Law of Agency Examples

The need to appoint another person to perform one act or another on one’s behalf assumes greater proportion daily. This is so because of the rapid economic developments that has taken place in the recent years. A party may want to do many things but because of lack of time or expertise, he is compelled to appoint another person to act on his behalf and whatever that other person does will be binding on him.

The question is: ‘Who is an agent?’ An agent is one who acts on behalf of another called the principal. The agent has power to affect the principal’s legal position vis-à-vis a third party e.g. by entering into a contract or disposing of the property of the principal. Agency has been defined in different ways by different scholars. According to Fridman in his book ‘Law of Agency,’

‘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.’ Bowstead has defined agency as:

‘The relationship that exists between two persons one of whom expressly or impliedly consents that the other should represent him or act on his behalf and the other of whom similarly consents to represent the former or so to act.’ Prof. Powell defined an agent as:

‘A person who is authorized to act for a principal and who has agreed so to act and who has the power to affect the legal relationship of his principal vis-à-vis a third party.’ The American restatement of the law of agency defines agency as: ‘The relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control and consent.’ In the case of Ikemefuna

C. Amadiume & Anor v. Mrs Agnes Solomon Ibok (2006) All FWLR pt 321 pg. 1247, the Court of Appeal defined an agent as: ‘Any person who acts for another in the capacity of deputy, steward, rent collector or any other agent or trustee on oath.’ Also, in E.A. Okoyode v. FCDA (20006) All FWLR pt 298 pg 1200 at 1405, the Court of Appeal also defined an agent as ‘One who is authorized to act for or in place of another.’ Here, the Court of Appeal was actually quoting the Black’s Law Dictionary 7th edition. Seavey defined agency as:

‘A consensual relationship.’ This Seavey’s definition has received judicial approval in Garnac Grain Company Ltd v. HMF Faure & Fair Clough Ltd. (1967) 2 All ER pg 353. In that case, Lord Pearson said, ‘The relationship of principal and agent can only be established by consent of the principal and the agent. They would be held to have consented if they had agreed to what amounts in law to such a relationship even if they do not recognize it themselves and even if they have professed to disclaim it.’ Note that this statement has been criticized by Fridman.

This is because this idea of consent as the basis of agency relationship is contestable because there are circumstances in which the agency relationship exists without the consent of the parties or even against the wishes of either one of them or even both of them.

See for example Phibbs v. Boardman (1965) 1 All ER pg 849. In that case, the defendant who was not appointed as an agent but acted as one and made secret profits was compelled by the court to yield over the secret profits to the beneficiaries. This shows that some of the obligations of an agent are imposed by the law regardless of the agreement of the parties. There are other instances in which agency relationship is not by consent but by operation of law. Examples are agency of necessity and a deserted wife’s right to pledge the husband’s credit.

AGENTS DISTINGUISHED FROM PERSONS IN SIMILAR CIRCUMSTANCES

Agent and Trustee An agent and a trustee occupy similar position. Both the agent and the trustee deal with the property for and on behalf of another person. Whereas an agent deals with the principal’s property, a trustee does so, on behalf of the beneficiary. As a result, both of them can affect the legal position of the person on whose behalf they are acting. An agent can sell and transfer the principal’s property to a third party. A trustee can also transfer the trust property to a third party. Just as a principal can trace, in agency, his property in the hand of a thirdh, party, a beneficiary can also trace his trust property in the hands of a third party in trust relationships. A trustee is a fiduciary and an agent is also a fiduciary.

They both occupy a fiduciary position. Therefore, an agent must not make secret profits just as a trustee. An agent and a trustee must not act in a way that will conflict with their duties. The following are however the major areas of distinction between the agent and the trustee. Whereas a trustee is the legal owner of a trust property, an agent is not a legal owner of the principal’s property. Secondly, an agent can always represent the principal within the scope of his property. On the other hand, a trustee does not represent the beneficiary in the same way as the agent represents the principal. Thirdly, agency relationship to some extent is based on consent.

