The Gazette 1986

GAZETTE

sepTemBER

1986

Duty of Obedience

(a)

introduction

An agent must obey all lawful

express and implied

instructions given by the principal.

This rule

may be

analysed in the following manner. First, if the principal

gives express lawful instructions then the agent must

obey them. Secondly, if express instructions are not

given (for example, on a particular point) then the agent

must act in accordance with whatever instructions can

be implied by reason of business or trade customs and

practices.

Thirdly, if no express instructions are given

and no implied instructions are discernible (as, for

example, might happen in a novel situation) then the

agent must use discretion

and act to the principal's

benefit.

(b)

express instructions

The agent must meticulously obey any express lawful

instructions. The agent has no discretion in respect of

matters on which the principal has given such

instructions.

This means, for example, that there is no

defence for the agent who believes that it would improve

the principal's lot by departing from the principal's

express instructions.

Fray

-v-

Voules

is a case in

point. A solicitor was told by his client not to enter a

compromise. But the solicitor, following the advice of

counsel, did enter a compromise. The solicitor (agent)

was held liable for disobeying the instructions of his

client (principal). Another example is

Bertram

-v-

Godfray

The agent stockbroker was expressly

instructed to sell shares at a particular price. The agent

waited because he expected that the share prices would

rise, thereby increasing the principal's profit. Even

though such a belief was reasonable in the circum-

stances, the agent was still held liable because he did not

obey the instructions given to him by the principal. The

case-law is clear on this point: there is no defence for the

agent who departs from express instructions in an effort

to better the principal's position.

It is clear that the agent must comply with the

instructions given by the principal, but what if those

instructions are ambiguous? No liability attaches to an

agent who genuinely (

bona fide)

follows a reasonable

interpretation of those instructions, even if there are

adverse consequences for the principal.

The agent

should interpret the instructions in the light of any trade

custom or practice.

(c)

implied instructions

In the absence of express instructions, the agent

must act honestly within any instructions which can

be implied from the relationship. Similarly, if the

instructions given by the principal allow the agent some

discretion, then the agent is also under a similar duty to

honestly exercise his or her judgment so as to meet the

interests of the principal.

Chown

-v-

Parrott

instructive. A solicitor had not been given express

instructions as to settling an action but decided that the

compromise offered was reasonable and in the interests

of his client. The solicitor was held not to be liable to the

client. The solicitor had acted in accordance with

whatever instructions could be discerned in the specific

case. One might summarise this by saying that there is a

duty of reasonable care.

(d)

consequences of disobedience

If the agent fails to obey lawful instructions then the

agent loses the right to remuneration for the

unperformed acts or tasks

and is liable to the principal

for any loss caused by the disobedience.

An agent is not obliged to follow instructions which

contemplate an illegal

or null and void act.

Consequently, the principal is not entitled to recover

damages on account of the agent's failure to act on such

instructions.

What if there are no instructions (either express or

implied) from the principal to guide the agent? Then the

agent must use discretion and act to the principal's

benefit.

Duty of Care and Skill

(a)

introduction

Agents are under a duty to exercise due care and skill

in the execution of the agreed undertaking. While the

duty to obey instructions

is superior to the duty to

exercise care and skill, this latter duty is nonetheless

important.

For example, an agent appointed with

general authority (especially a professional agent)

cannot blindly follow foolish instructions without

advising the principal of the latter's folly.

In the

absence of a contractual agency relationship,

this duty

will arise in tort.

The degree of care and skill varies among different

types of agent. The courts have traditionally drawn a

distinction between the standard or degree of care and

skill expected from an unpaid (gratuitous) and a paid

(commission) agent. This distinction may be discerned

from comments of Crompton J. in

Beal

-v-

South

Devon Rly. Co. :

"What is reasonable varies in the case of a

gratuitous bailee and that of a bailee for hire.

From the former is reasonably expected such care

and diligence as persons ordinarily use in their own

affairs, and such skill as he has. From the latter is

reasonably expected care and diligence, such as are

exercised in the ordinary and proper course of

similar business, and such skill as he ought to have,

namely, the skill usual and requisite in the business

for which he receives payment."

(b)

professional agents

A professional agent must display the standards of

care and skill expected from a professional in that field

of activity

The test is objective. For example, a paid

estate agent who is appointed to sell property is expected

to obtain the best price that is reasonably available.

(c)

gratuitous agents

A gratuitous agent must act with due care and skill

but need only "display such skill as he actually possesses

and exercise such care as he would in his own affairs."

(d)

gratuitous

paid: the debate

It has been suggested that no real importance should

be attached to the distinction between gratuitous or paid

agents.

The case for a higher duty to be exacted from

the paid agent is essentially two-fold. First, the paid

agent should display a higher standard of care and skill

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