Business Law Lecture Notes

Topic 9: Law of Agency (Part 1)

Introduction to Agency

• Key Definitions:
  • Agent: A person employed to act for another or represent them in dealings with third parties (Section 135 of CA 1950).
  • Principal: The person for whom the agent acts.
  • Agency Relationship: The legal relationship between the principal and the agent.
• Triangular Relationship: Involves the principal, agent, and a third party.

Examples of Agency

• Example: Ali appoints Abu to buy a house from Jean on his behalf.

Types of Contracts in Agency

• There are contracts between:
  • Principal and Agent
  • Principal and Third Party

Creation of Agency

1. By Express Appointment:

   • Requires actual consent of the principal and agent.
   • Can be in writing (e.g., Power of Attorney).

2. By Implied Appointment:

   • Derived from the words and conduct of the parties.
   • Law infers agency by implication when conduct suggests authority.

3. By Usual Authority:

   • Occurs when the agent occupies a position with typical authority for certain acts.

4. By Ratification:

   • Occurs when an agent acts without authority, and the principal later approves the act.

5. By Necessity:

   • When it is impossible for the agent to get instructions, and action is needed to prevent loss to the principal.

6. By Estoppel:

   • A person can be estopped from denying authority if they allowed a third party to believe someone is their agent.

Key Case Studies

• Garnac Grain Co Inc v HMF Faure & Fairclough Ltd. (1968): Principal-agent relationship requires mutual consent.
• Chan Yin Tee v William Jacks & Co (Malaya) Ltd. (1964): Implied agency through conduct; liability regardless of partnership status.
• Watteau v Fenwick (1893): Liability under usual authority despite lack of express authority.

Legal References

• Contracts Act 1950: Defines express and implied authority, ratification, estoppel.
• Notable Sections:
  • Section 135: Definition of agent and principal.
  • Section 140: Differentiation between express and implied authority.
  • Section 149: Ratification of unauthorized acts.
  • Section 190: Liability of principal when inducing belief in unauthorized acts.

References for Further Reading

• Lee Mei Pheng, Ivan Jeron Detta (2022), Business Law, 3rd Edition
• Dr. Loganathan Krishnan, Parimaladevi Rajoo, Anne Chrishanthani Vergis (2022), Principles of Business and Corporate Law, Malaysia, 4th Edition
• Contracts Act 1950, Federal Constitution, Civil Law Act 1965, Subordinate Courts Act 1948, Courts of Judicature Act 1964