Folake was appointed by Zenith Merchants to negotiate the purchase of a commercial property. During the transaction, the property vendor offered Folake an undisclosed financial commission of ₦500,000 to expedite the deal, which she accepted without informing her principal. Which of the following best describes the legal position of Zenith Merchants regarding this financial commission?
- Zenith Merchants is legally entitled to claim the ₦500,000 from Folake, as an agent must not make any secret profit from the agency.Answer
- BFolake is legally entitled to retain the money because it was a voluntary gift paid directly by a third party.
- CZenith Merchants can only dismiss Folake but has no legal right to demand the money received from the vendor.
- DThe transaction becomes void automatically, requiring both parties to return to their initial positions without financial recovery.
Answer
Zenith Merchants is legally entitled to claim the ₦500,000 from Folake, as an agent must not make any secret profit from the agency.
Under the Law of Agency, an agent owes a fiduciary duty of loyalty and honesty to the principal. This includes the duty not to make any secret profit or receive secret commissions. If an agent receives an undisclosed benefit from a third party while executing agency duties, the principal has the legal right to recover that money in full.
Step-by-Step Solution
Key Concept
Duty of Agent Not to Make Secret Profit