- Agency relationship
1.1 Millions of properties are put up for sale in this country everyday. These transactions usually start with the instructions given to an estate agent to look for prospective buyers but the scope of authority of estate agents can sometimes be in dispute. The piece discusses agency principles. First, the narrower one, which is whether or not an estate agent can conclude a contract of sale on behalf of the owner of property. Secondly, the broader one, which is whether or not the act of an agent outside the scope of his authority can bind the principal.
1.2 The relationship of agency and principal can arise in five ways. First, by express appointment, whether orally or in writing, including by power of attorney. Second, by ratification of the acts of the agent by the principal. Third, by virtue of the doctrine of estoppel. Fourth, by implication of law in the case of agency of necessity. Fifth, by presumption of law in the case of co-habitation. See, Vulcan Gases v Gesellshaft (2001).
2. Authority of agent to sell property
An agent who does not have exclusive legal right to a property by deed or power of attorney cannot sell it. In Fakayode v Adeniyi (2017), a husband, purporting to be her agent, sold property belonging to his wife without her authority. The Court of Appeal held that the sale was unlawful and the agent could not transfer legal title to the purchaser. Dongban-Mensem JCA said,
“It is the law that in an agency relationship, an agent who is to transfer title in a property on behalf of his principal must be appointed by deed. In other words, an agent appointed to execute a deed must be appointed by a deed (power of attorney). An agent cannot dispose of interest in land unless he is appointed in writing.”
- Incar v Bolex
3.1 In the case of Incar v Bolex, Incar (the company) wanted to dispose of some properties and engaged estate surveyors (the agents) to look for buyers. The agency in this case arose by express appointment in writing of the agents made by the principal. Their instructions were, “to look for prospective buyers for the properties and communicate same to the company.” Pursuant to their instructions the agents received an offer of N4 million from Bolex for the property. The agents without reverting to the company accepted the offer and collected a cheque for the sum of N4 million. The company rejected the amount and insisted on the sum of N4.2 million. Meanwhile, the company had received offers from other agents and eventually sold the property to another buyer (Trevi) for the sum of N4.25m. Therefore, Bolex commenced an action to enforce the contract of sale purportedly entered into between them and the company through the agent.
3.2 The main issue for determination was the correct interpretation of the letter of instruction given to the agent. The agent asserted that the letter gave them the authority to sell the property but the company countered that the letter did not confer any such power on the agent. The pertinent question was whether an estate agent who had authority to accept offers from prospective buyers also had the power conclude a binding contract on behalf of the owner of the property. Delivering the judgment of the Supreme Court, Ogundare JSC said,
“It is not in dispute that the Company commissioned the Firm (the agents) to look for buyers for its properties. Exhibit H (the letter of authority) is clear on this point and to that extent PW1’s Firm was and remained an agent of the Company as long as its properties mentioned in Exhibit H remained unsold and not withdrawn from sale. The Firm however is not, on the basis of Exhibit H, an agent of the Company for the purpose of concluding a contract of sale of the property in dispute. On the evidence before the Court, both oral and documentary, it could not reasonably be found that PW1’s Firm at anytime had general authority to sell the property in dispute without reference first to the Company for its acceptance of a particular offer. The Firm’s authority was to introduce buyers to the Company for the latter’s consideration to accept or not. The Firm had no authority to contract on the Company’s behalf. That being so the respondent (Bolex) had failed to prove that there was a valid contract of sale between it and the Company capable of being enforced by an order of specific performance.”
3.3 The above statement of the court also answers the broader agency principle, which is whether or not the act of an agent outside the scope of his authority can bind the principal. Clearly, since the agents acted beyond the scope of their authority their actions could not bind the company. As we stated earlier, one source of agency is the ratification of the acts of the agent by the principal so that even when an agents act outside the scope of his authority his acts may be ratified by the principal. In this case, the company (Incar) refused to ratify the sale of the property by the agents to Bolex.
3.4 Again in Akin-Taylor v Boja Investment & Development (2013), the Court of Appeal (per Iyizoba JCA) held that,
“It is now the accepted position under our law that an estate agent despite his style (name) is an independent person engaged on a commission basis to find and introduce a willing purchaser. He is not the agent of the vendor to contract on his behalf and his actions are only attributable to the vendor in a limited case as for example the making of representation as to the conditions of the property. An estate agent does not have actual, implied nor ostensibly apparent authority to ask for or receive a pre-contract deposit as agent of the vendor.”
- Agency commission
Mere introduction of the buyer and the seller is not sufficient to earn agency commission. An estate agent who seeks to earn commission on a property brokerage transaction must do more than introduce the buyer and seller but must go further and facilitate the conclusion of the sale before commission can be earned. In Ukah v Onyia (2016) the Court of Appeal held that,
“In order for a real estate agent to succeed in a claim for a commission, it is not enough to show that he introduced a purchaser, but he must also show that the introduction was an efficient cause in bringing about the sale of the property. See Mike Achoru v INEC (2010) LPELR-3588; NPMC v Alli Balogun (1961) LLR 69. The principle in Miller Son & Co. v Readford (1903) 19 TLR 575, Erabor v Incar (Nig) (1973) NCLR 273 is to the effect that the introduction by an agent to the purchaser of the property and its eventual purchase by the defendant at the price proposed by the estate agent made the consummation of the transaction possible and the agent cannot be ignored but should be compensated for his efforts.”
