Convenience of Agency: An Exception to the General Rule

By Jesse Nwaenyo

The law of agency has been developed over the years to allow for persons to be able to transact business without necessarily being present at a particular location or event. As such, principals are able to transact their businesses or even fulfill their obligations through other persons known as ‘agents’. These agents act within the length of authority granted them by their principals.

In the legal relationship between principals and agents, the general rule is that the agent cannot by himself without recourse to the principal further delegate the powers donated him by the principal. The general rule is encapsulated in the Latin maxim ‘delegatus non potest delegare’. This principle has been affirmed by various courts in a catalogue of decided cases. Despite the line of judicial authorities, it is however not unlikely for ignorant persons to abuse the agency relation. This article aims at shedding light on the implication and the allowable exception under the law.

The Supreme Court of Nigeria in the case of INCAR (NIG) PLC & ANOR v. BOLEX ENTERPRISES (NIG)[1], settled the position of law on agency relations as regarding the extent of powers an agent can exercise on behalf of his principal. The Court held that:

 “I think also that it is necessary to add that generally an agent cannot act beyond the powers given to him by his principal. This rule was aptly stated in the case of De Bussche v. Alt (1878) 8 CHD (CA) 286 where at 310 per Thesiger U said: “The first contention raises a question which, as it appears to us, does not present any difficulty. As a general rule, no doubt, the maxim “delegatus non potest delegare” applies so as to prevent an agent from establishing the relationship of principal and agent between his own principal and a third person.”

The Court of Appeal affirmed the above decision of the Supreme Court in reaffirming the founding principle for the general rule of agency, when it decided the case of NNPC & ANOR v. TRINITY MILLS INSURANCE BROKERS & ORS[2]. In that case, the Court of Appeal stated that the power granted an agent “…is exercisable by that person himself directly and personally and he lacks the legal power to re-delegate such power.…”

This general rule in the operation of agency is not without an exception which is that, while authorized agents cannot transfer their power, they may hire sub-agents. If the sub-agents act in the name of the authorized agent, their actions will be legally binding on the principal.

This exception was given effect in the case of SIMEON v. COLLEGE OF EDUCATION EKIADOLOR BENIN[3] where Justice Ogakwe J.C.A stated very aptly that:

 “Nearer home, the Supreme Court (per Nnaemeka-Agu, JSC of blessed memory) in the case of NWOSU vs IMO STATE ENVIRONMENTAL SANITATION AUTHORITY (1990) 2 NWLR (PT 135) 688 at 718 – 719 H-B (quoting from Administrative Law by Wade, 3rd Edition, page 67) stated as follows: Although the Courts are strict in requiring that statutory power shall be exercised by persons on whom it is conferred and by no one else, they make liberal allowance for the working of the official hierarchy at least so far as it operates within the sphere of responsibility….This is embodied in the Latin maxim: qui facit per alium facit per se i.e. he who does an act through another is deemed in law to do it himself.

Furthermore, in NNPC v TRINITY MILLS INS. BROKERS[4], this Court per Aderemi, JCA (as he then was) stated:

“Generally, a delegated power cannot be delegated. The Latin maxim is DELEGATA POTESTAS NON POTEST DELEGARL This principle or rule applies wherever the authority involves a trust or discretion in the agent for the exercise of which he is selected. But it does not apply where it involves no matter of exercise of discretion; and it is immaterial whether the act is to be done by one person or the other.” Per UGOCHUKWU ANTHONY OGAKWU, JCA (Pp 35 – 38 Paras B – C).

The implication of the above is that there are instances where an agent can lawfully further delegate his powers to another person who will be regarded as a sub-agent. This kind of agency is created for “convenience of agency or business”

It is essential to note that a sub-agent is a person employed by and acting under the control of the original agent in the business of agency. The relevant circumstances making for necessary exception to the general rule in agency relations are:

1. When the principal agrees to the appointment of such a sub[1]agent expressly or impliedly.
2. When the ordinary custom of the trade permits the appointment of a sub-agent.
3. When the nature of the agency business requires the appointment of a sub-agent.
4. When the act to be done is purely ministerial and involves no exercise of discretion or confidence.
5. When some unforeseen emergency has arisen.

A CONVENIENCE OF AGENCY SCENARIO

‘Company A decided to appoint Company B as its Attorney-in -Fact.

Company A via the Power of Attorney authorized Company B to appoint another company (Company C) in Nigeria to relate with Regulatory agencies.

Can Company B delegate such powers to Company C via another Power of Attorney, if yes, what would be their status? Would Company B now be principal?’

RESOLVING THE SCENARIO

In the above scenario, it is without dispute that the Power of Attorney empowered company B to appoint another person to execute the duties assigned to it within the circumference of the Power of Attorney. Consequently, company B can validly donate its powers to company C. Company C would now become a sub-agent and its actions legally binding on the original/authorized agent and the principal.

The status of company B is the original agent. The principal is company A while the status of company C is a sub-agent; and it can only act within the ostensible powers subscribed to Company B who is the original agent. And if company C do act in the name of the authorized agent, its’ actions will be legally binding on the principal. This nature of agency is created for “convenience of agency or business.”

CONCLUSION

The convenience of agency or business rule or exception becomes relevant when some unforeseen emergency arises. Very typical, is the global lock-down that was experienced in the greater part of 2020 as measures to curtail the spread of the COVID-19 virus. A circumstance which made it practically impossible for foreign transacting parties to engage in business travels to execute their responsibilities, to Nigeria for instance. The implication of this prior unforeseen event was that a lot of modifications emerged to keep business contracts alive. One of the viable options in this regard is for either of the contracting party to donate his authority to a person in Nigeria to act on his behalf. In taking advantage of the convenience of agency, the primary agent appointed in Nigeria, where he resides for instance in Lagos state whereas the contract is to be executed is in Abia State, can further assign his powers to another person residing in Abia state, if he is unable to get to Abia State due to circumstances beyond his immediate control such as an interstate travel ban like was ordered during the COVID-19 lock down. In such circumstances, the authority of the original agent and the sub-agent are a derivation of the authority of the Principal.

Jesse  is former Head of Chambers Prof. Paul C. Ananaba, SAN & Co. jurisource@gmail.com, @jessenwaenyo

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Footnotes

[1] (2001) LPELR-1514(SC)

^[2]  (2002) LPELR-7142(CA)

[3] (2014) LPELR-23320(CA)

[4] (2002) LPELR (7142) 1 @ 14

Source: DNL