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AGENCY
Introduction:
The law is governed by Part X of the Contract Act1950.
An agenta person employed to do any act foranother or to represent another in dealings withthird persons: s.135
The principalthe person for whom such act isdone, or who is so represented.
Agencyis the relationship which subsistsbetween theprincipal & the agent, who has beenauthorized to act for him / represent him in
dealings with others.
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2 contracts are in effect in
agency:-
1. Contract made between principal &
agentwhich the agent derives his
authority to act & on behalf of theprincipal
2. Contract made between the principal &
the third party through the work of anagent
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cont
Any person who is 18 years old/ above &
who is of sound mindmay be a principal. :
s.136
Any person may become an agentBUT
persons of unsound mind & who are below
18 years of age are not liable towards theirprincipals for acts done by them as agents :
s.137
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CREATION OF AGENCY
A contract of agency can be expressed /
impliedfrom the circumstances & the
conduct of the parties:
KGN Jaya Sdn Bhd v. Reliance Sdn Bhd
Court of Appeal held : the law does not
require that an agency /sub-agencyagreement must be in writting
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Cont
An agency may arise in the following ways:
By express appointment by the principal
By implied appointment by the principal
By ratification by the principal
By necessity; i.e by operation of law
By the doctrine of estoppel / holding out.
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By express appointment : s.139
Express appointment by the principal
Authorization may be given by words
spoken / written : s.140
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By implied appointment: s.139
(i) Implied appointment when a person, by
his words / conduct, holds out another
person as having authority to act for him:i.e. it can be inferred from the
circumstances of the case : s. 140
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Case: Chan Yin Tee v William Jacks @ Co.
(Malaya) Ltd
Facts: AppChan, Yonga minor, wereregistered as partners in business.
At the meeting with resp co, Chan held himselfout to be Yongs partner.
Then supplied goods to Yong but the price wasnot paid.
Resp co obtained judgement against Chan &Yong.
Chan appealed.
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cont
Held: Irrespective of whether Chan was a
partner or not, Chan had the authority to do
things on his behalf & and as such, liablefor Yongs act.
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(ii) Relationship between husband & wife
Presumptionhusbandprincipal & wifeagent, wife has an authority to pledge herhusbands credit for necessaries suited to their styleof living.
Can be rebutted:
(a) he has expressly forbade his wife to pledge his
credit (b) he expressly warned the tradesman not to
supply his wife with goods or credit; or
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cont
(c) his wife was sufficiently provided forwith goods of the kind in questions; or
(d) his wife was given a sufficientallowance for buying the goods withouthaving to pledge her husbands credit; or
(e) the order, though for necessaries, wasunreasonable, taking into consideration herhusbands income at that time.
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cont
(iii) By the Partnership Act 1961S 7:
partners are each others agent when
contracting in the course of the partnershipbusiness.
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By ratification: s.149
Can be created by either an agent,
who duly appointed & has exceeded his authority,
or a person, who has no authority to act for theprincipal & has acted as if he had the authority.
When either one of the above happens, the
principal can either:-
- reject or,
- accept the contract so made
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cont
The effect of ratification is to render the
contract binding on the principal as if the
agent had been properly authorizedbeforehand: s.149
Ratification is retrospective: i.e. it dates
back to the time when the original contractwas made by the agent & NOT at the time
of ratification.
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cont
Ratification can only be done:
(I) The act or contract must be unauthorized
(2) The unauthorized act must be one which
is recognized by law.
(3) the agent must, at the time of the
contract, expressly act as agent for the
principalS 149.
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cont
Must not allow 3rd party to believe he is theprincipal.
CASE: KEIGHLEY MAXTED & CO V.DURANT [1901]
Facts: Roberts, was authorized by the Keighley tobuy wheat at a certain price.
Robert exceeded his authority & bought at higherprice from Durant & used his own name butintending it for Keighley.
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cont
Keighley agreed o take the wheat at that
price but failed to take delivery.
Held: Keighley was not liable to Durant, ashe could not ratified Roberts contract, since
Robert did not profess to act as agent.
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cont
(4) contract entered into by a company or its
agent prior to its formation may be ratified
by the co after its formationS35 Co Act1965.
CASE: COSMIC INSURANCE V
KHOO CHIANG POH
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cont
(5)The principal must have contractual capacity at
the time when the contract is made & at time of
ratification (6) The principal must have full knowledge of the
material factsat the time of ratification
(7) The principal must ratify the whole act or
contractcannot accept only part which
advantageous to him & reject the rest
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cont
(8) the ratification must be made within a
reasonable time.
