LAW of agency
Prepared by:
Norazla abdul wahab
LEARNING OUTCOME
At the end of this chapter, students will be able to:
 Explain how an agency relationship is created.
 Explain the authority of an agent.
 Explain the agent’s duty to the principal.
 Explain the agent’s right against the principal.
 Explain the liabilities of principals and agents to third
parties.
 Describe the termination of agency.
Introduction
 Agency is the relationship which subsists between
the principal and agent,
 where the agent has been authorized to act for the
principal or
 represent him in dealing with others/ 3rd party.
Introduction
 S.135 CA-
Agent is a person employed to do any act for
another in dealing with third person
 S.135 CA-
Principal is the person to whom such act is done
or who is so represented.
 For e.g.
 If Ali appoints Muthu to buy some goods on his
behalf, Ali is called the principal while Muthu is his
agent. The seller of the. goods is called as third person
Parties to Agency
 The creation of agency involves three
parties;
 the principal who passes the authority to act
to the agent and
 the agent who in turn with this authority
affects the legal relations of the principal
with a third party.
 Third party
CAPACITY OF AGENTS
AND PRINCIPALS
 Capacity of the Principal
Section 136 of CA, 1950
 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.
Continue…..
 Capacity Agent
Section 137 OF CA, 1950
As between the principal and third persons,
any person may become and 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 the behalf herein
contained.
 Any person can become agent, including
minors and unsound mind persons
 However, they are not responsible for their act
 The principal must be responsible and take the
risks of their acts.
Chan Yin Tee v William Jacks & Co
(Malaya) Ltd [1964] MLJ 290
 Chan & Yong (minor) were partners in business. Chan
told William Jacks (third party) that Yong is his
partner and has authority to act on his behalf.
 William Jacks supplied goods to Yong but no payment
was be made.
 WJ brought an action against Chan as a Principal of
Yong.
Chan Yin Tee v William Jacks & Co
(Malaya) Ltd [1964] MLJ 290
 Held:
 Chan was responsible to Yong’s act no matter he is
an adult or a minor.
Contractual relationship
 2 kinds of contractual relationship :
a) Between principal and agent
b) Principal and 3rd party.
CREATION OF AGENCY
 Agency is created or formed by agreement and
consent of both parties
 No specific formality in order to form the contract of
agency
 Consideration is not necessary in order to form a
contract of agency.
 S 138 OF CA :
“ No consideration is necessary to create an agency”.
Modes of creation
Express
appointment
Estoppel/
holding
out
Ratification
Implied
appointment
Necessity
1. Express appointment
Section 139 CA:
“The authority of an agent may be expressed or
implied”
Section 140 CA:
“ An authority is said to be EXPRESS when it is
given by words spoken or written .”
(Express = verbally/ writing).
i.e. Power of Attorney- that is created by the
authorization by the client given to the solicitor to
act on his behalf.
2. Implied appointment
 S.140 CA
“...an authority said to be implied when it is to
be inferred from the circumstances of the
case...”
a) Circumstances of the Case.
b) Relationship between Husband & Wife
c) The Partnership Act 1961
a) Circumstances of the Case.
 Illustration Section 140
“A, owns a shop in Kajang, living himself in Kuala
Lumpur, and visiting the shop occasionally. The said
shop 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 fund with A’s acknowledge.
B has IMPLIED AUTHORITY from A to order goods
from C in the name of A for the purposes of the shop.
 Chan Yin Tee v William Jack
 Chan and Yong (minor) , were registered as
partners. At a meeting with a representative of
the respondent company, the Chan held
himself out to be Yong partners (impliedly).
Good were supplied to Yong but were not paid
for.
 Chan was liable for Yong’s acts.
b) Relationship between Husband
& Wife
 It is implied that the wife has authority to pledge the
husband’s credit in a contracts that are necessaries and
suited to their condition and style of living.
 Impliedly, the wife is an agent to the husband. The
wife has an implied authority to make contract on
behalf of the husband. The husband as the Principal
liable upon such contracts that are necessaries and
suited to their condition and style of living.
 However, the husband can rebut by proving that:
1) expressly forbid his wife from pledging his credit;
2)Expressly warned the tradesman not to supply his
wife with goods or credit;
3) His wife was sufficiently provided with the goods ;
or
4) His wife was given a sufficient allowance for buying
goods without having to pledge her husband’s credit;
5) The contract was unreasonable , taking into
consideration her husband’s income.
c) The Partnership Act 1961
 S. 7 of the Partnership Act : each partner in a
partnership is an agent to the firm or other partners
in the firm, when contracting the course of the
partnership’s business.
 Each partner : implied agent to the firm
 The firm/ other partners are the implied Principal to
any one of the partners.
 The firm/ other partners are liable to whatever
contracts which has been entered into by any of the
partners.
