Creating Agency by Estoppel

A person cannot be bound by a contract made on his behalf without his authority. However, if he by his words and conduct allows a third party to believe that that particular person is his agent even when he is not, and the third party relies on it to the detriment of the third party, he (principal) will be estopped or precluded from denying the existence of that person’s authority to act on his behalf.

In LUKAN V OGUNNUSI (1972)5 S.C. 40, the Supreme Court of Nigeria affirmed this when it stated that:

“When a person behaves in such a way as to lead another person to believe that he has authorized a third person to act on his behalf and that other person in such belief, enters into transaction with the third person within the scope of such ostensible authority, the first mentioned person would be estopped from denying the fact  of  the first person’s agency. It would be immaterial whether the ostensible agent had no authority whatever in fact. It  would also not matter whether the ostensible agent acted  in excess of his usual authority”.

Agency by estoppel is based on the principle of “holding out” by the principal to the third person or upon the “apparent” or “ostensible” authority of the agent.

Thus, in DIDIGUN V.R.T. BRISCOE LTD (SUPRA) OMOTESHO, J. emphasizing this element of estoppel stated that:

“In law ostensible authority gives rise to agency by estoppel. Ostensible authority is based on the doctrine of “holding out””…. The holding out may be by acts of the principal. For example, by allowing the agent to hold himself out as having authority. An important factor however, is that there must be a holding out by the principal, some acts of the principal which are capable of leading another to believe that the ostensible agent has authority”.

The classical, judicial statement of the doctrine of  agency by estoppel was made in SAUL RACCAH V STANDARD COMPANY OF NIGERIA LTD (1938) 4 W.A.C.A 162. The court observed as follows:

“…. where any person by word or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of such other person with respect to anyone dealing with him as an agent on the faith of such representation,  to  the same extent as if such other person had the authority, he was so represented to have”.

It is therefore possible, from the above illustrating and  judicial authorities, to proffer a broader definition of the term “estoppel” which would eliminate the need for the secondary category of agency liability based on apparent authority. In some ways, the two  categories, (ostensible and apparent authorities) seem to cover the same area. That is, that the principal has done something or has failed to do  something  on which a reasonable third party relies upon  as granting  authority on the agent to contract on behalf of the principal. In those circumstances it is right to hold the principal bound and responsible for any resulting contract with the third party. Nevertheless, there is still reason for considering them distinctly. Some courts have distinguished them and secondly apparent authority as opposed to ostensible authority generally describes the situation in which the principal has been more active in causing his own liability.

ESSENTIAL ELEMEN TS OF AGENCY BY ESTOPPEL

a.         Representation

For a successful plea of agency by estoppel, a party must show some statement or conduct by the principal amounting to a representation that the supposed agent has the authority he has been represented to have.

In ADENIJI V JADESIMI (1976) 3 Pt. 1 OYO SHC. 142 at page 145,

Agbaje J., In this respect pointed out that:

“Where, as in this case, the appellant did not have  contract with the respondent in so far as the transaction, the subject matter for this action are concerned before the transaction was concluded between her and the first defendant it is difficult for one to say that the appellant  had by words or conduct represented or permitted to be represent to the respondent that the first defendant had authority to act on his behalf in those transaction.”

In PRESIDENT CLOTHING & CO. LTD V JOSEPH ANYANWU

(1975) 1 CCHCJ 1, a Lagos High Court held that a representation in order to amount to ostensible authority must

i)          be made by word or conduct or acts of a general nature;

ii)         be made by the principal or by sources authorized to act for him;

iii)        representation of fact.

In COLONIAL BANK AND ANOR.V JOHN CANDY AND

ANOR(1890) 15 A.C .267 , the English court of appeal held that for a statement or conduct to amount to a representation. It must be clear and unambiguous.

b.        Reliance on Representation

The party who raise the issue of estoppel must show not only that a representation was made to him but in actual fact he acted upon it. If however he did not act at all on the faith of the representation, no agency of estoppel has been created.

In FARGUHARSON BROTHERS & Co. V KING &Co.(1902)

A.C.325, Lindley L.J. said that: “The holding out must be to the particular individual who says he relied on it, or under such circumstances of publicity as to justify the inference that he knew of it and acted upon it.”

c.         Alteration of Position

For a successful plea of estoppel by representation, the claimant must show that he altered his position consequent upon the representation and to his detriment.

Therefore, if he has not altered his position at all, or has done so but has not suffered any loss or detriment thereby, or has done so but not on the faith of the representation, there is no valid agency by estoppel. The position of the law on this issue is that for a  representation  to operate as an estoppel, it must be “the proximate cause of the loss” suffered by the third party.

Generally, a party seeking the aid of estoppel must himself have acted honesty and without knowledge that the supposed agent had no authority or that he had exceeded hit authority, if that be the case. This is based on the fact that estoppel is an equitable remedy and he who comes to equity must do so with clean hands and must have acted without blemish

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