At the end of this chapter, students should be

able to:
CLO2: explain clearly the position of law
regarding contract of agency
 AGENCY

RELATIONSHIP WHICH SUBSISTS BETWEEN A

PRINCIPAL & AGENT WHERE AGENT HAS BEEN
AUTHORIZED TO ACT FOR THE PRINCIPAL OR
REPRESENT HIM IN DEALING WITH OTHERS/3RD
PARTY
 AGENT

A PERSON WHO IS EMPLOYED BY THE PRINCIPAL

TO DO CERTAIN ACT FOR HIM OR REPRESENT
HIM IN DEALINGGS WITH 3RD PARTY
(s.135 CA)
 PRINCIPAL

A PERSON WHO AUTHORIZES THE AGENT TO

ACT ON BEHALF OF HIM
(s.135 CA)
1. PRINCIPAL - THE AGENT
2. PRINCIPAL 3RD PARTY
PRINCIPAL (s.136)

MUST BE OF THE AGE OF MAJORITY & SOUND

MIND (s.136 C.A)
AGENT (s.137)

- ANY PERSON MAY BECOME AN AGENT (INCL.

MINORS & UNSOUND MIND)
- NOT RESPONSIBLE FOR HIS ACT
- PRINCIPAL MUST BE RESPONSIBLE & TAKE THE
RISKS.
 CHAN YIN TEE v WILLIAM JACKS & CO LTD

Facts: Chan & Yong (a minor) were a partner in

business. C told WJ that Y is his partner &
has authority to act on behalf of him. WJ
supplied goods to Y but no payment was
made. WJ sued C as principal of Y.
Court Held: Chan was responsible to Yongs act
no matter he is an adult or a minor.
 Created/formed by the agreement/consent
of both parties (principal & agent)
No specific formality in order to form a
contract of agency
CONSIDERATION is not necessary in order to
form a contract of agency. (s.138)
 Law provides 5 ways agency may be formed:

1. By express appoinment
2. By implied appointment
3. By ratification
4. By necessity
5. By the doctrine of estoppel or holding out
 s.140

Principal appoints the agent expressly, either

orally or in writing
Implied from the circumstances of the case
Referring to the words, conduct or the
regular conduct of the business between the
parties.
S.140 it appears to the public that certain
person is having authority to act on behalf of
another person. (illustration)
Refer Chan Yin Tee v William Jacks Co Ltd

Held: Once C told WJ that Y is his partner, it

shows Y has the implied authority to act on
behalf of C.
Implied From the Relationship of Husband &
Wife

Wife has authority to pledge the husbands

credit in a contract
Condition it is necessaries & suited to their
condition & style of living
 Impliedly wife is an agent to husband
Husband (principal) is liable upon such
contract provided for necessaries and suit
their style of living.
 Husband can rebut by proving that:
i. Expressly forbid his wife from pledging his
credit; or
ii. Expressly warned the tradesman not to
supply his wife with goods or credit; or
iii.Wife was sufficiently provided with the goods
of the kind in question; or wife was given
sufficient allowance for buying goods without
having to pledge her husbands credit; or
iv. Contract was unreasonable consider of
husbands income.
 By The Partnership Act 1961
s.7 (P.A) each partner in a partnership is an agent
to other firm or other partners in the firm.(in the
course of the partnership business)
- Each partner is implied agent to the firm
- Has the implied authority to act on behalf of the
other partners
- The firm/other partners implied principal to
any one of the partners
- The firm/other partners liable to whatever
contracts had been entered into by any other
partners.
What is ratification?

certification/acceptance by the principal for

an act done without authority or exceeding
the authority given
 How it may happen?

i. When an agent, who was appointed by he

principal, has exceeded his given authority
ii. When a person, who has no authority to act
for the principal, has acted as if he has the
authority to act on behalf of the principal.
 If any situation occurred principal has
choice either to reject@accept the contract,
which has been made on behalf of him.
If accepts and confirm, means that he
ratifies the contract.
S.149 agency by ratification exists between
the principal and agent who had exceeded
his authority or without authority
IF PRINCIPAL DOES NOT AGREE, THERE IS NO
AGENCEY RELATIONSHIP & NOT LIABLE TO IT
 EFFECTS
- Once principal ratified, he is bound to the
contract made by the agent.
- The principal is bound to the contract
retrospectively. i.e. the contract is effective
from the date when the original contract was
made by the agent, not from the date of the
ratification s.149
- BOLTON & PARTNERS v LAMBERT

