Comprehensive Notes on the Law of Agency (Law 312)

Definition and Scope of Agency

  • Agency in Law of Agency: a consensual relationship where one party (the agent) is expressly or impliedly authorized to act on behalf of another (the principal) in dealings with a third party.
  • Multiple definitions cited:
    • Adesanya & Oloyede: consensual relationship; agent acts for principal in dealings with third parties.
    • Achike: agent acts on behalf of principal; principal becomes answerable for lawful acts of agent within scope of authority.
    • Fridman: agent represents principal in a way that affects the principal’s legal position in respect of strangers, via contracts or disposition of property.
  • Core maxim: qui facit per alium, facit per se (he who acts through another, acts himself).
  • Legal effects of agency:
    1) The acts of the agent bind the principal.
    2) It creates corresponding rights and obligations between the principal and third parties.
    3) It creates privity of contract between the principal and the third party.
  • Practical implication: when an agent acts within authority, the principal bears liability for those acts; agency may involve criminal acts, which raises questions of liability beyond civil liability.

Essential Features of Agency

  • Agency creates two types of relationships: bipartite (agent-principal) and tripartite (agent-principal-third party).
  • The agent represents the principal.
  • Agency is a fiduciary relationship: based on mutual trust and confidence.
    • Godwin v. C.A.C (1998) LPELR-1327(SC): the principal’s right to an account rests on fiduciary relationship with the agent.
  • Agency arises in circumstances carved out by law (not always purely by agreement): Bamgboye v. University of Ilorin & Ors (1991) 8 NWLR 129.
  • Agency arises when one is able to affect the legal position of another; it need not always be consensual.

Classification and Types of Agents

  • Classification affects principal’s liability for agent’s actions; depends on agreement and nature of entrusted business.
  • Special Agent: tasked with a specific act/transaction; limited powers; cannot bind principal if overstepped.
  • General Agent: represents principal in a series of transactions; wider powers than a special agent.
  • Universal Agent: unlimited authority in relation to principal’s business; appointment requires formalities (e.g., deed).

Types of Agents (examples and specifics)

  • Del credere Agent: indemnity/guarantee; higher commission (del credere commission); case: Omorege v Portland Cement (1962) 1 All NLR 156.
  • Auctioneers: sell goods at private/public auctions; no credit; license; no authority to sell below reserve; warranty of authority – Okoleji v Okupe (1939) 15 NLR 28.
  • Partners: each is an agent of the partnership.
  • Mercantile Agents/Factors: possess goods for sale in ordinary course; can sell in their name; can pledge; transfer title if sale is in ordinary course; buyer must be bona fide purchaser for value without notice (Weiner v Harris (1910) 1 KB 285).
  • Brokers, Banker, Estate Agents, Stockbrokers: other agent types in trade.

Capacity of Principal or Agent

  • Capacity to Act as Principal:
    • Legal capacity in line with contract law; principa l must have capacity to engage in matters; maxims apply: qui facit per alium, facit per se.
    • Exceptions: statutory restrictions; public office holders; companies; insane persons (Jenkins v Morris (1880) 14 ChD 674).
  • Capacity to Act as Agent:
    • Agent is a conduit; contract capacity of agent is not essential; principal bears risk; agent must have capacity to consent and act in that capacity.

Types of Principals

  • Disclosed Principals: third party knows the principal’s existence (or at least existence is known) at contract formation; may sue or be sued on contracts made on behalf of the principal; agent acts within actual authority (Niger Progress Ltd v. North East Line Corp. (1989) LPELR1996(SC)).
  • Undisclosed Principals: agent conceals principal’s existence; third parties contract with agent as if the agent is the principal.
  • Importance of disclosure distinction:
    1) Ratification: who can ratify depends on whether principal is disclosed vs undisclosed.
    2) Action by third parties: whether action is against agent or principal often hinges on disclosure status. See West African Shipping Agency (Nig.) Ltd. v. Alhaji Musa Kalla (1978) 3 SC 21 (OBASEKI, JSC).

Methods of Creation of Agency

  • Agency may arise by express appointment, estoppel, ratification, implication of law in emergencies, or presumption of law in cohabitation.
  • Pascutto v. Adecentro (Nig) Ltd (1997) LPELR-2904(SC): list of formation avenues summarized.

