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TEST III
INTRODUCTION TO LAW : THE LAW OF AGENCY

1. Agency may generally be defined as: -

a. a relationship between the offeror and the offeree.
b. a relationship which exists between two legal persons; the principal and the agent.
c. a relationship between the employer and the employee.
d. a relationship which exists between two legal persons; the husband and the wife.

2. The function of the agent is: -

a. to take care of the employer’s business.
b. to represent the principal in any dealings with third party.
c. to maintain the relationship between the employer and the employee.
d. to maintain the relationship which exists between two legal persons; the husband and the wife.

3. The function of the principal is:-

a. to take care of the agent.
b. to pay the agent their remuneration when they fail to perform their duty.
c. to pay for all expenses incurred by the agent in caring for their family.
d. to be responsible for all act done legally for and on behalf of the principal with the third party, by the agent.

4. Who may become the principal to the agent under Section 136 of the Contract Act 1950:-
a. Any person who has the money and able to pay the salary of an agent.
b. Any person of the age of majority and of unsound mind.
c. any person of the age of minority and of sound mind.
d. Any person of the age of majority and who is of sound mind.

5. Who may become the agent to the principal under Section 137 of the Contract Act 1950:-
a. Any person can become an agent.
b. any person who want to represent another person and make some money out the contract.
c. Any person who is of sound mind and of the age of minority.
d. As between the principal and the third persons, any person may become an agent but to be responsible to
the principal the agent must be of the age of majority and of sound mind.

6. Section 141 of the Contract Act provides for the extent of an agent’s authority which includes:-
i. An agent having an authority to do an act has authority to do every lawful thing which is necessary in order
to do the act.
ii. An agent having an authority to carry on a business has authority to do every lawful thing necessary for the
purpose, or usually done in the course of conducting such business.
iii. An authority inferred from the circumstances of the case; and from things spoken or written.
iv. An authority inferred from the ordinary course of dealing.

a. i, ii and iii
b. i and ii
c. i, ii, iii and iv
d. i, iii and iv

7. Agency relationship between the principal, the agent and the third party, creates what kind of contracts which is
enforceable by law;

i. A contract of agency between Principal and Agent

ii. A commercial contract between the parties having intention to contract
iii. A domestic contract between parties sitting in a near relation to each other
iv. A contract of business between Principal and Third party
a. i and ii
b. i and iii
c. i and iv
d. i, ii and iv
8. Section 138 of the Contracts Act 1950 provides that consideration is necessary to create a contract of an
agency.
a. True
b. False

9. Agency may arise in any of the following ways:-

(i) by express appointment by the principal.
(ii) by implied appointment by the principal.
(iii) by ratification by the principal.
(iv) by necessity.
(v) by the doctrine of estoppel or holding out.

a. i, ii and iii
b. ii, iii and iv
c. i, ii, iii, iv and v
d. i, iii and iv

10. Section 140 of the Contracts Act provides that agency by express appointment by the principal can be done
by:-
a. spoken words or in writing.
b. pointing a finger at any person intended to be his agent.
c. advertisement in the local newspaper.
d. announcing a person’s name.

11. Section 140 of the Contracts Act provides that agency by implied appointment by the principal may fall into one
of this three categories:-
i. by authority inferred from the circumstances of the case
ii. by authority inferred from things spoken or written
iii. by authority inferred from the ordinary course of dealing
iv. by authority inferred from announcing a person’s name

a. i, ii and iii
b. ii, iii and iv
c. i, ii, iii and iv
d. i, iii and iv

12. The law would normally presumed that there exists the implied agency relationship between husband and wife.
This implied agency is however limited to the followings fact:-
i. it only applies when a husband and wife are living together.
ii. it only limited to the wife pledging the husband’s credit for “necessaries”.
iii. by authority inferred from the ordinary course of dealing.
iv. by authority inferred from announcing of the wife’s name.

a. i, ii and iii
b. ii, iii and iv
c. i, ii, iii and iv
d. i and ii

13. The husband may rebut the presumption that he has agreed that the wife is to be his agent under the following
circumstances:-
i. if the husband warns tradesman not to supply goods on his account to the wife’s order.
ii. if the husband forbids his wife to pledge his credit in this way.
iii. if the goods are not necessaries and not needed by his wife.
iv. if the husband go and work outstation without informing the wife.

a. i, ii and iii
b. ii, iii and iv
c. i, ii, iii and iv
d. i and ii

14. Ilustration in Section 140 of the Contracts Act 1950, reads:

“A owns a shop in Kajang,living himself in Kuala Lumpur, 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 A’s funds with A’s knowledge. B has an implied authority from A to order goods from C in the name
of A for the purpose of the shop.”
This illustration represent the principle that:-
a. an authority of a principal is said to be implied when it is to be inferred from the circumstances of the
case.
b. an authority of an agent is said to be expressed when it is to be inferred from the circumstances of the
case.
c. an authority of a third party is said to be implied when it is to be inferred from the circumstances of the
case.
d. an authority of an agent is said to be implied when it is to be inferred from the circumstances of the case.

