Sample ON HOW TO Answer A Problematic Question ON LAW OF Agency LAW240 TUTO W8 PDF

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SAMPLE ON HOW TO ANSWER A PROBLEMATIC QUESTION ON LAW OF AGENCYQUESTION ONEAllan was instructed by his employer, Tan to carry a consignment of fruits and vegetablesfrom Cameron Highland to Penang. The lorry that he was driving was badly damaged whenit was involved in a road accident near Butterworth...

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SAMPLE ON HOW TO ANSWER A PROBLEMATIC QUESTION ON LAW OF AGENCY QUESTION ONE Allan was instructed by his employer, Tan to carry a consignment of fruits and vegetables from Cameron Highland to Penang. The lorry that he was driving was badly damaged when it was involved in a road accident near Butterworth. Since he needs to wait for two days for the lorry to be repaired, Allan sold the fruits and vegetables for half of its price. When Tan discovered what had happened he refused to accept the action taken by Allan and he wants to claims the loss against Allan. Advise Tan. I SSUE: Wh e t h e rAl l a ni sl i a b l ef o rt h el o s ss u ff e r e db yT a n ? PRI NCI PL EOFL AW: Se c t i o n1 4 2CA1 9 5 0: Ap e r s o nc a nb e c o mea na g e n t b yn e c e s s i t ywi t h o u t f o r ma l a p p o i n t me n t b yt h e Pr i n c i p a l i ne me r g e n c ys i t u a t i o n . Ho we v e r , ac o n t r a c t u a l r e l a t i o n s h i pmu s ta l r e a d ye x i s t b e t we e nt h e m. I nt h i ss i t u a t i o n ,a g e n th a sa na u t h o r i t yt ou s eh i so wnd i s c r e t i o nt os a f e g u a r dt h ei n t e r e s to fh i s p r i n c i p a l . Gr e a tNo r t h e r nRa i l wa yCo mp a n yvSwa ffie l d T h ep r i n c i p a l /d e f e n d a n ti n s t r u c t e dt h ea g e n t( t h et r a n s p o r t a t i o nc o mp a n y )t oc a r r yh o r s et oac e r t a i n d e s t i n a t i o n . Wh e nt h et r a i na r r i v e da tt h ed e s t i n a t i o n , n ob o d yt o o kt h eh o r s e .T h es t a t i o nma s t e rk e p t t h eh o r s ei nt h es t a b l e .T h eh o r s e ss t a y e do v e rn i g h ti nt h es t a b l e .T h ep r i n c i p a lr e f u s e dt op a y /b e a r t h ec o s ta n dc h a r g e so ft h eh o r s e ,wh e nt h ea g e n tc l a i me df o rh i m.T h ec o u r th e l dt h a tt h es t a t i o n ma s t e rh a sa c t e da sa na g e n t b yn e c e s s i t y . T h ep r i n c i p a l wa sb o u n dt op a y . I no r d e rt oc r e a t ea na g e n c yb yn e c e s s i t y , t h ef o l l o wi n gc o n d i t i o n smu s t b ef u l fi l l e d . i )

i t i si mp o s s i b l ef o r t h ea g e n t t oc o mmu n i c a t ea n dg e t i n s t r u c t i o nf r o mt h ep r i n c i p a l

Ag e n tmu s tu s ea l lr e a s o n a b l ed i l i g e n c et oc o mmu n i c a t et og e ti n s t r u c t i o nf r o mt h ePr i n c i p a li fi ti s p o s s i b l et od os o .I fh ef a i l st oc o mmu n i c a t e ,t h e nh ec a nu s eh i so wnj u d g me n t /d e c i s i o ni no r d e rt o a c t .I f h ed o e sn o t t r yt oc o mmu n i c a t e , h ewi l l b ep e r s o n a l l yl i a b l e . Spr i nge rvGr e a t We s t e r nRa i l wa yCo T h ep r i n c i p a l i n s t r u c t e dt h ec o mp a n y( a g e n t )t ob r i n gt o ma t o e sf r o mJ e r s e yt oL o n d o n . Wh e nt h et r a i n a r r i v e da t Po r tWe y mo u t h ,t h e r ewa sas t r i k e . T h ea g e n t s o l dt o ma t o e swi t h o u ti n f o r mi n gt h ep r i n c i p a l . T h ec o u r t h e l dt h a t n oa g e n c yb yn e c e s s i t ya r o s e . Ag e n t i sl i a b l ef o rt h el o s s e sb e c a u s ei nt h i sc a s ei t wa sp o s s i b l ef o rt h ea g e n t t oc o mmu n i c a t ewi t ht h ePr i n c i p a l t og e t f u r t h e ri n s t r u c t i o n . Th ea g e n t h a st o p a yd a ma g e s / c o mp e n s a t i o nt ot h ep r i n c i p a l f o r t h el o s s e ss u ff e r e db yh i m.

