University of Yangon Research Journal 2020, Vol 10.

Creation of Agency Relationship in Commercial and Non-commercial

Transactions

Dr Khin Khin Su1

Dr Khaing Zin Win2

Abstract
The circumstances that bring into play the concept of agency in todays’ commercial transactions
cannot be easily overlooked. The role played by agents in the actualization of existing and
prospective contracts, make the existence of agency relationship in today’s business. Agents
cannot perform a business or a specific transaction without the requisite consent, approval or
authority of their principals to do an act. Therefore, authority exerted by agents to act is derived
from their principals who in turn fulfill their own obligation under the terms of agreement.
Therefore, the basic rules for the coming into effect of a valid contract or agreement must be
observed. For this reason, the agent or agency will not be able to enforce such contracts where
there is a breach. This paper has its aim or focus on the methods or ways at which agency
relationship can be created with particular emphasis on or with respect to whom an agent is and
will also present the benefits of creating the agency relationship.
Keywords: Agent, Agency Relationship, Authority, Principal.

Introduction

An agency relationship is a fiduciary principle and also based on trust. Agency

is the relationship that subsists between the principal and the agent, who has been
authorized to act for him or represent him in dealing with others. Thus, in an agency,
there are in effect two contracts i.e. (a) made between the principal and the agent from
which the agent derives his authority to act for and on behalf of the principal; and (b)
made between the principal and the third party through the work of the agent. An agent
and a principal make a contract that the agent can only perform some commercial or
non-commercial dealings on behalf of a principal depending on their contract. Their
agreement may be concerned with the commercial dealings or non-commercial dealings
such as client-lawyer relationship, government and its staff’s relationship. An agency
relationship may be created by three ways such as express agreement, implied
agreement and operation of law and the benefits of creating the agency relationship will
also be presented in this paper.

Material and Methods

In drawing up this research, the provisions relating to the creation of agency
relationship in commercial and non-commercial transactions under laws, namely, Civil and
Commercial Code of Thailand, Contract Act of Myanmar, and Convention on Agency in the
International Sale of Goods are studied. In addition, the comprehensive study has been done
on leading cases and prominent cases of Myanmar, US and UK in this research.

Express Agreement

Express agreement means a contract that the terms, duties and liabilities of the parties
to the contract are clearly mentioned in accordance with the parties’ consent. Therefore, due to
the clearly expressed terms, duties, and liabilities, both parties to the contract are bond at the
1
Lecturer, Department of Law, University of Yangon.
2
Lecturer, Department of Law, University of Yangon.
2 University of Yangon Research Journal 2020, Vol 10, No1.

time of concluding the contract and it may be in writing or verbally. Therefore, since agency is
also a kind of contract, the appointment of the agent is made in writing or verbally. In formal
cases when written appointments are made, it is done by a power of attorney which is normally
stamped and registered.
Usually, an agency relationship is the result of the contract between the principal and
agent. Under such a contract, between the principal and the agent, as stated in the Thai Civil
and Commercial Code, a transaction concluded by the latter has the same effect as if it had
been concluded directly in the name of the principal.3
Consideration is not necessary for the creation of an agency under section 185 of the
Contract Act of Myanmar.4 Likewise, the American Law Institute specifies that the
relationship of principal and agent can be created although neither party receives
consideration.5
Generally, where the relationship is created without consideration on the part of either,
it ordinarily may be terminated by either without liability. However, during the existence of the
relationship, the agent has the same power to affect the principal’s legal relations to third
persons as if there were consideration in the creation of the relationship.6
Sections 183 and 184 of the Contract Act (1872) in Myanmar mention the capacity of
parties to employ agents or to become agent. With regard to the former capacity, the law
prescribes that any person who is of the age of majority according to the law to which he is
subject, and who is of sound mind, may employ an agent. 7 In the case of the latter, it is stated
that as between the principal and third persons any person may become an agent, but no person
who is not of the age of majority and of sound mind can become an agent, so as to be
responsible to his principal according to the provisions in that behalf herein contained.8
Though the Contract Act of Myanmar does not expressly state that the appointment of
an agent needs to be in writing, it does mention that any contract required to be made in
writing or in the presence of witnesses or any law relating to the registration of documents is
recognized as a contract under section 10 of the Contract Act of Myanmar. Accordingly, it can
be assumed that in Myanmar whether or not the appointment of an agent needs to be in
writing, depends on the nature of the contract for which he is appointed to transact.
In Thailand, if a transaction is by law required to be made in writing, the appointment
of an agent for such transaction must also be made in writing. If the transaction is required to
be evidenced by writing, the appointment of an agent for such transaction must also be
evidenced by writing.9 Thus, the Myanmar and Thai practices regarding the appointments of an
agent are basically similar. Similarly, in Convention on Agency in the International Sale of
Goods, the authorization need not be given in or evidenced by writing and is not subject to any
other requirement as to form. It may be proved by any means, including witnesses.10
However, in cases that an agent to make a binding contract under seal, that is, in
writing, it is necessary that he should receive authority under seal. Such a formal authority is
called a power of attorney.
A power of attorney is a legal document that allows a person, called the principal, to
appoint someone to make decisions on the principal’s behalf. The appointed person, or agent,
can handle commercial transactions. Generally, a power of attorney must be in writing and

