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COMMERCIAL TRANSACTION: LAW OF AGENCY
OUTLINE
Part A
 Introduction
 Definition and Characteristics of Agency -
o Who is an agent
o Elements
 Agency distinguished from other similar relationship -
o Trust, bailment, servants & independent contractors
 Classification of Agents
 Types of Agents -
o Mercantile, Del Credere, Auctioneer, Attorney, Shipmaster,
Confirming houses and others.
 Capacity to act as Principal & Agent
Part B
 Creation of Agency -
o Agreement, Ratification, Estoppel and by Operation of law.
 Scope of the Agent’s Authority
 Duties of the principal
 Relation of Principal & Agent and Third parties
 Termination of Agency
Part C
 Hire Purchase
This delineation of topics into 3 parts is for the sake of ease.
Part A
INTRODUCTION
An agent is the person through whom another’s act is referred.

Agency is concerned with the legal effect of the act performed through
another.
Under the law of agency, an agent does not act on his own behalf, he
acts to bring into existence a contractual link between the person
appointing him and a third party.
Agency law is an exception to the common law rule that ‘no one can
sue or be sued on a contract to which he is not originally a party.
Although, an agent is the instrument to the formation of contract, he
is not a party to it.
Que: Who then is the party?

Ans: The Principal
The legal principle holding the law of Agency is founded upon the
Latin maxim: Que facit per alium facit per se which means “he who
acts by another acts as himself”.
According to Stirling J. in Bevan v Webb, ‘whatever a man sui juris
(i.e. having full rights or capacity) may do by himself he may do by another’.
Thus, an act done by a principal’s agent is done indirectly by the

principal.
DEFINITION OF AGENCY
An agent, in ordinary parlance, is a person who has undertaken to act

for and on behalf of a principal with authority to create legal relations
between the principal and a third party. He is one who has express or
implied authority to act for another so as to bring the principal into
contractual relationship with another person……
Essential Elements of this definition

a. The agent must have authority to act
b. The agent must not only stand in the place of the principal
but must act for the principal
c. The result of such acting must be create legal relation
between the principal and the third party
The result of the inculcation of these elements is that, there would be

lacunae where a person described as agent acts in his own name or the
relationship between him and the purported principal is that of a
wholesaler and retailer. The essence of this assertion is to indicate that
agency in commerce is used in a different sense i.e. they are two distinct
topics. A common illustration is an instance where a car dealer acts as a
sole agent to the distributor of a certain make of a car.
Note: The word ‘agent’ here does not mean such a person is an agent
stricto sensu. Instead, he is an independent contractor who buys and sells
on his own behalf to his customers.
It is imperative to note that the existence of agency relationship in the

true legal sense is a matter of law in that there is no need for the parties to
intend to create a relationship of agency before it can exist. The law may
hold such a relationship to exist when the parties did not contemplate it.
In this regard, the locus classicus case is the case of Lamb WT &
Sons v. Goring Bricks Co. ltd [1932]. In this case, in an agreement
describing the plaintiffs sole selling agents, they were given the monopoly
of selling the defendants products for 3 years. Before expiration, the
defendant broke the monopoly by selling themselves. The plaintiff sued the
defendants successfully for a breach of contract. NOTE: had there been a
true agency relationship, they wouldn’t have been liable. If he is an agent
the manufacturer would have been entitled to sell personally.
Derivations from this case

a. The fact that the parties have labeled their relationship as
one of agency does not legally establish agency.
b. A person given sole selling rights is not an agent.
Despite the myriad of definitions given in this material, note that no

definition is all-encompassing as the whole law cannot be compressed into
a phrase or sentence. Nevertheless, this difficulty does not render it idle to
attempt to summarize what is involved in the concept.
According to Fridman, he talk of agency as “…the relationship that
exist between two persons when one, called the agent, is concerned 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 disposition of property”.
Bowstead sees it as “the relationship which exists between two
persons, one or whom expressly or impliedly consents that the other should
represent him or act on his behalf, and the other of whom similarly
consents to represents the former or so to act. The one who is to be
represented on whose behalf the act is to be done is called the principal.

Any person other than these two is referred to as third party.
CHARACTERISTICS OF AGENCY
A number of characteristics of agency are usually ascertained:
1. The agent’s capacity to affect the principal’s legal position (i.e. to say his
rights and liabilities towards other people) by the making of contracts or
disposition of property.
2. The definitions are based on contracts i.e. several of the definitions
revolve around the idea that the principal & the agent have agreed either
by way of contract or otherwise that the agent should represent the
principal (e.g. the definitions of Bowstead & American Re).
Nigerian jurisprudence supports this approach in:
In Ofodile v. Chinwuba [1993] where Ejinwumi J.C.A said “…in

the ordinary law of agency, the paradigm in which the agent and the
principal agree is that one should act for the other. The term ‘agency’ is
assigned to this basic relationship which involves the consent of both
parties. It is therefore trite law that the agency arises mainly from a
contract or agreement between the parties express or implied.
Cases
Niger Prowess Ltd v. NorthEast Line Corp [1989]
Bamgboye v University of Ilorin [1991]
Q: What is the summary of all these?

A: The conclusion to be drawn from this is simply that a study of the
instances that can bring about the existence of a principal and agent
relationship leads to the conclusion that, even though in many instances,
constant is relevant, and possibly a determining factor in the existence as
well as the scope of an agency relationship, it is not completely satisfactory,
to base agency upon consent alone.
Its relationship and its effects do not always arise from and determined by
agreement.
AGENCY DISTINGUISHED FROM OTHER SIMILAR

RELATIONSHIP
1. Agency &Trust
2. Agency servants & Independent Contractor
3. Agency & Bailment
Agency & Trusts

Agency is analogous to trust in the sense that the trustee acts on
behalf of the beneficiary of the trust.
In trust, the relationship between them is confidential. However, in
agency, the principal can trust the agent with property or business to
manage.
They differ in the sense that in trusts, the trustee has a legal title of
the trust property whereas; the agent has no title to his principal’s property.
Another distinction is evident in the fact that the act of agent is that of
the principal, but a trustee acts on his behalf and his own name. The mode
of termination in a legal trust is by way of a legal action. The trustee has no
power to halt the trust save in exercise of an inherent power by the court to
remove the trustee. On the other hand, the agent can revoke the agency.
Agency, Servants & Independent Contractors

A servant is one who, by agreement, whether gratuitously or foreword
gives his service. An independent contractor on the other hand, is one who
by agreement, usually for reward provides services to another.
In both cases, they have power act for others.

The distinction can be clarified in three key areas /mechanisms.
- Control: servants are of often told how to go about the work and what to
do which is usually provided in their contract of employment or service
of apprenticeship. But in agency, you only tell the agent what to do
- Triangular Relationship: In master/servant relationship, there is no
triangular relationship (it is not allowed). But there is a triangular
Relationship in agency relationship (you can have more than one
principal).
- Termination: In master/servant/ or employer / relationship, the
employer is a private organization, then the principle hire and fire will
apply but in a public organization certain rules have to be followed have
to be followed/abided by. While in agency, it need not be.
Agency & Bailment

A bailment is the delivery of personal property by one person to
another for a specific purpose in the understanding the property would be
returned after the special purpose is achieved.
A bailor is the person that is giving the possession of the goods to the
bailee so that the bailee will relate the goods for specific purpose.
A bailee is the person who relates the goods for specific purposes.
Distinction
A bailee is not agent; he is just in custody of the goods and cannot
relate the custody to a third party.
The bailee does not represent the bailor; he merely exercises with
leave of the bailor certain powers in respect of the author.
The bailee cannot and has no power to make contracts on the other
bailor’s behalf neither can he make the bailor liable, for any of his (the
bailee) acts.
Cases
Nwa v Akpabio
B.B. Apugo & Sons ltd v. OHMD Orthopedic Hospital (MNGT)
Board
C T M a d e E a s y b y S o f e k | 10
CLASSIFICATION OF AGENTS
Agents can be divided into 3 main classes namely:

1. Special Agents
2. General Agents
3. Universal Agents
Special Agents
Special Agent is an agent that is appointed by the principal to carry
out a particular Act and for a particular purpose or to represent his
principal in some particular transaction and such transaction not being in
the ordinary course of his trade profession or business as an agent.
A special agent has no authority to bind his principal in any other
matter than that for which he is engaged.
An example is where A appoints B to buy a car.
There are two ingredients in the discussion of a Special agent:
i. There must be a particular act
ii. Such an act is not within the scope of the ordinary course of his
trade or profession as an agent.
General Agents
A general agent is one who has authority to act for his principal in all
aspect matters concerning a particular trade or business, or of a particular
nature; or to do some act in the ordinary course of his trade profession or
business as an agent.
The peculiarity of this agent is that he may exercise his professional
discretion.
Universal Agents
A universal agent is an agent appointed with unlimited authority to
act on behalf of his principal. This implies that he has authority to act for
his principal in all matters without restrictions.
These types of agents are rare, but when they do, they are appointed
by extensive power of attorney.
However, the limit (only) imposed is that is that which the law
mandates with regard to the legality of the objects and the capacity of the
parties in relation in relation to contracts in general.
TYPES OF AGENTS
- Attorney, Mercantile, Del Credere, Auctioneer

- Shipmaster and Confirming Houses
Attorney
Attorney simply means an agent or representative. When an attorney
is appointed under a seal (i.e. signed, sealed and delivered) he is said to
have “power of attorney”.
If such agent is a lawyer [licensed as such under the Legal
Practitioners Act 1975 CAP L. 11 (vol. 18) LFN 2004] appointed to act for
another in legal matters, he is referred to as “attorney-at-law”. An attorney-
at-law cannot commence proceedings on behalf of his principal without
express permission/instruction by his principal to do so.
Once permission is granted, he has an implied authority to perform.
The client is bound by every act of his lawyer. The attorney-at-law has
authority to receive money [Olatunde Laja v Ogunsiji] on behalf of his
client and as such cannot be held liable for money paid by third party to his
client.
An attorney-at-law cannot act outside the scope of his client request.
For instance, we the client requires an action to be tried in open court; he
cannot compel settlement in a different manner.
Neale v. Lady Gordon Lennox [1902]
See Nwokorie v Nwanolue [1960]. (See this case as to the
legality of one lawyer holding brief for another).
A legal practitioner (or an attorney at law) can be liable in negligence.

