Title: BUSINESS LAW
URL Source: blob://pdf/40f4fa91-c879-43a1-b756-ca5ad69c015e
Markdown Content:
BUSINESS LAW
TOPIC 9:
LAW OF AGENCY
(PART 1)
PREPARED BY: ABIGAIL C. CHONG
1
BLAW / LAW2013 REV 00
01/08/2017
Copyright of Almacrest International College. All
rights reserved. LEARNING OUTCOMES (LO)
After studying this chapter, students should
be able to :
1. Explain entities that involve in agency
relationship .
2. Discuss situations where an agency
relationship could be created
2 Copyright of Almacrest International College. All
> rights reserved.
> CLAW / LAW2013 REV 00
> 01/08/2017
## Introduction
> 3
Agent and principal
Section 135 of CA 1950
An agent is a person employed to do any act for another
or to represent another in dealings with third persons .
The person for whom such act is done, or who is so
represented, is called the principal .
Agency:
Relationship which exists between the principal and the agent .
Agent:
person who has been authorized to act for him OR represent him
in dealings with others .
> Copyright of Almacrest International
> College. All rights reserved.
> CLAW / LAW2013 REV 00
> 01/08/2017
## Introduction
Agency is a triangular relationship .
Constructs the creation of a legal relationship between a
person (the principal) and a 3rd party via agent .
Agent is a person who represents and is required to act in the
best interests of the principal .
> 4
Principal
Agent
3rd Party
> Copyright of Almacrest International
> College. All rights reserved.
> CLAW / LAW2013 REV 00
> 01/08/2017
## Example
Ali appoints Abu to buy house from Jean on
his behalf .
5
## Introduction
## Principal = ?
## Agent = ?
## 3rd party =?
Copyright of Almacrest International
College. All rights reserved.
CLAW / LAW2013 REV 00
01/08/2017 Introduction
> 6
In agency, 2 types of contract are in effect:
Principal
+
Agent
Principal
+
3rd Party
The agent derives his authority
to act for and on behalf of the
principal.
Through the work of
the agent.
> Copyright of Almacrest International
> College. All rights reserved.
CLAW / LAW2013 REV 00
01/08/2017 1 - By Express Appointment
It involves the actual consent of the principal and the agent .
May be in writing .
Example : Power of Attorney .
> 7
Creation of Agency
Garnac Grain Co Inc v HMF Faure & Fairclough Ltd.
[1968] AC 1130
Lord Pearson said:
The relationship of principal and agent can only be established
by the consent of the principal and agent . They will be held to
have consented if they have agreed to what amounts in law to
such a relationship even if they do not recognise it themselves
and even if they have professed to disclaim it . . The consent
however must be given by each of them either expressly or by
words and conduct .
> Copyright of Almacrest International
> College. All rights reserved.
> CLAW / LAW2013 REV 00
> 01/08/2017
2 - By Implied Appointment
Appointment derived from the words and conduct of
the parties in the way they have acted in connection
with one another .
The law can infer the creation of agency by implication
when a person by his words/conduct holds out
another person as having authority to act for him .
> 8
## Creation of Agency
> Copyright of Almacrest International
> College. All rights reserved.
> CLAW / LAW2013 REV 00
> 01/08/2017
2 - By Implied Appointment
> 9
Definitions of express and implied authority
Section 140 of CA 1950
An authority is said to be express when it is given by words spoken
or written . An authority is said to be implied when it is to be
inferred from the circumstances of the case ; and things spoken or
written, or the ordinary course of dealing, may be accounted
circumstances of the case .
Express Authority :
when it is given by words spoken OR written .
Implied authority :
it is inferred from the circumstances of the case .
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 10
Illustration
A owns a shop in Kajang , living himself in Kuala Lumpur,
and visiting the shop occasionally .
The shop is managed by B, and he is in the habit of
ordering goods from C in the name of A for the purpose of
the shop, and of paying for them out of As funds with As
knowledge .
B has an implied authority from A to order goods from C
in the name of A for the purposes of the shop .
2 - By Implied Appointment
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 11
Chan Yin Tee v William Jacks & Co (Malaya) Ltd. [1964] MLJ
290
Facts of case:
15 Nov 1961 : Appellant registered himself and one Yong, a
minor as trading in partnership as general merchants
under the name of Chan & Yong Trading .
2 - By Implied Appointment
Chan & Yong Trading
# +
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 12
Chan Yin Tee v William Jacks & Co (Malaya) Ltd. [1964] MLJ 290
Facts of case:
At the same time, appellant and Yong wrote to Bangkok Bank in KL
applying to open a current account in their name .
It states that they were partners of a firm and cheques of the account
would be signed by both of them .
2 - By Implied Appointment
Bangkok Bank
# +
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 13
Chan Yin Tee v William Jacks & Co (Malaya) Ltd. [1964] MLJ
290
Facts of case:
Before doing any business with the Rs company, the appellant and
Yong met a representative of the R in a coffee shop .
The appellant held himself as a partner of Yong .
On this representation, business between them commenced .
2 - By Implied Appointment
Rs
representative
# +
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 14
Chan Yin Tee v William Jacks & Co (Malaya) Ltd. [1964] MLJ
290
Facts of case:
Between 20 Dec 1961 3 June 1962 : Goods were supplied to Yong .
R sued for the price and won the case . The appellant appealed .
2 - By Implied Appointment
Respondent
# +
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 15
Chan Yin Tee v William Jacks & Co (Malaya) Ltd. [1964] MLJ
290
Held of case:
Appealed dismiss .
Irrespective of whether Yong was the appellants partner, the
appellant had held out Yong as his agent with authority to do
things on his behalf and for whose acts the appellant was liable .
