Law of Agency Online Version

LAW OF AGENCY
(COMMERCIAL LAW I LECTURE NOTE)
Prepared by: MWUESE M. MNYIM L L M ( I f e ) ; B L ( A b j ) ; L L B ( I f e ) ; P G D E

(Kdn) mnyimmwuese@bsum.edu.ng; mnyimmwuese@gmail.com
1.0 INTRODUCTION
The Law of Agency is simply the law or legislation that relates to or governs the
relationship between a person1and his agent (being a person who acts on the other’s behalf). In
other words, the Law of Agency is that law that governs the relationship between people and
those who act on their behalf. Agency relationships have existed amongst men from time
immemorial for which reason the importance of this law can never be over emphasised. The
agency relationship can be said to date back to creation when God having created the world and
being in need of one to act on his behalf to rule over his creation, created man and delegated him
as his agent here on earth.2 In the same way that even God needed someone to act on his behalf,
so have men over the ages needed others to act on their behalf and even bind them especially in
transactions that are commercial in nature. Knowing that issues can ensue from every human
relationship some of which may not be palatable, the law has thus been created to govern agency
relationships.
Again, with the advent of globalisation the interaction and integration among people,
companies, and governments worldwide3 has greatly heightened. This has been made possible by
advancement in technology. Both of these have greatly impacted on the nature of commercial
transactions thereby creating a whole range of intricate and specialized commercial transactions
that may require new skill sets in order to engage in business in the commercial terrain. 4For
instance, with the combined effect of globalisation and advancement in technology, a peasant
Nigerian farmer may sit in Gboko and transact business with a buyer in Malaysia. They may
1
Referred to in such relationships as a principal.
2
Holy Bible, Genesis 1: 26-31.
3
The Levin Institute, What is Globalization? < https://www.globalization101.org/what-is-globalization/ >
accessed 1 October 2020.
4
This sometimes could be Information Communication Technology (ICT) skills.
1|Page LAW OF AGENCY -Lecture Note by M.M.Mnyim, LLM (Ife);
BL (Abj); LLB; PGDE (Kdn) mnyimmwuese@bsum.edu.ng
never meet each other physically (and do not even need to) by the aid of Information
Communication Technology (ICT) as long as they have the requisite ICT skill set. Where the
farmer devoid of ICT skills finds the ICT aided transaction to be too complex, he may need
someone with that skill set to act on his behalf as his agent. People generally need agents with
specialised skills in order to do business in terrains they cannot act for themselves, even in
common private transactions. A man, for example, may engage the services of a broker to effect
an insurance contract or a sale or purchase of shares in a company. To this end, agency has
assumed great relevance in modern day business practice.
Another consideration for the appointment of agents by owners (principals) has been said
to be because all men are not equally talented in doing business.5This inequality may be seen in
terms of their different technical knowledge as well as their skill and experience. For this reason
Agency has been described as a ‘miracle’6 since it enables a person who otherwise lacks capacity
to do something by way of a commercial transaction to do same with the help of another person
called his agent. To this end, it is inevitable that a person who is called a principal would be in
need of the services of another called the agent, for the singular reason that such other should act
on his behalf while transacting business with third parties.7
2.0 DEFINITION OF AGENCY
Like many other legal concepts, there is no definition to end all definitions of Agency.
Nonetheless, there are several definitions of Agency, some of which will be discussed here. For
instance, the Blacks’ Law Dictionary defines Agency as ‘a fiduciary relationship created by
express or implied contract or by law, in which one party (the agent) may act on behalf of
another party (the principal) and bind that other party by words or actions.’8 By this definition,
the agency relationship creates duties as between the parties, one of which is that the agent do
something or say something on behalf of his principal and in so doing or saying, bind him.
Again Agency has been defined:
5
MC Okany, Nigerian Commercial Law (Africana First Publishers Plc, 2009) 449.
6
Sigitas Mitkus and Vaidas Jurkevičius, Agency Law in Business Relationships: The Main Characteristics from a
Comparative Perspective < https://www.researchgate.net/publication/299401896 > accessed 24 September 2020.
7
ibid.
8
BA Garner (ed), Blacks’ Law Dictionary (7thedn, West Group St. Paul, 1999) 62.
A relationship between a principal and an agent in which the principal confers his or
her rights on the agent to act on principal’s behalf. Such a relationship is based on an
agency contract. The rights and duties of the agent and principal are in accordance
with the express or implied terms of the contract.9
Dale Baze has also given a definition of agency which covers not just what agency means
but goes into the responsibilities, obligations, and duties of the agent with regard to dealing with
third parties. According to him:
An agency is the legal relationship whereby one person, an agent, is authorized by