Any contract with his client relieving him of such liability is void. See
Section 9 of the Legal Practitioners Act (1975).
A vivid exception in this regard is where he acted gratuitously or his
negligence arises from the conduct of his client’s case in court or tribunal –
Randel v Worsley [1967] 1. Q.B. 443.
Auctioneer
An auctioneer is an agent that sells in a public sale. An auctioneer is
an agent whose ordinary course of business is to sell goods or other
property by public auction, for a reward generally in the form of a
commission.
They may or may not be given possession of the goods but it is clear
that when such possession is given auctioneers are Mercantile Agents by
virtue of the Factors Act 1889.
Features
A special attribute of ‘auctioneers’ is that they are agents for both
parties to the sale for the purpose of signing the memorandum of sale on
behalf of the buyer.
Another feature of the auctioneer is that even though they are agents,
they can personal sue for the price of goods sold and delivered as
auctioneer even if their commission has been paid.
See Chelmsford Auction ltd v Poole [1973]
An auctioneer is primarily the agent of the seller but, in the absence of
special circumstances or contrary intention, he is also the agent of the
purchaser for signing the note or memorandum of sale.
See Alli Safe v Northern States Marketing Board

Section 5 law Reforms (contracts) law vol. 5 Cap L.63 Laws of
Lagos State
Sections 2, 3 & 5 Contracts Law (1959) Laws of Western Nigeria
It is noteworthy that the auctioneer is the agent of the purchaser

when the sale is not by auction.
The auctioneer is under a duty to obey and carry out the instruction of
the seller to the last detail and not to delegate his authority in the absence
of any custom or agreement permitting delegation.
He is obliged to sell publicly even if the sales proved abortive and not
by private agreement.
See Okoleji v Okupe
A sale by auction is complete on the fall of the hammer except where

the sale is subject to a condition like the approval of the sale by other
persons.
Section 24 Sales by Auction Law 1959 Laws of Western Nigeria.
An auctioneer has an implied authority to sell without reserve (fixed)

price. See Obaseki v A.C.B. Ltd. A limitation to this authority is where
the seller place is a fixed price and any sale below this price is not binding.
Rainbow v Howkins.
If such instruction was not communicated to the auctioneer or came
up after a sale is complete the sale is binding and the purchaser can enforce
it by specific performance. McManus v Fortescue [1907]
Like all agents, an auctioneer has no authority to take cheques unless

it is customary in the particular case.
As an agent, an auctioneer is not liable in conversion to the true
owners. Ajanaku v P.Z & co ltd [1907]. However, where the auctioneer
has notice of the title of another person other than his principal to the
goods before sale he will be liable in conversion.
Broker
A broker is a mercantile agent employed to make a contract between
principal and others for a commission usually called brokerage. A broker
is an agent whose essential business is to bring parties together for the
purpose of negotiation.
A broker’s remuneration or commission is called a brokerage. He is
not placed in possession of any property of all the subject matter of the
contract you cannot say in his own name because he has no right to sue in
his own name but in the name of the person who he represents.
As a broker, he has no authority to receive the price and ordinarily
not being entrusted with goods he has no right of lien.
Factor
As defined by Section 2 (1) Mercantile Agents Law of Lagos State a
factor is a mercantile agent who, in the customary course of his business,
has authority to sell or buy or raise money on the security of goods.
At common law, Abbott C.J in Baring v Carrie defined a factor as
‘a person to whom goods are assigned for sale by a merchant residing
abroad or at a distance away from his place of sale…… He normally sells in
his own name without disclosing that of his principal.
Simply put, a factor is an agent to whom goods are consigned for the
purpose of sale. He has possession of the goods and a general discretion as
to their sale or of title to the goods. He has certain implied authority and
can receive payment for the goods from the purchaser and give receipt. He
can sue under contract in his own name and can exercise a lien over goods
whilst in his possession.
Del Credere Agent

A del credere agent is a factor who, in return for a higher rate of
commission promises that persons with whom he enters into a contract on
behalf of the principal, shall really pay any sum becoming due under the
contract.
See Omoregie v B.P Cement Fabrik [1962]
He is a surety for the third party and he assures and guarantees that
the third party will definitely pay for the goods.
Key points
i. A del credere agent is in the position of a surety to his principal for
the dire performances by the person's with whom he deals with on
behalf of the principal.
This creates a similarity to contract of guarantee but the
undertaking of del credere agent is not stricto sensu a contract of
guarantee. It is rather a contract of indemnity hence, it is not
necessary that such contract be in writing as required by Section 4
of the Statute of Fraud Act 1677.
In Omoregie v B. Portland Cement Fabrik [1962] the

Supreme Court held that in the absence of clear words or something
definite in the parties’ course of conduct a del credere agency could
not easily be inferred.
ii. A del credere agent agency is confined to answering for the failure to
pay any ascertained sums which may become the as debts. Hence,
liability does not extend to other breaches of the contract by the other
party e.g. where the breach is in some manner of refusal to take
delivery of the goods.
Thomas Gabriel & Sons v Churchill & Sim [1914]
Churchill & Sim v Goddard [1936]
Shipmaster
The shipmaster has authority to enter into contract in the matters
relating to the usual employment of the ship. The shipmaster is an agent
of the ship owner who has the authority to carry out repairs and manage
the ship on behalf of the ship owner. He also has the power to enter into
contract of necessary on the owner's behalf.
Confirming Houses
Confirming Houses are mostly used in international trade. They
normally act on behalf of an overseas client who wishes to import goods
and provide them with local knowledge sometimes acting as spies.
In the simplest instance, a confirming house may buy goods in the
domestic market and resell them to his clients overseas creating a
contract of sale. Alternatively, it may act simply as an agent, negotiating
a purchase on behalf of its clients and revealing its capacity as agent.
The authority of a confirming house depends on the agreement

between them and the parties:
- Where they purchase good on your behalf without paying with its
money, the confirming house is your agent.
- If the Confirming house buys goods and pays with his money, he is not a
confirming house rather its buying and selling
- A Confirming house in other circumstances just bargain and confirm
price on your behalf.
- In some instances, the confirming House may stand as guarantor for the
oversea client if the seller is not sure of its creditworthiness. Here, the
Confirming house will be liable to pay for the goods in the existence or
presence of a default.
B.P Apugo & Sons ltd v Orthopedic Hospital Management
Board (OHMD)
Similar Arrangement/ Some other Commercial Marketing

Arrangement
Distributorship
The contract of relationship between a distributor and manufacturer
is not an agency contract; it is merely a contract of buying and selling
between the manufacturer and distributor. Even if a situation of debt
arises it doesn't change the definition of distributorship.
Franchising
It means an authorization given by one party (the franchisor) to
another party the franchisee enabling the individual to carry out
specified commercial activities it is also an arrangement of buying and
buying and selling.
Types of Franchising
 Business Format Franchise - Gives out license, trade secrets, trademark
and allows the franchisee to enjoy the reputation and goodwill.
 Product Distribution Franchise - Does not give out License, trade secret,
trademark and allows the franchise to enjoy reputation and Goodwill.
 Management Franchise - Brought in order to move the Business of the
franchisor forward.
Licensing
A licensor is selling his right to use his intellectual property, brand or
business processes to another party. It is a clear case of buying and
selling.
Subsidiaries
Where a business establishes a network of subsidiaries to market its
products and/or services, the general rule is that a company is a separate
entity that is one parent is not an agent of another.
Each subsidiary company will have a separate legal personality from
the holding company or proprietor. The subsidiary may act as agent for
the Holding Company or proprietor, but the common general
relationships that is that of seller and buyer.
In cases of fraud, or tax evasion the court may classify them as one.
CAPACITY TO ACT
The capacity of parties to an agency contract to act affects the
validation and nullification of the contract. Hence, the capacity of the
principal and agent will be considered:
Capacity to Act as Principal

Only persons with full contractual capacity (with certain limited
exceptions) may employ an agent. The rule is that anyone may appoint
an agent to do any act which he has capacity to do himself.
If the principal is under some disability, the powers of the agents are
accordingly limited to the extent of his disability. For example a
principal who lacks capacity either through infancy, insanity or some
other disability cannot make a valid contract even by employing an agent
who has full contractual capacity. This capacity is still a matter for the
general law of contract.
By the general law of contract, mentally incompetent persons,
corporations and infants either have no capacity or only a limited
capacity to appoint an agent.
A mentally incompetent person can only appoint an agent during a
lucid interval. See Drew v Nunn [1879]
Also, a mentally incompetent person may be treated as principal
where the third-party contracts in ignorance of his condition and not
taking advantage of it.
See Moulton v Camroux [1849] 4 Exch 17.
Furthermore, where a party to a contract is of unsound mind the
contract is nevertheless binding on him unless he can prove that he was
so insane as to not know that what he was doing and this act was known
to the other party.
This principle is espoused in the illustrative case of Imperial Loan
Co. V Stone [1892] 1 Q.B. 599
Corporations:
The common law rule is that a person must have the power to appoint
an agent by virtue of its memorandum of association. The memorandum
of association must specify the appointment of an agent as one of its
objects. Where such is not the case any appointment made would be
ultra vires the Corporation.
Note: That Section 38 of the Companies and Allied Matters Act
abolishes the harsh effects of ultra vires as so that the ultra vires act of
companies are not now ipso facto void.
Infants:
An Infant can only appoint an agent in circumstances in which he
himself has the power to act. See Labinjo v Abake.
He can appoint an agent in contracts which are enforceable by him
but he cannot do so in those that are void against him.
Thus, what is ultra vires the principal is ultra vires the agent.
See: The S.C Ghana judgment in Mensah & ors v Ada & ors [1965]
ALR 159 at 16
Capacity to act as an Agent

An agent is only an intermediary in bringing the contracting parties
together. Thus, anyone may be an agent even though he is incapable of
contracting validly himself.
There is no need for an agent to have full capacity.
Formalities:
There is no particular form required for the appointment of an agent.
This was expressed by Lord Cranworth in Pole v Leaski [1963]
Part B
CREATION OF AGENCY
There are four major forms:
1. Agency by Agreement
2. Agency by Ratification
3. Agency by Estoppel
4. Agency by Operation of the law
Agency by Agreement
Express Authority
This is the commonest and most embraced way of creating an agency

relationship. Agency is created by express agreement arising from consent
usually expressed in the form of a contract. Under express authority, the
principal confers authority expressly i.e. orally or in writing.
According to Friedman, the ordinary rules of contract apply i.e.
their minds must be ad idem; there must be no fraud, duress,
misrepresentation or mistake made.
“It is correct to say that in most instances of agency relationship there is a

contract of agency between the principal and agent”.
Unless required by law to be in a particular form, an agent can be

appointed by spoken or written words.
Cases
Ayandike v Akindele
Pole v Leask (1863)
Alexander Logius v A.G (1938)
It is pertinent to note that the burden of proving agencies is on the

person alleging it. Further proof is however unnecessary where the
contract is in writing or under seal or when it is said to be a deed.
See:
Abina & ors v Farhat
There are a few cases in which an agent’s appointment must be under

seal and a few where it must be in writing.
 If an agent is to dispose off or create an interest in land, he must be
appointed in writing. Section 6 Law Reform (Contracts) Law
1994 laws of Lagos State.
 Where the agent is given power on his principal’s behalf and instructed
to execute and the make contracts under seal, he must be appointed by
deed.
In Attorney General v Ogunlana [1970], where Agbaje J
applied the rule in Berkley v Hardy.
This form of appointment is termed a power of attorney.

