Agency Law

What is Agency Law?

An agent is a person who acts in the name of and behalf of another, having been given and assumed some degrees of authority. The law of agency is governed by Part X of the contracts Act 1950. The person for whom such act is done, or who is so represented, is called the "principal".

Agency is the relationship which subsists between the principal and the agent, who has beed authorised to act for him or represent him in dealings with others.

Example-

Party A appoints party B to sign the agreement on his behalf, here party A is called the principal and party B is his agent. 

Who can become an agent?

Section 136 CA is any person who is eighteen years old and above and who is of sound mind may be a principal. As between the principal and third persons, any person may become an agent, but persons of unsound mind and who are below eighteen years of age are not liable towards their principal for acts done by them as agents. 

Example-

If A employs ask B to buy some good from C on his behalf and C supplies the goods, A cannot allege that he is not liable to pay for the goods just because B is not at the age of majority. A still liable to pay C for the goods.

Types of Agents

1. General Agent

• is a process of the authority to carry our a broad range of transactions in the name and on the behalf of the principal. 
• for example - as a purchasing agent or as a life insurance agent authorised to sign up customers for the home office. 
• to restrict the general agents' authority, the principal must spell out the limitations explicitly, and even so the principal may be liable for any of the agents' acts in excess of the authority. 
• one common form of a personal general agent is the person who hold another's power of attorney
• is a delegation of authority to another to act in his stead; it can be accomplished by executing a simple form. 

General Power of Attorney

2. Special Agent 

• is the one who has authority to act only in a specifically designated instance or in a specifically designed set of transactions. 
• for example - a real estate broker is usually a special agent hired to find a buyer for the principal’s land.

Example-

Kelvin, the seller, appoints an agent Jane to find a buyer for his property. Jane's commission depends on the selling price, which, Kelvin states in a letter to her, "in any event maybe no less than $150,000." If Jane locates a buyer, Peter, who agrees to purchase the property for $160,000, her signature on the contract of sale will not bing Kelvin. As a special agent, Jane had authority only to find a buyer; she had no authority to sign the contract.

3. Subagent

• to carry out their duties, an agent will often need to appoint their own agents.
• these appointments may or may not authorised by the principal.
• the agent will necessarily conduct their business through agent of their own choosing.
• if the general agent had the express or implied authority of the principal to hire them.
• for legal purposes, they are agents for both of the principal and the principal’s general agent, and both are liable for the subagent’s conduct although normally the general agent agrees to be primarily liable.

4. Servent  

• an agent employed by a employer to perform service is his affairs whore physical conduct in the performance of the service is controlled or is subject to the right to control my the employer. 
• this is the restatement (second) of Agency, Section 2.
• until the nineteenth century, any employees whose work duties were subject to an employer was control.  

5. Agency Coupled with an Interest

• an agent whose reimbursement depends on his continuing to have the authority to act as an agent if he has a property interest in the business.
• for example - customarily agrees to sell a literary work to a publisher in return for a percentage of all monies the author earns from the sale of the work. 
• also acts as a collection agent to ensure that his commission will be paid.

Example for a real case in Malaysia regarding agency law-

SRM Meyappa Chettiar v Lim Lian Koo [1954] 20 MLJ 246

PC, the attorney of SC, entered into an agreement with the respondent under which the PC handed over to the respondent a piece of land belonging to his principal in consideration of RM 7,000/- and agreed ‘ upon the return of normal conditions, the vendor shall obtain a special power of attorney from the said SC now in India and execute the true and lawful transfer of the said land at the purchaser’s own expenses’. He further agreed that if he was unable to obtain the necessary power from his principal the RM7,000/- will be return to the respondent. At the trial, the learned judge held that the agreement had been satisfied by SC and therefore dismissed a claim for recovery of possession of the land. The Court of Appeal held that the terms of the agreement showed that PC was acting in his personal capacity and therefore the principal of ratification could not apply to the agreement

The principal only applies where the agent has professed to contract for his principal who afterwards ratifies.

Tindal C.J in Wilson v Tumman [1843] 6 M&C 242

The act done for another, by a person, not assuming to act for himself, but for such other person, tough without any precedent authority whatever, becomes the act of the principal, if subsequently ratified by him, is the known and well established rule of law. In that case the principal is bound by the act, whether it be for his detriment or his advantage, and whether it to be founded on a tort or on a contract, to the same effects as by, and with all the consequences which follow from the same act done by his previous authority.

The agent must have a principal, who is in actual existence or capable of being ascertained, when a contract is made. No one can ratify a contract if he is not a party competent to a contract at the date of the contract.

Company Law

What is Company Law?

