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Law Of Agency Question
Business Law (Universiti Teknologi MARA)
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Name: Nur Zahira Binti Wasin
No Student: 2020973515
Class: BA2421A
With reference to the Malaysia Law of Contract, discuss how agency may be
terminated automatically or by act of parties.
(Question 3/ 2019/ Session 1)
The law of agency is governed by Part X of the Contracts Act 1950. An agent is defined as a
person employed to do any act for another or to represent another in dealings with the third
parties. The person for whom such act is done, or who is represented, is called the principal.
In other words, agency is the relationship that subsists between the principal and the agent,
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who has been authorized to act for him or represent him in dealing with others. Based on
Malaysia Law of Contract, an agency can be terminated at any time. If the trust between the
agent and the principal has broken down, it is not reasonable to allow the principal to remain
at risk in any transactions that the agent might conclude during a period of notice.
Termination of agency may take place in two ways either automatically by operation of law
or by the act or agreement of parties. Termination of agency by law occur if the agency
relationship is terminated pursuant to the provisions of the agreement itself. The situations
that may arise the termination of agency automatically based on Malaysia Law of Contract is
because the expiry of time. If the agreement provides for the appointment of the agent for a
particular period of time, the agency will come to an end automatically when that period of
the time is expired.
Next, fulfilment of object. If the agreement provides for the agency to terminate upon the
occurrence of a specified event, when the specified event happening, the agency will come to
an end.
Then, the termination of agency also occurred automatically if either party death or lunacy.
Whenever principal or agent come across death or lunacy, the agency will gets terminated.
After that, the bankruptcy of principal. Principal should have capacity to contract. If a
principal become bankrupt, he foregoes capacity to contract, then the termination of agency
will take place. However, the act is silent regarding to insolvency of agent. As minor also can
act as an agent, it can be conformed that a bankrupt person may act as agent.
Next, the destruction of subject matter. When the subject matter of contract gets destructed,
then agency contract would come to an end.
Then, liquidation of company. Because of account of legal entity, company may act either as
a principal or an agent. Whatever the status may be, if company enters into liquidation, the
termination of agency will automatically take place.
Lastly, for the sub agency, whenever agency gets terminated on account of any reason, subagency also gets terminated automatically.
Besides, an agency also can get terminated by the act of parties. The agency may be
terminated by the acts of either the principal or agents. Firstly, the termination of agency that
revocation by the principal. The authority of an agent may be revoked at any time by the
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principal. Principal can terminate the contract of agency by giving notice to agent. By doing
so, if agent comes across any suffering, principal had to compensate the agent. As example,
if the agent has exercised his authority partly, the principal may revoke the agency for future
acts only.
Secondly, termination of agency by revocation by the agent. Agent also can terminate the
agency contract by giving notice to the principal but by doing so if principal come across any
suffering, agent had to compensate the principal which is, if the contract of agency is entered
into for a fixed period, agent should pay compensation to the principal for the earlier
renunciation of the business of agency.
Lastly, termination of agency by both the parties to the contract. It means if there a mutual
understanding between the agent and principal, the agency may be terminated at any time and
at any stage. Therefore, the authority of an agent terminates, when the principal and the agent
agree to terminate it.
As a conclusion, agency is a type of general contract. The contract of agency is between an
agent and a principal, therefore, the relation between the principal and the agent can only be
terminated by operation of law and by the act or agreement of the parties. By operation of
law, the agency can be terminated by a period of time, death or lunacy either the principal or
agent, bankruptcy, fulfilment of object, liquidation of company etc. Then, by the act or
agreement of the parties, the relation between principal and agent can be terminated by their
agreement and by revocation of the principal and renunciation of the agent. Finally, if either
party acts in a way which is inconsistent with the continuation of the agency then it will be
terminated though even this may well give rise to rights of action for breach of contract.
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