3
Section 844 of Civil and Commercial Code of Thailand, 1925.
4
Section 185 of Contract Act of Myanmar, 1872.
5
Restatement of the Law of Agency, Volume I, American Law Institute Publishers, U.S, 1933,p-53.
6
Restatement of the Law of Agency, Volume I, American Law Institute Publishers, U.S, 1933, p- 53-54.
7
Section 183 of Contract Act of Myanmar, 1872.
8
Section 184 of the Contract Act of Myanmar, 1872.
9
Section 798 of the Civil and Commercial Code of Thailand, 1925.
10
Article 10 of the Convention on Agency in the International Sale of Goods, 1983.
University of Yangon Research Journal 2020, Vol 10. 3

signed by the principal in the presence of a notary public, but some states might also require
that two or more witnesses be present. States also differ on the need to record the power of
attorney.
There are two kinds of power of attorney, one is general, and the other is special. A
general power of attorney gives broad authority to the agent. On the other hand, a special
power of attorney pertains to a limited authority to be exercised by the agent. In the latter, the
agent can only perform the specific tasks as stated in the Power of Attorney.
In appointing the agent with a power of attorney, in Myanmar, the parties must apply
the following particulars: first, a contract is made in writing under the Contract Act, 1872;
secondly, it may be registered under sections 16 or 17 of the Deed Registration Law, 2018;
finally, sufficient stamp duties must be served under the Law Amending the Stamp Act,
schedule 1 clause 48.

Implied Agreement

Generally, the agent has been appointed by any writing or verbally. But there are facts
and circumstances that can show that an agency has been created. In other words, agency is
implied from the special circumstances of the case.
In the following U.S case, it was held that the duty to pay tax cannot be avoided
because there is an agency relationship arises between the parties. This case is Warren v.
United States11. Bobby and Modell Warren were cotton growers. For two years, they took their
cotton crops to certain cotton gins that ginned and baled the cotton. Then, after being instructed
to do so by the Warrens, the gins obtained bids for the cotton from prospective buyers and the
Warrens told the gins which bids to accept. The gins sold the cotton to the designated buyers,
collecting the proceeds. At the Warrens’ instruction, the gins deferred payment of the proceeds
to the Warrens until the year the one in which each sale was made.
Johnson, circuit judge, said that the relationship between the Warrens and the gins for
the purpose of selling the cotton was indisputably that of principal and agent. The Warrens
instructed the gins to solicit bids, the Warrens decided whether to accept the highest price
offered, and the Warrens determined whether or not to instruct the gins to hold the proceeds
from the sale until the following year. The gins’ role in the sale of the cotton was to adhere to
the Warrens’ instructions. The Warrens were the owners of the cotton held for sale; the
Warrens were in complete control of its disposition. The income was received by the Warrens’
agents in the year of the sale. The fact that the Warrens restricted their access to the sales
proceeds does not change the tax status of the money received. Judgment passed in favor of the
government because there is an agency relationship between them.
It can be said that the Court decided that an agency relationship arises between the
parties although there is no any express agency agreement. This case shows that agency
relationship can arise from the circumstances of the case.
Although the Contract Act extends to the authority given between individuals, the
government staffs who are the government’s agents do not come within the extent of the
Contract Act when they serve their duties. Therefore, in order to bind the government, it is
required that the government staff’s acts must come within the authority given by the
government.12 An agency relationship also arises from the situation of government and its
servants.
In carrying out their duties, the government servants need to maintain their honesty and
loyalty to the government. The following case is mentioned as an example.
11
5th Cir. 1980.
12
Thet Phay, U, Comments on the Law of Contract, 1st Edition, Sar Pay Paung Kuu Publishing House, Yangon,
Myanmar, 1998, p- 244.
4 University of Yangon Research Journal 2020, Vol 10, No1.

