Who is Mercantile Agent
Introduction
Commerce thrives on trust, representation, and contractual obligations. In today’s fast-paced global market, individuals and companies rarely conduct every aspect of a transaction personally. Instead, they rely on professionals to act on their behalf. One such commercial intermediary is the “mercantile agent”.
The role of the mercantile agent is crucial in both domestic and international trade. These agents are empowered to buy, sell, consign, or otherwise deal with goods in their principal’s name. In Nigeria, their activities are governed by law, primarily the Sale of Goods Act, common law principles, and commercial practice.
This article explores in depth: Who is a mercantile agent? What are their duties, rights, powers, limitations, and relevance in modern commerce, particularly in Nigeria?
Definition of a Mercantile Agent
A mercantile agent, also known as a commercial agent, is defined under Section 2 of the Sale of Goods Act 1893 (applicable in Nigeria) as:
“A mercantile agent having in the customary course of his business, as such agent, authority either to sell goods, or to consign goods for sale, or to buy goods, or to raise money on the security of goods.”
In simpler terms, a mercantile agent is a person who acts on behalf of another (the principal) in commercial transactions involving buying, selling, consigning, or pledging goods.
Key Characteristics of a Mercantile Agent
Acts in the Ordinary Course of Business
The person must act in a commercial context—not merely as a personal helper or informal messenger.
Acts on Behalf of a Principal
The agent does not own the goods but acts for the owner (the principal).
Deals in Goods
Typically involves movable property such as commodities, machinery, vehicles, etc.
Has Express or Implied Authority
Authority may be granted in writing or inferred from behavior or trade custom.
Examples of Mercantile Agents
Commission Agents
Auctioneers
Consignees
Brokers
Factors
Del Credere Agents
Shipping and Clearing Agents
Legal Framework Governing Mercantile Agents in Nigeria
1. Sale of Goods Act (1893)
Still applicable in many Nigerian states. Key provisions include:
Section 2 – Definition
Section 21-25 – Protection of third parties dealing in good faith with mercantile agents
2. Law of Agency (Common Law)
Recognizes relationships based on:
Consent
Control
Fiduciary duties
3. Contract Law Principles
Applies to transactions between principal, agent, and third parties.
Functions of a Mercantile Agent
1. Sale of Goods
Sells the principal’s goods to third parties.
May negotiate terms, receive payments, and issue receipts.
2. Purchase of Goods
Buys goods on behalf of the principal.
Ensures goods conform to contractual terms.
3. Consignment and Storage
Takes goods from the principal to deliver to a third party.
May store goods in warehouses pending sale or delivery.
4. Pledging Goods
Uses goods to obtain loans or credit on behalf of the principal.
5. Representing Principal in Negotiations
Binds the principal in contracts with third parties.
May act with wide or limited authority.
Duties of a Mercantile Agent
1. Duty of Care and Skill
Must act with reasonable competence and diligence in handling the principal’s goods and affairs.
2. Duty of Obedience
Must follow lawful instructions given by the principal. Unauthorized acts may make the agent personally liable.
3. Duty of Good Faith
Must act honestly and not for personal gain or conflict of interest.
4. Duty to Account
Must keep proper records, provide statements of account, and remit proceeds to the principal.
5. Duty Not to Delegate
Should not delegate authority unless permitted under the contract or custom.
Rights of a Mercantile Agent
1. Right to Commission
Entitled to payment for services rendered, usually based on a percentage of the transaction value.
2. Right of Lien
May retain possession of the principal’s goods until payment or reimbursement is made.
3. Right to Indemnity
If the agent incurs losses or expenses while acting lawfully, they may be indemnified by the principal.
4. Right to Retain Goods
Until fees, commission, and legitimate expenses are settled.
