DUTIES AND

RESPONSIBILITIES

1. Performance

Duties
of an
agent
towards
principal

An agent must use a proper ways to perform their

work. Their performance must be in acceptable
manners which is an agent must use a reasonable
diligent and skills.
The degree of skills that an agent required is usually
expected of a reasonable person under similar
circumtances. Usually.if the agent have a special
skills, the agent is expected to use it.
For example, those that accountant or attorney
possesses.

2. Notification

Duties
of an
agent
towards
principal

To inform the principal all matters regarding the

agency that come to his or her attention
Under the law of agency, notice to the agent is notice
to the principal.
For example, a business women hires an agent to sell
her women apparel. If the agent learns that the buyer
will be unable to pay, the agent must inform the
principal of this fact.
Another example, the manager (the agent) of an
grocery store is notified that one of the shelf is
damage and there is a risk that it will collapse. If the
managers fails to take a precaution step to fix it and a
customer is injured, the stores owner (the principal)
is liable for injury.

Duties
of an
agent
towards
principal

3. Loyalty
must act solely for the benefit of the principal
and not for her or his personal gain.
information that was gained regarding the agency
relationship should be kept confidential
If the information was disclosed during the agency
relationship or after its termination, it will be
considered as breach of loyalty

4. Obedience
An agent must fulfil all the act based on the principals
instruction.

Duties
of an
agent
towards
principal

exception where
an agent may
deviate from the
instruction
the instruction
was against the
law

emergency
situation and the
principal cannot
be consulted

For example, if there are situation that an agent must make a

move without principals consent and the failure of an agent to
act will causes the financial loss to the principal, an agent are
allowed to act.

 5. Accounting

Duties
of an
agent
towards
principal

The agent must keep for the principal an account

which have all the property, money received and the
expenses during the transaction on behalf of the
principal.
It is including the gift received from the third party in
connection with the agency.
For example, A is a salesperson to a firm. A have
been delivered the firms product and he received a
gift from the customer. The gift that he received was
belong to the firm not himself as it is two different
entities where the agent must maintain separate
accounts between the principals funds and the
agents personal funds.

Duties of
an agent
laid down
in
Contracts
Act 1950

Section 164 of the Contract Act 1950

To obey the principals instructions
Failure to follow the principals instruction will lead to
the breach of contract and the agent will be liable for
any loss that suffered by the principal.
For example, an auctioneer must obey his/her
principals instructions regarding the reserve price.

Duties of
an agent
laid down
in
Contracts
Act 1950

Turpin v Bilton [1843] 5 Man & G 455

The agent has been instructed by the Principal to get
the insurance for his vessel. However, the agent
failed to do so. The vessel lost and as a result the
Principal bare some loss.
Held : the agent is liable for breach of duty due to his
failure to obey the Principals instructions. Thus the
agent liable to pay compensation.

Duties of
an agent
laid down
in
Contracts
Act 1950

Bostock v Jardine (1865) 3 H. & C. 700.

The plaintiff instructed the defendant,cotton brokers,
to purchase for him 5 bales of cotton. The defendant,
being also employed by other principals, made a
contract on their own names for the purchase of the
300 bales, and having informed the plaintiff that they
had purchased 50 for him and paid them part of the
purchase money.
The court held that the agent was liable when he
bought more than he was directed to buy

Duties of
an agent
laid down
in
Contracts
Act 1950

However, the agent is not obliged to perform an act

that is contrary to statute or illegal at common
law
Cohen v Kittel [1889] 22 Q.B.D 680,
the principal instructed agent to place an illegal
betting.
Held: the agent is not liable for failing to place the bet
as it is an unlawful instruction

Duties of
an agent
laid down
in
Contracts
Act 1950

Section 165 of the Contract Act 1950

To exercise care and diligence in carrying out his
work and to use such skill as he possesses.
An agent have to conduct the business as much skill
as is generally possessed by persons engaged in
similar business unless the principal have told about
what kind of skills that he want.
An agent must give full effort in exercising care
and diligence in his work.
For example, if the agent is employed for professional
service, he must use all his skills & expertise that
usually required for a same professional man

Duties of
an agent
laid down
in
Contracts
Act 1950

Keppel v Wheeler [1927]1 KB 577

the D (agent) was employed by the P (Principal) to
sell his house. The first offer was accepted by the P
with a condition. A few days later a higher offer (2nd
offer) was made by X but this does not communicated
to P.
Then, the court held that the D liable to pay the
differences between 1st offer and 2nd offer as the
agent did not communicate to the plaintiff.

