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Obligations in Agency (Commercial Law) NG

obligations in agency

N.B. This article is particular to Nigeria.

Obligations in Agency

Wondering what obligations exist in an agency relationship? This post is about obligations of Agency.

The relationship between a principal and agent is essentially consensual. Where an agent has agreed to serve as the agent of the principal and the principal has equally given his authority to the agent, certain duties are expected of the parties.


An agent having accepted to be an agent has certain duties to perform, such duties either arise from the agreement or from the fiduciary nature of the relationship. The following are the duties:

  1. DUTY TO PERFORM: where the agency is contractual, an agent must perform what he has undertaken to perform under the contract. This is simply governed by the rule of contract as stated in turpin v. bilton. Professor Powell in his book “law of agency” concludes that there is a duty on the agent to inform the principal within a reasonable time and failure to do so gives rise to liability in negligence. This is stated in otohamman v. senbanjo
  2. OBEDIENCE: The agent must act in accordance with the authority which has been given to him by the principal. Such authority may either be express, implied or usual authority. The paramount consideration where there are no express or usual custom to guide the agent, the agent will usually have some discretion as long as he acts for the principal as seen in bonsor v. musician union.
  3. CARE AND SKILL: an agent must perform his undertaking with care and skill. All agents owe this duty to their principal, whether the agency is contractual or gratuitous. Nevertheless, the decision is usually drawn between the standard of care and skill to be observed in each case. As stated in giblin v. mcmullen, gratuitous agent is only bound to show such skills as he in fact possess.
  4. PERSONAL PERFOEMANCE OR NON-DELEGATION: the general rule is that an agent must perform his undertaking personally. The contract of agency between both parties is a confidential one. This is normally expressed in the Latin maxim “delegatus non potest delegare”. Therefore, the employment of a sub agent is a bridge to the principal unless he has permitted it. This is illustrated in Allam co ltd v. Europa costa services ltd.
  5. RESPECT OF THE PRINCIPALS TITLE: an agent cannot deny the title of his principal to goods money or land in his possession on behalf of the principal. The possession of the agent is the possession of the principal for all purpose. There may be circumstances where the agent may be able to refuse to assent to claim by his principal. For example, the right of a third party called JUSTER TII
  6. DUTY TO ACCOUNT: An agent must pay over to the principal all sum received by him on behalf of the principal as seen in blaustein v. mattz mitchelle. This duty requires the agent to keep his principal’s property distinct from his own and also keep proper account of such property. The case of Ogbonnaya v. apostolic church provides a detailed illustration.
See also  Contract in Law: Definition and Classifications (NG)


There are two major duties of a principal namely:

  1. Renumeration
  2. Indemnity

Both terms will be discussed

  1. RENUMERATION: under a contractual relationship, the principal is bound to take the renumeration he has promised to pay the agent by agreement. Where it is expressly stated, he is bound to pay once the agent has discharged his own obligation under the contract. Where there is no express renumeration, it would be Implied to the contract agreement. As stated in taylor v. powell, where the agent is acting gratuitously, the principal is not bound to pay renumeration. Similar grounds were adopted in Bryant v. flight. In that case, the agent had to work for the principal in the terms “the amount of payment I am to receive, I leave entirely upon you”. It must also be noted that liability for renumeration only arises where it is earned.
  2. INDEMNITY: this duty may be express or implied and the extent of liability for indemnity will depend on the nature of the agreement between the principal and the agent on the grounds of business. For the agent to make his principal liable in indemnity, he must have acted within the express, implied or usual authority. Again, there is no duty to indemnity under the following in circumstances:

i. Where the agent has acted unlawfully

ii. Where the agent has breached any of his duties

iii. Where the agent has acted negligently.

Contributed by: Abdulganiyu Ismail (AKA) Mastermind
Prepared and Written by: Ucheakonam Chijioke Joshua (CJ)

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