In the United Kingdom case of Reading v. Regem13, the plaintiff was a sergeant in the
Royal Army Corps stationed at the general hospital in Cairo, where he was in charge of the
medical stores.
The plaintiff had not had any opportunities, in his life as a soldier, of making money,
but in March, 1944, there was found standing to his credit at banks in Egypt, several thousands
of pounds, and he had more thousands of pounds in notes in his flat. He had also acquired a
motor car worth £ 1500. The Special Investigation Branch of the army looked into the matter,
and he was asked how he came by these moneys. The facts appeared that the wearing of the
uniform and his position as a soldier is the sole cause of his getting the money and he gets it
dishonestly. That is an advantage which he is not allowed to keep. Although the Crown, has
suffered no loss, the court orders the money to be handed over to the Crown, because the
Crown is the only person to whom it can properly be paid. The plaintiff must not be allowed to
enrich himself in this way. He got the money by virtue of his employment, and must hand it
over. Petition dismissed with costs.
The above case shows that in a government and its servants’ relationship, there also
arises an agency relationship. In this case, the agency relationship arose when he used his
position as a soldier (government servant) and his soldier’s uniform to get the money. Thus,
this case only shows that there is an agency relationship between a government and its
servants.
The attorney-client relationship, it should be noted that this is based on contract, agency
and fiduciary principles. In a Myanmar case, Dawson Bank Ltd v C. Ein Shawn and three
others14, it was held that an admission of fact by counsel is binding on the client and when
once a fact is admitted proof of the same need not be furnished. But, compromise by counsel
without knowledge or instruction of the client stands on a different footing. Thus, this case
shows that the agency relationship can arise from the attorney-client relationship.
The above situations may be recognized as the implied agreement because, the
relationships between the government and its servants, and lawyer and clients are not made
expressly contracted as agent and principal.

Operation of Law

Agency by operation of law may arise in the ways of emergency, necessity and
ratification.
An agent of necessity can be described as a person who, in circumstances of an
emergency (for example, a person’s property being in danger of destruction) acquires by
operation of law, a presumed authority to act as an agent. Some unforeseen events can create
an agency, and the agency relationship can arise even against the intentions and wishes of the
parties concerned.
The R.M.M.R.M Perichiappa Chettyar v Ko Kyaw Than15 case illustrates that
according to English Law the agency of necessity arises by operation of law and the agent’s
authority to bind his principal is not derived from the principal.
The court’s decision in this case can be assumed to have been based on the following:
the three launches had been sunk in the river and in that condition was a total loss to the
principal. By selling them in that condition, the agent recovered part of their value for the
principal and therefore, reduced the amount of his loss. His act was therefore, performed under
an agency of necessity, and was in line with section 189 of the Myanmar Contract Act. In this
13
(1948) 2 KB 268.
14
1951 BLR (H.C) p- 300.
15
1949 B.L.R (S.C) 64.
University of Yangon Research Journal 2020, Vol 10. 5

