Capacity and Creation of an Agency

The general rule is that both principal and agent must be capable as such. In this regard, the ordinary rules of contract apply to the contract of agency. It follows therefore that:

1. The 3rd party must have capacity to contract in order that the contract with the agent makes with him on behalf of the principal may be enforceable.
2. Generally, the agent must have capacity to contract if his contract is to be enforceable; otherwise the agent and principal may not be able to enforce the rights and duties arising under the contract of agency.

However, there is a marked distinction between a person’s capacity to act as a principal and his capacity to act as an agent.

Capacity to act as a Principal

Only persons with full capacity to act contractually may appoint an agent to act on his behalf. Thus, the capacity to contract or do any other act by means of an agent is co- extensive with the capacity of the principal himself to make the contract or do the act which the agent is authorized to make or do.

To this general rule, there are 2 exceptions

• First, where the act is required by statute to be done by the person himself.
• Secondly, where the competence to do the act arises by virtue of the holding of some public office.

N.B: Section 39(1) of the Companies and Allied Matters Act 1990 prescribes that a company cannot appoint an agent to do acts which are not in the objects clause of the company because it will be beyond the powers of the company (ultra vires)

*A principal that does not have full contractual capacity cannot make a contract by employing an agent who has full contractual capacity, that is those who lack capacity to contract, like an infant or lunatic cannot as a general surmount his contractual disability by employing agents to enter into a contract on their behalf

*An infant cannot appoint an agent to purchase goods other than necessaries for him since such contracts would be void.

Section 1 of the Infants Relief Act of 1874 states situations where contracts entered into with an infant will be void. It follows therefore that an infant cannot appoint an agent to contract on his behalf with a 3rd party as regards such contracts.

He can only appoint an agent in circumstances in which he himself has the power to act. This restricts an infant’s capacity to appoint an agent only to kinds of valid contracts which he himself can make.

*Also, mentally unsound persons have no capacity except during their “lucid intervals”, hence they cannot appoint an agent to contract on their behalf during the time they are mentally incapacitated.

Nevertheless, there may be cases where a mentally incompetent person (or a drunkard) can be treated as a principal; for instance (1) if the 3rd party contracts in ignorance of his condition and (2) without taking advantage of the disability.

The same rule also applies to drunkards. They have limited or capacities to appoint an agent at the time of their disabilities. The rule is stated clearly in the case of Imperial Loan Company v. Stone. The rule is to the effect that

Where a party to a contract is of unsound mind, the contract is nevertheless binding upon him unless he can prove that he was so insane as to not know what he was doing and the fact was known to the other party who took advantage of it.

*It is also important to note that that although the principal may have capacity at the creation or inception of the agency, but subsequent loss of capacity through insanity for instance, may bring the agency relations to the end. The case of Yonge v. Toynbee is illustrative of this point. (Check the handout for the facts and judgment)

*The position canvassed earlier on corporations and their capacity to appoint agent seems to have now been affected by recent legislations on companies. The Companies and Allied Matters Act in Section 38 now gives a company all the powers of a natural person of full capacity for the furtherance of its authorized business or objects unless its memorandum or any other enactment otherwise provides

Section 39 abolishes the harsh effects of the doctrine of ultra vires as so that the ultra vires of a company are now ipso facto void.

Capacity to act as an Agent

The capacity to act as an agent is not completely governed by the same rules as capacity to act as a principal, since an agent does not enter into a contract on his own behalf consequently, it is not necessary that he should have full contractual capacity.

All persons of the said mind, including infants and other persons with limited or no capacity to contract on their own behalf are competent to act or contract as agents.

In other words, since agency depends on agreement and not necessarily on contract, a person under contractual incapacity is not disabled from serving in the capacity of an agent. The rationale of these rules is not that the agent is a mere instrument and that it is the principal who bears the risk of adequate representation.

Thus, an infant may act as an agent in any type of contract provided that he has sufficient understanding to consent to the agency and do the required act. It is therefore, irrelevant to his capacity to act as an agent, that because of his infancy he may not be liable to the 3rd party on the contract, where adult agents would have been personally liable.

Formalities for Appointment of an Agent

Generally, no formality such as writing or deed is required for the valid appointment of an agent. There is no particular from prescribed by law, thus an agent can b appointed orally, in writing or implied from the circumstances.

A great number of agencies are created orally, and very often without any express arrangements at all. This is so even if the agent is appointed to make contract which is required by law to be evidenced in writing or to be evidenced by a note or memorandum in writing signed by the party to be charged or his lawfully authorized agent. However, writing is always advisable even where it is not required.

