Acting for two or more principals

It is a fundamental tenet of English Law that an agent will not prefer his own interest or the interest of another principal above that of the first principal for whom the agent is acting.

It follows that if an agent acts for one principal, he cannot act for another principal if the second principal competes with the first one.  If the agent does so, he will be in breach of his agency agreement with the first principal.   

But there is an exception.  This is where the principals have given their informed consent.

But what does ‘informed consent’ mean in this context?

It is probably best to answer this question in terms of what does not constitute informed consent.  Accordingly the fact that the agent takes the view that his principal knew or should have known that X (being another principal for whom the agent is going to act) sells competing products is irrelevant.

Equally an agent cannot treat silence by the principal as implied consent.  The fact that the agent may have informed the principal that he plans to act for another principal selling competing products and the first principal makes no comment is again irrelevant.

What often happens is that the first principal is aware that the agent is acting for another principal.  The fact that the first principal does not determine whether the products of the second principal compete or (if the first principal does so determine) does nothing about it, is also not informed consent.

It follows that it is incumbent on the agent to ensure that when starting a new agency that the agent;

1.informs an existing principal of his plans and seeks the informed consent of that principal; and

2.the agent does likewise so far as the principal for whom the agent is proposing to act.

In both cases the agent should go on to inform each principal of all relevant details or, at the very least, inform each principal that information about the products of the other principal can be found online at a particular website.

If having done this, both first and subsequent principal(s) do not object, it is likely that they will be unable to do so at a later date.

Another common situation is where at the outset of the relationship with each principal the products offered by both do not compete but that during the course of the agency agreement with one of the principals, competition occurs by, for example, the principal in question extending the range of products which it supplies.  In this situation, it is for the agent to look to resolve the issue.

As such, the agent should approach both principals and seek their respective informed consents.  If, however, the informed consent of both principals is not forthcoming, it will be necessary for the agent to choose which principal he will act for going forwards.

Ultimately, an agent, who fails to obtain the informed consents of both principals either at the outset of an agency agreement or in the event of competing products being offered for sale by a principal, will imperil the agency agreements which the agent has with the competing principals and in the event of a termination by a principal prevent the agent from successfully claiming compensation or indemnity. 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
Stephen Sidkin
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