case, the agent was held to be an agent of necessity because, although he was expressly
prohibited from selling his principal’s boat, he sold it due to the fact that it was necessary for
him to do so in view of the prevailing emergency situation.
In Thailand, in case of an emergency, the agent is presumed to have an authority to do,
in order to protect his principal from loss, all such acts as would be done by a person of
ordinary prudence.16
In Article 9 (2), the agent has authority to perform all acts necessary in the
circumstances to achieve the purposes for which the authorization was given.17
On the subject of “Agency of Necessity”, section 189 of the Myanmar Act, section 802
of the Thai Civil and Commercial Code and Article 9(2) of the CISG provide that the agent has
authority to act, in case of emergency, to protect the principal for loss.
For agency of necessity to apply, four conditions must be satisfied in the U.K. (1) It
was impossible for the agent to communicate with the principal. If the intending agent can
obtain instructions from the principal, then must attempt to do so. A failure to try to contact the
principal will mean that agency of necessity cannot arise. (2) There must be a commercial
necessity. A necessity may be equated to an emergency. (3) The agent must have acted in the
interests of his or her principal. (4) The action taken by the agent must in all the circumstances
have been reasonable.
The object of the law in these circumstances is to recognize the inability of the agent to
communicate with the principal. In the context, commercial necessity imposes on the agent the
duty to act in good faith in the interest of all the parties. The legal rules relating to agents of
necessity seek to achieve common sense in day-to-day human life.
In the U.S case of Jordan Marsh Co. v. Hedtler18, marriage imposes on the husband
the general legal duty of supporting his wife; and if he neglects or refuses to supply her with
what is necessary for decency and comfort in his condition in life, he is liable to third persons
who furnish her with such necessaries. The only ground of liability on which the plaintiff can
recover in this case is that of agency. It could be found that the defendant by cohabitating with
Mrs. Hedtler and holding her out to the community as his wife impliedly authorized her as his
agent to purchase the necessaries for herself and the household, in accordance with the
ordinary practice of married people.
An agency relationship can also arise from the ratification of an agent’s act.
Ratification means the affirmation by principal of an act done by agent on principal’s behalf
without principal’s authority. But, for ratification to be made, certain conditions need to be
fulfilled.
In the Convention on Agency in International Sale of Goods, the effects of ratification
are mentioned in Article 15: “(1) On ratification the act produces the same effects as if it had
initially been carried out with authority. (2) Where, at the time of the agent's act, the third
party neither knew nor ought to have known of the lack of authority, he shall not be liable to
the principal. (3) Where, however, the third party knew or ought to have known of the lack of
authority of the agent, the third party may not refuse to become bound by ratification before
the expiration of any time agreed for ratification or, failing agreement, such reasonable time as
the third party may specify. (4) The third party may refuse to accept a partial ratification.(5)
Ratification shall take effect when notice of it reaches the third party or the ratification
otherwise comes to his attention. Once effective, it may not be revoked. (6) Where the act has
been carried out on behalf of a corporation or other legal person before its creation, ratification
is effective only if allowed by the law of the State governing its creation.(7) Ratification is
16
Section 802 of the Civil and Commercial Code of Thailand, 1925.
17
Article 9 (2) of the Convention on Agency in International Sale of Goods (Geneva, 17 February 1983).
18
238 Mass. 43
6 University of Yangon Research Journal 2020, Vol 10, No1.

