AGENCY | METHODS, DUTIES, PRINCIPLES, PARTIES, AGENTS

What is an agency?

An agency is a relationship which arises whenever one person (the agent) acts on behalf of another person (the principal) and has the power to affect the principal’s legal position with regard to a third party.

In practice, the two most important functions of an agent are:

Making contracts on his principal’s behalf
Disposing of his principal’s property

There are three parties to the contract of agency

Principal
Agent
Third party (parties)

Methods of Creation of Agency

By agreement or consent of the parties either express or implied
Necessity – by the operation of the law under the doctrine of agency of necessity.
By Ratification – retrospectively approving what someone has done on one’s behalf without prior authority.
By Estoppel – Where a person having information that someone has been parading himself as his agent without his authority and failing to stop him; will subsequently be prevented from denying that such a person is his bonafide agent.

Duties of the Agent

Obedience: The agent must act strictly according to the principal’s instructions.
Care and skill: An agent professing a particular calling must show the degree of skill appropriate to his mandate. He must also exercise care in handling the business of his principal.
Personal performance: Duty of non-delegation; the agent must perform personally and cannot delegate.
Duty to Account: An agent must keep proper books of accounts on behalf of his principal. He must also render (present) this account to his principal at stated intervals.
The agent also has a duty to keep the principal’s property distinct from that of the agent.
Duty of good faith: An agent is not allowed to make a secret profit or receive a bribe.
Duty of Secrecy: An agent must keep his principal’s affairs secret
Full performance: Agent has duty to perform fully according to terms of the agreement.
An agent must communicate all material facts to his principal with reasonable diligence.

Duties of the Principal

Indemnity : The principal is expected to reimburse the agent on any expense he incurs in the performance of his agency
Remuneration: The principal must pay the agent all commissions and remunerations due to him.
Performance: The principal also has the duty to perform fully according to the terms of the agreement.

NB:

The duties of the agent are the rights of the principal
The duties of the principal are the rights of the agent

In addition to the above, the following right of the agent must be noted

LIEN: An agent has the right to retain possession of the property of the principal as security for payment of a debt (e.g. his commission)

Method of Termination of Agency

By agreement between the agent and the principal
Revocation of the agent’s authority by the principal
Renunciation of the agent’s authority by the agent himself
Full Performance – i.e. completion of the agent’s assignment
Death of either party
Insanity of either party
Bankruptcy of either party
Passage of time: Where an agent is appointed for a fixed period of time, the expiration of that period terminates his authority whether the agent has completed his assignment or not
Frustration: e.g. changes in the law, subsequent illegality, destruction of the subject matter of the agency etc

GENERAL EVALUATION QUESTIONS

List eight means of payment in business
Give five reasons for the protection of consumers
State five measures taken to protect consumers
What is a channel of distribution
Explain five advantages of home trade over foreign trade

THEORY

List three ways by which an agency can be created
State four rights of the agent