Creation of an Agency

The relationship of principal and agent may arise in one of the following 4 ways:

1. Express Agreement(Express or Implied)
2. Ratification
3. Estoppel
4. By Operation of Law

Express or Implied Agreement

The commonest and by far the simplest means of relationship is by express agreement in the form of a contract.

An agency agreement must be based upon some indication by the principal to the agent that he consents to having the latter act on his behalf, and a similar manifestation of consent by the agent to act for the principal.

• No particular form is required for such agreement for it may be expressed or implied from the conduct of the parties. It could also be written or oral, unless he is authorized to execute a deed in which case his appointment must be by deed. Thus, Abina & Ors v. Farhat, it was held that, a deed signed by an agent on verbal authority was in cooperative.
• Where such an agreement is oral, proof would be essential for the mere spoken words may be easily misunderstood or misinterpreted. The burden of proving the existence of such relationship rests on the party who asserts it. In the absence of such proof, the court should hold that there is no agency by agreement.
• Where such an agreement is inferred from conduct, the law demands that there must be some positive act from which such inference can be drawn. Accordingly mere silence without move would not be sufficient.
• There are a few other cases in which an agent’s appointment must be under seal and a few moves where it must be in writing. Appointment under seal (or by deed) is necessary where the agent is given power on behalf of his principal to make contracts under seal. An appointment in this form is termed a “power of attorney” and it is commonly given by a person temporary leaving the country to an agent who is to look after his affairs during his absence. Appointment in writing is necessary on cases where the disposition of land or an interest in land is concerned. See sec. 78 of the Property and Conveyancing Law 1959 which provides that an agent could not create or dispose of an interest in land or dispose of and equitable interest or trust on behalf of a principal unless he himself had been appointed in writing.
• It is important to note that not all agency agreements are strictly contractual, manifesting all the features of the common law contract. An agency may be gratuitous, if so, it is not truly contractual. The main difference between consensual and contractual agency lies in the absence or presence of consideration (remuneration) to the agent.

Implied Appointment

This type of authority may arise under two situations

1. First, it may arise from the express authority conferred, thus, an agent appointed to conduct a particular trade or business can do all such things as are necessarily incidental to the conduct of such trade or business. In Ryan V. Pilkington, an estate agent was instructed by the owners to find a purchaser for a private hotel, he did so and accepted from the prospective purchaser a small deposit ‘as agent’ of the owners. It was held that although the estate agent was not expressly given the authority to accept deposits, he had acted within the ostensible scope of his authority.
2. Secondly, an agreement to create an agency may be also implied from the conduct of the parties.

The law will imply such an agreement of the partner have, by their conduct, consented to a state of affairs which is expiable only in terms of agency.

In general, however, it will be the assent of the principal which is more likely to be implied, for, expects in certain cases, “it is only by the will of the employer that any agency may be created. Such assent may be implied where the circumstances clearly indicate that he has given authority to another to act on his behalf.

This may be so even if the principal did not know the true state of affairs. The effect of such implication is to put parties on the same position as if the agency had been expressly created.

Ratification

This arises where a person without authority (or who having an authority exceeds that authority) acts on behalf of another and that afterwards accepts and adopts the act as if there has been prior authorization to do the act.

Agency by contract as seen earlier is usually created before anything has been done by the agent, that is the agent’s authority to act is granted before the existence of that authority. But with ratification, the situation is reversed.

In ratification, what is done on behalf of the principal is done at a time when the relationship of principal and agent does not exist, in that the agent has no authority to do what he does at the time he does it. But also happens that subsequent to the act, the person on whose behalf it is done accepts it or adopts it. The process of adopting the act or transaction is known as ratification.

• The doctrine of ratification is well expressed in the Latin maxim, “omnis ratihabitio retrotrahitur et mandato priori aequrparatur ” ( an act without precedent authority becomes the act of the principal, if subsequently ratified by him).
• Ratification is retroactive. It relates back to the time of transaction and not to the time of ratification, and thus supplies the authority lacking at the time of transaction. This is exemplified in the famous constructional case of Buron v. Denman, in which the defendant, a British Naval Commander, forcefully freed some slaves belonging to the plaintiff. Subsequent ratification by the secretary of state and the Admiralty, Lords was held to render the defendant’s act an “Act of State” for which he could not be made personally answerable.
• Ratification need not to take a particular form. In most cases any act of statement which clearly shows the intention of the principal may be a sufficient act of ratification (even for a written contract). But if the contract made by an agent is on the form of a deed, then the principal’s ratification must be by deed.

Conditions/Requirement for a Valid Ratification

For a ratification to be valid, the following conditions must be satisfied.