subject to no requirements as to form. It may be express or may be inferred from the conduct
of the principal.”19
According to the section 196 of the Contract Act of Myanmar, the conditions are
necessary; (1) The act must have been done on behalf of another (2) The act must have been
done without knowledge or authority of the person on whose behalf the act is done.20
If the said conditions are satisfied such other person has two options either to ratify or
to disown.21 The ratification may be expressed or may be implied in the conduct of the person
on whose behalf the acts are done.22
It appears to be that in order to establish a case of ratification is essential that the party
ratifying should be conscious that an act beyond the authority of the agent had been done, and
further after notice of that fact the party consciously by an overt act agreed to be bound by it or
by acquiescence in the situation arising thereafter allowed the business to continue.
Thus, if an agent contracts with a third party as an agent of a principal but without the
principal’s authority, the principal can subsequently adopt the transaction as their own, i.e. they
can ratify it. However, the principal must have known the full knowledge of the circumstances
or an intention to ratify whatever the facts are. If the facts have not been known by the
principal, he does not need to ratify such facts. It is provided in section 198 of the Contract Act
that “No valid ratification can be made by a person whose knowledge of the facts of the case is
materially defective.”23
Therefore, in Myanmar to constitute a binding adoption of acts, these conditions must
exist (1) the acts must have been done for and in the name of the supposed principal, and (2)
there must be full knowledge of what those acts were, whatever they were.24
Therefore, there can be no ratification without any intention to ratify, and there can be
no intention to ratify an illegal act without knowledge of the illegality. There could be no valid
ratification when the knowledge of facts is defective. Acquiescence in an act while in progress
may amount to consent but not mere inaction after the act has been completed. Ratification is
an act more active than acquiescence. Mere inaction on the part of the defendant where he is
under no duty to act cannot amount to ratification. 25 While a Court of law is entitled to accept a
part of the evidence of a witness and to reject another part, a pleading on ratification cannot be
so dissected, but must be taken either as a whole or left alone altogether.26
Therefore, with regard to the effect of ratifying an unauthorized act forming part of a
transaction, section 199 provides that a person ratifying any unauthorized act done on his
behalf ratifies the whole of the transaction of which such act formed a part. 27According to this
section, a principal cannot ratify the favorable parts of the transaction and disaffirm the rest
that he dislikes. He must ratify the whole transaction. Therefore, it is obvious that a man
cannot ratify part of a transaction and repudiate the rest at his own choice.
Moreover, ratification must not injure the third person under section 200 of the
Contract Act of Myanmar.28
In the United States of America, to constitute ratification there must be the following
facts: (1) The agent must have acted as agent; (2) The act must be one that could have been
19
Article 15 of the Convention on Agency in the International Sale of Goods, 1983.
20
Section 196 of Myanmar Contract Act, 1872.
21
JH Dalal, Mulla on the Indian Contract Act, 10th edition, N.M Tripathi Private Ltd, Bombay, India,1977, p-
289.
22
Section 197 of Contract Act of Myanmar, 1872.
23
Section 198 of the Contract Act of Myanmar, 1872.
24
JH Dalal, Mulla on the Indian Contract Act, 10th edition, N.M Tripathi Private Ltd, Bombay, India,1977, p-292.
25
Essof Ismail Attia v Yacoob Ahmed Mamsa, 1948 BLR 684.
26
K P R M Raman Chettyar v K Supaya (1958 BLR 208.)
27
Section 199 of Contract Act of Myanmar, 1872.
28
Section 200 of the Contract Act of Myanmar, 1872.
University of Yangon Research Journal 2020, Vol 10. 7

authorized; (3) The ratifier must have been in existence when the contract was made; (4) The
ratifier must be fully informed as to the facts; (5) ratification must be of the entire act; (6) must
be before the other party's withdrawal, and (7) must be in the form required of previous
authorization.29
In the United Kingdom, the effect of ratification is retrospective; therefore, the
contract takes place when the agent enters into the transaction not when the principal gives the
authority.
The concept of ratification is relatively easy. However, before it can apply four rules
need to be satisfied. (1) The agent must contract as agent. (2) The principal must have been in
existence when the act was done. (3) The principal must have contractual capacity when the act
was done as well as at the time of ratification. (4) The agent must contract for such things as
the principal can and lawfully may do.

