COMMERCIAL LAW

FIRST SEGMENT
AGENCY RELATION SHIP
LAW TWO/ C- CLASS
FIRST SEMESTER

NATURE OF AGENCY RELATIONSHIP

Generally, the law of agency deals with the relationship which arises when one person is used by
another person to perform certain task on his behalf. The law of agency deals with the
implication of the activities of this employed person with another person known as the third
party in relation to the employer. It is important to note that in most cases, an individual or a
legal entity may find it tedious or practically impossible to personally undertake the execution of
the numerous commercial transactions or even social dealings, therefore it became imperative or
compulsory to employ some helping hand to render the necessary assistance in that direction and
whenever this is done, an agency relationship is said to emerge. Therefore, agency relationship is
a relationship that subsists between one person called THE PRINCIPAL and another person
called THE AGENT, whereby the principal employs the agent with a view of having his legal
relationship altered by bringing about a contract with a THIRD PARTY. This will show that the
agent whenever authorised to act will in law be deemed to be acting as if the principal is acting
by himself and this is clearly expressed in a Latin maxim Qui Facit Per Aluim Facit Per Se
meaning that he who does something through someone is deemed to have done it himself. It is
important in law that once a person is authorised by another to affect or to alter his legal
relationship of the employer in relation to some acts with a third party, an agency relationship
will be said to exist and for all these purposes and depending on the nature of the services to be
rendered by the agent, an agent may be assigned a different names, all these names depending on
the nature of the relationship. The general classifications of the agency in business transaction
are as follows;
1. A General Agent: A general agent is one who is authorised or has the authority arising
out of and in the ordinary course of his business, trade or profession to act on behalf of
the principal generally in a transaction of a particular kind e.g. a legal practitioner who
acts or represents his client or a director of a registered company.
2. Special Agent: A special agent is one whose authority is limited to doing some particular
transaction that are not in the ordinary course of his business or transaction e.g. a polling
agent.
 3. Mercantile Agent: This is an agent who has the authority of his principal to sell goods or
to consign goods for the purpose of sell or to buy goods or to raise money on the security
of goods.
4. A Factor Agent: This is also a mercantile agent who is entrusted with the possession of
the goods for the purpose of sell only.
5. Broker Agent: This is also a mercantile agent who makes contract for the sale or
purchase of goods that belong to another person. The difference between a factor and
Broker agent is the possession of goods, e.g. insurance or stoke broker.
6. Delcredere Agent: This is an agent who for extra commission which is called Delcredere
commission undertakes to be liable to his principal for the price of the goods sold by him
to a third party in the event that the third party makes default in payment or where the
third party becomes insolvent.
7. Auctioneer: This is an agent employed by the principal to sell goods or property at a
public sale called an auction, he can only receive payment in cash unless otherwise
agreed and has no authority to sell on credit.
FORMATION OF AGENCY RELATIONSHIP
Before an agency relationship can be created, an agent must have some bases for acting as an
agent on behalf of his principal. This is very fundamental because the agent cannot bind the
principal or he cannot alter his legal relationship with a third party without consent and authority
which are the legal bases in the agency relationship.
1. Consent: It must be noted that both the principal and the agent must have given their
consent to the formation of this relationship, more particularly and in view of the fact that
the agent act in other to bind his principal in the relationship, the principal must have
given his consent by authorising or instructing the agent to act on his behalf. It is
important to note that this requirement of consent can either be given express or it may be
implied. The consent may be implied in the famous dictum of Lord Pearson in the case
of GARMAC GRAIN Co. INCORPORATED vs. FAIRCLOUGH LTD (1967) ALL
E.R. Pg 353 " they will be held to have consented if they have agreed to what amount
in law to such a relationship even if they did not recognize it themselves and even if
they profess to disclaim it..." therefore, in any case whether expressly or impliedly
consent must have been given by each i.e the principal or the agent either expressly or by
implication from their words or their conduct.
2. Authority: When consent of the parties is established, then an agent will have the
authority to bind the principal and such an authority may either be actual or real or
express which is the authority clearly and unambiguously given to the agent on what to
do specifically and it will also include all other things necessarily incidental to the
 expressly authorized act. Lord Justice Diplock LJ described the actual or real authority
of the agent in the case of FREEMAN vs. PARK PROPERTY LTD (1964) 1 ALL
E.R. Pg. 610 "... Legal relationship between the principal and agent created by a
consensual agreement to which they alone are parties its scope is to be ascertain by
applying ordinary principle of construction of contract including any proper
implication from the express words used, the usage of the trade or the cause of dealing
between the parties". Such authority may be express when it is given by express words
or implied when it is inferred from the conduct of the parties or the circumstances of the
case at hand. There is also an apparent or ostensible authority on the other hand, this is an
authority that is presumed to exist, this authority is a protection that is given to third party
when they are dealing or acting with an agent, the third party will presume that an agent
has the ostensible to act as an agent this is because the third parties will not normally or
necessarily know whether the agent has any authority at all and they will not also know
the extent of such authority. The third parties in that context may merely impute what is
reasonably apparent to be the authority which the agent appears to have and this may or
may not necessarily exist and this kind of authorities could be illustrated in the case of
Agency by Estoppel or by Holding out.

