Question

Discuss the principles related to the formation of agency contract under Malaysian law.

Answer 1

The Law of agency in Malaysia is in Contract Act 1950 under section 135 to 191. An Agency refers to a person who is employed to represent another or act behalf in dealing with the third person. A contract of agency can be created in any of the following ways.

Express Appointments: A contract of agency can be created by an express appointment. This happens when the principal expressly appoints a person as an agent. Express appointments may be done either orally or in writing.

Implied Appointments: An implied appointment refers to the situation whereby the appointment may be implied from the conduct of the parties. The principal either by word or conduct holds out in which another person has the authority.

Agency by ratification: A contract of agency by ratification can arise in two circumstances. First, the agent who has been appointed but has exceeded his authority when he entered into a contract with a third party. Second, Ratification is a person who has no authority to act for the principal but he acted as if he has the authority to enter into a contract with a third party. According to Section 149, a principal has the authority to either reject or confirm such a contract. Ratification can be either express or implied ratification. There are some conditions that must be fulfilled before a principal can ratify the contract. The condition is the act must be unauthorized. They are:

• The principal must be in actual existence
• The principal must have the capacity to enter into a contract and must be made within a reasonable time.

Agency by necessity: According to section 142, a person may become an agent even though he was not appointed. There are three conditions that need to fulfill in this type.

• when it is impossible to get the principal's instruction
• An agent's action is necessary in order to prevent loss to the principal
• The agent must act in good faith.

Estoppels: As a general rule, a person cannot be bound by any contracts made on his behalf without him giving any authority. However, he will be estopped from claiming that he was not given any authority and not bound by any contract made on his behalf. if, by words or conducts, he allows a third party to believe that another person is his agent.

In conclusion, all the above ways are used to create the law of agency. However, there are some duties that the principal and the agent need to fulfill in order to complete this law. The agent and principal also can terminate this contract by agreement or by the agent's renunciation.