Benefits for Creation of Agency Relationship

By creating the agency relationship, the following benefits can be enjoyed by the
contracting parties.
1. When the contract is made through an agent, the principal can reduce the cost such
as the cost of distances, the need of acquiring expertise and the inconvenience of
dealing personally with all contracting parties.
2. When a person wants to do several transactions at the same time, but he could not
do all these transactions at the same time. To perform these transactions, the
creation of agency relationship is the only one that can be solved. Therefore, the
concept of agency can also reduce the expanding the scares resources of time, and
energy.
3. While the activities are performing, the person who lacks certain skills or
knowledge need another person who has the required skills or knowledge. The only
way to settle this inability is that the person who has the required skills or
knowledge acts on behalf of the person who lacks skills or knowledge.

Findings
Relating to the law of agency in Myanmar, some findings are presented to take
into consideration, if a new contract law is enacted, as follows,
(1) With regard to the emergency, the current provisions are too general. It needs to
mention more clearly that what the agent should do at the time of emergency. For
example, the agent is required to communicate the principal as far as possible at the
time of emergency, and when he acts for the purpose of protecting the principal’s
benefits, there must be a commercial necessity. Agent’s action is necessary to be
reasonable.
(2) Relating to the effect of ratification, it should be provided clearly. The followings
are necessary to add:
(a) The ratifier should have contractual capacity when the unauthorized act was
done by the agent as well as at the time of ratification.
(b) Ratification is an act more than acquiescence.
(c) The ratifier must have been in existence when the agent made a contract.
(d) Ratification related to the time is required to be provided obviously.

29
Restatement of the Law of Agency, Volume I, American Law Institute Publishers, U.S, 1933, p- 63.
8 University of Yangon Research Journal 2020, Vol 10, No1.

(3) With regard to the authority, there are only express authority and implied authority.
Sometimes, the expressions in the agreement are ambiguous. In such situation, the
issues can arise relating to the interpretation of the agreement. Therefore, the modes
to interpret the ambiguous terms are required to add in the law.

Conclusion

Therefore, an agency relationship can arise not only from the contract but also from the
operation of law. Moreover, an agency relationship can be created for commercial purposes or
non-commercial purposes. It depends on the purposes of the parties whether they want to
appoint a party as an agent for the purposes of commercial transactions or not. By creating the
agency relationship, the points can best elaborate the need to overcome time and space
limitation and the need to overcome limitations of knowledge and skill for having an agent
acting on behalf of someone.
Acknowledgement
I would like to show my gratitude to Dr Khin Phone Myint Kyu, Professor, Department of Law,
University of Yangon for sharing her knowledge while I am doing this research, and I am also immensely grateful
to Professor Dr Khin Chit Chit, Head of Department of Law, University of Yangon for her encourage of doing
this research paper.

References
Laws and Convention
1. Civil and Commercial Code of Thailand, 1925.
2. Contract Act of Myanmar, 1872.
3. Convention on Agency in the International Sale of Goods, 1983.
Books
1. JH Dalal, Mulla on the Indian Contract Act, 10th edition, N.M Tripathi Private Ltd, Bombay, India,1977.
2. Restatement of the Law of Agency, Volume I, American Law Institute Publishers, U.S.
3. Thet Phay, U, Comments on the Law of Contract, 1st Edition, Sar Pay Paung Kuu Publishing House,
Yangon, Myanmar.
Website
1. https://www.abyssinialaw.com/online-resources/study-on-line/item/382-the-concept-of-agency-
preliminary- considerations

Cases
2. Dawsons Bank Ltd v C. Ein Shawn and Three others, 1951 BLR (H.C) p- 300.
3. Essof Ismail Attia v Yacoob Ahmed Mamsa, 1948 BLR 684.
4. Jordan Marsh Co. v. Hedtler, 238 Mass. 43
5. K P R M Raman Chettyar v K Supaya, 1958 BLR 208.
6. R.M.M.R.M Perichiappa Chettyar v Ko Kyaw Than, 1949 B.L.R (S.C) 64.
7. Reading v. Regem,1948 2 KB 268.
8. Warren V the United States, 5th Cir. 1980.