Company law is the field of law concerning companies and other business organisation. this includes corporation, partnership and other associations which usually carry on some form of economic. 

Section 3(1) of the Company Act, 1956 defines Company as "Company means a Company formed and register under this act or an existing Company".

According to Haney "A Company is incorporated Association, which is an artificial person created by law, having separate entity, with a perpetual succession and a common seal".

According to Marshall " A company is a person, artificial, invisible, intangible, and existing only in the eyes of law. Being a mere creature of law, it possesses only those properties which the charter of its creation confer upon it, either expressly or incidental to its mere existence". 

There are main form of business organisation 

Sole Proprietorship 

Sole proprietorship is an incorporated business with one owner who pays personal income tax on profits from the business. As an economic until he/she is helpless since he/she can be made personally bankrupt for his/her business trade. Most of the sole proprietors do business under their own names because creating a separate business or trade name is not necessary. Sole proprietorship is also known as "proprietorship". Example of sole proprietorship are computer repair service, catering company, landscaper, financial planners. 

Advantages of a Sole Proprietorship 

• Easy and helpless to form - a sole proprietorship is the simplest and least expensive business structure to establish. Costs are minimal with legal costs limited to obtaining the necessary license or permits.
• Easy tax preparation - the business is not taxed separately, so it is easy to fulfil the tax sporting requirements for a sole proprietorship. The tax rates are also lowest of the business structures. 
• Complete control - because is sole owner of the business, so, will have complete control over all decisions. The owner should not consult with anyone when need to make decision or what to make a changes in business. 

Disadvantages of a Sole Proprietorship 

• Unlimited personal liability - because there is no legal separation between the owner and the business, the owner must be held personally liable for the debts of the business. This risk extends to any liabilities incurred as a result of employee action.
• Heavy burden - the flip side of complete control is the burden and pressure it can impose. The owner are alone responsible for the successes and failures of the business.
• Hard to rase money - sole proprietorship often face challenges when trying to raise money. Because the owner can not ell stock in the business, investors will not often invest. Bank are also hesitant to lend to a sole proprietorship because of a perceived lack of credibility when it comes to repayment if the business fails. 

Partnership 

Partnership is the relation of two or more persons carrying on a business in a common view to make profit. Each partner contributes to all aspects of the business, including money, property, labor or skill. The partner also must shares in the profit and losses of the business. There are three general types of partnership arrangements which are general partnership, limited partnership and joint ventures.  

Advantages of a Partnership 

• Easy and inexpensive - partnership are normally an inexpensive and easily formed business structure. The majority of time spent starting a partnership often focuses on developing the partnership agreement. 
• Complementary skills - a good partnership should reap the benefits to being able to utilise the strengths, resources and expertise of each partner. 
• Shared financial commitment - each partner is equally invested in the success of the business. Partnerships have the advantage of pooling resources to obtain capital. This could be beneficial in terms of securing and expertise of each partner. 

Disadvantages of a Partnership

• Disagreements among partners - with multiple partners, there are bound to be disagreements partners should consult each other on all decisions, make compromises, and resolve the problems. 
• Shares profits - because partnership are jointly owned, each partner mush share the successes and profit of their business with the other partners. 
• Joint and individual liability - is similar to sole proprietorships, partnerships retain full, shared liability among the owners. Partners are not only liable for their own actions, but also for the business debts and decisions made by other partners. In addition, the personal assets of all partners can be used to satisfy the partnership's debt.

Limited Company

A limited liability company, quite simply is a company whose liability is limited. That is the short version. The longer version is that a limited company is a type of company which when set-up allows an entrepreneur to keep their own assets and finances separate from the business itself. This means that people who have invested in the business are only responsible for ant company debts up-to the amount that they have invested. There are two types of limited company which are public limited companies and private limited companies. 

Unlimited Company

Unlimited company is one, which the liability of the members is nit limited in anyway. When a company is wound up every present and the past member is liable to contribute to the assets of the company an about sufficient for the payment of its debts and liabilities and the cost changes and expenses. An unlimited company may also be useful where a company is requires for a specific transaction and unlimited liability is not regarded as a problem, or for a business where the risk of insolvency is very low or non-existent.

Misrepresentation

What is Misrepresentation?

A misrepresentation is a false statement of fact made by one party to another party, which, whist not being a term of the contract, includes the other party to enter the contract. This usually results in the innocent party suffering some form of loss to damage. 

Types of Misrepresentation

1. Fraudulent Misrepresentation

• this occur where an untrue statement is made knowingly or with our belief in its truth.

