AN APPRAISAL OF THE CONCEPT AND SCOPE OF AGENCY RELATIONSHIP UNDER THE NIGERIAN COMMERCIAL LAW
Agency relationship from its origin, presents situation where a person (principal) is bound by the acts of another (the agent) and he (the principal) takes the rights and obligations arising out of such relationship is therefore, an exception of the doctrine of privity of contract which generally disentitles a person from acquiring any right or obligation arising from any contract to which he is not a party. Agency relationship arises when a person is vested with authority by another to enter into a legal transaction on his behalf. The two basic ingredients for agency relationship are authority and consent. However, in the course of this research, the finding of the writer is that the doctrine of privity of contract disentitles a person from acquiring any right under or being subjected to any obligation arising from a contract to which he is not a party to the contract. Thus, a contract cannot confer enforceable rights or impose obligations arising under it on any person except parties to it, this event, further constituted a statement of problem of the research. In view of this, the objective of this research is to identify the basic rules of agency relationship vis-à-vis their adequacy or otherwise in practice. In this regard therefore, the research finally concluded by recommending that the law should provide an avenue for redress to genuinely affected persons who the strict common law interpretation of privity of contract might have deprived of such. Such that even a perfect stranger could be awarded damages if infringement is proved. The sources of information relied upon here are relevant text materials, statute, journals (both local and international), judicial authorities and e-materials
CHAPTER ONE GENERAL INTRODUCTION
General, the doctrine of privity of contract disentitles a person from acquiring any right under or being subjected to any obligation arising from a contract to which he is not a party. However, the law does to dissuade a person from employing the services of another to negotiate or conclude a contract on his behalf. The employer may lack the expertise or skill of the trade, business or profession, the knowledge or experience of a particular market, area or commodity or may simply be too busy with the other matters to conclude the contract himself. Obviously, a limited liability company or even a partnership being an artificial person cannot contract for itself, but, must rely on human beings to be its mind and body for the purpose of making its contracts. So the law meets these needs of business through the concept of agency.
The law which governs agency relationship in Nigeria is the received English law particularly the common law and equity. The law itself primarily deals with the relationship which arises where one person expressly or impliedly employs another or is by law deemed to have employed such person to perform some tasks for and or his behalf.
The concept of agency is an essential part of commercial law in Nigeria because organizations/companies and men alike can conduct their business in most occasions through agents. The functions of the law of agency is to enable agents to bring commercial parties into contractual relations in such a way as to render those parties and not the agents liable on, and able to enforce the contract. The principal, on whose behalf the agents is bargaining, must be able to place complete confidence in the agent. This has led the law of agency to make the agent a fiduciary, which imposes strict obligations. However, there are interest other than the protection of the principal against misuse of power by the agent the protection of the third party with whom the agent had dealt, the protection of the agent against any liability incurred on behalf of the principal, and the rights an agent may have against the principal. However the agent must act within the authority given to him by the principal which can be actual or real authority or apparent or ostensible authority. In other words, an agent cannot act outside its authority if he does he would personally liable unless such authorized act has been ratified by the principle before the principal becomes liable.
1.2 Statement of Research Problem
Generally, the doctrine of privity of contract disentitles a person from acquiring any right under or being subjected to any obligation arising from a contract to which he is not a party to the contract, thus, “a contract cannot confer enforceable rights or impose obligations arising under it on any person, except parties to it”1. However, the law does not dissuade a person from employing the services of another to negotiate or even conclude a contract on his behalf. The problem emerges from the constant abuse of the word “agent” misconception of the nature of agency relationship. Many businessmen in Nigeria engage in agency relationship without having a clear understanding of the concept and scope of agency relationships under Nigerian law as epitomized by Lord Hershel in Kennedy v. Annete De Trafford2 thus: No word is more likely commonly and constantly abused than the word “agency”. A person may be spoken of as agent and no doubt in the proper sense of the word may properly be said to be an agent although when it is attempted to suggest that he is an agent under such circumstances as creates the legal obligations attaching to agency. That use of the word is only misleading.
