LAW OF AGENCY

 Governed by Part X of the Contracts Act 1950.

 Definition of agency can be found under S 135 of

the Act. S 136 &137 defines principal and agent
respectively. The combination of the respective
sections amounts to AGENCY as the relationship
which subsists between the Principal and the agent
who has been authourised to act for him or
represent him in dealings with others.
 General rule : An agent who act within his powers,
Principal will be responsible and if the agent were
to act outside his powers he will be personally
responsible.
CREATION OF AGENCY
 Agency may arise the from following :-
1) by express appointment
2) by implied appointment
3) Ratification by the principal
4) by necessity
5) Estoppel
1. Express App – Authorisation can be in writing or oral.
2. Implied Appointment –
 1)When a person by his words or conduct HOLDS OUT another as having authority
to act for him,
case: CHAN YIN TEE V WILLIAM JACKS AND CO.
2) The relationships between husband and wife
3) Section 7 Partnership Act 1971
3. Agency by Ratification – two situations b4 it arises
1) Agent appointed has exceeded his powers
2) A person who has no authority to act for Principal has acted as if he has been.
 Effect – Principal can either reject the contract since he has not authorised or accept
the contract so made. Principal who accept or confirms is known as RATIFICATION.
Conditions for Ratification
1. The act or contract must be unauthorised
2. Unauthorised act must be recognised by law
3. Agent during contract must expressly act as agent for the
Principal. (Keighley Maxted v Durant) s 149 ca50
4. Agent must have Principal who are in actual existence or
capable of being ascertained – s65 CA 2016 (Cosmic insurance
v Khoo Chiang Poh)
5. Principal must have contractual capacity
6. Principal must at time of ratification have full knowledge of all
material facts
7. Principal must ratify the whole act or contracts (100%)
8. Ratification must be made within a reasonable time
(Grover & Grover v Matthews)
Cases for ratification
3) KEIGHLEY Maxted v DURANT
Roberts, the agent was instructed by Keighley to buy wheat at a certain
price. Roberts exceeded his authority by buying the wheat a higher price
and IN HIS OWN name but intending it for Keighley. Keighley agree with
the price but failed to take delivery. Court held: Keighley was not liable
to Durant(seller) as he did not ratify the contract because Roberts did not
declare himself as agent for Keighley when he enter the contract.
4) COSMIC Insurance v KHOO CHIANG POH
Before s65 CA2016 can be applied, 3 things must be proved:
1) There must be a contract before Company was registered
2) Contract may be ratified by Co. after its formation
3) Upon ratification contract is ante dated to the date it was
made
8) GROVER and GROVER V MATHEWS
A fire insurance policy ratified AFTER the event insured against
had happened was held to be ineffective.
TUTORIAL
Q1. Bob, a security officer had previously arranged a fire insurance
policy for his employer, Cilli Bhd. Three days before the policy was
due to expire, Bob renewed it on their behalf even though he had not
received any instruction from them. A week later Cilli Bhd was burnt
to the ground. Cilli Bhd wished to ratify the insurance contract which
was renewed by Bob and submit their claim to the insurance
company.
Advise Cilli Bhd.
Q2. Suraya has been instructed by Liza to buy a car for a price not
exceeding RM40K. Suraya bought a car from Wong Motor in her
own name for the price of RM50K. Liza initially agreed to Suraya’s
purchase but subsequently refused to accept the car and pay for the
price. She claimed that the car was too expensive and that it was for
Suraya personal use.
Advise Liza.
Tutorial q3

Dato Zain appointed Tambi, a property agent, to buy a

bungalow house at Putera Heights at a price of RM 5
million. Tambi bought a bungalow house at Putera
Heights at a price of RM 5.5 mill. Tambi also obtained
an insurance policy for the house even though there
was no instruction from Dato Zain to do so. Dato Zain
liked the bungalow so much that he ratified the
contract upon being informed about the contract.
However, Dato Zain had requested to consider the
insurance policy and he only ratified the contract 3
months later after the house was destroyed by fire.
Advise Dato Zain
4. Agency by Necessity
 A person may become the agent of another without being appointed as such…S 142
CA’50
 Eg: Wife deserted by husband.
 A commercial agency happens when a person is entrusted with another property and
becomes necessary to preserve that property although he has no express authority.
Case: Great Northern Railway v Swaffield
 4 conditions must be satisfied:-
 Its impossible for agent to get Principal instructions. (refer to s 167 CA’50)
 Agents action is necessary to prevent loss to P.
 Agent acted in good faith.
 There must be a real emergency (Phelps co. v Hill)
5. Agency by Estoppel
The main purpose of estoppel is to provide protection against the
detriment which would flow from a partys change of position if the
assumption that led to the change of position were deserted by the
other party
Estoppel,continue
 3 elements to constitute estoppel:-

1. A representation made by or on behalf of the Principal to

the third party concerning the authority of the agent
2. Reliance by the third party on the representations made by
the Principal to the third party, and
3. The third party must rely in the Principals representations
A person cannot be bound by a contract made on his behalf
without his authority.
TETAPI, if he (P) by his words or conduct allows a third party to
believe that that particular person is his agent even when he is
not, and the third party rely on to his detriment of the third
party, he (P) will be estopped or precluded from denying the
existence of that persons
Tutorial. q4
Maju Imports imports roses and tulips from Holland. Maju
Imports usually used Quick Airlines to deliver the goods from
Amsterdam to Kuala Lumpur. The aircraft carrying the goods
made an emergency landing at Dubai Airport due to engine
problem. The plane was stranded for three days. Maju Imports
could not be contacted from Dubai Airport. The airline agent
sold the flowers since it started to wither. When Maju Imports
discovered what had happened they refused to accept the
action taken by the airlines
Advise Quick Airlines.
DUTIES OF PRINCIPAL AND AGENT
 S 164 – 178 CA’50