Duties of
an agent
laid down
in
Contracts
Act 1950

Section 166 of Contract Act 1950

to render proper accounts when required.
It is an agents duty to render all monies and
property of his principle as it was accepted on behalf
of the Principal. He must obey if he is demanded to
produce such accounts.
It is because it should mixed with the agents
property as it is the different entities.

Duties of
an agent
laid down
in
Contracts
Act 1950

Foley v. Hill, (1848) 2 HLC 28, 9 ER 1002

The appellant in 1829 opened a bank account with
the respondents who were bankers. Further deposits
were added in 1830 and 1831 interest was still added.
In 1838 the appellant brought proceedings against
the Respondant Bankers seeking recovery of both the
principle and interest.

Duties of
an agent
laid down
in
Contracts
Act 1950

Section 167 of Contract Act 1950

To communicate with the principal.
An agent must use all reasonable diligence in
communicating with his principal and in seeking to
obtain his instruction.
Based on the Section 142 of Contract Act, if he
fails to get further instruction, then he can use his
own discretion to act, in order to protect the interest
of his principal.

Duties of
an agent
laid down
in
Contracts
Act 1950

Section 168 of Contract Act 1950

States that he cannot sell his own shares to the
principal, unless he has earlier informed the principal
and obtained his consent.
The agent cannot make any secret profit out of
the performance of his duty such as bribe, secret
commission or financial advantage.
If the principal know about the profit, then the agent
can keep the profit.
However, if the profits are secret, then the principal
may repudiate the contract if it is disadvantageous to
him and the principal also can recover the amount of
secret profit from the agent (Section 169, Contracts
Act 1950)

Duties of
an agent
laid down
in
Contracts
Act 1950

Tan Kiong Hwa v. Andrew S.H. Chong [1974] 2

MLJ 188
The defendant was the managing director of house
agency company. The plaintiff has bought a flat from
that company. The plaintiff later instructed the
defendant as his agent to sell the flat for $45,000.
However the defendant sold the flat for higher price,
which is $54,000.
The difference of $9,000 was credited to the
company.
The court held that the plaintiff was entitled to
recover $9,000 from the defendant as the defendant
had breached his duty as an agent.

 The principal also may refuse to pay the agent his

commission

Duties of
an agent
laid down
in
Contracts
Act 1950

Andrews v. Ramsay and Co [1903] 2 KB 635

the principal successfully recovered both the
commission paid to the agent plus the secret
commission received by his agent from a third party.
In that case, the plaintiff directed the defendant to
sell property and agreed to pay him commission of 50
pounds. The defendant received 100 pounds from a
purchaser as deposit for the property. The defendant
paid 50 pounds to the plaintiff and kept the other 50
pounds in payment of his commission with the
plaintiffs knowledge. However the plaintiff learnt that
the defendant had also received another 20 pounds
as commission from the purchaser. He sued his agent
to recover this 20 pounds and also the 50 pounds he
had paid the defendant initially.
The court held that he could recover both of them.

Duties of
an agent
laid down
in
Contracts
Act 1950

Principal may also dismiss the agent for breach of

contract.
Wong Mun Wai vs Wong Tham Fatt & Anor (1987)
The principal instructed the agent to sell his share.
The agent had sold the share to his wife below the
market price. The principal sue thed the agent.
The court held that the agent had breached his duty
for letting his personal interest conflicts with his duty.

Duties of
an agent
laid down
in
Contracts
Act 1950

The principle also can sue both the agent and 3rd
party who gave the bribe and may claim damages for
any loss sustained.
Mahesan v. Malaysian Govt. Officers Co-operative
Housing Society Ltd [1978] 1 MLJ 149
The appellant was a director and secretary of the
respondent co-operative society. He brought land at a
price of $944,000 from the vendor who had earlier
paid $456,000 for it. The appellant knew of this fact
however he failed to inform the society. The society
discovered the fact only after the sale was done and
discovered the appellant had received $122,000 as
secret commission from the vendor.
Privy Council held that the respondent could recover
either bribe or the amount of the actual loss suffered
by it as a consequence of entering into the contract

 An agent has to pay to his principal all sums received

on his behalf.

Duties of
an agent
laid down
in
Contracts
Act 1950

Whatever amount received on behalf of the Principal,

the agent must paid to the principal.
However, section 171 of Contract Act
subject to the deduction specified in Section 170,
the agent is bound to pay his Principal all sum received
on his account.
Section 170 of Contract Act
Agent is entitled to deduct any sum from the
Principals money for the payment of which can be
any sum owed to the agent in respect of advances
made or expenses incurred by the agent in
conducting business. It also can be any commission
or remuneration payable to the agent

 Do not disclose any confidential information and documents

entrusted to him by his principal.

