Are principal agents also lifeguards?

A construction professional, acting as the principal agent in terms of a building contract, discovers that the employer it represents is going to breach the construction contract. Does the principal agent have a legal obligation to inform the contractor of the impending breach? At present, despite the fervent wishes of many a contractor, such a legal obligation does not exist. If you want to know what any of that has to do with lifeguards, read on.

Generally speaking, there are three potential sources of an obligation: contract, statute or common law.

Since there is no contract between the principal agent and the contractor, and there is no statute prescribing such an obligation, we must examine the common law to determine whether it contains the basis for such an obligation.

In South African law, there is no general obligation to prevent harm occurring to another. Merely failing to prevent the harm is not wrongful.

The age-old example was that there is no obligation on an ordinary person to dive into the sea to save someone who is drowning.

There are circumstances where the legal convictions of the community impose an obligation. In circumstances where the legal convictions do impose such a duty, failing to prevent the harm is wrongful.

If the individual standing on the shore is a professional lifeguard, the legal convictions of the community may require the lifeguard to rescue the person drowning.

In each case, the particular circumstances will need to be considered to determine whether such an obligation exists.

So are principal agents required to rescue drowning contractors or warn them of an impending flood?

In ordinary cases, it seems unlikely that a court would find that such a duty exists, for a number of reasons.

The first is that the principal agent is, as the title suggests, the agent of the employer.

The principal agent is responsible for safeguarding the interests of the employer and should always act in their best interest. The mere fact that, in certain circumstances, the principal agent must act impartially (e.g. in the rendering of interim and final certificates) does not detract from the
contractual duty to the employer.

The principal agent’s first obligation to its client, the employer, must ordinarily take precedence over a general duty of care to third parties such as the contractor.

Principal agents should be mindful of the employer’s rights to confidentiality in the event they breach that duty by informing the contractor of a potential breach (which may never occur).

The second reason is somewhat more technical and concerns the nature of the damages suffered by the contractor. In most circumstances, the contractor will suffer pure economic loss as a result of the principal agent’s failure to inform it of the potential breach. Pure economic loss is a nuanced legal term that refers to instances where a party suffers a purely financial loss, which is not directly due to damage to property or personal injury.

Our courts have limited delictual liability, which flows from an omission that causes pure economic loss.

A third consideration is the fact that the contractor has all the ordinary contractual remedies against the employer in the event the breach ultimately occurs.

The particular facts of each case are critical in determining whether the general principles apply (and therefore no obligation exists) or whether there are facts that make a particular case exceptional and create liability.

Principal agents have the task of acting in the employer’s best interests while at the same time having to be objective and impartial in certain situations in order to carry out their functions properly. It is not surprising, therefore, that the issue of where and to whom their legal obligations lie can be murky.

Ultimately, the answer is that the principal agent is primarily there to protect the interests of the employer and that the contractor should protect its own interests by ensuring the appropriate clauses are included in the contract it signs.

Only in exceptional circumstances (e.g. perhaps criminal conduct by the employer or a known fraud in relation to the contents of a certificate) could the duty to speak arise.

After all, sitting in a boat is far safer than relying on a passerby to pull you out of the water each time. 

Daniel McConnell

Associate

Deneys Reitz