LAW

OF
AGENCY
Introduction
Agency is part of contracts

Agents are hired by Principals to deal

with third parties.

E.g.?

2
Terms
S. 135 Contract Act: Agents;
Principals; Agency?
E.g.: ???

3
Terms: Agency?

The relationship that exists between

the principal and agent
Principal authorized the agent to do a
job/do some work on behalf of
himself
The agent can also be hired by the
principal to represent him in a
transaction/on a matter with other
person
4
Q: When an agency
relationship exists?
When the principal and agent sign a
contract of agency OR
When a principal appoints an agent to
enter into a contract with a 3rd party
on behalf of himself
Principal is liable for contracts made
by the agent as if the principal is
contracting with a 3rd party

5
Q: 2 Effects of agency
relationship:
1. An agency contract is formed
between the principal and agent.
The agency contract authorized the
agent for:
acting on behalf of the principal AND
do a job for the principal OR agent
enters into a contract with another
person on behalf of the principal.

6
Q: 2 Effects of agency
relationship:
2. A legal contract is formed between a
principal with 3rd party
Implication: 3rd party dealing with the
agent as if the principal does not exist

7
Sub Agents & Substitute Agents
S. 144 Contract Act: Sub Agents -
Persons hired / engaged by the original
agent
Acting under the control of the original
agent in the business of agency
E.g.:?

8
Sub Agents & Substitute Agents
(cont.)
S. 143 Contract Act: General Principle -
An agent can delegate duties to others
in certain agency businesses / practices
or by types of an agency that, an agent
can employ/hire a sub-agent to execute
agent's work

9
Formation of Agency Contract
1. Expressed
2. Implied
3. Ratification
4. Necessity
5. Estoppel

10
Formation of Agency Contract: 1. Expressed

S 140 CA:
An agent may be appointed by
agreement either orally / written
Under the agreement, the principal will
authorize an agent to act on his behalf
and state wages / commission [to be
paid when the work is completed]
The appointment : use the power of
attorney and/or by a letter of mandate.
11
Formation of Agency Contract: 1. Expressed
(cont.)

The power of attorney and/or by a letter

of mandate: A formal way in which a
person gives authority to another person
to represent him for specific purposes
and witnessed by 2 representatives.
Authorized person cannot use his
authority for the sake of himself e.g
issuing a check from the account of the
principal to pay his debts.

12
Formation of Agency Contract: 2. Implied

S 140 CA:
An agency relationship may be implied /
inferred / implied by words or actions
Words / actions show that he has the
power to do the work on the Ps behalf,
as if the person is appointed as an agent

13
Formation of Agency Contract: 2. Implied
(cont.)

S 140 CA: 3 ways:-

Circumstances of the case;
Matters referred (e.g. spoken words) /
writing;
Ordinary course of business.

14
Formation of Agency Contract: 2. Implied
(cont.)

Summers vs. Solomon:

H: When a person by words / actions
submitting another person as his agent,
he will be liable for all contracts entered
into by the person as if they appoint him
as his authorized agents.

15
Formation of Agency Contract: 2. Implied
(cont.)

Chan Yin Tee vs. William Jacks & Co.

(Malaya) Ltd.:
F: Chan and Yong (child) - partners - doing business
with the Co (William Jacks). Chan stated to William that
Yong is his partner. W's Co supplies goods to Yong.
When they fail to pay, W's Co claims debts from Chan.
H: Chan has submitted Yong as his agent who has the
authority to contract on his behalf. Therefore, Chan is
liable for acts done by Yong. Chan should pay off the
debts to the W's Co.

16
Formation of Agency Contract: 2. Implied
(cont.)

From the relationship of husband and

wife:
If a husband and wife live together, the legal
presumption is that the wife has the power to owe
(make debts) on his name. Provided, the wife can only
buy groceries according to their standard of living. Debt
will then bind the husband.
Q: How can the husband get away with the debts of his
wife???

17
Formation of Agency Contract: 2. Implied
(cont.)

From business partnerships:

S. 7 Partnership Act 1961:-
Each partner in a partnership is an agent of the
partnership firm and also to other partners
Any act / acts of a partner in the business will bind the
partnership firm and other partners
Profit and loss will be divided equally.
See: Mercantile Credit Co. Ltd. vs. Garrod

18
Formation of Agency Contract: 3. Ratification

S. 149: Principal agreed through

verbal or action to verify the actions /
action agents which was initially (at
first) not valid
The principal may choose to either:
Accept (validate) - effects - as if the
act is done with his consent and
authority OR
Reject the acts of agent
19
Formation of Agency Contract: 3. Ratification
(cont.)

