Law of Agency [part 2]

8/18/2019 Law of Agency [part 2]

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DUTIES AND

RESPONSIBILITIES


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Dutiesof anagent

towardsprincipal

1. Performance

An agent must use a proper ways to perfowork. Their performance must be in acceptmanners which is an agent must use a readiligent and skills.

The degree of skills that an agent required iexpected of a reasonable person under simicircumtances. Usually.if the agent have a spskills, the agent is expected to use it.

or example, those that accountant or attorpossesses.


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Dutiesof anagent

towardsprincipal

2. Notication

To inform the principal all matters regaragency that come to his or her attention

Under the law of agency, notice to the agento the principal.

or example, a business women hires an agher women apparel. !f the agent learns that will be unable to pay, the agent must informprincipal of this fact.

Another example, the manager "the agent#

grocery store is noti$ed that one of the sheldamage and there is a risk that it will collapmanagers fails to take a precaution step to $customer is in%ured, the store&s owner "the pis liable for in%ury.


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Dutiesof anagent

towardsprincipal

3. Loyalty

must act solely for the benet of the prand not for her or his personal gain.

information that was gained regarding the arelationship should be kept condential

!f the information was disclosed during the a

relationship or after its termination, it will beconsidered as breach of loyalty


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Dutiesof anagent

towardsprincipal

4. bedience

An agent must full all the act based on the princiinstruction.

• or example, if there are situation that an agent mumove without principal&s consent and the failure of act will causes the $nancial loss to the principal, anallowed to act.

exception wherean agent may

deviate from theinstruction

the instructionwas against the

law

emergencysituation and the

principal cannotbe consulted


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Dutiesof anagent

towardsprincipal

!. "ccounting

The agent must keep for the principal an ac

which have all the property, money receivedexpenses during the transaction on behalf oprincipal.

!t is including the gift received from the thirdconnection with the agency.

or example, A is a salesperson to a $rm. A been delivered the $rm&s product and he rec

gift from the customer. The gift that he recebelong to the $rm not himself as it is two di'entities where the agent must maintain sepaccounts between the principal&s funds andagent&s personal funds.


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Duties ofan agentlaid downin(ontractsAct )*+

#ection 1$4 of the %ontract "ct 1&!'

To obey the principal&s instructions

ailure to follow the principal&s instruction wthe breach of contract and the agent will beany loss that su'ered by the principal.

or example, an auctioneer must obey his-hprincipal&s instructions regarding the reserv


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(urpin ) *ilton +1,43- ! an / 0 4!!

The agent has been instructed by the rincithe insurance for his vessel. /owever, the afailed to do so. The vessel lost and as a resurincipal bare some loss.

/eld 0 the agent is liable for breach of duty d

failure to obey the rincipal&s instructions. Tagent liable to pay compensation.


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*ostock ) ardine 1,$! 3 . / %. 5''. The plainti' instructed the defendant,cotton

to purchase for him + bales of cotton. The dbeing also employed by other principals, macontract on their own names for the purcha1 bales, and having informed the plainti'had purchased + for him and paid them papurchase money.

The court held that the agent was liable whebought more than he was directed to buy


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Duties of

an agentlaid downin(ontractsAct )*+

owe)er, the agent is not obliged to perforthat is contrary to statute or illegal at colaw

%ohen ) 6ittel +1,,&- 22 7.*.8 $,',

the principal instructed agent to place an illebetting.

/eld0 the agent is not liable for failing to plaas it is an unlawful instruction


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Duties of


#ection 1$! of the %ontract "ct 1&!'

Toe9ercise care and diligence

in carryingwork and to use such skill as he possesses.

An agent have to conduct the business as mas is generally possessed by persons engagsimilar business unless the principal have towhat kind of skills that he want.

An agent must give full e:ort in e9ercisin

and diligence in his work. or example, if the agent is employed for pr

service, he must use all his skills 2 expertiseusually required for a same professional ma


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Duties of


6eppel ) ;heeler +1&25-1 6* !55

the D "agent# was employed by the "rincsell his house. The $rst o'er was accepted bwith a condition. A few days later a higher oo'er# was made by 4 but this does not comto .

Then, the court held that the D liable to pay

di'erences between )st o'er and 3nd o'er agent did not communicate to the plainti'.


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Duties of


#ection 1$$ of %ontract "ct 1&!'

to render proper accounts when required

!t is an agent&s duty to render all monies anproperty of his principle as it was accepted of the rincipal. /e must obey if he is demaproduce such accounts.

!t is because it should mixed with the agent

property as it is the di:erent entities.


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Duties of


? 1''2

The appellant in )53* opened a bank accouthe respondents who were bankers. urtherwere added in )51 and )51) interest was s!n )515 the appellant brought proceedings athe 6espondant 7ankers seeking recovery oprinciple and interest.