AGENCY RELATIONSHIP DISTINGUISHED FROM OTHER RELATIONSHIPS.

1. Agent, servant and independent contractor: An agent act for and on behalf of the
principal and in the process of acting, the agent enjoy some degree of discretion. But a
servant on the other hand works for his master under strict supervision and with a clear
instruction on what and how to carry out a particular order. But in certain situations, there
may be an agent cum servant e.g. In the case of a sole representative. An independent
contractor on the other hand, he renders services of a particular kind, he executes specific
contract independently and based on his specialised skills, he is not subject to instructions
on how to go about it e.g. an electrician or a bricklayer or any other professional that
executes services based on his skill.
2. An agent and a trustee: It is important to note that both the trustee and the agent they
owe a fiduciary duty in their relationships to the respected counterpart i.e. the agent to his
principal and the trustee to the beneficiary. However, a trustee has a legal interest over
the trust property, an agent does not, what an agent might have is just a disposing power
where he is authorised in the agency.
Similarly an agent act for and on behalf of his principal in a representative capacity, a
trustee does not but rather the trustee preserve the trust property for the beneficiary. And
finally, an agency is based on mutual consensus i.e. there must be consent of both parties
 but a trust is not this is because the beneficiaries have no consenting powers over the
appointment of the trustee.
3. An agent and a Bailee: A Bailment arises where personal property is delivered or
transferred by the owner (bailer) to another person (bailee) under an agreement that the
property can be returned to the owner (bailor) or transferred to a third party or dealt with
in any other way indicated by the owner (bailor). The bailee is not an agent of the bailor
strictly speaking since he has no authority to deal with the property in any other way
except in accordance with the instructions of the bailor. The bailee does not render any
service at all to the bailor which is an essential purpose of Agency.
There are some distinguishing between the agent and the bailee, thus;
a) The agent is the representative of his principal but the bailee does not thereby become
the representative of the bailor.
b) The agent has the authority to contract for and on behalf of his principal and can
make him liable in Tort while a bailee essentially has no authority to bind the bailor
in a contract except perhaps to preserve the property i.e the subject matter of the
bailment and rarely make the bailor liable in Tort.

LEGAL CAPACITY OF THE AGENT AND HIS PRINCIPAL

An agent acts for and on behalf of the principal, he does not incur personal liability, he drops out
of the picture the moment the contract is concluded between the agent and the third party.
Thereafter the principal steps into his shoes. Accordingly therefore, anybody can be appointed as
an agent, contractual capacity is not required in the appointment of an agent therefore a
minor/infant, a drunkard person or a person of unsound mind, an imbecile or even a stupid may
be appointed as an agent. This is because the most important thing to note is that in agency
relationship, the liability or benefit of the relationship is imputed to and is to be boned by the
principal, an agent is only used as a link between the principal and the third party. However, on
the other hand not all persons may appoint agents, in other words not all persons can be
principal, there are limitations to the effect that a person cannot authorise the performance of
what he cannot do by himself see the case of EAGLE LINE LTD vs. AG FED (1970) 1 ALL
E.R Pg, where pilot made the following observation ".... the person to be charged with the
action of another must be able and capable of doing that which the other has done and for
which he is in law to be made responsible". Accordingly therefore, a minor cannot act as a
principal except for the purchase of his necessities otherwise the transaction will be voidable
until after a reasonable time. Similarly, an agent cannot act for a non-existent principal e.g. an
unincorporated company is not legally in existence and therefore no action can purportedly be
done by that unregistered company or on its behalf, therefore, unless a company is incorporated
under Section 37 of the CAMA 1990, any action will not be enforceable by or against the
unregistered company. This legal position has been slightly amended by the CAMA and it allows
the company to rectify the action after been incorporated. Similarly, an agent generally need not
to have any formal qualifications, however, some statute and laws require that some particular
agent must possess some qualification e.g. a legal practitioner, estate agent etc they all have
some professional qualification to satisfy.
MODES OF CREATION OF AGENCY RELATIONSHIP
Agency by Agreement
As a general rule parties to an agency relationship may orally or in writing agree to expressly
create an agency relationship. Even though the agency relationship may sometimes be implied
from the conduct of the parties or even from circumstance, this as was held by Lord Pearson in
the case of GARMAC GRAIN Co. INCORPORATED vs. FAIRCLOUGH LTD where he
said "the relationship of principal and agent can only be established by the consent of the
principal and the agent, they will be held to have consented if they have agreed to what
amount in law to such a relationship even if they do not recognise it themselves and even if
they profess to disclaim it, primarily one looks at what they said and did at the alleged creation
of the agency, early words and conducts may afford evidence of a course of dealing in
existence at that time and may be taken into account more generally as historical
background". However, it is important to note that notwithstanding the above position, in
certain circumstances there are still some specific legal requirement attached as a pre condition
to the creation of the agency relationship e.g. In some agency relationship, there is the
requirement of writing e.g. Where an agent is to execute a deed on behalf of his principal then
the agent himself must be appointed by deed i.e. power of attorney see the case of ABINA &
ORS vs. FARHAT (1938) 12 NLR Pg 17 also the case of AG WESTERN STATE vs.