3. Necessity or Emergency
 Where an agent can be appointed
during an emergency even in the very
beginning the agent is not appointed by
the Principal to act on his behalf.
3. Necessity or Emergency
 An agency by necessity may be created if the
following conditions are met;
a) There must be a real & actual emergency
b) the agent’s action is necessary to prevent loss to
the principal or the agent was entrusted with the
Principal’s property/ goods.
c) it is impossible for the agent to get the principal’s
instruction at that time
d) the agent acted in good faith.
a) There must be a real & actual
emergency
Phelps James & Co. v Hill
 Held:
“ emergency must be referred to the reasonable
situations by looking into the dangerousity,
facilities available , cost, time distance etc.”
b) the agent was entrusted with the
Principal’s property/ goods./ in the
possession of the agent.
 Section142 CA.
“ an agent has authority , in an emergency , to do
all such acts for the purpose of protecting his
principal from loss as …”
 For e.g. selling off perishable goods to prevent
rotting.
 Jebarra v Ottoman Bank [1972]2 KB
254
 Held:
“ agency by necessity only exists if the agent is
entrusted with the goods of the principal or
being instructed to deliver the goods to certain
destination and where at the time emergency
occurred while the goods are under the
responsibility of the agent”.
c) it is impossible for the agent to get the
principal’s instruction
Generally, in S. 167 of CA, 1950.
“it is duty of an agent in the case of emergency
to communicate with the Principal to get some
instructions.”
c) it is impossible for the agent to get the
principal’s instruction
However in S. 142 of CA, 1950
“ if he failed to communicate with the Principal,
then only the agent may use his own
discretion taking the necessary steps”.
Springer v Great Western Railway Company [
1921] 1 KB 257
 the D (agent) agreed to carry P( Principal)’s
tomatoes from Jersey to Covent Garden Market.
 Owing to bad weather, the ship arrived late at
Weymouth. Some of the tomatoes were found to be
bad.
 The D decided to sell the tomatoes locally as they felt
the tomatoes could not arrive Garden Market in a
saleable condition.
 They did not communicate with P.
Springer v Great Western Railway Company [
1921] 1 KB 257
HELD:
 P was awarded with damages as D failed to
communicate with P as he could have done
so.
Effect of Agency By Necessity
 1. the agent will be protected from any
claims by the Principal
 The agent will be entitled to the additional
payment for his effort to protect & to
preserve the safety and interest of the
Principal
 A contract exists between the Principal and
& 3rd party.
Case study:
 Anis is the distributor of ikan keli around the cities of
Malacca and Ipoh. One day, her neighbor, Amir
wished to go back to his hometown in Kedah and
Anis requested him to send 3 baskets of ikan keli to
her agents in Ipoh. On arriving at Tanjung Malim,
Amir discovered that the ikan keli started to become
smelly. Amir tried to contact Anis to seek her latter
opinion. Unfortunately, Anis was not home. Amir
decided to sell the fish at the road shoulder where he
stopped and sold the fish at a lower price. When Anis
noted that, she felt very angry and wished to claim
against Amir in the court. Advise Anis?
4. Ratification
 Certification/ acceptance by the Principal for
an act done without authority or exceeding the
authority given.
4. Ratification
 2 situations:
 1) when an agent who was appointed has
exceeded his given authority; and
 2) when a person, who has no authority to act
for the principal, has acted as if he has
authority to act so;
 The Principal has a choice either to REJECT
or ACCEPT the contract that was made on
behalf of him.
 If he accepts and confirm with the contract,
that means that HE RATIFIES the said
contract.
 Can be either EXPRESS OR IMPLIED.
 S. 150 of CA, 1950:
“ Ratification may be expressed or may be
implied…”
 As a result, agency by ratification exist between
Principal and Agent
S. 149 of CA, 1950
“ where acts done by one person on behalf of another
but without his knowledge or authority, he may elect
to ratify of to disown the acts.
If he ratifies, the same effects will follow as if they had
been performed by his authority”
However,
if the Principal does not agree, NO
AGENCY RELATIONSHIP exists and
the Principal would not be liable upon
such contracts.
 For example, on 2 July, X appoints Y as his
agent to buy a car not exceeding RM 40,000. Y
ordered a car costing RM 50,000, telling the
salesman that he was buying the car on X’s
behalf. On 4 July, the salesman delivered the
car to X.
 If X adopts the contract on 4 July, then Y is
said to be his agent through ratification.
Alternatively, X can also reject the contract on
4 July since Y has exceeded his authority
Effects of Ratification
 Once, there is ratification by the Principal ,
the Principal is bound to the contract.
 S. 149 of CA
“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”.