Power of Attorney: may be described as an authority given under seal,

authorizing the person to whom it is given (the attorney) to act for the
principal purpose. A power of attorney can be made irrevocable. A vivid
example is where it is granted to a purchaser for value who gives
consideration for the power. The power is permanently irrevocable and it is
not even determined by the death or disability or bankruptcy of the
principal.
A power of attorney can be also made irrevocable without the
purchaser giving consideration. However, it must be limited to a fixed time
not exceeding one year by virtue of S. 126 & 127 Law Of Property Act
1925
Where a power of attorney is irrevocable the principal can just
terminate. Put in short, a power of attorney implies conferring authority on
somebody to act on your behalf. It does not follow however, that because
the contract to be entered into with the third party has to be evidenced in
writing or by deed the agent has to be appointed by deed.
An agent can without the power of attorney enter into a contract to

sell land by law; land can only be sold by conveyance (deed).
Moore v. Jones [1926]
Ayandike v. Akindele
Implied Authority
Aside expressly creating the agency relationship, an agency
relationship may be implied from the conduct of the parties.
Implied authority can mean appointment of an agent without

conferring express authority on him. Such agent is acting by conduct and
not necessarily by drawing inference.
Where an agent does an act which is not expressly authorized but can
be regarded as being secondary to or independent upon the actual authority
the agent is said to have implied authority to do the act in question.
It is limited to acts which are incidental and necessary for the exercise
of the actual authority but does not include acts which are outside the
ordinary course of business of the agent. For example, an agent appointed
to operate the bank account without actual authority has power to arrange
an overdraft and draw on the account accordingly.
Sowemimo J in A.C.B. Ltd v. Balogun & ors [1969] NCLR
Exception: Conversely, an estate agent authorized to sell has no implied

authority to enter into a contract of sale.
Kazeem J in Harry & Go. Ltd v Aremu anor CCHJ applied the
dicta in the case of Wragg v. Lovett.
He can only enter into an open contract or agree with the price.
Ayandike v Akindele
Where statutes provide requirements to be satisfied before a valid
contract can be concluded e.g. where a note or memorandum is required to
be signed, an agent needs no actual authority to sign it; such authority will
be implied.
Implied authority and Estoppel

 Both implied authority and estoppel are created by conduct.
 The difference is in the timing. How? Answer: Implied authority is

usually inferred by conduct before the agent acts on behalf. While,
estoppel is after the agent has acted on the principles desires.
 In implied authority the existence and Scope of the agent’s authority
are discoverable by reference only to the conduct of the parties and
not by the examination of any express agreement.
 Conversely, agency by estoppel exists where the principal did not
want to appoint the agent to act on his behalf.
Agency by Ratification
In ordinary parlance, a contract that is ratified is a contact adopted.
Ratification can take place where an act is done without authority or
in excess of authority, and an agent is adopted as binding by the principal.
Under the law of agency by ratification, the situation is reversed
compared to agency by agreement. In ratification, what is done on behalf of
the principal is done at a time when the relationship of principal and agent
does not exist. There is no authority conferred on the agent to do what he
does at the time it is done.
The effect of ratification is to create a privity of contract between the
principal and a third party just as if the agent had been acting with the
authority of the undisclosed or unnamed principal. Such action of the agent
can subsequently be adopted by the person on whose behalf it was done.
Ratification is therefore the process of adopting the act or transaction.
Forms of Ratification
There are two forms of ratification:

i. It may occur when the agent though contracting as an agent and having a
principal in contemplation was not in fact given such authority to so act.
ii. It may occur when the agent was in fact conferred as an agent by a
principal but exceeded the authority so given.
Definition by Professor P. K. Fogam: This kind of agency usually

comes about when a person without authority or who having an authority
exceeds that authority and act on behalf of another and that other
afterwards confirms and adopts that act.
Formalities
Ratification needs not take any form. Acts of statements clearly
showing intention may be sufficient for an act of ratification. But, if the
contract made by the agent is in the form of a deed, then the principal’s
ratification must be by deed. Oxford Corporation v Crow (1893) 3 ch
535
Where the agent has entered into a contract which itself must be or
evidenced by some writing, must ratification be in writing?
Soames v Spencer (1822) it was held that parole ratification was
good even though the agent’s contract with the third party had to be in
writing.
Ratification may be implied from the conduct of the principal or is
acquiescence. Mutual Aid Society v Akerele (1966)
Where the act covers series of transactions, the principal needs not
ratify all. See the illustrative case of Harrison & Cross field ltd v
London & N. W Ry Co.
But he cannot adopt those that beneficial to him and neglect those
that do not. This is expressed in Briston v Whitmore
Elements of Ratification
1. The agents must have acted on behalf of the principal.
The agents must profess at the time of making the contract that he is
acting on behalf of and intending to bind the person who subsequently
ratifies the contract. This is based on the principle that a man may not incur
liability on his account and then assign it to someone else under the colour
of ratification.
Question: how can a principal validly ratify the agent's act?

i. This is determined by reference to the way the transaction appears to the
third party.
ii. It depends on what the agent has shown his intention to be.
Thus, only the person whose authorization the agent as purported to

act can take the benefit of, or be made liable under the agent's act.
In Keighley Maxsted & co v Durant the question of law is
whether a contract made by a man purporting and professing to act on his
own behalf alone and not on behalf of a principal but having an undisclosed
intention to give the benefits of the contract to a third party, can be ratified
by that third-party, so as to render him liable to sue or be liable to be sued
on the contract.
The House of Lords in giving its judgment, which is succinctly
summarized by Lord McNaughton’s remark that ''civil obligations are not
to be created by, or founded upon disclosed intentions”.
The relationship must be based upon the knowledge on the part of all
concerned and their joint intentions that such a relationship should exist
and affects rights and liabilities. Folashade v Duroshola (1961)
2. The Principal must be in existence

During the acting on behalf of the principal, the principal must be in
existence and such existence must be ascertainable at the time the contract
was made.
According to Fridman in his book ‘Law of Agency’, “no one can
purport to act as an agent for a person who will come into existence at some
future date or even if the agent can reasonably expect that his acts will be
adopted”. The principal must be named, and where he is not, he must be
reasonably ascertainable by the third party.
Thus, an undisclosed principal cannot ratify.
In Keighley Maxsted & co v Durant, it was held that the plaintiff
could not ratify as his identity was not disclosed and therefore he was not
liable.
Where a company is not yet in existence but is still at the process of
birth, the common law position is still that such a company will not be able
to ratify a contract made on its behalf once the company has achieved legal
existence. Since, a company has no legal existence before incorporation; the
common law position is still that the company cannot ratify any contract
made prior to incorporation.
In Kelner v Baxter (1866), the court rejected the purported
ratification of a contract by a corporation which had not been formed at the
time the contract was made. Willies J said ''ratification can only be by a
person in existence either actually or in contemplation of law.
See the following cases

Cagliara v Gionvani Sartori & co. ltd (1961)
Newborne v Sensolid (GB) ltd (1953)
Urhobo v Chief J.S. Tarka (1976)
However, the Nigerian Law Reform commission reviewed the

Nigerian company law in the late 80s and recommended a statutory
modification of the common law rule which resulted in section 72 of the
company and Allied matters Act.
Section 72 (1) and (2) allows for ratification of pre-incorporation
contracts. This is neither automatic nor non-compulsory these lies at the
discretion of the company.
Section 72 has been said to have given statutory backing to Ikpeazu
J's decision in Firgos (Nig) ltd v Letters (Nig) pools ltd (1965).
Justice Ikpeazu can be said to have laid the foundation of section 72 (1) and
(2).
The principal must not only be in existence, but must be a person

capable of being ascertained or identified at the time. It is not necessary
you should be named, but there must be a description and reasonable
designation of the person intended to be bound as principal. Watson v
Swann (1962)
Thus, the only person who can ratify and agent’s act is the person on
whose behalf the act was expressed to be done. Only the person under
whose authorization the agent has purported to act can take the benefit of,
or be made liable under the agents act.
Wilson v Tumman (1843)

Barclays Bank ltd v Roberts
3. Capacity of the Principal to Contract

A person can only ratify an act if he has contractual capacity to do the
act himself. An agent’s act can be ratified only if the principal is legally
competent to do the act himself. That is, such acts must be within the
capacity of the principal and agent Thus, acts which are ultra vires the
principal cannot be ratified.
Firth v Staines
Adonike v State
Boston deep sea fishing Co v Farham
4. Knowledge of the Facts

The law requires that the principal must be aware of the full facts of
the act before he can ratify. This knowledge or otherwise may depend on
circumstances. For example, he may be deemed to know the facts if he
ought to have known. The court may construe knowledge where the
principal is deemed to have known the facts.
For ratification to take place validly the principal must be aware of all
the material facts and full knowledge of the transaction is proposing to
adopt.
Savery v King (1856)
5. The Legal Quality of the Act

This refers to the nature of the act. The question that arises is that
“whether the act is durable in law”. Theoretically, every act lawful or
unlawful which is capable of being done by means of agency is capable of

ratification by the person on whose behalf it was done.
However, the doctrine of ratification is primarily applicable to
contract. Life cannot be given by ratification to prohibited transactions.
The following principles should be considered:

i. Acts which are illegal or void cannot be ratified.
If the directors of a company enter into a contract that is not within
the scope of its memorandum of association, the contract cannot be ratified
even if every shareholder assents to it because it is ultra vires and therefore
void.
Ashbury Fly carriage & Iron v Richie.
In the same stead, criminal Acts cannot generally be ratified.

Lord Fitzgerald in La Banquet Cartier v La Banqued 'Epargee de
muntreal
ii. An act ultra vires the principal is void, an act which is ultra vires the
agent or which is done in excessive is power is not void but voidable and
can be ratified.
Thus, you can ratify a voidable contract entered into by your agent.
Brook v Hook (1871)
iii. An act ultra vires the director but intra vires the company can be
ratified.
Metalimpex v Attorney-General Leventis and Co.
6. Ratification applies to the whole contract

The rule is that the principal must ratify the whole contract. Thus, the
principal must ratify the totality of the act of the agent. A principal cannot
adopt whatever is advantageous to him, and repudiate those that are
onerous.
Union Bank of Australia v Mc Cuntock (1922)
Presentaciones Musicales SA v Secunda (1994)
7. Ratification must be within a reasonable time
8. Proof of Ratification
Ratification needs not be expressed in writing. Any act or statement
clearly showing the principal’s intention will suffice. But, if the contract
made by the agent is in the form of a deed, the principal's ratification must
be by deed.
The usual practice initially was that the principal must perform or do
some positive or unequivocal act which indicates ratification.
Like acceptance of a contract, ratification could not survive through
silence. But, Walter J in Suncorp Insurance & Finance v Millno
Assecurazoni Spa (1993) stated that mere acquiescence or inactivity
may be sufficient to establish ratification. Thus, merely standing by without
objecting will be sufficient.
Hence, the English view is that the inactivity of the principal can
constitute implied ratification of an unauthorized act.
Effect of Ratification
The effect of ratification is retroactive. That is, to put all persons in
the legal position they would have been had the unauthorized act being
authorized. Harman J in Boston Deep Sea Fishing Co v Farham said
ratification has a retroactive effect.
Lord Sterndale in Koenigsblatt v Sweet where there has been
ratification the act that is done is put in the same position as it had been
antecedently authorized.
Hence, what happens when a third-party withdraws before
ratification takes place? The better view supported by case law is that
notwithstanding that the third party has given a notice to the agent of his
withdrawal from the transaction, ratification is effective.
Thus, in the controversial case of Bolton Partners v Lambert
(1888), it was held that notwithstanding the third party's attempt at
revocation, he was bound by the contract with x, because ratification
related back to the time of the agent's acceptance and so prevented the
third party’s revocation.
The rationale of this decision is a confirmation to the retroactive
effect of ratification. However, if A's acceptance is subject to approval, the
offer could be withdrawn before the approval. Watson v Davies. That is,
where the offer is conditional and there is no binding contract until
ratification of the agent’s acceptance, the third-party can withdraw his
offer.
The third-party can escape this problem by making expressly or
impliedly his offer subject to ratification as seen in Watson V Davies
Supra.
In summary, there are 8 core requisite requirements for ratification to be

