LAW OF AGENCY

PART 1
SOURCES:
1. Contract Act 1950
2. Lee Mei Pheng, Ivan Jeron Detta (2011). Business Law : ,Kuala
Lumpur:Oxford University Press
Hassan, Mumtaj and Md. Salleh, Khuzaimah and Mohamed Yusoff, Zuryati and
Mohd Ali @ Ramli, Azlin Nam (2017). Undang-undang Perniagaan di Malaysia,
Sintok:UUM Press
 (1) DEFINITIONS

§ Governed by Part X Contracts Act 1950.

1. Definition of agent and principal:
§ S.135 CA
2. Definition of a Sub Agent:
§ S. 144 CA
a) Effects of appointing a sub agent:
§ S.145 CA
3) Definition of a Substituted Agent:
§ S.147 CA
§ Refer to Illustration (a) and (b) s. 147 CA.
a) Effects of appointing a substituted agent:
- S.148 CA
- Illustration (a) and (b) S. 148 CA.
 (2) EFFECT OF AGENCY

§ There are two contracts exist:

a) Between the principal and the agent from which the agent derives
his authority to act.
b) Between the principal and the third party through the medium of
an agent.
§ The effects:
a) Creation of a valid contract of agency between an agent and a
principle. An agent has a power to act on behalf of the principal.
b) Creation of a valid contract of agency between the principal and
the third party.
 (3) CONDITIONS AS AN AGENT AND
A PRINCIPAL

1. Conditions as a principal:
§ S. 136 CA: must be at the age of majority and sound mind.

2. Condition as an agent:
§ S. 137 CA: any person may become as an agent – but if an unsound
mind or a person below the age majority, the agent will not be
responsible
§ Case:
a) Chan Yin Tee v William Jacks (1964) 30 MLJ 290
• Yong (a minor) was introduced by Chan as his partner.
• Yong entered a contract with William Jacks & Co.
• However, he failed to pay the price of the purchased goods.
• Held: Chan had introduced Yong as his partner. Therefore, he was
responsible towards Yong’s action.
• The principal may be liable to the third party.
 (4) CREATION OF AGENCY

1. Express appointment (pelantikan nyata)

2. Implied Appointment (pelantikan tersirat)
• Husband and wife
• Partnership
3. Agency by ratification (agensi secara pengesahan)
4. Agency by necessity (agensi secara perlu)
5. Agency by estoppel (agensi secara persekatan)
1. Express appointment (pelantikan nyata)
§ Definition:
• S.140 CA - An authority is said to be express when it is given by
words spoken or written.
• It may be in oral or writing.
§ Case:
a) BBMB v Henry Ginai Anak Linggie
§ The case involved a contract of agency through appointment by
power of attorney.
§ The rule is that an agent cannot act beyond the power given by the
power of attorney.
2. Implied Appointment (pelantikan tersirat)
§ Divisions/Forms of an implied appointment:
a) Implied appointment under S. 140 CA.
b) Implied appointment through the relationship between husband and
wife.
c) Implied appointment from business partnership.
a) Implied appointment under S. 140 CA
§ Definition:
• S. 140 CA - An authority is said to be implied when it is to be
inferred from the circumstances of the case; things spoken or
written, or the ordinary course of dealing.
§ Cases:
i) Ryan v Pilkington [1959] 1 WLR 403
§ The agent was not given an express power to accept a deposit, but
in this case, as a banker, he has acted within his implied authority and
the principal will be bound by it.
ii) Chan Yin Tee v William Jacks & Co (Malaya) Ltd. (1964) 30 MLJ
290
§ appointment of partner as an agent

iii) Summers v Solomon (1857) 7 E & B 879

§ When a person holds out another person as having authority to act
for him, he is responsible for the act of the person that he holds out
as representing him.
b) Implied appointment through the relationship between husband and
wife
i) General rule:
§ There is an implied appointment.
§ So, a wife has a power to borrow money by using husband’s name to buy basic
necessities – suitable for lifestyle and conditions.
§ The husband is responsible to pay the debt.

ii) Exceptions (where the husband will not be responsible):

