Contract Act 1950: Formation of Agency

Formation of Agency

• Contract Act 1950, Section 135: Defines an agent and a principal.
• Section 136: Outlines principal qualifications (sound mind, legal age).
• Section 137: Explains agent qualifications (can be a minor, principal liable for minor agent's mistakes).
  • Chai Yin Tee v William Jacks & Co Malaya Ltd: Relevant case regarding agent qualifications.
• Section 138: Conditions for creating an agency.
  • Section 140 (Express Appointment): Clearly defined appointment.
  • Section 140 (Implied Appointment): Appointment through circumstances.
    • Circumstances: Appointment through situational cues.
    • Spousal relations (Wives and husbands): Implications for agency in marital settings.
    • Partnership Act 1961, Section 7: Links agency to partnership formation.
      • Chai Yin Tee v William Jacks & Co Malaya Ltd: Relevant case in relation to partnerships and implied agency.
  • Section 149 (Ratification): Retroactive acceptance of an agent's actions.
    • Two situations: Circumstances where ratification applies.
    • Section 150 (Express or Implied): Ratification can be explicit or implied.
    • Effects of ratification: Outcomes and implications of ratification.
    • Conditions for Valid Ratification:
      • Authority, exceeding authority: Necessary conditions for valid ratification.
      • Legal (Brook v Hook): Legal aspects of ratification.
      • Agent's declaration as agent (Keighley Maxted & Co v Durant): Agent's must represent themselves as agent when acting on behalf of a principle. .
      • Principal's existence at the contract time (Kelner v Baxter): The principle must have existed at the time of the contract between agent and third party.
      • Principal's capacity: Principal must be legally capable of contracting.
      • Section 151 (Principal's awareness): Principal's full knowledge of the contract. (Marsh v Joseph).
      • Section 152 (Ratification of entire contract): Principal must ratify the whole contract, not parts of it.
      • Reasonable Time (Metropolitan Asylum Board v Kingham & Sons, Grover & Grover v Matthews): Ratification must be prompt.
      • Section 153 (No harm to third parties): Ratification cannot harm third parties.
  • Section 142 (Agency of Necessity): Agency created due to circumstances.
    • Emergencies: Reasons for agency of necessity.
      • Desperate actions: Agent's actions in dire situations.
      • Great Northern Railway v Swaffield: Specific case involving agency of necessity.
    • Conditions:
      • Real & actual emergency (Phelps James & Co v Hill): Importance of real-life emergencies.
      • Agent's responsibility for assets (Jebara v Ottoman Bank): Agent's responsibilities for goods held in trust.
      • Section 167 (Impossibility of instructions): Principal's inaccessibility due to extraordinary circumstances.
      • Springs v Great Western Rail. Case relevant to the impracticality of contact.
    • Effects
  • Section 190 (Estoppel): Principal's actions creating the belief of an agent's authority
    • Examples (Graphic Lines Pte Ltd v Chai Chee Mein, Freeman & Lockyer v Buckhurts Park Properties Ltd, Armaigas v Mundogas, The Ocean Frost): Relevant court cases.

Duty of an Agent

• Section 164 (Obeying instructions/Acting appropriately): Agents must follow their principals' directions.
• Section 165 (Care & Diligence): Agent's duty to exercise due care. (Kerpel v Wheeler)
• Section 166 (Proper Account): Agents must properly account for transactions (Lye11 v Kennedy)
• Section 167 (Communication/Emergency): Agents must update principals with crucial information particularly during emergencies.  - Conflict of Interest: Agents cannot profit at the principle's expense.
• • Cannot be party to their principle's transaction (Armstrong v Jackson)
  • Cannot act on behalf of two principals (Fulwood v Hurley)
  • Must disclose everything relevant to the principle (section 169)
  • All profits must benefit the principal (Lye11 v Kennedy, section 169)
• Secret Profits (Section 2): Agent cannot make secret profits. With exceptions, in case the principle knows and consents to the profit.
  • Remedies: Principal Rights for breach of duty
    • Repudiate/Terminate Contract (Section 168): End the agreement.
    • Recover Bribes (Section 168): Legal recourse for bribes. (Tan Kiong Hwa v Andrew S.H. Chong)
    • Revoke Remuneration: Refusal to pay commission.
    • Dismiss Authority: Action to negate agent's authority.
    • Suing both Agent and 3rd Party: Collective action for misconduct.
    • Criminal Charges (Anti-Corruption Act, Section 11): Sanctions for corruption.
• Payments/Returns (Section 171, 170, 174) Agent’s obligation in relation to restitution/payment.
• Delegation (Section 143): Agents cannot delegate their authority.
  • Examples (De Bussche v Alt, John McCann v Pow): Relevant case examples.

Duties of Principal Towards the Agent

• Section 172: Payment Obligations of Principal to Agent
• Payment of Commission
  • Section 173: Conditions under which Agent is not entitled to remuneration following their breach. (Andrews v Ramsay)
  • Preventing Agent from earning Commission
    • Refusal of Agent’s contracts
    • Appointment of another agent for the same role.
• Section 175 (Indemnification): Principal's responsibility for agent's liabilities. (Hichens, Harrison, Woolston & Co v Jackson & Sons)
  • Section 177 (Liability for criminal acts): Principal not liable if agent performs a criminal act on principle's behalf.
    • *Liability under other circumstances (Kyall & Evatt v Lim Kim Keat, Section 176): Agents' liability for third party injuries.
    • Section 178 (Agency caused injury): Agent injured in the course of duty.

Termination of Agency

• Act of Parties: Agency termination by agreement
  • Mutual Consent
  • Revocation by Principal
  • Unilateral Action by Agent
• By Law
  • Performance (Section 154): Agency ends when contract is fulfilled.
  • Expiration: Fixed timeframe ends.
  • Death/Insanity (Section 154): Death, insanity of principal or agent. (Yong v Toynbee)
  • Bankruptcy/Insolvency: Principal or agent's financial struggles
  • By the occurrence of a specific event (Section 154): Circumstances determined the occurrence of a certain period.
  • Other sections (155, 161, 162): Relevant to various lawful circumstances of termination.