QUESTION SAM V BENG

Sam was instructed by Beng to sell a price of land in Dungun. He was promised a
remuneration of RM2,000. While performing his duties, Sam incurred expenses amounting
to RM950. Sam also received RM3,000 as a deposit from the buyer of the land but it had not
been handed to Beng. After the completion of the transaction, Beng refused to make any
payment to Sam. Advice Sam.

Answer:

ISSUES

1. Whether Sam has breached the duty as an agent when he did not hand over the deposit
of RM3,000 to the principal, Beng, and keep it with him?
2. Whether Beng has breached the duties as a principal when he refused to pay the
payment of remuneration of RM2,000 and also for the cost incurred of RM950 by the
agent in performing his duties?
3. Whether Sam can sue the principal, Beng, when the principal refused to pay his
commission and expenses that he incurred during the performance of his duties?
4. Whether Sam can claim compensation for the loss that he suffered due to actions of his
principal, Beng?

LAW

Agency is a contractual relationship which subsists between a principal and an agent, who
has been authorized to act for the principal or represent him in dealings with others. Under
Section 135, Contracts Act 1950, an agent is defined as ‘a person employed to do any act for
another or to represent another in dealings with third person’. ‘The person for whom such
act is done, or who is represented, is called the “principal”’.

Contracts act 1950, provides statutory duties of a principal towards the agent. The
principal’s duties will include; not to wilfully prevent or hinder the agent from earning his
commission.

Second duty of a principal is to pay commission or other agreed remuneration. As stated

under section 172, payment for the performance of any act is not due to the agent until the
completion of the act. However, an agent who is guilty of misconduct in the business of the
agency is not entitled to any remuneration, section 173. The case is Andrews v Ramsay. The
held is the principal is not bound to pay the agent’s commission due to the fact that the
agent had received secret profit or a bribe when performing his duties as an agent.
 Last but not least, to indemnify and reimburse the agent for lawful acts done in the
exercise of his duties. As in section 175, the employer of an agent is bound to indemnify him
against the consequences of all lawful acts done by the agent in exercise of the authority
conferred upon him. If the agent incurs some liabilities or losses in the exercise of his duties,
the principal is under a duty to indemnify or reimburse the agent. In the case of Hichens,
Harrison, Woolston & Co v Jackson & Sons, the court held, the agent is entitled to damages
for anything incurred in the performance of his duties and to be reimbursed for whatever
the agent had advanced or lost. However, under section 177, if the principal employs the
agent to do an act which is criminal, the employer is not liable to the agent, to indemnify
him against the consequences of that act.

The duty to indemnify arises in the following circumstances, i.e:

Firstly, the agent has incurred losses in performance of his duties. In the case of Kyall &
Evatt v Lim Kim Keat, an executive of an estate (principal) had instructed the plaintiff (agent)
who were share brokers, to sell on her behalf, shares in a company registered in England.
This is in accordance with a Will. The brokers then made a contract to sell the shares to the
third party. Unfortunately, it was discovered that the Will had not been proved in England
and therefore the shares cannot be delivered. The brokers were then compelled to buy
other shares for substitution and consequently suffered a loss in doing so. Plaintiff sued the
executrix (principal) to secure an indemnity for loss. The court held, as the executrix
(principal) knew that the Will has not been proved in England and failed to disclose that fact
to the plaintiff (agent), the plaintiff were entitled to be indemnified for their loss.

Secondly, the agent causes injury to third party in the execution of his authority. As in
section 176, where one person employs another to do an act, the employer is liable to
indemnify the agent against the consequences of that act, though it causes an injury to the
rights of the third persons.

Lastly, the agent suffers injury during the course of his duties due to the principal’s
negligence. The principal must make compensation to his agent in respect of injury caused
to the agent by the principal’s neglect or want of skill, section 178.

APPLICATION

As we refer to the case, we may say that, Sam has not breached his duty as an agent
because he has the right to keep the deposit when his principal did not pay for his
remuneration and also the expenses that he had incurred during the performance of his
duties.
 But according to the point of the case, it is clearly stated that Beng as the principle has
totally breached his duties as a principal. As a principal, he must make the payment for
remuneration as he promised which is RM2,000 and also he should pay for the expenses
incurred which is RM950, by Sam in performing his duties.

In this case, Beng cannot refuse to make any payment to Sam for Sam has completed all
duties instructed by Beng. But if Beng did not pay Sam his commission and expenses that he
had incurred when performing his duties, then Sam may sue.

Clearly, we may say that, Sam may claim compensation for the loss that he suffered due to
the actions of Beng, breaching his duties as a principal.

CONCLUSION

As to conclude the case, a principal must abide to his duties as a principal towards the
agent. When a principal has breached his duties, then the agent may sue and claim for his
rights.
QUESTION SYED V HAZRUL

Syed appointed Hazrul as his agent. He instructed Hazrul to sell his shop house at Jalan
Setiawangsa. According to the agency agreement, the shop house should be sold at a price
of RM200,000 within a period of one year and six months. After the appointment, Hazrul
suffered a heart attack. He was not able to perform his duties as an agent. Advice Syed
whether he could terminate the services of Hazrul.

