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Final Notes

Introduction to Commorcial Law (Universiti Teknologi MARA)

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SECTION A: 3 QUESTIONS (60 MARKS)

TYPE OF QUESTION: DIRECT ESSAY (C2)
TOPICS: 1) LAW OF AGENCY (20 MARKS)
2) LAW OF NEGLIGENCE (20 MARKS)
3) LAW OF CONTRACT (20 MARKS)
SECTION B: 1 QUESTION (40 MARKS)
TYPE OF QUESTION: PROBLEMATIC QUESTION (C3)
AREA: *CONSIDERATION
*CAPACITY
*INTENTION TO CREATE LEGAL RELATION
*CERTAINTY

LAW OF CONTRACT
A. CONSIDERATION
● DEFINITION
Section 2(d) of the Contracts 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 or abstain from doing, something, such act or abstinence
or promise is called a consideration for the promisee.
★ Currie V Misa
● CATEGORIES OF CONSIDERATION
Section 2(d), there are three categories of consideration: Executory, Executed, and Past
consideration.
1. Executory Consideration
★ K. Murugesu V Nadarajah
2. Executed Consideration
3. Past Consideration
★ Lampleigh V Brathwaite
★ Kepong Prospecting Ltd V A.E. Schmidt & Marjorie Schmidt
● NECESSITY OF CONSIDERATION
➔ Section 26, “An agreement made without consideration is void.”
➔ But, there are exceptions under Section 26 (a), (b), and (c)©
1. Natural love and affection (Conditions)

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Section 26 (a), “It is expressed in writing and registered under the law
for the time being in force for the registration of such documents, and it is
made on account of natural love and affection between parties
standing in any relation to each other.”
★ Re Tan Soh Sim
2. To compensate for a past voluntary act (Conditions)
Section 26 (b), “It is a promise to compensate, wholly or in part, a
person who has already voluntarily done something for the promisor.”
★ J.M Wotherspoon & Co Ltd V Henry Agency House
3. To compensate an act which the promisor was legally compellable to do
(Conditions)
Further: Section 26 (b), “It is a promise to compensate, wholly or in
part, a person who has already voluntarily done something… which
the promisor was legally compellable to do.”
4. To pay a statute-barred debt
Section 26 [c], “It is a promise in writing and signed by the person to be
charge therewith or by his agent generally or specially authorised in that
behalf, of a wholly or in part in a debt of which creditor might have
enforced payment but for the law for the limitation of suits.”
➢ Conditions:
1. The debtor made a fresh promise to pay bad the
statute-barred debt
2. The promise is in writing and signed by the promisor
(debtor) or his authorise agent
● CONSIDERATION NEED NOT BE ADEQUATE
If the promisor gets whatever he asks for in return to his promise, he is said to have
received sufficient or adequate consideration and is therefore bound by the contract.
★ Phang Swee Kim V Beh I Hock
★ Bolton V Madden
● CONSIDERATION NEED NOT COME FROM THE PROMISEE
Section 2 (d) states, “...the promisee or any other person…”
★ Venkata Chinnaya V Verikataramaya

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● WAIVER OF PERFORMANCE
➔ Under English law, a waiver of a right that is not supported by consideration is
void.
★ Pinnel's Case (1602) 77 ER 237
➔ However, in Malaysia, exception to this general rule is provided under Section
64, “Every promise may dispense with or remit, wholly or in part, the performance
of the promise made to him, or may extend the time for such performance, or
may accept instead of it any satisfaction which he thinks fit.”
➔ Methods of waiver of performance:
1. Payment of a smaller sum in discharge of a larger sum
2. Part payment by a 3rd party in discharge of a debt
★ Hirachand Punamchand V TemplesKerpa
★ Singh V Bariam Singh
3. If a person accepts an agreed sum in satisfaction of an unascertained
debt, that debt is discharged
4. Composition with creditors for the payment of a smaller sum