15. The Partnership Act 1961provides that Partners are each other's Agents by implied appointment when
contracting in the course of the partnership business.
a. True
b. False

16. In Mercantile Credit Co. Ltd. v Garrod (1962) Garrod and his partner entered into a partnership agreement for
a business which lets garages and repaired cars, however, their business does not involve the buying and
selling of cars. Despite this, his partner sold a car to a finance company and credit the sales money into the
partnership account without the consent of partner Garrod. His partner later disappeared. The finance company
took action against the Garrod as a partner to the partnership when they found out that there was fraud in the
sales.
The court held that:-
a. the finance company was not entitled to recover the money from Garrod because his partner acted as a
partner and therefore an agent to the partnership .
b. the finance company was entitled to recover the money from Garrod because his partner is not acted as a
partner and therefore an agent to the partnership .
c. the finance company was entitled to recover the money from Garrod because his partner acted as a
partner and therefore not an agent to the partnership .
d. the finance company was entitled to recover the money from Garrod because his partner acted as a
partner and therefore an agent to the partnership .

17. Agency by ratification arises in any one of the following situations:-

i. where a person is giving a monthly salary by the principal.
ii. where the agent is out of jurisdiction when his appointment is made by the principal.
iii.where an agent who was duly appointed as agent has exceeded his authority.
iv. where a person who has no authority to act for the principal but has acted as if he has the authority.

a. i, ii and iii
b. ii, iii and iv
c. i, ii, iii and iv
d. iii and iv

18. Section 149 of the Contract Act 1950 provides that:

a. 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 ratifies them, the same effect will follow as if they have been
perform by his authority.
b. Where acts are done by one person on behalf of another but with his knowledge or authority, he may elect
to ratify or to disown the acts. If he ratifies them, the same effect will follow as if they have been perform
by his authority.
c. Where acts are done by one person on behalf of another but without his knowledge or authority, he may not
elect to ratify or to disown the acts. If he ratifies them, the same effect will follow as if they have been
perform by his authority.
d. Where acts are done by one person on behalf of another but without his knowledge or authority, he may not
elect to ratify or to disown the acts. If he ratifies them, the same effect will follow as if they have been
perform not by his authority.
19. The effect of ratification by the principal of the agent/person’s act are as follows:-
i. The principal may sue or be sued by the third party.
ii. The agent no longer has any liability to the third party.
iii. The agent no longer liable for exceeding his authority.
iv. The principal is liable to pay the agent reasonable remuneration.

a. i, ii and iii
b. ii, iii and iv
c. i, ii, iii and iv
d. iii and iv

20. An agency by necessity may be created if the following conditions are met:-
i. The principal may sue or be sued by the third party
ii. It is impossible for an agent to obtain the principal’s instructions
iii. The agent’s action is necessary to prevent loss to the principal with respect to the interest committed to his
charge
iv. The agent must have acted in good faith

a. i, ii and iii
b. ii, iii and iv
c. i, ii, iii and iv
d. iii and iv

21. When a person, by his words and conduct, allows a third party to believe that the particular person is his agent
even when he is not, and the third party relies on it to the detriment of the third party, he will be stopped or
precluded from denying the existence of that person’s authority to act on his behalf. This is the circumstances
that the law recognized as the appointment of agent by:-
a. express appointment.
b. appointment by necessity.
c. appointment by ratification.
d. appointment by the doctrine of estoppels or ‘holding out’.

22. Illustrations (a) to Section 150 states that:

“A, without authority, buys goods for B. Afterwards B sells them to C on his own account; B’s conduct implies a
ratification of the purchase made for him by A.”
This illustration represent the principle that - Ratification may be expressed or may be implied in the conduct of the
person on whose behalf the acts are done.
a. True
b. False

23. Illustration (b) to Section 142 states that.

“A consigns provisions to B at Taiping, with directions to send them immediately to C at Parit Buntar. B may sell
the provisions at Taiping, if they will not bear the journey to Parit Buntar without spoiling.”
This illustration represent the principle that - 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 – in cases involving appointment of an agent by:
a. express appointment.
b. appointment by necessity.
c. appointment by ratification.
d. appointment by the doctrine of estoppels or ‘holding out’.

