By:

Ekmil Krisnawati Erlen Joni

CHAPTER 3
DUTIES
FORMATION

LAW OF AGENT PRINCIPAL

EXPRESS
AGENCY
IMPLIED
RATIFICATION
NECESSETY
ESTOPPEL

TERMINATION

LAW PARTIES
 AGENT No contract
a contract of
between an agent
agency
and the third
between
party because an
Principal and
agent is acted on
agent
behalf of the
principal

PRINCIPAL THIRD PARTY

a contract
between
principal and
third party
 Part X of
Law Applicable Contracts Act
1950

Agent
Parties involve
(Sec.135) Principal

3rd person
 S 135 OF CONTRACT ACT 1950
PRINCIPLES The person for whom such as is done, or
who is so represented.

S 136
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
AGENT
S 135 OF CONTRACT ACT 1950
An agent is a person employed to do any act for another
or to represent another in dealings with the third person

S 137
As between the principal and 3rd person, any person may become and
agent; but no person who is not of the age of majority and of
soundmind can become an agent, so as to be responsible to his
principal according to the provision in that behalf herein contained
 s. 140.
By EXPRESS An authority is said to be express when it
is given by words
Appointment spoken or written

s.140.
By Implied An authority is said to be implied when it is
Appointment to be inferred from the circumstances of
the case; and things spoken or written, or
the ordinary course of dealing, may be
accounted circumstances of the case
(a) When a person by his words/
conducts holds out another as having
authority to act for him

(b) Relationship between

HUSBAND & WIFE By IMPLIED
Appointment
(c) Partners are each other’s agents
when contracting in the course of the
partnership business (sec.7 Partnership
Act 1961)
 (a) When a person by his words/
conducts holds out another as having
authority to act for him

~from the circumstances of the case

~by referring to the words, conduct or the regular conduct of the
business

Illustration s.140
A owns a shop in Kajang, living himself in Kuala Lumpur, and
visiting the shop occasionally. The shop is managed by B, and he is
in the habit of ordering goods from C in the name of A for the
purpose of the shop, and of paying for them out of A’s funds with
A’s knowledge. B has an implied authority from A to order goods
from C in the name of A for the purposes of the shop.
Principal and agent exist between husband and wife. Husband and
wife life together, Thus the law presume that wife has authority to
pledge her husband’s credit for necessaries suited to their style of
living.

a) He expressly forbid his wife to pledge his credit and

b) He expressly warned the tradesman not to supply his wife
with the goods and credits.
c) His wife has given sufficient allowance for buying the goods
without having to pledge her husband’s credit.
d) His wife was given sufficiently provided for with goods of the
kind in question.
e) The order though for necessaries as unreasonable taking into
consideration her husband’s income at that time
 Each partner in a partnership is an agent to the firm or
other partners in the firm, when contracting in the course
of the partnership’s business
 Each partner is an implied agent to the firm. Thus he/she
has the implied authority to act on behalf of his/her
partner
 The firm partner/other partners are liable to whatever
contracts which had been entered into by any of the
partners
 DEFINITION

 Certification/acceptance by the principal for an act done without

authority or exceeding the authority given

SITUATION

a) An agent who was duly appointed has exceed his authority,or

b) A person who has no authority to act for the principal has acted
as if he has the authority
 EFFECT

S. 149.
Where acts are done by one person on
behalf of another but without his knowledge
or authority, he may elect to ratify or to
disown the acts. If he ratifies them, the
same effects will follow as if they had been
performed by his authority.