OGUNDANA (1970) NCLR Pg 131.
Secondly in the case of conveyance of a lease exceeding three years such contracts are by law
required to be in writing therefore an agent in that position must also be appointed in writing.
Thirdly, all contracts for the conveyance of land are required by law to be in writing i.e. by deed
therefore an agent acting in that transaction must also be appointed by deed.
Fourthly, in all contracts not supported by consideration or deed of partnership they are required
to be in writing and therefore they require the appointment of an agent to be in writing. It is
important to note however that where an agent is required to be appointed by deed but he is not
and he executes a contract on behalf of his principal and in the presence of the principal in that
case that execution is valid, binding and enforceable against the principal.
Agency by Estoppel or by Holding Out
This is a situation where Mr A purchases goods from Mr B on behalf of Mr C and Mr C has been
in the habit of paying for the purchases by Mr A, in this situation there may or may not be
express statement indicating the creation of any agency relationship. It could be implied however
that from the conduct of Mr C he has appointed, recognised and held out Mr A as his agent, Mr
B therefore will be right and will be legally protected in considering Mr A as the agent of Mr C
and Mr C will be estopped and he will be precluded from denying whatever liability Mr A might
have incurred, this is the position of the law even if Mr A has not been so appointed in reality or
he has not been so authorised to act on behalf of the principal on a particular occasion or a
particular case. The law is this that where one party hold out another to be acting for him then the
latter will be precluded from denying such authority, the basic rule to remember is that where a
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 the agency relationship. In such a situation or case the principal
will be bound by the act of the supposed agent to the same extent as if an actual agency
agreement existed between them this was the decision in the case of SOLE RACCHA vs.
STANDARD COMPANY NIG LTD (1922) 4 NLR Pg 46 also the case of COLONIAL
BANK &1 OR vs. JOHN CANDY (1890) 15 A C Pg 267 and in this case the executors of a
deceased signed a blank transfer on the back of share certificate, this was to enable the share
certificate to be registered in their name, however, the broker with whom the share certificate
were deposited for necessary actions he fraudulently made the transfer to himself and then he
deposited the certificate with a bank as a security for a loan to himself, the bank took the share
certificate in good faith and without notice of the fraud, the court held that the conduct of the
executors in delivering the certificate to the broker does not amount to a holding out and does not
amount to representation, the broker had no ostensible authority to deal with the certificate in his
own name and therefore the executors were not estopped from claiming their title to the share
certificate. It is important to note that there are certain essential elements or conditions that must
be present that must be successfully raise the creation of agency by Estoppel or by Holding out:
1. Representation: In order to raise third party must show a statement or conduct by the
principal which will amount to a representation that the suppose agent has the authority,
he has been represented to have, in the case of PRESIDENT AND CLOTHING Co.
LTD vs. ANYAWU it was held that in order to amount to an ostensible authority,
i) The representation may be made by word or by conduct or by any act of a general
nature and then,
ii) Secondly it must be made by the principal or by someone authorised to act by the
principal, and
iii) Lastly it must be a representation of fact and not law.
See also the case of SOLE RACCHA vs. STANDARD Co. NIG LTD (Supra), In this
case Mr W was employed to act as an agent for the defendant for the purchase of farm
produce to the knowledge of the defendant representative subsequently, the
representative instructed Mr W not to purchase farm produce for the defendant anymore.
 However not withstanding this instruction Mr W induced the plaintiff to enter into a
contract to sell farm produce to him, the plaintiff had previously dealt with Mr W as an
agent for the defendant and had believed that Mr W still retain the authority of the
defendant the plaintiff then claim the contract price of the farm produce from the
defendant and it was held that the claim succeeded and the court made the following
observation "where any person by word or conduct represents or permit it to be
represented that another person has the 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".
2. Reliance on the Representation: A third party who raises the issue of Estoppel or
holding out, he must show to the court not only that a representation was made to him but
also that he actually acted upon such representation, therefore, if he had not acted at all or
that he acted but not on the representation in that case no agency by Estoppel or holding
out has been created see the case of FARGURHARSON BROTHERS & CO. Vs
KING CO. LTD (1902) AC Pg 325 in this case a company or firm of a timber merchant
gave authority to one of their clerk's to make limited sales with their known customers,
however, the clerk fraudulently under an assumed name sold timber to the respondent
who was not one of such known customers but however who bought and paid for the
timber in good faith, it was held that the firm or company have not held out the clerk to
the respondent as their agent to sell to the respondent and therefore the firm was not
estopped from denying the clerk's authority to sell.
3. Alteration of Position: It is important to note that even where a representation has been
proved to have been made by the principal and it proved that it has been acted upon by
the third party the third party must further show that he altered his position as a result and
to his detriment, therefore if the third party had not altered his position at all or he has
altered his position but he has not suffered any loss to his detriment or he has suffered the
loss but not on the strength of the representation in that case there is no agency by
Estoppel.