Duties of
an agent
laid down
in
Contracts
Act 1950

Section 143 of Contract Act,

The agent cannot delegate his authority to another agent (sub
agent). Maxim delegates non potest delegare which is mean a
delegate cannot delegate.
However, there are few exceptions which is it is okay if the principal
approves the delegation.
De Bussche v Alt (1878)
The principal appointed the agent in China to sell a ship. The agent
was unable to sell so he sought the principals approval to appoint
sub agent to sell the ship in Japan. The court held the agent is
allowed to appoint an agent in Japan as his principal has consented.
There are also another exception which is there is an assumption
from the conduct of the parties that the agent has a power to
delegate his authority and the delegation was allowed by the
custom or trade. Besides, if it is necessary to complete the
business, if it is in emergency situation or necessity or if it is
involves ministerial or clerical job, then the delegation was allowed.

Duties of
the
principal
to his
agent

1. Compensation
Section 172 of Contract Act
To pay the agent commission and other remuneration
when the duty is completed.
When they are already agreed to the amount of the
compensation, the principal are bound to pay it if the
agent has completed his duty.
The principal will owes the agent the customary
compensation agents services if there are no amount
is expressly agreed on.

Duties of
the
principal
to his
agent

Tang Chiok Sing v Lian Fatt Sawmill Co. [1976] 2

MLJ 241,
the court held that the agent is entitled to reasonable
remuneration even though the contract between his
principal and the party fails.
Section 173 of Contract Act - if agent is guilty of
misconduct, he is not entitled to any remuneration.

2.Reimbursement and Indemnification.

Duties of
the
principal
to his
agent

(Section 175 of Contract Act).

There are some circumstances where the principle
need to reimburse and indemnify the agent which is
when the agent suffered losses in performing his duty
Kyall & Evatt v. Lim Kim Keat (1928) SSLR
The Agent was hired to sell shares. The defendant
(Principal) failed to disclose that certain shares cannot
be obtained. Agent concluded a contract to sell
shares but he could not deliver and suffered loss. The
Agent claimed from the Principal the loss.
Held :agent was entitled to be indemnified for the loss
because the principals neglect of skill, the principal is
legally bound to make compensation to his agent in
respect of that injury

Section 176 of Contract Act

Duties of
the
principal
to his
agent

The agent also can claim the principal for

reimbursement and indemnification if he cause injury
to the 3rd party
Section 178 of Contract Act
The agent suffers injury due to principals negligence
or lack of skill
Section 177 of Contract Act
The principal doesnt need to indemnify the agent if
he does an act which is crime.
Solloway v McLaughlin [1938] AC 247
The court held that the agent cannot be indemnified
since there is fraud done by him.

Duties of
the
principal
to his
agent

3. Cooperation
Principal must cooperate and assist the agent to
perform his duties and the principal cannot hire
another agent to compete with the first agent.
For example, when the bakerys owner (the principal)
grands its dealer the right to sell its cake in Kedah,
the bakerys owner cannot grand another dealer to
sell its cake in Kedah also.

THE AUTHORITIES
OF
AN AGENT

An agents act is binding upon the Principal if the act is

done within the authority of the agent

THE
AUTHORITIE
S OF
AN AGENT

2 Types of
authority

Actual Authority

Apparent/Ostens
ible
Authority

THE
AUTHORITIE
S OF
AN AGENT
(ACTUAL
AUTHORITY)

express
authori
ty

authority expressly given by the

principal orally or in writing
For example, the letter of
appointment as agent stated that he
has power to order stationary for the
office not more than RM1000

implied
authori
ty

an authority implied from express

authority, custom or trade of the
business, circumtances of the case
and conduct of parties
For example, A is appointed as agent
for B to run branch in Kedah and the
principal told him to generate profit
through that branch. Hence,
consent is given to be deemed to A
to make contracts with third party

THE
AUTHORITIE
S OF
AN AGENT
(ACTUAL
AUTHORITY)

Watteau v Fenwick [1893] 1 QB 346

A pub owner named Humble appeared to own and
manage a pub. Humble in fact acted for an
undisclosed principal, when he ordered cigarettes
from the claimant, and failed to pay for them. Humble
was not authorised to purchase cigarettes by virtue of
his actual authority.
It was held that the principal is liable since the
restriction was not known to the third party.

THE
AUTHORITIE
S OF
AN AGENT
(APPARENT/
OSTENSIBL
E
AUTHORITY)

Apparent or ostensible authority is when the principal

represent to another person with whom the agent
deals that he has given power to the agent to act on
his behalf .
It is also known when the agent has the authority but
that authority has been terminated and the third
party does not known about that as he believe that
he still has authority to act.
There are few conditions before apparent authority
can bind the principal for any contracts entered into
by him with third party
1.

there must be a representation or holding out by

the principal

2. representation must be one of fact

3. third party must rely on that representation.

