NATURE OF AN AGENCY

CREATION OF AN AGENCY
1.EXPRESS APPOITMENT

2. Implied Appointment
3. Ratification
• Ratification means “confirmation” or “approval” of an
unauthorised act of an Agent by his Principal.
• It can arise in any of these 2 situations:-
i. where a person who has no authority to act for Principal, has acted
as if he had the authority. .
(He is never appointed an agent. The parties need not have a pre-
existing agency relationship)
ii. where a duly-appointed Agent exceeded his authority. (Here, the
parties have a pre-existing agency relationship)
• S. 149: Where acts are done by one person on behalf of another
but without his knowledge or authority, he may elect to ratify or
disown the acts.
• This means the Principal can elect either to:-
 Ratify, i.e. accept and confirm the contract expressly or
impliedly by conduct; OR
 disown the agent’s acts.
• Effect of ratification:
 the contract becomes binding on the principal, as if it has
been performed by his authority.
 the contract takes effect retrospectively (‘backdated’)
E.g. Contract by Bruce on 1 Jan. If Arrow ratifies on 1 March, it takes
effect from 1 Jan.
• If there is no ratification: Agent personally liable on the contract
unless the 3rd party agrees to release him.
Conditions for Ratification:
• A contract can only be ratified under the following
circumstances:-
i. the act or contract must be unauthorized.
ii. At the time of the contract, the agent must profess (clearly)
to act as agent for the principal. He must not allow the third
party to believe that he is acting for himself.
Conditions for Ratification:
iii. Agent must have a Principal who is in actual existence
when the contract is made. If Principal is not, he cannot
later on ratify the contract.
Exception: A company may ratify pre-incorporation contracts
under s. 65(2) Companies Act 2016.
[Such contracts are usually made by promoters before a
company comes into existence. Promoters are people who help
to set up and register the Co.
A Co. only exists legally when it has been registered with the
Companies Commission of Malaysia and a certificate of
incorporation had been issued.
So once a Co. is incorporated, under s.65(2), it may ratify the
prior transactions/contracts. If the Co does not ratify, the
promoters will be liable personally].
CONDITION FOR RETIFACTION
Grover & Grover Vs Mathews

 Ratification on a policy of fire insurance was made after a fire

had happened, the principal ratified the agent’s act after the
premises had been destroyed by fire. Therefore the ratification
was held to be ineffective, because the ratification on agent’s act
should be done before the loss of goods.

 S153, CA 1950, any ratification made must not bring any

damages or termination of right or interest to 3 rd party.

4. Necessity


D agreed to transport P’s tomatoes from Jersey toCovent Garden

market. D’s employees were on strike so the tomatoes were
unloaded by casual workers. Some of the tomatoes were found
to be bad. D decided to sell the tomatoes locally as they felt that
the tomatoes could not arrive in Covent Garden in a saleable
condition. They did not communicate with P.
 The court held that P was entitled to damages in conversion
based on the difference between the market price of tomatoes
in Covent Garden and the priceachieved. The defence of agency
of necessity was not available to D as they failed to
communicate with P to seek further instructions when they
could have done so.
 See also. 167which provides that :It is the duty of the agent, in
cases of difficulty, to use all reasonable diligence in
communicating with his principal, and in seeking to obtain his
instructions.
5. By Estoppel or “Holding Out”
DUTIES OF AN AGENT TO HIS PRINCIPAL
 it was held that the defendant had breached his duty as agent to
the plaintiff (principal) on two reasons which are he sold the
plaintiff’s share of land below the market value and he failed to
inform the plaintiff that he had sold it to his wife.
 The court held the defendant is under the duty to act in good
faith in protecting the interest of the plaintiff and could not use
his position as agent to gain profit at the expense of the plaintiff.
Remedies for Principal when there is breach of duty
TERMINATION OF AN AGENCY