LAW OF CONTRACT

OF AGENCY
Learning outcome
At the end of this
chapter, students
should be able to:
CLO2: explain clearly the
position of law
regarding contract of
agency
 DEFINITION
AGENCY

RELATIONSHIP WHICH SUBSISTS BETWEEN A

PRINCIPAL & AGENT WHERE AGENT HAS
BEEN AUTHORIZED TO ACT FOR THE
PRINCIPAL OR REPRESENT HIM IN
DEALING WITH OTHERS/3RD PARTY
DEFINITION
AGENT
A PERSON WHO IS
EMPLOYED BY THE
PRINCIPAL TO DO
CERTAIN ACT FOR HIM
OR REPRESENT HIM IN
DEALINGGS WITH 3RD
PARTY
(s.135 CA)
DEFINITION

PRINCIPAL
A PERSON WHO AUTHORIZES THE AGENT
TO ACT ON BEHALF OF HIM
(s.135 CA)
 CONTRACTUAL RELATIONSHIP
1.PRINCIPAL
- THE
AGENT
2.PRINCIPAL
3RD
PARTY
 capacity
PRINCIPAL (s.136)

MUST BE OF THE AGE OF MAJORITY & SOUND MIND (s.136 C.A)

capacity
AGENT (s.137)
ANY PERSON MAY
BECOME AN AGENT
(INCL. MINORS &
UNSOUND MIND)
NOT RESPONSIBLE FOR
HIS ACT
PRINCIPAL MUST BE
RESPONSIBLE & TAKE
THE RISKS.
 capacity

CHAN YIN TEE v WILLIAM JACKS & CO LTD

Facts: Chan & Yong (a minor) were a partner in
business. C told WJ that Y is his partner & has
authority to act on behalf of him. WJ supplied goods
to Y but no payment was made. WJ sued C as
principal of Y.
Court Held: Chan was responsible to Yongs act no
matter he is an adult or a minor.
 FORMATION OF AGENCY

Created/formed by No specific formality CONSIDERATION is

the in order to form a not necessary in
agreement/consent contract of agency order to form a
of both parties contract of agency.
(principal & agent) (s.138)
FORMATION OF AGENCY
Law provides 5 ways
agency may be
formed:
1.By express
appoinment
2.By implied
appointment
3.By ratification
4.By necessity
5.By the doctrine of
By express
appointment
s.140

Principal appoints the agent expressly, either orally or in writing

 By implied appointment

Implied from the circumstances of the case

Referring to the words, conduct or the regular
conduct of the business between the parties.
S.140 it appears to the public that certain person is
having authority to act on behalf of another person.
(illustration)
Refer Chan Yin Tee v William Jacks Co Ltd
Held: Once C told WJ that Y is his partner, it shows Y
has the implied authority to act on behalf of C.
By implied appointment
Implied From the
Relationship of
Husband &
Wife
Wife has authority
to pledge the
husbands credit in
a contract
Condition it is
necessaries &
suited to their
condition & style
of living
By implied appointment

Impliedly wife is an agent to husband

Husband (principal) is liable upon such
contract provided for necessaries and
suit their style of living.
 By implied appointment

Husband can rebut by proving that:

1.Expressly forbid his wife from pledging his credit; or

2.Expressly warned the tradesman not to supply his wife with goods or credit; or

3.Wife was sufficiently provided with the goods of the kind in question; or wife was given
sufficient allowance for buying goods without having to pledge her husbands credit; or

4.Contract was unreasonable consider of husbands income.

 By implied appointment

By The Partnership Act 1961

s.7 (P.A) each partner in a partnership is an agent to other firm
or other partners in the firm.(in the course of the partnership
business)
Each partner is implied agent to the firm
Has the implied authority to act on behalf of the other
partners
The firm/other partners implied principal to any one of the
partners
The firm/other partners liable to whatever contracts had
been entered into by any other partners.
By RATIFICATION
What is ratification?

certification/acceptance by the principal for an act done without authority or exceeding the authority
given
By RATIFICATION
 By RATIFICATION