24. The present of this three (3) elements:-

1. There is a representation made by or on behalf of the principal to the 3 rd party concerning the authority of
the agent;
2. Reliance by the 3rd party on the representation made by the principal to the 3 rd party;
3. The 3rd party must rely on the principal’s representation and alter his or her legal position on the strength
of the representation.
are necessary to constitute:
a. express appointment.
b. appointment by necessity.
c. appointment by ratification.
d. appointment by the doctrine of estoppels or ‘holding out’.
25. The authority of an agent can be:-
a. express and/or implied authority
b. actual and/or apparent authority
c. express and/or ostensible authority
d. implied and/or ostensible authority

26. is an authority conferred expressly upon the Agent either by oral or written agreement. It may also
be implied from the following:-

1. Express authority given by the Principal

2. Custom and trade usage
3. Circumstances of the case
4. Conduct of the parties
a. express authority
b. implied authority
c. apparent and/or ostensible authority
d. actual authority

27. is established when a person without actual authority acts as an Agent and contracts with a third
party in the Principal’s knowledge. The Principal is aware of it but does not stop him. Later, the Principal is
precluded from denying the agents authority. The principle would be liable for the contract with the third party.

a. express authority
b. implied authority
c. apparent and/or ostensible authority
d. actual authority

28. authority may arise in TWO situations:

1. When the Principal by his words or conduct leads another party to believe that the Agent has authority
to make contract on behalf of him.
2. Where the Agent previously had authority to act but it has been terminated by the Principal without any
notice to third party. Third party can claim that the Agent has apparent authority and binds the Principal
to the contract.

a. express authority
b. implied authority
c. apparent and/or ostensible authority
d. actual authority

29. In these 4 circumstances:-

i. If the Agent agrees with third party to accept personal liability.

ii. Where the Agent executes a deed and negotiable instrument in his own name.
iii. Where the Agent exceeds authority and the Principal does not ratify.
iv. Where the custom of trade made the Agent liable.

a. the third party may not sue the Agent if there is any breach of contract.
b. the third party cannot sue the Agent if there is any breach of contract.
c. the third party may sue the Agent if there is any breach of contract.
d. the third party may sue the Agent if there is no breach of contract.

30. It is a situation when the Agent contracted as an Agent and the identity of the Principal is disclosed to the third
party. Where a Principal is named, a clear agency relationship exists between Agent and Principal.

a. the third party may sue the Agent if there is any breach of contract and the Agent is responsible.
b. the third party may not sue the Agent if there is any breach of contract and the Agent is not responsible.
c. the third party may sue the principal if there is any breach of contract and the principal is responsible.
d. the third party may not sue the principal if there is no breach of contract and the principal is not
responsible.
31. If the Agent exceeds authority or acting outside authority and the existence of the Principal is not disclosed,
the principal cannot ratify the contract.

a. Nonetheless, the principal still has right and liability under the contract.
b. Nonetheless, the principal still has right but no liability under the contract.
c. The principal has no right and liability under the contract.
d. The principal has no right but still liable under the contract.

32. An Agent, acting for undisclosed Principal and exceed his authority which cannot be ratify by the principal:-
a. may not sue on the contract if there is a breach because he can treat it as his own name for the
contract.
b. may sue on the contract if there is a breach because he cannot treat it as his own name for the
contract.
c. may sue on the contract if there is a breach because he can treat it as his own name for the contract.
d. may sue on the contract if there is a breach because he can treat it as his principal name for the
contract.

33. A “sub-agent” is:-

a. a person not employed by, and acting under the control of, the original agent in the business of agency.
b. a person employed by, and not acting under the control of, the original agent in the business of agency.
c. a person employed by, and acting not under the control of, the original agent in the business of agency.
d. a person employed by, and acting under the control of, the original agent in the business of the agency.

34. An agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to
perform:-
a. together
b. seperately
c. lawfully
d. personally

35. An agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to
perform:-
a. together, unless by the ordinary custom of trade a sub-agent may, or, from the nature of the agency, a
sub-agent must, be employed.
b. seperately, unless by the ordinary custom of trade a sub-agent may, or, from the nature of the agency,
a sub-agent must, be employed.
c. lawfully, unless by the ordinary custom of trade a sub-agent may, or, from the nature of the agency, a
sub-agent must, be employed.
d. personally, unless by the ordinary custom of trade a sub-agent may, or, from the nature of the agency,
a sub-agent must, be employed.

