Agency Unlawful act of an Agent 1

(a) Describe the nature of a relationship between a banker and a customer in the context of an agency relationship. (5 marks)

(b) Bob engaged Jack to transport some mangrove trunks on his behalf, from Kalimantan into Malaysia and agreed to pay for all expenses related to the task. It is known to both parties that the mangrove trunks are stolen from Kalimantan. Jack, nevertheless, agreed to carry out the task due to the lucrative fee Bob is willing to pay him. On the way, the boat carrying the mangrove trunks was seized by the authorities. Jack was charged, found guilty and paid the fine. Jack wants to recover from Bob the amount of the fine he paid and his legal expenses in defending the charge.

Advise Jack. (6 marks)

(c) A contract of agency can be expressed or implied from certain circumstances and conduct of the parties. Describe three ways by which an agency relationship may arise. (5 marks)

(d) In relation to an agency relationship, distinguish between actual authority and apparent or ostensible authority. (4 marks)

(MIA QE 2012/3 Q3, 20 marks)


(b) This is a case of unlawful act by agent, and based on S.177, principal is not liable.

S.177 Non-liability of employer of agent to do a criminal act.
Where one person employs another to do an act which is criminal (burning of car), the employer is not liable to the agent, either upon an express or an implied promise, to indemnify him against the consequences of that act.

Therefore, Bob is not liable for Jack who was caught using stolen mangrove trucks from Kalimantan. Jack cannot resort to Bob for any damage he has sustained from carrying out the unlawful act, inclusive of the fine and the legal fees in defending the charge.

Similar case on Principal's indemnity to Agent who has engaged in unlawful act:

MIA QE 2011/3 Q4 - Raz and Bakar.

MIA QE 2012/9 Q2 - Bob and Steve.
MIA QE 2013/3 Q2 - Man and Parjo.
MIA QE 2014/3 Q1 - Mello and Ijan.
MIA QE 2014/9 Q2 - Messa and Jojo (more complicated)
MIA QE 2016/3 Q2 - Prinse and Ejan

Earlier posts.