 The Principal is bound to the contract
retrospectively.
where the relationship of principal and agent
is created retrospectively, the contract is
effective from the date when the original
contract was made by the agent and not
from the date of the principal’s ratification
Bolton & Partners Ltd v Lambert
(1889) 41 Ch D 295
 Held:
The contract is effective from the date when it
was made, not from the date it was ratified by
the principal.
• A contract can only be ratified under the
following conditions:
1. The contract done by the agent was without
authority or exceeding the authority.
• A contract can only be ratified under the
following conditions:
2. The act or contract must be recognized by law
/not illegal.
Brook v Hook (1871) LR 6 Ex 89
Held:
“the Principal MAY NOT RATIFY a contract in
which his signature had been forged by the
unauthorized agent.”
illegal
Illegal
3. The agent must, at the time of the
contract, expressly act as agent for the
principal (section 149)
Keighley Maxted & Co. v. Durant [1901] AC
240
 An agent was authorised by the appellant
(Principal) to buy wheat at a certain price.
The agent exceeded his authority & bought it
at a higher price.
 However, the agent contracted in his own
name.
Keighley Maxted & Co. v. Durant [1901] AC
240
 Held:
“the principal was not liable for the act of an
agent who did not profess to be an agent
when he entered into the contract.”
4. The principal must be in actual
existence or capable of being
ascertained, when the contract is
made. (must exist).
Kelner v. Baxter (1866) LR 2 CP 174
“a contract to buy a hotel by an agent on
behalf of a company which was about to be
formed, could not be ratified by the
company since it did not exist at the time. ”
5. The principal must have contractual
capacity at the time of the contract
6. The principal must, at the time of the
ratification, have full knowledge of all
material facts,
UNLESS
it can be proven that he intends to ratify the
contract whatever the facts may be.
S. 151 of CA, 1950.
“no valid ratification can be made by a person
whose knowledge of the facts of the case is
materially defective”.
Marsh v Joseph
A principal had ratified a contract without the
full knowledge of all material facts.
Held:
The P not bound to such contract.
7. The principal must ratify the whole act or
contract.
 He cannot accept only a part.
S. 152 Of CA, 1950
 “A person ratifying unauthorized act done
on his behalf ratifies the whole of the
transaction of which the act formed a part” .
8. The ratification must be made within
reasonable time.
Metropolitan Asylum Board v. Kingham and
Sons (1890) 6 TLR 217
The agent contracted to buy eggs without the
authority. The Principal tried to ratify the
said contract after a week it was made.
Held:
the ratification was too late.
9. The ratification must not injure a third
party’s right or interest
Section 153.
“ an act done by one person on behalf of
another…which would have the effect of
SUBJECTING a third party to DAMAGES,
terminating any rights or interest cannot by
ratification”.
 If the Principal has ratified the contract,
but any one of those conditions had not
been fulfilled,
the contract IS NOT BINDING on the
PRINCIPAL.
Case study
 Afeedah has been instructed by Azliza to buy a
computer for a price not exceeding RM 6,000.
Afeedah then had ordered a computer from Ariff
Communication in her own name for a price of RM
6,500 since that was the lowest price in the market.
When Ariff Communication delivered the computer,
Azliza accepted it even though the price exceeded
the amount she had authorised. When Ariff
Communication demanded a payment, unfortunately
Azliza refused to pay on the ground that the said
price was too expensive and in fact it was bought by
Afeedah herself. Discuss whether there is contract of
agency between Afeedah and Azliza?
5. Estopple
 Generally, a person (Principal ) is not bound
by a contract made on his behalf without his
authority.
5. Estopple
 For an agency by estoppel,
is when a Principal who by conduct or words
allows a third party to believe that the agent
is acting on his behalf.
He is estopped (stop) or restrained from denying
that the agent is working on his behalf.
 Example:
A tells T in the presence of P that A is P’s agent
and P does not contradict this statement.
P later cannot deny that A is his agent; if T sells
goods to A, believing him to be P’s agent and
later claim for the price from P.
Effects of Estoppel
 S. 190 of CA, 1950
“ when an agent has , without authority done acts or
incurred obligations to third persons on behalf of his
principal, the principal is BOUND by those acts or
obligations if he has by his words or conduct induced
such third persons to believe those acts and
obligations were within the scope of the agent’s
authority”
 1) The P has LIABILITY / BOUND to the
contract that being made by the agent.
 2)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 continuous
acting on behalf of the P, then the P is
BOUND/ has LIABILITY for the contract
made by agent irrespective whether the agent
had acted with or without the Principal’s
knowledge.
Freeman & Lockyer v Buckhurst
Park Properties Ltd
 There were 4 directors in a company. One of them, A
contracted on behalf of the company with T (3rd party)
without any authority.
 The other directors knew about the contract but
does not inform T that A actually had no authority
to act on behalf of the company.
 Thus, T is induced to believe that A had authority to
enter into a contract on behalf of the company.