another, a principal, to act on that person’s behalf, and is empowered to do what the
principal could lawfully do in person. The axiom of agency is: “He who acts
through other acts himself.” The principal thus assumes all the responsibilities of
the acts of the agent in altering legal relationships with third parties on his behalf.
In so dealing, an agency is formed and brings into effect the law of agency, which
prescribes certain responsibilities and liabilities to the principal and the agent.
These rules of law also delineate responsibilities, obligations, and duties with
regard to dealing with third parties.
For Sigitas Mitkus and Vaidas Jurkevičius, ‘the law of agency deals with situations where
one person enters into legal relationships with another person by acting not personally but
through an intermediary.’10Though the definition appears simple, it essentially highlights that an
Agency relationship is a creation of law under which one party acts on behalf of another in
relation to others.
Another scholar who has pronounced on Agency is Fridman, who 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 effect the principal’s legal position in respect of strangers to the relationship
by the making of contracts on the disposition of the property.11
The Courts have also pronounced on what is Agency in a plethora of cases. For example
In Osigwe v PSPLS Management Consort Ltd.,12 the court per Ogbugu JSC adopted the
definition of Agency given in the Blacks’ Law Dictionary. 13Again in Dr.Tunde Bamgboye v.
9
USLEGAL, Creation of Agency <https://agency.uslegal.com/creation-of-agency/> accessed 2 October 2020.
10
n6.
11
GHL Fridman, The Law of Agency (Butterworths, 1971) 8.
12
(2009) LPELR-SC.244/2006.
13
n8.
University of Illorin & Anor,14the court per Onu JSC defined an Agent to mean ‘more or less the
same thing as a delegate.’
Agency is a relationship in which one person, agent, is permitted to act on behalf of and
under the directive and control of another, the principal. It is a situation whereby the principal
expressly or impliedly consents that the agent should act on his behalf so as to affect his
relationship with third parties and the agent similarly consents to so act. See generally, Global
Soap and Detergent Ind. Ltd v Bello, 15PHRC Ltd v Okoro,16NIBD v Olalomi Ind. Ltd.17Vulcan v
Gesellshaft,18and Modebe v Okadigbo.19
In every agency relationship, it is of utmost importance that the principal has full capacity
to enter into the contract.20 If the principal does not have the contractual capacity, he cannot
appoint or authorise someone to act for him.21 An agent, however, may be a minor and this is so
because the agent is not himself a party to the contract, 22 the contract is not personally his but
that of the principal. It is the principal and not the agent who can sue and be sued on the contract.
It is pertinent to note, however, that where an agent contracts for an undisclosed principal, that is,
the principal whose name and/or existence is not disclosed at the time of making the contract, the
agent can be sued on the contract even though the contract is not his.23
2.01 Key Legal Issues from the Definition of Agency
As earlier said, no one may ever be able to proffer a definition to end all definitions of Agency in
law. This problem of a lack of an all-encompassing definition is not peculiar to ‘Agency’ as it
traverses virtually all legal concepts and even the concept of law itself. Against this background,
any definition of Agency in law or any relationship that may be said to be an Agency
relationship in law should have the following features:
14
(1999) LPELR-SC.41/1993.
15
(2013) ALL FWLR (PT. 671) 1594 CA.
16
(2012) ALL FWLR (PT. 606) 466 CA.
17
(2002) 5 NWLR (PT. 761) 532 RATIO 5.
18
(2001) 4 NJSC151 AT 195.
19
(1992) 9 NWLR (PT. 263) 1 AT 20.
20
<https://s3-eu-west-2.amazonaws.com/the incapacitated principal > accessed 10 October 2020;
21
ibid.
22
Stephen Judge, Business Law: The Law of Agency < https://link.springer.com/chapter/10.1007/978-1-349-14962-
9_11 > accessed 4 October 2020; Global Soap and Detergent Ind. Ltd v Bello (supra).
23
West African Shipping Agency (Nig) Ltd v Musa Kala (1978) 3 SC 21; <https://www.theinsurancesurveyor.com >
accessed 10 October 2020
1. It is a legal relationship in that it is recognised in law.24
2. It exists between two people one of which is called the principal and the other the agent.25
3. The relationship is borne out of an agreement which could be express or implied.26
4. Within the relationship, one party (the agent) undertakes to act on behalf of another party
(the principal) in relation to a third party or parties.27
5. Within the relationship, one party (the principal) agrees to be bound by the actions taken
by the other party (the agent) on his behalf in relation to a third party or parties.28
6. While it is compulsory the principal has contractual capacity, same is not required of the
agent.29
2.02 The Legal Character of an Agency Relationship
This connotes the distinct legal features in Agency that make it different and distinct from other
forms of relationships in law. These include:
1. It is rooted in the law first in that it exists only where the law considers it to have arisen, 30
secondly in that the agent’s actions which affect the legal position of the principal are
within his lawful authority31 and finally in that, such actions affect the legal position of
the principal.32
2. It creates a fiduciary relationship between the principal and the agent.33
3. Where it exists, it creates two types of relationships the first as between the principal and
the agent, while the second is that between the principal, the agent and the third party. 34
The former could be described as ‘internal’ and the latter ‘external.’
24
John Holt & Co (Liverpool) Ltd v Jafa’aru (1958) NWLR 29.
25
PHRC Ltd v Okoro (2012) All FWLR (Pt. 606) 466 CA; Isa v Saje (2012) All FWLR (Pt. 644) 127 CA.
26
Upkanah v Ayaya (2011) All FWLR (Pt. 589) 1163 CA.
27
UBN Plc v Uwa Printers (Nig) Ltd (2011) All FWLR (Pt. 596) 578 CA.
28
B.B. Apugo & Sons Ltd v OHMB (2017) EJSC (Vol 55) 66 SC; PHRC Ltd v Okoro (supra); Ukpanah v Ayaya (supra)
29
Note 20; <https://www.coursehero.com> accessed 10 October 2020
30
John Holt & Co. (Liverpool) Ltd v Jafa’aru (supra).
31
Asaka v Raminkura (2015) All FWLR (pt. 787) 774 CA.
32
ibid.
33
Agency relationship: An Overview <https://www.shsu.edu/klett/agency et al> accessed 10 October 2020.
34
ibid.
4. It could be consensual35 (that is formed by agreement or consent of the parties being the
principal and the agent) and most often so. But sometimes it may not as in the case of
Agency by necessity or Agency by Estoppel.36
5. Application in situation where the principal’s legal position is affected;
2.03 The Legal Implications of Agency Relationship
By this connotes the effect of or that which ensues from an Agency relationship. Naturally,
Agency relationship as any other type of relationships are formed for a purpose. To this end,
what should ensue from an Agency relationship is the purpose for which it was created. Thus, the
legal implications of an Agency relationship include:
1. Any act done by the agent on behalf of the principal binds him.37
2. It creates privity as between the principal and the third party who is the subject of the
agent’s act. It is by virtue of this that rights and liabilities drawing from such act to the
third party devolve to the principal.38
2.04 An Agent Distinguished from similar Positions
An Agent may be confused with positions having similar characteristics. But there exists distinct
features in an Agent which may not exist in such similar positions. It is in fact such distinctive
features that serve to distinguish, set apart and make different the position of an Agent. Such
similar positions include the positions of a Servant and a Trustee. It is for this reason that a
distinction is being made between the position of an Agent and such other positions.
2.041 An Agent Distinguished from a Servant
35
ibid.
36
Lukan v Ogunsusi (1972) 5 SC 41 AT 43-45; RSUST v Okezie (2019) LPELR-46460 CA.
37
Asaka v Raminkura (supra).
38
Olaghere v PP & P (Nig) Ltd (2013) All FWLE (pt. 661) 1513; Ukpanah v Ayaya (supra); Isa v Saje (supra); Uwah v
Akpabio (2016) EJSC (Vol 38) 160 SC; Ania Lang, ‘Unexpected Contracts versus unexpected remedies: The
Conceptual Basis of the Undisclosed Principal Doctrine’ [2012] (vol 18) Auckland University law Review, 114-136
<https:www.azlii.org/journals> accessed 10 October 2020.
A servant may be confused with one who is an agent though a servant is not akin to an agent.
According to Blacks’ Law Dictionary however, a servant is ‘a person who is employed by
another to do work under the control and directions of the employer.39 For Wood, a servant is:
A person who, by contract or operation of law, is for a limited period subject to the
authority or control of another person in a particular trade, business or
occupation… The word servant, in our legal nomenclature, has a broad
significance, and embraces all persons of whatever rank or position who are in the
employ, and subject to the direction or control of another in any department of
labor or business. Indeed it may, in most cases be said to be synonymous with
employee.40
From the definitions above, it is clear that essentially the difference between a Servant and
an Agent lies in;
i. Relationship Type: What the parties are to each other in their relationship, in the
first, it is a servant to master relationship while in the latter it is an agent to
principal relationship.
ii. Number of Masters/Principals: While it is usual for a servant to serve only one
master, (and indeed it is said you cannot serve to masters, it is either you love the
one and hate the other, or else he will hold to the one, and despise the other 41) but
an agent can be an agent to several principals at the same time.
iii. Assignment of Duty: A servant in unique circumstances may assume the role of an agent
and act in that capacity. For instance, a Manager of a company is essentially a servant of
the company, but in dealing with certain matters on behalf of the company with third
parties, he may act as an agent as his acts bind the company as regards such third persons.
But an independent Agent who is not employed as a servant does not assume the role of a
servant as each of his acts on behalf of his principal binds the principal in relation to third
parties.
39
n8, P. 1372.
40
HG Wood, A Treatise on the Law of Master and Servant. Covering the Relation, Duties and Liabilities of Employers
and Employees (2nd edn, Albany, N.Y., J.D. Parsons, jr., 1886) p2.
41
The Holy Bible, Matt. 6:24.
iv. Control and Supervision: The extent of the control that is exercised over them.
While a servant is under the direct control, authority, supervision of the master, an
Agent is merely to act within the lawful instructions of his principal.
v. Authority to create contractual relationship: Beyond merely acting on behalf of
the principal, an Agent also has the authority to enter into contractual relations that
bind the principal and a third party. A servant does not have a similar authority.
vi. Mode of Remuneration: The way a Servant is remunerated for his work is different
from the way an Agent is also remunerated for the work done. While the remuneration of
a servant is paid in terms of salary or wages, an Agent is more often than not remunerated
by way of commission accruable on the volume of business transacted.
vii. Liability: The nature of liability suffered by a principal and a master are equally
different. For instance, a principal is only liable to third parties on contracts made on his
behalf by his agent within the scope of his authority as the principal’s agent. On the other
hand, a master is liable for any wrongful act of his servant insofar as it is done in the
course of the servant’s employment.
2.042 An Agent Distinguished from a Trustee
A Trustee may equally be confused with an Agent yet both relationships are not the same. A
Trustee has been defined as ‘An individual or corporation named by an individual, who sets
aside property to be used for the benefit of another person, to manage the property as provided
by the terms of the document that created the arrangement.’ 42 In sum, a trustee is the one made
the manager so to say, of a trust property.
Below are the basic differences between an Agent and a Trustee:
1. A Trustee is derived from a trust relationship while an Agent is derived from an agency
relationship.
2. A Trustee is made to manage a property 43 while an Agent may not have any authority over
the principal’s property as the subject matter of the agency may not relate to it.
42
The Free Dictionary, Trustee <https://legal-dictionary.thefreedictionary.com/trustee> accessed 6 October 2020.
43
Gilbert Kodilinye, An Introduction to Equity in Nigeria (Spectrum Books Ltd, 2009) 57.
3. The Trustee is usually vested with the legal title to which the trust relates 44 while the Agent is
never vested with the title to which the agency relates.
4. The acts of the Trustee over the trust property are done in his name 45 whereas though the
Agent’s acts are binding on the principal, he acts in the name of the principal.
5. It is not always the case that a trust is a contractual relationship 46 on the other hand, an
agency is more often than not, a contractual relationship.
6. More often than a trust is irrevocable 47 whereas, an agency is revocable safe it is with an
interest.
3.0 CLASSIFICATION OR TYPES OF AGENTS
Scholars have employed various grounds upon which to classify Agents into varying
types. For instance Okany classifies Agents first according to the extent of the Principal’s rights
of control and the nature of the acts to be performed by the agents, secondly according to the
liability imposed on the Agent and finally in terms of the particular functions performed by
agents.48 Be that as it may, Agents are generally classified into three major types. These are:
i. General Agent
ii. Special Agent; and
iii. Mercantile Agent
3.1 General Agent
According to the Blacks’ Law Dictionary, a general agent is one who is ‘authorised to
transact all the principal’s business of a particular kind or in a particular place.’ 49In other words,
when an agent is employed to conduct a series of duties which are within the scope of the
assignment given to him, he is a general agent. Under such arrangement, the agent employed and
authorised to carry out a particular business is not required to receive additional authorisation for
each transaction he conducts on behalf of the principal over such a business. To this end, even
third parties are prone to assuming that such an agent has the authority to do all that is usual for a
44
ibid.
45
Ibid, 57, 76, 77, 114, 115.
46
Ibid, 59.
47
ibid, 57; <https://www.rocketlawyer.com/irrevocable trust > accessed 10 November 2020.
48
n5, p454.
49
BA Garner (ed), Blacks’ Law Dictionary (10thedn, Thompson Reuters, 2014) 76.
general agent to do within such transactions. 50 Thus, any private restrictions on the agent’s
authority by the principal does not operate to affect the third party. Examples are Solicitors, sales
agents and the like.
3.02 Special Agent:
According to the Blacks’ Law Dictionary, a special agent is one ‘employed to conduct a
particular transaction or to perform a specified act.’ 51An agent may be employed and authorised
to perform a specific task such as selling real property (estate agent). Where an agent is to
perform a specific assignment, he is called a special agent. In this regard, he is authorised to
perform a single transaction and once the transaction is carried out, the agency ends. Against this
background, third parties are not prone to assume that he has unlimited authority to which end,
ultra vires act done by the agent cannot bind the principal.52
3.03 Mercantile Agent
The Blacks’ Law Dictionary defines a Mercantile Agent as one who is ‘employed to sell
goods or merchandise on behalf of the principal.’ 53 Section 1 of the Factors Act also defines a
mercantile agent as:
A person who, having in the customary course of his business as such agent,
authority either to sell goods, or to consign goods for the purpose of sale, or to buy
goods, or to raise money on the security of goods.
By this definition, the following are included;
i. Brokers Factors,
ii. Del credere Agent
iii. Auctioneers
iv. Partners; and
v. Bankers
50
Toppr, Classification of Agents <https://www.toppr.com/guides/business-laws-cs/indian-contract-act-
1872/classes-of-agents/> accessed 12 October 2020.
51
n49, p77.
52
n50.
53
n49, p77.
10 | P a g e L A W O F A G E N C Y - L e c t u r e N o t e b y M . M . M n y i m , L L M ( I f e ) ;
3.03.1 Brokers
A broker is an agent authorised to discuss prices, conditions or terms with respect to a

