Contract Act 1950: Formation of Agency

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Questions and Answers

What is the primary requirement for a person to be appointed as a principal under Section 136 of the Contract Act 1950?

They must be registered with the relevant authorities.

They must be a resident of Malaysia.

They must be of sound mind and of the age of majority. (correct)

They must have a minimum level of education.

What does the case of Chai Yin Tee v William Jacks & Co Malaya Ltd_ illustrate regarding the formation of an agency?

An agent can be appointed even if they are not of sound mind.

The principal is not liable for the acts of a minor agent if they make a mistake.

A minor cannot be appointed as an agent.

The principal will be liable for the acts of a minor agent, even if the agent makes a mistake. (correct)

According to Section 149 of the Contract Act 1950, what is ratification in the context of agency?

When a principal gives prior authorization to the agent to act on their behalf.

When a principal retrospectively approves an unauthorized act by the agent. (correct)

When an agent acts beyond the scope of their authority.

When an agent is appointed by a court of law to act on behalf of a principal.

Which of the following CANNOT be considered a condition for ratification to be valid under Section 150?

The principal must ratify the entire contract, not just parts of it. (A) Signup and view all the answers

In which situation does the principle of agency by necessity arise?

When an agent acts without authority in an emergency to prevent losses for the principal. (B) Signup and view all the answers

Which of the following legal principles is demonstrated by the case of Freeman & Lockyer v Buckhurst Park Properties Ltd?

Estoppel by representation (D) Signup and view all the answers

Under Section 164 of the Contract Act 1950, what is the primary duty of an agent to their principal?

To obey the instructions of the principal, unless they are illegal or impossible to perform. (C) Signup and view all the answers

Which of the following situations would fall under the principle of agency by estoppel?

A person holds themselves out as an agent for another, and the other person does not take any action to stop them. (D) Signup and view all the answers

Which of the following is NOT a remedy available to a principal when their agent makes a secret profit?

The principal may appoint another agent to do the same work. (D) Signup and view all the answers

Which of the following sections outlines the duty of an agent to act in good faith and avoid conflicts of interest?

SECTION 167 (D) Signup and view all the answers

What happens when an agent is found guilty of acting in breach of their duty to the principal?

The agent may lose their right to claim commission. (B) Signup and view all the answers

According to the content, which of these is a scenario where the principal is NOT obligated to indemnify the agent for losses?

The principal employs the agent to carry out an illegal act, leading to the agent's losses. (C) Signup and view all the answers

Which of the following is a legal principle in the context of agency that dictates that an agent cannot delegate their authority to another person?

SECTION 143 (A) Signup and view all the answers

Which of the following is NOT a way an agency can be terminated by the act of the parties?

By the occurrence of a specific event mentioned in the contract. (C) Signup and view all the answers

Which section outlines the termination of an agency due to the death of the principal or agent?

SECTION 154 (B) Signup and view all the answers

Which section outlines the duty of the principal to pay a commission to the agent?

SECTION 172 (A) Signup and view all the answers

Study Notes

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.

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Description

This quiz focuses on the principles of agency as defined in the Contract Act 1950, particularly Sections 135 to 138. It covers the qualifications of agents and principals, along with conditions for agency creation, including express and implied appointments. Case studies such as Chai Yin Tee v William Jacks & Co Malaya Ltd are also discussed to illustrate these concepts.