Freeman & Lockyer v Buckhurst
Park Properties Ltd
 Held:
“ the company is estopped from denying that A is the
company’s agent and had authority on behalf of
the company.
Summary
 Agency by Estoppel only happen if the
Principal himself through his own words or
conduct induced the 3rd party to believe that
a certain person having authority to act on
his behalf.
 It does not happen if the 3rd party was
induced by the agent only.
CLASSIFICATION OF AGENCY
A) According to extent of authority :
 Universal agent- a general agent with extensive
powers. He can do all acts which a principal may
personally do.
 General agent- an agent who is employed to act
on behalf of principal in particular goods or
trade.
 Special agent- agent with limited power to do
specific act or for specific purpose.
B) According to nature of works performed are:
 Del credere agents- an agent who undertakes that a
third party will perform his obligations. If third
party fails to perform, the agent will be held liable
 Factors- a commercial agent who is entrusted with
the goods of the principal for sale. He sells the
goods in his own name without disclosing the
principal’s identity.
 Broker- an agent who make contracts between his
principal and third parties for a commission
 Auctioneer- an agent who is employed to sell
goods at auctions.
 Bankers- can either be an agent for customer or an
employee as agent for banks.
Authority of the Agent
 An agent’s act is binding upon the Principal
if the act is done within the authority of the
agent.
 The authority of the agent is classified into:
1) Actual authority;
2) Apparent ( ostensible) authority
1. Actual authority
 Through agreement between the Principal and
the agent.
 It comprises of:
a) EXPRESS AUTHORITY
b) IMPLIED AUTHORITY
 A) EXPRESS AUTHORITY
 Expressly given by the Principal orally/ writing
 S 140 of CA, 1950.
“An authority is said to be EXPRESS when it is
given by words spoken or written .”
(Express = verbally/ writing).
.
 S 141 of CA,
 1) An agent having authority to do an act
and to do all the lawful things which are
necessary
 2) An agent having authority to carry on a
business and has authority to do every lawful
things that necessary for that purpose or the
usually done in the course of conducting such
business.
Example:
B appoints C as his agent to sell his car for not
less than RM 50K, If C acted accordingly
with the express authority, B is BOUND to
the contract made by C
B) IMPLIED AUTHORITY
Authority implied from the following:
i) All such powers which are proper/ necessary/
usual to execute the express authority;
ii) The circumstances of the case;
iii) The customs/ usages of trade
iv) The situation and conduct of the parties.
1) All such powers which are proper/ necessary/
usual to execute the express authority;
 Also known as “IMPLIED USUAL
AUTHORITY”.
 Example:
 B appoints C to sell his car and entrusts C with
possession of the car. C by implication has the
authority to allow potential buyers to test drive
the car.
CASES
 CHAN YIN TEE V WILLIAM JACKS
 Held:
“ From the conduct of Chan telling WJ that Yong
is his partner, it shows that Yong has implied
usual authority to act on behalf of Chan in
buying goods for the business.”
2.APPARENT /OSTENSIBLE
AUTHORITY
 The law presumed that the agent possesses certain
authority, although the Principal may not have
consented to or give such authority to the said
agent.
 Based on the representation made by the Principal to
the 3rd party irrespective of any agreement between P
& the agent.
 It arises in 2 situations:
 1) where a Principal by his words / conducts
leads the 3rd party to believe that his agent
has authority to make contract for him.
 S.190 of CA
 2) where the agent previously had authority to
act, but that authority was terminated by the
Principal without notifying it to the 3rd parties.
BREACH OF WARRANTY OF
AUTHORITY
 An agent who acts outside his authority or a
person who acts as if he has the authority to act
as an agent for another person is liable for
breach of warranty of authority.
 In other words, where a third party is misled
by the agent’s misrepresentation of
authority, however innocent, the agent is
personally liable.
Yonge v. Toynbee [1910]1 kb 215
 the agents were held liable for damages even
though they had acted in good faith.
 Where an agent acts in excess of his
authority and that part which is excess of
authority is separable from the rest, then the
principal is bound by those action within the
agent’s authority but not the rest.
 But if the acts are inseparable, the whole
transaction is not binding on the principal
(section 180- 181)
 But this does not affect the right of the third
party to claim against the agent for breach of
warranty of authority.
 An agent is not liable if his lack of authority is
known to the third party or if he expressly
disclaims authority or if the contract excludes
his liability
DUTIES OF AGENT TOWARDS
PRINCIPALS
 Normally , the rights and duties of an agent
are stipulated in the terms of contract of
agency.
 However, contract Act 1950 also provided
some rights and duties of an agent
towards Principal via versa.
 1) To obey the principal’s instructions
section 164
An agent must obey the principals’
instructions
If failed to obey; breach of contract of
agency and the agent is liable for any loss
sustained by the Principal.