A trustee and beneficiary relationship is not necessarily based on consent between the trustee and the settlor. Again, the relationship of principal and agent arises largely as a result of the manifestation of consent. Therefore, an agent normally creates a contractual relationship between the principal and a third party. Agents, Servants & Independent Contractors

All these people are engaged to act on behalf of another person. A master has a right of control on how a servant should carry out his duties. This right does not exist in the case of an independent contractor or possibly in the case of an agent. Note however that this control test in relation to servant, agent and independent contractor has been criticized to distinguish between the position of an agent and that of a servant. The essential distinction between an agent, servant and independent contractor is one of function. An agent is engaged to make contracts and to dispose the property of the principal. Truly, the duties can overlap in a single situation.

This is because a single person can act both as a servant and an agent while being an independent contractor. A single person may perform the duties of these 3 categories.

AGENT AND BAILEE

A bailee is a person who has possession of goods from or for the owner of the goods for a specific purpose. The concept of bailment overlaps with that of agency especially where the agent receives possession as a factor or a mercantile agent.

CREATION OF AGENCY

Formalities There are no formalities required for the appointment of an agent and this has been adequately or succinctly put by Lord Cranworth in Pole v. Leask ‘No one can become the agent of another except by the will of that other person. His will may be manifested in writing or orally simply by placing another in a situation which according to ordinary usage of mankind that other is understood to represent and act for the person who has so placed him.’ An appointment for example could be sending goods to an auctioneer or broker. Capacities

The general rule is that both the principal and the agent must be capable of acting as principal and agent. This is governed by the general rule of contract. However, see what Lord.

Denning said in the case of Shepherd v. Cartwright (1953) 2 All ER page 608 particularly page 618-619 where he said ‘The appointment by an infant of an agent has always been void.’ Incidentally, the same Lord Denning retracted in a later case of G v. G (1970) 3 All ER pg 546 at 549. It was held that: ‘An infant could appoint an agent to pay maintenance for the support of his illegitimate child, since that was a lawful act for him to do and one which he could be compelled to do.’ Where the principal suffers from mental disorder, the general rule is that the contract is nevertheless binding on him unless he can prove that he was so insane as not to know what he was doing and that this was known to the other party.

See the case of Imperial Loan Company v. Stone (1892) 1 QB pg 599. Note however that in the case of Young v. Toynbee (1910) 1 KB pg 215, the insanity of the principal was held to terminate his agent’s authority automatically, although the agent was not aware of the insanity.

OBLIGATIONS OF AN AGENCY RELATIONSHIP Duties of an agent An agent having accepted to be an agent, has certain duties to perform. Such duties may arise from: The agreement he has entered into with the principal. From the fiduciary nature of the agency relationship. By and large, the following are the duties of an agent.

Performance Where the agency is a contractual one, an agent must perform what he has undertaken to perform under the contract. This means that the agent is duty bound to carry out the contract that he has made to the principal. This is governed by the rule of contract. See Turpin v. Bilton (1843) 5 M & G at pg 455. In that case, an agent was appointed by conduct to insure the principal’s ship. He failed to do so and the ship was lost at sea. It was held that the agent was guilty of a breach of contract and therefore, he was liable. It must be noted however that an agent is not bound to perform an illegal undertaking or a transaction which is null and void either at common law or under statute. See Cohen v. Kitttel (1889)2 QB d at pg 680. In that case, an agent was asked to take a bet for the principal.

He failed to do so. The principal sued him for non-performance. It was held that betting was illegal and so the agent was not liable for breach of contract. Where the agency relationship is non-contractual, that is to say, where it is gratuitous, an agent is not obliged to perform the undertaking at all. It has been argued that in such an instance, the agent will not be liable for non-performance or failure to carry out his duty towards the principal.

