Sec.
135 of Contract Act:
• Agency is the relationship that subsists between the
Principal and the agent who has been authorized to act for
Him or represent him in dealings with others.
• the person for whom such an act is done, or who is so
Represented, is called the “principal”.
e.g. Yusuf appoints Ahmad to negotiate the price of his
House on his behalf. Yusuf is the principal, and Ahmad is the
Agent.
Agent- is the one who has legal authority to act for principal
• Principal-is the one who give authority to agent to act on
behalf of him in dealing with 3rd party
Sec. 136 and 137 CA
PRINCIPAL:
any person who is 18 years old and above and who is of
The sound mind may be a principal.
AGENT:
as between the principal and third persons, any person
may become an agent, BUT persons of unsound mind and
who are below 18 years are not liable towards their
principal for acts done by them as agents.
CHAN YIN TEE V WILLIAM JACKS & CO (MALAYA) LTD
• Chan & Yong (a minor) were partners in a business. Chan
told William Jacks that Yong is his partner and has authority
to act on behalf of Chan. William Jacks supplied goods to
Yong but no payment was made. WJ brought an action
against Chan as the partner (principal) of Yong.
• Held : Chan was responsible to Yong’s act no matter he is an
adult or a minor.
Agency can be created through:-
• i) Express appointment
This happens when the principal expressly appoints a person to be his agent.
(Section 140) This can be done in 2 ways:
a) oral b) in writing
Eg: Abu: “Ahmad, I want you to be my agent”.
• ii) Implied appointment by principal
This happens when a person, by his word or conduct holds out another person as
having authority to act for him.
E.G: • If he allows another person to order goods on his behalf and habitually
pays for them, an agency may be implied.
E.G: • A always ask B to order for him books from C. When C delivers the goods, A
will pay for the goods. Here, B is impliedly appointed as agent for A.
• (Chan yin tee v William jack- Chan expressly told Jack, Yong (a minor) was his
partner)
IMPLIED APPOINTMENT
• It may occur in following situations:
A. Implied from the circumstances of the case or habit
•By words, conduct, regular conduct of the business
between the parties
•Refer section 140 + illustration
•For example, when a board of directors appoints one
of its own to the position of managing director or chief
executive officer the board impliedly authorizes him to
do all such things as fall within the usual scope of that
office
B. Relationship of husband and wife
•General presumption: when a husband and wife live
together, the wife has authority to pledge her
husband’s credit for necessaries suited to their style of
living. Impliedly, wife is an agent to the husband.
EXCEPTION/THE HUSBAND CAN REBUT THIS PRINCIPLE
BY PROVING THAT:
• He expressly forbid his wife from pledging his credit
or
• He expressly warned the tradesman not to supply
his wife with goods or credit,
• The wife was sufficiently provided with the goods of
the kind in question
• The wife was given a sufficient allowance
• The contract was unreasonable, taking into
consideration her husband’s income at that time
MISS GRAY LTD V. CATHCART (1922) 38 TLR 562
• A wife was supplied with clothes to the value of £215, and the
husband refused to pay for them. On his being sued by the
tradesman, the husband proved that he paid his wife £960 a year,
as an allowance.
• Held:
• The husband was not liable.
C. Partnership Act 1961, section 7
•Each partner is an implied agent to the firm when contracting in
the course of the business with the third party.
•Each partner has the implied authority to act on behalf of the
other partners and the other partners or the firm are his principal.
•Mercantile Credit Co. Ltd v Garrod [1962] 3 All ER 1103
•Where the active partner in a business that repaired cars, sold a
car which he did not own.
•Held: He would have apparent authority to do this to an outsider,
and consequently the dormant partner (sleeping partner) was
bound by his act.
IMPLIED FROM THE CIRCUMSTANCES OF THE CASE OR HABIT
SECTION 140 CA
• “…An authority is said to be implied when it is to be inferred
(disimpulkan) from the circumstances of the case; and things
spoken or written, or the ordinary course of dealing, may be
accounted circumstances of the case.”
iii) Ratification by principal
Ratification is the process by which a principal retrospectively authorizes a specific
act of his agent, which was unauthorized at the time of the act.