1. The Agent must expressly contract as an Agent

The agent must profess at the time of making one contract that he is acting on behalf of and intending to bind the person who subsequently ratifies the contract. He must make it clear that the principal is a party to the contract.

This is based on the principle that a man may not incur liability on his account and then assign it to someone else under the color of ratification.

Therefore the possibility of ratification does not depend upon what the agent’s state of mind actually was but upon one way his statements and conduct were reasonable understood by the 3rd part. Hence, only the person under whose authorization the agent has purported to act can take the benefit of or be made liable under one agent’s act.

N.B: Lord Macnaghten remarked that
“Civil Obligations are not to be created by, or founded upon undisclosed intentions”.

If a relationship of principal and agent is to exist and affect third parties, it must be based upon knowledge on one parts of all concerned, and their joint intention that such a relationship should exist and affect rights and liabilities.

2. The Principal must be in Existence

Wills J. in Kelner v. Baxter said

“Ratification can only be made by a person in existence either actually or in contemplation of law. This means that the principal must be a live human being or a juristic person.

In order to effect a valid ratification, the principal must be in existence at the time the act was purportedly performed on his behalf.

Fridman says “no one can purport to act as an agent for a person who will come into existence at a future date, even if the agent can reasonably expect that his act will be adopted”.

Thus in Caligara v. Giovanni Sartori and Co. Ltd., it was held that a company cannot ratify a contract purported to have been entered into on its behalf by the promoters prior to its incorporation.

*This rule is important for example in its bearing on the liabilities of companies for pre- incorporation contracts. The common law position is that since a company has no legal existence before incorporation, it cannot ratify any contract made prior to incorporation. So in Kelner v. Barter, the court rejected the purported ratification of contract by a company which had not been formed at the time the contract was made.

For example, in Wilson v. Tuman, a sheriff under a writ of execution wrongly seized goods which were not the property of eh judgment debtor. When it was sought to make the execution creditor liable for his trespass it was held that he was liable because the execution creditor could not ratify the sheriff’s act so as to become liable for the sheriff’s trespass. This was because the sheriff acted in pursuance of a public duty, under the authority of the law which ordered him to seize debtor’s goods, not under the authority, and on behalf of the execution creditor. See also Barclays Bank Ltd v. Roberts.

3. Capacity of the Principal to Contract

The principal must have the legal capacity to make the contract both at the date of the contract and at the date of the purported ratification.

If an agent enters into a contract on behalf of a principal who is at the time, incapable of making it, no ratification is possible.

Therefore, infants, mentally incompetent and other incapacitated persons for example, may not be able to ratify acts purported to be done on their behalf, if at the time when the acts were done, they were incapable of doing them, even a prior agreement between the parties would not have this defect.

See Boston Deep Sea fishing and Ice co v. Farmham for illustration of this.

4. Knowledge of the facts

Ratification does not bind the principal unless he acts with the knowledge of all the important facts. There must be full disclosure of all the important and material facts of the agent to the principal (see Savery v. King) or it must be sworn that he was ready to ratify the matter no matter the circumstances. (See Marsh v. Joseph)

5. The Legal Quality of the Act

Generally, the principal may ratify any act which he could have authorized at the time the act was performed. However, certain acts are not capable of ratification so that any purported ratification could not make the principal liable. This act which the principal could not have authorized in the first place because it was legal or contrary to public policy does not become effective by ratification.

In Urhobo v. Chief J.S Tarka, a Lagos High Court held that if a pre-incorporation contract is purported to be made by the company which does not exist, the contract is a nullity and neither the company when formed nor the promoter whose signature is added can sue or be sued on the contract and the company cannot take any benefit under it.

Also, there can be ratification of a legal nullity or as it was put more recently “Life cannot be given by ratification to prohibited transactions”. So acts which are illegal or void cannot be ratified.

For example, if the directors of a company enter into a contract that is not within the scope of its memorandum of association, the contract cannot be ratified even with the assent of very shareholder, because it is ultra vires and therefore void.

Similarly, acts which amount to crimes cannot generally be ratified. Acts like forgery for example cannot be ratified, as seen in the case of Brook v. Hook. In that case, the agent forged his principal’s signature as the marker of a promissory note. Before the note matured the holder discovered the forgery and threatened to persecute the agent. Whereupon the principal refused to ratify the agent’s act. Later the principal refused to pay on the note. The question before the court was whether he was liable.

The majority of the court thought that the attempt at ratification was void because the act sought to be ratified was illegal. See Union Bank of Australia v. McClintock

6. Reasonable Time

In Folashade V. Alhaji Durusholae, it was held per curiam that a proper case of ratification is subject to the important qualification that ratification must be within a reasonable time after which an act cannot be ratified to the prejudice of a third party.

