In: Accounting
BUSINESS LAW
Aaron has been asked by Mariappan to negotiate a business deal
on his behalf with Tune Sdn Bhd. Mariappan has reminded Aaron to
close the deal legally with Tune Sdn Bhd before the end of March
2020. Aaron agreed. The deal had been successfully negotiated but
Mariappan found that Aaron had used the illegal means of obtaining
confidential profits through the negotiation. Mariappan argued on
how Aaron dealt with Tune Sdn Bhd. Aaron emphasized that it was a
common method used in business. Mariappan need not worry since his
instruction to obtain the contract had been successfully
completed.
Under the principle of agency, how is the business deal supposed to
be conducted? Support your answer with legal provision from the
Contract Act 1950 and ONE (1) relevant case.
(10 markah / marks)
According to the law of agency of contract act1950,The law of agency is when agent acts on behalf of principle to form a legal relationship with third party,principle is represented by the agent and agent is a person employed by principle. Ex: power of attorney also comes under the agent and principle relationship i.e,law ofagency.In this case Mariappan is the principle and Aaron is the agent to be acted on behalf of Mariappan to negotiate a business deal with Tune sdn Bhd company i..e, third party
According to law of agency Agents and principles have their own duties,with reference to contract act 1950,Agents are not allowed and cannot make any secret or personal profit for himself by conducting his duty
According to the facts of the case here agent Aaron has practised unfair means of obtaining confidential profit i.e, without knowledge of principle so there are threeothree for principle either h themthe principle may repudiate or not liable fro the contract and may dismiss or fire the agent for breach of contract,get amount of secret profit back from the agent and sue the agent and third party for damage and loss incurred,but if the principle already knows about the confidential profit and he had given concent to the transaction or contract then the agent Aaron can keep the profit.Here in this case Mariappan can sue Aaron for secret profit and he can claim the profit through court as princple also not entitled to pay any commission to agent.
According to case law:case Tan kiong vs Andrew S.H Chong
The principle was only authorised the agent to sell the flat for $45000,but the agent sold it for $54000,as the agent breached the contract the court held thet the principle was entitled to recover the $9000.
In our case also principle Mariappan is entitled to recover confidential profit obtained by illegal means by the agent Aaron