Law of Agency in Malaysia

• The law on Agency in Malaysia can be found in the Malaysian

Contract Act itself.
• Although generally most people like to act on their own when it
comes to any legal transactions, there could be circumstances where
a person may need another person to act on their behalf.
• In this kind of circumstances the role of an Agent becomes very
important.
• Agency basically refer to a relationship that subsist between the
principal and the agent who has been authorized to act for him or
represent him in dealing with a third-party.
 Classification of Agency
• It can be universal agent :
- A universal agent is a general agent with extensive power.
- He can do what ever the principal himself can do personally.
-It must created by deed in the form of General Power of Attorney.
• A general Agent: A general agent is an agent who is employed to act on
behalf of his principal in transactions relating to a particular business trade.
- He generally will not have limits in that particular trade.
• A special agent :This refers to an agent appointed to do a specific job or
transaction. stephensesaiah@gmail.com
 Creation of Agency
• Just like any other contract a agency contract can be created in an
express way or it could be implied based circumstances.
• It is important to take note that as far as agency contract is
concerned there is no need for consideration.
• In other words a contract of Agency can be valid even though there
was no consideration.
• Generally an Agency can arise in the following ways :
Express appointment by the principal
• There is no specific legal requirements as how this need to be done .
• As long as the principal appoints someone to act as agent in anyway it
will be recognized.
• The law clearly says that such appointment by the principal can be in
writing or just oral.
• Unless the agent is authorized to sign contract under seal, if so then
the authorization must be by way power of Atourney.
 Implied appointment
• In certain situations, even if there is no express appointment of agent
the law will imply, among the situation where the law will imply
appointment of agency are :-
- Where a person by his words or conduct holds out another person as
having authority to act for him.
Chan Yin Tee v William Jack & Co.
- The relationship of agent and principal may exist between husband
and wife. There is presumption that wife has authority to act as agent on
behalf of the Husband if they are still living together.
- Agency can be implied where there is a Partnership.
 Agency by Ratification
• This refers to a situation where a person goes ahead and represent someone as agent
without being appointed as an agent.
• After entering into the transaction the principal agrees to confirm this contract. This is
recognized under section 149.
• According to section 149 once ratified the contract will recognized just like any other
contracts.
• It is important to take note that although the contract was ratified alter the contract
will effective from the day it was signed.
• Express and implied agency is concerned – The relationship between principal and
Agent comes first, only after that the agent communicate with third party.
• Agent goes ahead and enters into a contract, on behalf of principal without the
principal knowing it.
• P appoints A ( 20/02/2021) to act as agent, then A goes and
represents P and enters into a contract with C on behalf of P
(23/05/2021). This for express or implied
• Ratification - A represents P and enters into a contract with C on
behalf of P( 20/02/2021), Then P confirms the contract on
28/02/2021.This Ratification.
 Condition for Ratification
• - The act must be unauthorized.
• - The act must recognized by law.
• - At the time of the contract the agent must have acted expressly as an agent.
• - At the time of the contract the agent must have a principal.
• - The principal must have had contractual capacity.
• - The principal must have full knowledge all material facts of the contract.
• - The principal must ratify the whole contract.
• - The ratification must take place within a reasonable time.
• -The ratification must not injure a third party.
 Agency by Necessity
• In the course of doing business a person may be force to act as an
agent of another person without even being appointed to do so.
• This is provided for in section 142.For agency by necessity to be
recognized the following conditions must be satisfied :
- It is impossible to communicate with principal to get instruction.
- The agent’s action was necessary in the circumstances.
- The agent acted in good faith.
- There must exist some kind of legal relationship.
 Agency by Estoppel
• If a person by his word or conduct allows a third party to belief that A
is his agent when in actual fact A is not. Latter that person cannot
deny that A is his agent.
• P leads the third party into thinking that A is his agent. Then A deals
with third party. In this situation P later cannot deny that A is his
agent.
 Duties of Agent
• Duty to obey the principal’s instructions
- Failure to obey may be treated as breach of contract.
- Agent could be held liable for any loss incurred.
- Agent has the right disobey an instruction that is illegal.
• In the absence of instruction, to act according to custom of the
industry.
• To exercise care and diligence in carrying out his work as required in
the contract.
• To render proper account when required.
 Duties of Agent
• To pay his principal all sums received on behalf of the principal.
• To communicate with the principal if faces problem to get further
instructions.
• Not to let his own interest conflict with his duty.