4. A Third Party Seeking to Enforce Estoppel or Holding out, he must himself have acted
honestly and without knowledge that a supposed agent had no authority or that he had
exceeded his authority. This is based on the fact that Estoppel is an equitable remedy and
the he who comes to equity must come with clean hands see the case of JOHN vs.
DODWEEL & CO. LTD (1980) AC 563, in this case the respondent authorised their
manager to draw a cheque upon their banking account for the purpose of their business
however, the manager fraudulently drew some cheques in favour of the appellant upon
the said account, there was evidence that the appellant has knowledge that the manager
was without apparent authority and therefore was drawing the cheques for his own
benefit, it was held that the respondent had a right of action and the appellant cannot
enforce the contract against the respondent.
Agency relationship by Ratification
Closely related with the agency by Holding out or by Estoppel, agency relationship by
ratification may be created whenever the alleged principal accepts or otherwise affirms the act or
conduct of another person purporting to act on his behalf even though there was no prior
agreement authorising the act. Agency relationship by ratification is retrospective in nature and it
has the effects of constituting the action so far performed into that of the alleged principal
thereby making him liable notwithstanding the absence of the consent and the authority.
Furthermore, in other to successfully raise the issue of agency by ratification, the purported act
must be valid and effective and in other to constitute a valid ratification the following conditions
must be satisfied;
1. The agent whose act is sought to the rectified must have purported to act for the principal,
2. Secondly, at the time the act was done, the agent must have had a competent principal,
3. Thirdly, at the time of the ratification, the principal must be legally capable of doing the
act himself,
4. Similarly, the purported act of the agent must not be unlawful and the ratification must be
made within reasonable time after the completion of the purported act,
5. The principal must have full knowledge of the act he seeks to rectify and the whole
transaction must be rectified, it cannot be partial or conditional.
6. The ratification must not affect the right of a third party adversely if the third party has an
interest in the transaction that is sought to be rectified e.g. see the case of BIRD vs.
BROWN (1850) 4 Ex-Ch Pg786, in this case some good were dispersed on transit to the
buyer and while the goods were on transit, the seller became insolvent and the seller's
agent without authority stopped the goods from reaching the buyer but the trustee in
bankruptcy ceased the goods immediately and thereafter the seller sought to ratify the act
of his agent. It was held to be too late as the ratification adversely affected the right of the
trustee in bankruptcy.
Agency Relationship by Implication of Law
There are some agency relationships that are by implication of law. These relationships do not
exist by the will of the parties but rather they were imposed on the parties by law. Broadly they
are of two categories;
1. In these circumstances, the law will confer on certain persons in certain situations to
make a particular situation. It is of necessity that such particular act is of immediate
necessity taken in order to avert the happening of some undesirable or disastrous effect or
consequences, e.g. is a situation where a person or a company dispatch some goods by
sea and in the course of transit both the goods and the ship were faced with the
 catastrophic threat of sinking down thereby perishing completely, in such a circumstance
if any person unilaterally does any act in other to save the goods from destruction or to
prevent the loss in any way then that person will qualify to have acted as an agent of
necessity who will bind the principal notwithstanding the absence of any prior consent or
authority. This agency can arise in a number of different circumstances and ways e.g. It
can arise where there is civil disorder or a riot or emergency and it can even arise in a
relationship between a doctor and a patient who is brought under a critical condition. The
following conditions must be satisfied before a person qualifies as an agent of necessity;
i) The agent must have acted for the benefit of the principal,
ii) It was not practicable for the agent to communicate with the principal and seek his
consent,
iii) The agent must have acted reasonably,
iv) That there was real emergency and not imaginary necessitating the taking of an
instantaneous action in other to avert the danger or the threat see the case of
LANGAN vs. THE GREAT WEST RAILWAY COMPANY LIMITED (1874) 3
CLR Pg 173, in this case a train belonging to the defendant was involved in an
accident and their employee took some of the injured passengers to the plaintiff's
hotel where he ordered some brandy for them, in an action for the price of the
alcohol, it was held that the defendant was liable to pay because their employee had
the authority to pledge the credit of the defendant for reasonably necessaries to people
in the condition of the injured passengers lord Bramwell J he further observed "there
is a necessity under circumstances such as this for what may be called
instantaneous action".
2. Agency by Co-habitation: The position under the English law is that where a man and a
woman live together and they cohabit, there is a presumption of an agency by implication
of law in the sense that the woman have the right to pledge the credit of her husband for
her necessaries, whenever she make purchases on credit for her necessaries the law will
consider her as an agent of necessity by implication of law meaning that the husband will
be under a legal obligation to honour the debt. The necessaries in this context are similar
with the necessaries of a minor under the general principle of contract. It must be noted
that the presumption of this agency relationship is much more stronger when the woman
has been deserted by the husband as was held in the case of HUTCHINSON vs.
