CLASSIFICATION OF

AGENCY
 THE AUTHORITY OF AN AGENT

GENERAL RULE
• Agent’s act is binding on the principal if it is done within his authority.
• If excess of that authority it does not bind the principal unless he
adopts/ratifies the unauthorized act.

Classified into TWO

ACTUAL APPARENT/
AUTHORITY OSTENSIBLE
AUTHORITY
 ACTUAL AUTHORITY

The authority given to the agent through an

agreement between the principal and the agent.

Authority expressly AUTHORITY IMPLIED

given by
the principal orally/in writing. I- Express authority that is all such
Section 141 : powers as are proper or
a)Agent has authority to do necessary to execute the
an act express authority
b) Agent has authority to carry II- The circumstances of the case
the business III- The custom or usage of trade
IV- The situation and conduct of
the parties
• GUIDELINE : What a similar agent in the same trade or profession
or business would be authorized to do

WATTEAU v FENWICK
It was held that the Principal is liable to pay the 3rd party because
the manager of a public house (agent) would usually have authority
to make purchases of the kind in this case.

PANORAMA DEVELOPMENT (GUILFORD) LTD v FIDELIS

FURNISHING FABRICS LTD

The court held that hiring of motor vehicles by the company secretary
(agent) was regarded as part of company administration which are
within the authority of the company secretary
APPARENT/OSTENSIBLE AUTHORITY

Which the law regards the agent as possessing

although the principal may not have
consented to his exercising such authority

Apparent or ostensible authority is where the Agent has no

authority at all but the Principal is bound by the acts of the
Agent if the Principal makes it appear to the 3rd Party that
the Agent has the authority.
 ARISE IN TWO SITUATION:-
1) Where a principal by 2) Where the agent
his words or conduct, previously had
leads at third party authority to act, but
to believe that his that authority was
agent has authority terminated by the
to make contract for principal without
him. S. 190 notice to third parties.
Case: Overbrook Estate
Case: Graphics Lines PTE Ltd v Glencombe
LTd v Cahi Chee
Mein
 AGENT’S LIABILITY FOR UNAUTHORIZED
ACTS
• S.180 – When the authorized action can be separated from the
unauthorized action, only those actions which are within his
authority is binding on the principal.

• S.181 – When the agent acts beyond his authority which cannot be
separated from those actions that are within his authority, the
principal is not bound by the transaction.
 EFFECTS OF CONTRACTS BY AGENTS

A contract entered into by an agent on behalf of the

principal is binding on the principal and the effects of
the contracts may depend on whether the 3rd party is
aware of the existence of the principal.

Categories of principal

UNDISCLOSED NAMED
DISCLOSED
PRINCIPAL PRINCIPAL
PRINCIPAL

EXISTENCE & IDENTITY NAME OF PRINCIPAL EXISTENCE OF PRINCIPAL

OF PRINCIPAL IS NOT IS DISCLOSED TO IS DISCLOSED TO 3RD
DISCLOSED TO 3RD PARTY 3RD PARTY PARTY BUT NOT HIS NAME
 NAMED PRINCIPAL

s,.183
The principal alone who can
effect
sue and to be sued under
the contract Provided that Section 179
the agent has acted on
behalf of the principal

EXCEPTION The agent signs a

negotiable instrument
in his own name

The agent agrees to

make himself
personally liable The agent executes a The agent has exceeds
CHIN YUEN TUNG’ case deed in his own name his authority
 DISCLOSED PRINCIPAL

EXISTENCE OF PRINCIPAL
IS DISCLOSED TO 3RD
PARTY BUT NOT HIS NAME

The agent has no liability under

the contract
The principal has the right over
the contract

EXCEPTION

3RD party does x know Principal is a foreign

Agent remains liable sovereign or a minor or
the credit & standing
even after the discovery person of unsoundmind
of the principal
of the principal by 3rd
party unless released
by 3rd party
 UNDISCLOSED PRINCIPAL