business transaction with a third party in order to make or procure a contract on behalf of his
principal.54 The broker does this and is paid compensation or brokerage. The compensation is
called commission. Real estate agents and stock brokers are examples.
A broker, unlike a factor, has no possession of the goods. Thus, he has no lien on them
(except, perhaps, an insurance broker who has a lien on the policy of insurance for his general
balance), and as such can only sue in his principal’s name. 55 In other words, a broker does not
take his principal’s goods in his possession; he cannot sue third parties in his own name unless
permitted by a custom of a particular trade. A broker can be an agent for both the buyer and the
seller. It follows that brokers and factors are mercantile agents, the main distinction between
these two classes of agents is that a broker is an agent who is authorised by his principal to
negotiate and conclude a contract for the sale of goods but without ever having been entrusted
with possession of them, whereas a factor is entrusted with the possession of goods for the
purpose of sale.
3.03.2 Factors
A factor is an agent authorised to sell goods of his principal for compensation. 56 The
principal allows the factor to be in possession of and control over the goods. The factor is
authorised to sell the goods and receive payments in his own name. He has a general lien on any
goods that fall into his possession as a factor and also on their purchase for the amount due to
him as remuneration from the principal.57
3.03.3 Del Credere Agent
54
Bryan, A. Garner, Black’s Law Dictionary (9th edn,Thomson Reuters, 2014), 219.
55
Ibid.
56
Ibid, 671.
57
https://www.ir.lawnet.fordham.edu accessed 10 November 2020.
A del credere agent is someone who sells the goods of his principal on credit and assures
or firmly promises his principal that the purchasers will pay for the goods. 58 If the purchaser
fails, the agent will have to pay for them. A del credere agent does this and is paid compensation
(del credere commission) on the sale.
This entails that a del credere agency is a contract of indemnity, in which the agent
merely promises to indemnify the principal should the third party fail to pay for the goods sold or
in the event of the third party becoming insolvent (that is, he is merely a guarantor of the buyer’s
solvency).59 He is, therefore, a surety of the buyer and his liability only arises contingently on the
buyer’s failure to pay up.
3.03.4 Auctioneers
An auctioneer is an agent who sells the goods of his principal at a public auction. 60 The
purchase price is paid to him. Where the purchaser fails or neglects to pay, the auctioneer can sue
for the purchase price in his own name.
3.03.5 Partners
A partner has been said to be one of two or more persons who jointly own and carry on a
business for profit.61According to the Partnership Act, each of the partners is an agent of all the
other partners in the partnership and at the same time, the principal of all the other partners in the
partnership.62To this end, every partner is said to be ‘the agent of the firm for the business of the
firm.’63
3.03.6 Bankers
In a way a banker could be an agent of the customer even though the general relations
between a banker and a customer are described as that between a debtor and creditor. A banker
58
n49, p76.
59
ibid.
60
Bryan A. Garner (n54), 149.
61
n49, p1205.
62
United Bank of Kuwait v Hammond (1988) 1 WLR 1051; A. Obi Okoye, Law in Practice in Nigeria: Professional
Responsibilities and Lawyering Skills (Snaap Press Nig Ltd, 2011) 254.
63
n50.
becomes the agent of the customer where he collects cheque to pay out monies as indicated by
the customer upon the cheque, buys or sells securities, interests, dividends, bills of exchange or
promissory notes on behalf of his customer. 64In such circumstances, the banker has a general lien
on all the securities of the customer in his possession in the event that the latter fails to pay him
his balance.65
4.0 FORMATION OR CREATION OF THE RELATIONSHIP OF PRINCIPAL AND