• Not to make any secret profit in carrying out their work as an agent.
• Not to disclose confidential information or documents entrusted to
him by his principal.
 Duties of Principal
• To make payment accordingly as agreed in the contract.
• Not to willfully prevent or hinder the agent form earning his commission.
• To indemnify and reimburse the agent for acts done in the exercise of his
duties.
- Where the agent has incurred losses or liabilities in performance of his
contract.
- Where the agent causes injury to third person in the execution of the
his duties.
- Where agent suffers injury during the course of his duty.
 Authority of the Agent
• When it comes to the relationship between agent and principal the
authority given to the Agent is very important.
• The extend of the authority is important,.
• As a general rule anything which the agent does in excess of that
authority does not bind the principal unless the later adopts or
ratifies.
• It is also important to know the exact nature of an agents authority.
• Now we will consider the types of authority.
 Actual authority
• It refers to the actually authority conferred upon the agent by agreement.
a) Authority expressly given.
b) Authority implied because of
- Implied authority needed to execute the express specific authority.
- The circumstances of the case.
- Custom and usage of the trade.
- The situation and conduct of the parties.
 Apparent Authority
• It refers to authority that the law regards the agent as possessing
although the principal may not have consented to his exercising such
authority. It may arise in the following two situation :
- Where a principal by his words or conduct leads a third party to
belief that his agent has the authority to make contract.(Section 190)
- Where the agent previously had authority to act, but that authority
was terminated by the principal without notice to third parties.
What happens if Agent acts beyond the
authority …
• An agent who act outside his authority or a person without authority
purports to act as agent for another person is liable for breach of
warranty of authority.
• In such situation the third party can bring an action against agent.
• The effect is this where a third party is misled by the agent’s
misrepresentation of authority , however innocent it may be, the
agent will be held liable.Yonge v Toymbee
• This is important because only then the Agents will be careful.
 Further points
• If the agent only acted beyond the authority in certain aspect, then
the law says that the principal can still be liable for the part that was
within his authority.
• It is important to take note that agent will only be liable if the third
party was totally unaware of the lack of authority on the part on
agent.
 Effect of contract made by Agent
• If the principal is a named principal as a general rule the agency exist
and generally the principal will be held liable.
• However it is important to take note that even in such situation the
agent can still be liable if :
- Where the agent agrees to accept personal liability.
- Where the agent executes the deed in his own name.
- Where he signs negotiable instrument in his own name.
- Where he exceeds the authority and the principal does not ratify it.
- Where the customs of the trade make the agent liable.
 Principal is disclosed but not named
• The situation under English is not clear, judges seem to have given
contradictory decisions.
• The Malaysian law can be found in section 183. ‘an agent cannot
personally enforce contracts entered into by him on behalf of his
principal , nor is he personally bound by them’ This rule is however
subject to certain presumptions :
- Where the contract is made by an agent for the sale or purchase of
goods for a merchant resident abroad.
- Where the agent does not disclose the name of his principal.
- Where the principal though disclosed cannot be sued.
 Undisclosed Principal
• This doctrine comes into play when an agent has authority to bind the
principal but neither the identity nor the existence of the principal is
disclosed.
• In this kind of situation the law deals with the rights of the parties
separately.
• Rights of third party :
- If he had no reason to suspect that he is dealing with an agent, he can
either sue the agent or the principal.
 Further points
• Rights of Principal :
- According to section 184(a) an undisclosed principal may require the
performance of the contract by the third party even though the third
party knew or had any reason to suspect that there was a principal.
• Rights of against third party :
- Where the agent has been acting for all appearance as if he were the
contracting party with the third party he can sue on the contract. But
where a person falsely contract with another as an agent, when in
actual fact is acting on his own behalf the contract is not valid.
 Termination of Agency
• An agency can be terminated in the following ways :
1) By the action of the parties :
- It could be by mutual consent.
- Section 154 an agency is terminated by the principal by revoking his
authority or by the agent renouncing the business.
- It could be done by giving reasonable notice.
 Further points
• By operation of Law :
- This like performance, provided in section 154.
- By expiration of fixed period
- By the death of either party.
- By subsequent insanity of parties.
- By the bankruptcy or insolvency of principal.
- By the happening of an event that makes the contract illegal.
 Sample
• D and B are office mates, one day D does not come to work. A sales
comes to office. Although D never asked B to buy anything, B goes
ahead and buy something for D. Now the sales man insist D must pay.
Do you think D have to pay?