Apparent Authority, a Secret Commission and a Summary Dismissal
Halcyon Retail Limited's procurement manual requires board approval for any purchase above N5 million. Its Head of Procurement, Emeka, has never held a board resolution, but the company website and letterhead describe him as Head of Procurement authorised to commit the company. In March Emeka signed a N38 million supply contract with Verdant Supplies, a supplier that had dealt with Halcyon for six years and had checked the website before signing. The goods were delivered and accepted by Halcyon's warehouse. The board now refuses to pay, saying Emeka exceeded his limit. Separately, delivery driver Musa was dismissed without a hearing after a supervisor alleged he stole fuel; the police later withdrew the case. Sales agent Ify has admitted taking N400,000 from a customer to secure a supply contract at an inflated price. The company secretary must advise the board on all three matters.
1. Is Halcyon bound to pay Verdant Supplies for the goods?
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Test. A company is bound by a contract made by an officer with actual authority, or by one with apparent (ostensible) authority: a representation by the company that the officer has authority, reliance by the third party, and no notice of any restriction. Internal limits are not notice to outsiders, and the indoor management rule protects those who deal in good faith.
Application. Emeka's title, the website and the letterhead are a holding out by the company. Verdant had dealt with Halcyon for six years and checked the website. The procurement manual was internal and there is no evidence Verdant knew of the N5 million cap. Halcyon then accepted the goods, which is ratification by conduct.
Conclusion. Halcyon is bound to pay the N38 million. The board's remedy is internal: disciplinary action against Emeka for exceeding authority, and tighter controls over titles, letterheads and purchase orders. A refusal to pay would expose the company to a claim for the price, interest and costs, and would damage its standing with a long-standing supplier.
2. Assess the validity of Musa's summary dismissal and the remedies available to him.
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Framework. Musa's rights depend on his contract and, because a driver's work is manual, the Labour Act. An employer may terminate on notice or pay in lieu; summary dismissal is reserved for gross misconduct proved after a fair hearing.
Application. The only evidence was a supervisor's allegation; the police withdrew the case; Musa was not given any opportunity to answer. That breaches the audi alteram partem rule and, on these facts, makes the summary dismissal unjustified.
Conclusion. Musa can bring a claim in the National Industrial Court for wrongful dismissal and unfair labour practice. Reinstatement is exceptional; the usual remedy is salary in lieu of notice, accrued entitlements and damages. The board should review the disciplinary procedure, require written statements and a hearing, and record outcomes. If the theft allegation is pursued, it must be reinvestigated properly.
3. What are the consequences of Ify's secret commission and what should the board do?
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Duty. An agent must not make a secret profit from the agency; any commission taken from a customer belongs in equity to the principal.
Consequences. Halcyon may dismiss Ify summarily, recover the N400,000, refuse to pay her commission, and rescind the customer's contract if the customer was party to the arrangement; the inflated price may also be recoverable as a loss caused by the breach. A secret commission may amount to a criminal offence, and the customer's conduct should be reviewed under the company's anti-bribery policy.
Governance. The board should disclose the matter to the audit committee, review approval controls for price variations, rotate customer-facing staff, and require annual conflict-of-interest declarations. Doing nothing would itself be a governance failure.