Ag e n t ’ sa c t i o ni sn e c e s s a r yt op r e v e n tl o s st ot h ep r i n c i p a l .The agent can use his own

ii)

discretion only in the case of real urgency and not because of it is inconvenience to the agent.

i i i )

T h ea g e n t mu s t a c t i ng o o df a i t hi no r d e rt op r o t e c t t h ei n t e r e s t o f t h ep r i n c i p a l , n o t f o rp e r s o n a l i n t e r e s t .

APPLI CAT I ON -

T h e r ewa sac o n t r a c t t od e l i v e rf r u i t sa n dv e g e t a b l e sb e t we e na l l a na n dT a n . Ac c o r d i n gt os e c t i o n1 4 2: Al l a nc a nb ea g e n c yb yn e c e s s i t ywi t h o u t f o r ma l a p p o i n t me n tf r o m T a ni ne me r g e n c yc a s et os a f e g u a r dT a n ’ si n t e r e s t . Al l t h r e ec o n d i t i o n smu s t b ef u l fi l l e db yAl l a n . F i r s t , i t i si mp o s s i b l et oAl l a nt oc o mmu n i c a t ea n d g e ti n s t r u c t i o nf r o mT a n . Ap p l y i n gt h ec a s eo fSp r i n g e rvGWRC :Al l a nwi l lb el i a b l ep e r s o n a l l yb e c a u s ef a i l st o c o mmu n i c a t ewi t hT a n . Hed i dn o t t r yt oc o mmu n i c a t et og e t f u r t h e r i n s t r u c t i o nf r o mT a n . n d 2– Al l a ns o l dt h eg o o d st op r e v e n t l o s s r d 3 –Al l a na c t i ng o o df a i t hi no r d e r t op r o t e c t T a n ’ si n t e r e s t . T h e r ewa sn oa g e n c yb yn e c e s s i t yb e c a u s eAl l a ns o l da l lt h eg o o d swi t h o u tt r y i n gt o c o mmu n i c a t ewi t hT a nwh e ni t i sp o s s i b l et od os o . So , Al l a ni sl i a b l et ot h el o s ss u ff e r e db yT a n . T a nh a sar i g h t t oc l a i mt h ec o mp e n s a t i o n .

CONCL USI ON Al l a nl i a b l et ot h el o s ss u ff e r e db yT a nb e c a u s en oa g e n c yb yn e c e s s i t yi nt h i ss i t u a t i o n . QUESTION TWO Zain was authorized by Annuar to buy a lorry for his business which does not exceed RM 100,000. Later, Zain went to Chong motors Sdn Bhd and ordered a lorry costing RM150,000. A week later, Chong Motor delivered the lorry to Mr. Annuar. Mr. Annuar came to seek your advice. Advise him. I SSUE: Wh e t h e rZ a i ni sl i a b l ef o rt h el o s ss u ff e r e db yMr . An n u a r ? PRI NCI PL EOFLAW: Se c t i o n1 4 9: Ag e n c yb yr a t i fi c a t i o nc a na r i s ei nt wos i t u a t i o n s :

1 .i f t h ea g e n t wh owa sa p p o i n t e d( a n dg i v e na u t h o r i t y )h a da c t e db e y o n d( e x c e e d )t h ea u t h o r i t y ; o r 2 .i f ap e r s o n , wi t h o u t a na u t h o r i t yt oa c t ( n e v e rb e e na p p o i n t e da sa na g e n t ) , b u t a c t e dh a sa c t e d a si f h eh a st h ea u t h o r i t y I f t h ea b o v es i t u a t i o nh a p p e n( e i t h e r o n e ) , t h ep r i n c i p a l h a st wor i g h t s , a c c o r d i n gt os e c t i o n1 4 9 ; i )

h ec a nr e j e c t / r e f u s et oa c c e p t t h ec o n t r a c t , o r

i i )