If any situation occurred principal has choice either to

reject@accept the contract, which has been made on
behalf of him.
If accepts and confirm, means that he ratifies the
contract.
S.149 agency by ratification exists between the
principal and agent who had exceeded his authority or
without authority
IF PRINCIPAL DOES NOT AGREE, THERE IS NO AGENCEY
RELATIONSHIP & NOT LIABLE TO IT
 By RATIFICATION

EFFECTS
Once principal ratified, he is bound to the contract made
by the agent.
The principal is bound to the contract retrospectively. i.e.
the contract is effective from the date when the original
contract was made by the agent, not from the date of the
ratification s.149
BOLTON & PARTNERS v LAMBERT
Court: contract effective from the date when it was made,
not the date
 By RATIFICATION

Conditions:
1. The contracts done by the agent was without
authority or exceeding the authority
2. The contract must be one, which is recognized by
law, not illegal
Brook v Hook
Court Held: The principal may not ratify a contract in
which his signature had been forged by the
unauthorized agent
By RATIFICATION
3. The agent must act expressly as an agent to
the principal. He must not contract in his
own name.
Keighley Maxted & Co. v Durant
Facts: An agent was authorized by the
appellant to buy wheat at a certain price.
The agent exceeded his authority & bought it
at a higher price. However, the agent
contracted in his own name
Court Held: The appellant was not liable to
Durant (3rd party) because the appellant
could not ratify the contract because the
contract was made in the agents own name.
 By RATIFICATION
4. When the contract was
made, the principal must
actually exist.
Kelner v Baxter
Court Held: A contract to buy
a hotel made by an agent
on behalf of a company
which was not
registered/formed, could
not be ratified by the
company because the
company(principal) did not
exist at that time.
 By RATIFICATION

5. The pricipal must have contractual capacity

6. The pricipal must have full knowledge of all material
facts at the time of ratification s.151
Marsh v Joseph
Fact: A principal had ratified a contract without the full
knowledge of all material facts.
Court Held: the principal was not bound to such
contracts.
 By RATIFICATION

7. The principal must ratify the whole contract. He

cannot accept only part of the contract s.152
8. Ratification must be made within a reasonable time.
Metropolitan Asylum Board v Kingham & Sons
Facts: The agent contracted to buy eggs without the
authority. The principal tried to ratify the contract 1
week after it was made.
Court held: The ratification was too late.
By RATIFICATION
9. Ratification must not injure or affect the interest of
a 3rd person s.153
Illustration b A holds a lease from B, terminable on
3 months notice. C, an unauthorized person,
gives notice of termination to A. The notice
cannot be ratified by B, so as to be binding on A.
* If the principal has ratified the contract, but without
fulfill any one of those condition, the contract did
not bind on the principal.
BY NECESSITY/EMERGENCY
S.142
A Person, who has
no authority, may
become an agent
due to the
necessity or
emergency
circumstances, in
order to protect
the principal from
any loss.
BY NECESSITY/EMERGENCY

How?
1. When a wife is deserted and has no means of
support.
- A wife can pledge her husbands' credit for necessaries
suited to the income and life condition of her
husband
- however, she cannot become an agent by necessity if
her husband has provided her with sufficient
allowance.
BY NECESSITY/EMERGENCY
2. When a person is entrusted with
another persons property, and it
becomes necessary for him due to
the emergency situation, to do
something in order to preserve & to
protect that property although he
has no authority to do so.
s.142 (illustration)
- An agent for sale may have goods be
repaired if it be necessary
A consigns provisions to B at Taiping,
with directions to send them
immediately to C at Parit Buntar. B
may sell the provisions at Taiping, if
they will not bear the journey to Parit
Buntar without spoiling.
BY NECESSITY/EMERGENCY

Great Northern Railway v Swaffield

Facts: The railway company has been
entrusted to deliver a horse of the
defendant to a destination. However,
when it reached the destination, nobody
came to take the horse. P had to look
after the horse & took several actions in
order to preserve the safety of the horse.
P claimed from D extra expenses
incurred in preserving the interest of the
D. D refused & claimed P was not
authorized to do so.
Court Held: P was an agent by necessity and
therefore entitled to the claim.
 BY NECESSITY/EMERGENCY