Prior to ratification by the principal, one

of the following must exist:
Action of the agent is illegitimate or
unauthorized
Action by a person pretending to be an
agent - no power to act on behalf of the
principal, but has acted as if he had the
power to do so

20
Formation of Agency Contract: 3. Ratification
(cont.)

If there is an action of the above, the

principal must choose whether to certify
the action as a ratification or not

Effects of Ratification:
The act which was initially void now becomes
valid/legitimate and the principal will be
responsible/liable for it
Principal will verify the entire affairs/transactions even
part of the deals was just illegal

21
Formation of Agency Contract: 3. Ratification
(cont.)

Retrospective effects: come into force

on the date of unauthorized affairs
made (not made on the date of
ratification)
Ratification shall be made within a
reasonable period.
See: Bolton Partners vs. Lambert

22
Formation of Agency Contract: 3. Ratification
(cont.)

Requirements:
i. The action should be something illegal
/ out of the powers of agent / done by
someone who pretends to be an agent.
ii. Agents must act as the agent of the
principal, not in his/her own name / give
the impression to a 3rd party that
he/she is acting on the position as the
principal. Keighley Maxted & Co. vs.
Durant (1901)
23
Formation of Agency Contract: 3. Ratification
(cont.)

iii. Agents must have a principal who is

able (capable) to contract during the
course of the transaction and during the
ratification to be made.
iv. During the ratification, the principal
must know the essential facts of the
transaction to be ratified, unless it can
be proved that he/she did not care
about any of the information / facts and
does not intend to ratify. (S. 151)
24
Formation of Agency Contract: 3. Ratification
(cont.)

v. Principal must certify the agent's acts.

If the principal has confirmed the act of
an agent, then it is deemed to he/she
has had certified the whole act. (S. 152)
vi. Ratification must not harm the 3rd
party.
vii. Ratification must be made within a
reasonable time.

25
Formation of Agency Contract: 3. Necessity

A person entrusted with other people's

stuff had to do something to preserve /
protect the goods even though no power
to do so.
S. 142 - an agent can during an
emergency situation, use his/her power
to do anything to protect the principal
from loss - seems to do that for
him/herself.

26
Formation of Agency Contract: 3. Necessity
(cont.)

G. N. Railway vs. Swaffield (1874)

F: A horse was shipped by train to a
destination. When it got there, no one
was entitled to accept the horse. The
train sent the horse to the stables for
the night.
H: The action of the train personnel was
beyond its power as an agent. They had
to do so to protect the horse. The
railway then has become an agent by
neccesity. 27
Formation of Agency Contract: 3. Necessity
(cont.)

Requirements:
i. It is impossible for the agent to
contact the principal for further
instructions. (Less relevant in the
present because we have now an
advanced system of
telecommunications) Springer vs. G.W.
Railway & Co. (1921)

28
Formation of Agency Contract: 3. Necessity
(cont.)

ii. The situation will be really compelling

(forced/under pressure) e.g. dealings
involving perishable goods.
iii. Agent shall act in good faith / good
intentions / good faith (bona fide)

29
Formation of Agency Contract: 3. Estoppel

A principal is not bound by acts of his

agent done without his permission first.
However, if through their words /
actions, the principal has made a 3rd
party believes that the agent is the real
agent who caused the detriment/loss,
the principal is precluded (prevented)
from denying the existence of the agent.

30
Liability of An Agent to Principal

1. Comply with the directions of the

principal (S. 164).
2. Doing the task/job with caution,
diligence, and the use of maximum
capabilities (S. 165).
3. Submit proper accounts when
required (S. 166).
4. Pay the principal of all monies
received by the agent on his/her behalf
(S. 171; S 174).
31
Liability of An Agent to Principal (cont.)

5. Contact the principal (S 167; S 142).

6. Prevent conflict of interests (S 168; S
169).
7. Cannot make any secret profit in
carrying out his/her duties. (S168)
If happens; what are rights of the
principal?
8. Agents must not disclose confidential
information or documents entrusted by
the principal. 32
Liability of An Agent to Principal (cont.)

9. Agents cannot delegate his/her power

to another person. Delegatus non potest
delegare a delegate cannot delegate.
Q: Exemptions?

33
Liability of A Principal to An Agent

1. Pay wages etc. (S 172)

2. Not intentionally obstruct Agent from
getting wages etc.
3. Exempt liabilities of agent if within
the scope of work; authorities; powers.
(S 175) instances: ???
Q: Examples?

34
Powers; Authorities of Agent

To be discussed further in nx. chapter:

Partnership Law.

35