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Duties of


#ection 1$5 of %ontract "ct 1&!'

To communicate with the principal.

An agent must use all reasonable diligenccommunicating with his principal and in seobtain his instruction.

7ased on the #ection 142 of %ontract "cfails to get further instruction, then he can u

own discretion to act, in order to protect theof his principal.


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Duties of


#ection 1$, of %ontract "ct 1&!'

8tates that he cannot sell his own sharesprincipal, unless he has earlier informed theand obtained his consent.

The agent cannot make any secret protthe performance of his duty such as bribe, scommission or $nancial advantage.

!f the principal know about the pro$t, then tcan keep the pro$t.

/owever, if the pro$ts are secret, then the pmay repudiate the contract if it is disadvanthim and the principal also can recover the asecret pro$t from the agent "8ection )9*, (oAct )*+#


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Duties of


(an 6iong wa ). "ndrew #.. %hong +1&L 1,,

The defendant was the managing director oagency company. The plainti' has bought a that company. The plainti' later instructed tdefendant as his agent to sell the :at for ;<

/owever the defendant sold the :at for highwhich is ;+


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Duties of


The principal also may refuse to pay the agecommission

"ndrews ). ?amsay and %o +1&'3- 2 6* $

the principal successfully recovered both th

commission paid to the agent plus the secrecommission received by his agent from a th!n that case, the plainti' directed the defendsell property and agreed to pay him commispounds. The defendant received ) poundpurchaser as deposit for the property. The dpaid + pounds to the plainti' and kept the pounds in payment of his commission with tplainti'&s knowledge. /owever the plainti' lthe defendant had also received another 3as commission from the purchaser. /e suedto recover this 3 pounds and also the + phad paid the defendant initially.

The court held that he could reco)er both


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Duties of

an agentlaid downin(ontracts

Act )*+

rincipal may also dismiss the agent for bre

contract.

;ong un ;ai )s ;ong (ham


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Duties of


Act )*+

The principle also can sue both the agent anparty who gave the bribe and may claim daany loss sustained.

ahesan ). alaysian 0o)t. @cers %oAoousing #ociety Ltd +1&5,- 1 L 14&

The appellant was a director and secretary orespondent co=operative society. /e broughprice of ;*


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Duties of


Act )*+

An agent has to pay to his principal all sumson his behalf.

>hatever amount received on behalf of thethe agent must paid to the principal.

/owever, section 151 of %ontract "ct

?sub%ect to the deduction speci$ed in #ectiothe agent is bound to pay his rincipal all sumon his account@.

#ection 15' of %ontract "ct

•Agent is entitled to deduct any sum from thrincipal&s money for the payment of which any sum owed to the agent in respect of advmade or expenses incurred by the agent in

conducting business. !t also can be any comor remuneration payable to the agent


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Duties of


Act )*+

Do not disclose any con$dential information and documentrusted to him by his principal.

#ection 143 of %ontract "ct,

The agent cannot delegate his authority to another ag

agent#. axim delegates non potest delegare which isdelegate cannot delegate.

/owever, there are few exceptions which is it is okay ifapproves the delegation.

8e *ussche ) "lt 1,5,

The principal appointed the agent in (hina to sell a shwas unable to sell so he sought the principal&s approvasub agent to sell the ship in Bapan. The court held the a

allowed to appoint an agent in Bapan as his principal ha There are also another exception which is there is an afrom the conduct of the parties that the agent has a podelegate his authority and the delegation was allowed custom or trade. 7esides, if it is necessary to completebusiness, if it is in emergency situation or necessity or involves ministerial or clerical %ob, then the delegation


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Duties oftheprincipalto his

agent

1. %ompensation

#ection 152 of %ontract "ct

To pay the agent commission and other remwhen the duty is completed.

>hen they are already agreed to the amoucompensation, the principal are bound to paagent has completed his duty.

The principal will owes the agent the customcompensation agent&s services if there are nis expressly agreed on.


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agent

(ang %hiok #ing ) Lian


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agent

2.?eimbursement and Bndemnication.

#ection 15! of %ontract "ct.

There are some circumstances where the pr

need to reimburse and indemnify the agent when the agent su'ered losses in performin

6yall / >)att ). Lim 6im 6eat 1&2, ##L

The Agent was hired to sell shares. The defe"rincipal# failed to disclose that certain shabe obtained. Agent concluded a contract to shares but he could not deliver and su'eredAgent claimed from the rincipal the loss.

