Business Law

BUSINESS LAW

LAW OF AGENCY

TEH JIA YEE 18DAT21F1038

Introduction

Agency is the relationship that subsists between the

principal and agent, where the agent has been authorized

to act for the principal or represent him in dealing with

others/ 3rd party.

ABOUT ME

S.135 CA-
Agent is a person employed to do any act

for another in dealing with third person
S.135 CA-
Principal is the person to whom such act is

done or who is so represented.

For e.g. If Ali appoints Muthu to buy some goods on

his behalf, Ali is called the principal while Muthu is

his agent. The seller of the. goods is called as third

person.

BUSINESS LAW

PARTIES TO AGENCY

1.THE CREATION OF AGENCY INVOLVES THREE PARTIES

The principal who passes the authority to act to the agent .
The agent who in turn with this authority affects the legal relations of

the principal with a third party.
Third party

MODES OF CREATION

1.EXPRESS APPOINMENT

Section 139 CA:
“The authority of an agent may be expressed or implied”
Section 140 CA:
“ An authority is said to be EXPRESS when it is given by words spoken

or written .”
(Express = verbally/ writing).
i.e. Power of Attorney- that is created by the authorization by the client

given to the solicitor to act on his behalf.

2.IMPLIED APPOINMENT

S.140 CA:
“...an authority said to be implied when it is to be inferred from the
circumstances of the case...”

Circumstances of the Case
Relationship between Husband & Wife
The Partnership Act 1961

3.NECESSITY OR EMERGENCY

Where an agent can be appointed during an emergency even in the very

beginning the agent is not appointed by the Principal to act on his behalf.

An agency by necessity may be created if the following conditions are met;
a) There must be a real & actual emergency
b) The agent’s action is necessary to prevent loss to the principal or the

agent was entrusted with the Principal’s property/ goods.
c) It is impossible for the agent to get the principal’s instruction at that time
d) The agent acted in good faith.

MODES OF CREATION

4. RATIFICATION

Certification/ acceptance by the Principal for an act done without authority or

exceeding the authority given.
2 situations:

when an agent who was appointed has exceeded his given authority
when a person, who has no authority to act for the principal has acted as he

has authority to act so
The Principal has a choice either to REJECT or ACCEPT the contract that was

made on their behalf of him. If he accepts and confirms with the contract, that

means that HE RATIFIES the said contract.

Can be either EXPRESS OR IMPLIED.
S. 150 of CA, 1950:
“ Ratification may be expressed or may be implied…”
As a result, agency by ratification exists between Principal and Agent.
S. 149 of CA, 1950
“ where acts done by one person on behalf of another but without his

knowledge or authority, he may elect to ratify of to disown the acts.
If he ratifies, the same effects will follow as if they had been performed by

his authority”
However, if the Principal does not agree, NO AGENCY RELATIONSHIP exists

and the Principal would not be liable upon such contracts.

5. ESTOPPLE

Generally, a person (Principal ) is not bound by a contract made on his behalf

without his authority.
For an agency by estoppel,
is when a Principal who by conduct or words allows a third party to believe

that the agent is acting on his behalf.
He is estopped (stop) or restrained from denying that the agent is working on

his behalf.

SUMMARY

Agency by Estoppel only happen
if the Principal himself through

his own words or conduct induce
d the 3rd party to believe that a


certain person having authority to act on his behalf.



It does not happen if the 3rd party was induced by the agent

only.



BUSINESS LAW