Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
of
Agency
Denitions
Agency
- An
agency
is
the
relationship
which
subsists
between
the
principal
and
the
agent
who
has
been
authorized
to
the
act
for
him
or
represent
him
in
dealings
with
others.
-
s.135
CA50 - Thus,
if
A
(the
principal)
appoints
B
(the
agent)
to
perform
some
work
on
his
behalf,
an
agency
relationship
arises
between
them. - The
act
of
the
agent
done
within
the
scope
of
his
authority
will
become
binding
between
the
principal
and
the
third
party. - Section
135
CA50
a
person
employed
to
do
any
act
for
another
or
to
represent
another
in
dealings
with
third
persons
Principal
- The
principal
is
dened
as
the
person
for
whom
such
act
is
done
or
who
is
so
represented.
- Section
136
CA50 any
person
who
is
of
the
age
of
majority
and
of
sound
mind
may
employ
an
agent
* Section 137 CA50 As between the principal and the 3rd person, any person may become an agent. In the event of a breach the agent will not be liable, the principal himself will have to be personally responsible to the 3rd parties.
Creation
of
Agency
(J07
Q2b)
1.
Express
Appointment
s.139
and
s.140 - This
involves
the
actual
consent
of
the
principal
and
the
agent. - Agency
entails
a
grant
of
express
power
by
the
principal
to
the
agent. - May
be
in
in
a
written
or
oral
form. - Example
(EA
made
in
writing): a
Power
of
Attorney.
2.
Implied
Appointment
s.139
and
s.140 - Is
by
way
of
the
implied
consent
of
the
principal
and
the
agent. - This
is
derived
from
the
words
and
conduct
of
the
parties
in
the
way
they
have
acted
in
connection
to
one
another. Hely
Hutchinson
v
Brayhead
Ltd - The
law
can
infer
the
creation
of
an
agency
by
implication
when
a
person
by
his
words
or
conduct
holds
out
another
person
as
having
authority
to
act
for
him. Section
140
CA50
Illustration
to
s.140 A
owns
a
shop
in
Kajang
living
himself
in
KL,
and
visiting
the
shop
occasionally.
The
shop
is
managed
by
B,
and
he
is
in
the
habit
of
ordering
goods
from
C
in
the
name
of
A
for
the
purpose
of
the
shop
and
of
paying
for
them
out
of
As
funds
with
As
knowledge.
B
has
implied
authority
from
A
to
order
goods
from
C
in
the
name
of
A
for
the
purpose
of
the
shop.
Creation
of
Agency
(J07
Q2b)
3.
Ratication
s.149
to
s.153
(J09
Q5)
Agency
by
ratication
can
arise
in
any
one
of
the
following
situations: 1. An
agent
who
was
duly
appointed
has
exceeded
his
authority. 2.A
person
who
has
no
authority
to
act
for
the
principal
has
acted
as
if
he
has
the
authority. When
any
one
of
the
above
mentioned
situation
arise,
the
principal
can
either
reject
the
contract
or
accept
the
contract
so
made.
Section
149
CA50. Section
149
CA50 where
acts
are
done
by
one
person
on
behalf
of
another
but
without
his
knowledge
or
authority,
he
may
elect
to
ratify
or
to
disown
the
acts.
If
he
raties
them,
the
same
eects
will
follow
as
if
they
had
been
performed
by
his
authority. When
the
principal
accepts
and
conrms
such
a
contract,
the
acceptance
is
called
ratication.
Ratication
may
be
express
or
implied.
Section
150
CA50. Section
150
CA50 Ratication
may
be
expressed
or
may
be
implied
in
the
conduct
of
the
person
on
whose
behalf
the
acts
are
done.
Illustration
to
s.150 (a) A,
w/o
authority,
buys
goods
for
B.
Afterwards
B
sells
them
to
C
on
his
own
account;
Bs
conduct
implies
a
ratication
of
the
purchase
made
for
him
by
A. (b) A,
w/o
Bs
authority,
lends
Bs
money
to
C.
Afterwards
B
accepts
interest
on
the
money
from
C.
Bs
conduct
implies
a
ratication
of
the
loan. A
contract
can
only
be
ratied
under
the
following
circumstances:
1. The
act
or
contract
must
be
unauthorized.
Brook
v
Hook 2.The
unauthorized
act
must
not
be
unlawful.
