
against the company (Mantzari, 2016). As it is not necessary that, every party work in good faith
or enter into the contract to carry the business. Thus, in such manner, agent before entering into
such deal inspect about the party and also gather relevant information about the reason behind
entering into the contract. Through these aspects they work and enhances the business in right
manner.
It is explained with the relevant case of Lawlor v Sandwick Mining & Construction
Mobile Crushers and screens Ltd [2012] in this the agreement is made between the parties
regarding carrying the goods related to wiring to the other party. They appoint the agents to work
and perform the deal on that behalf. Thus, accurate duty is maintained by the agents regarding
performing the task in right way (Lawlor v Sandvik Mining & Construction Mobile Crushers and
Screens Ltd [2012] EWHC 1188 (QB) (15 May 2012), 2020).

3) Duty to avoid conflict of interest:
In these, agents carry the duty regarding avoiding any such situation which resulting in
facing conflict in business or affecting their relationship with the principle. Thu, in such manner
agents not engaged their interest in such matters which affects their rights and reputation to
sustain longer term in business (Albiston, 2019). Usually conflict arises regarding motivating the
agents to share the internal information of the company to the third person and in exchanges of it,
they are offering higher job status or more money. Thus, these are such phases, through which
the conflict is raised in business.
In such manner, the conflict can be avoided regarding following the instruction which is
guided to them by the principle. Prevention is another important aspects which is attained by the
agents in respect of not disclosing any such information or moving away from such places.
Avoid interacting with such person who are interacting with them in respect of gaining the
information related to the company working and its investor and clients of the business (Hughes
and Vafeas, 2020). It can be explained with the case related to Barret Mckenzie V Escada Ltd. In
which the case is raised regarding working as the agent of the fashion company Escada. In this,
they get opportunity to have the extra benefits through giving the third party the design and new
fashion logo if the company. In such manner, Barret which is playing the role of agent, carries
the right regarding availing the confit of interest in respect of gaining chances of extra profits
through attaining any illegal activity (BARRET MCKENZIE AND CO LTD V ESCADA (UK)
LTD: QBD 1 FEB 2001, 2020).
4) Duty of account:
In this aspect, the agent had to perform the duty of account in respect of keeping the
personal and professional thing separate in business. As if he receives any property from his
principle or for his principle, he is liable to keep such property separate from his own property.
In respect of undertaking the matters related to the managing the accounts, he is liable to disclose
all the accurate information and also not include any personal expenses or losses in such
accounts (Macgregor, 2019). As agents are considered to be the trustee of the company, so they
carry the duty to manage the account in right manner. Once the time period of performing the
duty as the agents is finished, he is liable to return to all the document or paper which is given by
the company during the contract of agency (Worthington, 2017).

It is stipulated with the relevant case study of the Centrosteel Srl V Adipol GmbH in
which the Centrosteel, is acting as the agent of the company is liable to perform the duty till the
particular time period. In respect of attaining all the task which is assigned to them by the
company, they carry the duty to provide all the document or pamphlet which is given by the
company once he is terminated from his jobs (Centrosteel Srl v Adipol GmbH, 2020). The reason
behind the termination is that, the work is not committed as per the set instructions and thus
agent duty is to give all the relevant paper to the principle.
5) Duty not to delegate authority:
In this, the duty is to be carried by the agents in respect of not delegating any such
authority without carrying the approval from the principal. In respect of attaining any task
between the principal and agent, they enter into the agreement with each other regarding
performing the duty till the completion of the time or till the terms of contract is fulfilled
(Reynolds and Cheng Han, 2018). The following points in which the agents can delegate its
authority is relating to appointing the sub agents to perform in favour of him or when the agent is
not felling well. But if any agent delegated it authority, without the prior permission from the
principle, than they are liable to compensate for the losses incurred.
It is explained with the case related to the Watteau V Fenwick, as in this case the issues is
raised regarding delegating the authority without taking prior permission from the owners. Thus,
resulting in gaining losses in the business regarding dealing in wrong delivering of the products
and before disclosing such facts to the owner, he terminates the contract. As the judgement is
raised under the norms mentioned under the agency act, that if any agent delegated its authority
without the prior approval from the principle (Watteau Vs Fenwick, 2017). In such manner,
principal carry the duty to file suit against the person and also raise demand for the
compensations in respect of actual losses incurred.
6) Duty not to accept bribe or secret profits:
In this duty of the agent is not to accept any such profits which is against the terms and
condition imposed by the principles. The secret profits is relating to taking any membership on
using the name of the company or buying any property or taking any loan from the banks by
showing the company account or balance sheet (Worthington, 2017). In these aspects, it is the
stated that agent not carry any such duty in respect of using the name of the company or earning
any profits by dealing in any illegal activity.