B. CAPACITY
● INTRODUCTION
➔ Section 10 (1) of the Contracts Act 1950, "All agreements are contract if they
are made by the free consent of partics competent to contract for a lawful
consideration and with a lawful object, and are not hereby expressly declared to
be void.”
➔ Section 11 explains on who is competent to contract, "Every person is
competent to contract who is of the age of majority according to the law to which
he is subject, and who is of sound mind, and is not disqualified from contracting
by any law to which he is subject."
➢ To be competent, one must:
1. Reach the age of majority
2. Be of sound mind
3. Not be disqualified by the law to enter into a contract
➢ There are 3 categories of people who do not have the capacity:
1. Minors or infants

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2. An insane person or person of unsound mind or an intoxicated

person
3. A person disqualified by the law such as a bankrupt or an alien
enemy
● CONTRACTS BY MINORS OR INFANTS
➔ The general rule is, by virtue of Section 10 (1), Section 11, and the Age of
Majority Act 1971, a contract by minor (ie. a person below the age of 18) is void
because minors are not competent to contract.
➔ The main purpose is to protect the minor's interest from being abused or
manipulated by unscrupulous people.
★ Mohori Bibee V Dhurmodas Ghouse
★ Tan Hee Juan V Teh Boon Keat
● EXCEPTIONS
1. Contracts for necessaries
➔ Bound by a contract if the contract is for his necessaries:
A. The nature of the goods/ services supplied. The goods or services
supplied must be suitable to the minor's condition of life.
B. The minor's actual needs. The G/S supplied must be suitable to the
actual needs of the minor at the time of sale and delivery.
★ Government Of Malaysia V Gurcharan Singh
★ Nash V Inman
★ Chapple V Cooper
➔ Section 69, "If a person, incapable of entering into a contract, or anyone whom
he is legally bound to support, is supplied by another person with necessaries
suited to his condition in life, the person who has furnished such supplies is
entitled to be reimbursed from the property of such incapable person.” (Entitles a
person to be reimbursed if he enters into a contract with a minor for necessaries)
➢ Conditions:
1. Must have been actually supplied to the minor.
2. The supplier may claim only a reasonable price which may not be
the same as the contractual price.
3. The infant is not personally liable, He is obliged to pay only if he
has the property to do so.
★ Government Of Malaysia v Gurcharan Singh

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2. Beneficial contracts/ Contracts of apprenticeship

A contract under which the minor obtains education or training for a trade or profession,
or beneficial experience in a trade or profession.
★ Doyle V White City Stadium
Section 13 Children and Young Persons (Employment) Act 1966, “Any child
or young person shall be competent to enter into a contract of service under this
Act..."
★ De Francesco V Barnum
3. Contracts for scholarships
➔ Contracts (Amendment) Act 1976 has special provision for scholarship
agreement.
➔ Section 4 of the Act provides that any scholarship agreement is binding on the
minor and shall not be invalidated on the ground that the scholar entering into
such agreement is not of the age of majority or that it lacks consideration.
➔ This amendment is clearly intended to nullify the decision in the case of
Government of Malaysia e Gurcharan Singh where it was decided carlier that
contract for scholarship is void under the Contracts Act 1950.
➔ Further, section 5 of the above Act also departed from the decision of Gurcharan
Singh's case as regards the amount that the minor has to pay in the event of a
breach of contract. In Gurcharan Singh's case, the minor only had to pay a
reasonable amount and not the actual amount of the scholarship as the court
took into consideration the duration which the minor rendered services to the
appropriate authorities.
➔ Under section 5, when there is a breach by the minor/scholar:
1. If an amount is stated in the agreement, the scholar must pay the whole
amount
2. If no such amount is mentioned in the agreement, the scholar is liable to
pay:
A. The whole amount expended by the appropriate authority under
the agreement; and
B. The whole of such a further amount it will cost the appropriate
authority to engage a person with qualifications and experience
similar to those obtained by the scholar to perform services
required of the scholar on completion of his course of study.

