It is challenging to clearly understand agency relationships where the principal is in a foreign jurisdiction but having a local agent who contracts on his behalf with third parties. This occasions some exceptional situation in the agency relationship.
Law of Agency is an area of commercial law dealing with a set of contractual, quasi-contractual and non-contractual relationships, that involves a person, called the agent, who is authorised to act on behalf of another (called the principal) to create a legal relationship with a third party. Accordingly, Mofesomo Tayo-Oyetibo in his article titled “Doing Business in Nigeria and the Law of Agency” observed that “an agency relationship exists between two persons when one of whom expressly or impliedly consents that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly consents to so act.” It is my considered view that agency is an express or implied derivation of authority by one party, the agent, from the other party, the principal. Thus, it is a consensual relationship between both parties, for one (the agent) to act on behalf of, and acquire legal rights for, the other (the principal) vis-à-vis third parties.
From the above definitions of agency, it is noted that two parties are usually involved in an agency relationship: the principal and the agent. The principal is the party who employs the services of the agent and the agent is the party whose services have been employed by the principal to act on his behalf in his (principal’s) business transactions. It is noteworthy that a principal may be foreign (that is, resident or domiciled in a different jurisdiction from that of the agent). For example, a principal who resides in the United Kingdom may employ an agent in Nigeria to act on his behalf or a principal who resides in Nigeria may employ the services of an agent in a foreign country.
We are concerned here with a foreign principal who employs the services of an agent in Nigeria. In a situation involving a foreign principal, there is a presumption that the intention is to bind the agent and not the (foreign) principal, which brings about the general rule that a foreign principal cannot sue or be sued for a contract made by his agent in Nigeria. This goes against the usual notion, that if an agent acts within his derived authority given to him by the principal, in relation to his duties as agent, he will be free from any liability arising from the contract and the third party cannot enforce the contract on the agent. The case of a foreign principal and an agent should not be different, although the rationale behind the general rule is understandable based on the fact that the third party can only see the agent and not the (foreign) principal.
However, if it is expressly agreed between the agent and the third party that the contract would establish a privity of contract between the (foreign) principal and the third party or where such intention could be inferred, the agent has no liability in the contract. There is no doubt that the general rule is based on commercial convenience, but in a proper case, whether the agent will be personally liable or not will depend on the intention of the parties as may be inferred from the particular facts of the case. The mere fact that the principal is foreign is not a decisive factor, but may only be one of the factors that may be examined in order to determine whether the agent or (foreign) principal should bare the liability.
It is noteworthy that it is not being inferred or asserted that a foreign principal is an exception to the notion that an agent brings the (foreign) principal and third party together, but there is a presumption that he is incurring personal liability unless a contrary intention appears as dictated by the circumstances of the case. A person is liable for his engagements and also for his torts even though he is acting for another, unless he can show that by the law of agency, he is to be held to have expressly or impliedly negated his personal liability: Asafa Foods Factory Ltd v Alraine Nigeria Limited (2002) 12 NWLR (Pt. 781) 353.
The relationship between the foreign principal, agent and third party can be said to be a fiduciary relationship as it is based on trust laid on the agent by the foreign principal that the agent will not act fraudulently in his dealings with third party, in his (agent’s) designated country; while that of the foreign principal and a third party is indirect and their merger is the middleman (the agent) who creates the relationship between both parties.
Lastly, the agent’s relationship with a third party is also a direct fiduciary relationship, in view of the fact that the agent meets with the third party on a derived authority, conferred on him by the (foreign) principal to act on his behalf. A way forward for the foreign principal, agent and third party relationship to be business positive is if the agent is freed from liability even without any express agreement on privity of contract between the (foreign) principal and third party. All the agent needs do is to act within his derived authority and acquire legal rights for the principal in good faith.