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 AGENCY

Agency is the relationship that exists between two persons, one party called the Agent is
considered in law to represent the other, called the Principal, in such a way as to be able
to affect the Principal’s legal position in respect of strangers to the relationship by the
making of contracts or the disposition of property – Friedman, 1990.

A relation, created either by express or implied contract or by law, whereby one party
(called the principal) delegates the transaction of some lawful business or the authority to
do certain acts for him or in relation to his rights or property, with more or less
discretionary power, to another person (called the agent) who undertakes to manage the
affair and render him an account thereof – Cecile, 1980.
 The Parties
The Principal

The Agent

The Third Party

 Capacity of Principal and Agent

Capacity of the Principal Capacity of the Agent

 The Principal must have  An Agent does not make

full contractual capacity.
If he does not have it, he
cannot make a contract by
an Agent
the contract on his own
behalf, as such, it is not
necessary that the Agent
should have contractual
capacity.
 Agency and Other Related Contracts
The Agent and the Trustee
Trustee is a person who holds the legal title to property in trust for the
benefit of another (beneficiary)
The Agent The Trustee
 Acts to affect the legal  Merely holds property for
relations of the Principal another (beneficiary)
 Usually appointed by the  Appointed by Settlor and not
Principal the beneficiary
 Subject to the control of the  Not subject to the control of
Principal the beneficiary but must act in
accordance with the Deed of
Trust
 Agency and Other Related Contracts
The Agent and the Bailee
Bailee is a person who receives property from another for a certain
purpose or to hold until further instructions.
The Agent The Bailee
 The Agent may or may not  The Bailee holds property for
hold property. the Bailor.
 The Bailee may sometimes have
authority to act on behalf of the
Bailor to do anything reasonable
to protect the property; or
 To deliver the property to a
third party; in which instances
he becomes an Agent of the
Bailor.
 Agency and Other Related Contracts
The Agent and an Independent Contractor
Independent Contractor is a person who undertakes or executes a specific
work by his own means and approaches
Agent Independent Contractor
 An Agent is subject to the  He is not under the control of
control of his principal. the person for whom he does
 The Principal is usually liable the work.
for the acts of the Agent.  He usually does not have
agency powers.
 He is liable for his actions.
 Agency and Other Related Contracts
The Agent and an Employee
Employee is a person engaged under a contract of service

Agent Employee
 Under the control of his  under the control and
Principal. direction of the Employer
 Principal is responsible for the  Employer is responsible for
acts of the Agent acts of the Employee acting
within his usual authority
 Some Employees have Agency
powers and can bind
Employers.
 Creation of Agency
An Agency relationship can be created by; .
(i) Actual Authority
a. Express Authority
b. Implied Authority  
 
(ii)Operation of Law
a. Necessity
b. Estoppel
c. Ratification
d. Cohabitation
 Creation of Agency
(i) Actual Authority

An Agency is created in this instance when the Agent acts on the actual authority of
the Principal. Thus, the Principal vests actual authority in the Agent to represent him.
This Authority can be express or implied.

(a)Express Authority: By this, the Principal expressly appoints and vests the Agent
with authority. This is done by words, and could be either written or oral.
(b)Implied Authority: this flows out of the express authority given the Agent and
permits him to perform all acts incidental to the exercise of his express authority,
even though these incidental acts have not been expressly mentioned in the
express authority – HERLEY-HUTCHISON V BRAYHEAD LTD
(ii) Operation of Law
Creation of Agency
Even though the parties have not set out to enter into an Agency relationship, the law itself imposes an
Agency relationship between the parties based on the circumstances.
Agency created by the operation of law includes the following;
(a) Estoppel: This arises where a person who has not appointed another as his agent conducts himself by
words or deeds or both to lead others to believe that the other person is agent – SOANES V LONDON
SOUTHWEST RAILWAY CO.
Pre-requisites for an Agency by Estoppel;
(i) the person (principal) must make some statement or conduct which communicates to the third party that
the other person (Agent) has authority to represent him (principal);
(ii) the statement or conduct is intended to be acted upon by the person to whom it is made.
(iii) the statement or conduct must be the immediate cause of the third person’s action;
(iv) the representation is made intentionally or negligently.
(v) the third party is unaware of the lack of authority of the Agent.
 Creation of Agency
(b) Necessity: this arises where a person in possession of another’s property is compelled by
circumstances to do an act to preserve the property without the prior authority of the owner. The person
who has possession of the property and acts to preserve it is deemed by the law as an Agent of the owner
who becomes the Principal – GREAT NORTHERN RAILWAY V SWAFFIELD

Conditions for Agency of Necessity

(i) It must be practically impossible to get the Principal’s instructions

(ii) there must be actual and definite commercial necessity for the creation of the Agency

(iii) There is no Agency of Necessity unless there is a real emergency such as being in possession of
perishable goods or livestock requiring to be fed – SACHS V MIKLOS

(iv) the Agent must act bona fide in the interest of all parties concerned.
 Creation of Agency
(c) Cohabitation: this arises from the presumption that a wife living together with the husband has the
husband’s authority to pledge his credit for the purchase of “necessaries” judged according to his style
and standard of living, especially the aspects of domestic life which the wife ordinarily manages and
controls.

