The relationship between a principal and an agent is fundamental in modern commercial law and so the employment of agents in commercial transactions is of great importance in modern business practice.
There is no specific or generally accepted definition of agency. Agency has been defined by legal jurists and scholars based on their analysis and interpretation of the relationship between the principal and agent, the duties of both parties, inter alia.
Friedman defines 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 effect the principal’s legal position in respect of strangers to the relationship by the making of contracts on the disposition of property. Also, American Restatement of the Law of Agency describes agency as the relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control and consent by the other so to act.
Furthermore, the Courts in Nigeria have defined agency relations in a plethora of cases.
The relationship of a principal and agent may arise by express agreement, ratification, estoppel or operation of law. An agency agreement which may be oral or written and express or implied from the conduct of the parties must indicate that the principal consents to having the agent act on his behalf and also that the agent has agreed to act on the principal’s behalf. Ratification is a process whereby an act or transaction done by the agent before there was a relationship between him and the principal is adopted by the principal as being done on his behalf. Agency by operation of law occurs when although no relationship exists, the law regards what has been done by someone as having been done with the authority of some other person and therefore as his agent.
The actions of an agent binds the principal effectively. The agent is expected to always act within the scope of his authority and where he acts outside this scope, he bears the legal consequences of any negative outcome that may arise. An agent will not be held liable for his failure to execute an illegal act whether or not he has been paid. The agent is required to carry out his duty with the expertise, level of skill and experience possessed by him and he will not be held liable for negligence even if his efforts were not successful because the act was carried out with the skill and expertise possessed by the agent to the knowledge of the principal. The Privy Council in Omotayo v. Ojikutuheld that a principal who appoints an agent knowing his skills and experience is not entitled to expect or require from that agent a higher level of skill or knowledge than one of his position and experience could reasonably be expected to possess. In Incar Nigeria Plc & Anor v. Bolex Enterprises Nigerian Ltd, the Court of Appeal stated the scope of the authority of an agent.
It is a general rule that a person to whom a duty is delegated cannot delegate the same duty to another, this is enshrined in the Latin maxim ‘delegatus non potest delegare’ (a delegate cannot delegate). There is a confidential relationship between the agent and principal because the principal trusts the agent to act in his best interest and so the agent as a general rule may not delegate the duties given to him to another. To every general rule is an exception and so in Calico Printers Association v. Barclays Bank, it was held that where an agent has power to appoint a delegate or a sub-agent, the sub-agent becomes the agent of the agent and not of the principal, unless the principal has given authority to his agent not merely to appoint a delegate or sub-agent but to appoint someone to act as agent for the principal. It is important to note that there must be no conflict of interests between the principal and agent as seen in the case of Odudu v. Onyibe, where an estate agent sought to represent both the buyer and seller, the contract of agency was held by the Supreme Court to be illegal and unenforceable.
A contract made by an agent acting within the scope of his authority with a disclosed principal is in law the contract of the principal and so the principal can sue and be sued upon the contract. In a case where the disclosed principal is a foreigner or a foreign company in a domestic contract, he will still be liable upon the contract executed by his agent. Where an agent makes a contract in his name without disclosing that he acted on behalf of a principal, he can sue and be sued upon the contract.
The principal is expected to indemnify and pay the agent against all losses and for extra costs incurred in the performance of his duty. The right of the agent is to receive remuneration from the principal for all services rendered. The remuneration is usually in form of commissions and determined on the basis of quantum meruit where no express agreement is made. In Bryant v. Flight, the agent left the amount of payment he was to receive entirely to the principal, it was held that there was an implied term for some remuneration and the agent could recover on a quantum meruit basis.
An agency relationship is created by an agreement between the agent and principal and so the relationship can also be terminated by an agreement between both parties. Where the agency relationship was created for a definite period of time or to accomplish a purpose, the relationship comes to an end at the realization of the purpose or elapse of time.
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