43 |
3â Rights of an agent |
|
|
|
Q2 What are the obligations and duties of an agent? |
3â Rights of an agent
As previously stated, the agent relationship is often regarded as a fiduciary one. This simply means that the agent owes a number of duties to both the principal and any third party, which can be contrasted with the rights the agent has against the principal. Essentially, under the common law an agent has three rights:
(1) the right to remuneration;
(2) the right to indemnity; and
(3) the right to lien.
(a)â Commission and remuneration
One of the most obvious obligations owed by a principal to his agent relates to payment, which if agreed as part of a contract between the parties, the principal is bound to pay. However, where there is no express agreement between the principal and agent, there is an implied agreement that the principal will pay reasonable compensation. The issue of reasonable compensation was discussed by the House of Lords in Way v. Latilla.86 In this case, the plaintiff had been asked by the defendant to acquire gold mining concessions in Africa that were worth approximately £1 million. The plaintiff argued that his services were provided as part of an agency agreement with the defendant, which entitled him to a percentage of the concessions. At first instance, the court determined that a contract existed between the plaintiff and defendant and awarded the plaintiff £30,000.87 However, the House of Lords overturned the decision because in its opinion the agreement had not been completed and the plaintiff was awarded a quantum meruit of £5,000 for the work he had performed for the defendant.
The court thus determined that an agent is entitled to a reasonable payment on a restitutionary basis.88 Williams and Levine took the view that this case:
demonstrate[s] that restitution in quantum meruit can be claimed on the basis that there had been full performance of the work, the benefit of that work had been accepted by the other party and it would be unjust in the circumstances to allow the other party to retain the benefit of that work without paying compensation.89
86[1937] 3 All ER 759, HL.
87A. Lodder, ‘Benedetti v. Sawiris: unjust enrichment and the assessment of quantum meruit awards’ (2010) 126 Law Quarterly Review (Jan.) 42, 45.
88See A. Burrows, ‘Free acceptance and the law of restitution’ (1988) 104 Law Quarterly Review (Oct.) 576, 595.
89J. Williams and M. Levine, ‘Restitutionary quantum meruit: the crossroads’ 8(3) Construction Law Journal 244, 246.
44 |
|
Relations between a principal and agent |
|
|
|
|
|
|
|
|
An agent may be entitled to payment from the principal if a particular event |
|
|
occurs. In such a case, the agent must have been the ‘effective cause of the event |
|
|
|
he was employed to bring about’.90 |
|
|
|
|
In Rhodes v. Forwood, the important question was whether or not a princi- |
|
|
pal was able to preclude an agent receiving payment. The agent and principal |
|
|
|
had agreed ‘in consideration of the services and payments to be mutually ren- |
|
|
|
dered’, that for a period of seven years, or as long as the agent decided to carry |
|
|
|
on his business, he should act exclusively as the principal’s agent. The principal |
|
|
|
sold his business and the agent attempted to claim damages because the princi- |
|
|
|
pal had decided to close down his business before the seven years had expired. |
|
|
|
However, the court dismissed the agent’s claim.91 |
|
|
|
|
Luxor (Eastbourne) Ltd v. Cooper is a significant case in this area of law.92 The |
|
agent sued the principals for a commission, which the principals had agreed |
||
|
to pay him for successfully introducing a buyer for a property owned by the |
||
|
principals. The agent asserted that he had met his contractual obligations and |
||
|
produced a buyer who was willing to purchase the property, even though the |
||
|
sale did not take place. The agent claimed to be entitled, not to the agreed com- |
||
|
mission in the absence of a sale, but to damages of the same amount he would |
||
|
have earned if the principals had not broken an implied term of the contract |
||
|
entitling the agent to payment in these circumstances. The House of Lords |
||
|
held that there was no implied term in the contract and the agent was unable to |
||
|
claim the payment. However, this decision can be contrasted with that in Alpha |
||
|
Trading Ltd v. Dunnshaw-Patten Ltd.93 |
||
|
|
(b)â Indemnity |
|
|
|
Importantly, the agent has a right of indemnity, which arises if he incurs any |
|
|
|
financial liabilities whilst executing instructions from the principal. Munday |
|
|
|
noted that an agent is entitled to be reimbursed any expenses he has incurred |
|
|
|
whilst acting in the course of an agency and for any losses and liabilities.94 If the |
|
|
|
agent and principal have agreed a contract, the indemnity is either an implied |
|
|
|
or express term of the contract. Where there is no contract between the princi- |
|
|
|
pal and agent, the agent will receive a restitutionary indemnity.95 |
|
|
|
(c)â Lien |
|
|
|
In some circumstances, an agent will acquire a lien over property that belongs |
|
|
|
to the principal which is in the possession of the agent. Munday noted that ‘to |
|
|
|
facilitate recovery by the agent of sums owed to him by the principal, the law |
|
|
90 |
Bradgate, above n. 11, at 183. See, e.g., Coles v. Enoch [1939] 3 All ER 327, CA. |
|
|
91 |
(1875–76) LR 1 App. Cas. 256. |
|
|
92 |
[1941] AC 108.â 93â [1981] QB 290. |
|
|
94 |
Munday, above n. 1, at 206.â 95â Bradgate, above n. 11, at 183. |
|
45 |
3â Rights of an agent |
|
|
grants the agent a possessory lien on the goods and chattels of his principal in respect of all claims arising out of his employment’.96 A lien can be defined as a right to keep hold of or to hold on to property until a debt is paid off and a ‘right to retain possession of the goods of another as security for a debt, or other obligation’.97 A good example of this can be found in West of England Bank v.