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4. Contracts for insurance

Insurance Act 1963 (Revised 1972), a minor over the age of 10 may enter into a
contract of insurance. However, if the minor is under the age of 16, a written consent of
the parents or guardians is essential.
5. Contracts made under the Age of Majority Act 1971
➔ Section 4 (a) of this Act, "Nothing in this Act shall affect the capacity of any
person to act in the following matters, namely, marriage, divorce, dower and
adoption..."
➔ Exceptions to the rule that all contracts by minors are void:
1. He capacity of any person to act in matters relating to marriage, divorce,
dower and adoption
2. The religion and religious rites and usages of any class of persons within
Malaysia
3. Any other written law fixing the age of majority
★ Rajeswary & Anor. v Balakrishnan & Ors.
6. Contract of agency
Section 137 of the Contracts Act, as between the principal and third party, any person
may become an agent. Hence a minor can validly be appointed as an agent to an adul
principal. However, it is not recommended to appoint a minor to be an agent as the
principal will be liable for whatever done by the minor.
● CONTRACTS BY INSANE OR DRUNKEN PERSON (VOID)
➔ Section 11 requires that a person must be of sound mind to be competent to
contract.
➔ Section 12 (1) explains on "sound mind", "A person is said to be of sound mind
for the purpose of making a contract if, at the time when he makes it, he is
capable of understanding it and of forming a rational judgment as to its effect
upon his interests".
➔ Further, Section 12 (2) states that "A person who is usually of unsound mind, but
occasionally of sound mind, may make a contract when he is of sound mind".
➔ According to Section 12 (3), "A person who is usually of sound mind, but
occasionally of unsound mind, may not make a contract when he is of unsound
mind."

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➔ Section 12 is applicable to contracts entered into by a mentally disordered

person as well as those of persons incapacitated through sickness, alcohol or
other drugs.
➔ The basis of incapacity is that the person is unable to understand what he is
doing. He is unable to form a rational judgment as to its effects upon his
interests.

C. INTENTION TO CREATE LEGAL RELATION

● INTRODUCTION
➔ May be expressed or implied from the circumstances.
➔ The Contracts Act is silent. Thus, we refer to English Common Law.
● COMMERCIAL OR BUSINESS AGREEMENT
★ Winn V Bull
★ Low Kar Yitu V Mohd Isa
★ Lim Keng Siong V Yeo Ah Tee
★ Daiman Development Sdn Bhd V Matthew Lui Chin Teck
● SOCIAL, DOMESTIC, OR DOMESTIC AGREEMENT
➔ Intention can be presumed based on the nature
➔ Presumption can be rebutted with evidence
★ Balfour V Balfour
★ Jones V Padavatton
★ Merrit V Merrit

D. CERTAINTY
● REQUIREMENT OF CERTAINTY
➔ Agreement must be clear, certain, and definite.
➔ If the agreement is vague or not certain, the contract is void.
➔ Section 30, “Agreements, the meaning of which is not certain, or capable of
being ade certain, are void.”
➔ Aspects to the issue of certainty:
1. Language used may be too vague
2. Failure to reach agreement on a vital or fundamental term of agreement
★ Karuppan Chetty V Suah Thian

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LAW OF AGENCY
● INTRODUCTION
➔ Section 135 of Contracts Act 1950 defines an "agent" as a person employed to
do any act for another or to represent another in dealings with third persons.
➔ It further states that the person for whom such an act is done, or who is so
represented, is called the "principal".
➔ Agency is the relationship which subsists between a principal and an agent,
where the agent has been authorized to act for the principal or represent him in
dealing with others or 3rd parties.
➔ Section 136, “'Any person who is of the age of majority according to the law to
which he is subject, and who is of sound mind, may employ an agent”. (Principal
must have contractual capacity)
➔ Section 137, ”Any person may become an agent, but no person who is not of the
age of majority and of sound mind can become an agent, so as to be responsible
to his principal according to the provisions in that behalf herein contained.” (This
requirement is not necessary for the agent)
➔ The principal must be responsible and bear the risks of their act.
★ Chan Yin Tee V William Jacks & Co (Malaya) Ltd 2
● FORMATION (NO SPECIFIC FORMALITY)
A. AGENCY BY EXPRESS APPOINTMENT
➔ Section 140, “An authority is said to be expressed when it is given by
words spoken or written…”
B. AGENCY BY IMPLIED APPOINTMENT
➔ Section 140 provides that, "...An authority is said to be implied when it is
to be inferred from the circumstances of the case, and things spoken or
written, or the ordinary course of dealing, may be accounted for
circumstances of the case".
➔ Situations:
1. Implied from the circumstances of the case or habit
2. Implied from the relationship of husband and wife
➢ The common law developed a presumption that the wife has her
husband's authority to pledge his credit for necessaries in all
domestic matters ordinarily entrusted to a wife for family or