AGENT
The relationship of principal and agent may be created or formed in any of the following
ways.
4.01 Agreement (Express or Implied)/Contract
An agency relationship can be formed or created by the agreement of parties, one being
the principal and the other party agreeing to act as the agent to the principal. Such agreement
may be termed Express where a principal does a positive act to appoint an agent. But in other
circumstances, the agreement may be termed implied where a party acts as an agent for another
without prior agreement and such other though having the opportunity to refuse same failed to do
so.66 In such circumstance, the court would imply the existence of agency relationship by the
conduct of the parties as was in Biggar v Rock Life Insurance.67The agent may be appointed
orally or by letter or instrument of appointment or by deed, for example, Power of Attorney.
Where an agent is empowered or authorised to execute a deed, for instance conveyances or
leases, the authority to so act must be by deed. This was the position of the court in Abina and
Ors v Farhat,68same was upheld in Vulcan Gases Ltd v G.F. Industries.69
Where an agency relationship is through an agreement, such agreement must possess all
the essential elements of a valid contract to be sustainable or maintained. In determining whether
64
ibid.
65
ibid.
66
N. Kubasek, B.A. Brennan and M.N. Browne, The Legal Environment of Business: A Critical-thinking
Approach(Prentice Hall, 1999).
67
(1902) 1 K.B. 516; Ukpanah v Ayaya (supra); Isa v Saje (supra.
68
14 N.L.R. 17
69
(2001) 9 NWLR (PT. 719) 610 AT 664; See also Dada v Oshinkanlu (1995) 5 NWLR (pt 398) 755;
https://www.eaa.org.uk accessed 10 November 2020.
a valid contract of agency subsists or has been made, the general rules of law of contract are
applicable. Thus, there must be an offer and an acceptance of that offer and the purpose of the
contract must not be unlawful or against public policy. Just like other contracts, an agency
agreement can be vitiated by frustration,70 illegality,71 fraud,72 mistake,73 impossibility,74 duress
and undue influence.75 Consideration is, however, not essential to the creation of an agency
relationship, for one can be a gratuitous agent. The court gave voice to this in Isa v Saje.76
4.02 Agency by Ratification
This is a situation whereby the principal adopts an act or contract of an agent who did not
have the authority to act or who exceeded his authority. In other words, it is an act by the
principal showing the intention to be bound upon a previously unauthorised contract. This kind
of agency relationship is expressed in the Latin maxim omnis ratihabitio retrotrahitur et
mandato priori aequiparatur.
It is gratifying to note that for there to be a valid ratification, three conditions must be
present. These are: (a) The act must be on behalf of the principal; (b) There must be a competent
principal; (c) The principal must be legally capable of doing the act himself. These conditions
were captured in Firth v Staines77where Wright J spelt out the conditions thus:
To constitute a valid ratification, three conditions must be satisfied. First, the agent
whose act is sought to be ratified must have purported to act for the principal;
secondly, at the time the act was done the agent must have had a competent principal
and thirdly, the principal must be legally capable of doing the act himself.
The above statement was approved and applied in the Nigerian case of Ojugbele v Olasoji.78It is
pertinent to note that the principal may ratify the contract only if the agent made it clear to the
third party that he was acting for someone and the agent must have disclosed the name of his
70
Mazin Eng. Ltd v Tower Aluminium (1993) 5 NWLR (pt 295) 526
71
Melwani v Chandra Corp (1995) 6 NWLR (pt 402) 438 at 460.
72
Sule v Aromire (1951) 20 NLR 20.
73
Tabs Assurance Ltd v Awuzie Industries (Nig) Ltd (1995) 4 NWLR (pt 388) 223.
74
ACB v Alao (1994) 7 NWLR (pt 358) 614 at 634; C.P. Singh, ‘Termination of Agency’ < https://www.ikouniv.ac.in>
accessed 10 November 2020
75
Clifford Davies Mgt v WEA Records (1975) 1 WLR 61.
76
(2012) All FWLR (PT. 644) 127 CA.
77
(1897) 2 QBD 70 AT 75; Ofordum v Easy GEO International Ltd (2019) LPELR-46822 CA; Folachade v Duroshola
(1961) All NLR (pt 1) 87; <https://www.nigerian lawclaz.blogspot.com> accessed 10 November 2020.
78
(1980) FWLR 133 AT 140-433.
principal to the third party. The effect of ratification of the agent’s act is that the parties
concerned are put in the same position as that in which they would have been if the act ratified
had been previously authorised. See Mikano International Ltd v Ehumadu (2013) ALL FWLR
(PT. 667) 658 CA; Vulcan Gasesv Gesellshaft (SUPRA).
4.03 Agency by Estoppel
An agency relationship is created by estoppel 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 supposed agent. The principal will be estopped from denying the
existence of an agency relationship between him and the supposed agent. In such a situation, the
supposed principal will be bound by an act or omission of the supposed agent to the same extent
as if an agency relationship has existed between them. This position was affirmed by the
Supreme Court of Nigeria in Lukan v Ogunsusi79where it stated that:
When a person behaves in such a way as to lead another person to believe that he has
authorised a third person to act on his behalf and that other person in such belief
enters into such 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 be immaterial whether the ostensible agent had not the
authority whatsoever in fact; it would also not matter whether the ostensible agent
acted in excess of his usual authority.
This kind of agency relationship is based on the principle of holding out by the principal to the
third person or upon the apparent or ostensible authority of the agent.
Agency by estoppel may arise in a partnership where a partner does anything which is
within the scope of the partnership business. He would be taken to have acted for and on behalf
of the other partners in the business. Again, the law will imply an agency relationship in the case
of co-habitation.80 Where a man and a woman co-habit, it is implied that the woman has the
authority of the man to pledge his credit for necessaries, except where the man is able to prove
that the woman had enough money to purchase the necessaries.
79
(1972) 5 SC 41 AT 43-45; RSUST v Okezie (2019) LPELR-46460 CA
80
E.I. Nwogugu, Family Law in Nigeria (Heinemann Educational Books (Nig) Plc, 2006), lxxxviii;
<https://www.fabreads.org > accessed 10 November 2020.
Also, if a person conducts himself in a manner as to make others believe that he has
authorised another to enter into contracts on his behalf, he will be estopped from denying such
authority and therefore be bound by any such contract as if he had actually authorised it. A
classical judicial statement of the doctrine of agency by estoppel is found in Saul Raccah v
Standard Co. of Nig. Ltd.81In that case, W was employed to act as agent for the defendant for the
purchase of produce to the knowledge of the defendant’s representatives. Subsequently, its
representatives instructed W not to purchase produce any more for the defendant.
Notwithstanding this instruction, W induced the plaintiff to enter into a contract to sell produce to
him. The plaintiff had previously dealt with ‘W’ as agent for the defendant and had believed that
W still retained the authority of the defendant. The plaintiff in the action claimed from the
defendant the contract price of the produce supplied to W. It was held that the claim succeeded.
The court observed as follows:
…where any person by words or conduct represents or permits it to be represented

