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LAW 416 BUSINESS LAW

ASSIGNMENT 3

NAME

: NURSYAMIM BINTI ISMAIL

ID NUMBER : 2015747091
GROUP

: NBMFF2A

APRIL 2010 (QUESTION 3)


a) Salmi was empowered by David to buy a laptop computer worth not more than
RM5000.00. Salmi bought a laptop at a price RM8000.00 in his own name from
NoteBook Computers. David agreed to Salmis purchase but later refused to
accept the laptop when it was delivered to him. NoteBook Computers now
wants to sue David for the purchase price.

Advise David.
Salmi Agent
David Principal
NoteBook Computers Third Party
The issue is whether fulfilled the conditions of being an agent to be ratified by
David because of his mistakes bought the exceeding price of computer from
NoteBook Computers.
Agency by ratification can arise in any one of the following situation, an agent
who was duly appointed has exceeded his authority or a person who has no
authority to act for the principal has acted as if he has the authority. According to
Section 149 of Contracts Act 1950, provides that a principal may either reject or
confirm such contract and acceptance by the principal of such contract is called
ratification. Ratification can be either express or implied ratification under Section
150. When the principal accepts and confirm such a contract, the acceptance is
called ratification. Ratification may be expressed or implied. There are two
circumstances that can arise ratification. Firstly, an agent duly appointed has
exceeded authority. For example, Ali has been appointed as agent to with the
authority to spend no more than RM10, 000. Ali however ordered goods from a
supplier amounting to RM 12, 000. Here Ali has exceeded his authority and will be
responsible for payment unless his principal ratify such contract. Second, a person
who has no authority acted as if he/she has the authority. For example, A is an agent
and B is a principal. A lends Bs money to C. C then pays interest to B and B
accepted the payment. Here the act of B accepting the payment is called ratification.
The effect of ratification is that the contract is binding on the principal as if the agent

has been given the authority from the beginning under Section 149 as retrospective
effect. There are 7 conditions stated that must be fulfilled before a principal can ratify
the contract. First, Act/contract must be unauthorized. Second, must expressed act
as an agent. Third, principal must be in actual existence. The case that can be
referred is Keighley Maxted v Durrant. An agent has been authorized to buy wheat at
certain price. Agent bought the wheat at a higher price in his own name although it
was intended for the principal. The principal agreed to take the wheat at a higher
price but later refused to take it. It was held because the principal was not liable
since

the

agent

did

not

express

himself as an agent at the time of the transaction. Third, principal must be in actual
existence. The case that can be referred is Kelner v Baxter. A contract was made by
an agent on behalf of a company, which was yet to be formed, and the court held
that the principal (company) couldnt ratify the contract since it was not yet in
existence when the contract was made. Fourth, the principal must have full
knowledge of all material facts unless intend to ratify whatever facts and must be
made within reasonable time to constitute a valid ratification the principal must at the
time of ratification have full knowledge of all material facts. Fifth, the principal must
have contractual capacity at time contract made and at time of ratification as the
principal must at the time of activity as well as at the time of ratification. Sixth, the
whole contract must be ratified, a contract must be ratified as a whole and not in
part. There cannot be a partial ratification and a partial rejection. Lastly, ratification
must not injure third party as ratification should not lean to breach of contract that
may be harmful to third party.
Based on the question given, as we know Salmi was instructed by David to
buy computer for a price not exceeding RM5000 and he ordered a computer for a
price RM8000.00 from NoteBook Computers in his own name. This can be referred
to Section 149 and case Keighley Maxted v Durrant where the principal agreed to
take a higher price but later refused to take it. It suit with Salmi case without acted as
an agent to NoteBook Computers, when David agreed and accepted the price even
exceeded the amount he authorized, but when NoteBook Computers delivered to
him, David refused to pay and furthermore it was under Salmi himself.
In conclusion, David was not liable since Salmi did not express himself as an
agent at the time of the transaction.

b) Ali wants to know how he can be classified as an agent by necessity.


Discuss.
An agency may arise by necessity or in an emergency. Agency of necessity
means a person may become the agent of another without being appointed as such
under certain circumstances. According to Section 142 of the Contracts Act 1950
states that an agent has authority, in an emergency, to do all such acts for the
purpose of protecting his principal from loss as would be done by a person of
ordinary prudence, in his own case, under similar circumstances. However, to create
an agency by necessity, there are three conditions have to be satisfied.
First, it must be a situation that impossible for agent to get the principals
instruction. The case can be referred is Springer v. Great Western Railway Company
where Great Western Railway Company as defendant agreed to carry plaintiffs
tomatoes from Channels Island to London, by ship to Weymouth and by train to
London. The ship was stopped at Channels Island for three days due to bad
weather. Eventually, when the ship arrived at Weymouth, defendants employees
were on strike, tomatoes were unloaded by casual laborers but it was delayed for
two days. At that time, some of the tomatoes were found to be bad. So, defendant
decided to sell the tomatoes as they felt that tomatoes could not arrive in Covent
Garden market in a good and saleable condition. When plaintiff found out about this,
plaintiff wanted to claim damages from defendant. The court was held that plaintiff
was entitled to damages because defendant ought to have communicated with the
plaintiff when the ship arrived at Weymouth to get instruction. As defendant has
failed to communicate with plaintiff when they could have done so, thus, there was
no agency of necessity. Second, the agents action is necessary where the agents
action is to prevent loss to the principal with respect of goods, such as perishable
goods. However, agency of necessity does not arise when goods are merely sold
because of inconvenience. In the case of Great Northern Railway Co. vs. Swaffield,
the plaintiff railway company had transported a horse to a station on behalf of
defendant. When the horse arrived, there was nobody to collect it. So, the plaintiff
sent it to a stable. A number of months later, the plaintiff paid the stabling charges
and then straight to recover what it had paid from the defendant. In this case, the
court was held that the plaintiffs claim succeeded even though he is involved in the
extension of doctrine of agency of necessity to include carriers of goods by land.

There was an agency of necessity because the plaintiff was found to have had no
choice but to arrange for the proper care of the horse. If there is no urgency and then
goods are sold just because they are inconvenience to the agent, then agency of
necessity does not arise. The agent who sells the goods may be liable in tort for
conversion because those goods are not belongs to the agent. For example, in case
of Sachs v. Miklos, sale of furniture done by agent without urgency happened before
it is sent to the destination or a car being sold by agent in case Munro v. Willmott and
Co. under a condition which has no urgent thing happened . Lastly, agent of
necessity has acted in good faith where note that in executing his duty under Section
142 of the Contracts Act 1950, an agent must act with reasonable prudence as he
would have acted if the goods belong to him.
In conclusion, Ali can be classified as an agent by necessity if he fulfilled the
three ways of conditions for agency by necessity.