From the case above, we find out that Ali was given the responsibility to sell the antique clock with the price where it should not less than RM 20,000. Thus, Ali delivered the antique clock to Abu with the instructions where they can’t sell the clock for less than RM 20,000.
So, according to the Contract Act 1950 of law of agency in Malaysia, Ali is known as the (principal) and Abu is known as (agent) where it is clearly stated that they have relationship under the section 135 to section 191. So, according of the section 135 of Contract Act 1950, Abu is agent that appointed to facilitate or negotiate a transaction on behalf of the principal, the agent owes a duty to the principal to act in the principal’s best interests within the authority of the agent. While Ali is principal who authorizes an agent to act to create one or more legal relationships with athird party and Tai Poo is the third party who buys the antique clock from Abu.From the statement above, it is clear that Abu buys the antique clock from Ali with the price of RM 20,000. Then, Abu sells the same antique clock to the third party Tai Poo with the price of RM 25,000. In this case, Ali is the principal that assigned the responsibility to sell the antique clock to his agent Abu with the price of RM 20,000 and obtain the money from Abu after sold it. While Abu is known as the mercantile agent who is authorizes to purchase and liquidate assets, and to raise funds by using the principal’s assets as loan collateral. Abu sell the antique clock that belongs to Ali without disclosing the name or existence of the principal in the common law to the other principal.
Tai Poo is considered as the third party in this case who buy theantique clock from the agent and pay the amount of RM25, 000.In this situation, as the agent Abu sell the antique clock with Tai Poo with the price ofRM25, 000. Then he paid the total amount of RM 20,000 to his principal Ali and the balance money of RM 5,000 is kept by Abu himself. According to Section 149 of Contract Act 1950 it is mentioned that where acts are done by one person on behalf of another but without his knowledge or authority, he may elect to ratify or to disown the acts. If he ratifies them, the same effects will follow as if they had been performed by his authority. So, it’s clear that ratification exists between both parties (agent and principal). Thus, the contract is void because Ali as a principal that unaware of the business authority that happens between Abu and Tai Poo where Abu sells the antique clock with the exceeding price of RM25, 000.
Ali can reject the deal between them because Abu has exceeded his authority.The principal-agent relationship is an arrangement in which one entity legally appoints another to act on its behalf. In a principal-agent relationship, the agent acts on behalf of the principal and should not have a conflict of interest in carrying out the act. In this case, the deal only made by the agent, Abu and not from the principal, Ali’s approved mean that the relationship of principal and agent is created retrospectively. The agency contract only be ratified under the conditions including the contract done by agent was without authority or exceeding the authority. Second, the agent must at the time of the contract, expressly act as agent for the principal in Section 149 and the third is contract or act must be recognized by law and not illegal.
For an example case Keighley Maxted & Co. v. Durant 1901 AC 240, an agent was authorized by the appellant (principal) to buy wheat at a certain price. The agent had exceeded his authority and bought it at high price. However, the agent contracted in his own name.
Finally, the principal was not liable for an act of an agent who did not profess to be an agent when he entered into the contract. In this case the deal is happened without the knowledge of principal where Abu as the agent sell the antique clock to Tai Poo the third party with the price of RM 25,000Other than that, according to the section 164 Contract Act 1950, an agency must obey the principals’ instructions if failed to obey; breach of contract of agency and the agent is liable for any loss sustained by the principal. As a result was not to follow instruction that against the law. In this situation, Abu has completely obey the instruction as an agent where he sold the antique clock with the price that is not less than RM20, 000 but he buys the problem s he buy the clock himself with the price of RM 20,000 from his principal Ali and sell it to Tai Poo the third party with the price of RM25,000.While in Section 141 of Contract Act 1950 it is clearly mentioned that an agent having authority to do an act and to do all the lawful things which are necessary. In addition, an agent having authority to carry on a business and has authority to do every lawful things that necessary for that purpose or the usually done in the course of conducting such business.
In this case, Ali as a principal where passed the antique clock to Abu his agent with the instruction that it can’t be sold less than RM 20,000. But Abu sell it to RM 25,000 where he didn’t follow the instruction. If Abu sells the antique clock with the stated price thus the contract is valid.So it is clear that there are so many sections that are included in the contract of law.
A lot of references can be made in order to find out the right decisions.