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household use suited to their condition, style and standard of

living.
➢ This presumption comes under the words "circumstances” of the
case under Section 140 above.
➢ However, the husband can rebut the presumption of this implied
authority by proving that:
I. He had expressly forbidden his wife from pledging his
credit
II. He had expressly warned the supplier or tradesman not to
supply his wife with goods on credit
III. His wife was sufficiently provided with the goods of the
kind in question
IV. His wife was given a sufficient allowance for the purpose of
buying goods
V. The contract, though necessary, was unreasonable, having
regard to her husband's income at that time
★ Miss Gray Ltd. V Cathcart
3. Implied by the Partnership Act 1961
➢ Section 7, “Each partner in partnership is an agent to the firm or
other partners in the firm, when contracting in the course of the
partnership’s busines.”
★ Chan Yin Tee V William Jacks & Co (Malaya) Ltd
C. AGENCY BY RATIFICATION
➔ Relation that is created when the principal accpets or ratified the contract.
➔ Situations:
1. When an agent, who was expressly appointed by the principal,
has exceeded his given authority.
2. When a person, who has no authority to act for the principal, has
acted as if he has the authority to act on behalf of the principal.
➔ Effects:
★ Bolton & Partners V Lambert
1. The act or contract done by the agent was unauthorized i.e. either
without authority or exceedsthe given authority.

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2. The unauthorised act done by the agent must be one which is

recognised by law, not illegal.
★ Brook V Hook
3. The agent must have acted expressly as an agent to the principal
at the time of the contract. He must not contract in his own name
and must not allow 3rd parties to believe he is the principal.
★ Keighley Maxted V Co & Durant
4. When the contract was made the principal must actually be in
existence
★ Kelner V Baxter
5. The principal must have contractual capacity at the time when the
contract is madeand at the time of ratification.
★ Boston Deep Sea Fishing & Ice Co V Farnham
★ Grover & Grover V Matthews
6. The principal must have full knowledge of all material facts at the
time of ratification.
★ Marsh V Joseph
7. The principal must ratify the whole act or contract. He cannot
accept only part of the contract.
8. Ratification must be made within a reasonable time.
★ Metropolitan Asylum Board V Kingham & Sons
9. Ratification must not injure or affect the interest of the 3rd person.
D. AGENCY BY NECESSITY
➔ Section 142, “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.”
➔ Situations:
1. When a wife is deserted or is justified in leaving her husband and
has no means of support, a wife is entitled to pledge her
husband's credit for necessaries suited to the income and life
condition of her husband even against his wishes. However, she
cannot become an agent by necessity if her husband has provided
her with sufficient allowance.

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2. When a person is entrusted with another person's property, and it

