[Student ID: 1234567]
[Course: LLB Law]
[Module: Law of Agency]
The relationship between a principal and an agent is based on trust and confidence. The law imposes various duties upon an agent to ensure they act in the principal’s best interests. These duties can arise from the agency agreement itself or be implied by law, most notably the fiduciary duties owed by an agent. When an agent breaches these duties, the principal is not left without recourse. This essay will briefly explain the remedies available to a principal (A) in four distinct scenarios involving a breach of duty by their agent (B), according to the principles of the law of agency in England and Wales. The remedies available, such as damages, an account of profits, and rescission, are designed to compensate the principal for loss or to strip the agent of any gains made from their wrongdoing.
(a) Breach of Duty of Skill and Care
In the first scenario, B, a lawyer, has breached the duty to exercise reasonable skill and care. All agents owe this duty, but for a professional agent like a lawyer, the standard is that of a reasonably competent member of that profession (Bolam v Friern Hospital Management Committee [1957]). By filing the case in the wrong court, causing the action to fail, B has clearly fallen below this professional standard. This constitutes negligence. The primary remedy for A is to sue B for damages for this breach. The purpose of damages is to place the principal in the financial position they would have been in had the agent fulfilled their duty correctly (Mcgregor, 2021). Therefore, A would be entitled to claim the amount of money he would have recovered from C, assuming the original legal action had a reasonable prospect of success. A would have to prove that, but for B’s negligence, the claim was likely to have been successful.
(b) Breach of Fiduciary Duty and Secret Profit
The second scenario demonstrates multiple breaches of B’s fiduciary duties. As an agent, B owes a strict duty of loyalty to A. By taking a secret commission of K200,000 from the buyer, C, and by not securing the best possible price of K5.5 million for A, B has breached the duty to avoid a conflict of interest and the duty not to make a secret profit (Boston Deep Sea Fishing and Ice Co v Ansell (1888)). A has several remedies. Firstly, A can claim the secret profit of K200,000 from B in an action for an account of profits. Secondly, A can sue B for the loss suffered, which is the K500,000 difference between the price offered and the price A received. Thirdly, A is entitled to refuse to pay B any commission for the transaction and can recover any commission already paid (Andrews v Ramsay & Co [1903]). These remedies ensure that the agent is not only held liable for the principal’s loss but is also stripped of any gains from their disloyalty.
(c) Breach of Duty to Obey Instructions
Here, B, the insurance agent, had a clear instruction from A to insure a car but failed to do so. This is a breach of the agent’s fundamental duty to obey the lawful instructions of their principal. Consequently, when the car was damaged in an accident, A was left uninsured and had to bear the cost of the damage. The law provides a direct remedy in such cases. The principal is entitled to be put in the position they would have been in had the agent performed their duties. In *Turpin v Bilton* (1843), an agent who failed to insure a ship was held liable for its value when it was lost. Similarly, A’s remedy is to sue B for damages. The amount of damages would be the sum A would have received from the insurance company to cover the repairs or loss in value of the car, had B procured the insurance policy as instructed.
(d) Breach of the ‘No-Self-Dealing’ Rule
In the final scenario, B has breached the fiduciary rule against self-dealing. An agent appointed to purchase property for their principal cannot sell their own property to the principal without the principal’s fully informed consent. This is a strict rule designed to prevent an agent from being in a position where their personal interest (to get the highest price for their boat) conflicts with their duty to the principal (to get the lowest price for the boat). As held in *Armstrong v Jackson* [1917], the transaction is voidable at the principal’s option. Therefore, A’s primary remedy is rescission. A can choose to set aside the contract, return the boat to B, and recover the purchase price paid. This right exists regardless of whether the price was fair or if B acted in good faith. Alternatively, if A does not wish to return the boat, he can affirm the contract and demand that B account for the profit made from the sale.
Conclusion
In my view, the remedies available to a principal in the law of agency demonstrate a clear policy by the courts to protect principals from exploitation. The duties imposed on agents, especially fiduciary duties, are strict for a reason. The remedies of damages for negligence, and particularly the remedies of rescission and an account of profits for fiduciary breaches, are not just about compensating the principal for loss. They serve a deterrent function, sending a strong message that agents must act with undivided loyalty and integrity. The law rightly prioritises the principal’s interests, ensuring that an agent cannot benefit from their own wrongdoing, which in my opinion is essential for maintaining trust in commercial and professional relationships.
References
*Andrews v Ramsay & Co* [1903] 2 KB 635.
*Armstrong v Jackson* [1917] 2 KB 822.
*Bolam v Friern Hospital Management Committee* [1957] 1 WLR 582.
*Boston Deep Sea Fishing and Ice Co v Ansell* (1888) 39 Ch D 339.
Mcgregor, H. (2021). *McGregor on damages*. 21st ed. Sweet & Maxwell.
*Turpin v Bilton* (1843) 5 Man & G 455.
