According to Article 15.2.1 of the Commercial Law, an agency agreement is defined as “the relationship which arises where one person known as the agent acts for another known as the principal. Through the acts of the agent, the principal and a third party may be brought into a contractual (sometimes tortious) relationship.”
And according to article 15.6.1, an Agent is defined as “an intermediary, generally, once the principal and third party are brought into a contractual relationship, the agent drops out of the picture, subject to any issues of remuneration or indemnification that he may have against the principal, and more exceptionally, against the third party. Generally, agents are entitled to be indemnified for all liabilities reasonably incurred in the execution of the agents´ authority.”
The operation of commercial agency contains 2 relationships:
- the first (contractual) relationship is between the agent and the principal (section 6 of chapter 15 of the Commercial law): “An agent is considered a fiduciary vis-à-vis the principal. As such, the agent should not, without obtaining the informed consent of the principal, place himself in a position where his duty to his principal may conflict with his own interests.” This goes to say that an agent, acts as a representative for the principal which means he shouldn’t act outside of the frame that the principal has given. As a matter of fact, “if the agent exceeds the authority conferred on him and this causes the principal loss, the principal may claim against the agent.”;
- the second relationship is between the principal and a third party.
However, there is a peculiarity under Singapore law regarding the relationship between an agent and a third party. The rule is that an agent should not be liable to the third party as playing the role of an intermediary between them and the principal. Nevertheless, there is a possibility for the agent to be held liable because it is possible for them to negotiate on behalf of the principal but on their behalf as well.
This is a very interesting option because it is not foreseeable in the EU Directive 86/653/EEC on the coordination of the laws of the Member States relating to self-employed commercial agents. In the EU Directive, the relationship with a third party only exists with the principal, never with the agent because the agent is just a representative. Nonetheless, in Singapore, the agent could act in their own interest.
Employees and workers in a principal
According to Section 3 (“Agency contrasted with other relationships”) of chapter 15 of Commercial law, there could be numerous relationships resembling an agency “but may not have the distinguishing feature of being able to affect the legal position of another”.
An employee or a servant are given orders by the entity that employed them (which gives them remuneration for executing their orders) but this does not give them the authority or power to bind their principal.
Another example is that of the finance manager. The finance manager, even though having the undeniably crucial role of properly managing and keeping up to date the principal’s accounts, does not have the power or authority to sign contracts on behalf of the principal and binding them.
There are some entities in the company which are allowed to bind the principal such as the director of the company.
They are frequently given wide powers to enter into transactions on behalf of their companies (and indeed have more powers than directors in Civil Law jurisdictions). Under Singapore Commercial Law, they are considered both agents and employees. The fact they play a double role, or have a “double casquette”, is quite interesting because under the EU Directive, an agent can also be “a partner who is lawfully authorised to enter into commitments binding on his partners”.
According to Article 15.3.2, Commercial Law, “A bailee is a person to whom goods have been entrusted. Normally, bailees do not have any power to deal with the goods that have been entrusted to them. However, bailees can also be given authority to dispose of the goods entrusted to them, or such authority can sometimes arise by operation of law. In such circumstances, the bailees are also agents.”
- a bailee should only be entitled to keep the goods until the other party’s obligation is executed;
- a bailee does not, originally, have the right to dispose of the goods;
- there is a possibility for the parties to dispose of the goods, in which case, under Singapore law they are considered agents (but it should be reminded that this is possible only under the parties’ will, it is not a constant or default situation).
According to Article 15.3.2, Commercial Law, “A trustee’s role is to hold property for the benefit of another person. A trustee may have no authority to enter into contracts or dispose of the trust property. Nevertheless, trustees may sometimes be conferred with such power.”
- a trustee should only hold the property of the settlor for the benefit of the beneficiary;
- a trustee does not have the authority to enter into contracts on behalf of the settlor;
- it is possible for the settlor to give the trustee such power, in which case they will be considered an agent, only if the trustor gives them this “extra” power.