Conditions
These conditions must be satisfied:
1. There must be a real & Actual emergency
Phelps James & Co v Hill
Court Held: what is meant by emergency must be refer
to reasonable situations by looking into the
dangerousity, facilities availability, cost, time
distance etc.
BY NECESSITY/EMERGENCY
ii. The agent was entrusted with the principals
property/goods
Any person, who was not entrusted with the
principals property, is not entitled to become
an agent by necessity (s.142)
Jebarra v Ottoman Bank
Court Held: Agency by necessity only exists if the
agent is entrusted with the goods of the
principal or being instructed to deliver the
goods to certain destination and where at that
time emergency occurred while the goods are
under the responsibility of the agent
 BY NECESSITY/EMERGENCY
iii. It is impossible for the agent to get the
principals instruction at that time.
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 do so, then only
the agent may use his own discretion
taking the necessary steps (s.142)
BY NECESSITY/EMERGENCY

Springer v Great Western Railway Co.

Facts: The D agreed to carry P tomatoes
from Jersey to Covent Garden Market.
Owing to bad weather, the ship arrived
late at Weymouth. Meanwhile, D workers
were on strike. Therefore the tomatoes
were found to be bad. The defendant
decided to sell the tomatoes at
Weymouth because D felt it could not
arrive at Covent Garden market in
saleable condition. However D did not
communicate this to P. P claim damages.
Court Held: P was entitled to damages
because D were not agents by
necessities when they failed to
communicate the acts with P.
BY NECESSITY/EMERGENCY
iv. The agent of necessity has acted in
good faith
- What is done might be done by any
other person in similar position.
BY NECESSITY/EMERGENCY

1. The agent will be protected

Effects?
from any claim of the principal

2. The agent will be entitled to

the additional payment for his
3.A contract exists between the
effort to protect & to preserve
principal and 3rd party
the safety and interest of the
principal
BY ESTOPPEL
How?
1. Ehen 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.
. The principal is estopped by
the law from denying that
agents authority (s.190)
. Principal cannot avoid the
liability upon the contract
made by that agent
BY ESTOPPEL

ii. When a principal does not inform or

announce to the 3rd party that his agent
has no authority or the agents authority
had been terminated, but the agent still
continues acting on behalf of that
principal.
- In this situation, the principal would be
liable for the contract made by such
agent irrespective whether the agent had
acted with or without the principal
knowledge.
BY ESTOPPEL

Freeman & Lockyer v Bruckhurst Park Properties Ltd.

Facts: There were 4 directors in a company. A,
contracted on behalf of the company with T(3rd
party). The other directors knew but did not inform
T that A had no authority to do so. T believe A had
the authority.
Court Held: the company is estopped from denying that
A is the companys agent and denying that A had
the authority to make contract on behalf of the
company.
BY ESTOPPEL
Please Take Note!
Agency by estoppel only
happen if the principal
himself, through his own
words or conduct, induced
the 3rd party to believe that
a certain person is having
the authority to act on
behalf of the principal.
It does not happen if the 3rd
party was induced by the
agent only
BY ESTOPPEL
Armagas v
Mundogas, The
Ocean Frost
Court Held: Agency by
estoppel does not
exist if the agent
himself represent to
the 3rd party that he
is the agent of the
principal, and not
from the words or
the conduct of the
principal.
 DUTIES OF PRINCIPAL TOWARDS
THE AGENT
1. TO PAY THE COMMISSION/OTHER
AGREED REMUNERATION
. The principal is under a duty to
pay the remuneration upon
completion of all contractual
duties s.172
. Amount? Depends on the terms
of the contract of agency
. If no amount fixed, reasonable
amount would be paid
. However, if agent is guilty of
misconduct, the right is loses
s.173
DUTIES OF PRINCIPAL TOWARDS THE AGENT

ANDREWS V
RAMSAY
Court Held: The
principal is not
bound to pay the
agents
commission due to
the fact that the
agent had
received secret
profit or a bribe
when performing
his duties as an
DUTIES OF PRINCIPAL TOWARDS THE AGENT