1. To obey principal’s instructions

2. To follow custom if there’s no express inst.
3. Exercise care and diligence and use skill (KEPPEL V WHEELER)
4. To render proper account when required (s 166)
5. To pay principal all sums received (s 170,171 &174)
6. To communicate with the principal (s 167 & 142 CA’50)
7. Cannot have conflict of interest (Wong Mun Wai v Wong Tham Fatt)
8. Cannot make secret profit – 5 remedies for Principal
9. Cannot disclose confidential information
10. Delegatus non potest delegare ( a delegate cannot delegate)
tutorial

Q1. Ahmad instructed his agent Mani, to sell his business premises at a
price of not less than RM 1 mill. Mani sold the premises to Ah Chuan.
Six months later, Ahmad discovered that Mani received RM 50K as
commission for the sale from Ah Chuan. Ahmad was informed that a
person by the name of Omar had offered the price of RM 2mill. to Mani
but he chose to sell the premises to Ah Chuan because Omar refused to
pay him any commission.
Advise Ahmad

Q2. Ah Kong appointed Siva to buy Bob’s land on his behalf. Siva was
told to purchase the property at a price not exceeding RM100K. The
property was important for Ah Kong future investment. Bob had agreed
to sell the property at RM 70K. Both Bob and Siva agreed that the price of
the property would appear as RM 100K. in the contract. The contract was
signed and paid in full. Later Siva kept RM 20K and Bob RM10K.
Advise Ah Kong
5 remedies for Principal.( secret profit)
1. The Principal may repudiate or terminate the contract which
was made on his behalf by the agent. (S 168 CA1950)
2. The Principal may recover the amount of the bribe.
(S 169 CA1950, TAN KIONG HWA v ANDREW
S.H.CHONG)
3. The Principal may refuse to pay the agent’s commission
and other remunerations . (ANDREWS V RAMSAY)
4. The Principal may terminate agents authority.
(BOSTON DEEP SEA FISHING & ICE CO. v ANSEL)
5. The Principal may sue both the agent and the third party who
gave the bribe and may claim damages.
(MAHESAN v MALAYSIAN GOVT OFFICERS CO OP
HOUSING SOCIETY)
DELEGATUS NON POTEST DELEGARE (exceptions)
Meaning an agent cannot employ another person to do his duty.
EXCEPTIONS:
1. WHERE THE PRINCIPAL APPROVES OF THE DELEGATION (Consent)
(DE BUSSCHE v ALT)
2. WHERE IT IS PRESUMED FROM THE NATURE, CUSTOM,TRADE OR CONDUCT
OF THE PARTIES THE AGENT HAS THE TO DELEGATE HIS AUTHORITY
3. IN CASE OF EMERGENCY
4. IF THE ACT TO BE DONE IS PURELY MINISTERIAL OR CLERICAL
Duties Principal to Agent
 S 175 – 178 CA’50
1. To pay agent his commission or other agreed remuneration unless the
agent relationship is gratuitous.

2. Not to willfully hinder or prevent the agent from earning his

commission

3. To indemnify and reimburse the agent for acts done in the exercise of
his duties
AUHTORITY OF AGENT
 Agent’s act is binding on the Principal when its done within his authority.
 Actual Authority – Authority expressly given by the Principal to the
agent orally or in writing. Authority implied is that all powers given that
are necessary to execute the express authority.
 Cases:1) Watteau v Fenwick
 2) Panorama Development v Fidelis Furnishing fabrics
 Apparent Authority – s 190
TERMINATION OF AGENCY
 Sections 154 to 163 CA50 deal with the manner in which an
agent’s authority may be terminated.
 Agency may be terminated by 1) by ACT OF PARTIES
2) OPERATION OF LAW
 ACT OF PARTIES
An agency contract may be terminated by Mutual consent or by
unilateral revocation by the principal or unilateral
renunciation by the agent at any time by giving notice. s154 &
160.
- When Principal may revoke agents authority – s 156 CA 50
 Reasonable TIME must be given in either revocation or
renunciation otherwise AGENT may claim damages if anything
were to happen – s 159
Case : Sohrabji v Oriental Sec. Assurance
 Limitation on Principal
 Power of Principal to revoke agents authority is
limited in several circumstances:-
 Where agent himself has an interest in the property
which forms the subject matter of the agency, agency
cannot be terminated.
s 155, case: Smart v Sanders, Firth v Firth and
illustrations. P 78, S 155 CA 1950.
- Please read S 156 Ca 50
 Principalcannot revoke agents authority ‘after the
authority has been partly exercise, so far as regards
such acts and obligations as arise from acts already
done in the agency’.
 Third party rights
 So far as third party rights is concerned its still protected:-
Case: Pichappa Chitty v Haji Jah
Trueman v Loder

BY OPERATION OF LAW
1) By the performance of the contract of agency
2) By the expiration of period fixed
3) Death of either agent or principal
4) Subsequent insanity of either parties
5) Bankruptcy or insolvency
6) Event which renders agency unlawful (perang la!)
LAW 446 & 416 FOREVER!
 tutorial
Q1. Daud appointed Remy as his agent. He instructed Remy to sell his
shophouse at Jalan Permai. According to the agreement the price of the
shophouse should be sold at RM 500K within one year. After the
appointment, Remy unfortunately had a nasty accident. He was
paralysed and could not perform his duty at all.
Advise Daud
Q2. Salina owes Haris RM50K. For the purpose of discharging her
debt, Salina gives an authority to Haris to sell her Ferrari and to use the
proceeds of the sale to pay of her debt. Haris managed to get a buyer but
Salina then changed her mind and refused to proceed with sale.
Advise Haris