Court: contract effective from the date when

it was made, not the date
Conditions:
1. The contracts done by the agent was
without authority or exceeding the authority
2. The contract must be one, which is
recognized by law, not illegal
Brook v Hook
Court Held: The principal may not ratify a
contract in which his signature had been
forged by the unauthorized agent
3. The agent must act expressly as an agent to the
principal. He must not contract in his own
name.
Keighley Maxted & Co. v Durant
Facts: An agent was authorized by the appellant to
buy wheat at a certain price. The agent
exceeded his authority & bought it at a higher
price. However, the agent contracted in his own
name
Court Held: The appellant was not liable to Durant
(3rd party) because the appellant could not ratify
the contract because the contract was made in
the agents own name.
4. When the contract was made, the principal
must actually exist.
Kelner v Baxter
Court Held: A contract to buy a hotel made by
an agent on behalf of a company which was
not registered/formed, could not be ratified
by the company because the
company(principal) did not exist at that
time.
5. The pricipal must have contractual capacity

6. The pricipal must have full knowledge of all

material facts at the time of ratification
s.151
Marsh v Joseph
Fact: A principal had ratified a contract
without the full knowledge of all material
facts.
Court Held: the principal was not bound to
such contracts.
7. The principal must ratify the whole
contract. He cannot accept only part of the
contract s.152
8. Ratification must be made within a
reasonable time.
Metropolitan Asylum Board v Kingham & Sons
Facts: The agent contracted to buy eggs
without the authority. The principal tried to
ratify the contract 1 week after it was made.
Court held: The ratification was too late.
9. Ratification must not injure or affect the
interest of a 3rd person s.153
Illustration b A holds a lease from B,
terminable on 3 months notice. C, an
unauthorized person, gives notice of
termination to A. The notice cannot be
ratified by B, so as to be binding on A.

* If the principal has ratified the contract, but

without fulfill any one of those condition,
the contract did not bind on the principal.
 S.142
A Person, who has no authority, may become
an agent due to the necessity or emergency
circumstances, in order to protect the
principal from any loss.
 How?
1. When a wife is deserted and has no means of
support.
- A wife can pledge her husbands' credit for
necessaries suited to the income and life
condition of her husband
- however, she cannot become an agent by
necessity if her husband has provided her
with sufficient allowance.
2. When a person is entrusted with another persons
property, and it becomes necessary for him due to
the emergency situation, to do something in order
to preserve & to protect that property although
he has no authority to do so.
s.142 (illustration)
- An agent for sale may have goods be repaired if it
be necessary
A consigns provisions to B at Taiping, with
directions to send them immediately to C at Parit
Buntar. B may sell the provisions at Taiping, if
they will not bear the journey to Parit Buntar
without spoiling.
 Great Northern Railway v Swaffield
Facts: The railway company has been entrusted to
deliver a horse of the defendant to a
destination. However, when it reached the
destination, nobody came to take the horse. P
had to look after the horse & took several
actions in order to preserve the safety of the
horse. P claimed from D extra expenses incurred
in preserving the interest of the D. D refused &
claimed P was not authorized to do so.
Court Held: P was an agent by necessity and
therefore entitled to the claim.
Conditions
These conditions must be satisfied:

i. There must be a real & Actual emergency

Phelps James & Co v Hill
Court Held: what is meant by emergency must
be refer to reasonable situations by looking
into the dangerousity, facilities availability,
cost, time distance etc.
ii. The agent was entrusted with the principals
property/goods
- Any person, who was not entrusted with the
principals property, is not entitled to become an
agent by necessity (s.142)
Jebarra v Ottoman Bank
Court Held: Agency by necessity only exists if the
agent is entrusted with the goods of the principal
or being instructed to deliver the goods to
certain destination and where at that time
emergency occurred while the goods are under
the responsibility of the agent
iii. It is impossible for the agent to get the
principals instruction at that time.
- Whenever an emergency occurs, an agent is
under a duty to communicate with the
principal to get some instructions (s.167)
- However, if he failed to do so, then only the
agent may use his own discretion taking the
necessary steps (s.142)
 Springer v Great Western Railway Co.
Facts: The D agreed to carry P tomatoes from Jersey
to Covent Garden Market. Owing to bad weather,
the ship arrived late at Weymouth. Meanwhile, D
workers were on strike. Therefore the tomatoes
were found to be bad. The defendant decided to
sell the tomatoes at Weymouth because D felt it
could not arrive at Covent Garden market in
saleable condition. However D did not
communicate this to P. P claim damages.
Court Held: P was entitled to damages because D
were not agents by necessities when they failed to
communicate the acts with P.
iv. The agent of necessity has acted in good
faith
- What is done might be done by any other
person in similar position.
 Effects?
i. The agent will be protected from any claim
of the principal
ii. The agent will be entitled to the additional
payment for his effort to protect & to
preserve the safety and interest of the
principal
iii.A contract exists between the principal and
3rd party
 How?
1. Ehen the principal himself induces the 3 rd
party to believe that a person has an
authority to act for him, as if that person is
his agent.
- The principal is estopped by the law from
denying that agents authority (s.190)
- Principal cannot avoid the liability upon the
contract made by that agent
ii. When a principal does not inform or
announce to the 3rd party that his agent has
no authority or the agents authority had
been terminated, but the agent still
continues acting on behalf of that principal.
- In this situation, the principal would be liable
for the contract made by such agent
irrespective whether the agent had acted
with or without the principal knowledge.
 Freeman & Lockyer v Bruckhurst Park
Properties Ltd.
Facts: There were 4 directors in a company. A,
contracted on behalf of the company with
T(3rd party). The other directors knew but
did not inform T that A had no authority to
do so. T believe A had the authority.
Court Held: the company is estopped from
denying that A is the companys agent and
denying that A had the authority to make
contract on behalf of the company.
 Please Take Note!
- Agency by estoppel only happen if the
principal himself, through his own words or
conduct, induced the 3rd party to believe
that a certain person is having the authority
to act on behalf of the principal.
- It does not happen if the 3rd party was
induced by the agent only
Armagas v Mundogas, The Ocean Frost
Court Held: Agency by estoppel does not exist
if the agent himself represent to the 3rd party
that he is the agent of the principal, and not
from the words or the conduct of the
principal.
1. TO PAY THE COMMISSION/OTHER AGREED
REMUNERATION
The principal is under a duty to pay the
remuneration upon completion of all
contractual duties s.172
Amount? Depends on the terms of the
contract of agency
If no amount fixed, reasonable amount
would be paid
However, if agent is guilty of misconduct,
the right is loses s.173
ANDREWS V RAMSAY
Court Held: The principal is not bound to pay
the agents commission due to the fact that
the agent had received secret profit or a
bribe when performing his duties as an
agent.
2. NOT TO WILFULLY PREVENT OR HINDER THE
AGENT FROM EARNING HIS COMMISSION
Principal is under a duty, not to prevent agent
from earning commission (agents right)
Examples where principal have willfully
preventing agent from earning commission
a. The principal refused to accept the contract
made by the agent
b. The principal appointed another agent to carry
on the same duty, to deprive original agent from
earning commission.
3. TO INDEMNIFY & REIMBURSE THE AGENT FOR
LAWFUL ACTS DONE IN THE EXERCISE OF HIS
DUTIES S.175
If agent incurs liabilities/losses in the exercise of
his duties, principal is under a duty to reimburse
the agent
HICHENS, HARRISON, WOOLSTON & CO V
JACKSON & SONS
Court held: the agent is entitled to damages for
anything incurred in the performance of his
duties & to be reimbursed for agent
advancement or lost.
 However, if the agent employed to do a
criminal act, the principal is not liable to
indemnify the agent for any consequences of
that criminal act even there were promise
from principal to indemnity s.177
 Duty to indemnify arises in the following circumstances:
a. The agent has incurred losses or liabilities in performance
of his duties.
Kyall & Evatt v Lim Kim Keat
Facts: L(executrix of an estate)had instructed the plaintiff
who were share brokers, to sell on her behalf, shares in a
company registered in England. This in accordance with a
will. P then made a contract to sell the shares to 3 rd party.
Unfortunately, it was discover, the will had not been
proved in England. The brokers compel to but other shares
for substitution and consequently suffered a loss in doing
so. P sued D to secure an indemnity for loss.
Court Held: as the executrix knew that the will has not been
proved in England and failed to disclose that fact to the P,
P were entitled to be indemnified.
b. The agent causes injury to 3rd party in the
execution of his authority s.176
c. The agent suffers injury during the course of
his duties due to the principal negligence
s.178
 Rights and duties of an agent are stipulated
in the terms of the contract of agency
Contracts Act 1950 provides some rights &
duties of an agent towards principal.
 Main duties
1. OBEY THE PRINCIPALS INSTRUCTION s.164
An agent must follow principals instruction
If he failed to do so, there will be a breach of
contract of agency and liable for any loss
sustained by the principal s.164 illustration (a)
A, an agent engaged in carrying on for B a business
(custom to invest from time to time, at interest,
the moneys which may be in hand, omits to
make the investment). A must make good to B
the interest obtained.
 TURPIN V BILTON
Facts: The agent has been instructed by the
principal to get the insurance for his vessel.
Agent failed to do so and the vessel lost and
principal has to bare some loss.
Court Held: The agent is liable for breach of
duty, due to his failure to obey the
instruction. He is liable to pay compensation
for the loss.
However, if the instructions are against the
law, agent does not have to obey.
2. IF THERE IS NO INSTRUCTION, THE AGENT
MUST ACT ACCORDING TO THE CUSTOMS THAT
PREVAIL IN DOING BUSINESS OF THE SAME
KIND
S.164 Illustration(b)