2. NOT TO WILFULLY PREVENT OR HINDER

THE AGENT FROM EARNING HIS
COMMISSION
Principal is under a duty, not to prevent
agent from earning commission (agents
right)
Examples where principal have willfully
preventing agent from earning
commission
1. The principal refused to accept the
contract made by the agent
2. The principal appointed another agent to
carry on the same duty, to deprive
original agent from earning commission.
DUTIES OF PRINCIPAL TOWARDS THE AGENT

3. TO INDEMNIFY & REIMBURSE THE AGENT

FOR LAWFUL ACTS DONE IN THE
EXERCISE OF HIS DUTIES S.175
If agent incurs liabilities/losses in the
exercise of his duties, principal is under a
duty to reimburse the agent
HICHENS, HARRISON, WOOLSTON & CO V
JACKSON & SONS
Court held: the agent is entitled to damages
for anything incurred in the performance
of his duties & to be reimbursed for
agent advancement or lost.
DUTIES OF PRINCIPAL TOWARDS
THE AGENT
However, if the agent employed to
do a criminal act, the principal is not
liable to indemnify the agent for any
consequences of that criminal act
even there were promise from
principal to indemnity s.177
 DUTIES OF PRINCIPAL TOWARDS
THE AGENT
Duty to indemnify arises in the following circumstances:
1. The agent has incurred losses or liabilities in performance of
his duties.
Kyall & Evatt v Lim Kim Keat
Facts: L(executrix of an estate)had instructed the plaintiff who
were share brokers, to sell on her behalf, shares in a
company registered in England. This in accordance with a
will. P then made a contract to sell the shares to 3rd party.
Unfortunately, it was discover, the will had not been proved
in England. The brokers compel to but other shares for
substitution and consequently suffered a loss in doing so. P
sued D to secure an indemnity for loss.
Court Held: as the executrix knew that the will has not been
proved in England and failed to disclose that fact to the P, P
were entitled to be indemnified.
DUTIES OF PRINCIPAL TOWARDS
THE AGENT
b. The agent causes injury to 3rd party
in the execution of his authority
s.176
c. The agent suffers injury during the
course of his duties due to the
principal negligence s.178
 Duties of agent towards
principal

Rights and duties of an agent are Contracts Act 1950 provides some
stipulated in the terms of the rights & duties of an agent towards
contract of agency principal.
 Duties of agent towards
principal

Main duties
1. OBEY THE PRINCIPALS INSTRUCTION s.164
. An agent must follow principals instruction
. If he failed to do so, there will be a breach of contract of
agency and liable for any loss sustained by the principal
s.164 illustration (a)
A, an agent engaged in carrying on for B a business (custom to
invest from time to time, at interest, the moneys which may
be in hand, omits to make the investment). A must make
good to B the interest obtained.
 Duties of agent towards
principal

TURPIN V BILTON
Facts: The agent has been instructed by the principal to
get the insurance for his vessel. Agent failed to do so
and the vessel lost and principal has to bare some loss.
Court Held: The agent is liable for breach of duty, due to
his failure to obey the instruction. He is liable to pay
compensation for the loss.
However, if the instructions are against the law, agent
does not have to obey.
 Duties of agent towards
principal

2. IF THERE IS NO INSTRUCTION, THE AGENT MUST ACT

ACCORDING TO THE CUSTOMS THAT PREVAIL IN
DOING BUSINESS OF THE SAME KIND
S.164 Illustration(b)
B, a broker, in whose business is not custom to sell on
credit sells goods of A on credit to C (credit at the
time was very high). C before payment becomes
insolvent. B must make good the loss to A.
 Duties of agent towards
principal