Agency by Agreement (Express/Implied)

  • A may be appointed directly via express or implied agreement between A (agent) and P (principal).
  • No formalities required generally; can be verbal, written, or by deed (Biggar v Rock Life Insurance (1902) 1 KB 516).
  • Exceptions to formalities:
    • If A will execute deeds, appointment must be under seal/by deed (Abina v Farhat 14 NLR 17; cf Cole v Jead 5 WACA 92).
    • Statutory requirement for appointment in writing.

Agency by Estoppel

  • Occurs when a principal’s conduct or words create a false impression that someone is the principal’s agent, and third parties rely on this.
  • P is estopped from denying authority in relation to those who relied on the representation; third parties may sue the agent or the principal depending on circumstances.
  • Key quote: If a person represents/permits representation that another has authority to act on his behalf, he will be bound as if that other had actual authority (Ayankoya v. Olukoya (1996) LPELR-669(SC)).
  • Conditions:
    • Representation made (verbal, written, or conduct).
    • Reasonable reliance by a third party.
    • Disclaimers: principal may issue disclaimers to prevent reliance.

Agency by Ratification

  • General rule: principal is not liable for contracts made by agent beyond or without authority unless ratified.
  • Principal can ratify when aware of the act.
  • Conditions for ratification:
    • Principal identified (stated as contracting as agent and named principal or identifiable): Folashade v Duroshola (1961) 1 All NLR 87.
    • Principal has full knowledge of material facts (or dispenses with them).
    • Ratification covers the whole contract.
    • Principal exists and has contractual capacity at both contract date and ratification date; exception for companies per Section 72(1) CAMA.
  • Time limit: ratification must occur within an agreed time or a reasonable time.
  • Effect: retrospective regularization ( Bolton Partners v Lambert (1889) 41 Ch.D 295).

Agency by Implication of Law

  • Agency Presumed from Cohabitation: e.g., husband and wife living together creates presumption that wife may pledge husband’s credit for necessaries (Ryans v Sams (1848) 12 QB 460).
  • Grounds to rebut presumption: adequacy of necessaries, sufficient allowance, express warning to traders, goods supplied on wife’s credit alone, etc.
  • Agency of Necessity (Emergency): bound to act without prior authority to prevent irreparable loss to principal (Prager v Blatspiel (1924) 1 KB 566).
  • Conditions for application:
    • Existing agency relationship.
    • Real or imminent commercial exigency.
    • Practically difficult to communicate/trace principal.
    • Agent acts bona fide.

Scope of Authority of Agent

  • Principal’s liability for torts/acts within scope of agent’s authority; non-liability if acts fall outside the scope.
  • Iyere v. Bendel Feed And Flour Mill Ltd (2008) LPELR-1578 (SC): distinction between acts within scope and outside scope of authority.

Actual Authority

  • Created by consensual agreement (express or implied) or from surrounding circumstances.
  • Express Actual Authority: A must strictly follow express authority; principal may disown beyond express authority; extent determined by agreement; A may claim indemnity/remuneration; acting beyond may make A liable to third parties for breach of implied authority.
  • Incidental/Implied Actual Authority: authority to do whatever is incidental to the execution of express authority in the usual way.
  • Usual Authority: act in accordance with the trade or profession in which appointed.
  • Customary Authority: implied authority to act according to customs and practices of a market or business.

Apparent/Ostensible Authority

  • Authority conferred when principal causes a third party reasonably to infer that the agent has power to act for the principal.
  • Differs from actual authority; appears to the third party rather than to the agent.
  • Ostensible authority can be inferred from principal’s words or conduct.
  • Rule: acts of an agent with managerial status and ostensible authority bind the principal if within scope of authority (Obeya v. Okpoga MFB LTD (2019) LPELR-47615(CA)).

Presumed Authority

  • Where the agent presumes he is acting as agent of the principal and proceeds to act for the principal.
  • Basis for agency of necessity and cohabitation.

