COMMERCIAL TRANSACTIONS 1.1 GENERAL INTRODUCTION TO AGENCY
Agency relationship is an exception to the privity of contract rule. It is “An agreement between two that one should represent him”-Bowstead. The acts or omissions of the agent are seen as that of the principal –Salami JCA in Akalonu V. Amokaro.
An agent can be seen as a mere “conduit-pipe” connecting the principal to the third party-Prof Fogam. Agency relationships may arise in various situations as shall be discussed later.
- Agency and trust
- Agency and bailments
- Agency, servants and independent contractors.
A trust involves the notion of holding any property for the benefit of another called the beneficiary.
- Trust and Agency involve a fiduciary relationship.
- Both act for the benefit of another (An agent for his principal and a trustee for the beneficiary.
- The duty not to make secret profits applies in both.
- Generally, unlike an agency, a trust should be created in writing.
- A trustee is the legal owner of the property and can act in his own name while the agent is not the legal owner of the property but acts on his principal’s behalf.
- Unlike an agent, a trustee cannot negotiate and conclude contracts on behalf of the settlor (person that creates a trust).
- Generally, the agent can revoke the agency but a trustee cannot revoke a trust.
Bailment involves where a person (bailor) keeps his property in the possession another (called bailee) for a particular purpose/duration on the understanding that it shall be returned once the purpose has been fulfilled. The Bailee should keep the property in good conditions. The difference here is that, unlike an agent, the bailee cannot negotiate and conclude contracts on behalf of the bailor.
AGENCY, SERVANTS AND INDEPENDENT CONTRACTORS
A servant is one who subjects himself to the service and control of another.
An independent contractor is one that provides services to another in return for a reward. In essence, an independent contractor is his own master.
A servant when working on the direction of the master makes his master liable for faults. However an independent contractor is liable for any wrong he commits.
- SPECIAL AGENTS
- GENERAL AGENTS
- UNIVERSAL AGENTS
SPECIAL: Appointed for a particular purpose, transaction or act. Cannot bind his master in any other matter than that for which he is engaged. E.g. Tayo tells Tolani to go and buy a car for him. Tolani should not go and purchase a house. Tolani has been appointed for a particular purpose: to buy a car.
GENERAL AGENTS: He acts in all matters relating to his particular trade or business on behalf of his principal. E.g. a lawyer. Tayo, is Mr Ajao’s lawyer. He Draws up land transactions on his behalf, concludes contracts on his behalf, defends him in court and renders legal services to Mr Ajao.
UNIVERSAL AGENTS: Acts on behalf of his principal in all matters without restrictions. Except the act relates to an illegality. Rich sportsmen who are illiterate usually appoint someone to do all their works and transactions… Their mouthpiece… A wise man would never appoint a universal agent.
We have noted the classes of agents. Under each class, there is a further division into the following:
- Mercantile agents.
- Del credré agents
- Attorneys or legal practitioners.
- Confirming house.
Mercantile agents: One authorized by the principal to buy or sell goods and raise loan using the principal’s goods as collateral- Section 1 of the Factors Act 1889.
- A Factor is a mercantile agent who has authorized possession of the goods of his principal and can sell or dispose them in his (agents) name. Provided the consent of the owner (principal) is sought and obtained- Pearson Rose Young ltd. The factor can sue on the contract in his own name. e.g Tayo sends clothes from Dubai to Nigeria for Tolani to sell for him and render accounts.
- A Broker is a mercantile agent employed to negotiate contracts on behalf of the principal for a commission (brokerage). Brett L.J in Fowler Hollins noted that a broker… is a mere negotiator… He is a middleman. A broker is not entrusted with the possession of the goods… as such, he cannot sell, act or sue in his own name. E.g. Bisi really needs a hostel on campus. She approaches John and complains to him about the stress and time it takes for her to come to school every day from Ketu. She then begs him to help her look for someone that wants to sell Moremi bedspace (this is illegal and inappropriate but for the sake of understanding, let us assume it is allowed and proper). John goes on a search and finds Titi who says she would sell her Moremi bedspace for #120k. After long negotiations, John and Titi agree for 100k. John goes back to Bisi and tells her about the negotiation with Titi. Bisi then meets Titi and pays for the hostel. In this case, John is Bisi’s broker… he has negotiated a contract with Titi and linked her with Bisi. Example of Brokers are stockbrokers who generally links a person wishing to buy shares with another wishing to sell shares.
The major distinction between a factor and a broker is that the factor has the possession of the goods and can sell in his name while the broker cannot do either. In the Tayo and Tolani example above, we see that Tayo sends the goods to Tolani in Nigeria but Bisi has not yet given John the money.
- DEL CREDERE AGENT: Is a mercantile agent who clearly promises to indemnify his principal if the third party brought by him (the agent) fails to pay what is due under the contract. This is not a contract of guarantee but rather a contract of indemnity… It does not need to comply with Section 4 of the statute of frauds 1677 and Sutton V. Grey… meaning that it does not need to be in writing.
- AUCTIONEER: An agent legally authorized to sell property by public sale called an auction. Before sale, he is the agent of the seller… after sale, he is the agent of the buyer. Sale by auction is generally completed on the fall of the hammer. The auctioneer usually gets a commission.
- LEGAL PRACTITIONERS OR ATTORNEYS.
Often referred to as attorney at law. They act on behalf of someone engaged in a legal proceeding when instructed to do so. They can be liable in negligence when acting in their legal capacity irrespective of any agreement by the legal practitioner negating that. Except where he acted gratuitously or the negligence arose from the conduct of the case in court. See Section 9 legal Practitioners Act 1975.
The shipmaster can enter into contracts for the purchase of necessaries and the repair of the ship on behalf of the owner when he cannot communicate with the owner. Only contracts for necessaries would bind the owner.
- Confirming Houses.
- Other commercial marketing arrangements.
Distributorship, franchising, partnership… The list goes on.
 Even in Yearworth and Others V North Bristol NHS Trust, the court held that sperm samples can be held in trust.
 Clear expression is needed –Omoregie V. B. Portland Cement Fabric.
 The promise only covers failure to pay rather than other issues like refusal to take possession of the goods, and so on-Churchill and Sim V. Goddard.