An Appraisal of the Concept and Scope of Agency Relationship Under the Nigerian Commercial Law

1.0  INTRODUCTION:

Generally, the Doctrine of the Privity of Contract disentitles a person from acquiring any right under or being subjected to any obligation arising from a contract to which he is not a party. The law recognizes the need for a person to employ the services of another to negotiate or conclude a contract on his behalf. There are certain circumstances such as where the employer lacks the expertise or skill of the trade, business or profession, the experience or knowledge of a particular market area, or commodity or may be simply too busy with others matters to conclude the contract himself. This is achieved through the concept of Agency.

The law which governs Agency relationship in Nigeria is the received English law particularly the common law and equity. The law itself primarily deals with the relationship which arises where one person expressly or impliedly employs another or is by law deemed to have employed such person to perform some tasks for and or on his behalf. Agency relationship from its origin presents a situation where a person (principal) is bound by the acts of another (the agent). This is an exception to the doctrine of privity of contract which generally disentitles a person from acquiring any rights or obligations arising from any contract to which he is not a party. Agency relationship arises when a person is vested with authority by another to enter a legal transaction on his behalf. The two basic ingredients for agency relationship are authority and consent.

1.1 CONCEPT OF AGENCY

Commercial  Law, also known as Trade law, is the body of law that applies to the right, relation and conduct of persons and business engaged in commerce like merchandising, trade, and sales.

The Law of Agency is a very important part of commercial law as companies can only carry out their daily business activities through agents. The essence of the law of agency is to ensure proper and legal dealings when it comes to actions carried out in a representative capacity. Thus, the interest of the parties to an Agency relationship, third party inclusive, is protected by law. The employment of agents in commercial transactions has assumed great importance in modern business practice and thus the relationship between a principal and an agent is fundamental in the modern commercial law[1]. According to Robert Lowe, “it lies at the very heart of the subject and without it, modern commerce would not exist”. Others believe that commerce would literally come to a standstill if businessmen and merchants could not employ the services of factors, brokers, estate agents, auctioneers, and the likes and were expected to do everything themselves.

DEFINITION OF AGENCY

There has never been any definition of agency which is comprehensive enough for all purpose and free from controversy. This is due to the complex nature of the subject matter.

AGENCY has been described as a special type of contract or relationship created in a situation where one called “the Agent” acts for and on behalf of another called “the principal” under the authority conferred by “the principal” on “the Agent”, thus, establishing an Agency relationship.

The Doctrine of the Privity of Contract disentitles a person from acquiring any right under or being subjected to any obligation arising from a contract to which he is not a party. However, an Agency relationship is an exception to the doctrine of privity of contract. Salami JCA in AKALONU v. OMOKARO[2] stated that “The acts or omissions of the agent are seen as that of the principal.”

The term Agency has been defined by the Oxford Companion Law to mean “The relationship between one person, the agent, having authority to act, and having consented to act on behalf of another, the principal, in contractual relations with a third party. The term is also used more widely as one acting in the interest of another.”

FRIEDMAN in his Law of Agency defined agency as:

“…the relationship that exists between two persons when one, 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 on the disposition of property”.

ADESANYA and OLOYEDE defined agency as:

“a consensual relationship existing between two parties by which one, the agent, expressly or impliedly authorized to act on behalf of another, the principal, in any dealings with the third parties”.

BOWSTEAD defines agency as:

“An agreement between two that one should represent him”.

According to PROF. FOGAM, an agent can be seen as a mere “conduit pipe” connecting the principal to the third party.

The concept of Agency contemplates the execution of a lawful transaction. If an agent carries out an unlawful act, he becomes liable as a party to the offence or as a joint tortfeasor with the principal. The idea behind the concept of agency is the recognition by the common law that a person need not always do or carry out things that change his legal relations himself. He may employ the services of another person.

LEGAL IMPLICATIONS OF THE DEFINITION OF AGENCY

The act of the agent in concluding a contract on behalf of the principal binds the principal and will therefore create reciprocal rights and liabilities or privity of contract between the principal and a third party. The act of the agent will bring about the same consequence on the principal as if he had contracted for himself. This is expressed by the Latin maxim; “oui facit per alium facit per se” (He who acts through another, acts for himself).

