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Paper 1 · Lesson 8 — Law of Agency and Negligence

Negligence duty of care

When a duty of care arises: the two-stage proximity / policy test (Spandeck), duty to non-clients, pure economic loss.

2 questionsAnswers & explanations includedFree — no sign-up

Question 1

A team leader is describing to a new salesperson the difference between what an agent owes his own client and what he owes the party on the other side of the same transaction. She has assumed that because an agent must be honest with everybody he deals with, the obligations must run equally in both directions, and had said as much to a buyer earlier that week when the buyer asked whether she was "on his side too". The team leader explains that honesty is indeed common to both, but that one of the two relationships carries a further and considerably heavier set of obligations which the other does not, and that the distinction matters most precisely when the two parties' interests diverge.

Which statement is correct?

  1. A. He owes a fiduciary duty to both, and a duty of care to neither.
  2. B. He owes a fiduciary duty to the other side only.
  3. C. Both a fiduciary duty and a duty of care to the client; care to the other side.
  4. D. He owes his client a duty of care only, fiduciary duties arising solely by express agreement.
Show the answer and full explanation

Answer: C

The rule. To his client an agent owes both fiduciary duties and a duty of care. To the other party he owes a duty of care only.

Why C is correct. Two duties to the client, one to the other side.

The other options.

  • A owes fiduciary duties to both.
  • B inverts the relationship entirely.
  • D denies that fiduciary duties arise without express agreement.

Exam note. Loyalty is owed to one side. Care is owed to both.

To the other party he owes a duty of care only →

Question 2

Given Mr Nadarajah's diagnosed condition, which statement most appropriately describes what Wei Sheng owed him?

  1. A. A higher standard, the condition being a relevant impairment.
  2. B. The ordinary standard, the client being able to converse normally and recognise people.
  3. C. A higher standard of care, but only because of his age.
  4. D. The ordinary standard, no formal authority having been granted to anyone over his affairs.
Show the answer and full explanation

Answer: A

The rule. A higher standard of care is owed where the client has an identified impairment. Age alone does not raise it, and no formal declaration of incapacity is required.

Why A is correct. A diagnosed condition materially affecting his ability to follow documents and weigh alternatives is an impairment.

The other options.

  • B treats conversational ability as answering the point.
  • C attributes the higher standard to age.
  • D requires a formal authority to have been granted.

Exam note. Impairment is about decision-making, not about sociability or self-presentation.

A higher standard of care is owed where the client has an identified impairment →

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