Can a Conditional Promissory Contract Create a Legally Binding Agency Relationship


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PRACTICE AREA: Commercial Law- Agency


The Respondent, as Claimant in the trial Court, instituted an action against the Appellants, claiming that he was entitled, as an agent of the Appellants, to be paid 10% commission on the sum of N40, 000, 000, being the price for which the property of the Appellants was sold.

The Appellants claimed otherwise, stating that they never appointed the Respondent as their agent but rather that the parties’ agreement was that the Respondent would be paid the 10% commission of the purchase price by the purchaser if he was able to find one. However, because it was a certain Mr. Okanle who brought the eventual purchaser Mr. Akinlaja, and not the Respondent, he was not entitled to the agreed 10% commission.

In its considered judgment, the High Court found that there existed an agency relationship between the parties, and awarded the sum of N3.7 million naira in favor of the Respondent.

Dissatisfied, the Appellants appealed to the Court of Appeal.


The appeal was determined upon consideration of the following issues:

  1. Whether having regards to the pleadings and the evidence before the lower Court, the respondent was an agent of the appellants?
  1. Whether the judgment of the lower Court is against the weight of the evidence adduced by the parties before the lower Court?


Learned Counsel to the Appellants contended that the trial Court erred when it held that there was an agency relationship between the Appellants and the Respondent after having agreed that there is no documentary evidence to establish principal and agent relationship between them before it then went on to award the judgment sum of N3.7 million to the Respondent as 10% of the purchase price.

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Learned Counsel submitted that the trial Court did not properly evaluate the totality of the evidence of the parties and their witnesses before arriving at the decision granting all the reliefs sought by the Respondent. That a cursory reading of the judgment vis-a-vis the evidence clearly shows that the judgment was not based on the evidence adduced before the trial Court and that the evidence of Respondent’s second and third witnesses were not credible.

On the other hand, Learned Counsel to the Respondent contended that the Respondent was the only person appointed by the 1st Appellant to find a purchaser of the property and so the assertion that there are other persons who have been appointed to do same cannot be so. That an agency relationship can be created unintentionally or unknowingly. It can be entered into by conduct or words spoken by the parties.


In the final analysis, the Court of Appeal allowed the appeal and set aside the decision of the High Court.


  1. COMMERCIAL LAW- AGENCY: Instance in which the Court will determine that an agency relationship does not exist between parties

“At this juncture, it is pertinent to refer to the pleadings of the parties, in order to ascertain whether an agency relationship was formed or came into being by the parties…Having due regard to the pleadings, the evidence adduced by the parties and the definition of the relationship of “Principal/Agent” in the case cited supra, in this judgment, it is clear that both parties were operating on different wavelengths. The appellants probably assumed that when the respondent was able to find a buyer that he would be paid 10% commission of the purchase price by the purchaser, whilst the respondent assumed it is the appellant who will pay the 10% commission if he found a buyer. However, the respondent failed to find a buyer but still expected the 1st appellant to pay him 10% commission on N40,000,000:00. There was no “consensus ad idem” between the 1st appellant and the respondent to constitute agency enforceable in law. What this means is that they didn’t agree as to a legally binding nature of their relationship. In short, they never intended to enter into a legally binding relationship of agency. The implication being that there was no consensus in the relationship of agency by both parties, which is a crucial determinant to valid formation of an agency relationship. To buttress or reinforce the adumbration supra, I refer to the case of Bilante vs NDIC (2011) 6 SCNJ P.481 @ 491, wherein, it was held that: “Contract is defined as an agreement between two or more persons which creates an obligation to do or not to do a particular thing. Its essentials are competent parties, subject matter, a legal consideration, mutuality of agreement and mutuality of obligation.” In Okugbule& Anor vs Oyagbola&Ors (1990) 4 NWLR Pt.147 P.723, the Court enunciated thus: “To constitute a binding contract between parties, there must be a meeting of the mind often referred to as consensus ad idem. The mutual consent relates to offer and acceptance. An offer is the expression by a party of readiness to contract on the terms specified by him which if accepted by the offeree gives rise to a binding contract. The offer matures to a contract where the offeree signifies a clear and unequivocal intention to accept the offer.” Nowhere in the pleadings and the evidence of the parties was any agreement made in regard to legally binding relationship. What was agreed to by the parties was a conditional promissory contract to wit: that if the respondent is able to find a buyer, he would be paid 10% commission by the buyer on the purchase price. The totality of the evidence before the Court on record is unequivocal that it was not the respondent that brought Mr. Akinlaja who bought the house, that Mr. Okanle did. The respondent having failed woefully to find a buyer for 1st appellant’s property, has no cause of action or locus standi to bring this action.” Per BDLIYA, J.C.A.

  1. COMMERCIAL LAW- AGENCY: Definition of agency; what determines the existence of agency relationship

“What determines agency has been stated in a litany of decisions of the Superior Courts. For instance, in Nigeria Progress Ltd vs North-East Line Corporation (1989) 3 NWLR Pt.107 P.68 @ 92, the apex Court espoused that: “Agency can be defined as the consensual relationship which arises when a person called the agent acts on behalf of another called the principal whereby the later becomes answerable for the lawful acts of the former, carried out within the scope of his authority as to affect the legal relations between the principal and a third party.” The Apex Court went further to enunciated thus: “A relation of agency is generally said to exist whenever one person called the ‘agent’ has authority to act on behalf of another called the ‘principal’ and consents to act. Whenever that relationship exists in any situation depends not on the precise terminology employed by the parties to describe their relationship, but on the true nature of the agreement, or the exact circumstances of the relationship between the alleged principal and agent. See Samson vs Artchison (1912) A-C 884 P.C; Atlantic Mutual Insurance Co. vs King (1919) 1 K.B 307 and Generally Halsbury’s Law of England 4th Edition paragraph 701 and fig.” The Court of Appeal, in the case of UTC (Nig) Plc vs Philips (2012) 6 NWLR Pt. 1295 P.140, had this to say: “A fiduciary relationship which exist between two persons, one of whom expressly or impliedly consents that the other should act on his behalf so as to affect his relationship with third parties and the other of whom similarly consents so to act or so act.” Per BDLIYA, J.C.A.


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