See Ibadan City Council v. Odukale (1972) 8 SC 128. The question has always been whether the agent of a gratuitous relationship is obliged to inform his principal of his intention not to perform. Prof. Powell for example in his book ‘Law of Agency’ concludes that there is a duty on the agent to inform the principal within a reasonable time and failure to do so will give rise to a liability in negligence. Note also that where an agent is instructed to buy specific goods, it is his duty to ensure that the goods supplied are in accordance with the specification. See Oto Hamman v. Senbanjo (1962) 2 All NLR pg 139.

Obedience The agent must act in accordance with the authority which has been given to him by the principal. Such authority may either be express, implied or usual/customary authority. Within the usual or customary authority are duties that are general in such situations or the custom of a particular trade. These are called business customs, usages or instructions. The paramount consideration where there are no express instructions, usage or business custom to guide the agent is that the agent will have some discretion as long as he acts for the benefit of the principal. See Bonsor v. Musicians Union (1955) 3 All ER pg 518. An agent must keep within his authority and he must not disregard the instructions of the principal, even if this will benefit the principal. See Bertran Armstrong v. Godfrey (1830) 1 KNAP pg 301.

In that case, an agent was instructed to sell stock at a certain price (85 pounds or more). He waited until the price came up to 85 pounds which was the price he was instructed to sell but he decided to wail further for a higher price. The price came down. He was held liable for not selling at the price he was instructed to sell. Note however that where the principal’s instructions are ambiguous, the agent may not be liable if he did what he considered to be reasonable and what he thought will benefit and interest the principal even though the principal never intended the act.

Care and Skill An agent must perform his undertaking with due care and skill. All agents owe this duty to their principal whether the agency is contractual or gratuitous. Nevertheless, a distinction is usually drawn between the standard of care to be observed in each case. A gratuitous agent is only bound to display or show such skill as he in fact possesses. See Giblin v. McMullen (1868) LR pg 317. In that case, an agent who was acting gratuitously made a mistake when acting for his principal as a result of which the principal’s property was liable to forfeiture and was seized

. It was held that the agent was not liable to the principal since he had exercised the same care and skill in respect of his property. On the other hand, a contractual agent must display or show the degree of skill which an agent in his position will usually display. Again, this distinction has been criticized by Prof. Powell in his book ‘Law of Agency’ at pg 304. The question is whether it is fair to hold a gratuitous agent liable for any lack of reasonable care not amounting to gross negligence. See Omotayo v. Ojikutu (1961) All NLR pg 901.

Non – Delegation (personal Performance) The general rule is that an agent must perform his undertaking personally. The relationship of principal and agent is a confidential one. The rule is expressed in the Latin maxim ‘delegatus non potest delegare.’ Therefore, the employment of a sub-agent by his agent is a breach of his duty to the principal unless he has been permitted either by law or by the agreement of the two parties.

See Allan v. Europa Postal Services Ltd. (1968) 2 All ER pg 575. It must be noted however that there are certain exceptions to the general principle of delegatus non potest delegare. These include: The agent can delegate where the act is purely ministerial and not involving confidence or where it involves the exercise of discretion. Where the principal has expressly authorized the agent to delegate his power. Where the power to delegate can be implied from the circumstances of the case. See De Bussche v. Alt (1878) 8 Ch Div pg 286 An authority to delegate may and should be implied where the usage of the transaction permits it. Where the authority to delegate is derived from a statute or legislation.

Respect of Principal’s Title or Estoppel An agent cannot deny the title of his principal to goods, money or land in his possession on behalf of his principal. The possession of the agent is the possession of the principal for all purposes including the acquisition of title under the statute of limitation. Note however that there are circumstances in which an agent may be able to refuse to assent to a claim by his principal to the principal’s title to property which are in his possession.

E.g. if a third party is entitled to the property in question, the agent may set up the title of such third party i.e. jus tertii, provided that the agent is defending on behalf and by the authority of the third party or if he has handed the property to him i.e. if he has already settled with the actual owner. Note however that an agent must not have knowledge of the adverse claim (the third party’s claim) at the time of taking possession. If he knows, then, he cannot setup the adverse claimant’s title against the principal.