Thus,
void
or
illegal
contracts
cannot
be
ratied. 3.The
agent
must
at
the
time
of
the
contract,
expressly
act
as
agent
for
the
principal
-
Section
149
CA50.
He
must
not
allow
the
3rd
party
to
think
that
he
is
the
principal.
Keighley
Maxsted
&
Co
v
Durant 4.The
agent
must
have
a
principal,
who
is
in
actual
existence
or
capable
of
being
ascertained,
when
the
contract
is
made. Kelner
v
Baxter
(a
contract
to
buy
a
hotel
made
by
an
agent
on
behalf
of
a
co.
which
was
about
to
be
formed,
could
not
be
ratied
by
the
co.
since
it
did
not
exist
at
that
time.
The
agent
was
therefore
held
liable
for
the
contract
unless
the
3rd
party
agreed
to
release
him)
However,
this
rule
does
not
apply
to
pre-incorporation
contracts
in
Malaysia
as
s.35(2)
CA65
allows
companies
to
ratify
pre-incorporation
contracts
after
they
have
been
incorporated. 5.The
principal
must
have
contractual
capacity
at
the
time
when
the
contract
is
being
made
and
at
the
time
of
ratication.
6.The
principal
must
have
full
knowledge
of
all
material
facts.
Section
151
CA50
states
that
no
valid
ratication
can
be
made
by
a
person
whose
knowledge
of
the
facts
is
materially
defective. 7.The
principal
must
ratify
the
whole
act
or
contract.
He
cannot
ratify
one
part
and
reject
another
part.
If
he
does
so
he
is
deemed
to
have
ratied
the
whole
transaction
-
Section
152
CA50
8.The
ratication
must
be
made
within
a
reasonable
time.
Metropolitan
Asylum
Board
v
Kingham
&
Sons 9.The
ratication
must
not
injure
a
3rd
party,
i.e.
it
must
not
subject
the
3rd
party
to
damages
or
terminate
his
right
or
interest
-
Section
153
CA50
11
-
3
Teh
Joo
Ling
All
rights
reserved
Creation
of
Agency
(J07
Q2b)
4.
Necessity
s.142
(J04
Q4)
- An agency of necessity may arise as a result of an emergency or urgency of the situation. - In such an event the agent may do all such things as are necessary for the prevention of loss to the principal. Section 142 CA50 An agent has authority in an emergency to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances. - An agency by necessity will arise if the following th conditions are met. 1. It must be impossible to obtain the principals instruction. If the agent had failed to obtain the principals instructions when he could have obtained them an agency by necessity will not arise. Springer v Great Western Railway Company (Held - they had no authority to do so. They could have contacted the plaintis and had not done so)
2.The agents action must be necessary in order to prevent loss to the principal. Where, for example, the agent sells o the goods under his charge because the goods are rotting, an agency by necessity will arise, as the action is taken urgently to prevent further loss to the principal. However, if the goods are sold merely because they are an inconvenience to the agent, no such agency will arise and the agent may be held liable to the principal. Munro v Wilmott & Co 3.The agent must have acted in good faith.
5.
Estoppel
s.190 - A
person
cannot
be
bound
by
a
contract
made
on
his
behalf
w/o
his
authority. - However, if
a
person
by
his
words
and
conduct
allows
a
3rd
party
to
believe
that
that
particular
person
(B)
was
his
agent
even
when
he
(B)
is
not,
and
the
3rd
party
relies
on
it
to
the
detriment
of
the
3rd
party,
he
will
be
estopped
from
denying
the
existence
of
that
persons
authority
to
act
on
his
behalf.
Section
190
CA50 when
an
agent
has,
w/o
authority,
done
acts
or
incurred
obligations
to
3rd
persons
on
behalf
of
his
principal,
the
principal
is
bound
by
those
acts
or
obligations
if
he
has
by
his
words
or
conduct
induced
such
3rd
persons
to
believe
that
those
acts
and
obligations
were
within
the
scope
of
the
agents
authority.
Illustration
to
s.190 (a) A
consigns
goods
to
B
for
sale,
and
gives
him
instructions
not
to
sell
under
a
xed
price.
C,
being
ignorant
of
Bs
instructions,
enters
into
a
contract
with
B
to
buy
the
goods
at
a
price
lower
than
the
reserved
price.
A
is
bound
by
the
contract.
(b) A
entrusts
B
with
negotiable
instruments
endorsed
in
blank.
B
sells
them
to
C
in
violation
of
private
orders
from
A.
