Agency Formation (Contract Act 1950)

Formation of Agency (Contract Act 1950)

• Section 135: Defines an agent and principal.
• Section 136: Outlines conditions for a principal (sound mind, majority age).
• Section 137: Specifies agent conditions (can be a minor, principal liable for mistakes).
  • Chai Yin Tee v William Jacks & Co Malaya Ltd: Case referencing agent/principal issues.
• Section 138: Conditions for creating an agency.

  • Section 140 (a): Express appointment.

  • Section 140 (b): Implied appointment.

    • Circumstances: Implied agency due to certain situations.
    • Spousal relations: Implied agency in specific marital situations.
    • Section 7 of Partnership Act 1961: Partnership relation implies agency.
      • Chai Yin Tee v William Jacks & Co Malaya Ltd: Case referencing agency in a partnership context.

  • Section 149: Ratification.

    • Occurs in two scenarios.
    • Section 150: Ratification can be expressed or implied.
    • Effects: Consequences of ratification.
    • Conditions: Necessary criteria for valid ratification.
      • Acting without authority or exceeding authority.
      • Legal (e.g., Brook v Hook).
      • Agent must state they act as agent. (e.g., Keighley Maxted & Co v Durant).
      • Principal's existence at contract time (e.g., Kelner v Baxter).
      • Principal's capacity to contract.
      • Section 151: Principal's awareness of contract details (Marsh v Joseph).
      • Section 152: Ratification of entire contract, not parts.
      • Reasonable time: Ratification must occur within a reasonable timeframe.
        • (e.g., Metropolitan Asylum Board v Kingham & Sons, Grover & Grover v Matthews).
      • Section 153: No harm to third parties from ratification.

  • Section 142: Agency created by necessity.

    • Circumstances: Reasons for agency of necessity.
      • Wife's desertion and financial need.
      • Protecting principal from loss (e.g., Great Northern Railway v Swaffield).
    • Conditions: Necessary criteria for agency of necessity.
      • True emergency (Phelps James & Co v Hill).
      • Agent entrusted with goods or property (Jebara v Ottoman Bank).
      • Section 167: Instructing principal is impossible (Springer v Great Western Rail).
      • Agent acting in good faith.
    • Effects: Consequences of acting under agency of necessity.

  • Section 190: Estoppel; Principal leads third party to believe a person is an agent.

    • Cases: Illustrative instances. -(e.g., Graphic Lines Pte Ltd v Chai Chee Mein, Freeman & Lockyer v Buckhurts Park Properties Ltd, Armaagas v Mundogas, The Ocean Frost).

Duty of an Agent

• Section 164: Obey principal's instructions (Trupin v Bilton).

• Section 164: Act reasonably if instructions are lacking.

• Section 165: Exercise care and diligence (Kerpel v Wheeler).

• Section 166: Render proper accounts (Lyell v Kennedy).

• Section 167: Communicate during emergency.

• Good faith and no conflicts of interest: Agent must act honestly and avoid conflicts.

  • Cannot be party to transaction with principal (Armstrong v Jackson).
  • Section 168: Principal refusal to pay for agent using own account without consent (Wong Mun Wai v Wong Tham Fatt).
  • Cannot act for two principals (Fulwood v Hurley).
  • Disclose all relevant information.
  • All profits belong to principal (Lyell v Kennedy, Section 169).

• No secret profits (Section 169): Agent cannot profit secretly (exceptions).

• Agent breaches duty remedies: Principal remedies.

  • Repudiation (Section 168): Canceling contract.
  • Recovery of bribe amount (Section 169): Receiving back money lost.
  • Refusal to pay agent's commission.
  • Dismissing agent's authority.
  • Suing both agent and briber.
  • Criminal charges (Anti-Corruption Act): Penalties for bribery.

• Agent payment/return (Sections 170, 171, 174): Agent obligations.

• Section 143: Agent cannot delegate authority (De Bussche v Alt, John McCann v Pow).

Duties of Principal Towards the Agent

• Pay commission (Sections 172, 173): Agent's compensation payment.
  • Section 173: Agent's compensation forfeiture for wrongdoing (e.g., Andrew's v Ramsay).
• Avoid preventing agent's commission.
  • Refuse or prevent a contract for this reason
  • Appointing another agent to do the same job
• Indemnify agent for liabilities and losses (Sections 175): Principal's compensation for agent's losses, (Hichens, Harrison, Woolston & Co v Jackson & Sons).
• Section 177: No principal liability for criminal acts of an agent.
  • Section 176: Agent causing harm to a third party.
  • Section 178: Agent suffering damage.

Termination of Agency

• Termination by parties: mutual agreement (agreement), revocation (principal), agent resignation.
• Termination by law:
  • Performance of contract.
  • Expiration of time period.
  • Death or insanity of principal or agent (Sections 154, 155, 161, 162).
  • Bankruptcy or insolvency.
  • Occurrence of an event.