• It allows a principal to adopt his or her agent´s past acts.
• the principal retrospectively clothes his agent with authority and the law then
proceeds on the basis that the agent had authority from the outset.
• The date of the contract would be the date of the original contract between the
agent and the 3rd party and not the time ratification was made.
BOLTON PARTNERS V LAMBERT
An offer of purchase was made by the Defendant to Scratchley, who was acting as an
agent of the Plaintiffs, but was not authorized to make any contract for sale on 8th of
December, 1886. The offer was accepted by Scratchley on 9th of December on behalf
of the Plaintiffs with a direction that the company’s solicitor had been instructed to
prepare the necessary documents. On the 13th of January, 1887, the Defendant
withdrew his offer on the ground that he had been misled by the statements that had
been made to him as to the value of the property. After the withdrawal, the Plaintiffs,
on 28th of January, ratified the acceptance of the offer by S.
HELD - The rule of ratification is applicable as per which ratification is thrown back
to the date of the act done, and that the agent is put in the same position as if he had
authority to do the act at the time the act was done by him.
Agency by ratification can happen only if it falls under these 2 situations:-
1. Agent who has been appointed but has exceeded his authority when he
entered into a contract with a third party.
2. A person who has no authority to act for the principal but he acted as if
he has the authority to enter into a contract with third party
Section 149 CA
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 effects will follow as if they had been performed
by his authority.
Section 150 CA
Ratification may be expressed or may be implied in the conduct of the
person on whose behalf the acts are done
According to section 149 of CA,
if either one of two situation happen, the principal has two choices;
• reject the contract or accept the contract; or
• Accept the contract.
• When he accepts the contract, it is known as ‘ratification’.
CONDITION OF A VALID RATIFICATION:
1) the contract done by agent was without authority or exceeding
authority
2) the contract recognized by law, not illegal
3) agent acted as agent for the principal not in his own name
4) the principal must actually exist when the contract was made.
5) the principal must have contractual capacity
6) the principal must have knowledge of all material facts
7) principal must ratify the whole contract (Section 152)
8) ratification must be made within a reasonable time
9) ratification must not injure or affect the interest of a third person.
(Section 153)
THE CONTRACT ENTERED INTO BY THE AGENT MUST BE UNAUTHORIZED OR
EXCEED AUTHORITY.
The contract done by the agent was without authority or exceeding the authority.
THE CONTRACT RECOGNIZED BY LAW, NOT ILLEGAL
• The unauthorized act/contract entered into by the agent must be lawful
• Brook v Hook The principal may not ratify a contract in which his signature had
been forged by the unauthorized agent.
AGENT ACTED AS AGENT FOR THE PRINCIPAL NOT IN HIS OWN NAME
• He must let people believe he was the agent, and he should not have acted in
his own name.
• Keighley Maxted & Co v Durant
• An agent (Robert) was authorized by the appellant (principal) to buy wheat at a
certain price. The agent exceeded his authority & bought it at a higher price.
However the agent contracted in his own name.
• Held:The appellant was not liable to Durrant(3 rd party) because the appellant
could not ratify the contract because the contract was made in the agent’s own
name
THE PRINCIPAL MUST ACTUALLY EXIST WHEN THE CONTRACT WAS MADE
• The principal must be in existence when the unauthorized contract was entered
into by the agent.
• Kelner V. Baxter
• Held: A contract to buy a hotel made by an agent on behalf of a company which
was not registered/formed could not be ratified by the company, because the
company(principal) did not exist at that time.
THE PRINCIPAL MUST HAVE CONTRACTUAL CAPACITY
• The principal must be a competent person as defined under the Contract
Act. General principle in Contract Act applies :-
Section 11 of Contract Act:-
• Every person is competent to contract who is of the age of majority
according to the law which he is subject and who is of sound mind, and not
disqualified from contracting by any law to which he is subject.