/eld 0agent was entitled to be indemni$ed fbecause the principals neglect of skill, the plegally bound to make compensation to his respect of that in%ury


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agent

#ection 15$ of %ontract "ct

The agent also can claim the principal forreimbursement and indemni$cation if he ca

to the 1rd

party#ection 15, of %ontract "ct

The agent su'ers in%ury due to principal&s nor lack of skill

#ection 155 of %ontract "ct

The principal doesn&t need to indemnify thehe does an act which is crime.

#olloway ) cLaughlin +1&3,- "% 245

The court held that the agent cannot be indsince there is fraud done by him.


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agent

3. %ooperation

rincipal must cooperate and assist the ageperform his duties and the principal cannot another agent to compete with the $rst age

or example, when the bakery&s owner "the grands its dealer the right to sell its cake in the bakery&s owner cannot grand another de

sell its cake in Cedah also.


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T/ AUT/E6!T!8E

AF AGFT


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T/AUT/E6!T!8 EAF AGFT

An agent&s act is binding upon the rincipal ifdone within the authority of the agent

3 Types ofauthority

Actual AuthorityApparent-Est

ible

Authority


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T/AUT/E6!T!8 EAF AGFT

"A(TUAHAUT/E6!TI#

;atteau )


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T/

AUT/E6!T!8 EAF AGFT"AA6FT-E8TF8!7HAUT/E6!TI#

Apparent or ostensible authority is when therepresent to another person with whom the deals that he has given power to the agent his behalf .

!t is also known when the agent has the autthat authority has been terminated and the party does not known about that as he beliehe still has authority to act.

There are few conditions before apparent aucan bind the principal for any contracts enteby him with third party

). there must be a representation or holdingthe principal

3. representation must be one of fact

1. third party must rely on that representatio


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76A(/ E T/

AUT/E6!TI


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76A(/E T/AUT/E6!T

I

An agent who acts outside his authority or awho acts as if he has the authority to act asfor another person is liable for breach of wof authority.

!n other words, , the agent is personally lthird party is misled by the agentCs

misrepresentation of authority, however i


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76A(/E T/AUT/E6!T

I

Donge ). (oynbee +1&1'-1 kb 21!.

The agents were held liable for damages evthey had acted in good faith.

>here an agent acts in e9cess of his auand that part which is excess of authority is from the rest, then the principal is bound action within the agentCs authority butrest.

The whole transaction is not binding on thprincipal if the acts are inseparable, "sectio)5)#.


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76A(/E T/AUT/E6!T

I

7ut this does not a'ect the right of the thirdclaim against the agent for breach of warranauthority.

An agent is not liable if his lack of authority to the third party or if he expressly disclaimauthority or if the contract excludes his liab


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(T E

(EFT6A(TFT6D 7I

AGFT


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(T E(EFT6A(TFT6D7I AGFT

Named Principal

rincipal&s name has been disclosed to 1rd pthe agent. The 1rd party knows the name an

of the principal. The 1rd

party also knows thaagent is acting on behalf of the principal.

#ection 1,3 of %ontract "ct 1&!'

the agent incurs no right or liability under thcontract as he is not a party to contract.

#ection 15& of %ontract "ct 1&!'

The principal alone can be sue or be sued bthird party provided the agent act within hisin making the contract


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The principal will be liable as the agency rellawfully exists but there are four exception.

if the agentagrees to the thirdparty that he willpersonally liablefor the contract.

if the ageexecute thagreement

negotiablinstrument i

own nam

if the agent

exceeds hisauthority and theprincipal does not

ratify.

if the accordi

trade and cuof the businthe agent wi

liable


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%hin Duen (ung ) *ep "ketik +1&5,-1 L

6 "1rd party# were requested by the A to mavaluation report on piece of land in 8&wak an

a copy of the report to a F.Iork company "!n the previous dealing, the 6 were paid by Awhen the 6 claimed payment, the A refuseddisclosed that they were merely acting as aagent for the F.I company.

!t was held0 ? the A should make the paymehad represented that the terms of payment

the same as earlier dealings. The agents agaccept and make himself personally liable ucontract


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8isclosed Principal

The principal&s existence is disclosed but theis unknown to the 1rd party. /e only knew thwhom he is dealing with is acting as an age1rd party does not know the name and idenrincipal. The agent will not liable for the co

/owever, in a certain situations, the agent wliable such as if the agent enters into a tranwith the third party residing abroad"oversea

Another situation is when the principal cannsued. or example, the principal was a minounsound mind and sovereign.


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#ection 1,3b of %ontract "ct 1&!'

agent incurs liability when the agent did notthe name of the principal.

#ection 1,$ of %ontract "ct 1&!'

the agent is personally liable, a person dealhim may hold either him or his principal, or them liable.


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Pernas (rading #dn *hd ). Persatuan Pe*akti elaka +1&5&- 2 L 1'&

chemicals and fertiliKers have been orderedrespondents for themselves rather than on bprincipal. >hen the appellants sued for the the price, the respondents denied liability onground that they were ordered for another pprincipal#.