• PURPOSE OF AGENCY

There are variety of reasons for the important roles an agent plays in the conduct of commerce:

1. The agent may possess special skills or expertise.
2. He/She may have special knowledge of a particular market, area, or community.
3. Distance at times presents some difficulties, and therefore could be disadvantageous to the astute businessman; consequently, the principal finds it necessarily to appoint an agent in such distant places where he has business interests.
4. All men are not equally talented in doing business. People differ in terms of their technical knowledge as well as in their skill and experience so that it has become very necessary for a principal to employ the services of an agent.
5. The principal may be too busy to make every contact personally.

Essentially, the Law of Agency is concerned with the rules put in place to regulate the problems that may arise from the introduction of a third person to perform certain tasks on behalf of another.

• CHARACTERISTICS OF AGENCY RELATIONSHIP

1. Agency creates two types of relationships: a bi-partite relationship between the principal and the agent on the one hand and a tri-partite relationship between the principal, the agent and the third party.
2. The law of agency applies only in situations where the agents’ representation or action on behalf of the principal affects the principal’s legal position that is his rights against, and liabilities towards other people.
3. Agency relationship arises only in circumstances where it is considered in law to arise. It is not what the parties choose to call their relationship, or intend it to be, that matters, but the effect the law attaches to it.
4. Admittedly, most agency relationships arise from agreement or consent whether express or impliedly but not all agency relationships are consensual. For example, in the case of agency of necessity or estoppel, there is no form of agreement or consent.
5. In an agency relationship, the agent represents the principal and thus he is like the ‘alter-ego’ of the principal or at least a conduit pipe connecting the principal and the third party.
6. Agency creates fiduciary relationships, that is, a relationship of trust, confidence honesty. Although Agency creates an exception to the rule of privity of contract, since the law allows an agent to be a channel connecting the principal and the third party, it is opined that it reinforces the rule of privity in such situations because the agent drops out of the transaction and allows the principal and third party to have a direct contractual relationship.

The primary role of agents is the negotiation and conclusion of contracts.

• THEORIES OF AGENCY

There are three main theories that seek to define and explain the role of the agent.

These are:

1. The power-liability theory.
2. The consent theory.
3. The qualified consent theory.

The Power-Liability Theory

The concept of agency exists when a person (the agent) acquires the power to alter the principal’s legal relations with a third party in such a way that it is only the principal who can sue and be sued by that third party. This focuses on the external relationship with the third party and ignores the internal relationship between the principal and the agent. Nevertheless, they are subject to fiduciary duties in the same way as agents narrowly defined.

1. The Consent Theory

This arises in a situation where the Agent, is acting on behalf and for the Principal with the consent of the principal thus establishing a direct relationship with the duo. In other words, the agent must have invested with a degree of discretion that shows the principal has placed trust and confidence in the agent. It is this which gives rise to a fiduciary duty. Here, both the Agent and the Principal can be liable for a breach or misconduct.

2. Qualified Consent Theory

This can happen in a situation where the actual authority of the Principal was not given initially but the action of the Agent became acceptable and approved by the Principal. This theory combines the consent theory with the protection of ‘misplaced reliance’ to account for actual and apparent authority. This is more clearly defined in agency by ratification to reflect commercial reality since authorization may not always be neatly contemporaneous with the initial transaction.[3]

• AGENCY AND OTHER RELATIONSHIPS

The concept of agency in commercial transaction has in most cases been mistaken to be the same with some other relationship of similar nature and character, thus, the need to distinguish the relationship of principal and agent from other similar ones.

• AGENCY AND TRUSTS

Trust involves an equitable obligation binding on a person called a trustee to hold or deal with the property over which he has control for the benefit of another person called the beneficiary.

Similarities:

1. Trust and Agency involve a fiduciary relationship in that both are persons who act on behalf and for the benefit of others (an Agent for his principal and a Trustee for the beneficiary)
2. Both must not allow their interest to conflict with their duties.
3. Certain equitable remedies in respect of property in the hands of an agent may in the same way that they are available to the beneficiary against a trustee. For example, an agent who makes a secret profit must account for it in equity, in the same way as a trustee who makes a secret profit out of his trust.