Another problem occurs due to ignorance of the importance of agency relationship among businessmen in Nigeria as an important aspect of the emerging
1 Sayag Nigerian Law of Contract (1989) 2nd edition, Spectrum Law series Ibadan page 489. 2 (1987) A.C. 180, 188.
modern Nigerian commercial life. The expansion and development of commercial activities requires a comprehensive understanding of the concept and scope of agency relationship under Nigerian commercial law and its applicability to the emerging modern Nigerian commercial law. 1.3 Aim and Objectives of the Research The aim and objectives of the study is to examine and pay close attention to the basic rules of agency relationship and their logical explanation so that the basis could be clearly understood. It is also the aim of this study to create and highlight awareness of the importance of agency relationship as an important tool of the emerging modern Nigerian commercial life in its diversified economic structure. This is due to the practical necessity which arises from the changing needs of specialization and divisions of labour which has called for the delegation or distribution of various functions among specialist and amateurs alike in line with the economic reform programs of the present administration. After this analysis, parties will be able to understanding the concept and scope of agency relationship under Nigerian commercial law and its importance as distinguished from its understanding in the social parlance.
1.4 The Scope of the Research
The study covers the concept and scope of agency relationship as an aspect of the emerging modern Nigerian commercial life. Thus, this study will cover mainly the definition, classification of the agency relationship, how they can come about, in other words, the creation of agency relationship, the duties and rights of the principal and agent arising out of the relationship, the remedies available to both parties and how the agent’s acts affect the principal’s legal position with third parties. The study also deals with the applicability of agency relationship to the emerging Nigerian commercial life.
1.5 Research Methodology
The method of research adopted in this study is the doctrinal method which is essential based on consultation of textbooks, article and journals which are related to the subject matter of research. Reference is also made to Nigerian Statues as well as judicial decisions, the internet was also consulted.
1.6 Literature Review
The law of Agency is an area of commercial law which is defined as a consensual relationship created by contract or by law where one party, theprincipal, grants authority for another party, the agent, to act on behalf of and under the control of the principal to deal with a third party.3 In researching on this thesis topic, quite a number of textbooks, articles, journals as well as conducted interviews where examined for this thesis.
In examining the law of agency on a broader context, going beyond Nigeria, Goode4, discusses typical contract structures to demonstrate how the law of agency can be organized in different ways to produce or avoid a desired legal result, it provides a detailed analysis of the law of agency stating the key benefits.
Also, Sealey L.S. and Hooley5 Combines extracts from cases and other materials with substantial commentary and explanatory text as regards the law of agency, hence supporting its explanations with adequate cases and enlightenments. It should be noted however, that the two textbooks mentioned above provides the Law of Agency on a wider perspective, giving a full understanding on what the law of Agency entails but however gives no reference to the law of Agency in Nigeria.
Igweike K.I in his book entitled “Nigeria Commercial Law: Agency”6 discussed extensively on the concept of agency relationship and the two poles
3The free dictionary. AGENCY. http://legal-dictionary.thefreedictionary.com/agency 4Ewan M. (ed) (2010) Goode on Commercial Law, (fourth Edition) Penguin books. 5 Sealey L.S. and Hooley (2008) Commercial Law: texts, cases and materials, (fourth edition) Oxford University Press
around which agency relationship is considered, which are the consensual aspect of the judicial formality.
While focusing on the discussion on the nature of agency relationship, Yagba, T.A.T, Kanyip B.B and Ekwo S.A. in their book entitled “Element of Commercial Law”7 provided this discussion but however failed to elaborate on the scope of agency relationship in Nigeria.
In analyzing the law of agency on a wider scope in Nigeria, Ezejeofor G. Okonkwo C.O and Ilegbune C.U, in their book entitled, “Nigerian Business Law “8 made this analysis, giving a general view on the law of Agency, nonetheless, he did not consider its applicability to modern Nigerian Commercial life.
Okanyi M.C, in “Nigerian Commercial Law”9 discussed extensively the concept and nature of agency relationship under Nigerian commercial law but paid little attention to its applicability to the emerging modern Nigerian commercial life.
Iroye10 in her article provides the definition the concept of agency as an essential part of commercial law, focusing on the general operation of the agency relationship vis-à-vis the duties and obligations of the parties involved in the
6St. Henbal and Co. Lahore (1980)p. 4 7(1940), Tmaza, Zaria. 8(1982), Sweet and Maxwell, London. 9(1992), Africana-Feb Publishers Ltd. p.200 10Iroye, Mr. Samuel. “Course Developers/Writers: Mr. Ugbejeh O. Ernest Mr. Njoku C. Nduka Mr. Martins Ishaya.”
relationship and remedies available to arties where there is a breach of obligation. However, the explanations are given in short summaries but nonetheless gives an understating on the whole concept of the Law of Agency in Nigeria.