• The age of majority is 18 years old. This is provided by the age of Majority
Act 1971.
THE PRINCIPAL MUST HAVE KNOWLEDGE OF ALL MATERIAL FACTS
• Marsh v Joseph
• A principal had ratified a contract without the full knowledge of all
material facts- a solicitor s clerk acted fraudulently on behalf of his
employer. The solicitor discovered certain aspects of the fraud. The clerk
gave a partial account of the fraudulent actions, which the solicitor believed
to be a full account. The solicitor then atified the clerk s actions but the full
story only came out later.
• Held : The principal was not bound to such contract.
PRINCIPAL MUST RATIFY THE WHOLE CONTRACT
• The principal cannot accept which is advantageous to him and reject the
rest. He cannot cherry-pick.
• Section 152 CA;
• A person ratifying any unauthorized act done on his behalf ratifies the
whole of the transaction of which the act formed a part.
RATIFICATION MUST BE MADE WITHIN A REASONABLE TIME
When an act is required to be done by a certain time, i.e. a time is fixed
for doing an act, whether by statute or agreement, the act cannot be
ratified beyond that time. If no time is stipulated, the ratification must
be made within reasonable time. What is a reasonable time will depend
on the nature of the contract and the circumstances.
•Metropolitan Asylum Board V Kingham & Sons
• The agent contracted to buy eggs without the authority. The principal
tried to ratify the contract 1 week after it was made.
• HELD: ratification was too late.
RATIFICATION MUST NOT INJURE OR AFFECT THE INTEREST OF A THIRD
PERSON
• Section 153 of CA An act done by one person on behalf of another,
without that other person’s authority, which, if done with authority,
would have the effect of subjecting a third person to damages, or of
terminating any right or interest of a third person, cannot, by
ratification, be made to have that effect.
ILLUSTRATIONS
• (a) A, not being authorized thereto by B, demands on behalf of B, the
delivery of a chattel, the property of B, from C, who is in possession of it.
This demand cannot be ratified by B, so as to make C liable for damages
for his refusal to deliver.
• (b) A holds a lease from B, terminable on three month’s notice. C, an
unauthorized person, gives notice of termination to A. The notice cannot
be ratified by B, so as to be binding on
IV) AGENCY BY NECESSITY
• Sec.142
- a person may become an agent although he was not appointed. When this
situation happen, that person is known as agent by necessity. If an agent fail
to communicate with principal, the agent can use his own discretion to take
the necessary steps
• S167 –it is a duty of an agent in the case of emergency to communicate
with principal to get some instructions
Therefore, an agency by necessity can be created by fulfilling these 3
conditions:
- It is impossible to get the principal’s instructions.
- The agent’s action is necessary to prevent loss to the principal. This
happen when the principal put the agent to be in charge of the goods. .
- The agent had acted in a good faith. And to the best interest of the
principal
SPRINGER V GREAT WESTERN RAILWAY COMPANY
• Df agreed to carry Pf’s tomatoes from Channels Island to London, by ship to
Weymouth and by train to London. The ship was stopped at Channels Island
for three days due to bad weather. Eventually, when the ship arrived at
Weymouth, Df’s employees were on strike, tomatoes were unloaded by
casual laborers, but it was delayed for two days. At that time, some of the
tomatoes were found to be bad. So, Df decided to sell the tomatoes as they
felt that tomatoes could not arrive in Covent Garden market in a good and
saleable condition. When Pf found out about this, Pf wanted to claim
damages from Df. • HELD: Pf was entitled to damages. Df ought to have
communicated with the Pf when the ship arrived at Weymouth to get
instruction. As Df has failed to communicate with Pf when they could have
done so, thus, there was no agency of necessity
GREAT NORTHERN RAILWAY V. SWAFFIELD (1874)
• The Defendant has put his horse on to the Plaintiff’s train to be sent to a
destination which has been agreed by both parties. Upon arrival at the
destination, there was no one to take the horse. The station master didn’t know
the Defendant’s address and thus directed that horse to be put in stable. The
railway company later claimed from the Defendant for the charges of the stable.