EXISTENCE & IDENTITY

OF PRINCIPAL IS NOT
DISCLOSED TO 3RD PARTY

Rights of 3rd Rights of the Rights of the

party principal agent

~
~3rd party has the right ~ Principal may require
to claim/sue either the the performance of the the agent can
agent /principal/both contract by the 3rd party claim his rights under
even though the 3rd the contract is actually
~PERNAS TRADING SDN party does not know his contract and he has
BHD v PERSATUAN that there is a principal been acting as if he was
PELADANG s.184(a), 185, 184(b) contracting party with
3rd party
 DUTIES OF AN AGENT TO HIS
PRINCIPAL
1. To obey the principal’s instructions
2. In the absence of instructions from the principal, to act
according to the customs
3. To exercise care and diligence in carrying out his work and to
use such skill as he possesses
4. To render proper accounts when required
5. To pay to his principal all sums received on his behalf
6. To communicate with the principal
7. Not to let his interest conflict with his duty
8. Not to make any secret profit out of performance of his duty
9. Not to delegate his authority
10. Not to disclose confidential information or documents
entrusted to him by his principal
To obey the principal’s instructions Section 164
Must obey the principal’s instruction
Failure to obey : may be treated in
breach of contract
Agent will be liable for any loss sustained
by principal on account of the breach
Case : Bostock v. Jardine 1865

2) In the absence of instructions from the
principal, to act according to the customs
•Section 164 and Illustration (b) to
s.64
•Custom which is prevails, in doing
business of the same kind, at the place
where he carries out his work.
•Otherwise he has to make good any
loss sustained by the principal.
•If there is no instructions from the
principal, the agent do as usual
(3) To exercise care and diligence in •Section 165 and Illustrations (a),
carrying out his work and to use such skill (b), (c), (d)
as he possesses •The agent act as a professional
wish demand a particular skill he has
to display such skill as is generally
possesses by people engaged in
similar profession, unless the
principal has notice of his lack of skill
•Otherwise the usual requirement is
(4) To render proper accounts when
required that the agent must act with
reasonable diligence and use the skill
he has
•It is the duty of the agent to account for all •Case : Keppel v. Wheeler
monies and property handled by him as agent
for the principal and to produce such accounts
when demanded by the principal
•Section 166
•This includes money received by him from
transactions which are illegal or void, provided
the contract of agency is itself not illegal.
•Parker v. Mason
(6) To communicate with the principal • Section 167 - in cases of difficulty, he
must use all reasonable diligence to
communicate with and in seeking to
obtain instructions from his principal
• But if the situation is such that
communication is impossible or
impracticable and any delay may
cause loss to the principal
• For example, in emergencies, the
agent may use his own discretion in
adopting a course of action to
safeguard the interest of the principal
• Case: Springer v. Great Western
Railway
6) Agent must act in good faith • The primary duty of an agent is to act
and no conflict of interest solely for the benefit of his principal
• He cannot allow his personal interest to
conflict with this duty
• The agent cannot become a party in a
transaction which is against the principal’s
interest.
• Section 168 and Illustration
• Section 169 and Illustration
What is meant as acting in
• Case : Wong Mung Wai v. Wong Tham
good faith and no conflict of
interest Fatt

a. The agent cannot

b. The agent cannot act c. The agent must
become a party to the
on behalf of both parties disclose everything that
transaction
to transaction at one the knows, the principal
time without their relating to all materials
consent facts of the contract.
d. All monies and profits
should be put into the
principal’s account.
7. Not to make any secret profit • Secret profit refers to a bribe e.g. a
out of performance of his duty payment of a secret commission/a kick
back/any financial advantage which an
agent receives over and above the
commission or other remuneration
agreed.
• If the principal knows of the extra profit
& consents to it, the agent is entitled to
Remedies: keep the profit, as it is no longer secret
(section 168)
• If the principal does not know – certain
remedies available to the principal

The principal The principal The principal The principal The

may repudiate may recover the may refuse to may dismiss principal
the contract amount of the pay or terminate may sue
which was made secret profit commission to the agent’s both the
on his behalf by the agent authority for agent and
the agent with a breach duty 3rd party
3rd party.
• Zain appointed Loh as his agent to buy a piece of land at Cyberjaya at a price not exceeding
RM500.000 for him. Jega, a land broker, agreed to sell a piece of land to Loh at RM450.000.
Loh made an arrangement with Jega that the purchase price of the land is stated as
RM500.000 in the Sale and Purchase Agreement. Upon payment of the purchase price, Loh
kept RM40.000 for himself and gave the remaining RM 10,000 to Jega, without Zain's
knowledge. Two months later, Zain discovered the deal between Loh and Jega. Advise Zain

I whether Zain can bring an actyion against Loh and jega

L Section 168. explain the definition of secred profir. Explain also section 166 and 170.

Application
In the current case, Loh kept RM40.000 for himself and gave the remaining RM 10,000 to Jega,
without Zain's knowledge. This can be considered as secret profit ad Zain can claim all the
following remedies .