that another person has authority to act on his behalf, he is bound by the acts of such
other person with respect to anyone dealing with him as an agent on the faith of such
representation to the same extent as if such other person had the authority he was so
represented to have.
See also Isa v Saje (Supra).
4.03.0 Essential Elements of Agency by Estoppel
There are certain essential elements that must be present and specifically proved for a plea
of agency by estoppel to succeed. These elements are enunciated in Rama Corporation v Proved
Tin and General Investment Ltd82which is a locus classicus of the essential elements of agency by
estoppel where Slade J said:
…a person cannot call in aid an estoppel unless three ingredients are present (1) a
representation (2) a reliance on the representation (3) an alteration of his position
resulting from such representation.
Aside the above (the above 3 elements), it is pertinent to note that a party seeking the aid
of estoppel must himself have acted honestly and without knowledge that the supposed agent had
no or had exceeded his authority, if that being the case. This is because estoppel is an equitable
81
(1922) NLR 48.
82
(1952) 1 ALL ER 554 AT 556; RSUST v Okezie (2019) LPELR-46460 CA; Adeniji v Jadesimi (1976) 3 (pt 1) Oyo SHC
142 at 145
remedy and the equitable maxim is that he who comes to equity must come with clean hands and
must have acted without blemish.83
4.04 Agency of Necessity
Agency of necessity is created where the law gives authority to a person to act for and on
behalf of another even though the two of them did not agree to such an agency relationship. This
usually happens where the agent is under a legal or moral duty to act.
For an agency relationship to be created by necessity, there must be an emergency

warranting the agent to act the way he acted and it must have been impossible to get in touch with
the principal so as to receive instructions from him. Again, the agent must have acted in good
faith. An example will suffice. There is a ghastly motor accident along Makurdi-Gboko Road
leaving Senenge deeply unconscious. Senenge’s husband, Aondosoo, is not aware of the
accident. Kwaghfan, a passer-by who does not even know Senenge and her husband, took her to
the General Hospital, Gboko for treatment. The medical bill is N50, 000.00 only. Kwaghfan is
Aondosoo’s agent of necessity and he, Aondosoo, is bound to pay the N50, 000.00 even though
he did not authorise Kwaghfan to take his wife, Senenge, to the hospital. See Hutchinson v
Madam Olagide Omowumi (1870) NNLR 3; Isa v Saje (SUPRA); RSUST v Okezie (2019) LPELR-
46460 CA.
5.0 THE AUTHORITY OF AN AGENT
The authority of an agent may be express (actual), implied or apparent.
5.01 Express or Actual Authority
An agent has an express authority of his principal where the principal has by words of
mouth or a written instrument, for instance, a Power of Attorney, permitted the agent to enter into
a contract with a third party on behalf of the principal. Where an agent is given such express
authority, an act done by him which is within the limits of the authority so given will bind the
principal and the third party. The act done by the agent is as stipulated in the agency agreement.
83
See also President Clothing and Co. Ltd v Anyanwu (1975) LLR 1.
See generally Asaka v Raminkura84;Milchell v Charaff85; Nigerian Ports Authority v Cogefar 86;
Nasidi v Mercury Assurance Co. Ltd.87
5.02 Implied Authority
Implied authority is also known as apparent or ostensible authority. It is an authority that