established:
1. The agent must act on behalf of his principal
2. The principal must be in existence
3. The principal must be capable
4. He must have distinct knowledge of the facts
5. Legal quality of the act
6. Ratification of the whole contract
7. Ratification must be within a reasonable time
8. Proof of ratification
Finally, the vitality of these elements draws to a conclusion that for agency
by ratification to be established and proven, these 8 elements must be
satisfied.
Agency by Estoppel
Estoppel is a rule of evidence law which precludes a person from
denying a representation he made when in reliance upon the representation
another person's position is materially altered. It is pertinent to note that
the term estoppel is not exclusive to Commercial Transactions.
The rule is founded on the Latin Maxim allegans contraria non
est audiendus i.e. one making contradictory statements is not to be
heard. According to Akanki, a person cannot be heard or allowed to blow
hot and cold with regards to the same transaction. In ordinary parlance, the
Maxim means a person making a contradictory statement would not be

heard by the court.
As applied to agency, estoppels will render a person liable to a third
party who by words or conduct has allowed another to appear to the outside
world to be his agent with the result that third parties deal with him as his
agent.
See Amagolu J in Franca (Nig) Ltd v African Real Estate &
Investment Co. ltd & Anor
It is immaterial that the agent has no authority or acted in excess of

his actual authority. This principle is elaborated in
Ogunsusi v Lukan [1968]
Combe C.J in Reccah V Standard Co. of Nig ltd put the rule succinctly
that where any person by words or conduct represents or permit it to be
represented that another person has authority to act on his behalf, he is
bound by the act of such other person with respect to any one dealing with
him as an agent on the faith of such representation.
Lord Denning in London property trust v High tree house made

clear the doctrine of promissory estoppel.
The principle involved in agency by estoppel involves holding out of
the Principal or ostensible authority by the agent.
Elements
1. There must be a REPRESENTATION
This means that the principal must have shown or exhibited conducts
or statement that would amount to an inference that the agent has
instructions to act on behalf of the Principal.
President Clothing v Anyawu
Core Elements of Representation

i. There must be ostensible authority made by words or conduct or
acts of the general nature
ii. Such acts must be made by the principal or someone capable to act
on his behalf.
iii. It must be a representation of facts.
See Agbaje J. in Adeniji v Jadesimi where he held that based on
the conduct between the principal and the agent of that case, the
relationship between the two, the agent could act based on the fact of that
case.
iv. The representation need not be intentional it can be negligent or

mistaken. See the case of Hedley Byrne & Co Ltd v. Heller &
Partners.
A statement or conduct capable to amount to representation must be

clear and unambiguous.
See the case of Colonial Bank v John Candy
2. There must be RELIANCE on the representation

The third party must have relied orally or written on the statement,
often times made by the principal. The party who is alleging agency by
estoppel must show that not only was representation, made to him but he
actually acted upon the representation.
See the case of President clothing v Joseph Anyanwu
Farguaharson bros v King
3. There must be an ALTERATION of a party's position resulting from the

reliance
The third-party must have altered his position based on reliance. he
must have acted on it to his own detriment.
See Tower Cabinet v Ingram
Scarf v Jardine
Agency by Operation of the Law
In some circumstances, the law regards what has been done by

someone as having been done with the authority of some other person and
therefore as his agent.
Two Legs of agency by operation of the law

1. Agency by Necessity
2. Agency by Cohabitation.
Agency by Necessity
This often arises when in emergency conditions a person is obliged to
act in order to prevent an irreparable loss to the property or similar interest
of the person on whose behalf of the act is performed. This occurs in
instances where a person enters into transaction on behalf of another
without authority so as to protect the interest of that other person from
ruin, loss or damage. Hence, the basis of this agency is necessity.
In such a situation, even though the person who so acts has no
authority to do so, yet because of the agents needs, the law regards what
has been done by someone as having been done by the authority of some
other person as his agent.
Conditions for Agency by Necessity
1. Prior Contractual Relationship

Where there is in existence a prior contractual relationship between
the parties and the acts constituting the agency of necessity, it is a mere
extension of that relationship by the agent who in the unforeseen
circumstances that have been arising is compelled to exceed his authority.
For instance, a master of a ship may sell or load off cargo if the ship is in
danger and such act though not authorized will bind the owners.
In Great Northern Railway Company v Swaffield, where as a

result of delays not responsible by the railway company, the horse could not
be delivered to its consignees as agreed. This prompted the company to
keep the horses with a stable keeper and consequently paid the stable
keeper’s charges. It was held that the defendants were liable to pay the
plaintiff’s incurred expenses. Although, the company had no express or

implied authority to incur such charges, it had acted in an emergency as an
agent of necessity.
2. There must be in existence actual or imminent or critical commercial

need for the agent to act on behalf of the principal.
This means that there must be a genuine emergency to warrant of the
agency.
A classic example is where the goods are perishable. See Swaffield’s
case.
Note: Where therefore goods are not of perishable nature and are not likely
to deteriorate in quality if properly stored; an agency of necessity will not
easily be employed.
Furthermore, mere inconvenience will not spurn the creation of an agency
of necessity.
In Sachs v Miklos [1948], where S stored his furniture in M’s
premises, M wanted space and sold the furniture after 3 years. M was held
in conversion.
Also, in Munro v Wilmot [1948] where the defendant allowed the
plaintiff to park in his garage, it was left there for some years. The D sold it
and was held subsequently by the court liable for conversion.
3. It must have been impossible and impracticable for the agent to

communicate with the Principal
The locus classicus for this principle is the case of Springer v
Great. Western Railway Co. In this case, the defendant sold
tomatoes which ought to have been consigned to the plaintiff. The
railway company was held liable in damages to Mr. Springer for they
ought to have communicated such intention.
This nowadays, as a result of technological advancement, has been
difficult to prove and is not popular.
Agency Presumed by Cohabitation

Where a married woman is cohabitating with her husband and both
maintain a household establishment, there is a presumption that she has
implied authority to pledge the credit of her husband for necessaries
suitable to the style which they live by virtue of cohabitation.
In determining whether goods supplied are necessaries, it seems
regard is made to the man's style of living rather than his actual means. The
ruling of the court in Phillipson v Hayter establishes that it is the
ostensible and not the justifiable mode that sets the standard.
See Sanderlands v Carusa.
Elements
1. There must be actual cohabitation
2. There must be domestic establishment
Cohabitation
Under this law, cohabitation demands that the parties must be living
together. The meat of cohabitation is that before a claim for necessity can
succeed there must be a proof that both parties live. However, some
circumstances exempt the creation of this type of agency.
Exceptions
i. Where they are separated she has prima facie no authority to pledge
his credit and this form of agency cannot be invoked.
ii. Where they are separated by court order, the husband is not liable
for necessary supplied.
iii. Respirations by Mutual consent, the woman can you longer pretty
husband and there is no liability on the husband safe in a situation it
defaults on his part of the bargain.
Domestic Establishment
Mere cohabitation is insufficient. They must be living together as man
and wife in a circumstance that they are a family. Domestic establishment
indicates that it is not sufficient that they live together; they are to be
perceived by the outside world to be husband and wife.
In Debenham v Mellon, the husband and wife were manager and
manageress of a hotel where they lived and cohabited. The wife incurred
some debts on the husband. The House of Lords held, inter alia, that there
is no presumption of agency because the parties were not cohabiting in a
domestic establishment but in a hotel and thus, the husband was not liable.
Factors that Deprive the Wife of this Authority

The husband may escape liability where he can prove that:
i. The goods were ordered exclusively on the wife's credit.
ii. The goods are extravagant.
iii. The wife has sufficient goods at home already.
iv. The husband has discredited the woman i.e. the trader has been
expressly warned not to supply goods to his wife on the husband’s
credit.
v. The wife had been forbidden to plant credit on his behalf photo
Note: Where the husband credits his wife in public a rebuttal in private
cannot avail him of liability.
SCOPE OF THE AGENT’S AUTHORITY
Background
Once an agency relationship has been created, it is important to

establish the scope of such relationship. This implies the nature and extent
of the power possessed by the agent.
Generally, the agent’s authority is conferred by the same method
leading to the formation of the contract of agency. Thus, it depends on the
creation of agent and the authority conferred on them. We have:
Types of Authority
- Express authority
- implied authority
- usual authority
- apparent or ostensible authority
- Customary authority
Express Authority
This is the authority conferred either orally or written while forming
the agreement. This type of authority arises directly from the authority
expressly or directly given by the principal to the agent under the
agreement between them.
It may be conferred orally or in writing or by deed (a.k.a. a power of
attorney).
 Where the authority is given by Deed
In Freeman & Lockyer v Buchurst Park Properties the
instrument or deed will be strictly construed according to the rules of
construction which are usually applicable to all kinds of deeds.
 Where the agent’s authority is contained in a document not under seal,

(i.e. written or parole) the authority is to be construed having regards to
the purpose of the agency i.e. the surrounding circumstances and the
usual course of the business which concerns the agent.
In Ashford Shire Council v Dependable Motors where it was
held that where the agent’s authority is in doubt, the extent of such
authority must be determined by inference from the whole circumstances.
It is important to note that where there is ambiguity about the

wording of the agent’s authority, then, as long as the agent acts in good
faith in accordance with a reasonable construction of his authority, he will
be considered to have acted within his authority, whether or not what he
did was that the principal intended he should do.
The rule of interpretation is the literal rule.
See Boden v French
Ireland v Livingston
Blandy Bros & co. ltd v Nero Simon ltd
Stafford v Conti Community Services ltd
Note: The tort of action is not against the principal but against the agent
that is, the agent is fully liable except where there is ratification.
Implied Authority
It is almost beyond possibility for an express agency to spell out the
full extent of the authority of the agent.
The court in Ghandi v Pfizer International Products ltd stated
‘a term which is not expressed in a contract will be implied if it is so
necessary that had the parties averted to the situation, they must have
intended that it should be a term of the contract’.
This type of authority is therefore derived from the express authority
of the agent. The agent has authority to do whatever is necessary for, or
ordinarily incidental to the effective execution of his express authority. This
connotes the use of discretion.
Thus, where an agent is appointed to conduct a particular trade or
business he can impute expertise and do the necessities in the trade or
business. For instance, an agent employed to sell certain property has
implied authority to describe the property and state to an intending
purchaser any facts which may affect its value.
See Mullens v Miller
Usual Authority
This authority is similar to usual, implied and customary kinds of
authority. It is the type of authority possessed by agents employed to act for
a principal in connection with matters concerning a particular trade or
business or to acts for the principal in the ordinary course of his trade,
business or profession. That is, he does what is usual in his trade,
profession or business in carrying out what is necessary.
Thus, a commissioned agent employed to make a bet for his principal
is impliedly authorized to pay for the bet if he lost.
In the illustrative case of Read v Anderson,
Similarly, in Watteau v Fenwick [1893] the learned Justice, Will

