1. John Palumbo was an agent of the First Appellant in negotiating the First Contract.

We humbly submit before the court that the Respondent will prove that John Palumbo was the
agent of the First Appellant in negotiating the First Contract.

The law of agency is governed by Part X of the Contract Act 1950. Section 135 of the Contract
Act defined an agent as a person employed to do any act for another or whom such act is done,
or who is so represented, is called the principal. An agent acts within the scope of authority
conferred by the principal. There are essentially two kinds of authority recognized by the law:
actual authority (whether expressed or implied) and apparent authority.

Actual authority further divided into either the principal may have expressed authority on the
agent, or authority may be implied. Express actual authority means an agent has actually been
expressly told that he or she may act on behalf of the principal.

Apparent authority refer to situation whereby the principals words or conduct would lead a
reasonable person in the third partys position to believe that the agent was authorized to act,
even if the principal and the purported agent had never discussed such relationship. Apparent
authority may arise in two circumstances; the first one is where there exist no relationship but the
act of agent binds principal or where there exit an agency relationship but the agent acts outside
his authority his act will bind his principal if the principal acted in a manner that suggest
approval.

In applying, although it was never discussed, John Palumbo and Haidar Nik Mat may possess the
relationship of principal-agency by looking into Haidar Nik Mats conduct when John Palumbo
acts on his behalf bringing about the first contract.
The mutual rights and liabilities between a principal and an agent reflect commercial and legal
realities. The principal is bound by the contract entered into by an agent, so long as the agent
performs within the scope of agency.


A third party may rely in good faith on the representation by a person who identifies himself as
an agent for another. If it is subsequently found that the agent was acting without necessary
authority, the agent will generally be held liable.

In applying, since Haidar Nik Mat did not deny liabilities on his part or expressed authority to
John Palumbo, it is reasonable that the third party, Ehsan Harvest to believe that John was acting
on the behalf of Haidar Nik Mat.

In Rama Corporation Ltd v Proved Tin and General Investments Ltd, Slade J states that the
fundamental condition that must exist in an agency by estoppels is a representation by word or
conduct intended to be acted upon, reliance upon the representation by there presented, change in
legal position as a result of the reliance. You cannot call in aid an estoppels unless you have
three ingredients: a representation, reliance on the representation and an alteration of your
position resulting such reliance.

To constitute a person as an agent, the three elements in Rama Corporation Ltd v Proved Tin and
General Investments Ltd must be established. The first element is a representation.
Representation exists where the principals words or conduct would lead a reasonable person in
the third partys position to believe that the agent was authorized to act, even if the principal and
the purported agent had never discussed such a relationship.

In applying, there is an element of representation established on the part of the agent, John
Palumbo where he had represented to Ehsan Harvests geologist by directing him to a place
which John Palumbo believes to be within the approved application for prospecting.
The second element is reliance upon the presentation made by the agent. It must be established
that the third party relied on the statement made. If a principal creates the impression that an
agent is authorized but there is no actual authority, third parties are protected so long as they
have acted reasonably. This is termed as agency by estoppel or the doctrine of holding out,
where the principal will be stopped from denying the grant of authority if third parties have
changed their positions to the detriment in reliance on the representation made.
In the case of Freeman and Lockyer v. Backhurst Park Ltd, it was held that the company was
liable as it had represented this director as its Managing Director and third parties relied upon the
representation. It was stopped from denying his apparent authority.
In applying, Ehsan Harvest had relied on the statement made by John Palumbo and then proceeds
with an action to bring about a contract between Ehsan Harvest and the principal, Haidar Nik
Mat. It is clear that the statement made by John Palumbo had induced Ehsan Harvest to enter into
a contract with Haidar Nik Mat.

The third element is that there is an alteration on the part of the principal regarding to their
position due to the reliance. Even if the agent does act without authority, the principal may ratify
the transaction and accept liability on the transaction as negotiated. This may be expressed or
implied from the principals behavior. For example, if the agent had purported to act in a number
of situations and the principal has knowingly acquiesced, the failure to notify all concerned of
the agents lack of authority is an implied ratification to those transactions and an implied grant
of authority for future transactions of a similar nature.

We submit that the principal, Haidar Nik Mat consciously knew about the contract made by
Ehsan Harvest and John Palumbo who had acted as agent on his behalf. Haidar Nik Mat did not
deny his liability on Johns action. Therefore he had impliedly allows Johns act. Fact of the case
showed that Haidar Nik Mat had ratified the contract by allowing such. In addition, Haidar Nik
Mat can be held liable even if it was the agent, John Palumbo who committed the fraud. The
leading case is Llyod v Grace, Smith & Co [1912] AC716,HL where it was held that a principal
is liable for the fraud committed by his agent acting within the scope of authority although the
fraud is committed for the benefit of the agent.
Since all the three elements outlined by Slate J in Rama Corporation Ltd v Proved Tin and
General Investment Ltd is established in the present case, therefore it can be concluded that John
Palumbo is an agent of Haidar Nik Mat and for that reason they are jointly liable.

If I can be of no further assistance to the court, I shall now yield the floor to my co-counsel to
proceed with the respondents submission. I thanked the court for its time and indulgence.