The
sale
is
good.
Authority
of
an
Agent
(D05
Q3)
Actual
Authority
- Refers
to
the
authority
that
is
given
to
an
agent
by
agreement. - Comprises: 1. Express
authority;
and
- May
be
given
either
orally
or
in
writing Section
140
and
141
CA50 - For
example, if
the
principal
appoints
an
agent
with
express
instructions
to
buy
for
him
a
piece
of
land
at
a
price
not
exceeding
RM100k,
then
the
agents
actual
authority
is
to
purchase
such
land
for
any
price
not
exceeding
RM100k.
The
principal
will
be
bound
so
long
as
the
agent
has
acted
within
this
express
authority. 2. Implied
authority. - Actual
authority
also
includes
those
matters
that
may
be
properly
implied
in
the
circumstances.
- For
example, the
implied
authority
will
include
all
such
powers
as
are
proper
or
necessary
to
carry
out
the
express
instructions
of
the
principal.
Thus,
if
the
agent
has
to
obtain
the
services
of
a
valuer
in
order
to
assess
the
true
value
of
the
property,
the
principal
will
be
bound
to
pay
for
the
services
of
the
valuer
so
incurred. - Implied
authority
may
also
arise
from:
(objective
test) (i) the
circumstances
of
the
case (ii)the
custom
or
usage
of
trade;
or (iii)the
situation
or
conduct
of
the
parties. Watteau
v
Fenwick
Ostensible
Authority
(Apparent
Authority) - Refers
to
the
authority
which
the
agent
is
said
to
have
as
a
result
of
the
principals
words
or
conduct
which
leads
a
third
party
to
believe
that
the
agent
has
the
authority
to
act
on
behalf
of
the
principal. Section
190
CA50
- May
also
arise
where
the
agent
has
previously
acted
on
behalf
of
the
principal,
but
such
authority
had
been
terminated
by
the
principal,
w/o
notice
to
the
3rd
party.
- Where
ostensible
authority
arises,
the
agent
is
presumed
to
have
the
authority
that
the
principal
causes
him
to
appear
to
have.
The
element
of
estoppel
applies
as
the
principal
is
precluded
from
denying
that
the
agent
had
such
authority. Graphic
Lines
Pte
Ltd
v
Chai
Chee
Mein
and
Ors
- It
must
be
noted
that
where
the
3rd
party
knew
or
ought
to
have
known
that
the
agent
did
not
have
the
authority
in
question,
he
cannot
rely
on
apparent
authority
of
the
agent
to
enforce
the
transaction. Overbrook
Estates
v
Glencombe
Properties
Ltd
Based on the terms of the agreement Where the contract of agency is silent, the rights and duties are governed by s.164 to s.178 CA50
Duties
Agent
to
Principal
s.164
-
s.174
(J08
Q2)
Principal
to
Agent
s.175
-
s.178
(J05
Q6)
1. To obey the principals instructions - Section 164 CA50 OR In the absence of instructions from the principal, to act according to the customs which prevail, in doing business of the same kind, at the place where he carries on his work. Otherwise, he has to make good any loss sustained by the principal. 2. To exercise care and diligence in carrying out his work and to use such skill as he possesses - Section 165 CA50 The agent is expected to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business unless the principal has notice of his lack of skill. He will have to compensate the principal for the consequences of his own neglect, want of skill or misconduct. 3. To render proper accounts when required. An agent is under a duty to account for all the monies and property handled by him. Such accounts must be produced by the agent when demanded by the principal. Section 166 CA50 4. To communicate with the principal. In cases of diculty, the agent must use all reasonable diligence in communicating with and in seeking to obtain instructions from the principal - Section 167 CA50 5. Not to let his interest conict with his duty. The duty of an agent is to act solely for the benet of the principal and he cannot allow his own personal interest conict with this duty - Section 168 CA50 The principal also has the right to claim from the agent any benet received by him from the transaction. Section 169 CA50 6.To pay to his principal all sums received on his behalf. Section 171 CA50 However, an agent may retain or deduct from such sums received, advances made or expenses incurred by him in carrying out his duty, his commission and other remuneration payable to him for acting as agent. Section 170 CA50 Section 171 CA50 allows the agent to retain his principals property in his possession until his remuneration is paid. 7. Not make any secret prot out of the performance of his duty. Secret prot refers to a bribe or other nancial advantage obtained by the agent in the course of carrying out his duties, w/o the knowledge of the principal. When the principal discovers it, he may recover the secret prot from the agent. He may also repudiate the transaction concerned - ss.168 n 169
