Tutorial 4:

AGENCY
1. Amanda had recently passed her driving test and knew nothing about cars, she asked
her friend, James, who claimed to have knowledge of cars, to find her a suitable
secondhand car. She stipulated that the car should not have been involved in an
accident. James found a car on which he noticed the bonnet had been crumpled and
straightened or replace, but he still recommended Amanda to purchased it for RM10,000.
A few months later it became apparent that the car had been involved in a serious road
accident, repaired badly and was unroadworthy. Is there any legal relationship between
Amanda and James?
Discuss.

Issue: Whether there is a legal relationship between Amanda and James?

Law: S.136 CA1950 states that any person who is of the age of majority according to the law to
which he is subject, and who is of sound mind, may employ an agent.

S.137 CA1950 states that as between the principal and third persons, any person may become
an agent; but no person who is not of the age of majority and of sound mind can become an
agent, so as to be responsible to his principal according to the provisions in that herein
contained.

According to Chan Yin Tee v William Jacks & Co (Malaya) Ltd [1964] MLJ 290. In this case,
Chan and Yong were partners in business. At a meeting with a rep. of William Jacks's co., Chan
held himself out to be Yong’s partner. The William Jacks corporation supplied goods to Yong
but no payment was made. After that, William Jacks' corporation brought an action against
Chan as Yong’s principal. The court held that since Chan had held Yongout as his agent who
had the authority to do things on his behalf, Chan was liable for Yong’s acts and Chan was
responsible for Yong’s act regardless he is a minor under Section 137 Contracts Act 1950.

S.164 CA1950 states that “An agent is bound to conduct the business of his principal according
to the directions given by the principal, or in the absence of such directions according to the
such custom which prevails in doing business of the same kind at the place where the agent
conducts the business…”

Application: In the question, it mentions that Amanda had passed her driving test. This means
that she is of sound mind. However, it does not mention Amanda’s age in the question.
According to Malaysian laws, the minimum age to apply for a car license is 17 years old. If
Amanda is at the age of 17, she is not qualified to be a principal. If Amanda is 18 years old and
above and is of sound mind in this case, she is qualified to be a principal under S.136 CA1950.

Based on the question above, it doesn’t mention James’s age and whether he is of sound mind
or not. However, no matter how old he is and what his state of mind is, he can be an agent of
Amanda under S.137 CA 1950. But if James is below 18 years old, he is considered as a minor.
Therefore, Amanda will need to be responsible for the action done by James on her behalf
based on the Chan Yin Tee case.

According to S.164 CA1950, it means that an agent needs to carry out his or her duties by
following the instruction given by the principal. Based on the question, Amanda clearly
stipulated that the car should not have been involved in an accident when she appoints James
as her agent to find a suitable secondhand car for her. However, James found a car on which
he noticed the bonnet had been crumpled and straightened or replaced, but he still
recommended Amanda purchase it for RM10,000. This clearly shows that James as an agent
does not follow the instruction given by Amanda, his principal under S.164 CA1950. Therefore,
if James is 18 years old and above and is of sound mind since James is fail to follow Amanda’s
instruction that she does not want a car that was involved in an accident before, James needs to
be liable for any losses suffered by Amanda. For example, as an agent, James needs to pay the
repair cost of Amanda’s car.

Conclusion: If Amanda is below 18 years old, she cannot be a principal under S.136 CA1950,
and thus there is no legal relationship between Amanda and James. If Amanda is 18 years old
and above, the legal relationship between Amanda and James is formed under S.136 and
S.137 CA1950. Additionally, when there is a legal relationship between Amanda and James, if
James as an agent is below 18 years old, Amanda herself is liable for the action done by
James. On the other hand, if James is 18 years old and above, he is responsible for his own
action which does not follow the principal’s instructions under S.164 CA1950.

2. What is agency by estoppel or ‘holding out’?

According to S.190 Contracts Act 1950, when an agent has, without authority, done acts or
incurred obligations to third 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 third persons to believe that
those acts and obligations were within the scope of the agent’s authority. Thus, the Principal will
be estopped or prevented from denying that A is an agent of the principal. It is also known as
the presumption of the agency. For example, the existence of an agency may be presumed, and
the principal may be bound by the acts of the agent performed on the principal’s behalf even
though there is no formal agreement.

3. Distinguish implied appointment from appointment by way of estoppel.

Implied agency By estoppel

by consent between the parties before an P may not want or consent to the agent acting
agent acts on behalf of the P. This is by on his behalf, but the law considers the
reference to the P’s conduct in that he is agency relationship exists.
willing that the agent acts on his behalf.
 S.140 Contracts Act 1950, an authority is said
to be implied when it is to be inferred from the
circumstances of the case; and things spoken
or written, or the ordinary course of dealings,
may be accounted for in the circumstances of
the case.
S.190 Contracts Act 1950, when an agent
done acts or incurred obligations to third
persons on behalf of his principal without
authority if he has by his words or conduct
induced such third persons to believe that
those acts and obligations were within the
scope of the agent’s authority. Therefore, the
principle will be estopped from denying that A
is his agent.

