Introduction

The law of agency is governed by Part X of the Contracts Act 1950. An agent is defined as ‘a
person employed to do any act for another or to represent another in dealings with third persons’.
1
The person for whom such act is done, or who is so represented, is called the ‘principal’ (Lee
Mei Pheng, 2003). For example, Mr. Tan is holidaying in Hong Kong and cannot be present in
Penang to sell his car or his house. Mr. Tan thus appoints another person to represent him in the
transaction. Mr. Tan is the principal and that representative is the agent of Mr. Tan.
(http://awritingprescription.blogspot.com/2009/04/law-creation-of-agency.html, 20 October
2010, 5.26pm)

In other words, agency is the relationship which subsists between the principal and the
agent, who has been authorized to act for him or represent him in dealings with others. This in an
agency; there are in effect two contracts:

i. Made between principal and the agent from which the agent derives his authority to act
for and on behalf of the principal;
ii. Made between the principal and the third party through the work of the agent.
(Beatrix Vohrah & Wu Min Aun, 2007)

Any person who is eighteen years old or above and who is of sound mind may be a
principal.2 As between the principal and third persons, any persons may become an agent; but the
person’s unsound mind and who are below eighteen years of age are now liable towards their
principals for acts done by them as agents.3 (Lee Mei Pheng, 2003)

In common with other contracts, a contract of agency can be expressed or implied from
the circumstance and the conduct of the parties. In other words, the authority of an agent may be
expressed (given by words or spoken or written) or implied (inferred from things spoken or
written or from the ordinary course of dealing) (Lee Mei Pheng, 2003). Section 138 of the

1
Section 135, Contract Act
2
Section 136, Contract Act
3
Section 137, Contract Act
Contract Act provides that no consideration is necessary to create an agency. Generally, an
agency may arise in the following ways:
i. By express appointment by principal.
ii. By implied appointment by the principal.
iii. By ratification by the principal.
iv. By necessity
v. By the doctrine of estoppels (Beatrix Vohrah & Wu Min Aun, 2007)