Law of Agency

 An agency is the relationship which subsists between the principal and

agent who has been authorised to act for him or represent him for the
dealing with others. (Sec 135 CA 1950)
 Thus, if A (the principal) appoints B (the agent), to perform some work on
his behalf, an agency relationship arises between them.

 Sec 135 CA 1950,

 A person employed to do any act for another or represent another in
dealings with third party.

Principal
 The person for whom such an act is done or who is represented.

 Sec 136 CA 1950

 Any person who is age of maturity and sound of mind may employ an agent
 Sec 137 CA 1950
 As the between the principal and 3rd party, any person may become and
agent. In the event of agent will not be liable, the principal will have to be
responsible to the 3rd party. ( Chan Yin Tee v William Jacks co (Malaya) Ltd
 Creation of Agency

1. Express Apointment ( Sec 139 & 140 CA 1950)

 This involves the actual consent of the principal and the agent.
 Agency entails a grant of express power by the principal to the agent.
 May be in written or oral form.

2. Implied Apointment ( Sec 139 & 140 CA 1950)

 Is by way of implied consent of the principal and agent

 This is derived from the words of and conduct of the parties in the way they
have acted in connection to Hely Hutchon V Brayhead Ltd
 The law can infer the creation of agency by implication when a person by
his words or conduct holding person as having authority to act for him
 Chan Yin Tee V William Jacks co. (Malaya) Ltd

3. Ratification ( Sec 149 & 153 CA 1950)

 An agent who duly appointed has exceeded his authority

 A person who has no authority to act for the principal has acted as if he has
the authority

When any of these happen, the principal may accept or reject the contract so
made (Sec 149 CA 1950)

 If the principal accepts and confirms the contract, it is knowns as ratification

Sec 150 CA 1950

Ratification may be express or implied

A contract can only be ratified if:

i. The act or contract must be unauthorised (Brook v Hook)

ii. The unauthorised act must be one, which is recognised by law. A contract which is
void or criminal act can’t be ratified
iii. The agent at the time of contract, expressly act as agent for principal. He must not
allow the third party he is the principal (Keighly Maxted & co V Durant )
iv. The agent must have principal (existence) (Kelner V Baxter)
v. The principal must have full knowledge of material facts (sec 151)
vi. The principal must ratify the whole act/ contract. (sec 152)
vii. The ratification must not injure the third party to damage or terminate his right or
interest (sec 153)
 4. Neccesity (Sec 142)

 An agency of necessity may arise as a result of emergency and urgency of situation

 In such event, the agent may do all such things as are necessary for the prevention
of loss to the principal (Sec 142)
 An agent has the authority in an emergency to do all such acts for the purpose of
protecting from losses would be done by a person of ordinary prudence, in similary
case under similar circumstances.

Conditions :

i) It must be impossible to obtain principal’s instruction (Springer v Great Western

Railway Company)
ii) The agent act must be necessary to prevent principal from loss (Munro v Willmot
co)
iii) The agent of necessity has acted in good faith

5. Agency by Estoppel (Sec. 190)

 A person cannot be bound by a contract made on his behalf with or without his
authority

Sec 190 (ill a &b)

 When an agent has, without authority has done acts or incurred obligations
to thirds person on behalf of his principal,
 The principal is bound to obligations within the scope of agent’s authority

 Types of agent
Universal: general agent with extensive powers. He can do all acts which a principal may
personally do
General agent: agent who is employed act on behalf of his principal
Special agent: appointed to do specific act or specific purpose, his authority is limited to specific
act/purpose.
 Authority of Agent