 BINDS PRINCIPAL RETROSPECTIVELY

 For example :
 1st December – Agent contracted with 3rd party on behalf of
principal exceeding authority given
 10th December – Principal was informed of the contract & he
approves.
 Principal is bound by the contract from 1st Dec
 BOLTON & PARTNERS v LAMBERT
Instruction from a principal: Please purchase a house with RM90.000

The contract entered The agent however entered into a contract to

purchase a house with RM100,ooo:

The agent informs the principal that he has entered into a contract with
RM100,000. if the principal accept the contract that is a ratification,.
There will be a contract between the principal and the third party.
 Unauthorized act by agent
 Unauthorized act is not illegal (Brook v

Hook)
 Agent must not use own name to contract

(Keighly Maxted Co v Durant)

 Principal must exist at the time the

contract was made (Kelner v Baxter)

 S.35 Companies Act of Msia : pre –

Incorpn contract (Cosmic Ins v Khoo

Ching Poh)
• Principal must have capacity (Boston Deep
Sea Fishing & Ice Co v Farnham)
• Principal must know all material facts –
name of 3rd party, terms of contract, etc
(Marsh v Joseph)
• Must ratify whole act
• Ratify in reasonable time (Grover &
Grover v Matthew, Metropolitan Asylum
Board v Kingham)
• Must not injure 3rd party
 Question
Salmi was empowered by David to buy a laptop computer worth not more than RM5000.00. Salmi bought a
laptop at a price of RM8000.00 in his own name from NoteBook Computers. David agreed to Salmi's purchase
but later refused to accept the laptop when it was delivered to him. NoteBook Computers now wants to sue
David for the purchase price.

Issue: whether Notebook has a right to sue David for the purchase price?

Law: Define Ratification, explain situation, effect of ratification under sect. 149 and section 150. explain
the conditions which are relevant to the question.

Application : only apply the condition which are relevant to the question.
To enable David to ratify the contract that has been entered by Salmi the following conditions must be fulfilled.
1) Unauthorized act/exceeding by agent.
In the current case, Salmi was asked by David to buy a laptop computer worth not more than RM5000.00
however Salmi bought a laptop at a price of RM8000.00. Salmi has no authority to buy the laptop with
RM8000. There was an exceeding act by Salmi and the first condition was fullfiled. Support with Case law
2) Agent must not use own name to enter into a contract with a third party

In the current case, Salmi has used his own name when he entered into a contract with NoteBook
Computers. Thus, Salmi has failed to act as in the capacity as an agent. Therefore, the second condition was
not fulfilled. Case law
3) Must ratify whole act of the agent.

4) In the current case, David agreed to Salmi's purchase but later refused to accept the laptop when it was
delivered to him. Thus we can say that, David has refused to ratify the whole act of Salmi. Therefore, this
condition was not fulfilled. Case law
Conclusion
Section 142 - Contracts Acts 1950

“An agent has authority,in an emergency,to do all

such act for the purpose of protecting his principal
from loss as would be done by a person of ordinary
prudence,in his own case under similar
circumstances”

An agency of necessity is created

when a person is entrusted with
another property and it become
necessary to do something to
preserve that property although he
has no express authority to do so.
There must be already some
existing contractual relationship
between the principal and the
person who acts on his behalf.
 May happen in 2
situations:-

When a wife is deserted or is PERSON ENTRUSTED

justified in leaving a husband and WITH PROPERTY OF
has no means of support ANOTHER & HAS TO DO
SOMETHING TO PROTECT
THE PROPERTY FROM
LOSSES
a) When a wife is deserted or is justified in
leaving a husband and has no means of
supp
• A wife can pledge her
husband’s credit for
necessaries suited to the
income and life condition of
her husband even against his
wishes. However she cannot
become an agent by necessity
if her husband has provided
her with sufficient allowance

b) PERSON ENTRUSTED WITH

PROPERTY OF ANOTHER & HAS TO DO Illustration to s. 142
SOMETHING TO PROTECT THE GREAT NORTHERN
PROPERTY FROM LOSSES RAILWAY v SWAFFIELD
 1) REAL & ACTUAL EMERGENCY • To prevent lost to the principal
• The agent may become an agent by
a) Situasion during necessity if he had to incur
that time expenses in keeping goods safe.
b) Goods carried • A person cannot become an agent
by an agent any necessity if no urgency exists
and goods are sold merely because
they are inconvenience to the agent