However, not to follow instructions that
against the law.
 Turpin v Bilton (1843)5 Man & G 455
 The agent has been instructed by the Principal
to get the insurance for his vessel. However,
the agent failed to do so. The vessel lost and as
a result the Principal bare some loss.
 Held:
 the agent is LIABLE for breach of duty due to
his failure to obey the Principal’s instructions.
 Thus the agent LIABLE to pay compensation.
2) In the absence of instructions from the
principal, to act accordingly
section 164
“…according to custom that prevail in doing
business of the same kind”.
Illustration (b) of S. 164
3)To exercise care and diligence in carrying
out his work and to use such skill as he
possesses.
section 165.
“an agent is bound to conduct business of the
agency with as much skill as is generally
possessed by person engaged in similar
business…”
i.e. : if the agent is employed for professional
service, he must use all his skills & expertise
that usually required for a same professional
man.
Keppel v Wheeler [1927]1 KB 577
• the D (agent) was employed by the
P
(Principal) to sell his house. The first offer was
accepted by the P with a condition. A few days
later a higher offer (2nd offer) was made by X
but this does not communicated to P.
• the court held that the D liable to pay the
differences between 1st offer and 2nd offer
4)To render proper accounts when required
section 166.
“…agent is bound to render proper account to
his Principal on demand.”
Duty of the agent to account for all monies that
accepted on behalf of the Principal
It should not be mixed up with the agent’s
property.
5)To communicate with the principal during
EMERGENCY
section 167
section.142
6. Act in Good Faith and No Conflict of
Interest.
the agent must act solely for the benefit of his
principal.
Good Faith is:
1) The agent cannot become a party to
transaction with the Principal
• If the Principal noticed that he is contracting
with his own agent, the Principal has the right
to repudiate the contract.
 Section 168 states that he cannot sell his own
shares to the principal, unless he has earlier
informed the principal and obtained his
consent.
Wong Mun Wai v. Wong Tham Fatt & Anor [
1987] 2 MLJ 249
the court found that the defendant failed in his
duty as he sold the principal’s share of land
below the market value and he sold the land to
his own wife.
The agent (D) is under duty to act in good faith
and cannot use his position as agent to gain
profit at the Plaintiff’s expense.
2) The agent cannot act on behalf of 2
Principals at one time without their consent
 Fullwood v Hurley
 The agent had acted on behalf of both parties;
the P and the 3rd party, by claiming commission
from both of them without their knowledge and
consent.
 Held: the agent had breached his duty towards
the Principal for not acting in good faith.
3) The agent must disclose everything that he
knows to the Principal relating all materials
facts of the contract.
4) Not allowed to disclose his Principal’s
secret.
5) All monies & profit should be put into the
Principal’s account.
S. 166
7) Not to make any secret profit out of the
performance of his duty
section 168.
 Secret profits refer to a bribe/ secret
commission/any financial advantage which
is above and beyond the agreed commission
between P &A.
 When the principal knows of the extra profit
and consents to it, the agent is entitled to
keep the profit. (S. 168).
 If the principal does not consent; the
Principal may:
a) Repudiate the contract
b)recover the amount of the bribe from the
agent.
 S.169
“if an agent , without knowledge of his Principal
deals in the business of the agency on his own
account instead of an account of Principal, the
Principal is entitled to claim any benefit resulted
from the said transaction.”
 Tan
Kiong Hwa v Andrew S.H. Chong
[1974] 2 MLJ 188
 the P (Principal) bought a flat from a company
. The D (agent) was the managing director.
The P authorized the D as his agent to sell the
flat for $45000. the defendant sold the flat for
54000 and the extra $ 9K was credited into
company’s account.
 the court held that the P entitled to claim the
extra $9000 as the D had breached his duty as
an agent.
c) The Principal may refuse to pay the agent’s
commission/ other remuneration
d) The P may dismiss/ terminate the agent’s
authority
Boston Deep Sea Fishing & Ice Co &
Farham [1957] 1 WLR 1051
Held: an agent had been dismissed by the P for
receiving bribe.
e) The P may be sue both the agent and 3rd party
who gave the bribe and may claim damages.
 Mahesan v Malaysian Government Officers
Co-Operative Housing Society
 Appellant (agent) was Director & secretary of the
Respondent(Principal) which bought land at the price
of $944k from the Vendor who had earlier paid $
456K for that. The A knew the facts but failed to
inform the P. Only after the sale was made the P
discovered the fact that the A had received $122k as a
bribe.
 Held: the P could recover either bribe or the amount
of loss.
f) The agent and the 3rd party may be charged
under a criminal offence.
 S.4 of the Prevention of Corruption Act 1961 .
8) To pay to his principal all sums received on his
behalf
Whatever amount received on behalf of the
Principal, must paid to the principal.