Duties of an Agent

  • Duty to Perform: primary obligation under contract; performance with utmost good faith and best judgment; liable for breach of contract or negligence; duty not absolute if principal excused; inform principal promptly if unable to perform.
  • Duty to Account: keep and render accounts of stewardship when called; vital where money/property received on behalf of principal; action to compel account possible (Majekodunmi v. Daboul Ltd. (1975) 2 C.C.H.C.J. 161).
  • Duty Not to Disclose Confidential Information: protect confidential information; preserve after agency ends.
  • Duty of Care and Skill: exercised care, skill, and judgment as prudent person; higher standard for paid agents; professional standard appropriate to trade; does not guarantee success.
  • Duty of Personal Performance: no delegation of duties without permission; exceptions: express/implied authority to delegate; trade custom; necessity for proper execution; statutory authority; emergency.
  • Duty Not to Make Secret Profits: no secret profits beyond agreed remuneration; disclose facts; principal can recover profit; various remedies including rescission, damages, or dismissal.
  • Duty to Avoid Conflict of Interest: disclose material personal interests; avoid doubt of using confidence for own benefit; principal can rescind or consent after full disclosure.
  • Duty to Keep Principal’s Money and Property Separate from His
  • Duty to Pay Over to Principal All Money Held on His Behalf

Rights of an Agent against a Principal

  • Right to Remunerate: reasonable remuneration; may be expressed, implied, or customary; accrues if agent qualifies per contract; forms of remuneration include commission, share of benefits, etc.; entitlement conditioned on performing obligations.
  • Right of Reimbursement and Indemnity: agent entitled to reimburse liabilities/expenses incurred; indemnity can be enforced by action or lien; no reimbursement for acts beyond authority or where liability arises from breach of duty.
  • Right to Lien: right to retain the principal’s property to secure obligations; not a right to sell goods; exists only for lawfully possessed goods; possession must be continuous; lien can be excluded by agreement; distinction between general vs. particular lien.

Principal’s Remedies for Agent’s Breach of Duty

  • Terminate the agency contract and dismiss the agent without notice.
  • Sue for breach of contract; seek damages or injunction to restrain further breach.
  • Sue in tort for negligence where the agent acted carelessly (especially for gratuitous agents who cannot be sued for breach of contract).
  • Recover commissions or refuse remuneration where breach occurred.
  • Sue for accounts in cases of secret profits or undisclosed transactions.
  • Rescind contracts made by the agent with third parties; third party may sue the agent in such cases.

Third Parties’ Relationship to Principal & Agent

  • Who can sue:
    • The principal only, where the agent acts within authority.
    • Both principal and agent if the principal is undisclosed; action against one precludes action against the other.
    • Only the agent if the agent holds himself out as having authority but has none.
  • Agencies under seal: contractors sue/be sued by contract under seal.
  • If the principal lacks capacity, or bills of exchange endorsed in principal’s name without agency particulars, the agent may accept personal liability; agency may be presumed by custom or trade; foreign principals also possible.

Termination of Agency

  • By act of the parties: revocation of agent’s authority by principal; notice in accordance with contract; misconduct; disclaimer; irrevocable agency where authority is coupled with an interest; revocation may be forbidden by statute; to protect agent’s lien rights.
  • By custom: if trade custom dictates how agency ends, that governs.
  • By operation of law:
    • By performance: object of agency accomplished.
    • By effluxion of time: fixed term or implied reasonable time.
    • By frustration: Stevenson v Aktfur (1918) AC 239.
    • By bankruptcy of principal or agent.
    • By death or insanity of principal or agent (Nzom & Anor v. Jinadu (1987) 1 N.W.L.R. 533; Drew v. Nunn (1879) 4 A.B. 661; Younge v. Tonybee (1910) 1 K.B. 215).

Practice Scenarios (Second Semester Case-Style Questions)

  • Scenario 1: Greg (agent) buys cocoa for XYZ Ltd after being told to stop; traders sue XYZ Ltd. Issues: Is principal liable for agent’s unauthorized contract by estoppel? What remedies are available to recover from agent? Governing principles: agency by estoppel; representation relied on by third party; remedies include breach of contract by agent, plus principal liable due to estoppel; applicable cases: Summers v Solomon; Saul Raccah v SON Nig Ltd; Scarf v Jardine; Drew v Nunn.
  • Scenario 2: Paul, agent of Aboki Ltd, in emergency sells rotten groundnut and remits funds; principal sues for balance. Issues: Can agency be created without consent? Is principal liable for such contract? Authority: agency by necessity; conditions: existing agency, real/commercial emergency, difficulty in contacting principal, bona fide action.
  • Scenario 3: Becky’s interior décor shop; Ada (agent) buys goods on Becky’s credit without Becky’s approval; Becky refuses to pay for items bought; questions concern commission vs payment obligation; principles: agent’s authority; third party reliance; privity; implied agency if agency exists.
  • Scenario 4: Tolani-owned shop; Edo (nephew) orders jewelry; leaves with goods; Tolani refuses to pay; Musa ships tomatoes to Ada; deterioration before sale; Ada sells at a loss; liability arises for unauthorized acts or breach of duty; discuss agency remedies.
  • Scenario 5: Bode introduces Ade as property manager; Ade creates lease for Obi; Bode seeks eviction; oral appointment and lease creation; discuss agency creation and enforceability of lease.
  • Scenario 6: 3(a) Greg (government official) delegates responsibilities to Kalu; Kalu incurs large expenses; remedies for government; 3(b) Agu (tout) contracts with Ibe for fabrics; Eze present; if Agu does not furnish goods, Ibe sues Eze; discuss agent’s authority and principal’s liability.
  • Scenario 7: 4(a) Eno (MD) enters into contract with Tobe on behalf of ABC Ltd without authority; Eno leaves; is contract enforceable? 4(b) Fred’s wife’s debt to XYZ Stores; discuss agency and personal liability.