•GREAT NORTHERN RAILWAY •PHELPS JAMES & CO v HILL

v SWAFFIELD
To determine what is an
emergency, we would have to
look at the reasonable situations
by looking into the dangerousity
facilities available, cost, time,
distance etc.
2) AGENT WAS JEBARRA v OTTOMAN BANK
ENTRUSTED WITH (AGENT BEING INSTRUCTED TO
PRINCIPAL’S DELIVER GOODS TO A
PROPERTY DESTINATION)

3) IMPOSSIBLE TO GET s.167 + s. 142

PRINCIPAL’S SPRINGER v GREAT WESTERN RLY
INSTRUCTIONS CO

4) AGENT ACTED IN •The act done is what might have been

GOOD FAITH done by any other bona fide person in a
similar position.
•Acting in good faith also means that the
agent puts the interest of the principal
above his own personal interest and the
action done is what other reasonable
person would have done
The agent will be The agent will be A contract exists
protected from any entitled to claim between the principal
claim of the principle whatever additional and the third party
cost for his effort to
protect and to
preserve the safety
and interest of the
principal
I- whether Pak Din has a right to sue Ahmadand whether Ahmad is an agent by necessity

L- explain Sect. 142, situation, condition and effect

Application; the following are the condition which need to be fulfilled in order to make Ahmad as
agent by necessity:
a) REAL & ACTUAL EMERGENCY: explain
From the fact of the case, the situation may be deemed to be an emergency situation bearing in mind
that the durians was a perishable goods. It might be bad if Ahmad wait to uncertain time and it will
take such a long time to repair the road. Thus, it was necessary to Ahmad to sell the durians to
interested motorist. However, there was no emergency situation to enable Ahamd,ad to sell the
furniture due to the fact that the furniture will not found bad event it will take a long journey.
b) The agent was entrusted with the principal’s property or goods. Explain.
The question shows that, durians and furniture ware in the possession of Ahmad went he
was at Gopeng which is on the way to Kuala Lumpur. Thus, the second condition has
clearly fulfilled. Case law

c) Impossible to get principal’s instruction. Explain

In the current case, Ahmad used his reasonable effort to contact Pak Din to get further
instruction unfortunately, there was no coverage in the area. Thus, it was fulfilled
section 167 above. Case law.
d) Agent acted in good faith
It was clearly shows in the question that, Ahmad sold the durians to the relevant
motorist in order to protect Pak Din’s interest and to avoid Pak Din from suffering a
huge losses. Thus, it can be said that, Ahmad has acted in good faith for the case of
durian but he was not acted in good faith when he also sold furniture when he was on
the way back to Balik Pulau due to the fact that the furniture was inconvenience to him.

Conclution.
By ESTOPPEL

 A doctrine whereby a person is prevented from denying another

person’s authority as he had ‘held out” the person to be his agent.

If a person, by his words/conducts, allows a 3rd party to believe

that A is his agent even when A is not, and the 3rd party relies on
it to his detriment, that person will be estopped/precluded from
denying the existence of A’s authority
 A) when the principal himself induces the 3rd party to believes that a
person has an authority to act for him, as if that person his agent.
 S. 190

 The principal cannot avoid the liability upon the contract being made
by the agent.
 JOHN WAS NEVER APPOINTED
WANT TO BUY MY BY PRINCIPAL AS AGENT
CAR? DISCUSS
WITH JOHN

MEETS JOHN, DISCUSS &

BUYS CAR FROM JOHN

JOHN IS AN AGENT
BY ESTOPPEL.
PRINCIPAL IS ESTOPPED
FROM DENYING JOHN’S
3RD PARTY AUTHORITY
• B) when a principal does not inform or announce to the 3rd party that
his agent has no authority or the agent’s authority had been
terminated, but the agent still continues acting on behalf of that
principal.

• Thus, the principal would be liable for the contract made by such
agent irrespective whether the agent had acted with or without the
principal’s knowledge.
• Case:
• Freeman & Lockyer v Buckhurst Park Properties LTD