INTRODUCTION & FORMATION OF AGENCY

FORMATION OF AGENCY STATUTE?

AGENT? PRINCIPAL ?

AGENCY?

CONTRACTS ACT 1950.

A person who is employed by the principal to do an act on behalf of the principal or to represent the principal in dealings with the 3rd party.

A person who authorizes the agent to act on his behalf.

The relationship which subsists between a principal & an agent, where the agent has been authorized to act for the principal or represent him in dealing with others / 3rd party.

CONTRACTUAL RELATIONSHIPS PRINCIPAL

1 AGENT

2 THIRD PARTY

CAPACITY P = ADULT + SOUND MIND (s.136) A = CAN ALSO BE A MINOR OR AN UNSOUND MIND PERSON BUT IS NOT LIABLE FOR HIS ACTS (s.137)

EXAMPLE OF S.137 P appointed A (16 years old), to buy a Proton Saga car for a price not exceeding RM20,000.

P must proceed with the contract with T. A is not liable because he is under age.

A found a Proton Saga owned by T but to be sold at RM30,000. A booked the car from T for his principal, P.

FORMATION OF AGENCY • No specific formality.

• No consideration required – s.138.

• Can be formed :1.

2.

3.

4.

5.

Expressly Impliedly By ratification By emergency By estoppel

EXPRESS APPOINTMENT • s. 140 • P appoints A either orally or in writing A, go get me a cow. I’ll pay you RM200.

OK. Dear A, I hereby appoint you as my agent to search for a cow.

Your commission is RM200 once the suitable cow is found.

Signed: P

IMPLIED APPOINTMENT • May occur in three situations: 1.Implied from the circumstances of the case 2.Implied from the relationship of husband & wife 3.Implied by the Partnership Act 1961

1.Implied from the circumstances of the case • When a person by his words or conduct holds out another person as having authority to act for him.

• Peah runs a restaurant in Ipoh and she has one branch in Melaka. The restaurant is managed by Ani who orders fish everyday from Tipah and pays for them out of the restaurant’s fund with Peah’s knowledge. Ani has an implied authority here as an agent for Peah and what she does will bind Peah.

2. Implied from the relationship of husband & wife

• Wife can buy goods necessary for life and uses her husband’s credit i.e. Wife buys, husband pays!

Continues... • But, husband not liable to pay if :1. he expressly forbade his wife from pledging his credit, 2. he expressly warned the tradesman not to supply his wife with goods or credit, or 3. his wife was sufficiently provided with the goods of the kind in question, or 4. his wife was given a sufficient allowance for buying goods without having to pledge her husband's credit, or 5. the contract was unreasonable, taking into consideration her husband's income at that time.

3. Implied by the Partnership Act 1961

These 8 people form a partnership in food catering. Whatever is done by one partner binds other partners as long as the act is done for the purpose of the business.

AGENCY BY RATIFICATION

• What? • This is where the principal agrees with what the agent has done although in the first place, the agent does not have to authority to act as such or if the agent has exceeded his authority.

Continues...

• HOW? When the appointed agent exceeds his authority.

Eg: P appoints A to buy a piece of land at the price of RM100,000 only. But A buys a land at RM110,000. If P agrees with what A has done, P is said to have ratified A’s act.

When a person, who has no authority to act for the principal, has acted as if he has the authority to act on behalf of the principal.

Eg: Ali tells Abu that he wants to buy a car. Abu’s neighbour is searching for a buyer for his car. Abu deals with his neighbour to buy the car for Ali. If Ali agrees, Abu is Ali’s agent.

Section 149 • Principal has a choice either to reject or accept the contract which had been made on his behalf.

• If he accepts and confirms the contract this means that he ratifies the contract.

• As a result, agency by ratification exists.

• And it applies retrospectively from the date where the contract is made by the agent with the 3rd party.

• s.150 – ratification can be express or implied.

Action done by A is unauthorised or exceeds the authority given

Must not injure 3rd party’s interest

P must ratify the whole contract

Must be done in a reasonable time

CONDITIONS FOR A VALID RATIFICATION

P must have full knowledge

P must have capacity

The unauthorised act must be legal

A must act expressly; must not use his own name.