1. The principal is bound to indemnify the agent against the consequences of all lawful acts done by the agent within the scope of his authority - Section 175 CA50 Illustration (a) to s.175 B at kelang, under instructions from A, of Taiping, contracts with C to deliver certain goods to him. A does not send the goods to B and C sues B for breach of contract. B informs A of the suit, and A authorizes him to defend the suit, and is compelled to pay damages and costs and incurs expenses. A is liable to B for such damages, cost and expenses. 2.Where the principal has employed the agent to an act, and the agent does the act in good faith, the principal is liable to indemnify the agent against the consequences of that act, even if it causes an injury to the rights of 3rd persons. Illustration (b) to s.176 B, at the request of A, sells goods in the possession of A, but which A had no right to dispose of. B does not know this, and hands over the proceeds of the sale to A. Afterwards C, the true owner of the goods, sues B and recovers the value of the goods and costs. A is liable to indemnify B for what he has been compelled to pay to C and for his own expenses. 3.The principal must make compensation to his agent in respect of injury caused to the agent by the principals neglect or want of skill - Section 178 CA50 The section provides the following example: A employs B as a bricklayer in building a house, and puts up the scaolding himself. The scaolding is unskillfully put up, and B is in consequence hurt. A must make compensation to B. It must be noted, however, that where the principal employs the agent to do an act which is criminal, the principal is not liable to the agent, either upon an express or an implied promise to indemnify him against the consequences of that act. Thus if for example, the principal employes the agent to beat C and agrees to indemnify the agent against all the consequences of doing so, he (principal) will not be liable to so indemnify the agent if the agent has to pay damages to C for beating him. See: Illustration (a) of s.177.
(D04 Q4)
A person is said to be in a duciary position towards another when the relationship between the two is one of trust and condence. As such a person in a duciary position has to act honestly and in utmost good faith in all his dealings with the other and his undertakings on his behalf. He must in no circumstances make use of his position to obtain an advantage for himself w/o the principals consent.
There are several remedies available to a principal where the agent has breached his duciary duty and made a secret prot. These may be summarized as follows: 1. Repudiate the contract if it is disadvantageous to him. Section 168 CA50 If an agent deals on his own account in the business of the agency w/o rst obtaining the consent of the principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction if the case shows either that any material fact that has been dishonestly concealed from him by the agent or that the dealings of the agent have been disadvantageous to him. See also: illustration to s.168. 2. Recover the amount of secret prot from the agent. Section 169 cA50 If an agent w/o the knowledge of his principal, deals in the business of the agency on his own a/c instead of on a/c of his principal, the principal is entitled to claim from the agent any benet which may have resulted to him from the transaction. Tan Kiong Hwa v Andrew S.H. Chong 3. Refuse to pay the agent his commission or other remuneration, or recover any commission already paid. Andrews v Ramsay & Co 4.Sue the agent and the 3rd party giving the bribe, for damages for any loss he may have sustained through entering into the contract. Mahesan v Malaysian Government Ocers Co-operative Housing Society Ltd 5.Dismiss the agent for breach of duty. Boston Deep Sea Fishing & Ice Co v Ansell
Named
Principal
- is
a
principal
whose
identity
has
been
brought
to
the
knowledge
of
the
3rd
Party. - Thus,
the
3rd
party
would
be
fully
aware
of
who
exactly
the
agent
is
contracting
on
behalf
of.
Disclosed
Principal
(Unnamed
Principal) - is
a
principal
whose
existence
is
made
known
to
the
third
party
but
whose
identity
has
not
been
disclosed
to
the
3rd
party. - Thus,
the
3rd
party
would
know
that
the
agent
is
contracting
on
behalf
of
someone
else
but
does
not
know
how
exactly
that
principal
is.
Undisclosed
Principal
- is
a
principal
whose
existence
is
not
made
known
to
the
3rd
party. - Thus
the
3rd
party
would
be
contracting
with
the
agent
under
the
impression
that
he
is
contracting
personally
with
the
agent
and
that
there
is
no
3rd
party
involved. - It
is
only
subsequently
brought
to
the
knowledge
of
the
3rd
party
that
the
person
with
whom
he
was
contracting
was
in
fact
acting
on
behalf
of
someone
else.
