The legal framework within which the principal agent finds him/herself:

One of the primary obligations of the employer under the JBCC Principal Building Agreement is to appoint agents.  You may wonder why is this necessary?

The answer is two-fold.  Firstly, construction is a technical discipline and many employers simply lack the required expertise to perform certain functions on their own.

Secondly, another very important reason for the appointment of agents on a construction project is the common law principle of: (excuse the Latin) Nemo judex in causa sua. The principle that no one should be a judge in his own cause, meaning that no one should become a judge in a case where they have an interest.  For employers to observe these rules of natural justice and impartiality, the appointment of an agent becomes an important step.

The contract makes allowance for the appointment of a principal agent, who has full authority to act on behalf of the employer.  In laments terms, this simply means that any act by the principal agent can be construed as an act by the employer.

It is very important to note that the principal agent is not a party to the contract as per the law-defined meaning of a party.  In other words, the principal agent does not acquire any contractual rights and obligations.  In essence, the principal agent only receives a great number of obligations for which he acts on behalf of the employer.  This flicks an important legal switch. If the principal agent should cause wrongful harm to a contractor, he is liable for any such losses or damages based on a delictual duty and not a contractual duty. So, a contractor who has been harmed by the wrongful conduct of a principal agent has a contractual claim against the employer and a delictual claim against the principal agent him/herself.

Main duties:

The principal agent has two primary duties.  The first is to act and carry out his assigned duties with reasonable skill and care while exercising reasonable and professional judgement, independently.  In other words, his judgement cannot be interfered with by the employer.  Secondly, he must protect the employer’s interests.

This sounds like a misnomer doesn’t it? How can he exercise independent, reasonable judgement, yet protect the employer’s interest? It sounds as if the latter part, interferes with his independence.

Yet, if we think clearly, it is not the case.  Acting independently and fairly in this instance means that the principal agent must act in accordance with the terms of the contract as a primary set of boundaries and, within those boundaries, he must look after the client’s interest.

Example:

So, a good example would be: where the employer wants to make a change, which requires an instruction for additional work.  Acting in the employer’s interest in this instance, means the principal agent shall review alternative methods or designs, as well as cost and time impacts in order to provide the most cost- and time effective manner of implementing the employer’s request.

If the instruction has now been issued in accordance with the agreement and the employer is up-in-arms over the cost or time impact as claimed for by the contractor, the principal agent’s duty to act fairly and impartially should be the primary focus point here. He cannot suddenly act beyond the terms of the contract and deny a valid claim by the contractor in an attempt to satisfy the employer’s interest.  The agreement should ground the agent’s moral compass and he should act in accordance with those terms irrespective of whether they favour one party over another.

This is usually the problem for principal agents.  Because they sometimes have a vested interest in the project in the sense of getting more work from this particular client in future, they may struggle with this concept as it requires them to occasionally offend the employer’s sense of fairness or justice in the process.

Why it is so important to understand these principles:

However, on this point we must remember that the impartial nature of the principal agent is the very core… the very basis on which the contractor agreed to enter into a relationship with the employer in the first place. His tender price and the whole agreement is founded on this principle that he would have an impartial, professional looking after things like payment certificates, claims and the certification of practical completion.

Not having these fundamentals in place, alters the terms and conditions on which the contractor entered into the agreement in the first place. That is why the agreement makes provision for the contractor to find a claim against the employer for damages in an event where the principal agent fails to carry out his duties fairly and impartially.

This post was compiled by  Kobus le Roux for Le Roux Consulting, all rights reserved. Please contact us for your professional project planning, project control, claims or adjudication assistance services in the heavy civil and building industry.

http://www.lerouxconsulting.com/

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