On an appeal by the first defendant, the English Court of Appeal held
that a gratuitous agent in the position of the first defendant was under a
duty to exercise the degree of care and skill ‘which may reasonably be
expected of him in all the circumstances’: at 721c. His duty was not, so
the court held, merely a duty to be honest or to exercise that degree of
skill which he in fact possesses. Where the gratuitous agent has
represented that he has a certain degree of skill, that representation
will, assuming that P believed it, be the measure of his duty. Absence of
a remuneration is a factor tending to reduce the degree of care and skill
reasonably to be expected.
If A breaches this duty, P may recover the loss by using A for breach of
contract if there is an agency contract, or for negligence. If a duty isimposed by statute, P might also sue A for breach of statutory duty. For (^)
example CAMA, 1990 provides that directors and other executive
officers of corporations shall at all times act honesty and exercise a
reasonable degree of care and diligence in the exercise of powers and
discharge of duties.
- A Duty to Act in Good Faith
The relationship between P and A is a fiduciary one. Because A has
bound him/her self to act in the interests of P and because of the peculiar
trust and confidence P reposes in A, equity has seen fit to supervise this
relationship basically to prevent A from misusing A’s position for A’s
own advantage. There is also authority that fiduciary duties are based on
terms implied into all agency contracts. Thus is imposed on A a duty to
act in good faith or honesty, loyally and single mindedly in P’s interest.
Hence A must:
(a) Not Make a Secret Profit or Take a Bribe
Ay gain made by A whilst carrying out P’s work which gain is kept
from P, is a secret profit and recoverable by P. A will also lose his right
to commission. However, if A has acted bone fide, A may retain his
commission.
In Hovenden & Sons v Millhaff (1990) 83 LT 41 at 43, Romer LJ said,
‘If a gift be made to a confidential agent with a view to inducing the
agent to act in favour of the donor in relation to transactions between the
donor and the agent’s principal and that gift is secret as between the
donor and the agent – that is to say, without the knowledge and consent
of the principal – then the gist is a bribe in view of the law.’