J, said ‘the principal will be liable for all the acts of the agent which are
within the authority usually confined to an agent of that character.
The principal will be liable for the Acts of the agents or unless he has
prohibited or restricted the agents from acting in the way he has done and
the third party has notice of the prohibition or restriction.
Principle: If a person employs another as an agent in a character which

involves a particular authority, he cannot by secret reservation deprive him
of that authority. Edmonds v Bushel and Jones [1865]
Customary Authority
Where an agent is employed to act for his principal in a certain place,
market or business, then the agent is impliedly authorized to act according
to the usages and customs of such place, market or business.
It is the power of the agent to exercise by virtue of his trade or
business itself.
The Difference
The difference between customary authority and usual authority is that the
essence of usual authority is an inference from the ordinary course of a
particular trade, business or profession while the essence of customary
authority is the custom and practice of a particular place, market or
business.
In Bayliffe v Butterworth, Parke B said ‘if there is at a particular
place, an established usage in the manner of dealing and making contract, a
person who is employed to deal or make a contract there is an implied
authority to act in the usual way.
Exceptions:
 The principal can only be bound where such custom is known to him.
 or be so notorious that he cannot be heard to say that he had no
knowledge of it.
Note: The custom must be reasonable and lawful. If lawful but not
reasonable, the principal cannot be bound except he expressly consents to
it.
Cases: Cunliffe Owen & Teather v Greenwood
Anglo-African Merchants v Bayley
North & South Trust co. v Berkeley
Apparent/Ostensible Authority
This kind of authority is derived from either ratification or estoppel.
This is the authority which the principal by his words or conduct as led
third parties acting as reasonable and prudent persons justifiably to believe
is conferred on the agents by the principal.
The principle of apparent authority is an application of the principle
of estoppel.
Thus: Where one person expressly or impliedly represents another to have

authority to act on his behalf so that a third party reasonably believes him
to possess that authority and deals with him in reliance on the
representation, the person making the representation will be bound to the
same extent as if actual authority had in fact been conferred. Simply put, he
his estopped from denying the ostensible authority which he has created.
Elements
 A representation must be made by or with the authority of the principal.
For ostensible authority cannot be created by a representation of the
agent himself.
 The third party must rely on a representation of the agent’s authority to
act as agent. The doctrine cannot apply where the existence of the
principal is unknown to the third party.
 The position must be altered as a result of such reliance.
See Rama Corp v Proved Tin & General Investments ltd
The words or conduct must convey clear unambiguous message that

the agent has authority to do a particular act on behalf of principal.
See Colonial Bank v Cady
President Clothing v Anyanwu
Note: It is the authority exercised by the agent as a result of the principal

holding him out to the world as an agent and once you hold out in public
you cannot rebuke in private.
A solid example is where a husband takes his wife's liability in
dealings with tradesman upon himself; he holds her out as his agent and he
will be found liable on future contracts unless he informs the tradesman
about his revocation.
Cases: Nasidi v Mercury Assurance Co. ltd

NPA v Cogefar SPA
Where a person is entrusted to certain duties in the normal course of

his work, this may amount to an implied representation of authority to act
in a certain way.
See: Lloyd v Grace Smith & co
Essenkay (Nig) ltd v Leventis Stores ltd
Apparent authority may also be established where the agent has been
conducting similar transactions or doing similar acts to the knowledge of
the principal without his objection.
See: Raccah v Standard Co. of Nigeria
DUTIES OF THE AGENT TOWARD THEIR PRINCIPAL
Where an agency relationship is consensual, there are usually express

and implied terms which govern the right and liabilities of the parties. This
implies that, the obligations of the principal and agent are governed by the
terms. But, in the absence of these terms, those obligations are regulated by
rules of law applicable to such relationship.
Note: Where an agreement giving rise to an agency relationship has no

express contractual terms, the agent as a matter of law, owes certain
implicit duties to his principal. That is once there is no express contractual
term creating obligation; the agent’s duties would be implied by law.
These duties include:
1. Performance
This means the agent must do what he has been appointed to do. In
contractual agency or agency contract, this connotes the agent carrying out
the contract which he has made with the principal.
As a result, the agent will be personally liable for breach of contract if
he fails to perform his contractual obligations. However, where the
undertaking is illegal, the agent is not obliged to perform, nor is he obliged
to carry out a transaction which is null and void.
See: Cohen v Kittel [1889]; compare to
Fraser v B.N. Furman Ltd (productions) ltd [1967]
Where the agency is not contractual, (e.g a gratuitous agreement), the

agent is not obliged to perform the undertaken at all and thus will not be
liable for failure to perform; but where he decides to perform he could be

liable for negligent performance.
2. Obedience
An agent must act in accordance with the authority given to him in
the performance of the undertaking. He must obey the principal’s express
instructions (either written or oral) as long as they are lawful.
In the absence of express instructions, he must apply his implied
authority i.e. he must act in accordance with the general nature of his
business or trade or other customs or usage, where they can apply in the
performance of the undertaking.
According to Fridman, ‘no matter the circumstances the paramount
consideration is the benefit of the principal, and as long as he acts for the
principal’s benefits, the agent may use his discretion’.
3. Care and Skill

In addition to the above, an agent is required to exercise the requisite
skill and diligence in the performance of the duties.
This duty is founded on the principle that: ‘where an agent has
impliedly or expressly hold himself out to his principal as possessing skill
adequate to the performance of a particular undertaking, he must show
such care and skill’.
A distinction is often made between the standard of care to be
observed by contractual and gratuitous agents. In contractual agency, the
standard of care to be observed by the agent is the skill which an agent in
this position would usually possess and exercise. Thus, as long as he has
behaved with normal care and skill, having regard to the nature of his
business, and has acted in a reasonable manner as would be expected from

an agent employed in such an undertaking, the agent will not be liable for
negligence even if his efforts were not successful.
In Omotayo v Ojikutu [1961], the Privy Council held that a
principal who appoints an agent knowing his skills and experience is not
entitled to expect or require from that agent a higher measure of skill or
knowledge that one in his position and experience could reasonably be
expected to possess. Also, the agent does not guarantee the successful
outcome of transactions undertaken by him on behalf of his principal and
where he acts honestly, no more can be demanded of him than he should
show a measure of skill and diligence which could be expected of one of his
position and experience.
Thus, if an agent is expected to sell, it is duty to obtain the best price
reasonably obtainable.
Similarly, in Keppel v Wheeler, it was held that his duty to obtain
the best price obtainable does not cease when the agent had procured an
offer which has been conditionally accepted by the principal.
Furthermore, a gratuitous agent as seen earlier is under no obligation
to act. But if he does act, the degree of care and skill required of him is that
which a reasonable man would exercise in respect of his own affairs.
4. Duty to Account
An agent must not commingle, he must keep proper record. Money or
property entrusted to the agent must be accounted for to the principal.
The duty to account imposes on the agent a primary duty to keep
proper accounts of the property and money received on behalf of the
principal.
See Turner v Burkinshaw
The agent is required to keep proper record showing receipts and

expenditures in order that a complete accounting may be rendered.
Any money collected by an agent for his principal should not be
conflated (mingled) with the funds of the agent.
See Gray v Haig
5. Non-Delegation
As a general rule, the agent may not delegate to another person that
he has undertaken to do. This is expressed in the Latin maxim:
Delegatus non potest delegare – a delegate cannot delegate that
he has been delegated
This rule is established on the premise that the principal imposes

trust in the agent of his choice. As a result, the agent is obliged to act
personally. The principal is entitled to have the benefits of the skill of the
person whom he has selected as his agent.
In De Busshe v Alt [1978], Thesiger L.J outlined the reason for
this rule and its limitations as follows: As a general rule no doubt, the
maxim applies so as to prevent an agent from establishing the relationship
of principal and agent between his own principal and a 3rd
person;………and that an agent cannot without authority devolve upon
another obligations to the principal which he has himself and taken to
personally fulfill.
See also Buckley J. in Allam & co ltd v Europa Poster Services
ltd [1968].
It can be inferred from these cases that the facts and judgments does
not only reveal the basic principles of the law in regard to delegation by an
agent but also the recognition by the law that there are circumstances in
which it is permissible for the agents to delegate the performance of the
undertaking to another.
Therefore, there are a number of occasions when because of
exigencies of business, the above is relaxed in order to enable the agent to
delegate his powers.
This may arise in the following cases:
i. Where the duties to be performed are purely ministerial acts
which do not involve any special care and skill, they can normally be
delegated.
ii. Where the usage of custom of the trade or nature of the
business permit delegation.
iii. Where unforeseen circumstances arise which necessitates the
agents delegating.
iv. Where the principal expressly sanctions or consents to the
delegation.
Note: As you read and digest the principle of non-delegation, you are strongly
advised to commit the 4 exceptions listed above to memory taking careful
note of the importance of letters in bold.
Question: where delegation is proper, what is its effect?

Answer: The employment by the agent of a sub-agent does not normally
bring into being any privity of contract between the agent and the sub
agent. In this case, the sub-agent is responsible to the agent alone and
cannot be sued directly by the principal.
See Kahler v Midland Bank [1952],

Also, in Calico Printers Association v Barclays Bank [1931],
where it was held that where an agent has power to appoint a delegate or
sub-agent, the sub-agent becomes the agent of the agent and not of the
principal, unless the principal has given authority to his agent not merely to
appoint a delegate or sub-agent but to appoint someone to act as a agent for
the principal.
Thus, where the principal expressly or impliedly authorizes the
delegation or where he ratifies a delegation which has already taken place,
privity of contract is established.
Consequentially, the sub-agent becomes responsible to the principal
for the due discharge of their duties which his employment costs upon him;
a fiduciary relationship arises between them.
6. Duties arising from the Fiduciary Nature of the Agency.

Besides those ordinary duties which are implied by law into an agency
relationship, there are certain other duties that are owed by the agents to
the principal which arise from the fiduciary nature of the relationship
between them. These duties are equitable in character and are usually
lumped together under one general principle namely:
‘An agent must not let his own personal interest conflict with the
obligation he owes to the principal’.
This general idea is manifested in the following ways:

a. Fidelity
b. Secret profit
a. Fidelity
No agent may enter into any transaction in which he has a personal
interest which might conflict with his duty to his principal, unless the
principal with full knowledge of the agent interest consents.
Hence, where the agent is in a position in which his own interests
may affect the performance of his duty to his principal, the agent is obliged
to make a full disclosure of all the material circumstances, so that the
principal with such full knowledge can choose whether to consent to the
agent acting.
The absence of this consent may result in the principal repudiating
the transaction and claim from the agent any profit the agent may have
obtained from such transaction.
An agent may not depart from his exact character as an agent and
become a principal party even though such change will not affect the
principal. For instance, this is illustrated where an agent employed to sell
the principal’s property purports to buy the property himself.
What happens if it does so?

If he does so, he puts himself in a position where his interest directly
conflicts his duty.
What will the principal do?