becomes necessary for him due to the emergency situation, to do
something in order to preserve and to protect that property
although he has no authority to do so. (commercial agency of
necessity)
★ Great Northern Railway V Swaffield
➔ Conditions:
1. There must be a real and actual emergency
★ Great Northern Railway V Swaffleld
★ Phelps James & Co V Hill
★ Sachs V Miklos
2. The agent was entrusted with the principal's property or goods
★ Jebarra v Ottoman Bank
3. It is impossible for the agent to get the principal's instruction at
that time
➢ Section 167, “It is the duty of an agent to, in cases of
difficulty, to use all reasonable diligence in communicating
with his principal, and in seeking to obtain his instructions.”
★ Springer v Great Western Railway Co
4. The agent of necessity has acted in good faith
➔ Effects:
1. The agent will be protected from any claim of the principal.
2. The agent will be entitled to claim whatever additional cost for his
effort to protect and to preserve the safety and interest of the
principal.
3. A contract exists between the principal and the 3rd party.
E. AGENCY BY THE DOCTRINE OF ESTOPPEL/ ‘HOLDING OUT’
➔ Situations:
1. When the principal himself induces the 3rd party to believe that a
person has an authority to act for him, as if that person is his
agent. Hence, the principal is estoppelled by the law from denying
that "agent's" authority. The principal cannot avoid the liability
upon the contract being made by that "agent".

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➢ Section 190, “When an agent has, without authority, done

acts or incurred obligations to third persons on behalf of his
principal, the principal is bound by those acts or obligations
if he has by his words or conduct induced such third
persons to believe that those acts and obligations were
within the scope of the agent's authority.”
2. When a principal does not inform or announce to the 3rd party that
his agent has no authority or the agent's authority had been
terminated, but the agent still continues acting on behalf of that
principal.
★ Freeman & Lockyer v Buckhurst Park Properties Ltd
● CLASSIFICATION OF AGENCY
● AUTHORITY OF AGENT
● EFFECTS OF CONTRACT BY AGENT
● DUTIES OF AGENT
1. An agent must obey the principal's instructions
➔ Section 164, “An agent is bound to conduct the business of his principal
according to the directions given by the principal... When the agent acts
otherwise, if any loss is sustained, he must make it good to his principal, and if
any profit accrues, he must account for it.”
★ Turpin V Bilton
2. In the absence of instructions, the agent must act according to the customs which
prevail in doing business of the same kind
➔ Section 164,” 'An agent is bound to conduct... in the absence of any such
directions, according to the custom which prevails in doing business of the same
kind at the place where the agent conducts the business. When the agent acts
otherwise, if any loss is sustained, he must make it good to his principal, and if
any profit accrues, he must account for it.”
3. The agent must exercise care and diligence and use all skills he possesses in
carrying out his work.
➔ Section 165, “An agent is bound to conduct the business of the agency with as
much skill as is generally possessed by persons engaged in similar business,
unless the principal has notice of his want of skill. The agent is always bound to
act with reasonable diligence, and to use such skills as he possesses; and to

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make compensation to his principal in respect of the direct consequences of his

own neglect, want of skill, or misconduct, but not in respect of loss or damage
which are indirectly or remotely caused by such neglect, want of skill, or
misconduct.”
★ Keppel V Wheeler
4. The agent is under duty to render proper accounts when required
➔ Section 166, "An agent is bound to render proper accounts to his principal on
demand."
★ Keppel V Wheeler
5. Agent must communicate with the principal during emergency or difficulty
➔ Section 167, ‘It is the duty of an agent in cases of difficulty, to use all reasonable
diligence in communicating with his principal and in seeking to obtain his
instructions.’
6. Agent must act in good faith and no conflict of interest
➔ Section 168, “If an agent deals on his own account in the business of the
agency, without first obtaining the consent of his principal and acquainting him
with all material circumstances which have come to his own knowledge on the
subject, the principal may repudiate the transaction, if the case shows either that
any material fact has been dishonestly concealed from him by the agent, or that
the dealings of the agent have been disadvantageously to him.
➔ Section 169, “If an agent, without knowledge of his principal deals in the
business of the agency on his own account instead of on account of his principal,
the principal is entitled to claim from the agent any benefit which may have
resulted from the transaction".
➔ Acting in good faith and no conflict of interest means:
A. The agent cannot become a party to the transaction with the principal.
B. The agent cannot act on behalf of both parties to a transaction at one time
without their consent.
C. The agent must disclose everything that he knows, to the principal
relating to all material facts of the contract. He is also not allowed to
disclose his principal's secret to the others.
D. All monies and profits should be put into the principal's account. The
agent cannot mix them with his own money or property
★ Armstrong V Jackson