h ec a na c c e p t t h ec o n t r a c t

I fh er e f u s e st oa c c e p tt h ea c t ,t h ea g e n t /t h ep e r s o nwh od o e sn o th a v ea u t h o r i t ywi l lb ep e r s o n a l l y l i a b l e . Ont h eo t h e rh a n d , i f h ec h o o s e st oa c c e p t t h ec o n t r a c t , t h ep r i n c i p a l i sc o n s i d e r e da s“ h a sr a t i fi e d ”t h e s a i da c t ( t h ea c td o n ewi t h o u th i sa u t h o r i t y ) .T h er e s u l ti st h a th ewi l l b er e s p o n s i b l ea n dl i a b l ef o rt h e a c t , a si f t h ea c t h a sb e e nd o n ewi t hh i sa u t h o r i t y . I ft h ep r i n c i p a lh a sr a t i fi e dt h ea c t ,t h ea g e n ti sc a l l e da na g e n tb yr a t i fi c a t i o n .T h er a t i fi c a t i o nc a nb e e x p r e s s e do ri mp l i e d ,a ss t a t e di ns e c t i o n1 5 0 .T h ee ff e c to fr a t i fi c a t i o ni st or e n d e rt h ec o n t r a c ta s b i n d i n go nt h ep r i n c i p a l a si f t h ea g e n t h a db e e np r o p e r l ya u t h o r i z e dt od ot h es a i da c t . T h el i a b i l i t yo f t h ep r i n c i p a l wi l l s t a r t f r o mt h ed a t et h ec o n t r a c t i se n t e r e di n t o , n o t f r o mt h ed a t ewh e r eh er a t i fi e dt h e c o n t r a c t . Ho we v e r , b e f o r et h ep r i n c i p a l r a t i fi e st h ec o n t r a c t , 8c o n d i t i o n smu s t b ef u l fi l l e d : 1 )t h ea c t mu s t b eu na u t h o r i z e d( n oa u t h o r i t yt oa c t ) 2 )t h eu n a u t h o r i z e da c t mu s t b er e c o g n i z e db yl a w 3 )t h ea g e n t a c t e do nb e h a l f o f t h ep r i n c i p a l ( n o t o nh i so wnn a me ) . Hemu s t n o t a l l o wt h et h i r dp a r t y t ot h i n kt h a t h ei st h ep r i n c i p a l . I nt h ec a s eo f Ke i g h l e yMa x t e dvDu r a nt , t h ep r i n c i p a l i n s t r u c t e dt h ea g e n t t ob u yfl o u r f r o mt h es e l l e r , f o rc e r t a i np r i c e .T h ea g e n t , h o we v e r ,h a de n t e r e di n t oac o n t r a c tt ob u yfl o u rwi t hh i g h e rp r i c e ,o nh i s o wnn a me . T h ec o u r t h e l dt h a t t h ep r i n c i p a l c o u l dn o t r a t i f yt h ec o n t r a c t b e c a u s et h ea g e n t e n t e r e di n t o ac o n t r a c t o nh i so wnn a me( me a n i n gt h a t t h ec o n t r a c t i sf o r h i ms e l f ) . 4 )Th ep r i n c i p a l mu s t b ei ne x i s t e n c ea n dh a sc o n t r a c t u a l c a p a c i t y , wh e nt h ec o n t r a c t i sma d ea n da t t h et i meo f t h er a t i fi c a t i o n . I nt h ec a s eo fKe l n e rxBa x t e r , t h ec o n t r a c t wa se n t e r e di n t oo nb e h a l f o f t h ec o mp a n ywh i c hwa sn o t f o r me dy e t . T h ec o u r t h e l dt h a t t h ec o n t r a c t wa si n v a l i d . 5 )Ac c o r d i n gt os e c t i o n1 5 1 ,t h ep r i n c i p a lmu s th a v ek n o wl e d g ea b o u tt h ema t e r i a lf a c t so ft h e c o n t r a c t i no r d e r t or a t i f yi t . I nt h ec a s eo fMa r s hvJ o s e p h, t h ec o u r th e l dt h a t t h er a t i fi c a t i o nwa sv o i db e c a u s et h ep r i n c i p a l wa s n o t a wa r eo f t h ec o n t r a c t a t t h et i mewh e ni t wa sma d e .

6 )Ac c o r d i n gt os e c t i o n1 5 2 , t h ep r i n c i p a l mu s t r a t i f yt h ewh o l ec o n t r a c t . 7 )Ra t i fi c a t i o nmu s t b ed o n ewi t h i nar e a s o n a b l et i me . 8 )Ac c o r d i n gt os e c t i o n1 5 3 , r a t i fi c a t i o nmu s t n o t c a u s ei n j u r yt h et h i r dp a r t y . APPLI CAT I ON I nt h i ss i t u a t i o n ,Z a i ni st h ea g e n ta n dMrAn n u a ri st h ep r i n c i p a l .Bya p p l y i n gs e c t i o n1 4 9 ,Z a i nh a s e x c e e d e dh i sa u t h o r i t yb yp u r c h a s eal o r r yf o rRM1 5 0 , 0 0 0 wh i c he x c e e dt h ea u t h o r i t yg i v e nb yMr . An n u a r . Mr . An n u a rh a sac h o i c ee i t h e rt od e n yt h ep u r c h a s eo r r a t i f yi t b yf u l fi l l i n g8c o n d i t i o n s( Ap p l y ) . I f MrAn n u a ra g r e e st ot h ep u r c h a s ema d eb yz a i n , a l t h o u g hh ewi l l h a v et op a ye x t r a , h ema yr a t i f yi t . I fMrAn n u a rr a t i f y ,h ewi l l b el i a b l ef o rt h ep u r c h a s eb u ti fh ed o e sn o t r a t i f y ,z a i n wi l l b ep e r s o n a l l y l i a b l et op a yt h ep r i c eo f t h el o r r yt oCh o n gMo t o r sSd nBh d . . CONCL USI ON Mr Annuar can ratify or deny the purchase. QUESTION THREE