3.THE AGENT MUST EXERCISE CARE & DILIGENCE, AND USE ALL SKILLS
HE POSSESSES IN CARRYING OUT HIS WORK s.165
If agent is employed for his professional service, he must use all his
skills & expertise as usually required from a same professional man.
KEPPEL V WHEELER
Facts: D (agent) was employed to sell P house. An offer was received
and accepted by P subject to contract. Few days later, higher offer
was made by X, but this offer was not communicated to the P. Then,
a written contract between the P and the 1st offeror was duly signed.
Court Held: The defendant was liable to the plaintiff for the difference
between the 2 offers.
Duties of agent towards
principal
4. TO RENDER PROPER ACCOUNTS WHEN
REQUIRED s.166
It is the duty of the agent to account for all
monies & property accepted on behalf of the
principal.
The principals property should not be mixed
up with the agents own property.
LYELL V KENNEDY
Court Held: an agent who has been entrusted
with the principals money/property is bound
to keep the money/property separately from
his own property.
Duties of agent towards
principal
5. TO COMMUNICATE WITH THE
PRINCIPAL DURING
EMERGENCY/DIFFICULTY s.167
Agent must use all reasonable
diligence to communicate with
and to obtain instruction from
his principal in case of
emergency or difficulty
However, if impossible to do so,
agent must use his own
discretion to safeguard the
interest of the principal.
Duties of agent towards
principal
6. MUST ACT IN
GOOD FAITH AND
NO CONFLICT OF
INTEREST
Agent must not let
his own interest
conflict with his
duty.
Must act solely for
the benefit of his
principal, not for
his own benefit.
Duties of agent towards
principal
What is acting in good faith?
1.The agent cannot become a party to
the transaction with the principal.
. ARMSTRONG V JACKSON
Facts: An agent had been ordered to buy
shares for his principal. The agent sold
his own shares to the principal without
informing the principal.
Court held: agent has not acted in good
faith.
 Duties of agent towards
principal

If principal noticed he is contracting with his own

agent, and does not agree, he can repudiate the
contract. S.168
WONG MUN WAI V WONG THAM FATT
Court held: D had breached his duty as agent on 2
reasons.
1. He sold the Ps share of land below the market value
2. He failed to inform the plaintiff that he has sold it to
his wife.
D should act in good faith to protect interest of P and
Duties of agent towards principal

What is acting in good faith?

ii. The agent cannot act on behalf of 2
principals at one time without their
consent
FULWOOD V HURLEY
Facts: The agent had acted on behalf of both
parties; P and 3rd party, by claiming
commission from both of them without
their knowledge & consent.
Court Held: the agent has breached his duty
towards the principal for not acting in
good faith.
Duties of agent towards principal

What is acting in good faith?

iii. The agent must disclose everything that
he knows, to the principal relating to all
material facts of the contract.
Not allowed to disclose his principals
secret to the other.
iv. All monies & profits should be put into
the principals account.
Cant mix with his own money
Refer Lyell v Kennedy
Principal entitled to all profits made by
the agent (s.169)
Duties of agent towards
principal
7. CANNOT MAKE ANY SECRET
PROFIT
SECRET PROFIT?
bribe/secret commission/any
financial advantage which is above
beyond the commission agreed
under the agency contract.
However, if principal knows and give
consent, it is no longer secret
 Duties of agent towards
principal

Remedies if principal does not consent

1. The principal may repudiate the contract.
2. The principal may recover the amount of the bribe (s.169)
. TAN KIONG HWA V ANDREW S.H. CHONG
Facts: P (principal) bought a flat house from a company. D
was a director of the company. P ordered D to resell the
house at RM45,000. however D managed to sell at
RM54,000 and the extra credited into companys account.
Court Held: P is entitled to claim the extra RM9,000 from D.
Duties of agent towards
principal
Remedies if principal does not
consent
iii. The principal may refuse to pay the
agents commission
iv. The principal may dismiss agents
authority
BOSTON DEEP SEA FISHING & ICE CO
V ANSEL
Court held: an agent had been
dismissed by the principal for
Duties of agent towards principal

Remedies if principal does not consent

v. The principal may sue both (agent & 3rd
party) who receive and gave the bribe &
claim damages.
MAHESAN V MALAYSIAN GOVERNMENT
OFFICERS CO-OPERATIVE HOUSING
SOCIETY
Facts:Appellant (agent) was a director &
secretary of the respondent co-operative
society (principal) bought land at
RM944,000 from a vendor who had earlier
paid RM456,000. A knew this fact but failed
to inform R. only after sale completed R
discovered that A had received RM122,000
as a bribe from the vendor.
Court Held: R could recover either the bribe or
the amount of the actual loss suffered as a
consequence of entering into the contract
with vendor.
Duties of agent towards
principal
Remedies if
principal does not
consent
vi. The agent and
the 3rd party may
be charged under
a criminal offence.
They may be
charged under s.4
of the Prevention
Of Corruption Act
1961
 Duties of agent towards
principal