Where the agent and the third party stipulate time ratification, the principal can validly ratify only if he acted within the period so prescribed. Thus, in Metropolitan Asylum Board Managers v. Kingham & Sons, it was held that an act must be ratified within a reasonable time after acceptance by an authorized person, and that such contract cannot be ratified after the date fixed per performance to commence.

7. Proof of Ratification

Generally speaking, ratification need not be expressed in writing. Any act which clearly shows the intention of the principal is sufficient. But if the contract made by the agent is one form of a deed then the principal’s ratification must be by deed.

Furthermore, any conduct on the part of the principal showing clearly that he was approved or adopted what has been done on his behalf may constitute a sufficient act of ratification.

*Usually the principal must perform or do some positive or unequivocal which indicates ratification. At first it was believed that merely standing by without objecting will not be sufficient, that is silence was not ratification but in Suncorp Insurance and Finance v. Milano Assecurazioni, Waller J stated that mere acquiescence or inactivity may be sufficient to establish ratification.

The English view is therefore that in certain circumstances, the inactivity of the principal can constitute implied ratification of an unauthorized act. Also see Bolton Partners v.Lambert.

Effect of Ratification

Iguh JSC in Vulcan Gases Ltd. V. GF Industries said “the effect of ratification of the agent’s act is to put the partners concerned in the same position as that in which they would have been if the act ratified has been previously authorized”.

Ratification renders the contract as binding on the principal and their party as if the agent had been properly authorized beforehand.

Harman J in Boston Deep Sea Fishing Co v. Farham said “Ratification as we all know has a retroactive effect”. Thus it furnishes the authority lacking at the time of commission of the act.

Lord Sterndale in Koenigsblatt v. Sweet said “It related back, it is equivalent to an antecedent authority when there has been ratification the act that is done is put in the same position as it had been antecedently authorized”.

The principal that ratification is retroactive may sometime cause some curious situation. For instance, can the third party withdraw from the contract before ratification?

The better view and that supported by case is that notwithstanding that the 3rd party has given notice to the agent of his withdrawal from the transaction, the ratification is nevertheless effective. To hold otherwise would be to deprive the doctrine of its retrospective effect. Thus, in the troublesome case of Bolton Partners v. Lambert, an offer of purchase was made by the defendant to A; the plaintiff company’s managing director and agent who was not authorized to make any contract of sale. The offer was accepted by A on behalf of the plaintiff company. The defendant then withdrew his offer and ten days after his withdrawal, the plaintiff company ratified the acceptance of the offer by A.

It was held that ratification related back to the time of acceptance by A and that therefore the defendant was bound notwithstanding his purported withdrawal.

This is a decision which appears at first sight to be anomalous, harsh and difficult, considering the principle of contract that an offer may be revoked at any time before acceptance by the offence.

But who was the offeree? It was not the agent personally because, as far as the 3rd party knew, the offer was being made to the agent’s principal and irrespective of the true state of affairs between the principal and agent, the position must be taken in the way in which it appears to the 3rd party.

Hence, so far as the 3rd party was concerned there was a binding contract the moment the agent accepted the offer. On the other hand, if the principal had never ratified the agent’s acceptance of the offer, there could have been no valid contract.

The third party can escape this problem by expressly or implied making his offer “subject to ratification”. In such circumstances, the offer is conditional and there is no binding contract with ratification of the agent’s acceptance.

In conclusion, it would appear that notwithstanding the otherwise harsh effect of Bolton v. Lambert, the principal of ratification applies within very narrow limits. Bolton v. Lambert is therefore still good law and after more than a century of that decision and it was confirmed in 1994 in the case of Presentaciones Musicales SA v. Secunda.

Agency by Estoppel

Estoppel is a rule of evidence which precludes a person from denying the truth of certain matters under his or her control and upon the strength of which others have altered their position.

This type of agency arises largely as a result of the conduct of their parties. Thus, where a person who has allowed another to believe that a certain state of affairs exists, with the result that there is reliance upon such belief, cannot afterwards be heard to say that the true state of affairs was far different, if to do so would involve the other person in suffering some kind of detriment.

A largely binding agency relationship may arise where in fact; no formal agency agreement is in effect.

A principal may give an appearance of agency relationship, for example, furnishing his or her firm’s call cards or other stationery to the agent. In such cases, the existence of an agency may be presumed, and the principal may be bound by the acts of the agent performed on the principal’s behalf.

Everything depends upon the way the situation appears to the outside world, on the light of what is usual and reasonable to infer, and upon the reliance which is placed by third parties upon the apparent authority of the person whom they are dealing.