Differences:

1. A trustee is the legal owner of a property, but an agent is only authorized on behalf of the principal.
2. An agent represents his principal and can create contractual relations between his principal and third party, but a trustee is not in any way the representative of his beneficiaries; hence does not involve his beneficiary in personal responsibility for the trustees’ acts, whether in contract or not.
3. An agency can generally be created between parties without any special form, but a trust must be in writing.
4. An agent can revoke the agency, but a trustee cannot revoke a trust.

• AGENCY AND BAILMENT

A bailment arises where personal property is delivered or transferred by the owner (bailor) to another person (bailee) under an agreement that the property can be returned to the owner (bailor) or transferred to a third party or dealt with in any other way indicated by the owner (bailor). The bailee is under the obligation to keep the property in good condition.

 Similarity:

1. A bailee is not normally an agent of the bailor. However, when exercising some of his powers over the property e.g., to have them repaired or serviced, the bailee incidentally involves the bailor in liability on contract made for the purpose just as an agent can involve a principal.

Differences:

1. The bailee does not represent the bailor. He merely exercises with leave of the bailor, certain powers in respect of the property.
2. The bailee has no power to make and negotiate contracts on the bailors’ behalf.

• AGENCY, SERVANTS, AND INDEPENDENT CONTRACTORS

A servant is one who is completely subject to the control of his master as to what he does and how he does it. An independent contractor on the other hand, is one who by agreement, usually for reward provides services for another. In other words, an independent contractor is his own master. It has been suggested that the distinction between servants and independents contractors and agents is essentially one of action, in that agents are mainly employed to make contracts and to dispose of property, while servants are often employed for other tasks.

2.0 CLASSIFICATION OF AGENTS[4]

As a result of modern developments in commerce and the changing need for specialization, certain types of agents have distinguished themselves by name and function. The importance of classifying agents lies in the fact that it helps to determine the extent to which a principal may be made liable for the unauthorized acts of his agent. Agents are generally divided into 3 main classes. They include:

1. General and Special Agents
2. Commission Agents
3. Mercantile Agents
4. a) Factors Agent
5. b) Brokers
6. c) Del Credere Agent

2.1 GENERAL AND SPECIAL AGENTS

A General Agent is one who is authorized to act for and on behalf of his principal in all his affairs in connection with a particular kind of business, trade, or profession or one who represents him in the ordinary course of his own trade, business, or profession, as an agent.

A Special Agent on the other hand is one authorized to act for and on behalf of his principal on or for special occasion. Such an agent may also be required to handle a particular transaction or to do a specific act which is not within the ordinary course of his trade, business, or profession. If he acts outside his instructions, his unauthorized action will not bind his principal.

The distinction between a General and Special Agents lies in the nature and character of the authority given and its scope in relation to third parties.

2.2 COMMISSION AGENTS

A commission agent is the one to whom certain goods have been consigned for a foreign principal. A commission agent is saddled with dual responsibility, firstly as an agent to his principal with equal rights and obligation of any other agent and secondly as an agent who does not bind his principal contractually to third parties. Instead, he stands in his own right in the position of principal to such third parties basically because he benefits from the transaction.

2.3 MERCANTILE AGENTS

A Mercantile agent is a person “…having in the customary course of his business as an agent, authority to sell goods or consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.“[5] In essence, when one is dealing with a mercantile agent, it becomes pertinent to enquire whether “in the customary course of the agent’s business, he has authority to sell, consign for sale or to buy or raise money or the security of goods is in the possession of such agent.

There are three types of mercantile agents. These are Factors, Brokers and Del Credere Agents.

2.3.1 FACTORS

The term “Factors” is not defined by the Factors Act 1889. However, under common law, it has been defined as a mercantile agent who has been entrusted with the possession of goods for sale only.

The term “Factor” was described in the case of BARRING V. CORRIE[6] by Abbot C.J., as a “person to whom goods are consigned for sale by a merchant residing abroad or at a distance away from the place of sale and who normally sells in his own name without disclosing that of the principal”.

2.3.2 BROKERS

A Broker is a mercantile agent who, in the ordinary course of his business is employed to negotiate contracts on behalf of the principal, for the sale or purchase of property or goods for a commission usually called a brokerage. A broker, as an agent is usually a member of an institution, for example, the Nigerian Stock Exchange. He buys and sells in accordance with the rules of such institution. The Broker, unlike a Factor, has no possession of the goods. Consequently, he has no lien on them, and as such can only sue in his principals’ name.