OLAJIDE (1971) 2 NCLR Pg 20 where the court was of the opinion that a wife as an
agent of necessity may pledge the credit of her husband for necessaries when she's
deserted or driven out, she may therefore borrow and spend the money to purchase her
necessaries. It must be noted however that the necessaries are the necessaries that her
suitable to her station in life see the case of PHILLIPSON vs. HAYTER (1870). LR Pg
6 where lord Justice Wilace made the following observation "what the law infer is this
 that his wife has the authority to contract for things that are really necessary and
suitable to the style in which the husband chooses to live in so far as the articles falls
fairly within the domestic department which ordinarily confided to the management of
the wife".
THE RELATIONSHIP BETWEEN THE PRINCIPAL AND THE AGENT
DUTIES OF THE AGENT
It is important to note from the beginning that the principle and the sanctity of the will of the
parties in all contractual relationship is also applicable in agency relationship, meaning that the
parties to an agency relationship may agree to their own terms and specific duties and conditions
which will govern their agency relationship. This general position of the law was also the
decision in the case of OTTOHAMMAN vs. SANBAJO & ORS (1962) NLR Pg 545 where
Adefarasin J made the following observation "the rights and duties arising out of the
relationship of principal and agent are ascertainable by reference to their contract of agency".
However, subject to the agreed terms, the law also implies certain obligations and duties that the
agent owes to the principal, such implied obligations or duties are as follows;
Duty of the agent to perform the instruction of his principal
Where an agent for a consideration undertakes to perform some act for the principal then the
agent is under a duty to perform the instructions otherwise he will be liable for breach of contract
and for that reason he will not be entitled to claim any remuneration or any consideration agreed
upon. Furthermore, in the discharge of this obligation the agent must carry out the instructions of
the principal to the latter only that the instructions must be lawful instructions because there is no
obligation and there is no liability to follow an illegal instruction. Similarly, where the agent act
bona fide in the discharge of a vague or uncertain instructions there will be no liability against
him even if what was carried out was not the intention of the party. Where the agent cannot or
where the agent is incapable of carrying out the instructions of the principal, in that
circumstances the agent must notify the principal before the occurrence of any loss otherwise the
agent will be liable for the loss see the case of ESTOPPEL WEST AFRICAN
INCORPORATED vs. ALI (1968) NLR Pg 590 where it was held that it is the duty of the
agent to carry out any instructions that may be given to him by the principal and he cannot depart
from such instructions even though he reasonably believe that in doing so he is promoting the
interest of the principal. Failure to carry out the instructions of the principal may involve the
agent's liability to the principal in other words the agent will be liable to pay the losses to the
principal. However, it is important to note that this duty of obedience or of performing the
instructions of the principal or executing the term of agency is not absolute, this is because;
1. Where the agent is a professional agent, or where the instructions of the principal will be
subject to any custom of usage of a particular profession, business or trade that the agent
belong,
2. If the principal's instructions are ambiguous, in that circumstances the agent is put to
election and provided he acted fairly and honestly he will not be in breach of this
 particular duty even if the consequences are less favourable to the principal see the case
of ARMSTRONG & Co vs. GEOFFREY (1820) AC Pg 381 In this case a broker was
instructed to sell certain shares at a stipulated price but instead of selling at that price he
waited for a higher price and within the meantime the price of the shares fell down below
the price he was instructed to sell and therefore he failed to perform the instruction,
therefore it was held that the broker was liable for the breach of duty to perform and he
was liable to the principal.
Duty of the agent to act or perform personally
 This is otherwise known as duty of personal performance and is regulated by the popular
maxim DELEGATUS NON POTEST DELEGARE meaning that a delegate does not
have the capacity to delegate or sub delegate. This is a legal principle that prevents the
agent from sub delegating his authority except with the consent of the principal or if he is
otherwise excused by law. The general rule is this that an agent is required to personally
execute the agency obligation, where an agent improperly sub delegate, the principal is
not bound by the act of the sub agent and that particular agent will be his own principal
therefore he will be liable personally. Therefore, it is important to note that an agent may
only sub delegate his function in any of the following circumstances;
1. Where the authority to sub delegate is derived from any statute or legislation. See the
case of John Holt v Alhaji Jafaru
2. Where the agent has the express authority of the principal to sub delegate,
3. Where there is an emergency which require an immediate action in order to preserve or
protect the interest of the principal or the interest of the agency itself,
4. Where the particular function in issue requires no particular skill or no particular
discretion or where it is purely ministerial e.g. In cases of signing of letters or dispatching
them, and
5. Where the custom, or usage of a particular trade, business or profession of the agent it
allows for sub delegation. E.g The legal profession.
Duty of care and skill
Generally the duty on the agent to exercise due care and skill in the execution or discharge of the
agency relationship cannot be objectively determined. However, the position of the law is that in
the execution of the terms of his agency an agent must exhibit reasonable care, skill and
diligence. The measure of this standard will be that of a reasonable person on what would be
expected of a person in that class or position of that agent, therefore each case must be judged on
its own facts and circumstances. It is important to note that we have stated earlier that an agent is
under obligation to obey and perform the instructions of his principal, the question is this what
will happen if the agent follows such instructions but guided by his skills, he realized that if he
follows such instructions the consequences will be against the principal. Normally, the agent will
incur no personal liability in following such instructions but if the agency is specialized in that
circumstance the agent ought to advice the principal against such instruction e.g. a solicitor and
an advocate.
