QUESTION 1

Haris entered into an agency contract with Razif to get a buyer for a piece of land near Kampar for
RM600,000. Unknown to Haris, Razif has also received a personal commission of RM15,000 from
the buyer as well because he managed to influence Haris to reduce the price of the land to
RM500,000. Recently, Haris discovered about the personal commission received by Razif and
refused to pay his commission. Razif later threatened to sue Haris for the commission.
Advise Haris on this matter
(20 marks)

ANSWER
Whether Razif can sue Haris because of Haris refused to pay commission to Razif due to the
unknown facts that Razif received a personal commission of RM15,000.00 from the buyer as well
because he managed to influence Haris to reduce the price of the land to RM500,000.00

According to Section 135, Contracts Act 1950,  An “agent” is a person  employed to do any act for
another or to represent another in dealings with  third persons. The person for whom such act is
done, or who is so represented,  is called the “principal”. Examples of agents including brokers,
insurance agents, travel agents, and lawyers. Agents are important in business as they reduce
cost to access to market conveniently and effective in sales distribution channel. 

According to Section 171 Contracts Act 1950, an agent is not entitled to collect any remuneration
from the principal if the agent is guilty of misconduct in the business of the agency.

In the case of Parker v McKenna, an agent is required to act for the best interest of the principal
because fiduciary relation is referred as a principle “founded at the highest and truest morality”. If
the agent’s action conflicts the interest of the principal’s, then the agent has violated the fiduciary
duty.

It is essential for Razif to perform his duty with diligence as a breach of duty will cause him to be
liable for the damages. When an agent owes duties to the principal, in return the principal also
owes a few duties to the agent. 

In the case of Graham v Cummings 1904, the shareholder secretly negotiated in order to obtain a
higher amount for his stock than other shareholders. The court held that an agent is not allowed to
make secret profits without the consent from the principal in a business agency.

Haris can make decision to terminate the agency contract and can even refuse to pay commission
to Razif and Razif cannot sue Haris for not giving the commission as Razif has breach his duty.