The principal in such situation may set aside the transaction and claim
from the agent any benefit which he may have obtained from such
transaction.
See McPherson v Watt [1897], where the agent of two ladies who
wanted to sell their house, bought it in the name of his brother.
In such case, it is immaterial that the contract was fair or that a long
time has elapsed as the principal without fault on his part is in ignorance of
what happened.
Furthermore, an agent must not make use (for his own personal
benefit) of information acquired in the course of his employment as an
agent unless he has his principal’s consent.
In other words, an agent is not allowed to make use of such
confidential information to engage in competition with the principal. For
example, where an employee has had access to list of customers of their
employer and have sought after the termination of their employment to
make use of such knowledge.
In Boardman & Anor v Phillips [1960], it was held that
knowledge as to the value shares in a company which the agent gained
while acting as solicitor for the principal, was something like property
belonging to the principal, the use of which made the agent accountable to
the principal for profit hereby gained, even though the principal had earlier
refused to use the knowledge for his own benefit.
Similarly, in Robb v Green [1895], where an employer obtained
injunction and damages against an employee who after he finished working
for his principal made use of lists of names and addresses of the employer’s
customers which the employee had obtained while working for his
principal.
See also Sanders v Parry [1964]
This otherwise depends upon whether the agent’s position was such
that it gave him access to special information which he would otherwise not
have obtained.
See Nordisk Insulin Laboratorium v C.T. Bencard Ltd
[1953]
Arguments:
The difficult question however arises where the agent deals with his
principal after he has ceased to be an agent. It appears that the duty to
disclose can continue but whether it does so in any particular case will
depend on all the circumstances of the case.
For example: if the confidence created by the agency still exists at the time
of the transaction, or if he has acquired special knowledge during his
employment relating to the subject matter of the transaction, the court will
be inclined to hold that the duty of disclosure is still binding on the agent.
See Allison v Clayhills [1907]
Demrara Bauxite v Hubbard [1923] AC
If again the principal becomes an alien enemy, it may well be that the
agent’s duty of loyalty comes to an end.
Nordisk Insulin Laboratorium v Georgate Products ltd
[1953]
The agent may not (when employed to) bring his principal into
contractual relations with a third-party also act as an agent for that third-
party without disclosure of that fact to both parties and obtaining their
consent.
Fullwood v Huley [1920]
Where the agent failed to make full disclosure, his principal may
rescind the contract or affirm it and claim the profit the agent has made.
However, where rescission is no longer possible, the principal must affirm,
but he will usually be able to claim the profit the agent has made or
damages for breach of contract.
Thus, where an agent has bought his principal’s property, the
principal can claim the profit on the resale, or the difference between the
value of the property and the price the agent gave.
See De Busshe v Alt
b. Secret Profit
An agent must not make secret profit out of the performance of his
duties as agent. He has a duty to account for all such profit. Where an agent
fails to disclose such secret profit, he may lose commission or result to his
dismissal.
According to Fridman's law of agency secret profit refers to any
financial advantage which the agent receives over and above what he is
entitled to receive from his principal by way of remuneration.
These secret profits may include: rebate, bonuses, bribe or payment
of a secret profit.
It is sufficient if the agent without the complicity of a third-person,

secretly gains financial advantage to himself from the exercise of his
authority. The agents will be liable to account for the profit received,
because the contract of agency is one of utmost good faith.
See De Busshe v Alt
Hippisley v Knee Bros [1905]
Even if the agent is not being paid commission for acting on the
principal’s behalf he may still not secretly profit from his position.
See Turnbull v Garden [1864]
The position of agents who makes secret profits was considered at

length in Boardman V Phipps.
Similar doctrine has been applied to those who are not agents in the
strict sense but are in a similar fiduciary relationship. Thus, it has been held
to apply to policemen, soldiers who have used their position to make a
secret and illegal profit.
Where the secret profit takes the form of a bribe i.e. the payment of a
secret commission by a third-party or the receipt by the agent of a “secret
advantage for himself from the other party to a transaction in which the
agent was acting for his principal” he is liable to account for it and pay over
the amount to his principal as money he had and received to his use.
See Boston Deep Sea Fishing & Ice co v Ansell [1888]
Other remedies are available to the principal against both the bribed
agent and the briber. The initial position was that: “a principal could obtain
from his corrupt agents the amount of the bribe he had accepted since this
was a secret profit, and also sue the agent and the third-party giving the
bribe, jointly or severally for any loss or damage resulting from the agent
acceptance of the bride”.
But, the Privy Council in Mahesan v Malaysia Government
Officer’s Co-Operative Housing Society ltd [1998] 2 All ER 405
decided that ‘as against the agent and the briber, the affected principal had
alternative not cumulative remedies. He has to make an election which one
he wishes to pursue.
i. Claiming the amount of the bride from the agent as money had
and received by the agent and;
ii. Suing for damages for fraud in respect of the actual loss sustained
by the principal in consequence of entering the transaction in
relation to which the bribe had been given.
DUTIES OF THE PRINCIPAL

1. Remuneration
Every agent has a right to regulation for services rendered to the
principal. The remuneration is usually in form of commission. The
obligation to pay and the amount to be paid is usually found in the contract
express or implied between the principal and agent.
Where the contract expressly provides for remuneration, the term
must be very clear and the agent can only claim in accordance with those
terms. So, where the agent agreement provides for the payment of “such
remuneration as should be deemed right” such a term will be too vague and
uncertain to confer a remuneration right.
See Taylor v Brewer [1813].
But where as in Bryant v Flight [1839] the agent leaves the amount of
payments he is to receive entirely to the principal, it was held that there was
an implied term for some remuneration and the agent could recover on a
quantum merit basis.
Where nothing is said on the subject of remuneration but the nature
of the employment and the situation of the parties show that payment was
intended, remuneration will be paid on a quantum merit basis (that is what
is reasonable in the circumstances) and the fact that nothing was expressly
agreed is immaterial.
If there is a trade the other usage or custom which indicates that
remuneration is to be paid, the amount of remuneration may be calculated
by what is customary in the trade, profession or business in which the agent
is employed.
In Badawi v Elder Dempster Agencies ltd [1968], it was held

that where an estate agent is employed to sell property, he is entitled t
commission at the standard rate charged by the profession if that is known
to his principal.
Where it is expressly or impliedly agreed by the principal that he will
pay remuneration, another problem which arises is to determine at what
stage remuneration is payable.
The principle:
Note: Generally, an agent is only entitled to commission or remuneration if
he has been the direct, effective or efficient cause of the event upon the
occurrence which the principal has agreed to pay the agent’s remuneration.
In other words, the agents must show not only that he has achieved
what he was employed to do but also that his acts were not merely
incidental to that result but were essential to it happening i.e. he must have
been the means whereby the two consenting parties were brought together
and entered into a legally binding contract. However, whether in a
particular case an event has occurred which entitles the agent to his
commission is essentially a question of construction of the contract.
See the case of Luxor (Eastbourne) Ltd v. Cooper (1941).
It is immaterial to the payment of remuneration that the principal has

derived no benefits from the agent’s acts. As long as the agent has
performed what he was employed to do, and has not been at fault in failing
to benefit his principal, the latter will be bound to pay the agreed
commission.
See the case of Fisher v Drewett [1879]
Question: A question that arises at this point is whether a principal can

prevent the agent from earning his commission?
This was the central issue raised by the case of Luxor
(Eastbourne) Ltd v. Cooper (1941). In this case, L engaged C, to
negotiate the sale of property, €10, 000 commissions was to be paid to C,
‘on completion of the purchase’. Offers were secured for the properties but
the agreement made with the principal was expressed to be subject to
contract. A binding agreement between L and the purchaser was not
completed because L decided not to sell. C sued L claiming damages for an
implied term that would not, without just cause, do anything to prevent
him from earning his commission. It was held C would not succeed because
no sale had been affected and there was no implied term in the contract
that L should not act so as to prevent C from earning his commission. Lord
Wright exposed the unreasonableness of such an implied term.
See Alpha Trading ltd v Dunshaw – Pattern ltd [1981]
Even when there is an agreement to pay remuneration and the agent

obtained what the principal wanted, there may still be no liability to pay the
agreed remuneration. This will be so where the transaction in which the
agent was employed was illegal. But, the liability to pay remuneration
depends upon whether or not the agent new the undertaking was illegal.
In Haines v Busk [1814], a commission was recoverable by a
broker for procuring freight, even though the charter party arranged by the
broker was illegal.
This was because although to make it legal the charterer had to obtain
certain licenses, the broker did not have to obtain the licenses but was
entitled to rely upon the charterer’s doing so.
The agent may be unable to receive remuneration when he has acted
in breach of his duties under the contract of agency or is otherwise guilty of
misconduct.
2. Indemnity
The principal is also obliged to indemnify the agent against all losses
and liabilities and to be reimbursed for all expenses incurred in the lawful
execution of his duties. An agent may set off the amount of any losses,
liabilities or expenses incurred by him on behalf of the principal unless the
money which was deposited with the agent for a specific purpose has failed,
or is the balance of the money so deposited which remains after such
purposes has being fulfilled.
The right of indemnity exists whether the agency is contractual or
quasi-contractual.
- Where it is contractual, comedy right may be express;
- Even if it is not, it will be implied as regards payment made within the
authority of the agent.
It is pertinent to note that such payments are not confined to those
which the principal is legally bound to make but include those with the
agent is compelled to make although the principal is not liable.
Limitation
The limitation to this right is that it is lost if the loss was caused by:
i. The agent's own default or
ii. Breach of Duty or
iii. If he knowingly acted illegally or

iv. Acted outside the scope of his authority.
3. Right of Lien
General Rule: Every agent has a general or particular possessory lien on the
goods or chattels of his principal in respect of all lawful claims he may have
as such agent against the principal, for remuneration earned, or advances
made or losses or liabilities incurred in the course of the agency or
otherwise arising in the course of liabilities provided:
i. That the possession of the goods was lawfully obtained by him in the
course of the agency coma and in the same capacity as that in which it
claims the lien
ii. That there is no agreement inconsistent with the right of lien
iii. That the goods and chattels were not delivered to him with express
directions or for a specific purpose inconsistent with the right of lien.
This principle is encapsulated by Bowstead on Agency 13th edition.
Furthermore, there are three ways an agent may lose is lien. Thus, the
agent’s lien may be lost where:
- The agent waives the lien;
- The agent voluntarily parts with both actual and constructive
possession of the goods or chattels. This is so because possession is of
essence in the right of lien.
- The agent enters into any agreement or acts in any capacity which is
inconsistent with the continuance of the lien.
Estate Agent’s Commission

It is very common in estate agent’s contract to use phrases the
determination of which has caused difficulties.
The courts as a result of the decision in Luxor v Cooper, have
“constructed such provisions very strictly, and have said that a claim to
commission, if no sale is actually made, must be established by the use of
clear and unequivocal language”. There is a rich line of cases propagating
this principle since 1941.
In Jones v Lowe [1945], where the agent was to be paid
commission in the event of ‘introducing a purchaser’ it was held applying
the Luxor case that these words meant that the agent was only entitled to
commission if he introduced someone who was not only ready and willing
to purchase but goes so far as to sign a legal contract binding him through
with the purchase.
Similarly, in Murdoch Lownie Ltd v Newman [1949] where the
commission was to be paid ‘in the event of business resulting’ Slade J
concluded that the phrase and since it had been used by the agents it could
be construed contra proferentum.
Such contract had not resulted from the agent acts therefore the
house owner was not liable for only commission.
In EP Nelson & Co v Rolfe [1949], the agent’s were to earn their
commission if they introduced to “a person able, ready and willing to
purchase” the principal’s property. This they did but before a contract was
struck, the principal granted an option to purchase to another person
introduced to him by other agent’s. He therefore refuses to deal with other
potential purchaser. The agent’s sued for their commission. The Court of
Appeal held that the agent had fulfilled the contract and were entitled to
commission.
The principles were again discussed in Several Other C.A cases in
1950.
In Graham & Scott (Southgate) ltd v Oxlade [1950], where a
commission was to be paid to the agents in the event of the agent’s
introducing a person willing and able to purchase. The agent’s were not
entitled to commission where they introduce someone who offered to buy
the principal’s property ‘subject to contract’. The court held that the mere
introduction of a prospective purchaser was sufficient but the purchaser
must make affirm offer i.e. one which did not leave him free to avoid
completion without legal liability.
Cohen L.J distinguished EP Nelson & Co v Rolfe on the ground
that in this case a firm offer has been made.
Similarly, in McCallum v Hicks [1950] where the principal
instructed the agents to ‘find someone to buy his house’, it was held that the
expression was only a more colloquial way of saying ‘find a purchaser’.
Hence, no commission was payable where the agent introduced someone
who made an offer “subject to formal contract” but subsequently withdrew.
In Dennis Reed Ltd v Goody [1950] where Lord Denning
outlined the formation of the general law on estate agents commission
which provides the background for the interpretation of an estate agent’s
contract with his principal.
Fridman summarizes these principles into Six (6) salient points:
i. The agent is only to receive commission if he succeeds in effecting
a sale.
ii. Any language that is used in the contract will have this effect, as
long as it shows that the agent is to introduce a purchaser.
iii. If the agent is to be given commission on offers only, he must use
“clear and unequivocal language”.
iv. The normal arrangement, the common understanding of men is
that the agent’s commission is payable out of the purchase price.
v. If a binding contract of purchase is signed by the principal and the
third party then, if the principal repudiates the contract, he is still
liable to pay commission, not because it has been earned and is
payable but because it is his own fault that the sale has not been
completed.
vi. But, no commission is payable if it is the third party, and not the
principal, who has defaulted in a binding contract, unless the
principal sues for specific performance and gets damages in which
event, he will probably be liable to pay the commission out of such
damages.
RELATION OF PRINCIPAL AND AGENT AND THIRD PARTIES
Whether the principal or agent can sue or be sued upon the