In Raccah v. Standard Co of Nig. Ltd, X was employed to act as agent for the defendant for the purchase of produce to the knowledge of the defendant’s representative. Subsequently, this representative instructed X not to purchase any more for the defendant. X induced the plaintiff to enter into a contract to sell produce to him. The plaintiff had previously dealt with X as agent for the defendant and honestly believed that X still retained the authority of the defendant. It was held that the defendant was liable to the plaintiff for the price of the produce.

Requirements for Estoppel

Before an agency by estoppel can rise, the following conditions must be fulfilled.

1. THERE MUST BE A REPRESENTATION: This simply means that the principal must make a statement or conduct himself in such a manner as to lead 3rd parties reasonably to believe that an agency exists. Such statements or conduct must be clear and unequivocal.

Thus, on Colonial Bank and Anor v. John Candy and Anor, the executors of a deceased signed bank transfers on the back of shore certificates to enable these to be registered in their own names. The broker, with whom the certificates were deposited for necessary action, fraudulently made them out to himself and deposited then with a bank as security for a loan to him. The bank took the bonafide and without notice of the fraud. It was held that the conductors of the executors in delivering the certificates to the broker did not amount to a representation that the broker had insensible authority to deal with the certificates in his own name.

Their conduct it was held further was consistent either with an intention to sell or pledge the shares or to have themselves registered as the owners and therefore were not estopped from setting up their title as against the bank for the bank ought to have inquired into the broker’s authority.

2. There must be reliance in the representation

The 3rd party must know of such conduct or representation and act in reliance on the representation.

The party who raises the issue of estoppel must show not only that representation was made to him but also that he actually on it.

Thus, if he had acted at all or acted but not on the faith of the representation, no agency of estoppel has been created.

In Farguharsson Brothers & Co. v. King and Co, a firm of timber merchants gave authority to one of their clerks to make limited sales to their know customers. The clerk under an assumed name, fraudulently sold timber to the respondent who was not one of such known customers, but the respondent knew nothing of the clerk or his real name and bought and paid for the timber in good faith. It was decided the firm had not held out the clerk to the respondent as their agent to sell to the respondent and therefore was not estopped from denying the clerk’s authority to sell.

3. There must be an altering of the party's position resulting from the reliance

It has been held that the representation in order to operate as an estoppel must be “the proximate clause of the loss”.

Even where a representation has been proved to have been made by the principal and acted upon by one third party, the latter must further show that he altered his position thereby and to his detriment.

Thus, if he has not altered his position at all, or has done so out has not suffered any loss thereby, or has done so but not on the faith of the representation, there is no agency by estoppel.

In Mac Fisheries Ltd v. Harrison, it was held that the defendant was not estopped from setting up the true state of affairs because whatever representations were made, they did not reach the plaintiff nor cause him to act to his detriment.

Agency by Operation of Law

In certain circumstances, although no relationship of “principal and agent” exists, the law regards what has been done by someone as having been done with the authority of some other person and therefore as his agent.

Two instances clearly illustrate such circumstances

1. Agency by Neccessity
2. Agency Presumed from Cohabitation

Agency of Neccessity

This often arises when in emergency occasions a person is obligated to act in order to prevent irreparable loss to the property or interest of another. In such a situation although the person who so acts has no authority to so do, yet because of the urgent necessity, such an authority is implied. Agents of necessity are a very limited class are the courts are very reluctant to increase their number.

However, if an agency of necessity is to be conferred the following conditions must be satisfied.

PRIOR CONTRACTUAL RELATIONSHIP: This kind of agency is very readily implied in situations where there is in existence, a prior contractual relationship between the parties and the act consisting the agency of necessity is a mere extension of that relationship by the agent who in the unforeseen circumstances that have arisen is compelled to exceed his authority.

Examples of such re-existing contracts are usually seen in cases in cases of common carriers entrusted with another’s property who finds it necessary to do something to prevent that property from total loss, a master of a ship for example, has wide powers in relation to the ship or its cargo of either is in danger.

Carriers of goods by land have also sometimes been treated in a fashion similar to shipmasters in respect of goods they carry. Thus in Great Northern Railway v. Swaffield, a railway company was held to be an agent of competent to incur expenses in housing it in a stable.

Apart from cases where a prior contractual relationship existed, the doctrine of agency of necessity hardly applies. Thus where someone gratuitously interferes to protect another’s property for example, where a stranger , not bound by an existing contract with the owner looked after a stray animal, no liability to reimburse the stranger could be imposed on the owner, for the general principle is that benefits (or burden) cannot be imposed on a person behind his back. See Binstead v. Buck.

