AGENCY

4.1.2 Explain the creation of an agency

Express appoinment

Section 139 states that the authority of the agent may be express or implied. Express appointment by the principal can be done either in writing or in oral form, as stated in section 140 CA

Implied appointment
According to section 140 CA, an agency may be implied/ inferred from the circumstances of the case, and things spoken or written, or in the ordinary course of dealing. Example A owns a shop in Kajang, living himself in Kuala Lumpur, and visiting the shop occasionally. The shop is managed by B, and he used to order goods from C in the name of A, for the purpose of the shop, and of paying for them out of As fund, with As knowledge.
B has an implied authority from A to order goods from C in the name of A for the purposes of the shop.

Situations where a person is considered as an agent through implied appointment : i. in partnership business In partnership business, a partner is considered as agent to another partner. It means that a partner has an authority to make a contract on behalf of another partner. The application of implied authority in partnership business can be seen in the case of Chan Yin Tee v William Jacks & Co, where Chan and Yong (a minor) were registered as partners. Chan had represented himself to the third party, as Yongs partner. The supplier had supplied goods to Yong but not paid for. The legal action was taken against both Chan and Yong. The court held that since Chan had held Yong out as his agent/ partner who had the authority to do things on his behalf. Chan, therefore was liable for the price of the goods supplied.

ii. relationship between the husband and wife Agency relationship exists between the husband and his wife by implied appointment. The wife is an agent to her husband, thus, she is considered as having authority to buy things or goods on credit using her husbands name, if the goods are suitable and necessary to her living. It means that the husband will liable for the price of the goods ordered.

This presumption can be rebutted i.e the husband can deny his liability if he can prove that the wife is not entitled to buy goods using his name. In these circumstances, the wife cannot use her husbands name to buy goods on credit; i.e:
he expressly forbids his wife to pledge his credit he expressly warned the tradesman not to supply his wife with goods on credit the wife was sufficiently provided with the goods the wife was given sufficient allowance to buy goods without pledging her husbands credit the order was unreasonable (not suitable to her living)

Estoppels
Agency by estoppel arises when a principal, by his words or conduct, allows the third party to believe that a person (actually not an agent) as his agent. The third party made a contract with the person, acting so, believing that he is the agent to the principal. The principal is precluded or will be estopped from denying the authority of the agent. In the case of Freeman & lockyer v Burkhurst Park Pty Ltd, Mr Kapoor was an officer in a company. Even though he had no authority to act, he acted like the directors in the company. All the directors did not reject the contracts entered into by him. He hired surveyors and architects to work for the company. When they claimed the payment, the company refused to pay and claimed that the appointment made by Kapoor was not valid as he did not have an authority to do so. The court held that the company was estopped from denying Kapoors authority to act for them. The company was liable to pay because the third party believed that Kapoor had the authority to act on behalf of the company.