Example-

Derry v. Peek (1889)

A company was empowered to run trams by horsepower by steam. The directors issued a prospectus containing a statement that by this special Act the company had the right to use steam instead of courses. The plaintiff bought share on the strength of this statement. The Board of Trade refused to consent to the us of steam and the company was wound up. The plaintiff brought an action for deceit.

2. Negligent Misrepresentation 

• is a false statement made by a person who had no reasonable grounds for believing it to be true.
• is a "breach of a dirt of care".
• be a case where the duty is owned and breached.
• this can occur in a special relationship, or if an opinion is given carelessly by an expert.
• two possible way to aim: either under common law or statute.

Example-

Esso Petroleum Ltd v. Mardon (1976)

Esso purchased a vacant site on which to build a filling station. Before bidding on the site, Esso estimated that the throughput of petrol on a certain site would be reach 200,000 gallons in the third year of operation and so persuaded Mardon to enter into a tenancy agreement in April 1963 for three years. Mardon did all that could be expected of him as tenant but the site was not good enough to achieve a throughput of more than 60,000-70,000 gallons. Mardon lost money and was unable to pay for petrol supplied. Esso claimed possession of the site and money due. Mardon claimed damages in respect of the representation alleging that it amount to a warranty and a negligent misrepresentation. 

3.  Innocent Misrepresentation 

• is relatively easy to prove, requiring only proof of a false statement that induced the contract.
• a false statement which the person makes honestly believing it to be true.

Example-

Redgrave v. Hurd (1881)

Redgrave, a solicitor purchased into the partnership in the solicitors' firm. He said in an interview with Hurd that the practice brought in £300 per year. Redgrave showed him summaries that came to a £200 per year average income and said that the rest of the £300 figure was borne out by other papers in the office that he could check. Hurd did not inspect the papers, until he realised the truth just before completion of the agreement. He had signed the contract but he refused to go through.

Example of the real case in Malaysia regarding misrepresentation-

Mohd Shuaib Ishak v. Celcom (Malaysia) Berhad (2008) 1 LNS 314

The main beneficiaries of the wrongdoings have been Telekom, Telekom Enterprise and parties acting in concert as they succeeded in taking over Celcom at a relatively low price and the burden to pay DeTeAsia was passed on to Celcom. The main losers have been Celcom, which had to pay substantial damages to DeTeAsia and the shareholders of Celcom who should have received RM7.00 per share instead of RM2.75 under the MGO.

Consideration

What is Consideration?

Consideration is an important element of a contract. It can be anything of value which each party must agree to exchange in order to make a contract valid. An agreement without a valid consideration is void unless thy belong to one of those categories of agreement listed in the same section as being exempted from the rule.

Example of Consideration

Hari signs a contract to buy a bungalow at Kampar from Samuel for RM 300,000. Hari's consideration is the RM 300,000 and Samuel's consideration is the bungalow.

            
Consideration within the meaning of Malaysian contract law

          Section 2(d) Contract Act 1950:-

“When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do so or to abstain from doing something, such act or abstinence or promise is called consideration of the promise”

Types of Consideration 

1. Executory Consideration

• is an exchange of promises to perform acts in the future
• a bilateral contract for the supply of goods 

Example-

Party A promises to deliver good to party B in a date and party B promises to pay the amount on the delivery day. If party A does not deliver to them, this is a breach of contract and party B cansue party A. If party A delivers the goods his consideration then becomes executed. 

2. Executed Consideration

• if one party makes a promise in exchange for an act by the other party
• an unilateral contract 

Example-

Party A offer RM50 reward for the return of her lost handbag, if party B finds the bag and returns it, party B consideration is executed. 

3. Past Consideration 

• where a promise is made subsequent to and in return for an act that has already been performed, the promise is made on account of a past consideration.

Consideration need not move from the promisee 

In English Law consideration must move from the promisee. For example, the person who receives the promise must himself give something in return. In Malaysia a party to an agreement can enforce a promise even though he has given no consideration, so long as somebody else has done so – Section 2(d).

Example-

Assume that there are 3 parties to an agreement party A, B, and C. Party C promises to pay party A RM1000. If party B will repair party C’s car but party C does not pay anything to party A. Although party A has given no consideration for party C’s promise he may institute legal proceeding against party C.

   

Example of a real case in Malaysia regarding consideration-

Re Tan Soh Sim & Ors v Tan Saw Keow [1951] MLJ 21 

In this case, a woman on her deathbed expressed her intention to leave all her properties to her four adopted children. The court held that the claims of the adopted children were not effective as it was contrary to Section 26(a) - that it was not in writing, and there was no natural love and affection between parties standing in near relation to each other, since the four children were adopted and did not have natural relations (blood ties) to that woman.