Duty to act in good faith
The duty of the agent to act in good faith arises out of the fiduciary nature of the principal and
agent relationship and this duty of the agent has fiduciary duty has many aspects;
a. It implies that the agent must not allow his personal interest to conflict with his duty as an
agent, in other words, personal interest should not feature or conflict with the principal’s
interest see the case of IGBEN vs. ETAWARIE (1971) 1 NCLR Pg 85, it was held in
this case that it is a rule of general application that an agent shall not be allowed to enter
into an agreement in which he has or in which he can have personal interest conflicting or
which possibly may conflict with his principal’s interest. This is a positive rule which is
not founded on the principle of morality but rather on consideration that if it were not
sowed the agent might act to the prejudice of his principal by being carried away/swayed
by interest rather than duty. Therefore, where an agent is instructed to sell the property of
his principal, he cannot buy the property because there is presumption that he will favour
his personal interest over the interest of the principal. This is the position of the law even
in the absence of any element of fraud and even if the property are sold at its ordinary
market price see the words of Romilly M.R in the case of BENTLY vs. GRAVEN “the
law will not allow an agent to place himself in a situation which under ordinary
circumstances will tempt a person to do that which is not the best for his principal”. In
the same vein an agent will not be allowed to sell his personal property to the principal
unless if he disclose that fact to the principal and the principal and notwithstanding
decides to buy. see the case of LUCIFERO vs. CASTLE (1837) TLR Pg 511, in this
case the agent was instructed to purchase a yatch and the agent bought the yatch for
himself and subsequently resold it to his principal, the principal was unaware of this
therefore the court held that the agent was in breach to act in good faith therefore he was
allege to return the profit.
i. The agent must not make any secret profit or he must not
accept a bribery or any other benefit from his position as an
agent, it is important to note that generally that all the rights,
properties, benefits and claims which the agent receive or
acquire by virtue of his employment as an agent, except his
remuneration or commission, they all belong to his principal to
whom he owe a duty to account. Therefore duty to act in good
faith also presupposes that the agent should not allow the
interest of the principal he is serving to conflict with the
interest of the third party this is by purporting to act for the
third party and the principal at the same time i.e. An agent must
 not act for the two parties he seek to join under a single
contract but where the agent has disclosed this fact to the
principal and the principal consented then he may accordingly
act provided the interest of the original principal is not
jeopardize see the case of FULLWOOD vs. HURLEY (1928)
1 K.B. Pg 498 where Scrutton L.J observed “No agent who
has accepted an employment from one principal can in law
accept an engagement inconsistent with his duty to the first
principal unless he makes the fullest disclosure to each
principal of his interest and he obtains the consent of each
principal of the double employment”. Furthermore, any
information obtained or received by the agent in the course of
the agency relationship must be used in good faith and for the
interest of the principal alone because an agent must not use or
misuse any such information and this duty will continue upon
the agent even after the termination of the agency relationship
see the case of AYORINE vs. USENI (1973) NLR Pg 417 in
this case it was held that a counsel cannot be required to accept
a brief or to advice or to draw pleadings if he has previously
adviced another person on or in connection with the same
subject-matter and the counsel ought not to do so if he will be
embarrassed in the discharge of his duty by reason of the
confidence repose in him by such other person or where his
acceptance of the latter will be inconsistent with the former’s
interest. see the case of ROBB vs. GREEN (1895) 2 Q.B. Pg
315, in this case the defendant copied the list of names and
addresses of the plaintiff’s customers with the intention of
using it for the purpose of making business with them after he
had left the service with the plaintiff. The court held that such a
conduct is clearly a breach of contract and breach of duty to act
in good faith and it is clearly a breach of contract. It is
important to note that it is not necessary in establishing a
breach of duty to act in good faith to establish a dishonest
intention on the part of the agent or to establish that it was the
agent who initiated or demanded any such secret profit, what
need to be established is the fact that, any such secret profit
remain hidden or concealed from the principal.
E. The duty of the agent to account
It is the duty of the agent to account or to render appropriate account of his stewardship as an
agent to his principal, this duty to account entails that the agent must keep proper account of all
transactions which must be presented upon demand by the principal, it also presupposes that an
agent must keep the agency money separate from his own money and all agency money received
by the agent on behalf of the principal must be accounted for. This was the decision in the
unreported case of AKINBOLA vs. MEBURAGHO, in this case the plaintiff was a proprietress
of a nursery school and when she was away over-sea for furt`4`4her study she entrusted the
management of the nursery school to the defendant and in absence of the plaintiff, the defendant
refuse to communicate with the plaintiff on the state of her business and the court held that the
plaintiff was entitled to the account for the management of her business from the defendant.