agreement made by an agent depends upon the circumstance surrounding
the case.
In general, the rights and liabilities of the principal and agent
depends upon whether the agency was disclosed when the contract was
made.
Three situations usually arise;

i. Where the principal is named
ii. Where the agent acts for an unnamed principal
iii. Where neither the existence nor the name of the principal is
disclosed.
Where the Principal Is Named

This is the case where the agent contracts as agent and reveals the name of
the principal to the third party.
Here, the third party knows that the agent is contracting as an agent and
knows also the person for whom the agent is acting.
General Rule: ‘only the principal acquires rights or assume liabilities. The
agent having made the contract on behalf of a named principal drops out of
the contract.
An agent would incur personal liability in the following cases:

i. If he signs a bill of exchange in his own name, he is liable on the

bill. But, if he wishes to avoid personal liability he must negative
personal liability by adding words to his signature that clearly
discloses his representative character.
ii. Where he executes a deed in his own name, he is liable on the
deed.
iii. If though purporting to act as an agent, he is shown to be the real
principal.
iv. Where the particular custom of the trade makes the agent liable.
Where the Agent acts for an unnamed principal

Under this situation, the agent discloses the existence to the 3rd party but
does not disclose the name of his principal.
The position here is similar to the case of a named principal and the
presumption is that the principal alone incurs obligations and takes the
benefits under the contract.
Universal Steam Navigation Co. v J. McKelvie & Co [1923]
Exception: B.B Apugo & Sons v. OHMD Orthopedic
However, this presumption will be made more readily rebutted where it is

shown that the parties intended that the agent should be bound by the
contract.
In this case, the agent and not the principal will be bound by it.
In the outlined cases where an agent will incur personal liability when
contracting for a named principal, he will also incur liability when
contracting for an unnamed principal.
Where neither the existence nor the name of the principal is

disclosed
This is the case of the unnamed principal. This situation arises whereby
neither the identity of the principal nor the fact the agent is acting on behalf
of someone else is revealed to the third party.
The third party believes that he is contracting personally with the agent but
later, after the completion of the contracting, realizes there was an agency
relationship in existence. The third party when he discovers the true state
of affairs is entitled to enforce the contract either against the principal or
against the agent with whom he actually contracted.
RULE: The rule is that the third party must make his election of the party
he wants to sue within a reasonable time of discovering the principal. Once
the third party elects to hold either the principal or the agent liable he
cannot afterwards change his mind and sue the other. Example
Rationale: This is because the liability of the principal is not a joint
liability with that of his agent but an alternative liability.
Kendal v. Hamilton [1879]
On the other hand, the undisclosed principal can seek to enforce the
contract against the third party.
However, where he does this he makes himself personally liable to the

third party.
An undisclosed principal cannot however enforce a contract against the

third party in the following instance:
i. Where the principal could not have been a party to the contract at
the time it was made.
ii. Where the identity of the principal was made so important to the
third party that he (the third party) could not have entered into the
contract had he known the principal’s real identity.
Said v. Butt
Settlement with the Agent

It may happen that either the principal or the third party settles with
the agent who however by reason of bankruptcy or fraud fails to pass the
money on to the creditor. The question then arises whether the payer is
liable to pay over again.
i. Where the principal settles with the agent

This may arise where the principal having instructed his agent to buy
goods pays the purchase price to the agent who fails to pass it to the seller.
RULE: The rule is that the principal remains liable to the seller, provided
that the agent was known by the seller to be acting as agent. Exception:
The seller however, may be stopped by his conduct from taking advantage
of this rule if his conduct unequivocally showed that he looked to the agent
alone for payment and thereby induced the principal after the debt became
due, to settle with the agent.
The principal on his part must show that he was reasonably induced
by the seller’s conduct into selling with the agent.
The general principle and underlying reason for this was expressed by
Park B in the case of Heald v Kenworthy [1855].
He stated thus:
It was held in this case that the principal was still liable to pay the third
party even though he had already paid the agent.
The same was held in Irvine & co v Watson & co [1880]
The question remains whether the rule is different if the seller is aware of
the agency and deals with the agent as principal.
In Heald v Kenworthy [1855], it was held that even here the
general principle still applies and the principal may be compelled to make
payment.
ii. Where the third party settles with the agent

This is the case where for instance, the agent having sold his
principal’s goods receives payment from the buyer but does not pay over
the money to his principal.
Whether the buyer is in those circumstances liable to pay over again
depends entirely upon whether or not the agent is authorized to receive the
purchase price.
If he possesses this authority, the buyer is discharged from further, if

not the liability remains.
Where the agency relationship is undisclosed, it would seem that the
third party is entitled to treat the agent as principal and settle with him as
long as he had noticed that any other principal exists.
Hence, if settlement with agent would have discharged the third party
if the agent really had been the principal, then it will operate as a discharge
as against the real undisclosed principal.
Coates v Lewes [1808]
TERMINATION OF AGENCY
Agency relationship may be determined by one or two broad ways namely:

i. By acts of the Parties
ii. By operation of the law
Acts of the Parties

This may arise in two ways:
a. Agreement of the parties
b. Revocation or Renunciation
a. Agreement of the Parties

The most obvious way by which agency relationship may be
terminated is by mutual agreement between the principal and the agent.
Since the relationship of principal and agent is usually created by
agreement between the parties, it follows that the relationship can also be
determined by mutual agreement.
However, where an agency has been created to accomplish a certain
purpose or for the duration of a definite period then, the agency
automatically ends with the completion of the specific purpose or when the
period has elapsed.
b. Revocation or Renunciation
The agency relationship can be determined by the unilateral
revocation of the authority by the Principal. In this case, express notice
must be given to the third party with whom the agent has been dealing,
otherwise the agent will be assumed to have continuing authority to

contract for the Principal.
Similarly, the agent can unilaterally renounce the authority of the
principal and must give notice to the effect. But the notice of revocation or
renunciation will not affect any rights or liabilities which may have been
created by the principal and third party prior to the notice.
Irrevocable Agencies
There are certain cases in which the Principal cannot revoke the agent's
authority:
1. The case of Agency coupled with an interest: An agency or authority
coupled with an interest is where such agency was created or authority
was given either by deed or for valuable consideration as a security in
respect of a liability of the principal to the agent. This may be of two
types namely:
a. Those in which the agent has a legal or equitable interest in the
subject matter and;
b. Those in which the agency is created as a source of reimbursement to
the agent of money owed him by the Principal.
Note: In both cases the authority is conferred on him (i.e. the agent) for the
purpose of protecting and securing that interest.
In Raleigh v Atkinson [1940], P entrusted goods to A for sale.
From time to time, A made advances to P and received authority to dispose
of the goods at market value and to repay himself to advances out of the
proceeds. It was held that the authority was coupled with an interest and
was to that extent irrevocable.
Also, in Gaussen v Morton [1830], A was indebted to B. In order

to discharge the debt, A authorized B by power of attorney to sell lands. It
was held that being an authority coupled with an interest, it could not be
received.
But in Smart v Sanders [1848], a factor who had possession of his
principal goods for sale, made advances on account of the principal. Later
on, the agent gave notice to the principal that he required repayment of the
advances. The principal failed to repay the sum due and instructed the
agent not to sell. But, in order to reimburse himself the agent sold. It was
held that after the principal withdrew the agent’s authority, the agent had
no right to sell.
2. Where the agent acting in pursuance of his authority has incurred

liability for which he has to be indemnified by the principal, the
principal cannot revoke the agent’s authority so as to avoid the
obligation of indemnifying the agent.
See Read v Anderson
3. Where the agent has made a contract on behalf of the principal, and, if
he sued on that contract, he would be able, as against the principal, to
exercise a lien over any money or goods recovered as a result of such
action, and then the agent’s authority is irrevocable.
Thus, in Drinkwater v Goodwin [1775], a factor who became a
surety for his principal was held to have a lien on the price of goods, sold by
him for his principal to the amount or the sum for which he had so become
a surety.
4. Some statutes under certain circumstances prohibit the revocation of an

agency relationship. For example, Section 8 of the Conveyancing
Act 1882
By Operation of the Law
a. Death
The death of the agent obviously terminates his authority. Except in
cases of irrevocable agencies, the death or the liquidation of the principal
(in case of corporation) puts an end to the agency relationship. This is even,
if the agent had no knowledge of the death of his principal. The agents
cannot sue for remuneration or indemnity.
Note: The agent may be liable to the third party for breach of warranty of
authority.
b. Insanity
Once either the principal or agent is insane, the agency contract
automatically comes to an end. However, in cases of irrevocable agencies,
this principle will not be applicable.
But the rights of third parties are unaffected provided that they knew
nothing of the principal’s condition.
See Drew v Nunn [1879]
c. Bankruptcy
The bankruptcy of the agent may also terminate the agency
relationship.
d. Subsequent Illegality
The occurrence of an event that renders the continuance of the agency

relationship unlawful may also bring an agency relationship to an end.
e. Frustration
The destruction of the subject matter of the agency for example, or
the occurrence of any other frustrating event may terminate an agency
relationship.
Part C
HIRE PURCHASE
Introduction
Hire Purchase (H.P) started in the mid-19th century with a particular
company called Singer Manufacturing Company. Prior to this era,
there was no relationship of such nature called Hire Purchase. What
obtained was either Direct Payment or Credit sales.
A hire refers to the possession of a particular item for a particular
period of time. Hire purchase is an agreement between the owner of the
goods (hiree) and another person called the hirer under which the owner
gives delivery of the goods to the hirer and the hirer has the right of option
to purchase the goods after fulfilling certain conditions. Literally speaking,
H.P. is an agreement for the temporary use of an item, where the hirer has
the option to purchase or return the goods at the end of the hire.
In an ordinary Contract of hire, the owner of the subject matter of the
contract transfers possession to the hirer in return for periodical payments.
Thus the aim is that the hirer is not to buy but to use.
A H.P agreement on the other hand, is a contract of coupled with an

option to purchase. The object of this type of arrangement, defined in
Section 20 of the H.P. Act 1965 is to enable the owner to sell and the
hirer to buy eventually.
Hire Purchase & Common Law