General
Rule
- Where
an
agent
contracts
in
his
capacity
as
agent
for
his
principal,
and
he
acts
within
the
scope
of
his
authority,
he
incurs
no
rights
or
liabilities
under
the
contract. - The
contract
is
regarded
as
one
between
the
principal
and
the
3rd
party.
Only
the
principal
can
sue
or
be
sued
upon
it
-
Section
179
CA50
However,
there
are
several
exceptions
to
this
rule
and
an
agent
may
be
personally
liable
in
the
following
circumstances:
Exceptions
1. Where
the
agent
agrees
to
accept
personal
liability
or
contracts
in
such
a
way
as
to
make
himself
personally
liable. Ching
Yuen
Tung
v
BEP
Aketik
2. Where
the
agent
executes
a
deed
in
his
own
name
unless
he
has
a
power
of
attorney.
Mootiah
Chitty
v
Palianiappa
Chitty
3.Where
the
agent
signs
a
negotiable
instrument
in
his
own
name
w/o
making
it
clear
that
he
is
signing
it
only
as
an
agent. Kavena
Said
Meydin
v
Komarappa
Chitty
4.Where
the
agent
exceeds
his
authority
and
the
principal
has
not
ratied
the
action.
In
this
case
the
agent
will
be
personally
liable
for
breach
of
warrant
of
authority.
5.Where
a
custom
of
a
trade
makes
the
agent
liable. Further,
by
virtue
of
Section
183
CA50
provides
that
the
agent
is
presumed
to
have
agreed
to
accept
personal
liability
in
the
following
circumstances: (a) where
the
contract
is
made
by
an
agent
for
the
sale
of
purchase
of
goods
for
a
merchant
resident
abroad; (b) where
the
agent
does
not
disclose
the
name
of
his
principal;
and (c) where
the
principal,
though
disclosed,
cannot
be
sued.
(for
example,
the
principal
is
a
foreign
sovereign,
or
ambassador
or
a
minor
or
of
unsound
mind)
Termination
of
Agency
s.154
to
s.163
(J03
Q3)
An agency may be terminated by operation law in the following circumstances by virtue of Section 154 CA50: 1. By the performance of the contract of agency. For example, where the agency was created for a single specic transaction and the transaction has been performed. 2.By the expiration of the period xed or implied in the contract of agency. Where the duration of the agency is expressly xed or may be implied in the contract of trade, the agency is terminated when the period for which it was created to endure has expired, even if the business has not been completed, unless there are other terms to the contrary. 3.By the death of either the principal or agent. General rule (s.154) states that an agency is terminated when either the principal or the agent dies. However, Section 161 CA50 - the termination of the authority of an agent does not, so far as regards the agent, take eect before it becomes know to him, or, so far as regards 3rd persons, before it becomes known to them. Example - Illustration (c) to s.161 A directs B, his agent, to pay certain money to C. A dies and D takes out probate to his will. B, after As death, but before hearing of it, pays the money to C. The payment is good as against D, the executor. - Section 155 CA50 where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency is not terminated on death of either party. On the death of the principal, the agent may continue to exercise his authority and if the agent dies, his authority is exercisable by his personal representatives. - Section 162 CA50 when an agency is terminated by the principal dying or becoming of unsound mind, the agent must, on behalf of the representatives of the deceased principal, take all reasonable steps to protect and preserve the interests entrusted to him. 4.By principal or agent becoming of unsound mind. As persons of unsound mind are not competent to contract, an agency is terminated by reason of such unsoundness of mind. On the termination of the agency due to the unsoundness of mind of the principal, the agent must take all reasonable steps to protect and preserve the interest entrusted to him - Section 162 CA50 5.By the bankruptcy or insolvency of the principal. On a principal becoming insolvent or being declared a bankrupt, his rights and liabilities are vested in the ocial assignee thus putting an end to the agency. However, there is no specic statutory provision in respect of the bankruptcy of an agent an its eect on the agency. Under the general law, whether the bankruptcy of the agent terminates the agency depends on the agreement between the parties and the circumstances of the case. In the absence of specic terms in the contract of agency it would seem that bankruptcy of the agent also brings the agency to an end. 6.By the happening of an event which renders the agency unlawful. (beyond control) This falls within the doctrine of frustration applying to contracts generally. Stevenson v Aktiengesellschaf Fur Cartonnagen Industrie In addition to the above, it must be noted that by Section 163 Ca50, the termination of an agents authority also ends the authority of all sub agents appointed by him.