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➔ If the principal discovers that he is contracting with his own agent, and the
principal does not agree to it, the principal has the right under section 168 to
repudiate the contract even though the agent may have acted fairly in the
transaction.
★ Wong Mun Wai V Wong Tham Fatt
★ Fullwood V Hurley
7. Agent is under duty not to make any 'secret profit' out of the performance of his
duty
➔ Section 168, "If an agent deals on his own account in the business of the
agency, without first obtaining the consent of his principal and acquainting him
with all material circumstances which have come to his own knowledge on the
subject, the principal may repudiate the transaction, if the case shows either that
any material fact has been dishonestly concealed from him by the agent, or that
the dealings of the agent have been disadvantageous to him.
➔ Remedies:
A. The principal may repudiate the contract which was made on his behalf
by the agent with a 3 party. Refer to Section 169 above.
★ Shipway V Broadwood
B. The principal may recover the amount of the secret profit.
★ Tan Kiong Hwa V Andrew S.H. Chong
C. The principal may refuse to pay the agent's commission or other
remuneration. If the commission has been paid to the agent the principal
is entitled to claim it back.
★ Andrews V Ramsay & Co
D. The principal may dismiss or terminate the agent's authority for breach of
duty
★ Boston Deep Sea Fishing & Ice Co v Ansel.
E. The principal may sue both the agent and the 3rd party who gave the
bribe for the losses suffered.
★ Mahesan v Malaysian Government Officers Co-Operative
Housing Society
➢ Section 17 of the Malaysian Anti-Corruption Commission Act
2009 provides that it is an offence if a person who is an agent
accepts, obtains, or agrees to accept/obtain any gratification as an

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inducement/ reward in relation to the principal's business. The

person giving the gratification or bribe also commits an offence
under the same section.
➢ Section 18 makes the agent liable for an offence of deceiving the
principal.
➢ The punishment is provided under Section 24 where the agent
(who receives the secret profit) or the third party (who gives the
secret profit) shall be liable to imprisonment not exceeding 20
years and a fine of not less than 5 times the sum or value of the
secret profit.
8. An agent is under duty to pay to his principal all sums received on his behalf
➔ Section 170, “An agent may retain, out of any sums received on account of the
principal in the business of the agency, all moneys due to himself in respect of
advances made or expenses properly incurred by him in conducting such
business, and also such remuneration as may be payable to him for acting as
agent.”
➔ Section 171, “Subject to the deductions specified in section 170, the agent is
bound to pay to his principal all sums received on his account'.
➔ Any amount received by the agent on behalf of the principal must be paid to the
principal. However, this is subject to Section 170, where the agent is entitled to
deduct any sum from the principal's money for the payment of the followings:
A. Any sums owed to the agent in respect of advances made or expenses
incurred by the agent in conducting the business.
B. Any commission or remuneration payable to the agent.
➔ Section 174 gives the agent the right to retain his principal's property in his
possessios until his remuneration is paid. This right is called 'lien'. However, the
lien gives only a right to retain possession and the agent has no power to sell the
goods except with the consent of the principal.
9. An agent cannot delegate his authority to another person
➔ This is based on the maxim "Delegatus non potest delegare" which means 'a
delegate cannot delegate.
➔ Section 143, “An agent cannot lawfully employ another to perform acts which he
has expressly or impliedly undertaken to perform personally, unless by the