Madam Noor instructed her agent Man to manage a construction of her bungalow in Dungun. Madam Noor promised to pay Man RM30,000 as a commission. Unknown to Madam Noor, Man also received RM10,000 from Chan Construction, a contractor who build the house. Madam Noor discovered about this and seeks your advice on her rights. Advise Madam Noor. Issue : whether Man has breached his duty as an agent because he has received secret profit from Chan Construction? Principles: According to section 169 CA 1950, an agent cannot make secret profit, while dealing with the transaction on behalf of his principal. Secret profit means extra payment, secret commission or financial advantage. If the agent had made secret profit and the principal knows and consents, the agent can keep the amount/ benefit as it is no more secret. However, if the principal does not agree, he can take these actions: i) repudiate the contract between the agent and the third party ii)

recover the amount of secret profit

iii)

refuse to pay commission to the agent

iv)

dismiss the agent/ terminate the contract of agency on the reason of breach of duty

v)

sue the agent and claim damages for the loss suffered

vi)

initiate criminal action against the agent and/ or third party under Anti Corruption Act 1997.

Mahesan v Government Officers Cooperative Society, The principal (company) instructed the agent (director) to buy a piece of land. The agent found the seller who wanted to sell the land to the company for RM944,000. The seller gave a bribe to the agent RM122,000. The court held that the company can claim the payment given by the third party to the agent.

Boston Deep Sea-Fishing & Ice Co v Ansell, The company instructed the director (agent) to enter into certain contract relating to the building of boats for fishing. The director had entered into a contract with the manufacturer, in which he got commission out of the project. Apart from that, the agent also had entered into a contract with fish supplier and ice supplier, two companies, which he was a shareholder. The court held that the director had breached his duty by putting himself in conflict between his personal interest and the interest of the company. Action can be taken against the director. Application In this situation, Madam Noor is the principal and Man is her agent. Applying section 169, as an agent, Man cannot receive secret profit. Since man did not disclose to Madam Noor that he has received RM10,000 from Chan Construction, it shows that he has breached his duty as an agent by keeping RM 10,000 as a secret profit. Thus, if madam Noor does not agree, she has a choice either to recover the money from Man as in Mahesan’s case, or refuse to pay RM 30,000 commission to Man, dismiss Man as her agent, or to sue Man or Man and Chan for the loss. Madam Noor also can file criminal breach of trust against Man or Man and Chan. Conclusion Man has breached his duty as an agent to Madam Noor. Thus, madam Noor can take any legal action if he does not consent man to accept secret profit.

TRY THIS EXERCISE ! Question 1 1.a) An agency is a contractual relationship between a principal and an agent whereby each party owes a duty to the other. With reference to the relevant statutory provisions and cases, explain the main duties of a principal towards his agent.

b)Melor instructed Malim, who operated a warehousing service to store 100 sacks of onions, which belonged to her in Malim’s warehouse until she could find a buyer for them i.e. the said onions. Three days later, Malim discovered that the onions were beginning to rot and were likely to contaminate the other perishable goods kept in the warehouse. He tried to contact Melor but was informed that she was out of town and could not be reached. Malim later sold the onions to Pak Malau at below market price. Melor is frustrated with the decision made by Malim and wishes to sue him for her losses. Advise Melor.

Question 2 2.a) With reference to the Contracts Act 1950 and relevant decided cases, explain the effects of contracts made by agent.

b)Encik Suria had been appointed by Petra Bhd as an agent to purchase computers. He was told by Petra Bhd that he can purchase the computers from any supplier he wishes but the amount must not exceed RM150,000. However, Encik Suria exceeded his authority by purchasing the computers from Zul Enterprise which costs RM200,000. The supplier then claimed the payment from Petra Bhd as the principal to Encik Suria. Advise Petra Berhad.

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