Agency by necessity in an emergency


(a) N/A Sale of Goods Act, 1957.

(b) Describe the conditions that must be met for the creation of an agency by necessity. (5 marks)
(c) Give a summarized description of the duties of a principal to his agent. (5 marks)
(d) Amid authorizes Chan to sell his car since Chan is well connected in the used car market. Amid made an oral agreement with Chan to give him 10% of the proceeds of the sale of the car for whatever price it may fetch. Chan agrees to this arrangement and proceeded to find a buyer for Amid’s car. Later, Amid decided to revoke the authority given to Chan and sent an e-mail to Chan informing him of the revocation.
However, the internet service was down due to some natural disaster in the region and Chan never got the message. At about the same time, Chan managed to sell the car for RM100,000.
Advise Amid on the status of the revocation of the agency. (5 marks)
(MIA QE 2011/9 Q3, 20 marks)

(a) --- Not within Syllabus. ---

(b) Similar Question in MIA QE 2015 Q2c here.

Creation of agency by necessity is mentioned in S.142 of Contracts Act, 1950.

S.142 Agent's authority in an emergency.
'An agent has authority, in an emergency, to do such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances.'

[The key elements are:

  1. Cannot contact his principal in an emergency
  2. To protect his principal for loss
  3. Acted in good faith "bone fide" - prudent.

(c) Duties of a principal to his agent.

Earlier post on Responsibility of Principals and Agents D02 Law 2014 Q7 has similar answers.

However, based on Contracts Act, 1950 Sections below list out the duties of principal towards agent.

Principal's duty to Agent

S.175 Agent to be indemnified against consequences of lawful acts.

S.176 Agent to be indemnified against consequences of acts done in good faith.

S.177 Non-liability of employer of agent to do a criminal act.

S.178 Compensation to agent for injury caused by principal's neglect.

(d) Communication of revocation was the issue in this question. Chan was never informed of the revocation by Amid before he sold off his car. So, the revocation was invalid.

Refer earlier posts on Communication of revocation of contract here.

S.161 When termination of agent's authority takes effect as to agent, and as to third persons.
The termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards third persons, before it becomes known to them.

[In the case of Chan, he was in the impression that he had to look for a buyer, and never was in the slightest suspicion that he would be terminated. That termination of his appointment is a revocation of the promise that Amid has proposed to Chan - that a commission of 10% for the sale of his car.

Revocation is specified in S.4 S.5 and S.6 of Contracts Act, 1950.

Simply put:

A revocation is not valid unless it has been informed to the target acceptor.]

This is provided by S.4(3)(b) whereby the communication of a revocation is complete as against the person to whom it is made, when it comes to his knowledge.


S.5(2) An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

[Thus, in the above case, Chan was never informed of the revocation before he completed the sale of the car. This makes his contract valid. Amid's revocation has never reached Chan due to the problem with the Internet. It was only a revocation against himself (Amid) but not against Chan.

Unless Amid had called Chan before Chan sold his car that his revocation was earlier than the conclusion of the sale, thus able to stop Chan from performing his act.]

[x] Own account.