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Identify and elaborate upon the duties that a principal owes to an agent. Answer: An agency is the creation of a contract entered into by mutual consent between a principal and an agent. By agency, a principal grants authority to an agent to act on behalf of and under the control of the principal.
A principal owes certain contractual duties to his/her agent by an agent will serve the principal loyally and with obedient. The principal duties can be found in section 172 of Contracts Act 1950.The acts said that to pay the agent’s commission or other remuneration as agreed between the agent and the principal. Principal main duty is to pay his agent the commission or other remuneration as they have agreed unless the nature of their relationship is gratuitous one.
If there are no amounts being agreed, the agent is entitled to reasonable amount based on quantum meruit or based on how much the works have been done by the agent. For instance, cases of Tan Chiok Sing v Llian Fatt’s Sawmill Co. the case stated principal still has to pay the agent even of the contract between the principal and the third party had failed.This is because the agent had fulfilled his duties to the principal. However, there are exceptions on this section. Section 172 of Contracts Act 1950 states agent will be liable and entitled to the commission when he / she had fully fulfill the duties that been given by the principal.
Not only that, section 173 of Contracts Act 1950 states also the agent not only entitled to the commission if he is found guilty in misconduct, for example, doing a fraud or have or received a secret profits from the last duties, for example, in the case of Andrew v Ramsay.Next, the principal must not prevent or hinder the agent from earning his commission. Principal cannot do any act which would prevent his / her agent from earning his / her commission. Example of this statement, if principal appointed one agent to do a job or duties, the principal must not find or appoint other or second agent while in the negotiation. This is because the first agent is responsible to bring the parties or third party to come to a negotiation with the principal. However, if during the absence of any express agreement, principal himself may sell property or do the negotiation ven after he had appointed an agent to sell the property or doing negotiation. If this happen, the principal is not under a duty to pay any commission to the agent. For example, in one decided case, Luxor (Eastbourne) Ltd v Cooper in 1941, the case is about the payment to estate agent generally. Lastly, to indemnify and reimburse the agent for acts done in the exercise of his duties. An agent is entitled to be indemnified by the principal against any loses and liabilities incurred by agent while doing his duties.The right of indemnity arises when: 1) Where the agent has incurred losses or liabilities in performance of the contract of agency. ( Section 175 of Contracts Act 1950 ) 2) Where the agent causes injury to third party while exercising his / her duty in good faith. ( Section 176 of Contracts Act 1950 ) 3) Where the agent suffers injury during the doing his duties or neglect of principal or lack of skill. ( Section 178 of Contracts Act 1950 ) The first situation, section 175 of Contract Act 1950 governs that agent suffer loss while performing his duties.In the case of Kyall and Evatt v Lim Kim Keat in 1928, the case is about the agent was employed to sell principal’s shares. However, the principal fail to inform his agent about the share that maybe not available. Due to it, agent has to buy other shares to deliver by that, he has to pay more to complete his duties. This makes the agent suffers loss. The court said since the agent did not have any information regarding the real situation and the principal who knew about the situation and fail to inform the agent, the principal must pay to the agent to compensate the agent’s losses.However, an agent can lose his right to an indemnity when he / she acts beyond his duty or performs his / her duty in a negligent manner. In the cases of Solloway and Anor. v McLaughlin in 1938, the case is about the agent who is involve in the fraud scheme to defraud the principals. Next, section 176 of Contracts Act 1950, where an agent causes injury to third party while exercising his / her duty in good faith. In this matter, the principal is liable to indemnify the agent since the agent is acted on the principal’s instruction.The principal are also liable with the agent in wrongful act which causes injury or loss to third party. But, in section 177 of Contracts Act 1950, if the act involve in criminal matter, then principal is not liable to compensate the agent, even though the agent is acted behave on principal’s instruction. In section 178 of Contracts Act 1950, if agent suffers injury because of principal’s neglect or lack of skill, the principal is legally bound to make compensation to his agent in respect of the injury.In conclusion, the principal must fulfill his / her duties to the agent as the agent does the same to the principal. By that also, this will ensure a good relationship and with trust between the agent and the principal. Question 3 (B) April 2005 Saiful appointed Hasyim as his agent. He instructed Hasyim to sell his shop house at Jalan Perdana. According to the agency agreement, the shop house should be sold at a price of RM200,000 within a period of one year and six months. After the appointment, Hasyim suffered a heart attack.He was not able to perform his duties as an agent. Advise Saiful whether he could terminate the services of Hasyim. The issues are: 1) Whether the contract between the principal and the agent exist? 2) Whether to know what happen to duties of the principal? 