However,
section 171.
“subject to the deduction specified in S. 170, the
agent is bound to pay his Principal all sum
received on his account”.
 S. 170
Agent is entitled to deduct any sum from the
Principal’s money for the payment of :
1) Any sum owed to the agent in respect of
advances made/ expenses incurred by the
agent in conducting business;
2) Any commission / remuneration payable to
the agent.
 The agent also has the right to retain his
Principal’s property in his possession until
his remuneration is paid.
right of lien-S. 174
“…an agent is entitled to retain goods, papers
and other property, whether moveable or
immoveable ..until amount due to himself for
commission, disbursement, and respect of the
same has been paid for him”.
 9) Not to delegate his authority to other
person
 Maxim “ delegatus non potest delegare”
the relation between principal and agent is
personal one and the agent cannot employ
another person to do his duty.
Exception: The agent may delegate his authority to other person
 Exceptions:
 1) where the Principal approves the delegation of
authority.
2) Where it is presumed from the conduct of the parties
that the agent would have power to delegate his
authority to other person to perform his duty
3) In case of emergency (i.e. injured in accident)
4) If the act done is purely ministerial or clerical which
is does not involve any discretion or professional skill
of the agent.
 De Bussche v Alt (1878) 8 Ch D 286
 The Principal appointed an agent in China to
sell a ship at a certain price. The agent was
unable to sell the ship. Therefore the agent
sought the Principal’s approval to appoint sub
agent to sell the ship in Japan.
 Held:
 there was no breach of the agent’s duty in
appointing the sub agent because there was
express consent from the principal to the
delegation.
John McCann & Co v Pow [1975]1 All ER
129
 An agent has been employed to sell a house
belonged to Principal. The agent delegated his
authority to another person.
 Held:
“ the agent failed to get his commission due to
his breach of duty delegating his power to
another person. Such duty involves his
personal skill & discretion in order to get the
best price for his P. It was not merely
ministerial or clerical duty. “
Sub-Agents
where delegation of duties is authorized, the
person appointed to act on behalf and under the
control of the agent is called a sub-agent.
Sub-Agents
Sub agents:
person who is appointed by the original agent to
act in the business of the agency.
(S. 144 of the CA).
 and is under the order and control of the
original agent.
 The relationship between the sub-agent and the
agent is like the relationship between the
Principal and agent.
 The sub agent acts on behalf of the original
agent who appointed him to become the sub
agent.
 Consequently, sub agent is NOT under the
control of Principal.
Liability Between the Parties
 The S/A is RESPONSIBLE for his acts
towards the agent only.
 S/A has no direct contract / duty with the
original Principal.
Liability Between the Parties
 The principal cannot sue the sub-agent if there
is any breach of duty by the S/A unless the sub
agent commit fraud or wrongful action.
 s. 145 (3)
‘sub agent is responsible for his acts to the
agent but not to the Principal except in the
case of fraud / wilful wrong”.
 Sub Agent cannot claim any remuneration or
commission from the Principal.
 The S/A is liable towards the agent for any of
breach of duty as for his commission or
remuneration as well.
 Thus, S/A can claim against the agent only.
 In the other hand, agent is liable towards:
 i) His Principal
 ii) sub agent
 s. 145 (2)
“an agent is responsible to the Principal for the
acts of the sub-agent”.
o S. 145 (3)
If S/A commit fraud / willful wrong, the P can
sue both the S/A and agent.
 Hedley Byrne v Heller and Partners Ltd
[1964] AC 465
 Held:
“ the P who suffered some loss due to the
negligence statement of the sub agent can
bring direct action in tort against the S/A.
Effect of Contract By S/A:
 1. Contract that made by the S/A with the 3rd
party is LIABLE on the Principal:
 i) if the appointment of S/A is approved by the
P; and
 ii) if he is originally appointed by the P.
(S. 145 (1) )
 HOWEVER,
 If the appointment of the S/A was not approved
by the P, the P IS not BOUND to the contract
made with the 3rd party by such S/A.
 Agent is PERSONALLY RESPONSIBLE to
his P and to the 3rd party for the acts of the S/A
or for the wrongful conduct of the S/A.
(S. 146).
Duties of Principal Towards Agent
To pay Commission / other agreed Remuneration
Not to willfully prevent or Hinder the agent from Earning
Commission
To indemnify/ reimburse the agent for lawful acts done in
the exercise of his duty
1. To pay Commission / other agreed
Remuneration
upon the completion of all contractual duties of the
agent.
S.172 of CA
“…payment for the performance of any act due to
agent until the completion of the act.
1. To pay Commission / other agreed
Remuneration
Depends on the terms of the contract.
If no amount- reasonable remuneration will be paid.
If agency guilty of misconduct, he losses his right
S. 173
“..agent guilty of misconduct, not entitled to any
remuneration”.
