THE LAW OF AGENCY

Nurdayana NordinFatimah Hanim MohammadHanis AzmanHazirah Che HassimNor Azlynna Ismail

Law of Agency

Law of Agency

Law of Agency

Authority of An Agent

Law of Agency

Issue: Whether Sudhu is an agent of KariTawar Sdn Bhd

1. Principle:Contract Acts, 1950

• S(137) – any person can become an agent as long as he is not a minority and unsound mind, as to be responsible for principal.

• S(140) – An authority is implied when it is to inferred from circumstances and things spoken/written or ordinary course of dealing.

• S(190) – Liability of principal inducing belief that agent’s unauthorized acts were authorized.

2. Application• Sudhu is not directly appointed to be an agent, instead he was

appointed to be Managing Director of KTSB.• Ordinary course of dealing.• Ostensible authority (TJSB believes that Sudhu has the authority

to make contracts for the principal.

Freeman & Lockyer v. Burckhurst Park Properties (Mangal) Ltd Anor [1964]

A managing director of company employed an architecture firm but the company refused to pay fees for the firm because the duty is fell outside the Director’s authority.Court Held: The company was liable for the architect’s fee because there was ostensible authority.

Issue: Should Sudhu enters a contract of RM500,000 with TJSB

Application:• When sudhu entered into a contract with TJSB, he is not aware of contract

limit of RM300,000.• Ordinary course dealing• Implied actual authority ( sudhu had given proper authority from KTSB to enter

into contract with TJSB)

Panorama Development (Guilford) Ltd v. Fidelis Furnishing Fabrics Ltd (1971)

Fidelis’ company secretary, Mr Bayne, hired cars from Panorama Development's business, Belgravia Executive Car Rental. Bayne used the Fidelis' paper and represented that he wished to hire a number of Rolls-Royce's and Jaguars for the business while his managing director was away. He was lying and he used

them himself. Bayne was prosecuted and imprisoned, but Belgravia had outstanding £570 12s 6d for the hired cars. Fidelis claimed that it was not

bound to the hire contracts, because Bayne never had the authority to enter them.

Panorama Development (Guilford) Ltd v. Fidelis Furnishing Fabrics Ltd (1971)

Court Held:

Defendant’s company was liable for the contract of hiring of motor vehicles made by the company secretary. Although the company secretary exceeded his actual authority in hiring the motor vehicles from the plaintiffs, the act was within the usual authority of a company secretary, and it was considered as part of the company

administration.

Issue: Should Sudhu accept secret profit from Garphu?

Legal:Section 168 of the Contracts Act, 1950Right of principal when agent deals, on his own account, in business

of agency without principal’s consent.

Section 169 of the Contracts Act, 1950Principal’s right to benefit gained by agent dealing on his own

account in business of agency.Application:In this case, Sudhu has taken RM50k secret profit from

Garphu. It contradicts with S168 where an agent may take the given profit with consent from the principal.

Mahesan v Malaysian Government Officers Co Operative Housing Society Ltd [1978] 1 MLJ 149

The appellant who was a director and secretary of the respondent co operative society bought land at the price of RM 944,000 on behalf of the respondent. The appellant knew that the vendor had earlier paid RM 456,000 for it but did not inform the respondent accordingly. It turned out that the appellant had received RM 122,000 as a bribe or secret profit from the vendor.

held: The respondent could recover either the bribe or the amount of the actual loss suffered by it as a result of entering into the contract.

Arab Monetary Fund v Hashim (1993)

Refuse to pay the agent his commission or otherremuneration If the contract was induced by a bribe, as alleged then the principal certainly be entitled to recoverthe amount of the bribe. Whether or not damageswould be awarded depended on the circumstances.If the principal were not able to prove that the bribewas paid out of advance payments to the contractorby the principal. The agent was not liable to makerestitution for the amount of the bribe.

Issue: Whether Sudhu can enter into a contract exceeding the value of RM300,000

Agency by Ratification:a) When an agent exceeded his authorityb) When a person is not an agent but acted like an agent with

authority1.Principle:Contract Acts, 1950• S(149)-The principal can reject the contract since has not

authorized it, or accept the contract made.• S(150)-The ratification can be expressed or implied by the

principal.

2.Application•Sudhu as an agent has exceeded the limit amount of RM300k without the principal’s authority. It shows that Sudhu has exceeded his authority by entering to that contract.

Muthuchellapa Chettiar v. Indian Overseas Bank Ltd (1952)

An agent has made an overdraft payment without the principal’s authority. It was an implied ratification as the principal accepts the contract.

Therefore, the ratification renders the principal liable to the contract.

Issue: Whether Sudhu can be terminated after receiving incentive payment

1. Principle:Contracts Act, 1950• S(154) – Termination of agency• S(159) – The notice must be given for revocation or

otherwise the damage may affect the principal or the agent

2. Application Sudhu can be terminated by the principal since he

already breach the law of agent and also had be given the 24 hours notice by the principal.