NAME: Ayantayo Tolulope T.

Matric No: 199315

LEVEL: 400

COURSE TITLE: Law of Commercial Transactions II

QUESTION: Agency is 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 or the disposition of property." GHL Fridman, The Law of Agency, (7 th
Edition, 1996) p. 11
Discuss.
What is Agency?

Agency refers to an agreement, explicitly stated or implied by which one party, called the
principal, entrusts the management of a business to another party, called the agent, to carry
out transactions on his account or in his name, and the agent agrees to carry out the business
and render an account of his proceedings.
In the Oxford Companion Law, the term agency is defined as:
“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”
The American Restatement on Law of Agency describes the term as:
“ a term which in its broadest sense includes every relationship in which one acts for or
represents another by his authority but in the law of principal and agent, the term signifies the
fiduciary relations which result from the manifestation of consent by one person to another
that the other shall act on his behalf and subject to his control and consented by the other so
to act”.
The Agency law deals with agent-principal relationships; that is a relationship where one
party has the legal authority to act in place of another. Relationships that are commonly
associated with agency law include employer-employee, administrator-decedent or executor,
and guardian-ward.

Origin of Agency
The origin of the modern law of agency can be traced to the early medieval period where
instances of the institution were identified in some rudimentary forms. Some early English
writers traced these to the English doctrine of Uses. Although the rudimentary form of an
agency can be isolated and perceived, there was no developed legal institution which could
be strictly described as agency. There was therefore very little law on the subject at the time.
In fact, the designation ‘agent’ or ‘agency’ was not used under the English Common Law
before the seventeenth century. The idea of representation or agency was as of that time
subsumed with other service functions or auxiliaries, especially the master-servant
relationship. With the development of commercial life, in many ways, such as the growth of
trading companies, the law of agency grew in importance and extent and eventually emerged
as a separate concept distinct from the relationship of master and servant. Its further
development was aided and encouraged by the introduction of both equitable and civil rules.
The court of chancery dealt with the relationship of principal and agent as if it were a
relationship of cestui que trust and trustee. Holt, C.J introduced ideas developed by the Court
of Admiralty in respect of the relationship of ship owners, masters and merchants into the law
dealing with the relation of principal and agent.

Creation of Agency

Agency by appointment
An agency is created by express appointment when the principal appoints the agent by
express agreement with the agent. This express agreement may be an oral or written
agreement between the principal and the agent

Agency by estoppel (implied appointment)

Agency by estoppel arises when A makes a representation to a third party, whether by words
or conduct, that B is his agent, and subsequently that third party deals with B as A's agent in
reliance on such representation. A will not be permitted (is estopped) to deny the existence of
the agency if to do so would cause damage (usually financial loss) to that third party
In agency by estoppel, the authority of the agent is described as only apparent or ostensible
but not actual, as the principal has, in fact, not granted the agent such authority to act on the
principal's behalf.

Agency by ratification
Agency by ratification arises when a person (the principal) ratifies (that is, approves and
adopts) an act which has already been done in his name and on his behalf by another person
(the agent) who in fact, had no actual authority (whether express or implied) to act on his (the
principal's) behalf when the act was done.

Agency of necessity
Agency of necessity arises when a person ("A") is faced with an emergency in which the
property of another person ("B") is in imminent jeopardy and it becomes necessary, in order
to preserve the property for A to act for and on behalf of B. In this case, A acts as an agent of
necessity for B.
Types of Agency
There are two main types of agency.
They are the
1. General Agency
2. Special Agency

General Agent: A general agent is an agent who is given wide authority to act for / represent
his principal in all matters of a particular nature or relating to a particular business or trade or
to act in the ordinary course or business or profession as an agent. Examples are a legal
practitioner in respect of his client, a company director in respect of his company, a broker
etc. However, it should be noted that a transaction between a third party and a general agent
whose power had been limited by the principal may be binding, unless it can be established
that the third party was aware of the limitation placed on the agent’s authority.

Specific Agent:
This is also known as a particular agent. It is one appointed for specific or particular purpose.
It is one with limited authority to act or represent his principal in some particular transactions,
not being in the ordinary course of his business, trade or profession. For example, a polling
agent, an agent to buy a truck, to sell a specific property etc. Thus, he is one with authority to
do a specific act or to respect his principal in a particular transaction which ordinarily is not
within his powers to do.
However, a person may be both a general agent and a special agent at the same time i.e.
concurrently, depending on the circumstances of his case.
There are other types of Agencies. They include:
Del Credere Agent: A del credere agent undertakes to indemnify the principal upon the
breach of payment by a third party. A del credere agent can be likened to a guarantor. He
guarantees that upon default by a specific third party, he is to be bound. A del credere agent is
usually paid a commission known as del credere commission.
 Partners: In a partnership, each of the partners is regarded as the agent of the other partners.
Auctioneer: An auctioneer is an agent employed for the purpose of selling goods at auction
sales. An auctioneer is required to be licensed. The law imposes on him not to make sales
below the reserved price and also not make credit sales.

Termination of Agency
Agency can be terminated by either by:
1. Act of the properties, either by
a. Mutual agreement
b. Unilateral act of party
2. Operation of law.

Mutual Agreement:
On the basis that an agency relationship is created by agreement between the principal and
the agent, such a relationship can also be brought to an end by mutual agreement between the
parties, either in writing or orally.
In Butler v. Knight (1867) LR 2 EX 109 it was held that if a solicitor was retained to conduct
a case, his authority to act for his client, prima facie, ceases once the case is over and
judgement is given.

Unilateral Act of Party:

Either the principal or agent in an agency relationship can by giving the required notice
terminate the agreement and be discharged from obligations forth with.
Where it is the principal who does this, he is said to revoke the agency and where it is done
by the agent, he is said to renounce the agency. For example, a wife’s implied authority to
pledge her husband’s credit for necessaries can be terminated in this way.

2. By Operation of the Law:

An agency may terminate by operation of law upon the occurrence of the following events:
A. A. Where the party concerned is an individual:
Death
Insanity
Bankruptcy
 B. Where the party concerned is a limited company:
Winding up
Receivership

C. Frustration of Contract of Agency.

c
.