(9) the ratification must not injure a thirdparty.
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By necessity (in an emergency) :
s.142
It is created when a person is entrusted with
anothers property & it becomes necessary to
do something to preserve that propertyalthough he has no express authority to do so.
There must be already some existing
contractual relationship between the principal
& the person who acts on his behalf; e.g.between the owner & the master of a ship @ an
owner & a carrier of goods.
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cont
May be created if the following
conditions are satisfied:-
i)it must be impossible for the agent to get theprincipals instruction
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CASE: SPRINGER V GEATWESTERNRAILWAY COMPANY [1921]
Def agreed to carry ptfs tomatoes from Jersey toCovent Garden market.
Owing to bad weather, the ship arrived late atWeymouth.
Defs employees were on strike, tomatoes wereunloaded by casual labourers some of tomatoes
were found to be bad. Def decided to sell tomatoes as they felt that
tomatoes could not arrive in Covent Gardenmarket in a saleable condition.
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cont
Ptf claimed damages.
Held: ptf was entitled to damages because
defs were not agent s of necessity becausethey have failed to communicate with the
ptf when they could have done so.
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(ii) The agents action is necessary
I.e to prevent loss to the principal withrespect to the goods
Eg: perishable goods If no urgency existsgoods are merely sold
because of inconvenience agency ofnecessity does not arise.
(iii) agent of necessity has acted in goodfaith
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By estoppel
Generally, a person CANNOT be bound by
a contract made on his behalf without his
authority. BUT, if he, by his words & conduct, allows
a third party to believe that X is his agent,
when X is not, and the third party relies onit, he will be estopped / precluded from
denying the existence of Xs authority.
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Types of Agency
Agents may be classified according to:-
1. the extent of their authority
2. their functions
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Classification according to the
extent of authority:-
A universal agent
A general agent
A special agent
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Classification according to
functions:-
Del credere agents
Factors
Brokers
Auctioneers
Bankers
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Duties of principal and agent:
s.164178 C A 1950
Agents Duties:
To obey theprincipals instructions : s.164
Failure - will result in breach of contract & agentwill be liable for any loss suffered by theprincipal.
Refer to illustrations in C A 1950.
Case: Turpin v Bilton [1843] 5 Man. & G. 455,held: the agent was liable when he failed toinsure a ship when instructed to do so & the shipwas lost.
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cont
However, an agent is under NO duty to
obey instructions of his principal if the
instructions are unlawful. Case: Cohen v Kittel[1889] 22 Q.B.D 680;
Held: the agent was not liable for failing to
place bets.
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cont
2. In the absence of instructions from the
principal, to act according to the customs
which prevail, in doing business of the samekind, at the place where he carries on his
work.
Otherwise, he has to make good any losssustained by the principalS 164.
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Skill & diligence required from
agent : s.1653. An agent is bound to conduct the business ..with
asmuchskillas is generally possessed by
persons engaged in similar business, unless the
principal has notice of his want of skill. The agent is bound
to act withreasonable diligence,
to use such skill as he possesses; &
to make compensation to his principal in respect
of the direct consequences of his own neglect,
want of skill, or misconduct
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CASE: KEPPEL V WHEELER
Facts: def - agent instructed by ptf -, principal, tosell his house.
An offer was received & accepted by ptf subjectto contract.
A few days later, a higher offer was made by X,but agent didnt communicate this new offer toptf.
A written contract of sale between ptf & 1st ofereewere duly signed.
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cont
Held: def was liable to ptf for the difference
between two offers, coz agent must disclose
everything that coming to his knowledgewhich is likely to influence the principal in
making the contract.
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To render proper accounts when
required : s.166
4. An agent is under a duty to account for all
the monies & property handled by him as
agent for the principal & to produce suchaccounts when demanded by the principal.
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To pay his principal all sums
received on his behalfS 171
5. However, an agent may retain / deduct from such
sums received, advances made / expenses incurred
by him in carrying out his duty, his commission &other remuneration payable to him for acting as
agentS 170
s.174gives the agent the right to retain his
principals property in his possession until hisremuneration is paid, unless his contract provides
the contrary.
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To communicate with the
principal
6. In cases of difficulty, an agent must use all
reasonable diligence in communicating
with & in seeking to obtain instructionsfrom the principalS167.
However, in emergencies, the agent may
use his own discretion in adopting a courseof action to safeguard the interest of the
principal - 142.
