LEGAL PRINCIPLE: COMPANY LAW — Director — Agent of Company — Director Cannot Sue or Be Sued on Contract for Disclosed Principal
PRINCIPLE STATEMENT
A director is an agent of the company. Where a director enters into a contract in the name of or purporting to bind the company, it is the company (principal) which is liable, not the director.
RATIO DECIDENDI (SOURCE)
Per Niki Tobi, JSC, in Okolo & Anor v. UBN Ltd (2004) NLC-1611998(SC) at pp. 20–21; Paras D–A.
"A director of a company is, in the eyes of the law, an agent of the company for which he acts and the general principle of the law of principal and agent would apply. Thus, where a director enters into a contract in the name of or purporting to bind the company, it is the company, the principal, which is liable on it, not the director."
EXPLANATION / SCOPE
A director acts as agent of the company when contracting on its behalf. The company, as principal, is liable on the contract, not the director personally. The principle applies to company law and contract. The rule protects directors from personal liability for disclosed principal contracts. The company must be sued, not the director. Personal liability arises only in exceptional circumstances like fraud.