 The husband can rebut the presumption by;

(1) he expressly forbade his wife to pledge his credit;
(2) he expressly warned the supplier not to supply his wife goods on credit;
(3) his wife was already sufficiently supplied with goods of the kind in questions;
(4) his wife was supplied with sufficient allowance or sufficient means for the purpose of buying
such goods without pledging the husband’s credit
(5) the order, though for necessaries, was excessive in extent of having regard to the husband’s
income – MISS GRAY V CATHCART
(d) Ratification: where an Agent who has no authority to contract on behalf of the Principal, or exceeds his authority,
enters into a contract with a third party, the contract is not binding on the Principal. The Principal may afterwards
confirm and adopt such contract. The act of confirming or accepting the contract is known as Ratification.

The effect of ratification therefore is to make the contract binding on the Principal as if the Agent had actually been
authorized beforehand.

Requirements for a valid Ratification

(i) The Agent must expressly have contracted as an Agent – KEIGHLY, MAXSTEAD&CO. V DURANT

(ii) Ratification can only be done by the Principal who was named or ascertainable at the time of the contract –
SAUNDERSON V GRIFFITHS

(iii) The Principal must be in actual existence at the time of the contract – KELNER V BAXTER

(iv) The Principal must have contractual capacity both at the time of the contract and at the time of ratification

(v) The Principal must at the time of ratification have full knowledge of the material facts, or intends to ratify the contract
whatever the facts may be – MARSH V JOSEPH

(vi) The Principal must ratify within the time set or within a reasonable time.
 Creation of Agency
(e) Statutory Agency: It broadly refers to Agency relationships created by the provisions of
statutes enacted by the legislature.
(i) Hire Purchase Decree, 1974 (NRCD 292):
S.12 provides that where a person sells goods under a hire purchase or conditional sale
agreement, any representations made relating to the goods to the hirer or buyer by a
dealer or sales person of the goods shall be deemed to have been made by him as agent
of the owner or seller.
(ii) Incorporated Private Partnership Act, 1962 (Act 152)
S.12 of the Act makes the act of every partner binding on the firm as if they were
authorised expressly or impliedly by the other partners or they subsequently ratified by
them.
again, where the partner acts in the usual way, he binds the firm unless the third party
knows that he had no authority.
 Creation of Agency
(iii) Companies Act, 2019 (Act 992)
Section 216 retains the application of common law rules of Agency to Companies.
Section 139 treats the acts of members in general meetings , Board of Directors and Managing
Director acts of the Company.

(iv) Insurance Act, 2007 (Act 724)

Section 210 provides that an insurance agent or sub-agent who completes a form or a
document on behalf of a person is deemed to be the agent of the insurer and not the person on
whose behalf the form or document was filled.
 EFFECT OF CONTRACT MADE BY AGENTS

The effect of the contract made by an Agent is dependent on the circumstances under which the Agent
contracted;

(i) Where the Agent contracts as Agent for a named Principal: The Agent is this instance discloses that he is
contracting as Agent for a Principal whose identity he discloses. The general rule is that in such a situation,
the Agent acquires no rights and incurs no obligations under the contract.

There are however exceptions to this general rule. Thus;

(a) Where the Agent executes a Deed in his own name, he is liable;
(b) Where the Agent signs a bill of exchange in his own name without indicating that he has signed as
Agent, he is liable;
(c) Where the nature of the contract and the surrounding circumstances made it clear that the Agent is
liable;
(d) Where the Agent is in fact the Principal but contracts as Agent;
(e) Where the custom of trade makes the Agent liable.
(ii) Where the Agent contract for an unnamed Principal: the Agent here discloses that he is
contracting as an Agent but does not name the Principal. The rule is that, having contracted
as an Agent, he is not liable on the contract – UNIVERSAL STEAM NAVIGATION CO. LTD V
JAMES

(iii) Where the Agent contracts for an undisclosed Principal: the Agent in this instance does
not disclose the existence or identity of the Principal. He acts as if he is contracting for
himself. In this instance, where the Agent acts with authority;

(a) the undisclosed Principal can intervene and claim, and if necessary sue the third party
directly. If he chooses this option, the third party can also sue the Principal directly.

