AGENCY

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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.

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The Parties

The Third

Party

The

Agent

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Capacity of Principal and Agent

Capacity of the

Principal



The Principal must

have full contractual

capacity. If he does

not

have

it,

he

cannot

make

a

contract by an Agent

Capacity of the Agent



An Agent does not

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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



Acts to affect the legal

relations of the Principal



Usually appointed by the

Principal



Subject to the control of

the Principal

The Trustee



Merely holds property for

another (beneficiary)



Appointed by Settlor and

not the beneficiary



Not subject to the

control of the beneficiary

but must act in

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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 Agent may or may

not hold property.

The Bailee



The Bailee holds property

for 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

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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



An Agent is subject to

the control of his

principal.



The Principal is usually

liable for the acts of the

Agent.

Independent Contractor



He is not under the

control of the person for

whom he does the work.



He usually does not have

agency powers.



He is liable for his

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The Agent and an Employee

Employee

is a person engaged under a contract of service

Agent



Under the control of his

Principal.



Principal is responsible

for the acts of the Agent

Employee



under the control and

direction of the Employer



Employer is responsible

for acts of the Employee

acting within his usual

authority



Some Employees have

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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

a.Ratification

b.Cohabitation

.

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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 –

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Creation of Agency

(ii) Operation of Law

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.

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(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.

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(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

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(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.

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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.

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Creation of Agency

(iii) Companies Code, 1963 (Act 179)

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)

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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;

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(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.

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TORTS OF THE AGENT

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TYPES OF AGENTS

(i)Universal Agent:

(ii)General Agent:

(iii) Special Agent

(a) Del Credere Agent

(b) Brokers:

(c) Merchantile Agent:

(1) Factor:

-

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Auctioneer:-(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.

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(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.

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(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.

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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.

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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

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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

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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

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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

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