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ordinary custom of trade a sub-agent may, or, from the nature of the agency, a
sub-agent must, be employed .
➔ Exceptions:
1. Where the delegation of the authority is approved by the principal.
★ De Bussche V Alt.
2. Where it is presumed from the conduct of the parties that the agent would
have power to delegate his authority to another person to perform his
duty.
3. Where the custom or norm of the business allows delegation
4. Where there is urgency. necessity or unforeseen emergency sustained by
the agent.
5. Where the nature of the agency is such that delegation of authority to
another person is necessary to complete the business.
6. If the act to be done is purely ministerial or clerical which does not involve
any discretion or professional skill of the agent.
★ Allam & Co V Europa Poster Services Ltd
★ John Mccann & Co V POW
● DUTIES OF PRINCIPAL
1. Principal must pay the commission or other agreed remuneration to the agent
➔ Section 172, “In the absence of any special contract payment for the
performance of any act is not due to the agent until the completion of the act, but
an agent may detain moneys received by him on account of goods sold, although
the whole of the goods consigned to him for sale may not have been sold or
although the sale may not be actually complete.”
➔ Section 173, “An agent who is guilty of misconduct in the business of agency is
not entitled to any remuneration in respect of that part of the business which he
has misconducted.”
★ Andrews v Ramsay
2. Principal must not wilfully prevent or hinder the agent from earning his
commission.
➔ Examples where the principal is said to have wilfully preventing or hinder the
agent from earning his commission:
A. The principal refused to accept the contract made by the agent

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B. The principal appointed another agent to carry on the same duty, to

deprive the original agent from earning his commission.
3. Principal must indemnify and reimburse the agent for acts done in the exercise
➔ Section 175, “An employer of an agent is bound to indemnify him against the
consequences of all lawful acts done by the agent in the exercise of the authority
conferred upon him.”
★ Hichens, Harrison, Woolston & Co V Jackson & Sons
➔ The duty to indemnify arises in the following circumstances:
➢ The agent himself has incurred losses or liabilities in performance of his
duties.
★ Kyall & Evatt V Lim Kim Keat
➢ The agent causes injury to 3rd party in the execution of his authority
Section 176, “Where one person employs another to do an act, and the
agent does the act in good faith, the employer is liable to indemnify the
agent against the consequences of that act though it causes an injury to
the rights of third persons.”
➢ The agent suffers injury during the course of his duties due to the
principal's negligence.
Section 178, “The principal must make compensation to his agent in
respect of injury caused to the agent by the principal's neglect or want of
skill.”
● TERMINATION
❖ TERMINATION BY ACT OF THE PARTIES
*WAYS:
1. By mutual consent Both parties (principal and agent) may terminate their
agency relationship by mutual
2. By unilateral revocation or termination by the principal. The agency may
be terminated by the act of the principal revoking the agent's
➔ Section 154 provides that “An agency is terminated by the
principal revoking his authority....”
➔ Section 156, “The principal may, save as is otherwise provided by
the last preceding section, revoke the authority given to his agent
at any time before the authority has been exercised so as to bind
the principal.”

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➔ Section 160, “Revocation and renunciation may be expressed or

may be implied in the conduct of the principal or agent,
respectively.”
➔ Section 159, “Reasonable notice must be given of such
revocation or renunciation; otherwise the damage thereby
resulting to the principal or the agent, as the case may be, must
be made good to the one by the other.”
★ Sohrabji v Oriental Security Assurance Co
★ Syarikat Jaya v Star Publication (M) Bhd
➔ Section 158, “Where there is an express or implied contract that
the agency should be continued for any period of time, the
principal must make compensation to the agent, or the agent to
the principal, as the case may be, for any previous revocation or
renunciation of the agency without sufficient cause.”
➔ Exceptions:
1. When the agent himself has an interest in the property,
which is the subject matter of the agency
➢ Section 155, “Where the agent has himself an
interest in the property which forms the
subject-matter of the agency, the agency cannot, in
the absence of an express contract, be terminated
to the prejudice of such interest.”
★ Smart v Sanders
★ Firth v Firthst
2. After the authority has been partly exercised by the agent
➢ Section 157, “The principal cannot revoke the
authority given to his agent after the authority has
been partly exercised, so far as regards such acts
and obligations as arise from acts already done in
the agency.”
★ Read v Anderson
➢ Section 161, “The termination of the authority of an
agent does not, so far as regards the agent, take
effect before it becomes known to him, or so far as