Andrews v Ramsay & Co. [1930] 2
KB 635
 Held:
 The P IS NOT BOUND to pay the
agent’s commission due to the fact that
the agent had received secret profit or a
bribe when performing his duties as an
agent.
2. Not to willfully prevent or Hinder
the agent from Earning Commission
 Under the duty of P not to prevent the agent from
gaining his commission.
 Examples whereby the P is said to willfully
PREVENTING or Hinder the agent from Earning
Commission
1) the P refused to accept the contract made by the A
2) the P appointed another agent to carry on the same
duty or to deprive the original agent from earning
commission.
3. To indemnify/ reimburse the agent for lawful acts done
in the exercise of his duty
i) Where the agent incurs some liabilities or
losses in performing his duties.
Hichen, Harrison , Woolston & Co v Jackson &
Sons
 Held:
 The agent is entitled to damages for anything
incurred in the performance of his duties and to
be reimbursed for whatever the agent had
advanced or lost.
Kyall & Evat v Lim Kim Keat (1928)
SSLR 206
 The P had instructed the agent who were share
broker to sell on her behalf the shares in a company
registered in England which is according to the will
of the deceased. The broker then made a contract to
sell the shares to 3rd party.
 Unfortunately, it was discovered that the will had
not been proved in England and the shares cannot
be delivered. The agent was compelled to buy
other shares for substitution and consequently
suffered loss. The agent sued the P to recover hiss
loss.
 Held:
 fail to disclose the fact that the shares cannot
be delivered will render the P to indemnified
the loss of the A.
 ii) the A causes injury to 3rd party
 S 176
 “where one person employs another to do an
act, the said agent does the act in good faith,
the employer is LIABLE to indemnify the
agent against the consequences of the act
though it cause an injury to the rights of the
3rd person”.
 iii) the A suffers injury during the course
of his duties due to P.
 S. 178
“ the P must make compensation to his
agent in respect of injury caused to the
agent by the P’s neglect or want of skill”.
 However, if the agent is employed by the P to
do a criminal act, the P IS NOT LIABLE to
indemnify the A any commission for any
consequences of the said act, even though there
was an express or implied promise of the P for
such indemnify.
 S. 177
“ where one person employs another to do an
act which is criminal, the employer IS NOT
LIABLE to the agent”.
EFFECTS OF CONTRACTS MADE
BY AGENTS
 1)Named Principal
 P’s name has been disclosed to 3rd party by the
agent.
 The 3rd party knows the name & identity of the
P
 knows that the agent is acting on behalf of the
P
 2) Disclosed Principal
 The P’s existence is disclosed but the identity is
unknown to the 3rd party.
 He only knew the person whom he is dealing
with is acting as an agent
 3rd party does NOT know the name and identity
of the Principal.
 3) Undisclosed P
 The P’s existence & identity is UNKNOWN to
the 3rd party
 The 3rd party acts under the impression that he
is contracting with the A personally
 Only after the contract has been signed, the 3rd
part comes to know that the person whom he is
dealing with was actually acting on behalf of
the P.
1)Named Principal
No liability for the A
S. 183
“an agent cannot personally enforce contract
entered by him on behalf of his Principal”
P alone will be LIABLE, whereby he has the
right to enforce, can sue and be sued
S. 179
“contract entered through an agent will have the
same effect has it been entered by the P”
Exceptions:
a) The agents agrees to accept and make himself
personally liable upon the contract.
b) The A executes an agreement in his own name
c) The A signs a negotiable instruments in his own
name without making it clear that he is signing on
behalf of the P.
d) The A exceeding the authority UNLESS be ratified
e) The A liable to the said contract made according to
custom.
Chin Yuen Tung v Bep Aketik [1978]1 MLJ 211
 R (3rd party) were requested by the A to make
a valuation report on piece of land in S’wak
and to send a copy of the report to a N.York
company (Principal).
 In the previous dealing, the R were paid by A.
Now, when the R claimed payment, the A
REFUSED and disclosed that they were merely
acting as an oversea agent for the N.Y
company.
 Held:
“ the A should make the payment. The A had
represented that the terms of payment would
be the same as earlier dealings.
The agents agrees to accept and make himself
personally liable upon the contract.
2. Disclosed Principal
No liability for the A when he acknowledges
that he is contracting on behalf of the P.
S. 183
“an agent cannot personally enforce contract
entered by him on behalf of his Principal”
P alone will be LIABLE
S. 179
“contract entered through an agent will have the
same effect has it been entered by the P”
 Exceptions : (whereby the A is PRESUMED to be
LIABLE even the P has been disclosed)
1. Contract made for sale & purchase of goods
for a merchant resident abroad . (S. 183 (a))
2. Where the agent does not disclose the name of
his P . (S. 183 (b) ; and
3. Where the P’s name & identity has been
disclosed but the P cannot be sued. (S. 183
(c))
3. Undisclosed P
1) Right of 3rd party:
 section 186.