DUTIES OF THE PRINCIPAL TO THE AGENT
Duty to remunerate the agent
Generally, this duty must be clearly and expressly agreed to otherwise the principal is not under
any obligation to remunerate the agent. Therefore, in other words the agent has a right to claim
remuneration from the principal unless there is an express and clear agreement to that effect,
where there is no agreement there will be no remuneration. In the case of OMOREGIE vs. A.G
(1971) NCLR Pg 397, it was held that where an agent was promised a commission on the
happening of an event, the agent will not be entitled to any commission until the event happen.
Where any event upon which entitlement or remuneration arises does not occur, the agent will
not be entitled to receive remuneration on quantum merut, unless the provision is expressly made
in a contract term to that effect or it can be implied. Similarly, where the agent agrees to take
“such remuneration has may be deem right”, this has been held to entitle the agent to no
remuneration at all this was in the case of OBU vs. STRAUSS & Co LTD (1948) 12 WACA Pg
281. Also where the agent agrees that “remuneration is also paid to me by the company which I
have agreed to leave to the discretion of the company” this was amount to an incomplete
contract between the principal and the agent as to the payment of the commission. The court
further held that to determine any rate of commission on this type of statement will amount to
varying the agreement of the parties and creating a new one for them. However, it is important to
note that where there is no agreement as to remuneration of the agent but from the nature of the
transaction between the principal and the agent, it is customarily payable in that case the court
will intervene and fix a reasonable remuneration for the agent.
Similarly, where it is agreed by the parties that remuneration is only payable upon the happening
of certain contingency then the agent could only be entitled to the remuneration if he is the
effective cause of the happening of that contingency see the case of ERABOR vs. INCAR
NIGERIA LTD (1973) NCLR Pg 276, where it was held that the plaintiff as an agent was not
entitled to commission on sale transaction after the termination of his employment, similarly,
where remuneration is agreed to be payable upon earning a profit then no remuneration is
payable if no remuneration is realized see the case of STANDARD BANK WEST AFRICAN
vs. ABEDJAN (1967) NCLR Pg 138, in this case the parties agreed that remuneration is
payable only on the sum reaching the principal amount after deduction of expenses, the
commission is only payable from the Net Profit. Where remuneration is agreed to be payable
upon the conclusion of contract by the agent with a third party unless the contract comes into
being, no remuneration is payable, this was the decision in the case of BELLO vs. MANUAL
(1924) NCLR Pg 48, but where the agent has introduced a third party who is willing and ready
to conclude the contract, the remuneration becomes payable if the third person introduced remain
so willing, ready and able to contract up to the final completion of the contract.
It is important to also note that mere introduction of a party who does not remain willing, ready
and able to contract does not entitle any remuneration to the agent, but if the agent has
introduced a third party to the principal who is willing, ready and able to contract up to the
completion of the contract but the principal withdraw from the transaction, in that case the agent
becomes entitle to his remuneration see the case of CHARITY vs. RAPACIOLI (1974) 2 ALL
ER Pg 311, it was held that where the commission payable on the introduction of a person ready,
willing and able to purchase, the commission will be payable even though the transaction prove
aborted by withdrawal of the principal either by getting a better offer or by an unqualified offer
of the prospective purchaser which was within the terms that the agent has been authorized to
invite. If an agent is appointed to introduce a willing, ready and able third party then the
commission is payable to him even if he did not introduce the third party.
Duty to reimburse or indemnify the agent
An agent has the right towards the principal to be indemnified for all expenses incurred of loses
suffered while acting for the principal provided the agent acted within his actual or ostensible
authority. The principal is also under a duty to imburse the agent for all reasonable expenses
incurred by him in the discharge of the duty. However, where the act is unauthorized, there will
be no indemnity unless if it is ratified by the principal. Similarly, if the agent is negligent he
cannot claim indemnity but an agent will be entitle to be indemnified if the principal improperly
terminate the agency and the agent had already incurred some expenses see the case of HICHEN
& ORS vs. JACKSON & SONS (1943) 1 ALL E.R Pg 128, in this case a stoke broker was
instructed by his principal to find a purchaser for his shares and sell them, the stoke broker sold
the shares in accordance with the instruction but the principal repudiate the contract and
instructed the purchaser to return the certificate, the stoke broker sued the principal to recover the
expenses they have already incurred, it was held that the broker was entitled to his commission
in accordance with the stoke exchange regulations but he is not entitled to be indemnify against
the losses incurred. Similarly, where the agent incurred the loss, liability in consequences of his
own negligence, default or insolvency or where the agent acted in breach of his duty including
violation of any of the principal’s instruction or where the agent acted in respect of a transaction
which is manifestly or which is to the knowledge of the agent unlawful or immoral or contrary to
public policy, the agent will not entitled to any reimbursement or indemnity.