1. Actual Authority 2. Apparent/Ostensible Authority

 Refers to the authority which the agent
 Refers to authority given to agent by
is said to have a result of principal’s
agreement
words or conduct which leads third
party to believe that the agent has the
Comprises by:
authority to act on behalf of principal
i. Express authority
(s.190)
May be given orally or in writing (S. 140 &
141)  Agent previously had authority to act,
but the act was terminated by the
ii. Implied authority
principal without notice to third parties
Actual authority also includes those
matter that may be properly implied in the  Where ostensible authority arises, the
circumstances agent is presumed the authority that
the principal causes him to appear to
iii. By virtue of office have. The element of estoppel applies
 The circumstances of the case as the principal is precluded from
 Custom or usage of trade denying the agent has such authority (
 Situation/conduct of parties Graphic Lines Pte Ltd V Chai Chee
Watteau Vs Fenwick Mein & Ors)

 It must be the third party ought to have

known that agent did not have the
authority ,question, he cannot rely on
apparent authority of the agent to
enforce the transaction (Overbrook
Estates Ltd B Glen Combe Properties
Ltd)
 Duties
 Based on the terms of agreement
 Where the contract of agency is silent, the rights and duties are governed by sec 154 &178

 Agent to principal (S 164-174) 2. Principal to Agent (S 175-178)

 To pay agent commission or other agreed

 To obey the principal’s instruction (s164)
Failure to obey, may breach of contract.
Agent liable for loss causes to principal
 To care and diligence in carrying out his
work and use such skills he possesses
(s165)
The agent is expected to conduct the business
of agency as much skill he has. If the principal
notice he is lack of skill, he will have to
compensate based on his own neglect, want
or skill or misconduct
 To render proper accounts when required
(s166)
It is duty of the agent to account all money and
property handled him as agent and produce
such account when demanded by principal
 To communicate with principal (s167)
In diligence of difficulty, agent must
communicate with principal
remuneration
If agent is guilty for misconduct, he loses his
right to remuneration. Agent receive
remuneration based upon completion of
contract
 Not to wilfully hinder the agent from
earning his commission
If the agent is originally appointed, principal
can’t appoint second agent in the midst of
negotiation.
 To indemnify and reimburse the agent for
acts done in exercise for his duties
The agent has caused injury to third party
When principal employs an agent to do a
criminal act, he is not bound to indemnify the
agent against the consequences from the act
Agent has incur loss or liability in performance
contract of agency

 Not to let his personal interest conflict

(s168)
The duty of an agent is to act all on behalf
on interest and must not based on his
interest only,
 Remedies for Breach of Duty

There are several remedies available to a principal where the agent has breach his
fiduciary duty and secret profit:

 Repudiate the contract if disadvantages to him (Sec. 168 CA 1950)

If the agent deals on his own account in the business of agency, without first obtaining
principal Or dishonestly concealed material fact by the agent

 The principal is entitled to claim from the agent any benefit have obtained by
agent without knowledge of principal (Tan Kiang Hwa v Andrew S.H Chong)

 The principal may sue the agent and third party for damages any loss on entering
the contract (Mahesan V Malaysian Govt Officers Co-operative Housing Society
Ltd)

 The principal may dismiss agent for breach of duty (Boston Deep Sea Fishing &
Ice Co v Ansell)

 The agent and third party paying bribe may be guilty of criminal offence under
Prevention Corruption Act 1961 (Broadman v Phipps)
 Effect of Contract Made by Agents

Named Principal Disclosed Principal

 Is a principal whose identity has
been brought to the knowledge of
the 3rd party
 Thus, the 3rd party would have
known who the agent contracting
on behalf
 Is a principal whose existence is made
known to the 3rd party but whose
identity has not been closed to the 3rd
party
 Thus, the 3rd party would have know
agent is contracting on behalf but not
known who the principal is

Undisclosed Principal
 Is a principal who is not made known to the other party
 Thus the 3rd party would be contracting with the agent under
impression that he is contracting personally with the agent
and there is no 3rd party involved
 It is subsequently brought that the 3rd party is the person
whom he is contracting is acting on behalf of someone
 Termination of Agency (Sec 154 to 163)

 By the performance of contract of agency

 By the expiration of period fixed or implied in the contract of agency
 By the death either principal or agent
 By principal or agent is unsound of mind
 By bankruptcy or insolvency of principal
 By the happening of event which renders the agency is unlawful