UNIVERSITI TEKNOLOGI MARA

FACULTY OF BUSINESS AND MANAGEMENT

LAW 416
BUSINESS LAW

TAKE HOME TEST

PREPARED BY:
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PREPARED FOR:
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SUBMISSION DATE:
18TH JUNE 2023
 QUESTION 2

Mr. Tamak was appointed as an agent by Cik Momo to sell her double-storey house in
Kuching for a price of RM600,000. Cik Momo promised to pay Mr. Tamak RM12,000 as
commission. Mr. Tamak sold the apartment to Datuk K for RM550,000. The difference
of RM50,000 was kept by Mr. Tamak. Later Cik Momo found out about the secret profit
made by Mr. Tamak. Advice Cik Momo on the possible actions that can be taken
against Mr. Tamak.

Issue:

The issue for this case is whether Mr. Tamak has breached his duty as Cik
Momo’s agent for violating the authority given when he sold and made a secret profit by
keeping the RM50,000 difference from the overall selling price.

Law:

Agency is the relationship which subsists between the principal and the agent,
which the agent is authorized by the principal to act for him or to represent him in
dealings with others or third party.
Under Section 135 of Contract Act 1950, agent is defined as “a person employed
to do any act for another or to represent another in dealing with third persons” while
principal is defined as “a person to whom such act is done or who is so represented”.
There are two ways contractual relationship exist which are firstly, contractual
relationship between the principal and the agent as to when the principal appoints an
agent to act for him and secondly the contractual relationship between the principle and
the third party as to when the agent make a contract with the third party, the contract is
actually for the principal and the principal is bound to the contract created through an
agent.
Moreover, there are ten duties of agent to the principal. First, to obey the
principal’s instruction, which falls under Section 164 Contract Act 1950. It is stated that
an agent must follow the instruction of the principal. If the agent does not follow, it is a
breach of agency contract and hemust bear any loss suffered by the principal due to the
agent’s disobedience. An agent must follow the instruction if it lawful.
Secondly, the agent must act according to custom where instruction is not given
as to what has been stated under Section 164.
Thirdly, according to Section 165 the agent must exercise care, skill and
diligence in carrying out his work. Agent must use his skill and be diligence about the
interest of his principal and make sure that when he is acting on behalf of the principal,
it is important for him to be careful.
Fourthly, agent must render proper accounts when required by the principal,
according to Section 166 Contract Act 1950. The agent must prepare a separate and
proper account for all the monies or property accepted on behalf of the principal when
the principal asked for it. The property of the principal must not be mixed up with the
agent’s property.
Fifthly, agent must communicate with the principal during emergency. Section
167 has stated that agent must use all reasonable diligence to communicate with the
principal in case of emergency or difficulty.
Sixthly, agent must pay the principal all sums received on behalf of the principal
which under Section 171 stated that whatever amount received on behalf of the
principal must be paid to the principal.
Seventhly, the agent must not let his own interest to conflict with his duty,
according to Section 168. Agent must perform the duty for the interest of his principal
and must not allow his interest to conflict with the interest of principal.
Eighthly, agent must not make any secret profit out of the performance of his
duty, as to what has been stated under Section 168. The secret profit may be a bribe or
payment of a secret commission by a third party or any financial advantage the agent
receives from third party on top of commission or salary that has been agreed by the
agent and principal.
The ninth duty of agent is to not disclose confidential information or documents
entrusted to him by his principal by not telling other parties.
 And the last duty of agent is agent must not delegate his authority to others
(Delegatus non potest delegare), which falls under Section 143. Agent must not ask
another person to perform his duty and must do it on his own.
The principal can take action when dealing with agent who make secret profit.
Firstly, the principal may repudiate the contract as the first remedy. According to Section
168 of CA 1950, the principal may revoke the agreement he has entered into on his
behalf by his agent with a third party.
The principal may be able to recover the bribe's full amount as a second remedy.
According to Section 169 of CA 1950, this is mentioned. In the case of Tang Kiong Hwa
v. Andrew S.H. Chong Tang Kiong Hwa, the plaintiff requested that his agent, the
defendant, sell the flat house for RM45,000. The remaining RM9,000 was credited into
the agent's personal account when the agency was able to sell it for RM54,000. The
principal in this case was given permission by the court to demand an additional
RM9,000 from the agent who has breached his duty as an agent.
The third action is for the principal to decline paying the agent's commission as
previously agreed. In the case of Andrew versus Ramsay and Co in 1903, the Plaintiff
appointed the Defendant as his agent to sell his property and agreed to give 50 pounds
as commission. The agent sold the property to the purchaser and received 100 pounds
as deposit and gave 50 pounds to the principal and kept another 50 pound after the
principal gave consent as the commission. The principal later found out that the agent
has also received 20 pound as a commission. The principal then sued the agent to
recover the 20-pound commission given by the purchaser and the 50 pound he had
given him, and the court held that the principal may recover both sums.
The principal may also dismiss the agent on the ground of breach of duty and the
principal may sue both the agent and the third party who provided the bribe and make a
claim for damages.
And lastly, the agent and the third party may be charged under criminal offence
under Section 4 of the Prevention of Corruption Act 1961 as receiving a bribe is
considered as a crime and illegal.
Application:

Therefore, in this case Cik Momo was the principal while Mr. Tamak was the
agent. Mr. Tamak has kept RM50,000 secret from Cik Momo’s knowledge and only
gave her RM550,000 after selling the house to Datuk K.
As an agent, Mr Tamak must not make any secret profit out of the performance
of his duty, as to what has been stated under Section 168. The secret profit may be a
bribe or payment of a secret commission by a third party or any financial advantage the
agent receives from third party on top of commission or salary that has been agreed by
the agent and principal.
Moreover, he must pay Cik Momo all sums received on behalf of her which under
Section 171 stated that whatever amount received on behalf of the principal must be
paid to the principal. Mr. Tamak violated his duty as Cik Momo’s agent when he made a
secret profit of RM50,000 out of the RM600,000 he received from Datuk K and only
gave RM550,000 to Cik Momo after selling the house.
It is clear that Mr. Tamak violated his duty as an agent when he was not giving
the full amount Datuk K has paid for the house and kept RM50,000 for his own profit on
top of RM12,000 commission that Cik Momo has promised him.
Therefore, Cik Momo is entitled to take actions against Mr. Tamak for his
misconduct and violation of contract as an agent. Firstly, Cik Momo may repudiate the
contract as the first remedy. According to Section 168 of CA 1950, the principal may
revoke the agreement he has entered into on his behalf by his agent with a third party.
She also may be able to recover the bribe's full amount as a second remedy.
According to Section 169 of CA 1950, this is mentioned. In the case of Tang Kiong Hwa
v. Andrew S.H. Chong Tang Kiong Hwa, the plaintiff requested that his agent, the
defendant, sell the flat house for RM45,000. The remaining RM9,000 was credited into
the agent's personal account when the agency was able to sell it for RM54,000. The
principal in this case was given permission by the court to demand an additional
RM9,000 from the agent who has breached his duty as an agent.
The third action for Cik Momo may take is to decline paying the agent's
commission as previously agreed. In the case of Andrew versus Ramsay and Co in
1903, the Plaintiff appointed the Defendant as his agent to sell his property and agreed
to give 50 pounds as commission. The agent sold the property to the purchaser and
received 100 pounds as deposit and gave 50 pounds to the principal and kept another
50 pound after the principal gave consent as the commission. The principal later found
out that the agent has also received 20 pound as a commission. The principal then sued
the agent to recover the 20-pound commission given by the purchaser and the 50
pound he had given him, and the court held that the principal may recover both sums.
Cik Momo may also dismiss the agent on the ground of breach of duty and may
sue both the agent and the third party who provided the bribe and make a claim for
damages.
And lastly, Cik Momo may report to the authority to charge the agent under
criminal offence under Section 4 of the Prevention of Corruption Act 1961.

Conclusion:

An agent is bound under the Contract Act 1950 and must perform his duty as an
agent to the principal and breaching the duties of agent is considered as violating the
Contract Act 1950 which entitle the principal to take action against the again for the loss
and damages he suffered.