is deduced from the actions or behaviour of the parties without express authorisation. 88 Here, the
principal may be bound by third parties because the agent appears to have authority, though as
between principal and agent there was in fact no authority and normal consequences of such
authority did not arise. See the case of Union Bank of Nig. Plc v Ofagbe Fans Ltd.89
Implied authority may also arise where an agent who has been authorised to perform a
particular task goes ahead to take some incidental actions in relation to the task he was employed
to perform. An illustration will suffice. A has a petrol filling station and has employed B to sell
petrol. In the course of this work, the pump develops a fault. B has invited C to repair the pump.
A is bound to pay C and this is so because B has A’s implied authority to employ someone and in
this case C to repair the pump. The action of B contracting with C for the repair of the pump is
incidental to the actual authority B has to sell the petrol.
6.0 RELATIONSHIP BETWEEN PRINCIPAL AND AGENT
The agency relationship is governed by the terms of contract created by the parties. Where
a party breaches any of the terms of the contract, he is liable to the other party for such a breach.
Beyond the duties created by the terms of the agency contract, the law imposes some duties upon
the agent and the principal. These are considered hereunder.
6.01 Duties of Agent to Principal
These entail the legal obligations the Agent has towards the principal, the breach of which makes
him liable to the Principal.90 These include:
84
(2015) ALL FWLR (PT. 787) 774 CA.
85
(1942) 8 WACA 99.
86
(1972) NCLR 199.
87
(1971) 1 NCLR 387.
88
Biggar v Rock Life Insurance (supra); Ukpanah v Ayaya (supra); Isa v Saje (supra)
89
(2003) FWLR (PT. 142) 39 AT 43.
i. Duty to Perform
ii. Duty of Care and Skill
iii. Duty of Loyalty or Obedience
iv. Duty to Keep Account
v. Duty to Notify the Principal
6.01.1 Duty to Perform
An agent is under the obligation to carry out the duty contained in the agency agreement. 91
Where the agent fails or neglects to execute his agreement in accordance with its terms, he may
be in breach of the agency and therefore liable to the principal for the breach. If, however, he
performs such duties carelessly or in an imperfect manner and thereby causes loss to his
principal, he may in addition be liable for negligence. Such liability may take the form of an
action for damages for the loss suffered by the principal or an indemnity or contribution from the
agent in favour of the principal. SeeFraser v Furmon (Production) Ltd.92
The agent is, however, not obliged to perform the terms of his agency if these are illegal
or null and void. If he fails to perform them at all, he would not be liable for non-performance. If
he performs improperly or negligently, he would nonetheless not be liable to the principal. In
Cohen v Kittle,93the plaintiff employed the defendant to place bets on commission on his behalf.
The defendant failed to make certain bets pursuant to the plaintiff’s order and the plaintiff sued
him for breach of contract as his agent. In his action, he claimed as damages, the excess of gains
over losses which should have been received by the defendant had the bets in question been
placed after deducting the amount of his commission. It was held that as by section 18 of the
Gaming Act, 1845, the bets would not have been recoverable at law. The plaintiff could not
therefore maintain an action.
90
Asaka v Raminkura (supra); Osigwe v PSPLS Mgt Consort Ltd (supra); UBN PLC v Uwa Printers (Nig) Ltd (supra);
notes 8 and 9.
91
<https://www.shsu.edu/klett/agency et al > accessed 10 November 2020.
92
(1967) 3 ALL ER 57; <https://www.courses.lumenlearning.com/agent’s personal liability for torts and contracts >
accessed 10 November 2020; <https://www.repository.law.indiana.edu/liability of an agent in tort> accessed 10
November 2020; <https://www.core.ac.uk > accessed10 November 2020.
93
(1889) 22 QBD 680.
If an agent is a gratuitous agent, he will not be liable for breach of duty to perform.
However, if he elects to perform such a duty, he would come under a duty of care when
performing and thereby may become liable for negligent performance.
6.01.2 Duty of Care and Skill
In executing the terms of the agency, the agent must exhibit utmost or reasonable care,
skill and diligence. He must exhibit high standard of performance and must not be careless. The
agent must handle the goods of the principal properly so that they are not destroyed. Ubn Plc v
Uwa Printers(Nig) Ltd94; Omotayo v Ojikutu95; Baxter v Gapp and Co. Ltd.96
6.01.3 Duty of Loyalty or Obedience
An agent must promote the interest of his principal. He must not do anything that is in
conflict with the interest of his principal. In this regard, the agent must not disclose confidential
information about the principal and must not compete with the principal. He must also not make
secret profits.
The duty of loyalty also requires the agent not to use confidential information acquired in
the course of the agency to the disadvantage of the principal. Where, to the knowledge of the
third party, the agent has allowed his interest to conflict with his obligation to his principal, the
contract is voidable at the option of the principal.97
6.01.4 Duty to Keep Account
An agent is under a duty to keep accurate accounts of money and property received or
spent by him on behalf of the principal. The duty to account involves keeping accurate records of
amount of money involved in every transaction, dates of transaction, not having to join his money
with that of his principal and not to misuse the property belonging to the principal. The Supreme
Court of Nigeria in Godwin v CAC98stressed this duty when it held that it is the duty of every
94
(2011) ALL FWLR (PT. 596) 578 CA.
95
(1961) ALL NLR 901.
96
(1939) 2 ALL ER 752.
97
Odudu v Onyibe(2001) 13 NWLR (PT. 729) 140 AT 157.
98
(1999) 14 NWLR (PT. 584) 162 AT 173.
agent to keep the money and property of his principal separate from his own and that of any other
person.
6.01.5 Duty to Notify the Principal
The agent is under a legal duty to keep the principal abreast with important information he
acquired from third parties while acting on behalf of the principal. The duty of notification is
essential considering the fact that whatever information acquired by the agent in the course of the
agency is deemed to have been acquired by the principal.99
6.02 Duties of Principal to the Agent
Where the agent has discharged his duties to the principal, the latter is under a
corresponding duty to do the following.
6.02.1 Compensate the Agent
The agent is entitled to remuneration or compensation for work done on behalf of the
principal. Where the agent and the principal have agreed on the remuneration to be made, the
principal is bound to pay such remuneration. Where there is no such agreement, the law requires
the principal to pay what is reasonable.100
6.02.2 Reimburse or Indemnify the Agent
Where the agent has expended his own money on behalf of the principal in rendering his
services, the principal is under a duty to reimburse or indemnify the agent. The principal will be
bound to perform this duty only if the expenses incurred by the agent were authorised by the
principal within the scope of the agency and necessary to discharge the duties of the agent in the
course of the agency.101
6.02.3 Duty to Protect the Agent
The principal is under a duty to provide safe working conditions in order for the agent not
to be injured while acting for and on behalf of the principal.
99
Igben v Etawarie(1971) 1 NCLR 85.
100
Luther v Mandilas and Karaberis Ltd (1958) 3 FSC 98.
101
Christoforides v Terry (1924) AC 566; Coker v Wickliffe (1944) 17 NLR 110.
7.0 REMEDIES FOR BREACH
The breach of agency relationship may give rise to a claim for damages or other remedies
available to the innocent party. The innocent party may be the principal or the agent and the
remedies available to either of the parties may depend on the terms of the agency agreement, the
nature of the breach and the circumstances of the particular case. These remedies are discussed
hereunder.
7.01 Remedies Available to the Principal
These remedies include the following:
7.01.1 Dismissal
The principal may bring the agency relationship to an end or otherwise dismiss the agent
from his employment without notice due to a breach of the agency agreement. In an action of the
agent for wrongful dismissal or for indemnity, the principal may set up the agent’s breach as a
complete defence to the action.
7.01.2 Rescission and Damages
The principal may also rescind any contract made on his behalf without authority.
Additionally, the agent may also be accountable to the principal for any damage resulting from
the breach and may be required to refund any secret commission or profit made or any other
advantage obtained therefrom.102
7.01.3 Action for Account
The principal may take an action to compel the agent to render an account of all his dealings
on his behalf in respect of their agency relationship. The agent may also be made to account for
any money or other property had and/or received on behalf of the principal in the process of
executing the terms of the agency.103
102
Armstrong v Jackson (1917) 2 K.B 822 AT 825 TO 826.
103
Godwin v CAC (Supra).
7.01.4 Action in Tort
The principal may in addition sue the agent for conversion where the agent had received
property on his behalf and has misappropriated or misused it. The principal may also institute an
action in negligence based on the negligent performance or discharge of duties by the agent
provided the agency relationship is not contractual. In respect of conversion, see Ihenacho v
Uzochukwu.104In respect of negligence, see Odinaka vMoghalu.105
7.01.5 Private Prosecution
The principal is also entitled to take out a direct criminal summons against the agent
where the agent’s conduct, act or omission is criminal in nature. This will be in addition to the
principal’s remedy in damages.
7.01.6 Withholding of Commission or Remuneration/an Action to Recover Same
The principal may refuse to pay the agent his commission or other remuneration in
connection with the transaction or to sue for the recovery of any commission already paid to the
agent. In Andrews v Ramsay & Co,106‘A’ instructed ‘R’ to sell a property and agreed to pay him
fifty pounds commission. R sold and received one hundred pounds from the purchaser as deposit,
of which he paid fifty pounds to A, retaining the other fifty pounds in payment of his commission
with A’s consent. A learnt that R had also received twenty pounds as commission from the
purchaser, and sued to recover the twenty pounds and also the fifty pounds he had paid to R. It
was held that he was entitled to recover both sums from R.
7.02 Remedies Available to the Agent
If the principal is in breach of any agency agreement or any term thereof, the agent is
entitled to and may claim any of the following remedies.
7.02.1 Action for Damages
104
(1997) 2 NWLR (PT. 487) 257 (SC).
105
(1992)4 NWLR (PT.233)1 AT 15 (SC).
106
(1903) 2 KB 635.
The agent may sue the principal to recover any loss or injury he may have suffered as a
result of the principal’s failure to perform any of his duties under the agency relationship. The
agent may also sue the principal and claim damages for the principal’s failure to pay him any
agreed remuneration or commission.107
7.02.2 Right of Set-off
In an action of the principal against the agent, the agent may claim a right of set-off or
counter claim of any amount due to him from the principal by way of remuneration, indemnity or
reimbursement. This must be specifically pleaded by the agent in his defence on the claim by the
principal.
7.02.3 Right of Lien
The agent has a right of lien on the property, goods or chattels of his principal in his
lawful possession or custody in respect of and up to the amount of his claim for remuneration,
losses, liabilities and expenses lawfully incurred and for advances made in favour of the
principal. This right is subject to any agreement between the principal and the agent.
Two types of lien are recognised under the law. These are the general lien and particular
lien. A general lien enables the agent to retain his principal’s property, chattels or goods until any
sum due to him by the principal is paid. A particular lien only enables an agent to retain such
property, chattels or goods pending payment of any sums due in respect of that property, chattels
or goods.
7.02.4 Right of Stoppage In-transitu
Where the agent stands towards his principal in the position of any unpaid seller of goods,
he may exercise the right of stoppage in-transitu against the goods of his principal. He stands in
such a position where having bought goods for his principal, he pays the seller with his own
money or incurs a personal liability to the seller for the price.
7.02.5 Other Remedies
107
Luther v Mandilas (Supra).
The agent may demand an account by the principal where there is reciprocal indebtedness
by the parties to each other. He may also be entitled to withhold further performance of the terms
of the agency where there has been a continuing breach by the principal.
Also, where an agent in the course of executing the terms of his agency becomes
possessed of property, goods or chattels or money to which conflicting claims have been made by
his principal and a third party, he may claim relief by way of inter-pleader summons. If he
delivered the same in accordance with the decision of a competent court, he incurs no personal
liability to his principal.
8.0 RELATIONSHIP OF PRINCIPAL AND AGENT TO THIRD PARTIES
It sometimes happens that contracts entered into by agents on behalf of their principal are
broken or breached. It, therefore, becomes necessary to determine who can sue and be sued on
such contracts. In this regard, the law determines when an agent is personally liable to the third
party in a contract entered into on behalf of his principal and when the principal is liable to the
third party on the contract created by the agent.
The liability of either the agent or principal depends on whether as at the time of the
contract with the third party, the agency was fully, partly or not disclosed. An agency is said to be
fully disclosed if as at the time of making the contract, the agent makes known to the third party
that he is acting for the principal and the agent goes ahead to give the principal’s name and
particulars. Thus, the contract created by the agent is between the principal and the third party.
In this case, it is the principal and not the agent who can sue and be sued on anything done or
neglected to be done by the agent. See Uwah v Akpabio108; CNE Investment Nig. Ltd v Asco
Investment Nig. Ltd109;Akalonu v Omokaro110; Oforkaja v Taraba State Government.111
If the agent has disclosed the existence of his principal to the third party but has failed or
neglected to disclose his name or identity, the agency is said to be partially disclosed. The
principal is, therefore, called partially disclosed principal. In this circumstance, both the principal
and the agent are liable on third party contracts. The agent will also be liable for the reason that
108
(2016) EJSC (VOL. 38) 160 SC.
109
(2012) ALL FWLR (PT. 611) 1588 CA.
110
(2003) FWLR (PT. 175) 493 AT 504 TO 505.
111
(2003) FWLR (PT. 178) 1036 AT 1063.
the third party relied on the agent’s reputation, integrity and credit since the principal’s identity
was not disclosed.112
If the agent does not disclose the name and existence of the principal, the agency is said
to be undisclosed and the principal is called undisclosed principal. Under this circumstance, the
agent who made the contract in his own name without disclosing the name and existence of the
principal is personally liable in the contract to the third party even though he, in fact, acted on the
principal’s behalf. First Bank of Nig. Plc v Excel Plastic Industries Ltd (Supra).
8.01 TORTS AND CRIMES COMMITTED BY THE AGENT
A principal is liable for the civil wrong committed against third parties by the agent who
acts within the scope of his actual or apparent authority. An agent is also liable for the tort
committed by the principal where the agent has (1) attained the age of criminal responsibility; (2)
perpetrated the act or omission constituting the particular crime (actus reus). Cotecna Int’l Ltd v
Churchgate (Nig.) Ltd.113Both the agent and principal are jointly and severally liable for trespass
committed on behalf of the principal.114
Regarding the personal responsibility of the principal, he is not personally responsible for
the crimes committed by his agent in the course of his employment. The principal will, however,
be responsible if he participated in the perpetration of the particular crime or ratifies it. He will be
held to have satisfied this position if he was found to have abetted, aided, authorised, connived,
instructed, counselled, procured or personally taken part in the commission or omission
constituting the offence in question. See APC v PDP.115 In Oyegun v Igbinedion,116the court held
that an elected candidate could not have his election nullified on the ground of corrupt practices
or any irregularity committed in the process of an election unless it could be proved that the
candidate expressly authorised that irregularity.117
8.02 VICARIOUS RESPONSIBILITY OF PRINCIPAL