1.Prohibits his wife form doing so
2.Warns the seller not to sell anything to his wife
3.Provides sufficient necessaries
4. Wife has been given sufficient allowances
5.Unreasonable demand by the wife – unaffordable
§ Case:
i) Miss Gray v Catcard (1922) 38 TLR 562
§ The husband was not bound to pay his wife’s debt if he can prove
that sufficient allowances has been given to his wife.
§ In this case, the wife bought £215.00 clothes on loan.
c) Implied appointment from business partnership
§ S. 7 of the Partnership Act 1961:
- All partners are agents to their partnership and partners.
- Any act or omission of each partner bound the other partners
§ Case:
i) Mercantile Credit Co. Ltd v Garrod (1962) 3 All ER 1103
- A and B were partners doing a business of renting a garage and repairing
cars.
- A, without the knowledge of B, had sold a car to one finance company and
the money had been paid into the partnership’s account.
- After the company realized that A had no power to sell the car, the
company had taken an action against B because A had disappeared.
- Held: B was liable to return the payment.
3.Agency by ratification (agensi secara pengesahan)
a) Meaning of ratification
§ It is when a principal approves his agent’s act that is originally not
valid.
§ S.149 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.
• S.150 CA: Ratification may be expressed or may be implied.
b) Examples:
§ Refer to Illustrations (a) and (b) S. 150 of the CA.
c) Two situations before an agency by ratification exist:
i) An agent duly appointed has exceeded his authority.
ii) A person who has no authority to act as an agent of a principal,
but has acted as if has the authority – S.188 CA.
d) Conditions of ratification:
i) The act or contract must be unauthorized (S. 149 CA) or the person has no
authority but acted as if he has the authority (S.188).
ii) The agent must at the time of the contract expressly act as an agent for the
principal and does not allow the third party to think that he is a principal.
§ Case:
§ Keighley Maxted & Co. vs Durant
§ Aa agent has done something beyond the authority given when he bought a flour
and has expressly acted as himself (bought under his own name, not Principal).
§ The principal will not be responsible if the agent, in the first place, did not act as an
agent.
iii) The principal must exist, have contractual capacity and full
knowledge of the material facts.
§ Case:
§ Kelner v Baxter (1866) LR 2 CP 174
§ At the time the parties entered into the contract to buy a hotel, the
company (the principal) was yet to exist, hence the company had no
capacity to contract.
§ Held: There was no binding contract. Thus, no ratification could be
made.
iv) The principal has the full knowledge of the important facts regarding
the matters to be ratified.
• S.151 CA

v) Must ratify all actions.

• S.152 CA

vi) Must not injure the third party.

• S.153 CA
vii) Ratification must be made within a reasonable time.
§ Case:
§ Metropolitan Asylum Board v Kingham & Sons
§ Ratification was made a week after the contract of sale of eggs. This
was considered as too late to be ratified as it was not made within
reasonable time.
e) Effects of ratification
i) The contract is binding on the principal, as if the agent had been
properly authorized beforehand – s.149.
ii) All the agent’s act becomes valid.
iii) Retrospective effect – dates to the time of the original contract and
not from the date of the principal’s ratification
§ Case:
i) Bolton Partners v Lambert
§ 1 May – P (buyer) offered to buy a land from S (X’s agent)
§ 2 May - S accepted the offer – although he has no authority to accept
on behalf of X.
§ 4 May – P revoked the offer to buy the land
§ 10 May – X ratified S action.
§ The ratification done by X on 10 May had ratified the action by S on 2
May – therefore, P cannot revoke the offer.
4) Agency by necessity (agensi secara perlu)
• S142 CA - An agent has authority, in an emergency, to do all such acts for the
purpose of protecting his principal from loss as would be done by a person of
ordinary prudence, in his own case, under similar circumstances.
• Case:
i) Great Northern Railway Co. v Swaffield (1874) LR 9 Ex 132.
§ This case involved a delivery of horse by train. Nobody accepted the horse when
it arrived. The railway company had to rent a stable to place the horse temporarily.
Later, the co. claimed the rent from the horse owner.
§ Held:Agency by necessity had been created.The horse owner was liable to pay.
a) Conditions:
i) Impossible to get the principal’s instruction.
§ Case:
i) Springer v G.W. Railway & Co
- Tomato delivery through sea voyage. Due to bad weather, the ship
failed to arrive on time and the tomatoes started to rot.
- Without trying to get principal’s instruction, the defendant sold the
tomatoes to local buyers.
- Held: The defendant was liable to bear the loss since he did not try
to get the principal’s instruction.
ii) Emergency situation/urgency
§ Cases:
i) Phelps James & Co v Hill
§ Reasonable situation refers to dangerous situation, facilities, time,
budget and etc.

ii) Prager v Blatspiel Stamp & Heacock Ltd

§ Unauthorized selling of leather was not under necessity because
leather product was not a perishable goods (not easy to rot).
§ The agent had to bear the loss.
iii) Agent acted in good faith.
§ Case:
i) Tronson v Dent
The action taken must be reasonable, i.e., any prudent person would do
the same act if they are put in the same situation.
5) Agency by estoppel (agensi secara persekatan)
• S.190 CA – 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 that those acts and
obligations were within the scope of the agent’s authority.
a) Depends on the power of an agent
i) Universal Agent:
§ wide power
§ can act in all performance of duties empowered
§ appointed by power of attorney

ii) General Agent:

§ appointed for performance of general actions required in a business or trade

iii) Special Agent

§ Appointed for a specific task
b) Depends on duties
i) Del credere
§ liable to the principal if 3rd party does not pay.
§ received special additional commission for risking such task.

ii) Factor Agent

§ Trusted to sell the principal’s goods.
§ Can sell under his own name and has the right of lien.

iii) Brockerage
§ deals contract between the principal and 3rd party.
§ doesn’t have the right of lien.
§ Cannot hold the principal’s goods and sell under his own name.
iv) Auctioneer
§ involved in the auction process.

v) Bankers
§ A banker as an agent for a customer, meanwhile the staffs are the
agents for the bank.