What agency means
Agency is one person standing in for another with the power to commit them.
The principal is the person on whose behalf the agent acts. The agent is the one doing the acting. When the agent contracts within their authority, the contract is between the principal and the third party, and the agent generally drops out of it.
That is what makes agency powerful and dangerous at once. A business is bound by what its agents do, including things it did not specifically authorise, if the third party reasonably believed the agent had the authority.
Agency arises in several ways. By agreement, which is the usual route. By ratification, where the principal adopts an unauthorised act after the fact. By necessity, in narrow emergency situations. And by estoppel, where the principal held somebody out as their agent and a third party relied on it.
How it is used
Agency is everywhere in commercial life, often without the word being used.
An estate agent marketing a property. A sales representative taking orders. A clearing agent handling imports. A broker placing insurance. A recruitment agent. A distributor, depending on how the arrangement is structured. An employee signing a purchase order.
The two kinds of authority decide most disputes. Actual authority is what the principal actually gave the agent, expressly or by implication. Apparent authority is what a third party could reasonably conclude the agent had, from the principal's conduct or the agent's position. A principal who tells an agent privately not to exceed five million naira, but lets them hold out as the head of purchasing, may still be bound by a ten million naira order.
An agency agreement should therefore state the scope of authority, whether it is exclusive, the territory, the commission and when it is earned, the duration and how it ends, expenses, and the agent's reporting obligations.
Key features
- The agent acts on behalf of the principal and can bind them
- Actual authority is what was given; apparent authority is what a third party could reasonably infer
- An agent owes duties of loyalty, care, obedience and accounting
- An agent must not make a secret profit or act where they have a conflict
- A principal can ratify an unauthorised act and become bound by it
- Commission terms and when commission is earned should be expressly agreed
How this works in Nigeria
Estate agency is where most Nigerians meet agency law, and where most agency disputes arise.
The recurring questions are the same. Was the agent actually instructed by the owner. Is the commission earned on introduction, on agreement, or on completion. Was the agent entitled to receive money on the owner's behalf. Can the owner deal directly with a buyer the agent introduced and avoid the commission.
None of those has a satisfactory answer without a written agency agreement, and Nigerian practice is overwhelmingly verbal. Nigerian courts have addressed the point in the context of agency commissions, and the pattern is consistent: the party with the written appointment wins.
Secret profits are the other Nigerian flashpoint. An agent who buys from a seller at one price and presents a higher price to their principal, keeping the difference, is in breach of the core duty of an agent, and the principal can recover the profit and terminate.
For buyers and tenants, the practical protection is to ask an agent to show written authority from the owner before paying anything. Paying an agent who was never instructed is one of the most common Nigerian property losses.
Agent vs employee vs independent contractor
Three roles that overlap and carry different consequences.
An agent has the power to bind the principal in dealings with third parties. That is the defining feature. An agent may also be an employee or a contractor, but the agency is about authority.
An employee works under the employer's control, is on the payroll, has PAYE deducted, and brings the employer vicarious liability for what they do at work. Most employees are also agents to some degree.
An independent contractor provides services on their own account, controls how the work is done, invoices for it, and does not usually bind the client to third parties.
The distinction matters for tax, for liability and for who is bound by what. A business that treats a commission based salesperson as a contractor may still be bound by the contracts they sign, because agency depends on authority rather than on employment status.
Limits and risks
An agent acting outside their authority does not bind the principal, unless apparent authority or ratification applies, and the third party's remedy is then against the agent personally rather than the principal.
Apparent authority also cuts against principals who are careless. Failing to withdraw a former agent's business cards, email address or letterhead can leave a principal bound long after the relationship ended.
Commission disputes are endemic because entitlement is so often undefined. An agent who introduced a buyer years earlier may claim commission on a sale they had nothing to do with, and without a written term nobody can say they are wrong.
And an undisclosed principal complicates matters further. Where an agent contracts without revealing they are acting for somebody else, the third party may have rights against both.
Worth knowing
Put the commission trigger in writing: introduction, agreement, or completion. Nigerian agency disputes are almost never about whether commission was promised. They are about when it was earned, and that is one sentence nobody writes down.
Questions people ask
What is agency in law?
A relationship where one person, the agent, acts on behalf of another, the principal, with power to bind them in dealings with third parties. Contracts made within the agent's authority are between the principal and the third party.
What is the difference between actual and apparent authority?
Actual authority is what the principal actually gave the agent. Apparent authority is what a third party could reasonably conclude from the principal's conduct or the agent's position. A principal can be bound by apparent authority even where they privately restricted the agent.
What duties does an agent owe?
To act within their authority, to follow lawful instructions, to act with reasonable care, to avoid conflicts of interest, not to make a secret profit, and to account for money and property received on the principal's behalf.
When is an estate agent entitled to commission?
When the trigger agreed between the parties occurs, which may be introduction, agreement of terms, or completion. Without a written agency agreement, this is the single most disputed question in Nigerian property transactions.
Can I deal directly with a buyer my agent introduced?
It depends on the agency agreement. Where the agreement provides for commission on introduction, going around the agent will not avoid it. Where nothing is written, expect a dispute.
How do I avoid paying an agent who has no authority?
Ask for written authority from the owner before paying anything, and pay the owner rather than the agent unless the agent is expressly authorised to receive money. Paying an uninstructed agent is a common and irrecoverable Nigerian property loss.