CREATION OF AGENCY
1. By Estoppel (Holding Out) (3rd Party)
• If principal by his words PRINCIPAL
• Causes 3rd party to believe
• That A is his agent (when A is not)
• And 3rd party rely on it A 3RD PARTY
• So principal is prohibited to deny existence of A’s
authority
• Requirement:
i. Representation by principal to 3rd party
ii. Reliance by 3rd party of representation
iii. Loss suffered by 3rd party
2. By Ratification (Exceeded) (No Authority)
• Ratification can rise:
 An agent who has duly appointed has exceeded his
authority OR
 Person who has no authority but acted as he has
authority
• Requirement:
i. Act/contract must be unauthorized
ii. Unauthorized act must be recognized by law
iii. Agent must at the time of contract
iv. Ratification must be made within reasonable time
v. Ratification must not injure 3rd party
3. By Necessity (Emergency)
• Agent has authority in emergency
• Purposes: to protect his principal from loss
• Requirement:
i. Get principal’s instruction
ii. Real & actual emergency
iii. Agent acted in good faith
iv. Prevent loss to principal with respect to goods
4. Implied appointment by principal
5. Expressed appointment by principal
DUTIES OF AGENT TO HIS PRINCIPAL
1. S164 Obey principal’s instruction
• Agent must act according to the direction given by
principal
• If no direction, follow custom order
• Agent must only obey lawful instruction of principal
• In Bostock v Jardine, the court held that the agent was
liable as agent bought more than as directed by
principal.
2. S165 Exercise care and diligence and use skill
• Agent must act with reasonable diligence and use
skill he has
3. Not to delegate his authority
• “ Delegatus Non Potest Delegare” : agent CANNOT
employ another party to do his duty UNLESS when
principal approved the delegation
• Agent cannot delegate his duty to other EXCEPT
 In case of unforeseen emergency
 Custom of trade permit delegation
 Act involve is clerical and ministerial
4. S166 Render proper account where required
5. Pay to his principal all sums received
6. Communicate with principal
7. Not to disclose confidential information
8. Not to make any secret profit out of his duty
9. Not to let his own interest conflict with his duty
SECRET PROFIT
• Any advantages received by agent from 3rd
party out his performance towards his principal
REMEDIES TO PRINCIPAL IF
AGENT MAKE SECRET PROFIT
• Repudiate contract
• Recover amount of bribe from agent
• Refuse to pay agent his commission
• May dismiss agent for breach of duty
• May sue agent
• May bring the case under criminal law
DUTIES OF PRINCIPAL TO HIS AGENT
1. Pay agent commission
• Pay remuneration to his agent for services rendered
within the authority
2. Indemnify agent for acts done
• Against the consequence of all lawful acts done in
good faith
• Situation:
 Agent incurred losses in performance of contract
 Agent cause injury to 3rd party in execution of his
authority
 Agent suffer injury during cause of his duty
3. Compensate agent for injury due to principal
neglect
TERMINATION OF AGENCY
1. By Operation Of Law
• Upon death of principal/agent
 Effective when agent notice of principal death
 Agent must take all reasonable steps
• When principal/agent become insane
 Unsoundness of mind person is not capable to
enter into valid contract
• When principal/agent become bankrupt
• Completion of agency
• Expiry of fixed period
• Agency unlawful/illegal
2. By Conduct of Parties (Mutual Consent)
• Principal may revoke authority before authority
been exercised
 Cannot revoked without goods reason
• Renunciation by agent:
 Give reasonable notice
 Only with goods reason