Answer:

ISSUE

1. Whether Syed can terminate the services of Hazrul to sell his shop house at Jalan
Setiawangsa for RM200,000 due to Hazrul suffering a heart attack after the
appointment?
2. Whether Hazrul can sue Syed for terminating his services to sell Syed’s shop house at
Jalan Setiawangsa for RM200,000 after the appointment?
3. Whether the contract is terminated due to incapacity of Hazrul to perform his duties?
4. Whether Hazrul can terminate the contract of agency due to his incapacity to perform
his duties after suffering a heart attack following his appointment?

LAW

Agency is a contractual relationship which subsists between a principal and an agent, who
has been authorized to act for the principal or represent him in dealings with others. Under
Section 135, Contracts Act 1950, an agent is defined as ‘a person employed to do any act for
another or to represent another in dealings with third person’. ‘The person for whom such
act is done, or who is represented, is called the “principal”’.

Agency termination may happen in two ways. Firstly, by operation of law.

Secondly, by the act of the parties which is between principal and agent. The principal and
the agent may terminate their agency relationship in three ways, which will include; by
unilateral renunciation by the agent.

Next, by unilateral revocation or termination by the principal. Under section 154, an

agency is terminated by the act of the principal revoking the agent’s authority. The principal
may revoke the authority given to his agent at any time before the agent has exercised the
authority, section 156. Based on section 160, the revocation may be expressed or implied in
the conduct of the principal or agent, respectively.
 However, in order to revoke the agent’s authority, reasonable notice must be given to the
agent, otherwise the agent is entitled to damages, section 159.

The case is Sohrabji v Oriental Security Assurance Co. The held is three and a half months’
notice was not adequate to properly terminate an agency which had lasted over 50 years. In
this circumstance, two years notice would have been a reasonable notice.

If the principal failed to give a reasonable notice of termination to the agent, the measure
of damages that the agent would be entitled to is the amount that the agent might have
earned under the contract of agency if he had not been prevented to continue his duty as an
agent.

One the other hand, an earlier termination for a fixed term agency where there is an
express or implied contract that the agency should be continued for any period of time, the
principal must make compensation to the agent, section 158. Thus, the earlier termination
might entitle the agent to claim for damages.

However, there are exceptions. In certain situations, the principal is prevented from
revoking the agent’s authority. The situations will include; under section 155, where the
agent himself has an interest in the property, which forms the subject matter of the agency,
the agency cannot be terminated to the prejudice of such interest.

In the case of Smart v Sanders, the factor, as in the agent, was sent with goods, to be sold
on behalf of the principal. The factor made advances to the principal for the security of the
goods. The court held, the agency cannot be terminated by the principal because the factor
(agent) has an interest in the goods, by paying the security of the goods. The case is Firth v
Firth. The held is the general authority of a factor, in whose hands goods were placed for
sale, is to sell at the best price which could reasonably be obtained. This authority could not
be revoked after the factor had made advances for the security of the goods to the ownder
and while these advances remained unpaid.

Second situation is the principal cannot revoke the authority given to his agent after the
authority has been partly exercised, section 157.

In the case of Read v Anderson, the principal instructed a turf commission agent to place
bets on his behalf. The agent placed the bets and lost. By custom, a turf commission agent
always bets in his own name and becomes solely responsible to person with whom the bet
is made. If he failed to pay a lost bet, he is subject to certain disqualification, which will have
a serious impact on his business. The court held, the principal could not revoke the turf
commission agent’s authority after losing the bet. The principal would have to indemnify the
agent for the amount, which the agent had paid to the person with whom he made the bet.
 The final situation is, under section 161, the notice of termination by the principal would
only take effect when it becomes known to the agent and the third party. If the agent and
the third party does not know about the notice of termination, the revocation is not
effective. Thus the agency is not terminated.

In Pichappa Chitty v Hj. Jah, the held is the plaintiff (third party) who advanced money to
an agent appointed, but whose authority had been revoked without the agent and plaintiff’s
knowledge, was entitled to recover the money from the principal. In Trueman v Loder, the
held is the third party who dealt with the agent whose authority had been revoked, was
able to claim from the principal, the goods supplied because the third party has no
knowledge of the revocation.

The last but not least way of agency termination is by mutual consent which is between
the principal and the agent. Both parties may terminate their agency relationship by mutual
consent between them. Once they agreed to terminate the agency, the agent has no longer
any authority to act on behalf of the principal, and the principal would not be liable for any
contract made by the agent after that termination.

APPLICATION

As we refer to the case, we may say that, Syed can terminate the services of Hazrul to sell
his shop house at Jalan Setiawangsa at the price of RM200,000 due to Hazrul suffering a
heart attack and in the condition of unable to perform his duties. This is possible when the
termination is to occur before Hazrul is able to exercise his authority, as Hazrul suffered a
heart attack right after his appointment.

However, Syed must provide a reasonable notice to Hazrul in order to terminate Hazrul’s
services. In this case, if Syed did not give a reasonable notice to Hazrul, Hazrul may sue Syed
as he could be entitled to damages. But if Syed did provide reasonable notice to Hazrul, then
Hazrul cannot sue.

In this case, both Syed and Hazrul may terminate their agency relationship as it is
considered as agency termination by mutual consent. Once both Syed and Hazrul agreed to
terminate the agency relationship, Hazrul will no longer has any authority to act on behalf of
Syed and Syed will not be liable for any contract made by Hazrul after that termination.

CONCLUSION
 As to conclude in the case of an agent suffering injury, either the principal or the agent or
both may terminate the contract of agency.