Professional Documents
Culture Documents
BUSINESS LAW
Chapter 4: Agency
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COURSE LEARNING OUTCOME (CLO2)
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4.1
Definition
4.6 4.2
Termination Formation
AGENCY
4.5
Rights & 4.3
duties of a Types
Principal
4.4
Rights &
Duties of
an Agent
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Introduction
Agency relationship that constructs the creation
of a legal relationship between a person (the
principal) and a third party via the intervention of the
agent.
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Introduction
Agency is the relationship which subsists
between the principal and agent, who has been
authorized to act for him or represent him in dealings
with others.
There are in effect two contracts;
Made between the principal and the agent from
which the agent derives his authority to act and on
behalf of the principal; and
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Who can be a principal?
Anyperson who is 18 years old or above,
Who is of sound mind
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4.2 Formation of Agency
Direct
By By
Appointmen
Implication Ratification
t
Agent of
Estoppel
Necessity
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Direct / Express Appointment
No special form is required for the creation of an agency by
express appointment.
This happens when the principal expressly appoints a
person to be his agent. This can be done in two ways: ORAL
and IN WRITING
E.g.: Ali said Abu, I want you to be my agent.
S140CA 1950 Event a letter written or words spoken
may be effective in appointing an agent
E.g: Ali always ask Siti to order for him, goods from
Abu. When Abu delivers the goods, Ali will pay the
goods. Now, as impliedly Siti become Abus agent.
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By Implied Appointment
2) Relationship between husband and wife
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By Implied Appointment
3) Relationship between partners
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By Ratification
Case: Bolton Partners v Lambert
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By Ratification
9 conditions of Ratification
1. The act must be unauthorized
The contract done by the agent was without
authority or exceeding the authority.
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By Ratification
5. The principal must have capacity to enter a
contract
Principle in Contract Act 1950 applies
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By Ratification
7. The principal must have all material fact
regarding the contract
Case: March Vs. Joseph
A principal had ratified a contract without the
full knowledge of all material facts.
Held: The principal was not bound to such
contract
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By Ratification
8. Ratification must be made within a
reasonable time
Case: Metropolitan Asylum Board Vs. Kingham
& Sons
The agent contracted to buy eggs without the
authority. The principal tried to ratify the
contract 1 week after it was made.
Held: Ratification was too late
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By Ratification
9 conditions of Ratification
9. Ratification must not injure a 3rd party
Sec. 153 CA - Ratification must not injure or
affect the interest of a 3rd person
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By Necessity
Under certain circumstances a person may become the
agent of another without having been appointed as such.
Sec. 142 CA A person may become an agent although he
was not appointed.
When this situation happen, that person is known as agent
by necessity.
3 conditions must be fulfilled;
It is impossible to get the principal instructions
The agent action is necessary to prevent loss to the
principal
The agent has acted in good faith
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By Necessity
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By Estoppel
Case: Freeman & Lockyer Vs. Buckhurst Park
Properties Ltd
A del
Broker Factor
credere
Auctioneer Banker
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4.3 Types of Agency
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DUTIES AND RIGHTS OF AN AGENT
1. To obey the principals instructions.
Case: Turpin Vs. Bilton
The agent has been instructed by
the principal to get the insurance
for his vessel. The vessel lost and
as result the principal has to bear
Sec. 164 CA some loss.
Held: The agent is liable for breach
of duty. Due his failure to obey the
principals instruction. The agent is
liable to pay compensation for the
loss.
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DUTIES AND RIGHTS OF AN AGENT
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DUTIES AND RIGHTS OF AN AGENT
4. To render proper accounts when required
by the principal.
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DUTIES AND RIGHTS OF AN AGENT
5. To pay to his principal all sums received on
behalf of the principal.
Secre
t
Profit
Bribe, payment of secret
commission by a 3rd party,
financial advantage.
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DUTIES AND RIGHTS OF AN AGENT
8. Not to make any secret profit out of the
performance of his duty
6 actions could be take by Principal if agent are making the secret
profit
1. Sec. 168 - Repudiate the contract
2. Sec. 168 - If the principal knows about it & consent to it, the agent can keep the profit
6. Principal may sue the agent & 3rd party for damages, for any loss he suffered due to entering
the contract
Case: Mahesan Vs. Malaysian Govt.
The differences of price was not informed to the P.
- Held: respondent could recover either one of these;
- The bribe money
- The actual loss suffered by respondent as result of entering onto the contract 48
DUTIES AND RIGHTS OF AN AGENT
9. Not to disclose confidential information or
documents entrusted to him by his
principal.
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DUTIES AND RIGHTS OF AN AGENT
10. Not to delegate his authority
Exceptions;
a) where the principal approves of the delegation.
Case: De Bussche Vs. Alt
The principal appoints an agent to sell the ship at a certain price. The
agent cannot sell it & ask the principal whether he can appoint a sub
agent to replace him. Principle approved it.
Held: Agent didnt breach his duty because the appointment of sub-
agent was approved by principal
b) Where it is presumed from the conduct of the parties that the agent
have power to delegate his authority
c) Where the customs of the trade or business permits the delegation
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DUTIES AND RIGHTS OF AN AGENT
10. Notto delegate his authority
Exceptions;
d) In case of necessity or unforeseen emergency.
E.g illness of agent
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TERMINATION OF AN AGENT
Termination ending the contract of agency
between principal and agent
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TERMINATION OF AN AGENT
Classification of modes of termination;
By agreement
By the principal revoking the agents authority
By the agents renunciation
By performance
By operation of law
By frustration
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By Agreement
When both parties desire and agree that the
agency shall terminated, the agency is
terminated.
In this method;
Both the principal and the agent can agree that the
agency is to come to an end
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By Agreement
In this method;
Both the principal and the agent can agree that the
agency is to come to an end
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By The Principal Revoking The Agents
Authority
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By The Principal Revoking The Agents
Authority
Case: Smart Vs. Sanders
Fact: A factor (an agent) was sent with goods
to be sold on behalf of the principal. The
factor made advances to the principal for the
security of the goods.
Held: the agency cannot be terminated by
the principal because the agent has an
interest in the goods by paying the security of
the goods.
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By The Principal Revoking The Agents
Authority
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By The Principal Revoking The Agents
Authority
Case: Read Vs. Anderson
Held: a principal could not revoke the turf
commission agents authority after losing the
bet. The principal would have to indemnify the
agent for the amount which the agent had
paid to the person with whom he made the
bet.
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By The Agents Renunciation
An agency may be terminated when the
agent surrenders his or her authority and by
doing so ends the mandate given to him as
agent.
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By The Agents Renunciation
Ifthe reasonable notice has been given, the
agent will no longer be liable to the principal.
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By Performance
Sec. 154 by the performance of the
contract of agency, that is the transaction
which has been undertaken is performed.
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By Operation of Law
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By Frustration
Upon the happening of an event which
renders the agency unlawful, the agency may
be terminated.
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