The distinguishing feature of a broker from a factor is that a broker is not entrusted with the possession of the goods or merchandise in which he deals. Also, he cannot sell in his own name. Therefore, he has no authority as a broker to receive the price and he has no lien on the goods.

2.3.3 DEL CREDERE AGENT

A Del Credere Agent is a mercantile agent with a special feature. The distinctive feature of this type of agency is that the agent, in consideration of extra remuneration called “del credere commission” guarantees to indemnify hisprincipal if the third party with whom he enters contract for and on behalf of the principal fails to pay any sum due under the contract.

It is worthy to note that the liability is secondary. It will only arise when the buyer defaults’ in making payment due under the contract. A Del Credere agency may be inferred from the conduct of the parties, but what is paramount is that there must be evidence of a higher reward due to the agent, otherwise del credere agency will be difficult to infer.

3.0 TYPES OF AGENCY[7]

The relationship of principal and agent may arise in one of the following 4 ways:

1. Agency by agreement or Contract (Implied/Express)
2. Agency by Estoppel
3. Agency by Ratification
4. Agency by Necessity

3.1 AGENCY BY AGREEMENT OR CONTRACT

Express Agreement

The commonest and by far the simplest means of relationship is by express agreement in the form of a contract. An agency agreement must be based upon some indication by the principal to the agent that he consents to having the latter act on his behalf, and a similar manifestation of consent by the agent to act for the principal.

This occurs in a situation where the Agency agreement is formalized by the express intention of both parties. The principal appoints and the Agent consent. This was established in the case of AYUA V. ADASU & ORS[8] Akanbi, JCA, restated the law in the following statement of page 611 thus:

“In the ordinary law of Agency, the paradigm is that in which the agent and the principal agree that one should act for the other. And the term “agency” is assigned to this basic principle which involves consent of both parties.”

 Implied Agreement

This may arise under two situations.

1. It may arise from the express authority conferred, thus, an agent appointed to conduct a particular trade or business can do all such things as are necessarily incidental to the conduct of such trade or business. In RYAN V. PILKINGTON[9], an estate agent was instructed by the owners to find a purchaser for a private hotel, he did so and accepted from the prospective purchaser a small deposit ‘as agent’ of the owners. It was held that although the estate agent was not expressly given the authority to accept deposits, he had acted within the ostensible scope of his authority.
2. Secondly, an agreement to create an agency may be also implied from the conduct of the parties.

In general, it will be the assent of the principal, which is more likely to be implied. Such assent may be implied where the circumstances clearly indicate that he has given authority to another to act on his behalf. This may be so even if the principal did not know the true state of affairs. The effect of such implication is to put parties on the same position as if the agency had been expressly created.

3.2 AGENCY BY RATIFICATION

This occurs in situations where a supposed agent portrays himself to be representing a supposed principal whose consent he might not have secured and the principal on becoming aware of this assented to the transaction. The action of the principal is tantamount to ratification. This doctrine was explained in  the case of WILSON V. TUNMAN[10]where it was stated as follows:

“That an act done, for another, by a person not assuming to act for himself, but for such other person, though without any antecedent authority whatever, becomes the act of the principal if subsequently ratified by him, is the known and well-established principle of law”.

The doctrine of ratification is well expressed in the Latin maxim, “omnis ratihabitio retrotrahitur et mandato priori aequrparatur” (an act without precedent authority becomes the act of the principal, if subsequently ratified by him).Ratification is retroactive. It relates back to the time of transaction and not to the time of ratification, and thus supplies the authority lacking at the time of transaction.

Ratification need not take a particular form. In most cases any act or statement which clearly shows the intention of the principal may be a sufficient act of ratification. However, if the contract made by an agent is in the form of a deed, then the principal’s ratification must be by deed.

 3.3 AGENCY BY ESTOPPEL

Estoppel is a rule of evidence which precludes a person from denying the truth of certain matters under his or her control and upon the strength of which others have altered their position.

The general position of law in this area is to effect that where a supposed principal intentionally or otherwise causes a third party to believe that another person is his agent and the third party so relies in dealing with the agent, the principal will be estopped from denying the existence of an agency relationship between him and supposed agent. In such a situation, the principal will be bound by an act or ommission of the agent to the same extent as if an agency relationship had existed between them.

