SCHOLARLY LIBRARY TIMES
By scholar AUGUSTE COMTE
The law of agency is when an agent is authorized to act on the behalf of the
principal and to create a legal relationship with a third party. An agent is a
person employed by principal in dealings and act on the behalf of principal with
third persons. Principal is the person for who is represented by the agent.
According to contract Act 1950, there are 5 ways that may arise an agency,
which are by express appointment by the principal, by implied appointment by
the principal, by ratification by the principal, by necessity and by the doctrine of
estoppels/holding out.
By express appointment by the principals
According to section 140, an agent may be authorized and raised by mouth or
word to sign a contract. When the term was specifically mentioned and agreed
by both parties and when the contract is made, the express terms is arising. The
contract can be either in oral or in writing form. There is an example of an
express appointment by the principals, which is a Power of Attorney. A Power
of attorney mean you can allow and authorized an agent to act on your behalf
when you are unable to do your affairs. For example, your agent will help you to
manage your affairs when you are mental illness or you are unable to do the
affairs. The power of attorney’s document should be in the written form. If the
attorney try to get the secret profit or personal profit by acted unreasonable of
his job scope and power, the principal is not liable on this act.
By implied appointment by the principal
According to section 140, implied appointment by principal will arise when a
principal was speak or write the dealing by using his own words, and there was
a third party has the authority to act for him or her. There are 3 conditions in
the implied appointment, which are:
Agency can be inferred from the circumstances of the case
Case: Chan Yin Tee v William Jacks & Co
Fact: The plaintiff agreed and supplier the goods to the defendants because the
defendant said that he is the partner of another in a meeting. However, the
defendant does not pay the payment for the goods delivered as he doesn’t
know the commerce of business. The plaintiff wants to sue as defendants
breach the contract for not being paid the goods.
Held: The court said the defendants was not entitled to repudiate the contract,
they are liable to the contract.
Husband and wife’s relationship
The relationship of principal and agent may arise between the husband and wife,
which is the husband, can be act as principal and wife and act as agent. The wife
can act as agent to her husband as she has the right to buy necessaries goods on
credit by under her husband’s name. The daily goods are use to suit their
lifestyle. The examples of goods are daily goods and etc. So, the husband is
liable for payment of the goods. Once both of them are not stay together
anymore, the presumption can be stopped. The husband can rebut the
presumption and not liable for the goods by proving that:
he was declare and stop his wife to warrant his credit specifically; or he gave the
warning to the tradesman by not to supply the goods to his wife expressly; or
the sufficiently and satisfactory allowance was given to his wife; or the enough
goods were provided to the wife; or
By consider the financial of the husband, the demands of necessaries were
unreasonable to her wife living style.
Partnership business, Partnership Act 1971, section 7
According to this partnership Act, it considers that a partner can act as an agent
of another while they are involved in the partnership business. The partner has
the authority to the act carry by another partner in the business. The
presumption can be accepted when the person with whom he is dealing with
was knows the partner has no authority to act on the agreement when the
contract is not complete yet.
Case: Edmund v. Bushell and Jones
Fact: The defendant was employed by plaintiff as a manager and defendant will
operate at the London’s company. Firstly, plaintiff was prohibiting defendant
from accepting bills of exchange. However, defendant still insists to accept the
bill and breached the prohibition at the end. Plaintiff sues for the defendant’s
act.
Held: The plaintiff was liable on this case as others knew that defendant was the
agent of plaintiff.
By ratification
Under the Contracts Act 1950, section 149, (Right of person as to acts done for
him without his authority, effect of ratification), whereby 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. This means that one of
the two situations must exist before agency by ratification can arise. This can be
created either an agent who was duly appointed has exceeded his authority or a
person who has no authority to act for the principal has acted as if he has the
authority. The principal can either reject the contract since he has not
authorized it or accept the contract made. Once accepted, the contract is known
as ratification.
Case: Sentance v Hawley
Fact: Plaintiff, a broker, on instructions of defendant bought three lots of sugar
for him, numbered 67, 68, and 69. By the conditions of sale the goods were to
remain at the wharf, at seller’s risk, till the warrants were delivered to the buyer.