REMEDIES OF THE PARTIES
Remedies of the principal
 1. Where the agent is negligent in the discharge of the principal’s instruction, the principal
may sue him for damages,
2. Where the agent acquire secret profit or secret commission or accept bribe, the principal
may sue the agent to recover it under his duty to account,
3. Where the agent default before the completion of the agency relationship e.g. by non
performance, the principal may claim for damages and may also repudiate the contract,
4. Where the agent breaches the terms of the contract express or implied or where the agent
misbehaves in a scandalous manner embarrassing the principal, the principal may
repudiate the contract,
5. Where the agent is in possession of any property received or kept for and on behalf of the
principal under the agency relationship or in the course of the discharge of the agency
relationship, the principal may recover it in an action for conversion and/or in an action
for money earned and received
Remedies of the agent
1. Where remuneration becomes due and is denied by the principal the agent may file and
action to recover it,
2. Where remuneration is due or where the agent is to be indemnify for some expenses but
the principal refuses to oblige and the agent happen to have possession or lawful custody
of some of the principal’s property or some goods in the case, the agent may instead of
suing to recover the money, he may exercise the right of lien over such property.
However, the right of lien in the context is of two types;
a. Particular lien; which is a right to retain possession of goods of lien in respect of any
debt that is due in connection with those goods.
b. General lien; this is not restricted against the goods sought to be retained, it may be
in respect of any debt owed to the agent, however the law does not favour general lien
because it gives too much power over the property of another person.
It must be noted that the right of lien can only be exercised when there is lawful
possession; therefore the right of lien cannot be exercised in any of the following;
a. Where the agent acquired the goods not in his capacity as an agent
b. Where the agent is clearly deprived from exercising the right of lien in an express
agreement
c. Where the agent voluntarily gave out
the possession of the goods
 d. Where the goods are delivered to the
agent for a special purpose
4. Where an agent who has concluded a contract at his expenses and the principal refuses to
honour, the agent has a right of stoppage in transitu just like an unpaid seller
5. Where the agent has possession of the principal’s goods or property and a third party
makes an adverse claim against such property in that case the agent has the right to inter
plea in order to show that he hold such goods only as an agent and that the title of the
goods is not with him but it is with the principal.
TERMINATION OF AGENCY RELATIONSHIP 20th November, 2015
By Act of the Party
This termination is done on mutual bases by both parties that the agency be terminated, such act
of the parties may be an agreement between them i.e. between the principal and the agent that the
agency be terminated since the relationship is primarily consensual in nature.
Secondly the termination could also be by revocation by the principal and thirdly by renunciation
by the agent i.e. the parties to the agency relationship may clearly and expressly agree that either
of them may unilaterally terminate upon giving reasonable notice and where this is done, it
means that the agent cannot bind the principal anymore, the agent will incur personal liability for
whatever he purport to do thereafter. Therefore, the third party may sue the agent for acting
without authority or for breach of implied warranty of authority. In situations like that where a
principal has held out an agent to be acting for him and then he revoke the contract without
notifying or without giving notice of the revocation that the agent no longer acts for him and the
third party contracts with that agent clearly relying upon the ostensible authority of the agent, in
such a situation the third party would be duly protected and the principal will continue to be
liable and responsible to the third party until such time when the third party is or acquire the
reasonable notice see the case of RACCHA vs. STANDARD COMPANY NIGERIAN LTD
(Supra). Similarly, where there is unilateral revocation by the principal in an executory contract,
the principal will be liable to pay to the agent all his prospective earnings that will have been due
to him had the contract continue to exist. However, the agent will only be entitled to such
earnings but the court would not compel the principal to retain him as an agent, in other words,
the court would not compel the continued existence of the relationship. It is important to note
that the general rule of revocation of an agent authority by the principal is with some exceptions;
a. A principal cannot revoke the contract concluded by his agent for the purpose of avoiding
the obligations and the liabilities arising from such contract,
b. Where the agent is appointed with an irrevocable authority then the principal cannot
unilaterally terminate. An irrevocable authority arises in a relationship where the agent
 acquire or is entitled to some interest or benefit in the transaction, in such a situation to
permit unilateral revocation will adversely affect the right of agent,
c. Where the agent is given an irrevocable authority arising out of a vested interest which he
has with the principal and for which consideration he was even appointed as that agent
e.g. for a subsisting debt between the agent and the principal in such a situation the
principal cannot unilateral revoke the contract because that will adversely affect the right
of the agent and therefore this makes the authority irrevocable, surviving up to the death
or the unsoundness or other incapacitating factors that may befall the principal.
By Operation of Law
Generally, on completion of a contract specified to be accomplished within a specific period of
time, the law renders the agent Quantus Officio upon the completion of that contract thereby
automatically bringing the relationship to an end.
Secondly, the death of either of the parties automatically terminates the relationship.
Similarly, the insanity of either the principal or the agent also automatically brings an end to the
agency relationship and there will be notice required, the relationship automatically terminates as
was held in the case of DREW vs. NUNN (1879) 4 Q.B Pg 661, where it was held that where
such a change occur, the principal can no longer act for himself and therefore the agent whom
has been appointed can no longer act for him.
Furthermore, it is important to note that the general law of frustration under the general principle
of contract applies to an also affect the contract of agency.