8. MUST PAY HIS PRINCIPAL ALL SUMS RECEIVED ON HIS BEHALF (s.171)
Whatever amount received on behalf of the principal, must be paid
to principal.
However, this subject to s.170, where the agent is entitled to
deduct any sum from the principals money for the payment of:
1. Any sums owed to the agent in respect of advances made during
conducting business
2. Any commission/remuneration payable
. Agent has the right to retain his principals property in his
possession until remuneration is paid right oflien
 Duties of agent towards
principal
9. THE AGENT CANNOT
DELEGATE HIS AUTHORITY TO
OTHER PERSON (s.143)
Based on the maxim Delegatus
non potest delegare (agent cannot
employ another person to do his
duty and must perform it himself)
Duties of agent towards
principal
Exception
1. Where the principal himself approves the
delegation of the authority
. DE BUSSCE V ALT
Facts: Principal appointed an agent in China to sell
a ship at certain price. The agent was unable to
sell it. Therefore the agent sought the
principals approval to appoint a sub-agent to
sell the ship in Japan.
Court Held: there was no breach of the agents
duty because principal express consent on
appointment of sub agent.
 Duties of agent towards
principal
Exception
ii. Where it is presumed from the
conduct of the parties that the
agent would have power to
delegate his authority to other
person to perform his duty
iii. In case of necessity or
emergency
e.g. illness or injured in an
accident
iv. If the act to be done is purely
ministerial or clerical which
does not involve any
discretion or professional skill
of the agent.
Duties of agent towards principal

Exception
iv. If the act to be done is purely ministerial
or clerical which does not involve any
discretion or professional skill of the
agent.
JOHN McCANN & CO V POW
Facts: An agent has been employed to sell a
house belonged to the principal. The
agent delegated his authority to another
person
Court Held: Agent failed to get his
commission by breaching the duty. The
duty involve his personal skill &
discretion and not clerical duty.
 The authority of the
agent
An agents act is binding upon the principal if the
act is done within the authority of the agent

Agents authority classified into:

1.Actual authority

2.Apparent authority
 The authority of the
agent
Given to the agent
through the
ACTUAL AUTHORITY Comprises of:
agreement between
principal agent

1. Express authority 2. Implied authority

 The authority of the

agent
EXPRESS AUTHORITY
Expressly given
(oral/writing) s.140
Example:
B appoints C as his
agent to sell his car
for not less than
RM30,000. if acted
in accordance with
this express
authority, B is bound
to the contract made
by C.
The authority of the agent

IMPLIED AUTHORITY
The actual authority of an agent can be
implied by
1. All such powers which are
proper/necessary/usual to execute the
express authority
. Also known as implied usual authority
. Example: B appoints C to sell his car and
entrust C with possession of the car. C
by implication has the authority to allow
potential buyers to test-drive the car.
The authority of the
agent
ii. Implied from the circumstances of the
case.
iii. Implied from the customs/usage of
trade
iv. Implied from the situation and conduct
of the parties.
Chan Yin Tee v William Jacks
Court Held: From the conduct of Chan
telling WJ that Yong is his partner, it
shows that Yong has the implied usual
authority to act on behalf of Chan in
The authority of the agent

Certain authority is implied, if it is of the

type that someone dealing with the
agent may expect the agent to have such
authority
It is the usual authority that can be
implied by the 3rd party
Normally the title/position of the agent
may give a measure of implied usual
authority
 The authority of the agent

PANORAMA DEV. (GUILFORD) LTD) v FIDELIS FURNISHING

FABRICS LTD
Facts: A company secretary exceeded his actual authority in
hiring motor vehicles for the company (defendant), from the
plaintiffs.
The issue was whether, the defendant could be made liable
upon the transaction.
Court Held: The defendant was liable (in appointing a company
secretary, D was representing to the 3rd party that agent had
authority to enter into those transaction) the hiring of motor
vehicle was regarded as part of implied authority.
The authority of the agent