P must exist

AGENCY BY NECESSITY s.142 = A person may become an agent without authority due to the necessity or emergency circumstances, in order to protect the principal from any loss.

EXAMPLE: A & B are neighbours. B, a fruit seller, has to go back to his kampung for emergency family matters and leaves two baskets of rambutans with A. After two days, A sells the rambutans after an attempt to call B fails. A is an agent by necessity because he is trying to safeguard B’s interest since rambutans are perishable goods

ELEMENTS OF AGENCY BY NECESSITY

1. There must be a real & actual emergency.

2. the agent was entrusted with the principal's property/goods – s.142.

3. It is impossible for the agent to get the principal's instruction at that time.

4. The agent of necessity has acted in good faith

1. REAL & ACTUAL EMERGENCY • The agent's action is necessary in the circumstances to prevent loss to the principal with respect to the goods committed to his charge.

• Must not act to reduce his burden.

• Sachs v Miklos

2. GOODS ARE ENTRUSTED TO AGENT.

3. NOT POSSIBLE TO CONTACT PRINCIPAL • Whenever an emergency occurs, an agent is under a duty to communicate with the principal to get some instructions - s.167. • However, if he failed to communicate with the principal, only then the agent may use his own discretion taking the necessary steps - refer s.142.

SPRINGER v GREAT WESTERN RAILWAY CO.

NO AGENCY

BY NECESSITY

HAS ACTED IN GOOD FAITH • The act done is what might have been done by any other bona fide person in a similar position.

• For eg: If tomatoes are going to be bad, any reasonable person will quickly sell them to get some profits for the Principal.

• See Sachs v Miklos

EFFECTS OF AGENCY BY NECESSITY 1. The agent will be protected from any claim of the principal.

2. The agent will be entitled to the additional payment for his effort to protect & to preserve the safety and interest of the principal.

3. A contract exists between the principal and the 3rd party.

AGENCY BY ESTOPPEL 1.When the principal himself induces the 3rd party to believe that a person has an authority to act for him, as if that person is his 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 continues acting on behalf of that principal

ESTOPPEL - REPRESENTATION • Example: Puan Mimi has a belacan business. One day, she has an appointment with Beyonce who wishes to order belacan from her. Puan Mimi brings along her friend Gayah who is a great fan of Beyonce. If Gayah says to Beyonce that she can order the belacan through her (Gayah) and Puan Mimi just keeps silence, there is an agency by estoppel if later on Beyonce really does make the order through Gayah. Gayah thus is an agent by estoppel.

NOTICE NOT GIVEN TO 3RD PARTIES

AUTHORITY OF THE AGENT • Y NEED TO KNOW AUTHORITY? BECAUSE THE PRINCIPAL WILL ONLY BE BOUND BY THE AGENT’S ACT IF THE AGENT ACTS WITHIN HIS OR HER AUTHORITY.

AUTHORITY OF THE AGENT ACTUAL

EXPRESS

ORAL WRITING

AUTHORITY IMPLIED APPARENT

PARTNERSHIP REPRESENTATION

PANORAMA DEVELOPMENT (GUILFORD) LTD v FIDELIS FURNISHING FABRICS • A company secretary exceeded his usual authority in hiring motor vehicles from the Plaintiffs for the company. The issue was whether the Defendant company could be taken to have authorized the transaction. • Held:The Defendant was liable because in appointing a company secretary, the Defendant was representing that the secretary had authority to enter into those transactions which company secretaries were usually concerned. The hiring of motor vehicles was regarded as part of company administration.

WATTEAU v FENWICK • The Defendant appointed a manager to run a public house and the licence was taken out in the manager's name, which appeared over the door. The Defendant forbade the manager to buy cigars on credit. In disregard of the said restriction, the manager bought cigars from the Plaintiff who then claimed against the Defendant for the payment. • Held: The Defendant, as Principal, was liable to pay the Plaintiff because a manager of a public house would usually have the authority to make purchases of that kind. The plaintiff could rely on such usual authority in the absence of express knowledge of the restrictions imposed by the Principal. The Principal is liable for all the acts of the Agent which are within the authority usually given to an Agent of that character.