Ethical, Philosophical, and Practical Implications

  • Fiduciary duties require utmost good faith; agents must avoid conflicts of interest and disclose material personal interests.
  • Transparency in agency relationships reduces risk of misrepresentation and protects third parties.
  • Delegation is allowed in certain circumstances but preserves principal’s ultimate responsibility; unauthorized delegation can expose the agent to liability.
  • Agency law balances efficiency (agents acting on behalf of principals) with protection for third parties and moral responsibility for misrepresentation or breach.
  • The distinctions between disclosed vs undisclosed principals affect ratification, third-party remedies, and who bears liability.

Key Legal Maxims and References to Cases

  • Qui facit per alium, facit per se: principal bears liability for agent’s acts when acting within authority.
  • Ayankoya v. Olukoya (1996) LPELR-669(SC); Summers v Solomon; Saul Raccah v SON Nig Ltd; Scarf v Jardine; Drew v Nunn: estoppel and agency principles.
  • Godwin v. C.A.C (1998) LPELR-1327(SC): fiduciary nature of agency.
  • Bamgboye v. University of Ilorin & Ors (1991) 8 NWLR 129; Eastern Directors v Goldring (1957) 2 QB 600; Jenkins v Morris (1880) 14 ChD 674; Biggar v Rock Life Insurance (1902) 1 KB 516; Abina v Farhat (20th century NLR cases cited).
  • Ratification: Folashade v Duroshola (1961) 1 All NLR 87; Bolton Partners v Lambert (1889) 41 Ch.D 295; Caligara v Giovani (1968) 1 All NLR 534; Section 72(1) CAMA (company exception).
  • Co-haabitation and necessaries: Ryans v Sams (1848) 12 QB 460; Prager v Blatspiel (1924) 1 KB 566; Nasidi v. Mercury Assurance Co. Ltd (1971) All NLR 523; Keppel v Wheeler (1927) 1 KB 577.
  • Fiduciary duties and professional skill standards: Spiropolous Co. Ltd. v. Nigeria Rubber & Co. Ltd (1970) NCLR 94; Keppel v Wheeler; Nasidi; Re Freeman and Lockyer.
  • Termination and remedies: Stevenson v Aktfur (1918) AC 239; Nzom & Anor v. Jinadu (1987) 1 NWLR 533; Drew v Nunn, Younge v Tonybee; Armstrong v Jackson; Reading v Attorney General (1951) AC 507.

Summary of Key Points

  • Agency is a fiduciary, consent-based relationship where the agent acts for the principal within authority and can bind the principal to third parties.
  • Creation of agency can be by agreement, estoppel, ratification, implication by law (cohabitation, necessaries, emergency), or presumption.
  • Authority types include express, implied, incidental, usual, customary, apparent/ostensible, and presumed; principal liability depends on agent’s scope.
  • Duties of the agent cover performance, accounting, confidentiality, care, personal performance, avoidance of secret profits, avoidance of conflicts of interest, and safeguarding principal’s money and property.
  • Principal’s remedies include termination, damages, injunctions, and rescision; third parties have remedies based on contract and tort principles.
  • Termination can occur by party act, custom, or operation of law; certain situations can create irrevocable agency in which the agent has a beneficial interest.
  • Practical scenarios illustrate application of agency concepts to estoppel, necessity, ratification, and mistaken authority; practice questions mirror exam-style application.