BREACH OF THE
AUTHORITY

BREACH
OF THE
AUTHORIT
Y

An agent who acts outside his authority or a person

who acts as if he has the authority to act as an agent
for another person is liable for breach of warranty
of authority.
In other words, , the agent is personally liable if a
third party is misled by the agents
misrepresentation of authority, however innocent.

Yonge v. Toynbee [1910]1 kb 215.

BREACH
OF THE
AUTHORIT
Y

The agents were held liable for damages even though

they had acted in good faith.
Where an agent acts in excess of his authority
and that part which is excess of authority is separable
from the rest, then the principal is bound by those
action within the agents authority but not the
rest.
The whole transaction is not binding on the
principal if the acts are inseparable, (section 180181).

BREACH
OF THE
AUTHORIT
Y

But this does not affect the right of the third party to
claim against the agent for breach of warranty of
authority.
An agent is not liable if his lack of authority is known
to the third party or if he expressly disclaims
authority or if the contract excludes his liability.

EFFECT OF
CONTRACT
ENTERED BY
AGENT

Named Principal

EFFECT OF
CONTRACT
ENTERED
BY AGENT

Principals name has been disclosed to 3rd party by

the agent. The 3rd party knows the name and identity
of the principal. The 3rd party also knows that the
agent is acting on behalf of the principal.
Section 183 of Contract Act 1950
the agent incurs no right or liability under the
contract as he is not a party to contract.
Section 179 of Contract Act 1950
The principal alone can be sue or be sued by the
third party provided the agent act within his authority
in making the contract

 The principal will be liable as the agency relationship

lawfully exists but there are four exception.

EFFECT OF
CONTRACT
ENTERED
BY AGENT

if the agent
agrees to the third
party that he will
personally liable
for the contract.

if the agent
execute the
agreement or
negotiable
instrument in his
own name.

if the agent
exceeds his
authority and the
principal does not
ratify.

if the according to
trade and custom
of the business,
the agent will be
liable

Chin Yuen Tung v Bep Aketik [1978]1 MLJ 211

EFFECT OF
CONTRACT
ENTERED
BY AGENT

R (3rd party) were requested by the A to make a

valuation report on piece of land in Swak and to send
a copy of the report to a N.York company (Principal).
In the previous dealing, the R were paid by A. Now,
when the R claimed payment, the A refused and
disclosed that they were merely acting as an oversea
agent for the N.Y company.
It was held: the A should make the payment. The A
had represented that the terms of payment would be
the same as earlier dealings. The agents agrees to
accept and make himself personally liable upon the
contract

Disclosed Principal

EFFECT OF
CONTRACT
ENTERED
BY AGENT

The principals existence is disclosed but the identity

is unknown to the 3rd party. He only knew the person
whom he is dealing with is acting as an agent. The
3rd party does not know the name and identity of the
Principal. The agent will not liable for the contract.
However, in a certain situations, the agent will be
liable such as if the agent enters into a transaction
with the third party residing abroad(oversea).
Another situation is when the principal cannot be
sued. For example, the principal was a minor,
unsound mind and sovereign.

Section 183(b) of Contract Act 1950

EFFECT OF
CONTRACT
ENTERED
BY AGENT

agent incurs liability when the agent did not disclose

the name of the principal.
Section 186 of Contract Act 1950
the agent is personally liable, a person dealing with
him may hold either him or his principal, or both of
them liable.

Pernas Trading Sdn Bhd v. Persatuan Peladang

Bakti Melaka [1979] 2 MLJ 109

EFFECT OF
CONTRACT
ENTERED
BY AGENT

chemicals and fertilizers have been ordered by the

respondents for themselves rather than on behalf of a
principal. When the appellants sued for the balance of
the price, the respondents denied liability on the
ground that they were ordered for another party (for
principal).
The court held that therespondents were liable as
they contracted in such a form to make themselves
personally liable.