In LUKAN V. OGUNNUSI[11] the Supreme Court of Nigeria stated that: “Where a person behaves in such a way as to lead another person to believe that he has authorized a third person to act on his behalf and that other person in such belief, enters into transaction with the third person within the scope of such ostensible authority, the first mentioned person would be estopped from denying the fact of the first person’s agency. It would not be material that the agent had no authority whatever in fact”.

3.4 AGENCY BY NECESSITY

This occurs in a situation where a person acts in good faith as regards the property of another with the intention of protecting the interest of the owner or that of the general good. Such an agent will be regarded as an agent of necessity. Generally, the courts are reluctant to find that an agency of necessity exists because it imposes obligations on someone who has not given consent to the supposed agent to so act.

 3.4.1 CONDITIONS FOR AGENCY BY NECESSITY

The existence or otherwise of an agency of necessity is dependent on the fulfilment of certain conditions and these are:

1. The action was reasonably necessary having regard to the circumstances in the case.
2. There is an emergency necessitating instantaneous action.
3. It was impossible for the claimed agent to communicate with the presumed principal at the material time.
4. The claimed agent acted bona fide and in the interest of the presumed principal.

3.4.2 DESERTED WIFE’S DOCTRINE (AGENCY OF NECESSITY)

This is an example of agency of necessity arising out of an existing or subsisting legal duty concerning a deserted wife. A deserted wife is an agent of necessity endowed by law with authority to pledge her husband’s credit for necessaries. In the case of PHILLIPSON V. HAYTER[12] Wiles, j, while explaining the rule stated as follows:

“What the law infers is this, that his wife has authority to contract for things that are really necessary and suitable to the style in which the husband chooses to live, in so far as the articles fell fairly within the domestic department which is ordinarily confined to the management of the wife.”

In invoking this principle, the following conditions must be involved:

1. The husband and wife are legally married and must have been cohabiting as husband and wife at the material time.
2. There must have been an actual or constructive desertion of the wife by the husband.
3. The credit pledged by the wife must be for chattels other than money and for domestic requirements.
4. It must be established that such expenditure was suitable for her style or situation in life or for what she was used to while she was living with her husband and that there was no other credit available to her for her maintenance either through her own earning power or under a court order.

4.0 THE SCOPE OF AGENCY RELATIONSHIP

In an agency relationship, the general rule is that the Principal and Agent must possess adequate capacity. The rules as regards capacity in a contract applies to the contract of agency. However, there is a distinction between a person’s capacity to act as a principal and his capacity to act as an agent.

4.1 CAPACITY TO ACT AS PRINCIPAL

Only persons with full capacity to act contractually may appoint an agent to act on his behalf. Thus, the capacity to contract or do any other act by means of an agent is co- extensive with the capacity of the principal himself to make the contract or do the act which the agent is authorized to carry out on his behalf.

A principal who lacks full contractual capacity cannot make a contract by employing an agent who possesses full contractual capacity. This means that, those who lack capacity to contract, such as an infant or lunatic cannot surmount their contractual disability by employing agents to enter a contract on their behalf.

An infant cannot appoint an agent to purchase goods other than necessaries for him since such a contract would be void. Section 1 of the Infants Relief Act[13] provides for situations where contracts entered by an infant will be rendered void. He can only appoint an agent in circumstances in which he himself has the power to act.

Also, mentally unsound persons have no capacity to enter a contract except during their “lucid intervals.” Hence, theylack the capacity to appoint an agent to contract on their behalf during the time they are mentally incapacitated. The same rule also applies to drunkards. They have no capacity to appoint an agent at the time of their disabilities or while under influence. The rule is stated clearly in the case of IMPERIAL LOAN COMPANY V. STONE[14] which states that:

“Where a party to a contract is of an unsound mind, the contract is nevertheless binding upon him unless he can prove that he was so insane as to not know what he was doing, and the fact was known to the other party who took advantage of it.”

It is also important to note that although the principal may have capacity at the creation or inception of the agency, but a subsequent loss of capacity through insanity for instance, may bring the agency relations to an end.

4.2 CAPACITY TO ACT AS AN AGENT

The capacity to act as an agent is not completely governed by the same rules as the capacity to act as a principal. This is so because an agent does not enter a contract on his own behalf. consequently, it is not necessary that he should have full contractual capacity. All persons of sound mind, including infants and other persons with limited or no capacity to contract on their own behalf are competent to act or contract as agents.