36. Where a sub-agent is properly appointed, the principal is, so far as regards third persons,
a. represented by the sub-agent, and is bound by and responsible for his acts, as if he were an agent
originally appointed by the principal.
b. represented by the sub-agent, and is bound by and responsible for his acts, as if he were an agent
originally appointed by the principal.
c. represented by the sub-agent, and is bound by and responsible for his acts, as if he were an agent
originally appointed by the principal.
d.represented by the sub-agent, and is bound by and responsible for his acts, as if he were an agent
originally appointed by the principal.

37. Ali employs Bob as a bricklayer in building a house. Ali puts up all the scaffolding around the construction area
himself. The scaffolding is unskillfully put up and part of collapsed to the ground and injuring Bob in the process.
In this case:-

a. The principal must not make compensation to his agent in respect of injury caused to the agent by the
principal’s neglect or want of skill.
b. 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.
 c. The principal must make compensation to his agent in respect of injury caused to the agent by the
principal’s not neglect or want of skill.
d. The principal must make compensation to his agent in respect of injury not caused to the agent by the
principal’s neglect or want of skill.

38.Ali employs Bob to beat Charles, and agrees to indemnify Bob against all consequences of the act. Bob relying
on Ali’s promise beats C, and consequently has to pay damages to Charles for his injury. The principle of law is:

a. Where one person employs another to do an act which is criminal, the employer is liable to the agent,
either upon an express or an implied promise, to indemnify him against the consequences of that act.
b. Where one person employs another to do an act which is criminal, the employer is not liable to the agent,
either upon an express or an implied promise, to indemnify him against the consequences of that act.
c. Where one person employs another to do an act which is criminal, the employer is liable to the agent,
either upon an express or an implied promise, to indemnify him against the consequences of that unlawful
act.
d. Where one person employs another to do an act which is criminal, the employer is not liable to the agent,
either upon an express or an implied promise, to indemnify him and the principal against the
consequences of that act.

39. Bob, at Kelang, under instructions from Ali, of Taiping, contracts with Charles to deliver certain goods to him.
Ali does not send the goods to Bob, and Charles sues Bob for breach of contract. Bob informs Ali of the suit, and
Ali authorizes him to defend the suit. Bob defends the suite, and is compelled to pay damages, costs and expenses.
What is the position of Ali under the law:
a. The employer of an agent is not bound to indemnify him against the consequence of all lawful acts done
by the agent in exercise of the authority conferred upon him.
b. The employer of an agent is bound to indemnify him against the consequence of all lawful acts done by
the agent in exercise of the authority conferred upon him.
c. The employer of an agent is bound to indemnify him against the consequence of all unlawful acts done
by the agent in exercise of the authority conferred upon him.
d. The employer of an agent is bound to indemnify him against the consequence of all lawful acts done by
the principal in exercise of the authority conferred upon him.

40. The followings are the principal’s duty towards the agent:-
i. to indemnify the agent against consequences of lawful acts
ii. to indemnify the agent against consequences of acts done in good faith
iii. to pay compensation to agent for injury caused by principal’s neglect
iv. No liability of employer of agent to do a criminal act

a. i, ii and iii
b. ii, iii and iv
c. i, ii, iii and iv
d. iii and iv

41. Section 164 of the Contract Act provides 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 any such directions,:-
a. according to the custom which prevails in doing business of the same kind at the place where the agent
conducts the business”.
b. according to the instructions which prevails in doing business of the same kind at the place where the
agent conducts the business”.
c. according to the instructions which prevails in doing business of the same kind in Malaysia”.
d. according to the custom which prevails in doing business of the same kind in Malaysia”.

42. Section 164 provides that “An agent is bound to conduct the business of his principal according to the
directions given by the principal, ……”. Therefore, failure of an agent to obey the principal instruction will result in:
a. breach of contract and the agent will be liable for any loss suffered by the principal.
b. breach of contract and the agent will not be liable for any loss suffered by the principal.
c. no breach of contract and the agent will be liable for any loss suffered by the principal.
d. breach of contract and the agent will be liable for any loss suffered by the third party.
43. “A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the
proper and usual enquiries as to the solvency of B. B, at the time of the sale, is insolvent, A must make
compensation to his principal in respect of any loss thereby sustained”.
This illustration represent the principle of law that:
a. To exercise care and diligence in carrying out his work and to use such skill as he possess.
b. Not to make any secret profit out of the performance of his duty
c. To communicate with the principal.
d. Not to make any secret profit out of the performance of his duty.

