By Amaka Ezeno, MCLArb,
The nature of the world of work and business is such that there would be little or no progress if businessmen and women, workers and professionals had to do everything by themselves, without the aid of a representative- someone acting for and on their behalf. Thus, the law of agency ensures business efficacy by allowing for the continuity of business even in the absence of the actual owners.
In his book, ‘Law of Agency’, Fridman defined agency as “The relationship that exits between two persons, when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal’s legal position in respect of strangers to the relationship by the making of contracts or the disposition of property.”
The Supreme Court, in James v. Mid-Motors (Nig.) Ltd, has also explained the term as “… the relation which exists when one person has the authority or capacity to create legal relations between a person occupying the position of principal and third parties. Agency is one of the exceptions to the law of privity of contract; that a person who is not a party to a contract can be liable in the contract created by his representative.
THE AUTHORITY OF AN AGENT
It is the authority of the agent to act on behalf of their principal that creates the relationship between them. Where no such authority exists, there does not, also, exist any principal-agent relationship. The actions of the agent as they affect their principal are limited to the authority s/he has been given.
Thus, the principal is only responsible for the rights and liabilities created by his agent within the authority he has been assigned. If he acts outside the scope of the authority, then the principal cannot be bound. The exception to this rule is where the principal decides to ratify any obligation created by the agent outside the scope of his (the agent’s) authority. The authority of the agent may be actual or apparent/ostensible.
The actual or real authority refers to the authority of the agent, to do that which the principal has agreed that the agent should do for or on his behalf. It includes the authority to carry out whatever the principal has expressly or impliedly engaged him to do.
Lord Denning expatiated this is in the case of Hely-Hutchinson v. Brayhead Ltd. He said:
Actual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass resolution which authorizes two of their members to sign cheques. It is implied when it is inferred from the conduct of the parties and the circumstances of the case such as when the board of directors appoint one of their members to be managing director. They directly impliedly authorize him, to do all such things as fall within the usual scope of that office.
The apparent or ostensible authority exists in a situation where a person by his word, conduct or omission creates to a third party an appearance or impression that someone is his agent. The difference between apparent and actual authority is that the latter is expressed by the principal directly to the agent. In the case of apparent authority, the principal expresses it to a third party.
An agent who has apparent authority may not have actual authority, though it may coincide or sometimes exceed. The apparent authority extends to doing all acts which a reasonable person familiar with the customs and usage of the particular trade or profession, where the agent belongs or is employed, would be justified in assuming that the agent has authority to perform.
In Freeman and Lockyer v. Burkhust, Diplock, LJ., explained apparent/ostensible authority as:
a legal relation between the principal and the contractor created by representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the apparent authority, so as to render the principal liable to perform any obligations imposed on him by such contract.
To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation. The representation, when acted on by the contractor by entering into a contract with the agent, operates as an estoppel preventing the principal from asserting that he is not bound by the contact. It is irrelevant whether the agent had actual authority to enter into the contract.
Again, Lord Denning, in Hely-Hutchinson case, supra, expatiated on this when he said that,
Ostensible or apparent authority is the authority of an agent as it appears to others. It often coincides with actual authority. Thus when the board appoint one of its members to be managing director, they invest him not only with the implied authority, but also with ostensible authority to do all such things as fall within the usual scope of that office. But sometimes, ostensible authority exceeds actual authority.
For instance, when the board appoint a managing director, they may expressly limit his authority by saying that he is not to order goods worth more than £500 without the sanction of the board. In that case, his actual authority is subject to the £500 limitation, but his ostensible authority includes all the usual authority of a managing director… Thus, if he orders goods worth £1,000 and signs himself as managing director for and on behalf of the company, the company is bound to the other party who does not know of the £500 limitation.
Apparent authority may arise where there has been actual authority in existence but has been terminated by agreement between the principal and the agent or by effluxion of time or by performance. In this case, subsequent events may have the effect of reviving the existence of agency.
In Drew v. Nunn, the defendant had given his wife authority to deal with the plaintiff, who was a tradesman, and held her out as his agent and entitled to pledge his credit. The defendant became insane shortly afterwards, which had the effect of terminating the wife’s actual authority. While the husband’s insanity lasted, the wife ordered goods from the plaintiff, who accordingly supplied them. At the time of supplying the goods, the plaintiff did not know that the defendant had become insane. The defendant afterwards recovered and then refused to pay for the goods.
The court held that the defendant was liable for the price of the goods supplied to his wife during the period of his insanity. This was because of the existence of apparent authority upon the termination of the wife’s actual authority.
Again, apparent authority may also arise where there is no existing agency at all. The case of Galbraith and Grant v. Block is instructive on this point. The plaintiff sold wine to the defendant on the term that it should be delivered at the defendant’s premises. When a paid carrier delivered the wine, someone who was an imposter received and signed for the wine on behalf of the plaintiff. The plaintiff never saw or received the goods, but the court held that delivery had been effected and the defendant was not liable for the price.
419 IS THAN A CLICHE MORE
People, especially those in the business sector, pull different tricks just to get one step ahead or take advantage of the other. For example, issuing a cheque for the payment of goods which the issuer knows that it will not be honoured, whether by reason of fact that there is no money in the account on which it is drawn or that the issuer does not have sufficient fund standing to his credit in the account. Or, a lecturer telling his student that she failed, though he knew that she passed excellently, and that she should pay One Hundred Thousand Naira in other to pass.
The term ‘419’ is an everyday expression used, often, to indicate ‘street smartness’ or ‘dupery’. The expression goes beyond these appellations. It is an actual crime called Obtaining Goods by False Pretences. In fact, it is provided for in Section 419 of the Criminal Code. Thus, it has become synonymous with the section wherein it is provided for, though many are not aware of this.
Obtaining by False pretences has been defined under Section 418 of the Criminal Code as “Any representation made by words, writing, or conduct, of a matter of fact, either past or present, which representation is false in fact, and which the person making it knows to be false or does not believe to be true…” The representation does not include future representation. It has to be past or present.
The difference between obtaining by false pretences and stealing is that in stealing, the accused obtains only possession, but in 419, the accused obtains both possession and ownership. This is because, unlike in stealing, the complainant freely gives the goods to the accused based on the representation, thus the accused obtains a good title.
The Supreme Court, in Ikpa v. State, agreed as follows:
- That the pretence must be made by the accused person.
- That the pretence was false.
- That he knew that it was false.
- That the pretence operated on the mind of the complainant.
- Upon which the property was obtained.
About the fourth element above, the complainant will fail if the representation did not work on their mind. for example, if the student whom the lecturer told to bring One Hundred Thousand Naira to pass, goes ahead to say, “I know that you are lying; I did not fail but I will just give the One Hundred Thousand Naira.” Then it cannot be said that she relied on the representation.
The punishment for obtaining by false pretences can be up to seven years imprisonment. Obtaining by false pretences is possible even where the accused did not obtain the property for his use. It is enough if he induced delivery to another person.