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regards third persons, before it becomes known to

them.
★ Pichappa Chitty v Hj. Jah
★ Trueman v Loder
3. By unilateral renunciation by the agent
➔ Section 154, "An agency is terminated... by the agent renouncing
the business of the agency…”
❖ TERMINATION BY OPERATION OF LAWS
*CIRCUMSTANCES:
1. By the performance of the contract of the agency.
Section 154, “An agency is terminated... by the business of the agency
being completed…”
2. By the expiration of the period fixed or implied in the contract of agency.
3. By the death of either the principal or the agent.
Section 154, “An agency is terminated by either the principal or agent
dying…”
➢ Exceptions:
A. The death of the principal would not terminate the agency
if the agent has an interest in the property, which is the
subject matter of the agency (Section 155)
B. Termination by death of the principal is only effective upon
the agent having notice of the principal's death (Section
161).
C. When the principal dies, the agent must take reasonable
steps to protect and preserve the interest of the principal
(Section 162).
4. By the subsequent insanity of either the principal or the agent.
➔ Section 154, “An agency is terminated... by either the principal or
agent...becoming of unsound mind....”
➔ Section 162, “When an agent is terminated by the principal dying
or becoming of unsound mind, the agent is bound to take, on
behalf of the representatives of his late principal, all reasonable
steps for the protection and preservation of the interests entrusted
to him.”

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5. By the bankruptcy or insolvency of the principal.

Section 154, “An agency is terminated...by the principal being
adjudicated or declared bankrupt or insolvent.”
6. By the happening of an event which renders the agency unlawful.

LAW OF NEGLIGENCE
● DEFINITION
Negligence is defined in Winfield & Jolowiez on Tort as the breach of a legal duty to
take care which results in damage, undesired by the defendant, to the plaintiff.
● ELEMENTS OF NEGLIGENCE
1. The defendant was under a legal duty of care to the plaintiff
2. There had been a breach of that duty
3. As a result the plaintiff has suffered damage
● DUTY OF CARE
★ Donoghue V Stevenson
★ Home office V Dorset Yacht Co Ltd [1970] AC 1004
★ Sathu V Howthornden Rubber Estate Co. [1961] MLJ 318
★ Yachuk V Oliver Blais Co.
➢ Standard of care depends upon these criteria:
1. The extent to which risk could have been foreseen
2. The magnitude of the risk
3. The importance of the object to be attained, relative to the measures
necessary to eliminate the risk
4. Usual and approved practice
● BREACH OF DUTY
*The conduct of the reasonable man is subject to the concept of risk:
1. Magnitude of the risk - Probability of injury occurring
★ Bolton V Stone
2. Seriousness of the injury
★ Johnstone V Bloomsbury Hospital Management
★ Elizabeth Choo V Government of Malaysia
3. Practicality or cost of precautions to the defendant
★ Latimer V [Link] & ORS V Wan Hanafi [1975] MLJ 203
4. General and approved practice

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● DAMAGE
★ School Division of Assiniboine South V Hoffer
★ Bourhill V Young
★ Wagon Mound [1961] AC 388
★ Reasonable foresight test is dependent on two principles:
1. Damage must be foreseeable as consequences of the defendant’s
conduct.
2. The type of damage must be foreseeable.
● RES IPSA LOQUITUR (LET THE THING SPEAKS FOR ITSELF)
*Requirement needed to invoke this maxim:
1. The thing that causes the damage must be under the control of the defendant
or his servants.
2. The damage will not ordinarily happen if that defendant takes adequate
precaution.
3. The cause of the accident is not known.
★ Scott V London & St. Katherine Dock Co.
★ Mahon V Osbourne [1939] 2 KB 14
● DEFENCES TO NEGLIGENCE
1) Act of God
2) Defence of Property
3) Mistake
4) Discipline
5) Necessity
6) Self Defence
7) Inevitable Accident
8) Contributory Negligence
★ Froom V Butcher
★ Henley V Cameron
9) Volenti Non Fit Injuria - “No harm done to one who consents”

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