An agent is, naturally, obliged to fulfill the contract, i.e. to perform the agreed tasks. An agent must always take into account the interests of the principal. In addition, the agent is under a duty of care, duty to provide information and a duty of accountability, and liable for damages in case of a breach of contract.
It is advisable to draft the commission agreement as carefully as possible, so that it clearly specifies the duties of the agent and the principal. The commission agreement is not disclosed to third parties. Therefore, the agreement may contain exact instructions, forming the basis of the parties’ duties and liabilities.
A commission agreement may place on the agent a duty to follow-up, even after completion of the commissioned tasks. This may include, for instance, following up that sales are completed as intended. The duty to follow-up can arise, in particular, in case of problems attributable to the agent’s omissions that have arisen during the performance of his/her duties.
The agent may not transfer the assignment for performance by a third party. On the other hand, the agent is entitled to employ subagents to fulfill the assignment. The agent is, however, personally liable for performance by such subagents. The use of subagents can be restricted in the commission agreement.
An agent must act loyally towards the principal. The duty of loyalty requires the agent to keep confidential information received from the principal. The agent is also, as a rule, entitled to rely on the information provided by the principal. Since the duty of loyalty is mutual, the agent can also require the principal to act loyally.
An agent must fulfill his/her duties with care. Care includes both normal care and care that can be expected of a professional expert. In other words, the agent must have up to date expertise within his/her own profession. The agent must act within the scope of his/her authority, and observe the instructions received from the principal. The remedies for breach of the duty of care include liability for damages incurred by the principal. A typical breach of the duty of care is, for example, a failure by the agent to verify title to the object which the agent has acted as an intermediary for. A Supreme Court judgment has held that an attorney-at-law was under a duty to establish the legality of a person’s last will, before assisting in realization of the estate’s assets.
An agent must report on the progress of the commissioned work, management of the principal’s funds and other assets, as well as incurred expenses. The agent must prepare accounts within a reasonable time after fulfillment of the commissioned work. The duty of accountability can be deemed to be quite strict, since if the agent fails to account for use of the principal’s funds, it will be deemed that the funds have not been used in the interests of the principal. In such a situation, the agent is under an obligation to substantiate, that he/she has acted in a proper manner. If, for some reason, the agent fails to prepare accounts following termination of the assignment, the agent must be required to do so. As a last resort, the agent can be required to prepare accounts by a court order.
In some cases it may have been agreed that the agent is not obliged to prepare accounts regarding the assignment. In such cases, it will be sufficient for the principal to receive the agreed performance.