Olumide K. O.11 narrowed the Law of Agency using two landmark cases; UKPANAH V. AYAYA (2011) 1 NWLR [PART 1227] 61 and Samuel Osigwe vs. Privatization Share Purchase Loan Scheme Management Consortium Ltd & Ors (2009) 3 NWLR (Pt. 1128) 378, nonetheless, although an appropriate understanding was given using these cases, that is however not adequate as agency law is broad and goes beyond referencing of just two cases.
Also, Igweike K., “Nigerian Commercial Law: Sale of Goods12, considers the law relating to the sale of goods when the most common method of acquiring goods in Nigeria is the contract of sale referencing the law of agency as it impacts the sale of goods which is also a branch of commercial law. Likewise, Olayiwola O. in his book entitled “An Introduction to Commercial Law in Nigeria”13 also provides the Nigerian commercial law and references to the Law of agency in Nigeria was also discussed.
All of the above reference focus their attentions on the concept and scope of Agency relationship under Nigerian commercial law but did not address its
11Olumide K. O.. (2011) A review of the Evolving Nigeria Principal-Agency Rules 12 Igweike K., (1993) , Nigerian Commercial Law: Sale of Goods, Jos Fab Anien (Nig), p.68 13Olayiwola O., (2014) An Introduction to Commercial Law in Nigeria , Sweet and Maxwell, London
applicability to the complexities of the ever changing and emerging modern Nigerian commercial life. It is on this background that the study intends to provide a detailed examination of the applicability of the concept and scope of agency relationship under Nigeria commercial law to the complexity of the emerging modern Nigeria commercial life. 1.7 Justification of the Research
This study is justified basically for two reasons: the first reason is, because of the expansion of commercial activities in Nigerian from small scale to larger ones as a result of the economic reform programmes and privatization of Public sector of the present Administration, it becomes pertinent to reconsider the concept and scope of agency relationship under Nigerian commercial law with the intent of the further clarification and expansion. The economic reform programme which includes diversification of the economy from the oil sector alone, reformation of the banking sector, insurance and aviation sector a free market to foreigners and protection of such through Nigerian Investment Promotion Commission (NIPC) and Immigration Act14.
Secondly, because most of business men in Nigeria are ignorant of the nature of agency relationship, it’s important to the complexities of the emerging
14 Section 58 Nigerian Investment Promotion Commission Act
modern Nigerian commercial life. Agency relationship is an important aspect of this complex modern Nigerian commercial life, which needs to be reconsidered and expanded. 1.8 Organization Layout This research study is divided into six main chapters. Chapter one deals with the general introduction of the topic, that is “the concept and scope of Agency Relationship under Nigerian commercial Law”. Here an attempt is made to introduce us to the general concept of the nature of agency relationship, the State of the research problem, aim and objectives of the study, the scope of the study which specifies the areas that the researcher has paid close attention to, the method of research adopted in the course of the research, literature review which shows how different authors have expunged on the topic of the research. Chapter two has considered the Conceptual Clarifications in agency relationship and in what circumstances one can say that the agency relationship exists. Chapter three dwells with the Scope of Agency Relationship as briefly discussed in chapter one, capacity to act as principal and capacity to be appointed as agent.
Chapter four examines the duties and right of the principal and his agent arising out of the relationship as created in chapter two. By this, each party in the relationship can easily ascertain when the other party is breach of his duties. Chapter five dwells on the Breaches of Obligations, Remedies Available to Principal and Agent and the remedies available to both parties that is the principal and his agent when there is a breach. Finally, last chapter, chapter six deals with the conclusion and recommendation to the findings in the research.
CHAPTER TWO CONCEPTUAL CLARIFICATIONS 2.1 Introduction
The necessity for the employment of some person to perform for or on-behalf of others is product of the complexities of modern commercial life. The development which is closely related to the changing needs for specialization and division of labour which have called for the delegation or distribution of various functions among specialists and amateurs alike.15 This make it pertinent to give the meaning of this relationship. 2.2 Meaning of Commercial Law