Batchelor.98 Millet LJ in Re Cosslett (Contractors) Ltd, stated that ‘in the case of a lien the creditor retains possession of goods previously delivered to him for some other purpose’.99 Stephens stated that:
Lien is a complex type of security right. It can be viewed from the perspective of contract law, as it arises typically in the context of reciprocal obligations. Equally, it can be seen as part of property law because it is a right relating to a thing which is effective in insolvency. As with many other areas of private law, there is a relatively large nineteenth-century case law, but little in modern times.100
There are two different types of lien: general and particular. A general lien has been defined as ‘a lien over property which can be retained until payment of the whole of the indebtedness of the owner to the person in possession on any account whatsoever’. However, such liens can rarely be established.101 It ‘also confers on the agent a right to retain the principal’s goods until the general balance of account between the principal and agent is settled’.102 The courts have adopted a very sceptical view toward the use of general liens, as illustrated by Lord Campbell LC in Bock v. Gorrissen:
The law of England does not favour general liens, and I apprehend that a general lien can only be claimed as arising from dealings in a particular trade or line of business, such as wharfingers, factors and bankers, in which the custom of a general lien has been judicially proved and acknowledged, or upon express evidence being given that, according to the established custom in some other trade or line of business, a general lien is claimed and allowed.103
The other type of lien is a particular lien, which is ‘a lien over property which can be retained only until payment of a particular debt due in respect of it is paid’.104 A particular lien ‘means that the agent’s right to retain possession of his principal’s goods can only be exercised in order to assist in recovery of monies owed to him in respect of those particular goods’.105 However, it has been argued that there are five different types of particular lien, including statutory, common, maritime, equitable and contractual.106 It is important to
â96
â97
â98
100
101
102
103
104
106
Munday, above n. 1, at 212.
G. McBain, ‘Repealing the Bill of Sale Act’ (2011) 5 Journal of Business Law 475, 487. Munday, above n. 1, 213.â 99â [1998] Ch. 495, 508.
S. Steven, ‘Property issues in lien’ (2010) 14(3) Edinburgh Law Review 455. S. Frieze, ‘Accountant’s lien’ (1990) 3(6) Insolvency International 45. Markesinis and Munday, above n. 44, at 105.
(1860) 2 De Gex, Fisher & Jones 434, as cited in Munday, above n. 1, at 213. Frieze, above n. 101.â 105â Ibid., at 145.
G. McBain, ‘Repealing the Bill of Sale Act’ (2011) 5 Journal of Business Law 475, 487.
46 Relations between a principal and agent
note that once an agent has acquired a lien, he is not entitled to sell or dispose of the goods. The agent is merely allowed to retain the goods or property in his possession.
In order for an agent to acquire a lien, a number of requirements have to be met. First, the agent must be in possession of the principal’s goods. This is illustrated in Bryans v. Nix,107 in which a carrier was employed by the principal to transport a cargo of oats to his agent in Dublin. The principal gave the carrier a series of documents in which it was stated that the carrier was to keep the goods for the agent. The court decided that, in this instance, the agent was in possession of the goods in transit, and had a lien over them. In particular, the court declared ‘it is an inference of law and not a presumption of fact that the contract for the safe carriage is between the carrier and the consignee and the latter has the legal right of action even if the consignor pays the freight’.108
Another requirement that has to be met is that the agent must have acquired the possession of the goods by lawful means. The court in Taylor v. Robinson was faced with this particular question.109 The case related to an agent who had been instructed by his principal to buy a large number of staves, which were to be stored on the seller’s property. The principal had agreed with the seller to pay rent whilst his goods were stored on the seller’s premises. Unbeknown to the principal, the seller instructed the agent to remove the goods from his premises, which the agent did without the principal’s authority. The court held, unlike the decision in Bryans v. Nix above, that the principal had retained possession of the goods because the agent had exceeded his authority by removing the goods from the seller’s property. Burrough J stated that ‘it is uncumnent on factors who claim a lien, to prove their possession of the property on which the lien is claimed. Possession is a matter of fact.’110 Therefore, if the agent gains possession of the principal’s goods via an unlawful act, this will prevent him from acquiring any lien rights.
The next requirement is that the agent must have acquired the property whilst acting in his capacity as an agent. For example, in Muir v. Fleming,111 the court held that if the principal merely leaves the goods with the agent for safekeeping, the agent is deemed not to have gained possession of them. For the agent to acquire a lien over the principal’s property or goods, the claim or action must relate to the agency agreement which resulted in the agent acquiring the goods. This rule was illustrated in Dixon v. Stansfield, where an agent who normally only sold goods for the principal under the agency agreement acted as an insurance broker on one occasion and obtained insurance of a ship’s cargo. The
107(1839) 4 M & W 775.
108As cited in C. Cashmore, ‘Case comment: theft by subcontractors, interpretation of exclusion clauses, parties to a contract of carriage (land)’ (1989) Journal of Business Law (Jan.) 78, 80.
109(1818) 9 Taunt. 648.â 110â Munday, above n. 1, at 216.
111 (1822) Dowl. & Ry. N.P. 29; 171 ER 906.