This allows a person to do what he would not have ordinarily been empowered to do physically or personally, through another person and he would be held liable for all the activities of that person. Agency is a situation where a person appoints another person or group of persons to represent his legal interest (capacity) to a third party. It is where an appointment is made or authority is given by a man known as principal to another person known as the agent to bring in a relationship with a third party.
It is a tripartite agreement that enables a third party to deal with other parties than the agent that contract with him. It is an exception to the rule of privity of contract. As soon as agents join relationship with third party and principal, third party can relate directly with principal. Where there is a no disclosure, third party cannot deal with the principal. Where there is disclosure, then third party can sue principal directly when agent fails to perform because the agent would have entered into the contract in the name of the principal. Agency relationship holds that as soon as the principal is disclosed, the principal becomes liable.
Agency distinguished from trusteeship
Trustee is also a tripartite agreement where the owner of property (testator) appoints trustees who are to take care of the property for the benefit of the beneficiaries (i.e estate). The agency on the other hand is created at the instance of the principal while trusteeship is created at the instance of the beneficiary (Estate).
The beneficiary does not enjoy anything until the death of the testator or his demise in case of will. But in the case of agency, the principal does not need to die before the third party enjoys from the contract. The responsibility comes in to play the very day the agent comes into contact with the principal. Another difference is that commission is paid for the services the agent renders to its principal, while in the case of a trusteeship, a trustee’s fee or charges is paid to the trustee aside from the property under trust.
Types of Agency
- Auctioneer: An auctioneer is basically a bid caller who sells on behalf of the owner. Normally a written contract between the seller and the bidder is drawn up. The auctioneer then has the authority to permit place the seller in contract with the highest bidder. This is an agency relationship, because the auctioneer acts as an agent to the seller.
- Stockbrokers: A stock broker buys and sells stocks and other securities on behalf of their clients which could be either retail or institutional clients. The stock broker acts as a mediator between the buyer and seller, matching sell orders with buy orders. In both cases, he acts as an agent to the customer placing the request, and he charges the customer a commission for its services.
- Estate agent: An estate agent deals with real estate, he arranges the selling of real estate properties, and also the renting, leasing and management of the properties. He is an agent also because he acts on behalf of the owner of the property.
- Del credere agent: A del credere agent sells goods on credit on behalf of his principal. If the debtors refuse to pay, he bears the loss. This is a special agency who takes special commission. Because of this, he is responsible for acts of the third party. He stands as a guarantor. Where third party refuses to buy or pay, the agent must pay on customers’ behalf.
- Attorney or solicitor: A solicitor is an agent because he is appointed by his client (principal) to represent his interest against a third party. Anybody that qualifies to practice law is a legal practitioner i.e a graduate of law called to bar by the council of legal education and body of benchers.
Where principal is not disclosed, the agent is personally liable. Disclosure needs not be in form of mentioning the name of the principal. Agency can be created in express manner; that is verbally or in writing in form of document. Agency can also be created impliedly or by estoppel. Impliedly means by behavior.
If an agent has been working for you, and he defrauded, and you did not issue a disclaimer, then if he goes out to represent you, and the third party has recourse to you on his act, you will be estopped from denying that you did not know him or denying liability.