In other words, since agency depends on agreement and not necessarily on contract, a person under contractual incapacity is not disqualified from serving in the capacity of an agent. Thus, an infant may act as an agent in any type of contract if he has sufficient understanding to consent to the agency and do the required act.

5.0 DUTIES OF PARTIES IN AN AGENCY RELATIONSHIP[15]

Generally, there are six duties that an agent owes the principal, and they are:

1. Duty to Perform.
2. Duty of Obedience and Loyalty.
3. Duty of Care and Skill.
4. Duty of Personal Performance.
5. Duty to Act in Good Faith.
6. Duty to Account.

Duties of the Principal to the Agent:

1. Duty to Remunerate
2. Duty of Re-Imbursement and Indemnity

 5.1 DUTY TO PERFORM

The primary duty of an agent, particularly where he was appointed under an agreement with the principal is to execute his agency in accordance with the terms of such agreement. In the case of OTTO HAMMAN V. SENBANJO & ANOR[16] where Adefarasin Ag. J., stated thus:

“It is the duty of an agent to carry out the business he had undertaken. This was his obligation unless he had in his contract expressly excluded responsibility.”

The basic rule of a contract of agency is that the agent must perform his obligations under the agency. Where an agent is employed to perform a particular function or action, if he fails to do so, he may be held liable for damages. However, if an agent is employed to perform an illegal act, he cannot be held liable if he fails to perform such act, irrespective of whether he was paid.

5.2 DUTY OF OBEDIENCE AND LOYALTY

When an agent is executing the terms of his agency, he is obliged to carry out such instructions as may be given to him by the principal relating thereto and must be seen to act promptly. The agent, in the performance of the undertaking, must act in accordance with the authority which has been given to him. The principal will not be bound by the act of the agent if the instructions has been withdrawn or varied before it was performed, and it is purportedly carried out by the agent. If the agent is a professional, he would be bound by the rules and ethics of his profession.

In the case of ESO WEST AFRICAN INC. V. ALI[17] an Ibadan High Court held that “it is the duty of an agent to carry out any instructions that may be given to him by the principal and cannot depart from such instructions even though he reasonably believed that in doing so, he was promoting the interest of the principal”.

5.3 DUTY OF CARE AND SKILL

In addition to performing his duty, an agent is also required to exercise the requisite skill and diligence in the performance of his duties. While executing the terms of his agency, an agent is bound to exhibit such care, skill, and judgment as are required under the circumstances of the situations.

In the case of SPIROPOLOUS CO. LTD V. NIGERIA RUBBER & CO. LTD[18] a High Court in Benin held that the prudence which an agent is expected to show in the affairs of his principal requires that he should not involve the principal in a heavier financial burden where there is available means of involving him in a lesser financial burden. Accordingly, it was held that an agent who undertook to effect a policy of insurance on behalf of his principal is under a duty to do so at the most economical state.

5.4 DUTY OF PERSONAL PERFORMANCE

The basic principle of law in this regard is covered by the maxim “Delegatus Non Potest Delegare (a delegate cannot delegate).” which means a delegated power cannot be further delegated. Agency relationship is one of confidentiality of principal and the agent. The agent is generally expected to perform all duties owed to the principal as an agent, personally.

However, there are exceptions to the general rule. There are occasions where because of exigencies of business, the above rule is relaxed to enable the agent to delegate his powers.

1. Where the duties to be performed are purely ministerial acts which do not involve any special care.
2. Where the nature of the business or trade permits delegation.
3. Where unforeseen circumstances arise which necessitates the agent delegating his powers.

4. Where the principal expressly sanctions or consents to delegation.

5.5 DUTY TO ACT IN GOOD FAITH

This duty of an agent arises principally from the fiduciary nature or character of the principal-agent relationship. Agency relationship is based essentially on the trust reposed on the agent by the principal. The principal employs an agent normally because he requires that agent’s personal service or expertise. He will usually depend on the agent for the due performance of those services. The law imposes on the agent the duty to show good faith in his dealings on behalf of the principal.

1. The agent must not make ‘secret profits.
2. The agent must not accept ‘bribe’
3. An agent must not put himself in a position where his interest conflict with the interest of the principal.