B, a broker, in whose business is not custom to

sell on credit sells goods of A on credit to C
(credit at the time was very high). C before
payment becomes insolvent. B must make
good the loss to A.
3.THE AGENT MUST EXERCISE CARE & DILIGENCE, AND USE
ALL SKILLS HE POSSESSES IN CARRYING OUT HIS WORK
s.165
If agent is employed for his professional service, he must
use all his skills & expertise as usually required from a
same professional man.
KEPPEL V WHEELER

Facts: D (agent) was employed to sell P house. An offer was

received and accepted by P subject to contract. Few
days later, higher offer was made by X, but this offer was
not communicated to the P. Then, a written contract
between the P and the 1st offeror was duly signed.
Court Held: The defendant was liable to the plaintiff for the
difference between the 2 offers.
4. TO RENDER PROPER ACCOUNTS WHEN REQUIRED
s.166
It is the duty of the agent to account for all
monies & property accepted on behalf of the
principal.
The principals property should not be mixed up
with the agents own property.
LYELL V KENNEDY

Court Held: an agent who has been entrusted with

the principals money/property is bound to keep
the money/property separately from his own
property.
5. TO COMMUNICATE WITH THE PRINCIPAL
DURING EMERGENCY/DIFFICULTY s.167
Agent must use all reasonable diligence to
communicate with and to obtain instruction
from his principal in case of emergency or
difficulty
However, if impossible to do so, agent must
use his own discretion to safeguard the
interest of the principal.
6. MUST ACT IN GOOD FAITH AND NO CONFLICT
OF INTEREST
Agent must not let his own interest conflict
with his duty.
Must act solely for the benefit of his
principal, not for his own benefit.
 What is acting in good faith?
i. The agent cannot become a party to the
transaction with the principal.
ARMSTRONG V JACKSON

Facts: An agent had been ordered to buy

shares for his principal. The agent sold his
own shares to the principal without
informing the principal.
Court held: agent has not acted in good faith.
 If principal noticed he is contracting with his own
agent, and does not agree, he can repudiate the
contract. S.168
WONG MUN WAI V WONG THAM FATT

Court held: D had breached his duty as agent on 2

reasons.
1. He sold the Ps share of land below the market
value
2. He failed to inform the plaintiff that he has sold
it to his wife.
D should act in good faith to protect interest of P
and not gain profit at Ps expense.
 What is acting in good faith?
ii. The agent cannot act on behalf of 2
principals at one time without their consent
FULWOOD V HURLEY
Facts: The agent had acted on behalf of both
parties; P and 3rd party, by claiming
commission from both of them without their
knowledge & consent.
Court Held: the agent has breached his duty
towards the principal for not acting in good
faith.
 What is acting in good faith?
iii. The agent must disclose everything that he
knows, to the principal relating to all material
facts of the contract.
Not allowed to disclose his principals secret to
the other.
iv. All monies & profits should be put into the
principals account.
Cant mix with his own money
Refer Lyell v Kennedy
Principal entitled to all profits made by the
agent (s.169)
7. CANNOT MAKE ANY SECRET PROFIT
SECRET PROFIT?
- bribe/secret commission/any financial
advantage which is above beyond the
commission agreed under the agency
contract.
However, if principal knows and give
consent, it is no longer secret
 Remedies if principal does not consent
i. The principal may repudiate the contract.
ii. The principal may recover the amount of the
bribe (s.169)
TAN KIONG HWA V ANDREW S.H. CHONG