On 25 May defendant requested plaintiff to obtain a warrant for lot 67 and clear
it at the Custom House, which he did. At the same time plaintiff paid and
obtained warrants for the other lots, which was the ordinary course of
proceeding among brokers, they getting discount allowed by the seller. It was
proved that defendant knew of this practice, and that it had been done in this
instance. On 22 June defendant instructed plaintiff to clear lot 68. According to
the ordinary practice, if the warrants had not been obtained previously, they
would have been obtained on the Saturday, and the duty would have been paid
on the following Monday. The warrants, however, had been previously
obtained. A fire broke out after business hours on Saturday, and lot 68 was
destroyed.
Held: The conduct of defendant amounted to a ratification or adoption of the
previous payment. The sugar was then standing at the buyer’s risk. Plaintiff
could recover the money paid for it as money paid for defendant’s use.
By necessity (in an emergency) An agent has authority, in an emergency; to do
all such acts 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. It is created when a person is entrusted with another’s property.
This becomes necessary for the person 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 & the person who
acts on his behalf. There are three conditions whereby it may be created if the
conditions are fulfilled. The conditions are it must be impossible for the agent to
get the principal’s instruction, the agent’s action is necessary and agent of
necessity has acted in good faith.
Case: In Prager v Blatspiel. Stamp & Heacock Ltd. [1924]
Fact: During the First World War an agent of a fur merchant in Bucharest bought
£1,900 worth of skins. The merchant paid for the skins but owing to the war the
agent couldn’t dispatch the skins to him. The skins increased in value and the
agent sold them.
Held: There was no agency of necessity the court held. The skins were not likely
to drop in value and could be preserved by proper storage.
(v) By estoppel
Normally, a person is not restricting by the contract which is made on his behalf
without his authority. But if a person allows a third party to believe A is his
agent, however, when A is not his agent and the third party believe that A is his
agent, the person will be estoppels from defending the existence of agent.
Case: Freeman & Lockyers v Burkhurst Park Pty Ltd
Fact: The agent actually has no authority and power to the act, but he still hired
the plaintiff to work for the defendant. But the defendant does not stop the act
or contract that authorized by the agent. After that, the defendant refuses to
make the payment to the plaintiff when the plaintiff claims for the payment
because the agent did not have the authority to ask the plaintiff to work for the
defendant.
Held: The defendant was estopped by denying the agent’s authority to act on
behalf of them. The defendant was not entitled to repudiate the contract and
liable to the payment because others were knew and believed that the agent
has the authority to act on behalf of them.
b. Agents and principals have their own duties to arise an agency. With the
reference Contract Act 1950 Section 168, agents are not allowed and cannot to
make any secret or personal profit for himself by conducting his duty. Actually
secret profit is not restricted to money only but it may include the others
value’s things, for example, an interest-free loan and etc. An agent who has
made secret profit on his own account ise of principal’ property, the principle
may:
Repudiate or not liable for the contract if it is bring disadvantages to him
Dismiss or fired the agent for breach of duty and performance
Get the amount of secret profit back from the agent.
For example, case Tan Kiong Hwa Vs Andrew S.H. Chong
The principle was only authorized the agent to sell the flat for $45,000, but the
agent sold it for $54,000. As the agent was breached his duty, the court held
that the principal was entitled to recover the $9,000.
Do not have the authority and need to pay the commission to the agent
For example, case Andrews Vs Ramsay and Co
The defendant was received 50 pounds as commission from the plaintiff.
However, the plaintiff later known that defendant does not report the others
commission from the purchaser. The amount is 20 pounds. Plaintiff sued the
defendant to recover the two amounts which paid by him. The court held that
he entitled to recover both sum of amount.
(e) The principal may dismiss the agent for breach of duty.
may sue the agent and third party for any damages and loss But, if the principal
knows about the secret profit and consent to the transaction or contract, the
agent is entitled and able to keep the profit.In the (Boardman v. Phipps [1966] 3
ALL ER 721, per Lord Denning on p. 856) case, the defendants, acts as a solicitor
of a family trust. The trust assets include 27% holding in a company, defendant
was cared about the accounts balances of a company and he was demanded
and required to protect the shareholding. Defendant and his beneficiary went to
a shareholders’