The case of Lee v. Butler and Helby v Matthew marked the hallmark of
H.P law.
See Lee v. Butler
Helby v Matthew
Under the common law, the operation of H.P attracted some toxicity
to the hirer, which eventually led to the enactment of the relevant Act in the
UK and much later in Nigeria.
Amusan v. Bentworth Finance
The irregularities included the following:

1. Absence of right to redeem
2. Losing the right to return the item: Min payment clause
3. Transfer of Property
4. Minimum payment clause
5. Legal interest in the surplus.
Hire Purchase Act
The Act was a response to the hardship suffered by hirer in their
agreement with the owners of goods, who were the strong parties. This
abolished the common law principles of H.P.
However, this Act has not solved the problem it was enacted to solve.
It has just 20 Sections which is not extensive enough.
Features of Hire Purchase

1. Contract: A hire purchase is actually a contract, which may be parole
or written. However, in the case of a hire purchase agreement, it must
be written.
2. Bailment: H.P is a bailment agreement by virtue of Section 26 of

the H.P.A.
3. Transfer of property: A hirer can only transfer property after the
payment of the last installment.
4. Option to purchase: Both parties, especially the hirer has the option
to purchase the goods or items in his possession.
5. Determination of the Contract: Parties are at liberty to put an end to
the agreement especially the hirer. Section 8 and 9 of the Act.
Differences between H.P & Contract of Sale

1. Separate legal regime: A Contract of sale is governed by Sale of
Goods Act, 1893 while a Hire purchase agreement is regulated both
by Common law and under the Hire Purchase Act, 1965.
2. Different Formalities/practices: A contract of sale is restricted to
buying and selling. NOTE: A Hire purchase is a sale with a condition
subsequent selling without any special formality such as writing. On
the other hand, Hire purchase agreements are compulsorily required
to be in writing.
3. Transfer of property: The moment a buyer relinquishes his goods,
under contract of sale, he automatically transfers both ownership and
possession to the seller, but in H.P agreements, the hirer only has
possession and not ownership. That is, under sale agreement the
buyer is under a legal obligation to buy but in a Hire Purchase
Agreement, there is no such obligation.
A condition subsequent has to be fulfilled by the hirer, if he wishes before

the agreement can become a sale. An agreement to purchase would infer an
obligation to pay a price, the payment of which could be enforced by action.
Lord McNaughten in Helby v Matthews
If the hirer decides to return the goods to the owner at any time, no action
can be maintained against him for the balance of the H.P price,
Llyod J. in G.B. Ollivant v Akinsanya[1930]
A true H.P contract must confer a right on the hirer to terminate. Although,
as will be later revealed, the exercise of this right may be financially
burdensome
Hence, where no such right exists, it will be a contract of sale both at

common law and the H.P Act.
Lee v Butler
See Felton Tile co.ltd v. Winger on difference in commercial practice
and existence of separate statutes.
In Sale of Goods, no special formalities or procedures are necessary to

effect a sale. In hire purchase contract on the other hand, care has to be
taken spelling out the intention of the parties to the contract.
Scanwell v Ouston [1941]
The court will not stop at mere terminological expressions used but will
look further to find out the real substance of the agreement.
Taylor J in Amao v Ajibike & ors
Thus, if the agreement states that it is one of Hire Purchase & the
hirer has no option to purchase the goods, the agreement will be treated as
an outright sale.
Joe Allen v Adewale
Hewison v Rickets
Lawrence v Bentworth Fin. Co [1966]
NOTE: In G.B Ollivant v Akinsanya, it has been held that “what is in

effect in a contract to purchase cannot be made into a contract of hire by
the parties calling it so”
Difference between Hire Purchase & Conditional Sale

A Conditional Sale is a transaction that is made subject to several
conditions which can be precedent or subsequent.
It is imperative to note here that payment remains the primary
condition.
A party in a Conditional Sale can transfer title to an innocent third
party, but cannot in Hire Purchase agreements.
Under this, the purchase price or part of it is payable by installments,
the buyer may be given possession but the property in the goods must
remain in the seller
It is similar to the Hire purchase device in that, until all the
installments are paid or the condition is fulfilled, ownership in the goods
sold will not be vested in the buyer. There is an agreement to sell which the
laws relating to sale of good will apply. The buyer can therefore transfer
title by sale to a sub-buyer. See Section 26(2) of Sale of Goods Law
and Section 25(2) of the Sale of Goods Act. This form of agreement is
not very popular in Nigeria.
For example in Amao v Ajibake where Taylor J found no difficulty
in holding the transaction as sale even though it had the elements.
In conditional sale you are not only releasing possession, but you are
relinquishing both possession and ownership. However, under H.P only
possession is transferred, and a further transfer invokes nemo dat quad
non habet.
Financing Hire Purchase Agreement:

There is a triangular relationship. In the triangular relationship, the dealer
sits at the apex of this structure, flanked by the Finance company and the
hirer.
The Dealer
Finance Company Hirer
The first relationship is between

1. The Finance company and the dealer

2. The second is between the dealer and the hirer.
Note: Where there is a guarantor in a Hire Purchase agreement, there is a

third relationship.
3. The third relationship ensues between the guarantor and the Finance
company
Thus, where no 3rd party is involved, there is only one relationship (either
between the dealer and the Finance Co or the dealer and hirer) but where
there is a 3rd party, we have two relationships.
The relationships:
Finance Company & the dealer

The relationship between the Finance company and the dealer is a
pure contract of sale governed by Sale of Goods Act, 1893 and it involves
the release of the full cash price of the goods in question. It is primarily a
relationship of seller and buyer.
The contract between finance company and the hirer is governed by
common law principles or in relevant cases by the Hire Purchase Act.
It is in the interest of the dealer to introduce a solvent and reliable
hirer. Sometimes the dealer has to give a warranty to the finance company
that the statements of the hirer introduced are true and if not, he will be
held liable for Breach of Warranty.
Liverpool & Country Discount co v A.B. Co. ltd [1963]
It is important to note that the dealer is treated for some limited purposes
as the agent of the Finance Company.
Financing Ltd v Stimson [1962] where the dealer
A Hire Purchase agreement ensues between the dealer and the hirer.
Igbadunni v Bentworth Finance
Falodun v Bentworth Finance
It is the duty of the Finance Company to inspect the products and failure to
do so makes it liable.
Falodun v Bentworth Finance
Note: Generally, there is no legal relationship between the dealer and the
hirer. There is no privity of contract between the dealer and the hirer.
Dealer & Hirer

Where the dealer does not finance his own business, it is wrong for the
hirer to think that he has made an agreement with the dealer.
The agreement is usually to the Finance company who alone can
accept the offer. Any subsequent contract of hire will be signed by the hirer
and the finance company and the dealer usually drops out.
In law, there is no contract of Hire Purchase between the dealer and
the hirer.
Thus, if there is any breach of the agreement entitling the hirer to sue,
he can only sue the finance company as the owner and seller.
Drury v Victor Buckland ltd [1941]
Formation of Hire Purchase Agreement

Question: Should Hire Purchase agreements take a specific form?
Under the common law, there is no specific formality, meaning and
could be in writing or oral.
Note: While Section 2 of the H.P.A does not require it to be compulsorily
in writing, it stipulates there should be a form of notice of memorandum in
writing which must contain the following:
- The hire Purchase price
- Amount of each installment
- Date of each installment
- Deposit
- Cash price (contrast this with the hire Purchase price)
- Subject Matter of the Hire Purchase agreement (the goods or item
sought to be purchased).
Termination and Minimum Payment Clause

One of the problems was that it became a one way road for the hirer
i.e. once he comes in, he cannot easily go out.
Amosan v Bentworth Finance
Section 8 of the Hire Purchase Act allows the plaintiff to terminate a

Hire Purchase agreement on the condition that he must:
i. Pay the liabilities or arrears till the date of termination , as well as
ii. The deficit between half of the Hire Purchase price and the total
payment if any.
This implies that before termination can be termed valid, you will
clear liabilities, you will pay the balance between one half of the amount
paid.
Note: If total payment is more than Hire Purchase price you are not to pay
anything again.
After the amendment, if there is a default for three times, there may
be a recovery.
Section 9 of Hire Purchase Act deals with the recovery of the
item by the dealer. The Section also distinguishes between vehicles and
other items, while highlighting relevant proportions.
The problem with Section 9 before the amendment of 1970 was that
after 3/5th the hirer jacked up the Hire Purchase price and that after 3/5th
the hirer may revoke.
Note: the distinction between ability to pay and willingness to pay.

Ebohimi v Nigeria Technical Company ltd.

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COMMERCIAL TRANSACTION: LAW OF AGENCY

An agent is the person through whom another’s act is referred.

Que: Who then is the party?

Thus, an act done by a principal’s agent is done indirectly by the

An agent, in ordinary parlance, is a person who has undertaken to act

Essential Elements of this definition

The result of the inculcation of these elements is that, there would be

It is imperative to note that the existence of agency relationship in the

Derivations from this case

Despite the myriad of definitions given in this material, note that no

represented on whose behalf the act is to be done is called the principal.

A number of characteristics of agency are usually ascertained:

In Ofodile v. Chinwuba [1993] where Ejinwumi J.C.A said “…in

Q: What is the summary of all these?

AGENCY DISTINGUISHED FROM OTHER SIMILAR

Agency & Trusts

Agency, Servants & Independent Contractors

In both cases, they have power act for others.

Agency & Bailment

Agents can be divided into 3 main classes namely:

- Attorney, Mercantile, Del Credere, Auctioneer

A legal practitioner (or an attorney at law) can be liable in negligence.

See Alli Safe v Northern States Marketing Board

It is noteworthy that the auctioneer is the agent of the purchaser

A sale by auction is complete on the fall of the hammer except where

An auctioneer has an implied authority to sell without reserve (fixed)

Like all agents, an auctioneer has no authority to take cheques unless

Del Credere Agent

In Omoregie v B. Portland Cement Fabrik [1962] the

The authority of a confirming house depends on the agreement

Similar Arrangement/ Some other Commercial Marketing

Capacity to Act as Principal

Capacity to act as an Agent

There are four major forms:

This is the commonest and most embraced way of creating an agency

“It is correct to say that in most instances of agency relationship there is a

Unless required by law to be in a particular form, an agent can be

It is pertinent to note that the burden of proving agencies is on the

There are a few cases in which an agent’s appointment must be under

This form of appointment is termed a power of attorney.

Power of Attorney: may be described as an authority given under seal,

An agent can without the power of attorney enter into a contract to

Implied authority can mean appointment of an agent without

Exception: Conversely, an estate agent authorized to sell has no implied

Implied authority and Estoppel

 The difference is in the timing. How? Answer: Implied authority is

There are two forms of ratification:

Definition by Professor P. K. Fogam: This kind of agency usually

Question: how can a principal validly ratify the agent's act?

Thus, only the person whose authorization the agent as purported to

2. The Principal must be in existence

See the following cases

However, the Nigerian Law Reform commission reviewed the

The principal must not only be in existence, but must be a person

Wilson v Tumman (1843)

3. Capacity of the Principal to Contract

4. Knowledge of the Facts

5. The Legal Quality of the Act

unlawful which is capable of being done by means of agency is capable of