PRINCIPLES OF AGENCY

• Definition: 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.
 Definition
• The relationship which results from the
grant of consent by one person to
another, that the other shall act on his
behalf, subject to his control and
authority (express or implied).
 Definition (contd.)
• Agency is a practical concept and
facilitates modern commercial
transactions bearing in mind the
related legal consequences.
• “Essentially, he who acts through
another acts for himself.”
 Nature of an Agency Relationship
• Legal implications of an agency
include:

(1)The relationship in the first instance,

takes into account the execution of a
legal and valid transaction.
• Thus, where an agent
performs illegal acts, he is
liable as a party for such
actions or may be jointly liable
with the principal.
Nature of an Agency Relationship(contd.)

(2)The transactions executed by the

agent has a binding effect on the
principal, so that the latter can
effectively participate in the
benefits and liabilities in relation
to a third party
Nature of an Agency Relationship(contd.)

An agency relationship will give

(3)
rise to the privity of contract
between the principal and third-
party, inspite of the fact that the
principal did not actually partake in
the execution of the contract.
 Nature of an Agency Relationship(contd.)

• It is a classic example of an exception

to the principle of privity of contract
which requires that; a contract will
only be construed to confer
enforceable rights and impose
obligations on the parties to a
contract
 Types of Agents
• There are different classes/species of
agents, with varying scopes and degrees
of authority to act;
• It is purely a contractual matter which
underlies the role of a contract in
regulating the corresponding obligations.
• General and Specific agents – Two broad classes
of agents
The former has the authority conduct a series of
transactions on a continuous basis.
The latter is restricted to a particular transaction
or series, and the performance is not on a
continuous basis.
The terms of the contract and the fact unveil the
realities.
 Types of Agents (contd.)
• Some agents include: Company-director,
Brokers, Partners, Auctioneers, Bankers, Estate
Agents, Solicitors, Advertising Agencies etc.
• Thus, it is the nature of the functions
discharged by the agent, that qualifies him to
assume such a position. That is, he acts on
behalf of another and not for himself.
 CAPACITY OF PARTIES
• The principal can appoint an agent to
act on his behalf in relation to
matters he can otherwise deal with
by himself.
 CAPACITY OF PARTIES (contd.)
• Generally, speaking where the principal
lacks the ability to contract by himself; he
cannot seek to cure this defect, by
appointing an agent with the required
capacity to now act on his behalf.
 CAPACITY OF PARTIES (contd.)
• Infant- Lacks capacity to act as a
principal except in cases of contract
of necessaries.
• Insane Person- Lacks capacity to act
as principal, except during lucid
intervals.
 CAPACITY OF PARTIES (contd.)
• Corporation- Capacity to act as
principal is determined by its
memorandum of association which
limits the scope of its powers
accordingly.
 CAPACITY OF PARTIES (contd.)

• Individual members of an un-

incorporated association (e.g.
Partnership) can appoint an
agent and will liable as
principals.
 CAPACITY OF PARTIES (contd.)
• Capacity to act as an agent differs to some
extent from that of a principal, so that even
though an infant cannot act as a ‘principal’ in
certain contracts, he can act as an ‘agent’ in
respect of such contracts.
 CAPACITY OF PARTIES (contd.)
• Infancy does not diminish his capacity to
act as an agent, even in the context that
he may not be liable to third parties, in
circumstances where an adult would
have been personally liable.
 Capacity (Exceptions)
• Where the contract is required by
law to be evidenced by a written
note, signed by the party bearing the
liabilities and claiming the benefits
respectively
• Thus, any random party cannot act
for the other with a view to enforce
such a contract of this nature.(E.g.
Sale of land and contracts where
specific personal service is required)
 FORMATION OF AGENCY
• Express Contract: This may be in an oral
or written form and will be sufficient to
create an agency relationship.
• This is consistent with the fluidity by
which contracts can be created, subject
to the agreement of the parties.
 FORMATION OF AGENCY (contd.)
• However, where an agent is required to
execute a deed, his authority to act must
also be provided for in deed (E.g. Power
of Attorney).
• The underlying nature of the agreement
refelects a specific mode of creation.
 FORMATION OF AGENCY (contd.)
• Implied Contract: Agency is implied,
where there exists a course of
conduct that can be ascribed to the
principal and which clearly indicates
that the agent has the authority to
act on his behalf.
 FORMATION OF AGENCY (contd.)
• Thus, agency can still be created even
where no express terms as regards or
aspects of the transaction have been
agreed upon between the principal and
agent.
• Hence, the focus is on the substance of
the obligations created and accepted by
the relevant parties.
• This thus alludes to the diversity of
ways by which agency can manifest
subject to the preference of the
parties;
• Also consistent with principle of
freedom to contract.
 FORMATION OF AGENCY (contd.)
• An agency relationship can manifest in other
specific ways namely;
(1) Ratification:
• The agent, in this case, acts without
having the principal’s authority in the first
instance (at the time of creation).
• The purpose must be legal and valid
 Ratification (Contd.)
• The principal afterwards, takes the necessary
measures to validate the agents previous
actions by ratifying or endorsing same;
• Timely notice of previous acts by the agent is
fundamental to ratification;
• Principal can decide to approve or disapprove
prior acts of agent.
 FORMATION OF AGENCY (contd.)
(2) Estoppel: In this case, agency arises where a
person has:
• By words or conduct represented another to
the outside world as his agent;
• Third parties have dealt with such a person as
his agent, and principal cannot reject the
apparent agency relationship he had created
by his representation;
 Estoppel (Contd.)
• If a declining of such representation will cause
damage to the parties who have dealt with
the agent.
• Especially where such parties in reliance on
such representation have significantly altered
their position
 FORMATION OF AGENCY (contd.)
• Implication of Law: Agency can also arise
in circumstances where the law deems it
fit to infer/presume that such a
relationship exists, even though the
element of consent is lacking between
the parties at a given time.
 FORMATION OF AGENCY (contd.)
• Thus, there can be ‘agency of necessity’ and
‘agency of co-habitation’. The former ( i.e.
necessity) arises in situations of emergency,
where a person is obliged to take due
measures in order to prevent irreversible loss
to another.
 Conclusion
• Modern commercial transactions in Nigeria
transcends several contractual platforms
• It touches on other relationship such as
debtor- creditor, lender-borrower, agency,
seller-buyer, trusteeship, and bailee-bailor
amongst others, depending on the specifics of
the transaction in question.