(b) the third party after discovering the Principal has the option, and can elect to proceed
against either the Principal or the Agent.
 TORTS OF THE AGENT

A Principal is jointly and severally liable with his Agent for any fraud or tort

committed by the Agent in the course of the relationship provided the act

was within the Agent’s authority - the wrongful act was performed by the

Agent acting within his ostensible or apparent authority – LLOYD V GRACE,

SMITH&CO.
 TYPES OF AGENTS
(i) Universal Agent:
(ii)General Agent:
(iii) Special Agent
(a) Del Credere Agent
(b) Brokers:
(c) Merchantile Agent:
(1) Factor:-  
(2) Auctioneer:-
 TYPES OF AGENTS

(i) Universal Agent: this type of Agent has unrestricted authority to contract on behalf

of his Principal. This type of Agent is rare, and has to be appointed by Deed.

(ii) General Agent: this type of Agent has authority to represent his Principal in all
matters connected with a particular trade or business, eg. The Director of a
Company.
(iii) Special Agent: this type of Agent is appointed to act in respect of a particular transaction or a series of
transactions. Such an Agent is usually given limited powers. The Principal is bound by the authorized acts of
the Special Agent. Examples of Special Agents are;

(a) Del Credere Agent: this is an Agent employed to sell goods who undertakes, for extra commission,
that purchasers he procures will pay for any goods they purchase. He undertakes that he will pay, if the
purchasers fail to pay due to insolvency or an analogous cause.

(b) Brokers: this type of Agent is employed to buy or sell on behalf of another. A Broker is an
intermediary who makes bargain and contracts between persons in matters of trade, commerce and
negotiations in return for a commission or “brokerage” or “brokerage fee”.

The mode of dealing involves the sending of a “bought note” to the buyer and a “sold note” to the seller. The
two notes constitute the contract.

A Broker does not have possession of goods and therefore has no lien on goods and cannot sue in his own
name. Eg. Insurance Broker or Stock Broker.
(c) Merchantile Agent: this is an Agent who in the ordinary course of his business as Agent
has authority, either to buy or sell goods, or to consign them for the purpose of sale or to
raise money on the security of goods when in possession of goods of his business. Examples
of Merchantile Agents are;

(1) Factor:- An Agent who sells goods or merchandise consignment delivered to him
by his Principal for compensation. The Factor has possession of the goods
belonging to his Principal and he has authority to sell the goods.

(2) Auctioneer:- An Agent contracted to sell goods at an auction or by auction.

 DUTIES OF AN AGENT
(i) Obey all lawful instructions of the Principal – BERTRAM, ARMSTRONG &CO V GODFRAY
(ii) Exercise due care and skill in the performance of his duties - KEPPEL V WHEELER
(iii) To render an account when required.
(iv) Act in good faith and avoid conflict of interest and duty – LUCIFERO V CASTEL
(v) Not to make any profit beyond the commission or remuneration paid by the Principal – BOSTON DEEP
SEA FISHING & ICE V ANSELL
(v) Not to delegate his authority – delegatus non potest delegare (a delegate must not delegate) – JOHN
McCANN & CO POW
The Agent may however delegate his authority where;
 The Principal has expressly or impliedly consented to the delegation
 Unforeseen circumstances make it necessary to delegate
 Delegation is necessary for proper performance
 Trade custom allows delegation, eg. Building Construction.
(vi) Not to disclose confidential information or documents entrusted to him by his Principal.
REMEDIES OF THE PRINCIPAL FOR BREACH BY AGENT OF HIS DUTIES

(i) Dismiss the Agent summarily

(ii) Claim the secret profit for the Agent

(iii) Refuse to pay the Agent the agreed commission or recover any paid

(iv) Repudiate the contract within a reasonable time

 RIGHTS OF AN AGENT

(i) Right to commission or remuneration

(ii) Right to indemnity:- this right is lost in the following circumstances;

(a) when the Agent acts outside his authority

(b) carrying out illegal instructions, unless the Agent can prove he has
no knowledge of the illegality

(c) Right to a lien over the goods

 DUTIES OF A PRINCIPAL
(i) to pay commission or remuneration to the Agent
(ii) to indemnify the Agent
(iii) to give precise instruction
RIGHTS OF THE PRINCIPAL
1. Sue for damages for breach of contract if Agent fails to act in accordance
with the terms of the contract.
2. Sue for damages for negligence if the Agent fails to exercise due care and skill
3. Sue for secret profit
4. Revoke authority.
 TERMINATION OF AGENCY
The relationship of Principal and Agent can be terminated in two main ways;
(i) Acts of the parties;
(a) Mutual Agreement between the parties
(b) Revocation of authority by Principal by notice
(c) Renunciation of authority by the Agent
(ii) Operation of Law
(a) Death – of Principal or Agent
(b) Insanity
(c) Bankruptcy of Principal
(d) Subsequent illegality
(e) Completion of assigned duties
(f) Expiration of stipulated period
(g) Frustration or Act of God
END OF LECTURE