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Not to let his interest conflict
with his duty
7. The duty of an agent is to act solely for the
benefit of the principal & he cannot allow
his own personal interest to conflict withthis duty : s.169
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Not to make any secret profit out of
the performance of his duty (e.g. a
bribe, secret commission / financial
advantage): s.168
8. But if the principal knows about the secret profit& consents to it, the agent is entitled to keep theprofit.
If however, the profits are secret, then the
principal may:-a) Repudiate the contract if it is disadvantageous to
him
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contb) Recover the amount of secret profit from the agent
: s.169
c) Refuse to pay the agent his commission / otherremuneration
d) Dismiss the agent for breach of duty
e) Sue the agent & the third party giving the bribe,for damages for any loss he may have sustainedthrough entering into the contract
Case:Mahesan v Malaysian Govt. Officers Co-operative Housing Society Ltd
Held: resp. could recover either the bribe / theamount of the actual loss suffered by it as a result
of entering into the contract.
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cont
9. Not todisclose confidential information /
documents entrusted to him by his principal
10. Not todelegate his authority
Maxim: delegatus non potest delegatea
delegate cannot delegate.
There are exceptions to this general rule
(please, refer on your own )
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Duties of a principal to his agent:
s175178 C A 1950
1. Agent to be indemnified against consequencesof lawful acts : s.175
- to pay the agent the commission / otherremuneration agreed, unless the agencyrelationship is gratuitous.
2. Agent to be indemnified against consequencesof acts done in good faith. : s.176
- not to willfully prevent / hinder the agent fromearning his commission.
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cont
3.Non-liability of employer of agent to do acriminal act : s.177
- to indemnify the agent for acts done in theexercise of his authority.
4. Compensation to agent for injury caused byprincipals neglect: s.178
- the right to be indemnified entitles the agent torecover not only his commission / remuneration
but also money which he paid on the principalsbehalf & all losses suffered by him in carryingout the directions of his principal.
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cont
However, the agent loses his right to
indemnified if he acts beyond his duty or if
he has performed his duty negligently.
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The Authority Of The Agent
General rule:
An agents acts are binding on the principal
if they are done within the agentsauthority.
BUT if an agent does an act which exceedsthat authority so given, the principal isnotboundUNLESS he adopts & ratifies theauthorized act.
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An agents authority may be :-
Actual; or
Apparent (ostensible)
Actual authorityis authority expresslygiven by the principal (orally / in writing);
orimpliedfrom the express authority given,from the circumstances of the case, custom /usage of trade, & the conduct of parties.
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cont
Apparent / ostensible authorityis that which isnot expressly given by the principal but which thelaw regards the agent as possessing although the
principal has not consented to his exercising suchauthority.
Case:The Firm of T.AR. CT v The Firm of SV.K.R.
Held: that an agent who had authority to part withthe firms money had, in the circumstances of thecase, a necessary implied authority to receiverepayment for the firm.
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cont
Note:-
Secret / private restrictions on the authority
of the agent DO NOT affect a third partywhodoes not know of such restrictions &
who has acted ingood faith in relying on
the agents apparent authority.
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Termination Of Agency
Agency may be terminated by:
1. The act of the parties, or
2. By operation of law
T i ti b th t f th
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Termination by the act of the
parties
It means by theact of the principal / agentExample:-
by mutual consent, by revocation by the principal, or
by renunciation of the agency by the agent
Note:Revocation / renunciation of the agencymay be expressed / implied by the conductof the principal / agent.
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..cont
The principal may revoke the authority at
any time before it has been exercised to
bind the principal. Where the agency is for an indefinite
duration, the agent can terminate the
agency by givingreasonable notice oftermination to the principal : s.159
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cont
Where the agency is for a definite / fixed
period of time, the agent CANNOT
terminate the agency before the expiry ofthat period without just cause.
Otherwise, hell be liable to the principal
for damages for any loss caused by thepremature termination of the agency : s.158
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Termination by operation of law When the contract of agency has been
performed: s.154
Upon the expiry of the period fixed in the
contract of agency
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cont
Upon the death of the principal or the agent:s.161, Illustration C
An exception to this general rulewhere theagent has an interest in the property which forms
thesubject-matter of the agency. In such case,when the principal dies, the agent may continue toexercise authority; & if the agent dies, theauthority passes to the agents personal
representatives.: s.155, Illustration A When principal dies, the agent must take all
reasonable steps to protect & preserve the interestsentrusted to him. : s.162
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cont
When the principal or agent becomes insane
When the principal or agent becomes insolvent /
is made bankrupt or by frustration when anevent happens which renders the agency
unlawful.
Note:Upon insolvency, a persons rights &
liabilities are vested in the Official Assignee &,the agency relationship ceases.