UNIT 8

COMPETENCE OF THE PRINCIPAL

In Nigerian commercial transactions, the competence of the principal is crucial for the validity of an agency relationship. The principal must have the legal capacity to enter into contracts. See the case of Omoregie v. Ogedegbe (1984) 10 S.C. 140 where the court emphasized that a principal must have the capacity to contract for an agency relationship to be valid. This means the principal must be:

1. Of Legal Age: This is where the principal must be at least 18 years old.
2. Of Sound Mind: This is where the principal must have the mental capacity to understand the nature and consequences of the transaction.
3. Not Disqualified by Law: This is where the principal should not be disqualified from contracting by any law.

COMPETENCE OF THE AGENT

An agent must also have the capacity to act on behalf of the principal. The agent’s competence is generally less stringent than that of the principal. See the case of Smith v. Brown (1922) 8 NLR 38 where the court held that the agent must have the capacity to understand and execute the tasks assigned by the principal. An agent can be:

1. A Minor: this is where minors can act as agents, but they may not be held liable for their actions.
2. Of Sound Mind: This is where the agent must understand the implications of their actions.
3. Not Disqualified by Law: This is where the agent should not be legally disqualified from acting in that capacity.

AUTHORITY OF AN AGENT

See the case of Alakija v. Abdulai (1998) 6 NWLR (Pt. 552) 1 where the court held that an agent’s authority is determined by the scope given by the principal and what third parties perceive as the agent’s authority. The authority of an agent can be actual or apparent:

1. Actual Authority: This is the authority that the principal expressly or implicitly gives to the agent. It can be:
   1. Express Authority: this is clearly defined and granted by the principal, either orally or in writing.
   2. Implied Authority: this is the authority that is necessary to carry out the express authority or duties.
2. Apparent Authority: This occurs when the principal's actions lead third parties to believe that the agent has authority, even if the agent does not have actual authority.

FORMALITIES TO CREATION OF AGENCY

See section 1 of the Statute of Frauds 1677 (Applicable in Nigeria) which requires certain contracts, such as those for the sale of land, to be in writing. The creation of an agency relationship in Nigeria can be formal or informal:

1. Formal Creation: this is done through a written agreement, often required in cases involving significant financial transactions or real estate.
2. Informal Creation: this can occur verbally or through the conduct of the parties.

AGENCY BY RATIFICATION

Agency by ratification occurs when a person (the principal) approves an act performed by another (the agent) who acted without authority or beyond their authority. See the case of Bolton Partners v. Lambert (1889) 41 Ch D 295 where the court illustrates that a principal can ratify the unauthorized acts of an agent, making them binding as if the agent had original authority. For ratification to be valid:

1. The principal must have been in existence at the time of the act.
2. The principal must have full knowledge of the material facts.
3. The act must be ratified in its entirety.

AGENCY BY NECESSITY

Agency by necessity arises in situations where the agent must act to prevent loss to the principal and it is impossible to get the principal’s instructions. See the case of Sachs v. Miklos (1948) 2 KB 23 where the court held that agency by necessity is valid if the agent’s actions are reasonable and necessary under the circumstances. Conditions for this type of agency include:

1. Genuine Necessity: This is where the situation must require immediate action.
2. Inability to Communicate with the Principal: This is where the agent must not be able to contact the principal for instructions.
3. Act in the Principal’s Best Interest: This is where the agent must act in a manner that protects the principal’s interests.

CONCLUSION

The principles governing the competence of the principal and agent, authority of an agent, formalities to creation of agency, agency by ratification, and agency by necessity are essential in Nigerian commercial law. They ensure that transactions are conducted smoothly and protect the interests of all parties involved. Understanding these principles, along with relevant cases and statutes, helps in navigating the complexities of agency relationships in Nigeria.