5.6 DUTY TO ACCOUNT

It is a fundamental obligation of every agent to keep and to render an appropriate account of his stewardship to his principal whenever he is called upon to do so. An agent is required to keep proper records showing receipts and expenditures so that a complete accounting may be rendered. Any money collected by an agent for his principal should not be mingled with the funds of the agent.

In MAJEKODUNMI V. JOSEPH DABOUL LTD[19] a Lagos High Court held, inter alia, that “once the relationship of principal and agent is established, and the agent fails to keep proper account or fails to account to the principal for monies or properties received by him in the cause of his agency, he is accountable to such a principal and can be compelled to render such account by an action in a court for an account.”

DUTIES OF A PRINCIPAL TO AN AGENT

5.7 DUTY TO REMUNERATE

The primary duty of a principal to his agent is to remunerate him for the services rendered. Such duties are arisen whenever the agent is employed under such circumstances as would reasonably justify the expectations that he should be paid.

5.8 DUTY OF RE-IMBURSEMENT AND INDEMNITY

In every agency relationship, there is by implication, a duty on the principal to indemnify the agent of all loses, damages or liabilities sustained by the agent while discharging his authorized duties.

6.0 REMEDIES AVAILABLE TO THE PARTIES

There are several remedies available to a principal or an agent in an agency relationship.

6.1 REMEDIES AVAILABLE TO THE PRINCIPAL[20]

Where an agent by some misconduct or otherwise commits a breach of a term of his agency relationship with the principal, the latter may avail himself of one or more of several remedies stated below.

1. Dismissal
2. Rescission and Damages
3. Action for Account
4. Action in Tort
5. Private Prosecution

6.2 REMEDIES AVAILABLE TO THE AGENT

Both the principal and the agent are entitled to and may claim one or more of the following remedies:

1. Damages
2. Right of Set-Off
3. Right of Lien
4. Right of Stoppage in Transit

7.0 TERMINATION OF AGENCY RELATIONSHIP

TERMINATION OF AGENCY BY ACTS OF THE PARTIES

The parties can on their own accord agree to bring the relationship to an end. This includes the agreement between the Principal and Agent, Revocation by the Principal, and payment of Remuneration to the Agent.

TERMINATION OF AGENCY BY OPERATION OF LAW

This happens in a situation where the law will presume certain operations in such a relationship, and it will be deemed to have occurred. Such situation includes by performance, By Effluxion of time, By Frustration, By Death of the principal or Agent, By Insanity of Principal or Agent and By Bankruptcy of Principal or Agent.

CONCLUSION

A thorough perusal and understanding of the creation and operations of an Agency relationship is very vital. Though the Doctrine of the Privity of Contract disentitles a person from acquiring any right under or being subjected to any obligation arising from a contract to which he is not a party. The law recognizes the need for a person to employ the services of another to negotiate or conclude a contract on his behalf. Agency relationship arises when a person is vested with authority by another to enter a legal transaction on his behalf.

FOOTNOTES:

[1] https://www.chamanlawfirm.com/scopes-of-corporate-and-commercial-law-in-nigeria

[2] (2002) LCN/1228   (CA)

[3] Kingsley Igweike (1993) “Nigerian Commercial Law: Agency”  Jos, Nigeria: FAB Educational Books.

[4] Friedman, G.H.L (1984) “Law of Agency”, 7^th Edition, London: Butterworths

[5] Section 1 of the Factors Acts 1889

[6] (1818) 2 B & AID . 137

[7] Kingsley Igweike (1993) “Nigerian Commercial Law: Agency”  Jos, Nigeria: FAB Educational Books.

[8] (1992) 3 N.W.L.R . 598

[9] (1959) 1 W.L.R. 403

[10] (1843) 6 MAN & G 236

[11] (1972) 5 S.C. 40

[12] (1870) L.R.6 C.P. 38

[13] Infant Relief Act 1874

[14] [1892] 1 Q.B 599

[15] Kingsley Igweike (1993) “Nigerian Commercial Law: Agency”  Jos, Nigeria: FAB Educational Books

[16] (1962) 2 All N.L.R. P9

[17] (1968) N.M.L.R 414

[18] (1970) N.C.L.R 94

[19] (1975) C.C.H.C.J. 161

[20] Kingsley Igweike (1993) “Nigerian Commercial Law: Agency”  Jos, Nigeria: FAB Educational Books