3) Whether the contract between the principal and the agent have terminated? According to Contracts Act 1950, section 135 provides that an agent is a person employed to do any act for another or to represent another in dealings with the third persons.The person for whom such act is done, or who is so represented, is called the “principal”. By that, section 136 of Contracts Act 1950 tells that 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. Also, section 137 of Contracts Act 1950 tells that between the principal and third person, any person may be an agent but person who is not 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.The principal duties can be found in section 172 of Contracts Act 1950. But, the section also governs that when agent only entitled to the commission if he / she fully completed the duties. But when the agent suffer loss during his duties, the principal can apply section 175, section 176 and section 178 of Contracts Act 1950. However, section 177 of Contracts Act 1950 will apply if the agent involve in the criminal matter during exercises his / her duties to the principal, principal will not liable to pay the compensate.The principal have power to terminate the agent when the agent cannot delegate the duties. This can be done by 2 ways, by act of parties and by operation of law. Section 154 of Contracts Act 1950 proves that an agent is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency or by the business of the agency being completed; or by either the principal or agent is dying or becoming of unsound mind; or by the principal being adjudicated or declared a bankrupt or an insolvent.Based on the case, the agent cannot delegate his works as he was suffered from heart attack. Section 162 of Contracts Act 1950 tells that 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. This act also governs the agent when the agent cannot perform his duties due to his death or becoming unsound mind.But there are an exception rules to it, by section 155 of Contracts Act 1950, when 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. This can governs to the principal if he has an interest to pay out the debt. Based on the issue in the first matter, the contract between the principal and the agent exist since the principal appoint the agent according to the section 135 and section 137 of Contracts Act 1950.But according to the case, the agent, Hasyim suffered an illness, a heart attack, after being appointed by Saiful to sell Saiful’s shop house at Jalan Perdana within a period of one year and six months with an agreement the shop house should be sold at a price of RM 200,000. Unfortunately, due to the illness, Hasyim cannot perform his duties as an agent to Saiful. By that, Saiful can terminate Hasyim’s services by according to the section 162 of Contracts Act 1950. This makes the contract to be terminated or void.But, since Hasyim was ill after being appointed, this makes the Saiful was liable to compensate to Hasyim by following section 178 of Contracts Act 1950. Section 178 apply that the agent suffers injury due to the principal’s neglect or want of skill, the principal is legally bound to make compensation. Also based on section 172 of Contracts Act 1950 apply to pay the agent‘s commission or other remuneration as agreed. But if there are no amount is agreed, the agent will entitled based on quantum meruit. But only, he does his duties.Next, in this case, Hasyim, the agent cannot fulfill his duties as an agent because during Hasyim carrying the duties, he suffers sickness. By that, Saiful must fulfill his duties as the principal and Hasyim is entititle to get reimbursed by the Saiful. The duties of the principal is pay the compensation to the agent by following the section 178 of Contracts Act 1950 which the agent suffers injury due to the principal’s neglect or want of skill, the principal is legally bound to make compensation. This also can apply thorough section 172 of Contracts Act 1950 apply to pay the agent‘s commission or other remuneration as agreed.But if there are no amount is agreed, the agent will entitled based on quantum meruit. But this can be apply only when the agent fulfilled his duties. However, if Hasyim involve in criminal matter, Saiful is not entitled to compensate Hasyim even though the act is according to Saiful. This is by the act of section 177 of Contracts Act 1950. For instance, the case of Tan Chiok Sing v Llian Fatt’s Sawmill Co, this cases state the principal still have to pay his agent even the contract between the principal and third party had failed.This is because the agent had fulfilled his duties. This is to compensate the agent. However, in certain matter, principal cannot do any act which would prevent his agent from earning the commission. But if during the absence of any express agreement, Saiful himself sells his property even he had appoint agent, Hasyim to do it. In that case, Saiful is not under a duty to pay any commission to the Hasyim. To know whether the contract between Saiful and Hasyim have terminated, this can be say, the contract is terminated or void.Ever since the case state that the agent, Hasyim suffered an illness, a heart attack, after being appointed by Saiful to sell Saiful’s shop house at Jalan Perdana within a period of one year and six months with an agreement the shop house should be sold at a price of RM 200,000. Unfortunately, due to the illness, Hasyim cannot delegate his duties as an agent to Saiful. Hasyim can be terminated by operation of law by using section 154 of Contracts Act 1950 which the agent, Hasyim complete performance of the contract that being agree between him and Saiful, the principal.However, Hasyim, the agent cannot delegate his works as he was suffered from heart attack. He is entitled to get terminated. This also govern by section 162 of Contracts Act 1950 since Hasyim suffered sickness and not able to perform the duties that being given by the principal, Saiful. But if there an agreement between Saiful and Hasyim that stated Hasyim was interested in Saiful’s shop house or property, the agent cannot be terminate by the death of others party.Not only that, if Hasyim dies, his authority can be exercised by his personal representatives. However, if Saiful dies, Hasyim can still perform the duties. In conclusion, Saiful can take action by terminate Hasyim as his agent since Hasyim cannot fulfill the duties. He can be some compensation but that will happen if Hasyim have show some progression in his duties, he will get compensation as much the works he had done. But if not, there will be no remuneration for him. The contract between him and Saiful also will be considered as void.