Facts: P (principal) bought a flat house from a

company. D was a director of the company. P
ordered D to resell the house at RM45,000.
however D managed to sell at RM54,000 and the
extra credited into companys account.
Court Held: P is entitled to claim the extra
RM9,000 from D.
 Remedies if principal does not consent
iii. The principal may refuse to pay the agents
commission
iv. The principal may dismiss agents authority
BOSTON DEEP SEA FISHING & ICE CO V ANSEL

Court held: an agent had been dismissed by

the principal for receiving a bribe.
 Remedies if principal does not consent
v. The principal may sue both (agent & 3rd party) who receive
and gave the bribe & claim damages.
MAHESAN V MALAYSIAN GOVERNMENT OFFICERS CO-
OPERATIVE HOUSING SOCIETY
Facts:Appellant (agent) was a director & secretary of the
respondent co-operative society (principal) bought land at
RM944,000 from a vendor who had earlier paid RM456,000.
A knew this fact but failed to inform R. only after sale
completed R discovered that A had received RM122,000 as
a bribe from the vendor.
Court Held: R could recover either the bribe or the amount
of the actual loss suffered as a consequence of entering
into the contract with vendor.
 Remedies if principal does not consent
vi. The agent and the 3rd party may be charged
under a criminal offence.
They may be charged under s.4 of the
Prevention Of Corruption Act 1961
8. MUST PAY HIS PRINCIPAL ALL SUMS RECEIVED ON HIS
BEHALF (s.171)
Whatever amount received on behalf of the principal,
must be paid to principal.
However, this subject to s.170, where the agent is
entitled to deduct any sum from the principals money for
the payment of:
i. Any sums owed to the agent in respect of advances made
during conducting business
ii. Any commission/remuneration payable
Agent has the right to retain his principals property in his
possession until remuneration is paid right oflien
9. THE AGENT CANNOT DELEGATE HIS
AUTHORITY TO OTHER PERSON (s.143)
Based on the maxim Delegatus non potest
delegare (agent cannot employ another
person to do his duty and must perform it
himself)
 Exception
i. Where the principal himself approves the
delegation of the authority
DE BUSSCE V ALT

Facts: Principal appointed an agent in China to sell

a ship at certain price. The agent was unable to
sell it. Therefore the agent sought the
principals approval to appoint a sub-agent to
sell the ship in Japan.
Court Held: there was no breach of the agents
duty because principal express consent on
appointment of sub agent.
 Exception
ii. Where it is presumed from the conduct of
the parties that the agent would have power
to delegate his authority to other person to
perform his duty
iii. In case of necessity or emergency
e.g. illness or injured in an accident
iv. If the act to be done is purely ministerial or
clerical which does not involve any discretion
or professional skill of the agent.
 Exception
iv. If the act to be done is purely ministerial or
clerical which does not involve any discretion or
professional skill of the agent.

JOHN McCANN & CO V POW

Facts: An agent has been employed to sell a house
belonged to the principal. The agent delegated
his authority to another person
Court Held: Agent failed to get his commission by
breaching the duty. The duty involve his personal
skill & discretion and not clerical duty.
 An agents act is binding upon the principal if
the act is done within the authority of the
agent
Agents authority classified into:

1. Actual authority
2. Apparent authority
 ACTUAL AUTHORITY
- Given to the agent through the agreement
between principal agent
- Comprises of:

1. Express authority
2. Implied authority
 EXPRESS AUTHORITY
- Expressly given (oral/writing) s.140
- Example:

B appoints C as his agent to sell his car for not

less than RM30,000. if acted in accordance
with this express authority, B is bound to the
contract made by C.
 IMPLIED AUTHORITY
- The actual authority of an agent can be
implied by
i. All such powers which are
proper/necessary/usual to execute the
express authority
- Also known as implied usual authority
- Example: B appoints C to sell his car and
entrust C with possession of the car. C by
implication has the authority to allow
potential buyers to test-drive the car.
ii. Implied from the circumstances of the case.
iii. Implied from the customs/usage of trade
iv. Implied from the situation and conduct of
the parties.
Chan Yin Tee v William Jacks
Court Held: From the conduct of Chan telling
WJ that Yong is his partner, it shows that
Yong has the implied usual authority to act
on behalf of Chan in buying goods for the
business.
 Certain authority is implied, if it is of the
type that someone dealing with the agent
may expect the agent to have such authority
It is the usual authority that can be implied
by the 3rd party
Normally the title/position of the agent may
give a measure of implied usual authority
 PANORAMA DEV. (GUILFORD) LTD) v FIDELIS FURNISHING
FABRICS LTD
Facts: A company secretary exceeded his actual authority in
hiring motor vehicles for the company (defendant), from
the plaintiffs.
The issue was whether, the defendant could be made liable
upon the transaction.
Court Held: The defendant was liable (in appointing a
company secretary, D was representing to the 3rd party
that agent had authority to enter into those transaction)
the hiring of motor vehicle was regarded as part of implied
authority.
 However, the 3rd party cannot rely upon the agents
implied usual authority if he knows or ought to have known
that the agent is acting in excess of his actual authority.
WATTEAU v FENWICK
Facts: D appointed a manager to run a public house (pub)
and the license was taken out in the managers name,
which appeared over the door. Manager was forbidden by
D to buy cigars on credit. In disregard of that restriction,
the manager bought cigars from P who then claimed for
the price.
Held: D, was liable to pay because manager of a public house
would usually have authority to make purchase of that
kind. P rely on such usual authority in the absence of
express knowledge of the restrictions imposed by the
principal.
 APPARENT AUTHORITY
- The law presumes that the agent possesses certain
authority, although the principal may not have consented
to, or given such authority to the agent.
- 2 situations:
1. Where a principal, by his words/conducts, leads the 3 rd
party to believe that his agent has authority to make
contracts for him s.190
2. where the agent previously had authority to act, but that
authority was terminated by the principal without
notifying it to the 3rd parties.
1. Where a principal, by his words/conducts, leads the 3 rd
party to believe that his agent has authority to make
contracts for him s.190
- The representation (by words/conduct) of the principal,
makes it apparent to the 3rd party that the agent has
authority.
- Condition must be principal himself who makes the
representation not the agent
GRAPHIC LINES PTE LTD. V CHAI CHEE MEIN
Facts: The GM who was a partner of a nightclub business had
represented to P that advertisement should be done
through the Asst. Manager.
The issue?whether D (partners) bound by the act by AM
Court Held: GM had the actual authority to give authority to
AM, D were bound by the act (apparent authority to AM)
2. Where the agent previously had authority
to act, but that authority was terminated
by the principal without notifying it to the
3rd parties.
 Distinction
IMPLIED APPARENT
BASED ON INFERENCES REPRESENTATION MADE BY
DRAWN FROM THE THE PRINCIPAL TO THE 3RD
AGREEMENT (PRINCIPAL PARTY IRRESPECTIVE OF
AGENT) ANY AGREEMENT BETWEEN
PRINCIPAL AGENT
Suzie has just been promoted as a personnel
manager of ABC Bhd. With the authority to
hire executives and office staffs. She then
hired C2 Dcor Sdn. Bhd. to renovate her
office which cost RM150,000. When C2 Dcor
claimed payment, Suzies employer refused
to pay on the ground that the renovation
work was done without their permission. C2
Deco wants to know the legal provision on
this matter. Advise C2 Dcor.
 Agency may be terminated in the following
manner:
1. By the act of the parties (principal & agent)
2. By operation of law
1. BY THE ACT OF THE PARTIES
- The principal and the agent may terminate
their agency relationship in 3 ways:
a. By mutual consent between them
b. By unilateral revocation/termination by the
principal
c. By unilateral renunciation by the agent
a. BY MUTUAL CONSENT
Both parties (principal & agent) may
terminate their agency relationship by
mutual consent between them.
Once agreed, the agent has no longer any
authority to act on behalf of the principal
Principal would not be liable for any
contract made by the agent after that
termination.
B. BY UNILATERAL REVOCATION/TERMINATION
BY THE PRINCIPAL
- The agency may be terminated by the act of
the principal revoking the agents authority
s.154
- The principal may revoke the agents
authority at any time, before the agent has
exercised the authority s.156
- The revocation may be done either expressly
or impliedly from the conduct of the
principal s.160
 In order to revoke the agents authority, the
principal must give a reasonable notice to
the agent. Otherwise, the agent is entitled
to damages s.160
What is reasonable notice?