There must be an actual or immenent commercial neccessity or genuine emergency to warrant of the Agency.

This recruitment if often construed strict and so would usually apply in cases where the goods are perishable or consist of say livestock which has been tended, fed or watered.

So the reason for the decision on Swaffield’s case was therefore the need to look after the horse which otherwise might have perished through lack of food and care. Where therefore goods are not of a perishable nature and are not likely to deteriorate in quantity of properly stored, on agency of necessity will not easily be implied. In this connection, mere inconvenience for example, will not create an agency of necessity.

In Sachs v. Miklos, S stored his furniture on m’s premises free of charge. Three years later m wanted the space which was occupied by the furniture for other purpose. But he was unable to communicate with s. he sold the furniture. There was certainly no emergency and therefore m was liable in conversion.

Similarly in Munro v. Wilmot, the defendant allowed the plaintiff to park her car in his garage. It was left there for some years, after which time the defendant found it too inconvenient to keep it further. He was unable to locate the plaintiff to take her car away. The defendant sold the car. The defendant was held not justified in selling the car, for no state of emergency, but only of inconvenience had arisen. The defendant was therefore liable for conversion.

It must be impossible or impracticable to communicate with the owner of the goods in order to get his instruction.

In Springer v. Great Western Railway Co, the plaintiff, one Mr. Springer consigned tomatoes from Jersey to London, the ship delivered the consignment of tomatoes and owing to a railway strike the tomatoes could not be unloaded until a further two days later. When unloaded they were found to be bad and the railway company decided to sell them locally. No attempt was made to communicate with Mr. Springer. The railway company was held liable in damages to Mr. Springer as they should have communicated with him and asked for his instructions as soon as the ship arrived.

However, modern means of communication where there is widespread use if telephone, fax, telex etc has generally minimized the occasions where anyone can successfully claim to be an agent of necessity in this circumstance.

The Agent must act in bonafide interest of all the parties.

In Prager Blastspiel Stamp & Heacock Ltd, the defendants as agent bought skins to be dispatched to the plaintiff a fur merchant in Romania. But owing to the German occupation of Romania, it was impossible to send the skins to him or to communicate with him. Thereupon, the defendant sold the skin which meanwhile had appreciated in value. It was held that as the skins were not likely to deteriorate in value if properly stored, the defendant had not acted bonafide in selling the skin.

Agency presumed from Cohabitation

Agency presumed from cohabitation is the second case of agency by implication of law.

Where a married woman is cohabiting with her husband and both maintain a household establishment there is a presumption that she has (implied) authority to pledge the husband’s credit for necessaries suitable to the style which they live. This is a mere presumption of fact founded upon the supposition that wires cohabiting with their husbands ordinarily have authority to manage in their own way, certain departments of the household expenditure, and to pledge their husbands credit in respect of matters coming from within departments. The question whether goods are necessaries is one of fact. But in determining this (i.e. whether goods applied are necessaries), it seems regard is had to the man’s style of living rather than his action means.

Where a man and a woman live together and cohabit although they are not married, agency of cohabitation is created. In other words, the presumption applies equally in the case of a woman living with a man as his mistress. Therefore, a wife or mistress who has been deserted by her husband and who is living apart due to the fault of the husband, is her husband’s agent of necessity. In defining necessities, Willes J said in Phllipson v. Hayter.

“What the law does infer is that the wife has authority to contract for things that are really necessary and suitable to the style in which the husband chooses to lice in so far as the articles fall fairly which the domestic department which is ordinarily confided to the management of the wife”

It would appear therefore that it is the ostensible and not the justifiable mode of living that sets the standard and if a husband chooses to live beyond his means, his liability may be correspondingly increased.

However, the liability of the husband is always subject to the proviso that the goods are suitable and reasonable not only in land but also in quantity.

Necessaries include clothing, for the wife and children, food, medicine, hiring of servants. So if a wife orders things which are not suited to the husband’s style of living or if excessive quantity, or extravagant nature, there is no presumption of authority and action cannot be maintained against the husband.

Requirements of such Agency

The presumed agency rests essentially on two major factors:

1. Cohabitation
2. Domestic Establishment

Cohabitation

In this connection, the law requires that the husband and wife must be cohabiting in such a manner from which it is reasonable to infer that the wife is acting on behalf of her husband when she orders necessaries.

NB: Marriage is not a prerequisite. As long as there is cohabitation between a man and woman in circumstances in which the outside world takes them for a man and wife, the woman will be in the same position as a wife.

