Agency Unlawful Act of an Agent 2

(a) State and explain three (3) ways by which an agency may arise. (3 marks)

(b) Briefly explain five (5) of the duties of an agent towards his principal. (5 marks)

(c) Distinguish between ‘apparent authority’ and ‘actual authority’ in relation to agents. (4 marks)

(d) Raz engaged Bakar to burn Ali’s car and agreed to indemnify Bakar against all consequences of the act. Acting upon this agreement, Bakar burnt Ali’s car. Ali successfully sued Bakar for damages amounting to RM5,000.00 which Bakar promptly paid. Bakar wants to recover from Raz the RM5,000.00 and his legal expenses incurred when defending the suit.

Advise Bakar whether he may succeed. (5 marks)

(e) State three (3) exceptions to the general principle that an agent cannot delegate the authority given to him by his principal. (3 marks)

(MIA QE 2011/3 Q4, 20 marks)

(a) Agency may arise in the following cases:

  1. S.139 By Express; or
  2. S.139 By Implied
  3. S.149 By Ratification
  4. S.142 By Necessity
  5. By Doctrine of estoppel or 'holding out' which is about Apparent or Ostensible Authority.

Refer earlier posts on this subjects:

Agency by necessity in an emergency
Agency creation and termination
Agency appointment of

Similar question was asked in:
MIA QE 2008/9 Q3 (a) with termination.
MIA QE 2009/3 Q3 (a)
MIA QE 2010/9 Q4 (e)
MIA QE 2012/9 Q2 (b)
MIA QE 2014/9 Q2 (a)
MIA QE 2015/3 Q2 (a)

(b) 5 duties of an agent towards his principal. See here for complete "Agent's Duty toward Principal CA50".

See below links Agent's Duty to Principal:
Agent's duties to Principal CA50, complete answer.
MIA QE 2008/3 Q3 (a) duties of an agent in an agency relationship.
MIA QE 2010/3 Q3 (a)(i) duties that the law imposes on an agent towards his principal.
MIA QE 2011/3 Q4 (b) 5 of the duties of an agent towards his principal.
MIA QE 2013/9 Q2 (d) 3 of the duties of an agent towards his principal by citing the corresponding statutory provisions.

S.164 - 174 specifies the duties of agent to his principal.

  1. S.164 - follows the direction and instruction given by principal, in its absence guided by common practice or custom of the local situation.
  2. S.165 - exhibits skill and diligence required of him as agent in the work assigned.
  3. S.167 - to communication with principal, to use all reasonable diligence in communicating with principal, and seek to obtain his instruction.
  4. S.166 - keep proper accounts for all monies handled and to produce such accounts, when required.
  5. S.171 - to pay all sums he received on behalf of the principal.
  6. S.143 - cannot delegate
Other duties which are not directly tied to the prospective duties of agents are the 'not to duties' or 'refrain from'
S.168 - Right of principal when agent deals, on his own account, in business of agency without principal's consent. To be read together with:
S.169 - Principal's right to benefit gained by agent dealing on his own account in business of agency.
  1. which, in summary, means that agents are not allowed to engage in business of conflicting interests, where there is any risk of maintaining his fiduciary duty to his principal, and disadvantage his principal.
  2. Confidentiality of the information, thus agent are not allow to divulge information to third party.
  3. Not to make secret money/profit.
  4. Not to delegate his duty, hence no sub-agent unless permitted by principal.
(c) Readings on apparent or ostensible authority refer to earlier posts below.

(d) This is a case in Contracts Act 1950 under "Principal's Duty to Agent" from S.175-178.

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, Raz is not liable to Bakar for Bakar burning Ali's car. Bakar cannot resort to Raz for any damage he has sustained from burning Ali's car, inclusive of RM5,000 and the legal fees.

Similar case on Principal's indemnity to Agent who has engaged in unlawful act:
MIA QE 2011/3 Q4 - Raz and Bakar.

(e) 3 exceptions to the general principle that an agent cannot delegate.

Similar posts are as below.

MIA QE 2011/3 Q4 (e)
MIA QE 2013/3 Q2 (a)
MIA QE 2013/9 Q2 (a)
MIA QE 2014/9 Q2 (b)(i)

MIA model answer:

Exceptions to the general principle that an agent cannot delegate authority given to him by his principal: Maxim: ‘delegatus non potest delegare’

(i) where the principal approves or consents to the delegation of authority;

(ii) where it is presumed from the conduct of the parties that the agent has the power to delegate his authority;

(iii) where the custom or practice of the trade or business permits delegation;

(iv) where the nature of the agency is such that delegation of the authority to another person is necessary to complete the business;

(v) In case of necessity or an unforeseen emergency;

(vi) where the act to be done is purely ministerial or clerical and does not involve the exercise of discretion.

Contracts Act, 1950.
Earlier posts.