AGENCY – Law of Agency (Business Law)

An agent is a person who is employed for the purpose of bringing his principal into a CONTRACTUAL relation with a third party. Agency creation can take any of the following forms.

Law of Agency

Creation of Agency. Agency can be created by;

  • Express agreement.
  • Implication or by conduct.
  • Necessity.
  • Ratification.

Express Agreement:

An agent may be expressly appointed either verbally or in writing. No particular form is required unless the agent is authorized to make a contract under seal. This is called power of attorney.

Implication / by Conduct:

If one person by words or conduct holds on another as having the authority to make a contract on his behalf. E.g. If he allows another to order goods on his behalf and pay for them, the Agency will be implied.

Wife’s Agency of Necessity or Agency Of Cohabitation.

The law implies an agency in favor of a wife living with her husband thus she can pledge credit for necessities suitable for their lifestyle. However, it can be rebutted by her husband by showing that;

  • He expressly forbade his wife to pledge his credit.
  • He expressly warned the trader not to supply his wife with goods on credit.
  • The order for necessities was excess or extravagant.



A wife was supplied with clothes of 215 dollars, the husband refused to pay. On being sued, the husband proved that he paid his wife 960 dollars a year allowance. It was held that the man is not held liable.

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Agency of Necessity:

This occurs when a person is entrusted with another’s property and it becomes necessary to do something to preserve that property, though the person has no express authority to do the actions necessary to preserve it.

Agency of Ratification:

If an agent has no authority to contract on behalf of a principal or exit such authority, the contract is not binding on a principal, however, the principal may confirm or adopt the contract so made. This is known as ratification.

Types of Agent

  • An Attorney.
  • An Auctioneer.
  • Del Credere Agent.
  • Brokers.
  • Estate Agent.

An Attorney:

This is an agent authorized by means of a document called POWER OF ATTORNEY to represent the principal to do a specific act. The power of attorney is a written document signed and stamped by the principal.

An Auctioneer:

This is an agent who undertakes to sell the property of others at competitive public sales conducted by him.

Del Credere Agent:

He is a merchandising agent who in return for extra remuneration known as “Del Credere Commission” promises to identify the principal if the third party failed to pay for their goods. He, therefore, guarantees payment and stands as a surety for due payment by the third party. Its liability is secondary I.e. he can only be sued if the buyer defaults.

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A broker is a mercantile agent employed to make a contract on behalf of the principal in excess for a remuneration called “BROKERAGE”. A broker does not usually contract to sell goods in his own name but uses the principals.

Estate Agent:

This is an agent of a person or the person who retains his services. It may be to sell a house or to buy one or as it is more usual in Nigeria to find a tenant for a house or find a house for a tenant. The extent of his power depends on the agreement.

Duties of An Agent NB: also the rights of the principal.

  • To obey the principal’s instructions.
  • To exercise care and due diligence on the principal’s behalf.
  • To disclose to the principal any material information he may receive in the execution of his duty.
  • Not to disclose confidential information entrusted to him by the principal.
  • Not to make any secret profit: If apart from his commission he receives extra profit, it must be disclosed to the principal. If the agent makes a secret profit or takes a bribe, the principal can; Sue him for the amount, refuse to pay agent commission, he can terminate the agency without notice, and he can also sue the agent and the third party for damages.
  • To render an account when required.
  • Not to become principal as against his employer.
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Duties of a Principal. NB: also the rights of the agent.

  • To pay the agent the agreed commission or remuneration.
  • To indemnify the agent against liabilities properly incurred in the discharge of his duty.
  • The agent has a lien over goods belonging to the principal enabling him to hold such goods until the commission is paid.

Termination of Agency

By Agreement: The principal and his agent can agree to terminate their relationship.

By Revocation: Notifying the agent that his services are no longer needed or required and this must be done in accordance with the contract agreement.

By Performance: The agent’s authority seizes as soon as he completes his assignment.

Death, Bankruptcy or Insanity: of either party.

By Frustration: When either party is frustrated.

Passage of Time: When the time or time is fixed for the performance of the duty, the relationship is terminated whether the assignment has been completed or not.

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