The only basis for presumption is the fact that the husband and wife are living together, if therefore the wife is separated from her husband, she has no authority to pledge his credits and this of agency cannot be invoked to create liability in the husband. But the appreciation of the presumption will depend on the reason for separation. Where the parties are living apart by reason of wife’s misconduct e.g. where she is guilty of desertion, or committed adultery, the does not have his authority.

Secondly, where the parties are separated as a result of court order, the husband is not liable for necessaries supplied to her so long as he complies with the order for alimony or maintenance.

Thirdly, where the separation is by mutual consent without any formal judicial decree, the existence of the presumption will depend upon whether there has been an agreement between the parties on the subject of maintenance to pledge his credit unless the agreement then she has presumed authority unless the wife has other adequate means of support, whether coming from her husband or elsewhere.

Domestic Establishment

The fact that the parties cohabit is in itself insufficient. They must in addition be living together as man and wife in circumstances which show that they are a family. This point is very well illustrated in Debenham v. Mellon. In that case, husband and wife were managers of a hotel where they lived and cohabited. The wife had an allowance for clothes, but the husband forbade her to pledge his credit for them. The wife bought clothes from the plaintiff in her own name and paid the bills. Then she incurred a debt with the plaintiffs who demanded payment of it from the husband. It was held by the House of Lords that the husband was not liable, one of the reason being that the parties were not cohabiting on a domestic establishment but in a hotel.

Conclusion

Where all the ingredients exist, the tradesman must still prove to the satisfaction of the court that the goods supplied to the wife are necessaries. He is liable to do this, for instance, where the goods contain jewels or articles of luxury, his only action lies against the wife, unless he can show an express or implied assent by the husband to the contract.

Factors which deprive the wife authority

Even where the goods are undoubtedly necessaries, he husband is only presumptively liable, and he may rebut the presumption and so escape liability. The presumption is rebutted if he proves of any of the following:

1. That the goods were supplied exclusively on the wife’s credit.
2. That the trader has been expressively warned not to supply goods to the wife on the husband’s credit.
3. That the wife was forbidden to pledge his credit whether or not the supplier knew of this. However, it is important to observe here that if the husband has held his wife out in the past to the plaintiff so to invert her with apparent authority under the doctrine of estoppel, then a mere private prohibition addressed solely to the wife will not relieve him from liability in respect of the future purchases of a similar nature. In such a case, it is his duty to convey an express meaning to the tradesman.
4. That the goods though necessaries are excessive or extravagant having regard to the husband’s income.
5. That the wife was already supplied with sufficient articles of that land or with sufficient allowance with which to purchase them.

What is the reliance of the wife’s dependent means?

Lord Denning in Biberfield v. Berens suggested that in compacting the husband’s liability for necessaries a “means state” must be applied. The reasoning is, that it must follow from the modern equality of the sexes, that one wife, if she can afford it must help in distinguishing the household accounts, and that a wife who is well off is not entitled to spend all her money on luxuries and know all domestic liability on the shoulders of the husband.

The Scope of the Agents Authority

Agency is essentially a matter of authority. It is the most central and important feature of the whole agency relationship .The scope of the agent’s authority determines not only the legal relations of the principal and his agent, but about the relations which may emerge between the principal and 3rd party, or the agent and 3rd party.

It is important to know the scope of the agent’s authority for two important reasons:

1. Although, the scope of the agents authority may depend on a large extent on the manner of creation of the agency relationship (e .g agency of necessity) may in fact have, or later acquire additional authority. In other words, regardless of the manner of creation of the agency relations an agents authority can be enlarged by other consideration base on usage ,custom and outward appearance
2. It is necessary to ascertain the real extent of the agent authority because the rights and duties as between principal and agent may depend on it, and so also may the legal position both as between the principal and the 3rd party and as between the agent and the 3rd party. An agent who acts within the scope of his authority carries out his obligation to his principal and succeeds in bringing his principal into legal relationship with the 3rd party.

Generally speaking, an agent’s authority is conferred by the same method leading to the formation of the contract of the agency. Thus, express confers actual or express authority and agency by estoppel confers apparent authority. The principle however, is that regardless of the type of authority conferred on the agent, it must not be ambiguous, (where for instance express instructions given to an agent are ambiguous, the agent will not be liable) neither must the authority be greater than the powers of the principal to act on his behalf. If the authority is ambiguous and the agent acts in good faith, according to one interpretation, the principal would be bound by the act, even though he expected the authority to be exercised in a different sense. Also, the principal would not be bound by the acts of his agent which are done in excess of the agents authority (Obaseki v. African Continental Bank & Ors)

As stated above, an agent who has no authority to contract on behalf of another, or who exceeds the authority which he has, will be liable in damages to the third party with whom he contracts, for a breach of an implied warranty of authority, even if he acted innocently in each case

The rationale is that every person who professes to act on behalf of another impliedly warrants that he has authority to act as he did. If it turns out that he acted without such authority, he will be liable in damages to the third party who is induced to contract with him. Unless the third party knows or ought to have known of his lack of authority.