In the case of Soanes v London, a railway

In the case of Chan Yin Tee, A has a shop in
Kajang, lives in Kuala Lumpur and visits the
shop occasionally. The shop is managed by
B, and always purchasing goods from C in
the name of A for the purpose of the shop
and paying for them out of A’s funds with A’s
knowledge. B is an implied authority from A to
order goods from C in the name of A for the
purposes of the shop.
company supplied a porter with a uniform,
thus holding him out as its agent. While off
duty and therefore not at the time acting as
the company’s agent, the porter took charge
of a passenger’s luggage at a railway station.
The luggage was stolen, and the passenger
claimed for the loss against the railway
company. The court held that the company
was estopped from denying that the porter
was its agent. Therefore, the company was
liable for its agent’s actions.

4. Alice appointed Carmen to be her agent, instructing her to buy a Prada bag on her
behalf costing not more than RM10,000-00. Carmen saw a RM15,000-00 Prada bag which
she knew that Alice had always wanted and therefore bought the bag for Alice. Alice is
very furious and refuses to pay for the Prada bag. Advise Alice whether she can refuse to
pay for the Prada bag.

Issue:
The issue is whether Alice can refuse to pay for the Prada bag.

Law:
According to S.140 Contracts Act 1950, an authority is said to be expressed when it is given by
words spoken or written.

According to S.149 Contracts Act 1950, 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.

Application:
The agent-principal relationship between Alice and Carmen is by express appointment under
S.140 Contracts Act 1950 since the question has clearly stated that Alice appointed Carmen to
be her agent. Therefore, Alice is liable for the act done by Carmen on behalf of her. However,
the act of Carmen to buy the bag that exceeds the price limit set by Alice is without the
knowledge and authority of Alice. Therefore, under Section 149 CA 1950, Alice can choose to
disown the act, so she can refuse to pay it.

Conclusion:
Alice can refuse to pay for the Prada bag since there is no agency by ratification.

5. The logistics company delivered a consignment of fruits to its destination. On arrival,

there was no one to receive the consignment. The driver did not know the Defendant’s
address and was directed to store the consignment in a cold-storage nearby. The logistic
company later claimed for the charges for the cold-storage from the Defendant but the
Defendant refused to pay. Advise the logistic company.

Issue: Whether the logistics company can claim charges from the Defendant.

Law: In the case of Great Northern Railway Co. v Swaffield (1874), The court held the railway
company acted as agent of necessity and the defendant must pay the charges.

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. However, the persons for whom such an act
is done, or who is so represented, is called “principals”

Section 142 Contract Act 1950, states that an agent has authority, in 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. Agency by necessity may be
created if: A) agent’s action is necessary to prevent loss to the principal; B) it is impossible for
the agent to get the principal's instruction from Section 167 Contract Act 1950, it is the duty of
an agent , in cases of difficulty, to use all reasonable diligence in communicating with his
principal, and in seeking to obtain his instructions, C) agent acted in good faith, an act as would
be done by a person of ordinary prudence, under similar circumstances.

Application: In this case, the defendant has appointed the logistic company to deliver a
consignment of fruits to its destination. According to the Section 135 Contract Act 1950, the
relationship of the defendant is principal and the logistics company is the agent and the driver
from the logistics company is the sub agent. Therefore, following the Great Northern Railway
Co. v Swaffield (1874) case, the railways Co. carried to contracted destination and no one
received it, railways Co. claimed the stable charges, but the defendant refused to pay. The court
held the railway company acted as agent of necessity and the defendant must pay the charges.
On the other hand, based on Section 167 Contract Act 1950, the driver should communicate
with the defendant to get the principal’s instruction, but in the situation the driver did not know
the Defendant’s address and no one receives the consignment so based on Section 142
Contract Act 1950, the driver may use his own choice to take necessary protecting the
defendant property from any loss, which store a consignment of fruits in nearby cold-storage.
Last, if the charges of cold storage are lower than the value of the consignment fruits, the driver
fulfills Section 142 Contract Act 1950 of (A)(B)(C). If the charges of the cold storage are more
than the value of the consignment fruits this means the driver did not act in good faith, which did
not fulfill Section 167(c) Contracts Act 1950.

Conclusion: Whether the defendant should pay for the charges of cold-storage, is depending
on whether the logistics company is fulfilled on three conditions of Section 142. if the logistics
company is fulfilled, the logistics company can claim from the defendant. If unfulfilled, then can’t
claim from the defendant.