The court held that therespondents were liathey contracted in such a form to make them

personally liable.

E di l d P i i l


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Endisclosed Principal

The principal&s existence and identity is unkthe 1rd party. The 1rd party acts under the ithat he is contracting with the A personally. the contract has been signed, the 1rd part c

know that the person whom he is dealing wactually acting on behalf of the principal.

The third party has a right to sue either the the principal or both of them. /e also can recontract if he can prove that he would not ethe a contract if he has been informed earlieprincipal discloses his identity before the co

of contract. The principal also have right to enforce the

against the third party because the contractentered into on his behalf.

The agent can sue the third party because hparty to the contract


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T6!FAT!EF EAGF(I


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T6!FAT!EF EAGF(I

*y Principal

The authority of the agent may be revoke aby the principle before it has been exercisedthe principle "8ection )+9 of (ontract Act#.

8uch revocation may bring liability to the prany damages created or su'ered.

Generally, the principal can revoke the agenauthority where the principal gives notice oftermination "a ?reasonable@ length of notice

agent or the agent is default by the agency


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T6!FAT!EF EAGF(I

/owever, the principal have certain right&squali$cation to revoke the agent&s authority

or example, when the agent has an authorcoupled with an interest.

#"?( ) #"N8>?# 1,4, ! %* ,&!

The court held that a principal could not revagent&s authority where the principal had cogoods to the agent for the purpose of sale aagent had loaned money to the principal onsecurity of the good consigned for sale


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T6!FAT!EF EAGF(I

*y agent

An agent is entitled to renounce his power by refusinby notifying the principal that he will not act for the p

The agency relationship can be terminate by the agesituation which is0

). inde$nite duration "not $xed# where the agent can

the agency by giving a reasonable notice of terminprinciple based on 8ection )+* of (ontracts Act. Thno longer liable to the principle and he or she can creimbursement for all his or her services as well asincurred up to the date of the termination of his or

once the reasonable notice to terminate the agencthe principle.

3. de$nite duration "$xed# where the agent will bear t

to the principle for damages and losses cause by thpremature termination of agency if he or she termiagency before the expiry of the period without %ustcause.


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T6!FAT!EF EAGF(I

#ohrabFi ) riental #ecurity "ssurance %"B? 1&4$.

!n this case the court held that 1 and )-3 minsuJcient to properly terminate the agencyrelationship, which has lasted for almost +

Therefore, an agency of a long standing reqlonger period of notice of termination whichnotice is reasonable notice for the cases of 8Eriental 8ecurity Assurance (o.

#yarikat aya ) #tar Publication *hd L 31

held 0 the 9 month notice is reasonable in tea relationship of sole agency. eaning, the ngiven to principal shall have a reasonable petenure as agency.


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T6!FAT!EF EAGF(I

*y the operation of law

8ection )+< states that an agency is terminthe business of agency has completed. !t simmeans that agency is terminated when thetransaction that has been undertaken is per


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T6!FAT!EF EAGF(I

The agency relation may also revoke by theof law based on the following circumtances.

Upon the death of the principal or the agen

As a general rule,agency may comes to the either the principal of agent dies.

*lades )


52/55

T6!FAT!EF EAGF(I

There is an exception to this general rule whagent has an interest in the property whichsub%ect matter of the agency.

!n such a case, when the principle dies, themay maintain to exercise the authority and agent dies, the authority will be passed to thpersonal representative.

#ection 1$2 of the %ontracts "ct providagent must take all reasonable steps to prot

preserve the interests entrusted to him wheprinciple dies or become insane.


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T6!FAT!EF EAGF(I

>hen either the principle or agent become

The insanity will also terminates the agencydoes not have a capacity to enter into a valand cannot appointed as an agent or act as

Thus, the agency will be terminated by such

>hereas , when the principle becomes insanagent is bound to take the responsible stepsprotect and preserve his principle&s interest


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T6!FAT!EF EAGF(I

The expiry of the $xed period in the contracagency.

At times contract of agency may get formedparticular period. !n such a case after expiryagreed period, termination of agency takes regardless of whether the business or suchtransaction has been completed or not.

>hen the principle or agent becomes insolvmade a bankrupt

Upon the insolvency, a person&s rights and lare vested in the EJce Assignee and therefagency relationship ceases.


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T6!FAT!EF EAGF(I

>hen the contract act of agency has been p

The agency agreement was entered into forparticular ob%ective or to do a particular vensuch a case, termination of agency takes placompletion of that venture.

#ection 1!4 of %ontract "ct provide thecomes to termination when an agency is cresingle speci$c transaction and the transacti

completed.

Documents

Law of Agency [part 2]