112
First Bank of Nigeria Plc v Excel Plastic Industries Ltd (2003) FWLR (PT. 160) 1624 at 1659.
113
(2011) ALL FWLR (PT. 575) 252 SC.
114
Dunu Merchants Ltd v Obanye (2015) ALL FWLR (PT. 765) 267 CA; Salau v Araba (2004) ALL FWLR (PT. 204) 88 AT
103, RATIO 18.
115
(2015) EJSC (VOL. 14) 1 SC.
116
(1992) 2 NWLR 747.
117
See also ACB Ltd v Agbanyim (1960) 5 FSC 19; Coker v Wickliffe (Supra); Dosumu v Lamboye (1971) 1 NCLR 313.
At common law, the general rule is that the principal is not ordinarily vicariously
responsible for a crime committed by his agent in the course of his employment. In Tesco
Supermarket Ltd v Natrass,118the general principle was stated by Lord Diplock as follows:
Save in cases of strict liability where a criminal statute exceptionally makes the doing
of an act a crime irrespective of the state of mind in which it is done, criminal law
regards a person as responsible for his own crime only. It does not recognise the
liability of a principal for a criminal act of his agent because its agent’s state of mind-
qui peccat per aliumpeccat per se is not a maxim of criminal law.
The above dictum raised the issue of when a statute should be considered as having
created a strict liability offence. The general test applied in determining this is whether the duty
or offence created is or has been rendered absolute thereby. If it has or is, the principal is
responsible just as the agent whether he has expressly delegated his duty under the statute to his
agent or not and regardless of any intent, knowledge or mens rea.
In addition to strict liability offences, a principal may be vicariously liable at common law
in cases of libel and public nuisance. For general vicarious liability of the principal, see SGBN
Ltd v Eleganza Ind. Ltd.119
9.0 TERMINATION OF AGENCY RELATIONSHIP
An agency relationship may be determined in either of the following ways; by the act of
the parties or by operation of law.
9.01 Termination by the Act of the Parties
This is where the end of the Agency relationship is occasioned by an overt act or something done
by one or both of the parties with the intent of bringing the agency relationship to an end.
9.01.1 Termination via Agreement
Subject to the principle of irrevocable authority, an agency relationship may be terminated

by the parties by agreement. Under this situation, the agent and the principal mutually agree that
the agency relationship should come to an end when it is no longer beneficial to them or suits
118
(1971) 2 ALL ER 127.
119
(2004) 8 NWLR (PT. 875) 432.
their purpose. The agreement to terminate the agency relationship may be incorporated into the
original agreement creating the agency or it may be made at a later date.120
9.01.2 Termination by Revocation
Another method of termination of agency relationship by the act of the parties is by

revocation of the agent’s authority by the principal. For revocation to be effective, notice thereof
must be given to the agent and the third party. Where the principal revokes the authority of the
agent and such revocation is not in accordance with the terms of the agency agreement, the agent
may sue the principal to recover damages.121
9.01.3 Renunciation
An agent through the act of renunciation may terminate an agency relationship. In this
regard, the agent unilaterally ends the agency relationship between himself and his principal.
Renunciation is effective only if notice thereof is given to the principal. The principal will,
however, not be entitled to notice of renunciation where he has breached any of his duties to the
agent.122
Renunciation by the agent may be effected by a written instrument or by word of mouth