 Undisclosed Principal

EFFECT OF
CONTRACT
ENTERED
BY AGENT

The principals existence and identity is unknown to

the 3rd party. The 3rd party acts under the impression
that he is contracting with the A personally. Only after
the contract has been signed, the 3rd part comes to
know that the person whom he is dealing with was
actually acting on behalf of the principal.
The third party has a right to sue either the agent or
the principal or both of them. He also can rescind the
contract if he can prove that he would not enter into
the a contract if he has been informed earlier if the
principal discloses his identity before the completion
of contract.
The principal also have right to enforce the contract
against the third party because the contract has been
entered into on his behalf.
The agent can sue the third party because he is the
party to the contract

TERMINATION OF
AGENCY

 By Principal

TERMINATIO
N OF
AGENCY

The authority of the agent may be revoke at any time

by the principle before it has been exercised to bind
the principle (Section 156 of Contract Act).
Such revocation may bring liability to the principal for
any damages created or suffered.
Generally, the principal can revoke the agents
authority where the principal gives notice of
termination (a reasonable length of notice) to the
agent or the agent is default by the agency

 However, the principal have certain rights

qualification to revoke the agents authority.

TERMINATIO
N OF
AGENCY

For example, when the agent has an authority

coupled with an interest.
SMART v SANDERS (1848) 5 CB 895
The court held that a principal could not revoke the
agents authority where the principal had consigned
goods to the agent for the purpose of sale and the
agent had loaned money to the principal on the
security of the good consigned for sale

By agent
An agent is entitled to renounce his power by refusing to act or
by notifying the principal that he will not act for the principal.
The agency relationship can be terminate by the agent in two
situation which is:

TERMINATIO
N OF
AGENCY

1.

indefinite duration (not fixed) where the agent can terminate

the agency by giving a reasonable notice of termination to the
principle based on Section 159 of Contracts Act. The agent is
no longer liable to the principle and he or she can claim
reimbursement for all his or her services as well as expenses
incurred up to the date of the termination of his or her agency
once the reasonable notice to terminate the agency is given to
the principle.

2. definite duration (fixed) where the agent will bear the liability
to the principle for damages and losses cause by the
premature termination of agency if he or she terminate the
agency before the expiry of the period without just or sufficient
cause.

Sohrabji v Oriental Security Assurance Co (1946)

AIR 1946.

TERMINATIO
N OF
AGENCY

In this case the court held that 3 and 1/2 months was
insufficient to properly terminate the agency
relationship, which has lasted for almost 50 years.
Therefore, an agency of a long standing requires a
longer period of notice of termination which is 2 years
notice is reasonable notice for the cases of Sohrabji v
Oriental Security Assurance Co.
Syarikat Jaya v Star Publication (M) Bhd (1990) 1
MLJ 31
held : the 6 month notice is reasonable in terminating
a relationship of sole agency. Meaning, the notice
given to principal shall have a reasonable period of
tenure as agency.

TERMINATIO
N OF
AGENCY

By the operation of law

Section 154 states that an agency is terminated when
the business of agency has completed. It simply
means that agency is terminated when the
transaction that has been undertaken is performed.

 The agency relation may also revoke by the operation

of law based on the following circumtances.
Upon the death of the principal or the agent

TERMINATIO
N OF
AGENCY

As a general rule,agency may comes to the end if

either the principal of agent dies.
Blades v Free and Pool v Pool.
An agency which is terminated by the death of the
principal is effective only when the agent has realise
about the principles death. All the agent transaction
is valid if it is done after the principles death if he or
she doesnt realise about it Section 161, Contract
Act.

 There is an exception to this general rule where the

agent has an interest in the property which form the
subject matter of the agency.

TERMINATIO
N OF
AGENCY

In such a case, when the principle dies, the agent

may maintain to exercise the authority and if the
agent dies, the authority will be passed to the agents
personal representative.
Section 162 of the Contracts Act provide that the
agent must take all reasonable steps to protect and
preserve the interests entrusted to him when the
principle dies or become insane.

When either the principle or agent become insane

TERMINATIO
N OF
AGENCY

The insanity will also terminates the agency as they

does not have a capacity to enter into a valid contract
and cannot appointed as an agent or act as one.
Thus, the agency will be terminated by such insanity
Whereas , when the principle becomes insane, the
agent is bound to take the responsible steps to
protect and preserve his principles interest.

The expiry of the fixed period in the contract of

agency.

TERMINATIO
N OF
AGENCY

At times contract of agency may get formed for a

particular period. In such a case after expiry of that
agreed period, termination of agency takes place
regardless of whether the business or such
transaction has been completed or not.
When the principle or agent becomes insolvent or is
made a bankrupt
Upon the insolvency, a persons rights and liabilities
are vested in the Office Assignee and therefore the
agency relationship ceases.

When the contract act of agency has been performed

TERMINATIO
N OF
AGENCY

The agency agreement was entered into for a

particular objective or to do a particular venture. In
such a case, termination of agency takes place after
completion of that venture.
Section 154 of Contract Act provide the agency
comes to termination when an agency is created for
single specific transaction and the transaction is
completed.