The elucidation of the notion of the agents’ authority is usually made complicated by the fact that there is hardly one unique and integrated notion of authority. In fact, there are several varieties of authority, and as noted earlier, the particular authority involved in any given agency relationship depends on the type of agency being considered.

Express Authority

Express/Actual authority is that which the principal confers on the agent, by agreement. It includes not only the authority expressly stated in the agreement (whether written or oral), but also the authority which is implied in the circumstance of the express agreement.

This type of authority arises directly from the authority expressly or directly given by the principal to the agent under an agreement or contract between them.

So, if the agent’s authority is contained in a deed (i.e. power of attorney), the instrument or deed will be strictly construed according to the rules of construction which are usually applicable to all kinds of deeds. But where the agents authority in a document under seal, i.e. it is written or given by parole, the agents authority is to be construed having regards to the purposes of the agency i.e. the surrounding circumstances and the usual course of the business in which the agent is concerned.

N.B: Written documents containing the agents authority is of prime importance. The scope of such documents is to be ascertained by applying ordinary rules of construction. Again if theres any ambiguity about the wordings of the agents authority then, as long as the agents act in good faith and in accordance with a reasonable construction of his authority, he will be considered to have acted within his authority, whether or not what he did was what the principal intended he should do. See the cases of Boden v. French, Ireland v. Livingston.

Implied Authority

It is hardly possible for an express agency to spell out the full extent of the authority of the agent. And as was said in Ghandi v. Pfizer International Products Ltd, a term which is not expressed in a contract will be implied if it is so necessary that the parties averted to the situation, they must have intended that it should be a term of the contract. This type of authority is therefore derived from the express authority of the agent, and simply means that the agent has authority to do whatever is necessary for, or ordinarily incidental to the effective execution of his express authority.

Thus, where an agent is appointed to conduct a particular trade or business, he can do all such things that are necessarily incidental to the conduct of such trade or business. For instance, an agent employed to sell certain property has implied authourity to describe the property and state to an intending purchaser any facts which may affect its value. See Mullens v. Miller

Usual Authority

This goes hand in hand with the agents implied authority. It is the type of authority possessed by agents employed to act for a principal in connection with matters concerning a particular trade or business or to act for the principal in the ordinary course of his business, trade or profession for the purpose of carrying out his authority or anything necessary or incidental thereto. Thus, a commissioned agent employed to make a bet for his principal is impliedly authorized to pay the bet if he lost.

N.B: The principal will be liable for the acts of the agent unless he has prohibited or restricted the agent from acting in the way he has done and the third party has notice of the prohibition or restriction. This is in keeping with the well-established principle that “if a person employs another as an agent in a character which involves a particular authority he cannot by secret reservation deprive him of that authority.

Customary Authority

Where an agent is employed to act for his principal in a certain place, market or business, then the agent is impliedly authorized to act according to the usages and customs of such place, market or business. Such is customary authority which itself is a variety of usual authority but the difference between the two being that whereas the essence of usual authority is an inference from the ordinary course of a particular trade, business or profession, the essence of customary authority is the custom and practice of a particular place, market or business.

However, the principal can only be bound where the custom is known to him, or be so notorious that he cannot be heard to say that he had no knowledge of it. Moreover, the custom must be reasonable and lawful. If, while lawful, it is not reasonable custom, then the principal will not be bound by it unless h expressly consents to be bound by it.

Apparent Authority

An agent’s apparent authority or ostensible authority as it is also usually called, is the authority which the principal by his words or conduct has led 3rd parties acting as reasonable and prudent persons justifiably to believe is conferred on the agent by the principal. The principle of an apparent authority is in fact, an application of the principle of estoppels; for estoppel means only that a person is not permitted to resist an interference which a reasonable man would draw from his words or conduct. Thus where one person expressly or impliedly represents another to have authority to act on his behalf so that a third party reasonably believes him to possess that authority and deals with him in reliance on the representation the person making the representation will be bound to the same extent as if the actual authority had in fact been conferred. He is estopped from denying the ostensible authority which he has created.

N.B: The main difference between implied authority and apparent authority is that implied authority is based upon inferences from matters which are the subject of agreement between the principal and the agent, whereas apparent authority arises from a representation by the principal to a third party independently of any agreement which may or may not exist between the principal and the agent.