Apply all the remedies. Support with cases.

Conclusion
 To pay to his principal all sums received on
his behalf

• Section 171
• He may retain or deduct out of any sum received on behalf of the principal, the
following items :
1. advances made or expenses incurred by him in carrying out his duty
2. his commission
3. Other remuneration payable to him for acting as agent
• Agent has a right to retain his principal’s property in his possession until his
remuneration is paid. (s. 174) Case : Valla Mal v. Buddhu Mal
 Not to delegate his authority

• The agent cannot employ another person to do his duty because the principal
has put his tryst in the agent he selects.
• Maxim: delegates non potest delagare (a delegate cannot delegate)
• Exceptions to this maxim:

The delegation is approve by Presume from the Custom or norm of

the principal conduct of the parties the business allows
that the agent have delegation
power to delegate

Necessities or unforeseen The act purely ministerial The nature of the

emergency which does not involve any agency that is
professional skill necessary to complete
the business
 DUTIES OF PRINCIPAL

1. To pay the agent the commission or other agreed

remuneration unless the agency relationship is
gratuitous
2. Not to willfully prevent or hinder the agent from
earning his commission
3. To indemnify for acts done in the exercise of his
authority
1. To pay the agent the commission or other agreed remuneration unless the
agency relationship is gratuitous

172. In the absence of any special contract, payment for the performance of
any act is not due to the agent until the completion of the act; but an agent
may detain moneys received by him on account of goods sold, although the
whole of the goods consigned to him for sale may not have been sold, or
although the sale may not be actually complete

173. An agent who is guilty of misconduct in the business of the agency is

not entitled to any remuneration in respect of that part of the business which
he has misconducted
(2) Not to willfully prevent or hinder the agent from earning his
commission

 Where an agent has been  Where the principal refused to

earlier appointed , a principal accept the contract made by
cannot employ a second agent the agent
in the midst of negotiations to
deprive the original agent of
his commission particularly
 3) To indemnify for acts done in the
exercise of his authority

• Section 175 – The employer of an agent is bound to indemnify him against

the consequences of all lawful act done by the agent in exercise of the
authority conferred upon him

• The right of indemnify arises in the

following situations :

The agent himself has The agent suffers

The causes injury to
incurred losses or injury during the
3rd party in the
liabilities in course of his duties
execution of his
performance of his due to the principal’s
authority
duties negligence
 The principal’s name has
been disclosed to the 3rd party
by the agents at the time of
the contract.
The principal’s existence is
disclosed to the 3rd party but
the identity is not disclosed
The 3rd party knows that the agent is
contracting as an agent but does not
know the name of the principal and
identity of the principal
The 3rd party knows the name and the
indentity of the principal and knows
that the agents is acting on behalf of
the principal.
The principal’s existence and
identity is unknown to the 3rd
party at the time of the
contract. The 3rd party acts
under impression that he is
contracting with the agent
personally.
Only after the contract is concluded, the 3td
party knows that the agent is acting on behalf
of the principal
The rights and liability of each party will
depend on whether the agent has disclosed
the principal and the agency relationship to
the 3rd party
 Termination of Agency
(Section 154-Section 163)

BY ACT OF BY OPERATION OF LAW

THE PARTIES 1. Contract of agency has been
performed.
1.By mutual 2 WAYS 2. Expiry period fixed in the
consent contract of agency.
3. Death of principal or agent
2.Revocation by 4. Frustration
the principal 5. Insanity of principal or
agent
6. Insolvency of principal or
3.Renunciation agent
by the agent
 BY ACT OF THE PARTIES

s.154 – terminate by revoking the agent’s authority

s.156- may revoke at any time
s.160- revocation may be express or implied
s.159- must give reasonable notice

SYARIKAT JAYA v STAR PUBLICATION

s.158-if there if implied or express contract that should

continued for any period of time, the principal must
make compensation to the agent
s.161- revocation effective if come to the knowledge of
the agent.

The principal •The agents himself has an interest in the

cannot terminate property
the agent if: •After the authority has been partly exercised by
the agent
 BY OPERATION OF LAW
BY OPERATION OF LAW
1. Contract of agency has been
performed.
2. Expiry period fixed in the
contract of agency.
3. Death of principal or agent •The death of principal would not
4. Frustration terminate the agent’s authority if the
5. Insanity of principal or agent has an interest in the property
agent •termination only effective upon
6. Insolvency of principal or agent having notice of the principal’s
agent death
•The agent must take reasonable
steps to protect the interest of the
principal.