 Where the third party has no knowledge
or reason to suspect that the person he is
dealing with is acting as an agent, he has
the right to sue either the agent or
principal or both of them
 3rd party CAN take legal action against the
agent.
 If not satisfy, party may proceed against the P
same if not satisfy with the A.
 H/ever, 3rd party may be prevented from
proceeding with the agent if :
i) he think that the agent is only the one can be
sued same as if he think that the P is the one
is liable. (S. 187).
ii) Doctrine of estoppel ( if he elects to sue 1
party, he may be estopped from suing other if
he has allowed the other to believe that only
the one he sued is liable.
 Pernas Trading Sdn Bhd v. Persatuan
Peladang Bakti Melaka [1979] 2 MLJ 109
 chemicals and fertilizers have been ordered by
the respondents for themselves rather than on
behalf of a principal.
 When the appellants sued for the balance of the
price, the respondents denied liability on the
ground that they were ordered for another party
(for P).
 Held:
 The respondents were liable as they
contracted in such a form to make themselves
personally liable.
2. Rights of the P.
 “ may require the performance of the
contract” by the 3rd party even the 3rd party
does not know that he is the P.
 S. 184 (a)
 Subject to the original rights & liabilities
subsisting between the agent & 3rd party.
 P who disclose himself, before the contract is
complete CANNOT enforce the contract if the
3rd party can show the identity of the P was
important ;OR
 3rd party would have not entered into contract
“ if he had known who is the P or..the agent
was not P
 S. 184. (b)
 3. Right of the A
 The agent can claim his rights under the
contract as the contract is actually his contract.
 However, not entitled to enforce contract, if he
falsely contract with the 3rd party as agent.
 S. 189.
TERMINATION OF
AGENCY
An agency may be terminated in the following
manner:
 1. By the act of the parties
1) mutual consent ;
2) unilateral revocation by the principal;
3) unilateral renunciation by the agent
 Unilateral revocation or renunciation : 1) s. 154: P revoke the agent’s authority/ agent
renounce the business of agency.
 S. 156: P revoke at any time before the agent exercise
his duty.
 S. 159: the P must give a reasonable notice .
Otherwise the A entitled to claim Damages via versa.
 S. 158: if agency for fixed term, earlier termination
will entitle the A to claim damages.
 S 160: expressed or implied in the conduct of the
parties
Sohrabji v oriental Security
Assurance co. AIR 1946
 Held:
 3 ½ months of notice that given by the P was NOT
Adequate to terminate the agency properly which had
lasted nearly 50 years.
 The measure of damages: the amount the agent might
have earned under the contract of agency had he not
been prevented from continuing his duty.
Exceptions: (WHERE P is prevented from revoke the
agent’s authority):
 1)the agent himself has interest in the property
(s. 155)
 2)after the authority has been partly exercised
by the agent (s. 157)
 3)the notice of termination by the P would only
effective when it comes to the knowledge of
the agent and 3rd party. (s. 161).
Smart v Sanders (1848)5 CB 895
 An agent was sent with goods to be sold on
behalf of the P . He also made advances to the
P for the security of the goods.
 Held:
 The agency cannot be terminated by the P
because the agent has interest in the goods.
Trueman v Loder (1840) 11
Ad&EI 589
 Held:
 A 3rd party who dealt with an agent whose
authority had been revoked was able to claim
from P the goods supplied because the 3rd party
had no knowledge of the revocation.
2. By operation of law:
completion of the task undertaken to be
performed by the agent-section 154;
2) Expiration of the period fixed
by the death of either the principal or agentsection 154;
4) by the subsequent insanity of either the
principal or agent- section 154;
1)
3)
5) by the bankruptcy or insolvency of the
principal- section 154 and;
6) by the happening of an event which renders
the agency unlawful.
 by the death of either the principal or agent-
section 154;
 Exceptions:
 If the A has interest in the property (s. 155)
 Effective upon agent having notice of the P’s
death (s.161)
 When the P died, the A must take reasonable
steps to protect & preserve the interest of the P.
Case study
 Afeedah has been instructed by Azliza to buy a
computer for a price not exceeding RM 6,000.
Afeedah then had ordered a computer from Ariff
Communication in her own name for a price of RM
6,500 since that was the lowest price in the market.
When Ariff Communication delivered the computer,
Azliza accepted it even though the price exceeded
the amount she had authorised. When Ariff
Communication demanded a payment, unfortunately
Azliza refused to pay on the ground that the said
price was too expensive and in fact it was bought by
Afeedah herself. Discuss the position of all parties
involved.
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is prepared for the benefit of her students enrolled in the MGM3351 course for their
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