or simply by refusing to act. If the renunciation is wrongful, the agent may be liable to the
principal for the damage or injury sustained by the principal as a result.
9.02 Termination of Agency Relationship by Operation of Law
There are certain conditions and circumstances whereby the law may intervene to bring to
an end an agency relationship. These are:
i. By Performance
ii. By the death of the principal or agent
iii. By the insanity of the principal or the agent
iv. By frustration or change in circumstances
v. By efluxion of time
120
NIDB v Olalomi(2002) 5 NWLR (PT. 761) 532.
121
NIDB v Olalomi (Supra); Raccah v Standard Co. of Nig. Ltd (1922) 4 NLR 48.
122
NIDB v Olalomi (Supra).
vi. By the bankruptcy of the principal
9.02.1 By Performance
If the authority of an agent was given to achieve a specific result or object, it is natural
that such authority terminates upon the object of the power being so accomplished or achieved.
Thus, it has been held that the authority of a Solicitor engaged to prosecute a particular case
ceased at judgment in that case. Similarly, if the authority of an agent was given to perform a
specific task or carry out a specific transaction, his authority ceases automatically by the
accomplishment or completion of that task or transaction. In Blackburn v Schole,123 Lord
Ellensborough held that a broker who was engaged to sell goods became functus officio when the
goods were sold.
9.02.2 By Death of Principal or Agent
Death of either the principal or the agent operates to terminate an agency relationship.
Where the principal has died, the law considers the agency relationship he entered into with his
agent as having come to an end. If the agent still acts on behalf of the dead principal, the contract
created by the agent with the third party is of no effect. The situation will still be the same even
where the agent had no knowledge of the death of the principal. Thus, in Smouth v Ilbery,124 a
butcher who sued for the price of meat supplied to a woman whose husband had died at the
material time was held unable to recover such price from the deceased husband’s estate, because
the authority of the wife to buy on her husband’s behalf had been revoked by the death of the
husband. In such a situation, however, the agent will be liable to the third party in damages for
breach of an implied warranty of authority. See also Friend v Young125where it was held that the
death of the agent also determines the agency.
It is pertinent to note, however, that where an agency gives the agent an irrevocable
authority, the death of the principal or agent does not terminate the agency relationship. An
irrevocable agency is one in which the agent’s authority is coupled with an interest. This may
arise where a party has a property interest in the subject matter of the agency and the authority is
123
(1810) 2 CAMP 341.
124
(1842) 10 M AND W 1.
125
(1897) 2 CH. 42.
granted for the purpose of protecting that interest. In other words, this takes place where the
agency is created for the purpose of securing the interest of the agent. Thus, in Smart v
Danders,126 a principal consigned goods to a factor for sale and the factor lent money to the
principal in consideration of a promise by the principal not to revoke the factor’s authority to sell
the goods. It was held that the authority was irrevocable.
In Gaussen v Morton,127 X owed Y a sum of money and, in order to discharge the debt, he
executed a Power of Attorney by which he authorised Y to sell certain parcels of land belonging
to him (X). He later purported to revoke the authority, but Y ignored the purported revocation
and sold the land. It was held that Y was entitled to act as he did, because the authority given to
him was coupled with an interest (namely, payment of the debt) and so irrevocable.
It stands to reason that where authority is genuinely coupled with an interest, it will be
secure not only from termination by notice, but also from termination as a result of the death,
insanity or bankruptcy of the principal.128 An example will further suffice. If the principal owes
the agent N1000.00 and he (the principal) delivers goods to the agent, authorising the agent to
sell them for the principal’s account, and to deduct from the proceeds N1000.00, the agent’s
agency is coupled with an interest. The death, insanity or bankruptcy of the principal will not
deprive the agent of the right to act for his own protection.
9.02.3 By Insanity of Principal or Agent
Insanity of the principal or agent operates to terminate the agency relationship except in
cases of irrevocable authority. Once the principal is insane, he becomes incapable to act for
himself and if he cannot act for himself because of his insanity, the agent can no longer act for
him.129
9.02.4 By Frustration or Change in Circumstances
Frustration or change in circumstances which renders the subject matter of the agency
unlawful or impossible to accomplish terminates an agency relationship. Frustrating
126
(1848) 5 C.B. 895.
127
(1830) 10 B AND C 731.
128
Spooner v Sandilands (1842) 62 ER 939.
129
Drew v Nunn (1879) 4 QBD 661; Young v Toynbee (1900) 1 KB 215.
circumstances may include outbreak of war, destruction of the subject matter of the agency
contract, change in law, etc. Thus, in Stevenson & Sons Ltd v Aktfur Cartonnagen Industries,130it
was held that the outbreak of war between England and Germany automatically puts an end to the
agency between an English company and its German principal.
9.02.5 By Efluxion of Time
Where the agency contract gives a specific period of time for the agent to act on behalf of
the principal, the law considers the agent’s authority to act to have come to an end when the
period of time to act expires.131 This will still be the case even if the task to be performed by the
agent has been carried out or not.
9.02.6 By Bankruptcy of the Principal
An agency relationship will be terminated where the principal is bankrupt. 132 A principal
is said to be bankrupt where he does not have enough money to pay his debt. It is gratifying to
note that bankruptcy of the agent does not, however, operate to terminate an agency
relationship.133
130
(1918) AC 239.
131
n33.
132
ibid.
133
Patton Briggs, ‘The Insolvency of Agents- When Agency Agreements are Irrevocable’
<https://www.lexology.com> accessed 8 November 2020.

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LAW OF AGENCY

(COMMERCIAL LAW I LECTURE NOTE)

Prepared by: MWUESE M. MNYIM L L M ( I f e ) ; B L ( A b j ) ; L L B ( I f e ) ; P G D E

2.0 DEFINITION OF AGENCY

Again Agency has been defined:

An agency is the legal relationship whereby one person, an agent, is authorized by

2.01 Key Legal Issues from the Definition of Agency

2.02 The Legal Character of an Agency Relationship

2.03 The Legal Implications of Agency Relationship

2.04 An Agent Distinguished from similar Positions

2.041 An Agent Distinguished from a Servant

2.042 An Agent Distinguished from a Trustee

Below are the basic differences between an Agent and a Trustee:

3.02 Special Agent:

3.03 Mercantile Agent

By this definition, the following are included;

A broker is an agent authorised to discuss prices, conditions or terms with respect to a

3.03.3 Del Credere Agent

4.0 FORMATION OR CREATION OF THE RELATIONSHIP OF PRINCIPAL AND

4.01 Agreement (Express or Implied)/Contract

4.02 Agency by Ratification

4.03 Agency by Estoppel

An agency relationship is created by estoppel where a supposed principal intentionally or

…where any person by words or conduct represents or permits it to be represented

4.03.0 Essential Elements of Agency by Estoppel

4.04 Agency of Necessity

For an agency relationship to be created by necessity, there must be an emergency

5.0 THE AUTHORITY OF AN AGENT

The authority of an agent may be express (actual), implied or apparent.

5.01 Express or Actual Authority

5.02 Implied Authority

Implied authority is also known as apparent or ostensible authority. It is an authority that

6.0 RELATIONSHIP BETWEEN PRINCIPAL AND AGENT

6.01 Duties of Agent to Principal

6.01.1 Duty to Perform

6.01.2 Duty of Care and Skill

6.01.3 Duty of Loyalty or Obedience

6.01.4 Duty to Keep Account

6.01.5 Duty to Notify the Principal

6.02 Duties of Principal to the Agent

6.02.1 Compensate the Agent

6.02.2 Reimburse or Indemnify the Agent

6.02.3 Duty to Protect the Agent

7.01 Remedies Available to the Principal

These remedies include the following:

7.01.2 Rescission and Damages

7.01.3 Action for Account

7.01.5 Private Prosecution

7.01.6 Withholding of Commission or Remuneration/an Action to Recover Same

7.02 Remedies Available to the Agent

7.02.1 Action for Damages

7.02.2 Right of Set-off

7.02.3 Right of Lien

7.02.4 Right of Stoppage In-transitu

7.02.5 Other Remedies

8.0 RELATIONSHIP OF PRINCIPAL AND AGENT TO THIRD PARTIES

8.01 TORTS AND CRIMES COMMITTED BY THE AGENT

8.02 VICARIOUS RESPONSIBILITY OF PRINCIPAL

9.0 TERMINATION OF AGENCY RELATIONSHIP

9.01 Termination by the Act of the Parties

9.01.1 Termination via Agreement

Subject to the principle of irrevocable authority, an agency relationship may be terminated

9.01.2 Termination by Revocation

Another method of termination of agency relationship by the act of the parties is by