44.”A directs B to sell A’s estate. B, on looking over the estate before selling it, finds a mine on the estate which is
unknown to A. B informs A that he wishes to buy the estate for himself, but conceals the discovery of the mine. A
allows B to buy, in ignorance of the existence of the mine A, on discovering that B knew of the mine at the time he
bought the estate, may either repudiate or adopt the sale at his option”.
This illustration represent the principle of law that:
a. To exercise care and diligence in carrying out his work and to use such skill as he possess.
b. Not to let his interest conflict with his duty
c. To communicate with the principal.
d. Not to make any secret profit out of the performance of his duty.

45.”A directs B, his agent, to buy a certain house for him. B tells A it cannot be bought, and buys the house for
himself. A may, on discovering that B has bought the house, compel him to sell it to A at the price he gave for it”.
This illustration represent the principle of law that:
a. To exercise care and diligence in carrying out his work and to use such skill as he possess.
b. To communicate with the principal.
c. Not to make any secret profit out of the performance of his duty.
d. Not to let his interest conflict with his duty

46. “An agent may retain, out of any sums received on account of the principal in the business of the agency, all
moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such
business, and also such remuneration as may be payable to him for acting as agent.”
This is the provision of Section:
a. Section 168 of the Contract Act 1950
b. Section 169 of the Contract Act 1950
c. Section 170 of the Contract Act 1950
d. Section 171 of the Contract Act 1950

47. Beside the statutory duties of an gent towards the principal as provided for under the Contract Act 1950
(Section 164 to Section 171), there are also duties provided under the common law, they are:-
i. Duty not to disclose confidential information or documents entrusted to him by his principal.
ii. Duty not to delegate his authority.
iii.Duty to exercise care and diligence in carrying out his work and to use such skill as he possess.
iv. Duty not to let his interest conflict with his duty.

a. i, ii and iii
b. ii, iii and iv
c. i, ii, iii and iv
d. i and ii

48. The followings are the method of terminating the contract of agency as provided for by Section 154 of the
Contract Act 1950:-
i. by the principal revoking the agent’s authority
ii. by the agent renouncing the business of agency
iii. by the business of agency being completed
iv. by the principal or agent dying or becoming of unsound mind
v. by the principal being adjudicated or declared a bankrupt or an insolvent

a. i, ii and iii
b. ii, iii and iv
c. i, ii, iii, iv and v
d. iii and iv
49.”A directs B to sell goods for him, and agrees to give B 5 per cent commission on the price fetched by the
goods. A afterwards, by letter, revokes B’s authority. B, after the letter is sent, but before he receives it, sells the
goods for RM100. The sale is binding on A, and B is entitled to RM5 as his commission”.
This illustration represent the principle of law that:
a. The termination of the authority of an agent does not, so far as regards the agent, take effect before it
becomes known to him, or, so far as regards third persons, before it becomes known to them.
b. The termination of the authority of an agent does, so far as regards the agent, take effect before it
becomes known to him, or, so far as regards third persons, before it becomes known to them.
c. The termination of the authority of a principal does not, so far as regards the agent, take effect before it
becomes known to him, or, so far as regards third persons, before it becomes known to them.
d. The termination of the authority of a principal agent does, so far as regards the agent, take effect before it
becomes known to him, or, so far as regards third persons, before it becomes known to them.

50. The termination of the authority of an agent causes the termination (subject to the rules herein contained
regarding the termination of an agent’s authority) of the authority of all
a. sub-agent’s appointed by him.
b. principal appointed by him.
c. sub-principal appointed by him.
d. principal employees appointed by him.

51. Mahmood is one of the director for Koperasi Penduduk Kg. Batu and was asked to purchase a piece
of land in Gombak for Koperasi to built houses to be sold to interested members of the Koperasi.
Mahmood managed to purchase a piece of land in Gombak at the price of RM500,000-00 from the
owner. However Mahmood informed the Koperasi, with the knowledge of the owner, that the purchase
price is RM750,000-00. The Koperasi paid RM750,000-00 to the owner who then paid Mahmood
RM250,000-00. Subsequently, the payment made to Mahmood came to the knowledge of the Koperasi
and the Koperasi seek your advice on the possibility of recovering RM250,000-00 from Mahmood.

Advice the Koperasi and support your answer with all relevant provisions of the Contract Act 1950 and
decided cases.
[50 marks]

NOTE:

PLEASE PROVIDE YOUR CORRECT ANSWER ONLY IN YOUR ANSWER SCRIPT FOR QUESTION 1 TO QUESTION
50 AND PLEASE PROVIDE AN ESSAY ANSWER TO YOUR TEST QUESTION NUMBER 51.

DATELINE TO SUBMIT IS ON OR BEFORE 25/12/2020.