Powers of a Mercantile Agent
A mercantile agent, by virtue of their role, may:
Enter binding contracts for sale or purchase
Transfer possession (and in some cases, ownership) of goods
Negotiate prices and payment terms
Pledge goods to third parties
Important Note: These powers must fall within the scope of authority—either express, implied, or apparent.
Liability of Mercantile Agents
1. Liability to Principal
Breach of duty
Unauthorized acts
Negligence or fraud
2. Liability to Third Parties
Misrepresentation
Acting outside authority
Conversion (misuse of goods)
Protection of Third Parties Dealing with Mercantile Agents
Sections 21 to 25 of the Sale of Goods Act protect innocent third parties who deal with mercantile agents in good faith and without knowledge of limitations.
Example:
If an agent pledges goods within their usual authority, the pledge is valid—even if the agent exceeded their private instructions—so long as the third party acted in good faith.
Termination of Authority of a Mercantile Agent
An agent’s authority may be terminated by:
Completion of the transaction
Revocation by the principal
Mutual agreement
Lapse of time
Death or insanity of either party
Bankruptcy
Upon termination, the agent must cease all representation and return all goods or funds belonging to the principal.
Mercantile Agent vs. Other Types of Agents
| Agent Type | Scope | Example |
|---|---|---|
| Mercantile Agent | Commercial transactions involving goods | Commission agent |
| General Agent | Represents in multiple transactions of a particular type | Company sales rep |
| Special Agent | Acts for a specific purpose or transaction only | Auctioneer |
| Broker | Finds buyers/sellers but does not possess goods | Real estate broker |
| Del Credere Agent | Guarantor of buyer’s creditworthiness | International trade intermediary |
Challenges in the Use of Mercantile Agents in Nigeria
1. Fraud and Abuse
Some mercantile agents act beyond authority or convert proceeds for personal use.
2. Poor Documentation
Many agents operate informally without written contracts, increasing disputes.
3. Lack of Regulation
There is limited licensing or monitoring of mercantile agents in Nigeria.
4. Lack of Awareness
Many principals are unaware of their rights or the duties of their agents.
Best Practices for Principals Using Mercantile Agents
Use written agreements defining scope, authority, and commission
Insist on regular reports and accounting
Use insurance or guarantees for high-value goods
Appoint agents of proven integrity and reputation
Register contracts and transactions where necessary
Case Law Illustrating Mercantile Agent Authority
Folashade v. Durojaiye (1980)
The Supreme Court emphasized that third parties are protected when they deal with agents acting within apparent authority, even if actual authority was exceeded.
Debs v. Sibecas Ltd (1954)
Held that a mercantile agent in possession of goods with the owner’s consent can bind the owner in sale or pledge to an innocent third party.
Role of Mercantile Agents in Modern Commerce
Mercantile agents are instrumental in:
Import/export operations
Retail and wholesale distribution
Clearing and forwarding
E-commerce logistics
Auctioning of vehicles, property, and machinery
They help reduce transaction costs, improve market access, and speed up delivery of goods.
Regulatory Oversight and Professionalism
Nigeria may consider:
Licensing and certifying mercantile agents
Creating a national register of commercial agents
Developing ethical codes of conduct
Promoting formal training for agents in business law, ethics, and negotiation
Conclusion
A mercantile agent is a vital link between buyers and sellers in the commercial chain. Empowered by law and business practice, they play a pivotal role in buying, selling, storing, consigning, and negotiating goods on behalf of principals.
Understanding their role—rights, duties, authority, and limitations—is essential for all parties involved in commercial transactions. In Nigeria, where informal trade and agency arrangements are widespread, strengthening legal awareness, contractual documentation, and regulatory oversight will help ensure efficiency, transparency, and trust in the use of mercantile agents.
Contact Us
At Chaman Law Firm, we assist businesses, importers, exporters, and entrepreneurs in drafting agency agreements, resolving commercial disputes, and navigating agency-related legal matters with confidence.
We draft, vet, and enforce commercial agency agreements to protect your business interests.
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