However, the 3rd party cannot rely upon the

agents implied usual authority if he knows
or ought to have known that the agent is
acting in excess of his actual authority.
WATTEAU v FENWICK
Facts: D appointed a manager to run a public
house (pub) and the license was taken out
in the managers name, which appeared
over the door. Manager was forbidden by D
to buy cigars on credit. In disregard of that
restriction, the manager bought cigars from
P who then claimed for the price.
Held: D, was liable to pay because manager of
a public house would usually have authority
to make purchase of that kind. P rely on
such usual authority in the absence of
express knowledge of the restrictions
imposed by the principal.
The authority of the
agent APPARENT AUTHORITY
The law presumes that the agent
possesses certain authority, although
the principal may not have consented
to, or given such authority to the
agent.
2 situations:
1. Where a principal, by his
words/conducts, leads the 3rd party to
believe that his agent has authority to
make contracts for him s.190
2. where the agent previously had
authority to act, but that authority was
terminated by the principal without
notifying it to the 3rd parties.
 The authority of the
agent
1. Where a principal, by his words/conducts, leads the 3 party
rd

to believe that his agent has authority to make contracts for

him s.190
. The representation (by words/conduct) of the principal,
makes it apparent to the 3rd party that the agent has
authority.
. Condition must be principal himself who makes the
representation not the agent
GRAPHIC LINES PTE LTD. V CHAI CHEE MEIN
Facts: The GM who was a partner of a nightclub business had
represented to P that advertisement should be done through
the Asst. Manager.
The issue?whether D (partners) bound by the act by AM
Court Held: GM had the actual authority to give authority to AM,
D were bound by the act (apparent authority to AM)
The authority of the
agent
2. Where the agent previously had
authority to act, but that authority
was terminated by the principal
without notifying it to the 3rd parties.
 The authority of the

agent
Distinction

IMPLIED APPARENT
BASED ON INFERENCES REPRESENTATION MADE BY
DRAWN FROM THE THE PRINCIPAL TO THE 3RD
AGREEMENT (PRINCIPAL PARTY IRRESPECTIVE OF
AGENT) ANY AGREEMENT BETWEEN
PRINCIPAL AGENT
 exercise
Suzie has just been promoted as a
personnel manager of ABC Bhd.
With the authority to hire
executives and office staffs. She
then hired C2 Dcor Sdn. Bhd. to
renovate her office which cost
RM150,000. When C2 Dcor
claimed payment, Suzies
employer refused to pay on the
ground that the renovation work
was done without their
permission. C2 Deco wants to
know the legal provision on this
matter. Advise C2 Dcor.
TERMINATION OF AGENCY
Agency may be
terminated in
the following
manner:
1.By the act of
the parties
(principal &
agent)
2.By operation of
law
TERMINATION OF AGENCY

1. BY THE ACT OF THE PARTIES

. The principal and the agent may
terminate their agency relationship in 3
ways:
1. By mutual consent between them
2. By unilateral revocation/termination by
the principal
3. By unilateral renunciation by the agent
TERMINATION OF AGENCY
Both parties (principal & agent)
may terminate their agency
1. BY MUTUAL CONSENT
relationship by mutual consent
between them.

Once agreed, the agent has no Principal would not be liable for
longer any authority to act on any contract made by the agent
behalf of the principal after that termination.
 TERMINATION OF AGENCY
B. BY UNILATERAL
REVOCATION/TERMINATION BY THE
PRINCIPAL
The agency may be terminated by the act of the
principal revoking the agents authority s.154
The principal may revoke the agents authority at
any time, before the agent has exercised the
authority s.156
The revocation may be done either expressly or
impliedly from the conduct of the principal s.160
TERMINATION OF AGENCY
In order to revoke the agents
authority, the principal must give a
reasonable notice to the agent.
Otherwise, the agent is entitled to
damages s.160
What is reasonable notice?
- Depends on the facts &
circumstances of each case.
 TERMINATION OF AGENCY

SOHRABJI v ORIENTAL SECURITY ASSURANCE CO.