- Depends on the facts & circumstances of

each case.
SOHRABJI v ORIENTAL SECURITY ASSURANCE
CO.
Court Held: 3 Months notice was not
adequate to properly terminate an agency
which has lasted nearly 50 years. In this
circumstance, 2 years notice would have
been reasonable notice.
 If principal failed to give a reasonable notice
of termination, the measure of damages that
the agent would be entitled to, is the
amount that the agent might have earned
under the contract of agency had he not
been prevented from continuing his duty as
an agent.
 If the agency is for a fixed term, earlier
termination might entitle the agent to claim
for damages s.158
 EXCEPTION
In certain situations, principal is prevented
from revoking the agents authority.
1. WHEN THE AGENT HIMSELF HAS AN
INTEREST IN THE PROPERTY, WHICH IS THE
SUBJECT MATTER OF THE AGENCY S.155
SMART v SANDERS
Fact: An agent was sent with goods, to be sold
on behalf of the principal. The factor made
advances to the principal to the principal
for the security of the goods
Court Held: The agency cannot be terminated
by the principal because the agent has an
interest in the goods( paying the security)
2. AFTER THE AUTHORITY HAS BEEN PARTLY EXERCISED BY
THE AGENT S.157
READ V ANDERSON
Facts: A principal instructed a turf commission agent to place
bets on his behalf. The agent placed the bets and lost. By
custom, a turf commission agent always bets in his own
name and becomes solely responsible to person with whom
the bet is made. If he failed to pay a lost bet, he is
subject to certain disqualification, which will have a
serious impact on his business.
Court Held: The principal could not revoke the turf
commission agents authority after losing the bet. The
principal would have to indemnify the agent for the
amount, which the agent had paid to the person with
whom he made the bet.
3. THE NOTICE OF TERMINATION BY THE
PRINCIPAL WOULD ONLY EFFECTIVE WHEN IT
COMES TO THE KNOWLEDGE OF THE AGENT
AND THE 3RD PARTY S.161
- If the agent & 3rd party does not know about
the notice of termination, the revocation is
not effective.
- Thus, the agency is not terminated.
 PICHAPPA CHITTY v HJ. JAH
Court Held: The plaintiff (3rd party) who advanced money to
an agent appinted, but whose auhority had been revoked
without the agents and plaintiffs knowledge, was entitled
to recover the money from the principal
TRUEMAN v LODER

Court Held: A 3rd party who dealt with an agent whose

authority had been revoked was able to claim from the
principal, the goods supplied because the 3rd party had no
knowledge of the revocation
C. BY UNILATERAL RENUNCIATION (RELEASED) BY
THE AGENT
- Agency is also terminated by the act of the agent
renouncing the business or the relationship of
the agency s.154
- The renunciation may be express or implied
s.160
- The agent must give a reasonable notice to the
principal. Otherwise the principal is entitled to
damages s.159
- Of agency is for fixed term, the agent is liable to
compensate the principal for premature
renunciation without sufficient cause s.158
2.BY OPERATION OF LAW
a. By the performance of the Contract Of
Agency s.154
b. By the expiration of the period fixed or
implied in the Contract Of Agency
- Once the agency is expired, the agency is
terminated even though the business has not
been completed
c. By the death of either the Principal or the Agent
s.154
Exception:
i. The death of the principal would not terminate
the agency IF the agent has an interest in the
property, which is the subject matter of the
agency s.155
ii. Termination by death of the principal is ONLY
effective upon the agent having notice of the
principals death s.161
iii.When the principal died, the agent must take
reasonable steps to protect & preserve the
interest of the principal s.162
d. By the Subsequent Insanity Of either the Principal Or
the Agent s.154
YONGE V TOYNBEE
Court Held: The agent is liable to the 3rd party because
he acted without the authority due to the fact that
the principal become insane.
e. By the bankruptcy or insolvency of the principal
s.154
f. By the happening of an event which renders the
agency unlawful
- Falls with the doctrine of frustration in contract
- E.g. principal becomes enemy due to the outbreak of
war
- A change in the law, which makes the agency business
unlawful.
 Jackie S/B appointed Man S/B to be its sole
agent for selling brand X cooking oil.
Jackie S/B then supplied 100 tons of cooking
oil to Man S/B. In return, Man S/B had to
pay a substantial sum of money as guarantee
on the goods supplied. After one month,
Jackie S/B intends to terminate Man S/B
authority. Man S/B objects to the
termination.
Discuss.