Any person, irrespective of his competency to contract, may
become an agent for whose acts the principal may be liable to
3rd parties .
2 - By Implied Appointment
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 16
Created by the agent occupying a position which would normally
carry with it authority to do an act of the kind in question .
3 - By Usual Authority
Watteau v Fenwick [1893] 1 QB 346
Facts:
The P sued the Ds for the price of cigars supplied to the Victoria Hotel . The
building was kept by a person named Humble .
The P gave credit to Humble and had never heard of the D.
However, the business was really the Ds and they had put Humble into it to
manage it for them, and had forbidden him to buy cigars on credit .
Held:
The cigars were such as would usually be supplied to and dealt in at such an
establishment . The Ds were liable .
> Copyright of Almacrest International
> College. All rights reserved.
> CLAW / LAW2013 REV 00
> 01/08/2017
## Creation of Agency 17
Ratification occurs where an agent does an act without
authority of the principal .
Effects of ratification :
It converts an unauthorized act into an act clothed with
authority .
4 - By Ratification
Hatman v Hornsby 142 Mo 368 the approval by act, word or conduct of that which was
attempted, but was improperly or authorizedly performed in
the first instance
> Copyright of Almacrest International
> College. All rights reserved.
> CLAW / LAW2013 REV 00
> 01/08/2017
## Creation of Agency 18
If any of the above situation occurred, the principal may
either choose to reject or accept the contract so made .
4 - By Ratification
Agency by ratification only occurred in the following
situations :
1. An agent who was duly appointed has exceeded his
authority .
2. A person who has no authority to act for the principal has
acted as if he has the authority .
> Copyright of Almacrest International
> College. All rights reserved.
> CLAW / LAW2013 REV 00
> 01/08/2017
## Creation of Agency 19
4 - By Ratification
Section 149 of Contracts Act 1950
Where acts are done by one person on behalf of another but
without his knowledge or authority, he may elect to ratify or to
disowned the acts . If he ratifies them, the same effects will
follow as if they had been performed by his authority .
> Copyright of Almacrest International
> College. All rights reserved.
> CLAW / LAW2013 REV 00
> 01/08/2017
## Creation of Agency 20
Examples:
2 Jan 2009
Ahmad appointed Bobby as his agent to buy a car not exceeding RM 40 ,000 .
5 Jan 2009
Bobby went to ABC Motors Sdn . Bhd . and ordered a car costing RM 50 ,000 ,
telling the ABC Motors Sdn . Bhds salesman that he was buying the car on
Ahmads behalf .
12 Jan 2009
ABC Motors Sdn Bhd delivered that car to Ahmad .
If Ahmad confirms the contract on 12 Jan 2009 , then Bobby is said to be
his agent through ratification .
Ahmad may also reject the contract on 12 Jan 2009 since Bobby has
exceeded his authority .
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 21
5 - By Necessity
An agency of necessity may be created if the following
conditions are met:
It is impossible for the agent to get the principals
instruction .
The agents action is necessary in the circumstances, to
prevent loss to the principal .
E.g.: when agent sells perishable goods belonging to his
principal to prevent them from rotting
The agent of necessity must have acted in good faith .
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 22
5 - By Necessity
Section 142 of Contracts Act 1950
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 .
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 23
6 - By Estoppel
A person cannot be bound by contract made on
his behalf without his authority .
However, if he allows 3rd party to believe that a
particular person is his agent even when he is not
and the 3rd part relies on it, he will be estopped
from denying the existence of that persons
authority to act on his behalf .
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 24
6 - By Estoppel
Example:
Mahmud tells Sally in front of George that Mahmud is
Georges agent and George does not deny this statement .
George cannot later deny that Mahmud is his agent if
Sally sells goods to Mahmud .
Because Sally believes Mahmud is the agent of George .
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 25
6 - By Estoppel
Form of agency which is created
constructively, that is by imposition of law .
Purpose : provide protection against the
detriment which would arise from partys
change of position .
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 26
6 - By Estoppel
3 elements necessary to constitute estoppel:
A representation made by/on behalf of the
principal to the 3rd party concerning the authority
of the agent
Reliance of 3rd party on the representation made
by the agent to the 3rd party
3rd party must rely on the principals
representation and alter his legal position .
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 27
6 - By Estoppel
Cheng Kheng Hong v Government of the Federation of Malaya
[1966] 2 MLJ 33
Raja Azlan Shah J
section 190 of Contracts Act 1950 , which enacts that where a
principal induces a belief that the unauthorized acts of an agent
are authorized, he is bound by the consequences there must
be an allegation or proof that the principal either by his words
or conduct has induced a third person to believe that the acts
done or obligations are within the scope of the agents
authority
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017 28
Section 190 of Contracts Act 1950
Liability of principal inducing belief that agents
unauthorized acts were authorized
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 agents authority .
> Copyright of Almacrest International
> College. All rights reserved.
## Creation of Agency
> CLAW / LAW2013 REV 00
> 01/08/2017
REFERENCES
> 1.
Lee Mei Pheng , Ivan Jeron Detta (2022), Business Law, 3rd Edition,
Oxford University Press.
> 2.
Dr Loganathan Krishnan, Parimaladevi Rajoo , Anne Chrishanthani
Vergis (2022), Principles of Business and Corporate Law, Malaysia, 4th
Edition, CCH Malaysia.
> 3.
Contracts Act 1950 (Act 136)
> 4.
Federal Constitution
> 5.
Civil Law Act 1965 (Act 67)
> 6.
Subordinate Courts Act 1948 (Act 92), Subordinate Courts
(Amendment) Act 2010
> 7.
Courts of Judicature Act 1964 (Act 91)
29 Copyright of Almacrest International College. All