Court Held: 3 Months notice was not adequate to
properly terminate an agency which has lasted
nearly 50 years. In this circumstance, 2 years notice
would have been reasonable notice.
 TERMINATION OF AGENCY

If principal failed to give a reasonable notice of

termination, the measure of damages that the agent
would be entitled to, is the amount that the agent
might have earned under the contract of agency had
he not been prevented from continuing his duty as
an agent.
TERMINATION OF AGENCY
If the agency is for a fixed term,
earlier termination might entitle the
agent to claim for damages s.158
TERMINATION OF AGENCY
EXCEPTION
In certain situations, principal is
prevented from revoking the agents
authority.
 TERMINATION OF AGENCY

1. WHEN THE AGENT HIMSELF HAS AN INTEREST IN THE

PROPERTY, WHICH IS THE SUBJECT MATTER OF THE AGENCY
S.155
SMART v SANDERS
Fact: An agent was sent with goods, to be sold on behalf of the
principal. The factor made advances to the principal to the
principal for the security of the goods
Court Held: The agency cannot be terminated by the principal
because the agent has an interest in the goods( paying the
security)
 TERMINATION OF AGENCY
2. AFTER THE AUTHORITY HAS BEEN PARTLY EXERCISED BY
THE AGENT S.157
READ V ANDERSON
Facts: A principal instructed a turf commission agent to
place bets on his behalf. The agent placed the bets and
lost. By custom, a turf commission agent always bets in
his own name and becomes solely responsible to person
with whom the bet is made. If he failed to pay a lost bet,
he is subject to certain disqualification, which will have a
serious impact on his business.
Court Held: The 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.
TERMINATION OF AGENCY
3. THE NOTICE OF TERMINATION BY
THE PRINCIPAL WOULD ONLY
EFFECTIVE WHEN IT COMES TO THE
KNOWLEDGE OF THE AGENT AND
THE 3RD PARTY S.161
If the agent & 3rd party does not
know about the notice of
termination, the revocation is not
effective.
Thus, the agency is not terminated.
 TERMINATION OF AGENCY
PICHAPPA CHITTY v HJ. JAH
Court Held: The plaintiff (3rd party) who advanced money to an
agent appinted, but whose auhority had been revoked
without the agents and plaintiffs knowledge, was entitled to
recover the money from the principal
TRUEMAN v LODER
Court Held: A 3rd party who dealt with an agent whose authority
had been revoked was able to claim from the principal, the
goods supplied because the 3rd party had no knowledge of
the revocation
 TERMINATION OF AGENCY

C. BY UNILATERAL RENUNCIATION (RELEASED) BY THE AGENT

Agency is also terminated by the act of the agent
renouncing the business or the relationship of the agency
s.154
The renunciation may be express or implied s.160
The agent must give a reasonable notice to the principal.
Otherwise the principal is entitled to damages s.159
Of agency is for fixed term, the agent is liable to
compensate the principal for premature renunciation
without sufficient cause s.158
 TERMINATION OF AGENCY

2.BY OPERATION OF LAW

1. By the performance of the Contract Of Agency
s.154
2. By the expiration of the period fixed or implied in the
Contract Of Agency
. Once the agency is expired, the agency is
terminated even though the business has not been
completed
TERMINATION OF AGENCY
c. By the death of either the Principal or the Agent
s.154
Exception:
1. The death of the principal would not terminate the
agency IF the agent has an interest in the
property, which is the subject matter of the
agency s.155
2. Termination by death of the principal is ONLY
effective upon the agent having notice of the
principals death s.161
3. When the principal died, the agent must take
reasonable steps to protect & preserve the
interest of the principal s.162
TERMINATION OF AGENCY
d. By the Subsequent Insanity Of either the Principal Or
the Agent s.154
YONGE V TOYNBEE
Court Held: The agent is liable to the 3rd party because he
acted without the authority due to the fact that the
principal become insane.
e. By the bankruptcy or insolvency of the principal s.154
f. By the happening of an event which renders the agency
unlawful
Falls with the doctrine of frustration in contract
E.g. principal becomes enemy due to the outbreak of
war
A change in the law, which makes the agency business
unlawful.
 Relax and think

Jackie S/B appointed Man S/B to be its sole agent for

selling brand X cooking oil. Jackie S/B then
supplied 100 tons of cooking oil to Man S/B. In
return, Man S/B had to pay a substantial sum of
money as guarantee on the goods supplied. After
one month, Jackie S/B intends to terminate Man S/B
authority. Man S/B objects to the termination.
Discuss.