The Law of Agency 代理法

Definition 定義

Agency is the relationship in which one person (the agent) is authorised by another (the principal) to act on the principal's behalf, so as to create, change or end legal relations between the principal and third parties. A contract the agent makes within their authority is a contract between the principal and the third party. The agent is normally not a party to it and takes on no personal liability under it.

An insurance company is a legal person and can act only through its directors, employees and intermediaries, so the law of agency underpins how the industry works. In Hong Kong, licensed insurance agents (licensed individual insurance agents, licensed insurance agencies and licensed technical representatives (agent)) represent the insurers that appointed them. Licensed insurance brokers represent policy holders or potential policy holders.

Knowing which side an intermediary represents matters, because it decides who is answerable for the intermediary's acts and whose knowledge the intermediary's information counts as. A broker normally acts for the client, but for particular tasks, such as when holding underwriting authority granted by an insurer, a broker may act as the insurer's agent.

How Agency Arises 代理關係如何產生

Agreement: this is the most common route. Principal and agent may agree expressly, orally or in writing (for example, an agency agreement between an insurer and its agent), or the agency may be implied from their conduct or relationship.

Ratification: where an agent acts in the principal's name without authority, or beyond it, the principal may later ratify the act. Ratification is backdated to the time of the act, as if the agent had been authorised from the start. The usual conditions are: the agent made clear at the time that they were acting for that principal; the principal existed at the time (for example, a company had already been incorporated) and had capacity to contract; the principal ratifies with full knowledge of the material facts; and the principal ratifies the whole act within a reasonable time, not just the parts that suit it. Ratification can be by words or by conduct and does not normally need to be in writing.

Marine insurance is an exception: a marine policy effected in good faith on behalf of another person can be ratified by that person even after they know a loss has occurred. In non-marine insurance, a principal generally cannot ratify after learning of a loss in order to obtain cover.

Agency of necessity: in an emergency the law may treat a person as another's agent even without express authority. The usual conditions are: a genuine emergency requiring immediate action to protect the principal's property or interests; no practical way of contacting the principal for instructions in time; and the person acts reasonably, in good faith and in the principal's interest. The classic example is a ship's master who sells perishable cargo during a voyage before it rots.

Authority of Agents 代理人的權限

Express authority: authority the principal gives clearly, orally or in writing. For example, an agency agreement may state that the agent can solicit certain classes of insurance, collect premiums or issue cover notes.

Implied authority: authority to do whatever is reasonably incidental to carrying out the express authority, and whatever an agent of that kind customarily has authority to do in the trade. The principal can expressly restrict implied authority, but if a third party does not know of the restriction, apparent authority may come into play.

Apparent (ostensible) authority: where the principal's words or conduct lead a third party reasonably to believe the agent has authority, and the third party acts on that belief in good faith, the principal cannot deny the authority and is bound, even if the authority was withdrawn or limited internally. An agent who exceeds their actual authority is answerable to the principal. If the principal is not bound in the end, the agent may be liable to the third party for breach of warranty of authority.

Knowledge: information an agent receives in the course of the agency is generally treated as known to the principal. So a fact the proposer discloses to the insurer's agent is generally regarded as disclosed to the insurer. Disclosure to a broker acting for the proposer is not the same as disclosure to the insurer.

Duties Owed by Agent to Principal 代理人對委託人的責任

Obedience and personal performance: the agent must follow the principal's lawful and reasonable instructions and must not exceed their authority. Agency rests on trust, so the agent must generally perform the work personally and must not delegate it without authority. Exceptions include the principal's express or implied consent, purely ministerial tasks (such as posting documents) and delegation allowed by trade custom.

Due care and skill: the agent must act with the care and skill of a reasonably competent person in that line of work. For example, a broker who fails to arrange cover as the client instructed, leaving the client uninsured when a loss occurs, may have to compensate the client.

Good faith: the agent must not let their own interests conflict with the principal's, and must not take a secret profit or a bribe. The agent must pass on all relevant information to the principal, keep the principal's affairs confidential, keep proper records and account for money received, without mixing the principal's money with their own.

Where the duty of good faith is breached, the principal can recover the secret profit, refuse commission on that transaction, end the agency and claim damages, without having to prove that it suffered any loss. An agent who solicits or accepts an advantage in relation to the principal's affairs without the principal's permission may also commit an offence under section 9 of the Prevention of Bribery Ordinance (Cap. 201).

Duties Owed by Principal to Agent 委託人對代理人的責任

Remuneration: the principal must pay the commission or other remuneration agreed. The agent earns commission only when the conditions set out in the agreement are met, and may lose it on a transaction in which they breached the duty of good faith.

Indemnity: the principal must indemnify the agent for expenses, losses and liabilities reasonably incurred while acting within their authority. The principal is generally not liable to indemnify where the agent exceeded their authority, acted negligently or did something illegal.

Lien: until the principal pays what it owes, the agent is generally entitled to retain the principal's goods or documents that are lawfully in the agent's possession, as security.

Termination of Agency 終止代理關係

By act of the parties: the parties agree to end it; the task is completed; an agreed period expires; or the principal revokes the authority or the agent renounces it. Even where one side can end the agency on its own, it may still owe damages if it breaches the agreement, for example by not giving the notice period required.

By operation of law: the agency ends automatically on the death, mental incapacity or bankruptcy of either party, the principal's bankruptcy being the most important. It also ends through frustration if performance becomes impossible (for example, the subject matter is destroyed) or illegal.

Exception: where the authority is coupled with an interest of the agent (for example, authority given to secure a debt owed to the agent), the principal generally cannot revoke it on its own.

Effect on third parties: after termination, the agent may still have apparent authority towards third parties who dealt with them and have not been told, so the principal may still be bound. In Hong Kong a licensed insurance agent may carry on regulated activities only for the insurers that appointed them. Once an appointment ends, the agent can no longer act for that insurer, and the insurer should inform the clients concerned.