If the agent deal in any such activity which resulting in affecting the right of the
principle, they carry the right to sue the agent in respect of breach committed in any of the terms
mentioned in the contract (Kiefer, Jones and Adams, 2017). If the principle disclose any such
information which is important for the agent to know, but the issues raised regarding using such
information for the personal use, the principle carry the right to file suits in respect of breach
committed by the agent. It is suggested with the case relating to Rosenbaum v Belson, in this
case the agents carry the authority to sell the property but on the terms and condition mentioned
in the contract which is approved by the principle (Cases - Rosenbaum v Belson, 2020).
CONCLUSION
From the above study, the report concludes the matters relating to examining the meaning
of the agency law and also its usefulness in the business. It refers to the set of the contractual,
quasi contractual and non contract relationship between the person. It carries two parties agents
and principle and both work under the fiduciary relationship with each other. In this report, the
discussion are also ascertained on the bases of express, implied and apparent authority and thus
examined the close relationship between the principle, agents and third party.
Yes, in some situation, the reforms are to be undertaken on the bases amending the
existing laws or making new laws under the Agency act. The reason behind applying this
procedure is that due to changes in time more flexibility is given to the agents regarding dealing
in right matter or taking the advantages of the policies or right given to them. They only work as
per the set direction which is given to them, thus resulting in less learning or adapting new
things. Through these aspects, the changes of breach also increased which results in affecting the
relationship between the principle and agents. Thus, in such aspects by amending the exiting
laws results in building stronger relationship and also it secures the rights and duties of principle
and agents in better manner.

REFERENCES
Books and Journals
Albiston, C.R., 2019. Structure, Agency, and Working Law. Law & Social Inquiry, 44(4),
pp.1221-1230.
Burt, E. and Mansell, S., 2019. Moral agency in charities and business corporations: Exploring
the constraints of law and regulation. Journal of Business Ethics. 159(1). pp.59-73.
Busch, D., Macgregor, L. and Watts, P. eds., 2016. Agency Law in Commercial Practice. Oxford
University Press.
Dal Pont, G. E., 2018. The Law of Agency.
Hughes, T. and Vafeas, M., 2020. Client/agency relationships: Value creation or value
destruction.
Kiefer, M., Jones, E. A. and Adams, A. T., 2017. Shareholders and managers as principal-agent
hierarchies and cooperative teams. Qualitative Research in Financial Markets.
Koh, P., 2017. Agency law. SAL Ann. Rev. p.50.
Lees, E., 2018. Agency, Knowledge and Good Faith in Land Registration: Knightsbridge
Property Development Corporation (UK) Limited v South Chelsea Properties Limited.
Li, H., Jones, E. and de Gioia Carabellese, P., 2019. Agency costs of board connections and
director retention: evidence from UK takeovers. International Journal of Managerial
Finance.
Low, K. F., 2016. Fiduciary duties: the case for prescription. Trust Law International. 30. pp.3-
25.
Macgregor, L., 2019. The Law of Agency. Edinburgh L. Rev. 23. p.150.
Mantzari, D., 2016. Economic Evidence in Regulatory Disputes: Revisiting the Court–
Regulatory Agency Relationship in the US and the UK. Oxford Journal of Legal
Studies. 36(3). pp.565-594.
Reynolds, F. and Cheng Han, T., 2018. Agency Reasoning-A Formula Or a Tool. Sing. J. Legal
Stud. p.43.
Ridley-Duff, R., 2018. The internationalisation of FairShares model: where agency meets
structure in US and UK company law.
Tosato, A., 2016. Commercial agency and the duty to act in good faith. Oxford Journal of Legal
Studies. 36(3). pp.661-695.
Worthington, S., 2017. Agents Behaving Badly?.
Worthington, S., 2017. Corporate Attribution and Agency: Back to Basics.
Online
BARRET MCKENZIE AND CO LTD V ESCADA (UK) LTD: QBD 1 FEB 2001. 2020. [Online].
Available through: <https://swarb.co.uk/barret-mckenzie-and-co-ltd-v-escada-uk-ltd-qbd-
1-feb-2001/>.
Cases - Rosenbaum v Belson. 2020. [Online]. Available through:
<https://www.isurv.com/directory_record/5164/rosenbaum_v_belson>.
Centrosteel Srl v Adipol GmbH. 2020. [Online]. Available through:
<http://www.agentlaw.co.uk/site/case_summaries/srl_v_adipol.html>.
Lawlor v Sandvik Mining & Construction Mobile Crushers and Screens Ltd [2012] EWHC 1188
(QB) (15 May 2012). 2020. [Online]. Available through:

<https://uk.practicallaw.thomsonreuters.com/D-000-1727?
transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1>.
Tigana v Decoro [2003]. 2020. [Online]. Available through:
<https://webstroke.co.uk/law/cases/tigana-v-decoro-2003>.
Watteau Vs Fenwick. 2017. [ONLINE]. Available through
<https://www.casebriefs.com/blog/law/corporations/corporations-keyed-to-klein/agency/
watteau-v-fenwick/>.