• Held: Plaintiff has acted as an agent by necessity.
IMPACT OF AGENCY BY NECESSITY
• The agent will be protected from any claim of the principal.
• The agent will be entitled to the additional payment for his effort to protect &
to preserve the safety and interest of the principal.
• A contract exist between the principal and the 3rd party.
V) AGENCY BY ESTOPPEL Section 190
• (1) it happens when the principal allows a third party to believe that a person
is the agent of the principal.
• (2) the principal can make a third party to believe so through his conduct or
word.
• (3) when this happen, the principal is estopped from refusing to accept that a
person is his agent.
Eg:
• You (agent) tell Bakar (third party), in the presence of Rosa (principal) that you
are Rosa’s agent and Rosa does not deny this statement.
• Rosa cannot later on refuse to accept you as her agent if Bakar sells goods to
you believing you to be her agent and later claims price from Rosa.
FREEMAN & LOCKYER V BUCKHURST PARK PROPERTIES LTD
• There were 4 directors in a company. 1 of them, ‘A’ contracted on behalf
of the company with ‘T’ (3rd Party) without any authority. The other
directors knew about the contract, but not inform ‘T’ that ‘A’ actually had
no authority to act. This induced ‘T’ to believe that ‘A’ had the authority to
enter into a contract on behalf of the company.
• Held:The co is estopped from denying that ‘A’ is the co’s agent & from
denying that ‘A’ had the authority to act on behalf of the company.
DUTIES OF AN AGENT TO HIS PRINCIPAL
The duties of an agent are governed by S164-178 contract act. Their duties
are:-
• To obey the principal’s instruction: sec164
• An agent must follow the instruction of the principal.
• If agent does not follow, it is a breach of agency contract.
• The agent must bear any loss suffered by the principal due to the agent’s
disobedience.
• Turpin v Bilton
• The agent has been instructed by the Principal to get the insurance for his
vessel. However the agent failed to do so.The vessel lost and as a result the
Principal has to bear some loss. Held: the agent is liable for breach of duty.
Due his failure to obey the principal’s instruction. The agent is liable to pay
compensation for the loss
An agent has to follow the instruction as long as it is lawful.
• Eg: the principal (a) instructed his agent (b) to sell his painting for
RM100,000.00. However, B sold a’s painting for RM60,000.00. Here, B had
breached section 164 of Contract Act
• Ie agent’s duty to obey the principal’s instruction. B is liable to bear the
loss of RM40,000.00 suffered by his principal,a.
2. To act according to custom where instruction is not given : sec. 164
• When the principal does not give any instruction, agent has to act
according to normal standard in doing a business.

3. To exercise care, skill and diligence - sec. 165

• Agent must use his skill and exercise diligence for the interest of his
principal.
• Agent must make sure that when he is acting on behalf of the
principal, it is important for him to be careful.

KEPPEL V WHEELER (1927) 1 KB 577

• Fact: the defendant was an agent for plaintiff. The agent was asked by
the plaintiff to sell a house. One offer was made by A through an agent
and was accepted by the principal subject to a condition.
Later, another offer was made by B, but this time the offer is higher
than the first offer made by A. The agent did not inform the principal
about B’s offer. Principal signed a contract with A. Principal took an
action against agent.
• Court held: that the agent was liable because he must use his skill and
care for the benefit of his principal. Since agents failed to do so, he was
liable to pay the principal the difference between the two offers.

To render proper accounts when required by the principal :sec. 166

• The agent must give all account for all monies and property that he is
in charge when the principal asked for it.
• Lyell V Kennedy
• Held: An agent who has been entrusted with the principal’s
money/property is bound to keep the money/property separately from
his own property