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WHERE DIRECTOR ENTER CONTRACT FOR COMPANY, IT IS COMPANY WHO IS LIABLE

Dictum

I have no doubt in my mind at all that as Chairman/Director of the 2nd appellant, the 1st appellant was in the eyes of the law an agent of the company for which he acted and the general principles of the law of principal and agent would generally have applied. Thus where a director enters into a contact in the name of or purporting to bind the company, it is the company which is liable on it, not the director. The director is not personally liable unless it appears that he undertook personal liability. Even where a director contracts in his own name but really on behalf of the company, the other party to the contract can generally on discovering that the company is the real principal, sue the company as undisclosed principal on the contract.

— Kutigi, JSC. Yesufu v. Kupper Intl. (1996) – SC.302/1989

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FIVE WAYS IN WHICH PRINCIPAL AND AGENT RELATIONSHIP MAY ARISE

Usually, the relationship of Principal and agent may arise in anyone of five ways, namely: – 1. By express appointment whether orally or by letter of appointment or, indeed, by a Power of Attorney, Under this heading. No formality, such as writing is required for the valid appointment of an agent except for instance, where the authority of the agent is to execute a deed on behalf of a principal. in which case, the agency itself must be created by deed. 2. By ratification of the agent’s acts by the principal. See for example Bird v. Brown (1850) 4 Exch 786, Firth v. Staines (1897) 2 QB. 70 etc. This mode of creation of agency is sometimes expressed in the maxim omnis ratihabitio retrotrahitur et mandato priori aequiparatur. 3. By virtue of the doctrine of estoppel. 4. By implication of law in the case of agency of necessity and 5. By presumption of law in the case of cohabitation.

— Iguh JSC. Vulcan Gases Limited V. Gesellschaft Fur Industries Gasverwertung A.G.(G.I.V.) ( SC.67/1995, 4th May 2001)

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THE IDEA BEHIND AGENCY RELATIONSHIP

The idea behind agency is that the law acknowledges that a person does not always need to act in person to change his legal relations. He may either employ the services of another to change them or do something to change them. Ordinarily, the idea is that the agent can affect the principal’s legal position by certain acts which, though performed by the agent, are to be regarded as acts of the principal. See Idowu v. Olorunfemi and Ors (2013) LPELR-20728 (CA).

— H.M. Ogunwumiju, JCA. Godwin Ukah & Ors. V. Christopher A. Onyia & Ors. (CA/E/295/2008, 21 Jan 2016)

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THE PRINCIPLE OF PRINCIPAL & AGENT IN AGENCY RELATIONSHIP

Agency has been defined in the case of SDV Nigeria Limited V Phillip Kayode Olusegun Ojo & Anor (2016) LPELR-40323 (CA), where Nimpar JCA, explained thus; “Agency is a relationship that exists between a principal and another called “agent” under which the agent has authority to act on behalf of the principal. Several authorities defined agency relationship, one of which is the case of OKWEIJIMONOR V GBAKEJI (2008) NWLR (Pt. 1079) 172 where the Apex Court held thus: “The general law relating to agency however , may be defined as the relationship which exists or arises where one person has the authority or capacity to create legal relations, i.e. the ‘agent’ who acts on behalf of another called the ‘principal’ whereby the latter undertakes to be answerable for the lawful acts of the former with a third party; provided it was done within the scope of his authority or ratified later by the latter. The fundamental element in agency relationship is authority of the agent to act on behalf of the principal.”

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WHAT IS AN AGENCY RELATIONSHIP

Okwejiminor v Gbakeji (2008) 5 NWLR (Pt.1079) 172 Mohammed JSC defined the concept of agency thus:- “Agency is the relationship which exists or arises where one person called the agent, has the authority or capacity to create legal relations by acting on behalf of another person called the principal, whereby the latter undertakes to be answerable for the lawful acts of the former provided it was done within the scope of the former’s authority, or ratified by the latter”.

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AGENT’S AUTHORITY ENDS THE MOMENT HIS PURPOSE IS SPENT

As a matter of law the authority of any agent appointed for a particular purpose is spent the moment he executes that purpose for which he was appointed.

— Nnaemeka-Agu, JSC. Ashibuogwu v AG Bendel State (1988) – SC.25/1986

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ACT OF FRAUD BINDS PRINCIPAL WHEN AGENT ACTS WITHIN SCOPE OF AUTHORITY

A principal, whether disclosed or otherwise is in position to plead all defences available to him, but in the case of fraud, where the Agent acts within the scope of his authority, actual or apparent, the act of fraud on the part of the agent binds the principal. The same goes for an act of undue influence, vis-a-vis the third party, brought to bear on the principal by the agent. The problem is one to be sorted out between the Principal and the Agent and not the third party.

— Eso, JSC. Ashibuogwu v AG Bendel State (1988) – SC.25/1986

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