UNIT 9

THE DISCLOSED PRINCIPAL

A disclosed principal is a person whose identity is revealed by the agent at the time of contracting with a third party. In other words, the third party is aware that the agent is acting on behalf of the principal, and the principal’s identity is known. See section 92 of the Companies and Allied Matters Act (CAMA) 2020 which deals with the acts of directors (agents) of companies and their binding effects on the company (principal) and the case of International Messengers (Nig.) Ltd v. Pegofor Industries Ltd (1987) 4 NWLR (Pt. 65) 362 where the court establishes that when an agent discloses the principal, the principal, and not the agent, is bound by the contract.
However, when an agent acts for a disclosed principal, the contract is between the principal and the third party, the disclosed principal is liable to the third party for the obligations under the contract, and the agent generally has no personal liability unless the agent acts outside the scope of authority or agrees to be personally liable.

THE UNDISCLOSED PRINCIPAL

An undisclosed principal is a person whose identity is not revealed by the agent at the time of contracting. The third party believes they are dealing with the agent personally and is unaware of the existence of a principal. See section 93 of the CAMA 2020 which outlines the rights and liabilities of undisclosed principals in commercial transactions and the case of G. E. Nig. Ltd v. UBA (1986) 2 NWLR (Pt. 20) 136 where the court held that an undisclosed principal could enforce a contract made on their behalf by an agent, even though the third party initially believed they were dealing solely with the agent.
However, the agent is personally liable to the third party because the principal’s existence is unknown, if the principal’s identity is later revealed, the third party may choose to hold either the agent or the principal liable, and the undisclosed principal can also enforce the contract against the third party once their identity is disclosed, provided the agent acted within their authority.

RELATIONSHIP BETWEEN PRINCIPAL AND AGENT

The relationship between principal and agent is fiduciary, meaning it is based on trust and confidence. The agent acts on behalf of the principal and is expected to act in the best interests of the principal. See section 94 of the CAMA 2020 which deals with the general duties of agents and the relationship between agents and principals in commercial transactions and the case of P. Z. & Co. Ltd v. Ogedengbe (1972) 1 All NLR (Pt. 2) 205 where the court discusses the fiduciary duties of agents and their accountability to principals.

DUTIES OF THE AGENT TO THE PRINCIPAL

1. Duty of Loyalty: This is where the agent must act solely for the benefit of the principal in all matters connected with the agency.
2. Duty of Care: This is where the agent must perform their duties with reasonable care, skill, and diligence.
3. Duty of Obedience: This is where the agent must follow all lawful instructions of the principal.
4. Duty of Accountability: This is where the agent must account for all money and property received or expended on behalf of the principal.

DUTIES OF THE PRINCIPAL TO THE AGENT

1. Duty to Compensate: This is where the principal must pay the agent the agreed-upon compensation for their services.
2. Duty to Indemnify: This is where the principal must indemnify the agent for losses or liabilities incurred in the performance of their duties, provided the agent acted within their authority and in good faith.

TERMINATION OF AGENCY RELATIONSHIP

1. By mutual agreement.
2. By completion of the purpose of the agency.
3. By revocation of authority by the principal.
4. By renunciation by the agent.
5. By operation of law (e.g., death or insanity of either party).

CONCLUSION

Understanding the concepts of disclosed and undisclosed principals, along with the relationship between principal and agent, is crucial in commercial transactions. These legal principles ensure that the rights and obligations of all parties involved are clear and enforceable. The cases and statutes highlighted provide a framework within Nigerian law for addressing these issues, ensuring that commercial transactions are conducted fairly and transparently.