CONTRACT OF AGENCY

.The law of agency is based on a relationship between principle (P) and agent (A)
.Principle and agent there is an agreement, actual relationship
.There is a contract, when somebody employs an agent, there is a contract of agency

.Q: What is contract of agency?
.A: Contract of agency is a contract whereby a contract known as principle appoints another known as agent to react on behalf of principle in return for payment known as commission. The agreement between principle and agent is a contract of agency

.Reason for appoint agent
1) time
2) skills and expertise
3) own way to expand business
4) allow principle to extend his business beyond physical limit
5) remain secrecy, confidentiality of identity

.The role of agent to bring the third party and principle together.
.When agent is appointed, agent is appointed with:
1. General power – agent will do everything on behalf of principle
2. Specific power – sometime agent appoint with specific power, agent in real estate, agent appoint to sell a house, so, the agent power is selling a house (very limited, general and specific power)

.The power is given to agent known as scope of the power
.As long as agent acts between the scopes of his power, the principle is liable and bound by the option by the agent.
.If the agent act intra-vires (within his power), the principle will be bound
.If the agent act ultra-vires (outside his power), then principle will not be bound or liable
The agent will have to assume personal liability

.How do we create an agent?
The relationship of agency may arise in any of these four ways:
1) expresses appointment
2) implied appointment
3) necessity
4) ratification

Expressed Appointment
principle express to agent to appoint him as an agent


Implied Appointment
3 ways:
a. Common law
b. Doctrine of estoppel
c. Section 7 partnership act

a) Common law
- under common law, wife still stay with her husband is consider as an agent of the husband (implied agent)
- She can buy goods and necessity by using the husband credit or money
- The husband will bound by what his wife buy
- This rule will not apply if:
i) the wife is given sufficient allowance
ii) if the husband has instructed to retailer or shop not to give credit to his wife
iii) If the expenditure is far exceed what is reasonable and unparticular and if it not commensurate with the husband income

b) Doctrine of estoppel
- the oldest doctrine in English law
- most widely use doctrine
- When somebody create impression
i. that something is true and the other person belief
ii. that impression and act on it
iii. then that person creating that impression (who exerts) will stop by the law from deny that impression (exertion)


Agent by ways of necessity
- An agent must been given a task to do
- In process to perform a task, he come across problem, and the issue is so stressing that he need to take an agent step in order to protect his principle interest and the step he has taken is an unauthorized action (ultra-vires).
- The way for the agent to avoid the liability is by claiming necessity
- Example:
i. Abu appoint KTM to send vegetables from Penang to Singapore
ii. The journey delay about 3 to 4 days due to flood
iii. KTM took immediate steps to sell the vege in Ipoh for lower price
iv. Original role : transport agent
v. In Ipoh: sales agent
vi. The principal suffer lost because the vege were sold at lower price
vii. The principal sue agent for the losses
viii. The act of selling is cover by necessity, if successful in establishing necessity, the scope of KTM is enlarge from transport agent to sales agent
ix. If the person can prove that the commission of the act was done by way of necessity, he will escape of personal liability

Three conditions must comply in order for necessity to be successful?
1) The agent must have attended or try to communicate with the principle for further instruction but somehow was unable to get the principle
2) The agent must have taken in good faith to prevent further lose to the principle or to mitigate or to lesser the potential loss to the principle
3) There must a situation of commercial agency

Case:
Great Northern Railway v Swaffield
- GNR is an agent to transport horse by train from one place to another
- When arrived destination, no one came to claim the horse
- The company decided to keep the horse at a special place
- The next day, the owner come and collect the horse
- The Company gives 2 bills to him, bill on transportation and bill to keep the horse
- The owner refuse to pay the second bill
- Court: Principle has to pay the bill because 3 condition apply
i) the company had tried to communicate with principle for further instruction
ii) the action taken to prevent further losses to the principle
iii) situation of commercial agency

Springer v GW Railway
- Consignment of tomato from one place to another
- The journey postpone because of strike
- Due to his GWR reload the tomatoes and sell it at lower price
- Springer claims of lose of profits against GWR
- GWR could not claim necessity because GWR did not inform the principle of the situation
-

Agent by way of ratification
- ratify means an act of legalizing a previous action which was originally unlawful
- Conditions:
- Conditions:
i. Before ratification, the agent must act ultra-vires
ii. The principle must have full information about the act which need to clarify
iii. The agent must have acted on behalf and in the name of principle

Case:
Keighley Maxted v Durant
- did not brought the name of the principle
- the principle could not ratify the action

iv. There must be competence principle at the time the ultra-vires act was done and at the time it was to be ratify

Case:
Kelner v Baxter
- A company was about incorporated
- While waiting, the promoter bought the hotel on behalf of the company
- The agent act –ultra vires
- When the company finally incorporated, the company ratifies it
- Court: - This was impossible because the act was done
- there was no principle (the principle does not incorporated yet)


v. Ratification must not injure the interest of the 3rd party