Business Law Agency Tutorial

Question 1 Tang who runs a lorry transport service, was instructed by Ron to deliver some durians from Tronoh to Kuala Lumpur. During the journey, one of the tyres burst. As a result, the lorry skidded and hit a lamp post. Some of the durians were damaged. Tang sold the damaged durians to passers-by at a very low price. The remaining durians were loaded onto his friend’s lorry, and transported to Kuala Lumpur. Advise Ron as to whether he can claim from Tang the losses suffered by him. (10 marks)

Answer Issue – Whether Ron can sue Tang for the losses suffered? Legal principals – Meaning of agency relationship  S135 CA 1950, state how agency by necessity can be created  S142 CA 1950 It is impossible for the agent to get the principal’s instruction The agent’s action is necessary, in the circumstances, to prevent loss to the principal The agent of necessity has acted in good faith Cases  Springer v Great Western Railway Co (1921)  Munro v Willmott and Co (1948) Application of the legal principles and conclusion

Question 2 Salem intends to appoint Tom as his agent. Before finalizing the appointment, Salem wishes to know what the duties and rights of an agent to his principal. Advise Salem. (10 marks)

Answer Explain the meaning of agency relationship – as per s135 CA 1950 State and explain the duties of an agent as provided by s164 to s178 with relevant cases:  To obey the principal’s instructions  In the absence of instructions from the principal, to act according to the customs  To exercise care and diligence in carrying out his work  To render proper accounts when required  To pay to his principal all sums received on his behalf  To communicate with the principal  Not to let his own interest conflict with his duty  Not to make any secret profit  Not to disclose confidential or documents entrusted to him by his principal  Not to delegate his authority

Question 3 Kevin was aware that his friend Lee was urgently in need to buy a shop, in order to start her boutique and was keen on a good commercial location. When Kevin was in Kuala Lumpur for his own personal business, he came across a very suitably located shop, which was also very reasonably priced. The purchase, however, had to be urgently made, as the present owner was interested in selling off and relocating to another country. Kevin was unable to contact Lee and bought the property, signing the contract as Kevin, agent of Lee. On his return from Kuala Lumpur, Kevin told Lee of the complete transaction. In your view, is this a valid contract of agency? What, if anything is required under these conditions so that the contract can be deemed as a valid contract of agency? (15 marks)

Answer Identification of Issues  Whether agency by necessity exist over here? Explanation and application of the law  s142 Contracts Act 1950  The following conditions must be satisfied An emergency must arise justifying the action to preserve or dispose of the property of the principal; It must be impossible to contact the principal to take instructions (Springer v Great Western Railway Company) The agent must have acted in the interest of the principal Concluding Advice  Are the conditions fulfilled?

Question 4 Ali requested Sam to sell his car. He specifically told Sam not to sell the car below RM30,000. However, Sam sold it to Jane for RM25,000. Ali is not happy about it and wants Sam to pay for the difference. Advise Ali whether he could so. In what situation can Sam avoid this liability? (10 marks)

Answer Sam has exceeded his authority. Thus he will be personally liable He can avoid liability if Ali ratifies the transaction  A principal can ratify – s149 CA 1950  State the conditions that must be met to ratify: - The act or contract must be unauthorised The agent, at the time of the contract, expressly act as an agent for the principal The principal must be in existence The principal must have contractual capacity The principal must have full knowledge of all material facts at the time of ratification The principal must ratify the whole act or contract The ratification must not injure a 3 rd party  State the consequence of ratification

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