Transcript Slide 1

Agency
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Outlines
 Agency
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Introduction
Creation of Agency
Duties of principal and agent
Termination
 Insurance
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Introduction
Nature of a contract of insurance
Insurable interests
Material facts
Exemption clauses
Definition
 Part X, CA 1950
 S 5 Civil Law Act 1956
 S 135 CA 1950
 An “agent” is a person employed to do any act for another or to
represent another in dealings with third persons. The person for
whom such act is done, or who is so represented, is called the
“principal”.
Creation of Agency
 CAPACITY
 S 137 CA 1950 - As between the principal and third persons,
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.
 CREATION of Agency?
(a) express and implied appointment
(b) ratification
(c) by necessity
(d) by estoppels
(a) Agency by express and implied appointment
 S 140 CA 1950
 An authority is said to be express when it is given by words spoken or
written. 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 circumstances of the case
 S 141(1) CA 1950
 An agent having an authority to do an act has authority to do every lawful
thing which is necessary in order to do the act.
 S 141(2) CA 1950
 An agent having an authority to carry on a business has authority to do every
lawful thing necessary for the purpose, or usually done in the course of
conducting such business.
(b) By Ratification
1. agent who was duly appointed has exceed his authority; s 149
CA 1950
 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.
2.
agent who has no authority but acted as if he has the authority; s
188 CA 1950
 A person untruly representing himself to be the authorized agent of another,
and thereby inducing a third person to deal with him as such agent, is liable, if
his alleged employer does not ratify his acts, to make compensation to the
other in respect of any loss or damage which he has incurred by so dealing.
 Circumstances of ratification:
Third party knew he was acted on behalf of his principal and not for
himself. (Keighley (1901))
2) Principal must really existed (Kelner 1866)
3) Principal must have full k/ledge of all material facts:
1)
s. 151 CA 1950 - No valid ratification can be made by a person whose knowledge
of the facts of the case is materially defective.
4)
Principal must ratify the whole act or contract:
s. 152 CA 1950 - A person ratifying any unauthorized act done on his behalf
ratifies the whole of the transaction of which the act formed a part
5)
Ratification must not injure third party:
s. 153 CA 1950 - An act done by one person on behalf of another, without that
other person’s authority, which, if done with authority, would have the effect of
subjecting a third person to damages, or of terminating any right or interest of a
third person, cannot, by ratification, be made to have that effect.
6)
Within reasonable time
(c) Agency by necessity
s. 142 CA 1950: an emergency to protect principal from loss.
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.
How andWhy?
(a) Principal must be contacted (Springer)
(b) to prevent loss
(c) acted in good faith
(d) Agency by estoppel (Liability of principal inducing belief that
agent’s unauthorized acts were authorized)
s. 190 CA 1950
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.
Example
A consigns goods to B for sale, and gives him instructions not to sell under a
fixed price. C, being ignorant of B’s instructions, enters into a contract with B
to buy the goods at a price lower than the reserved price. A is bound by the
contract.
Duties of principal and agent
 S 164 – 178 CA 1950
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2.
3.
4.
5.
6.
7.
S 164 CA 1950: Agent is bound according to principal
direction. If acts otherwise, responsible for the loss
S 177 CA 1950: criminal act, principal not liable expressly or
impliedly.
S 164 CA 1950: obey instruction. Agent acted acc to usage if
no complete instruction
S 166 CA 1950: to render proper accounts when required
S 171 CA 1950: pay principal all sums received; & retain /
deduct commission & remuneration– s 170 CA 1950
S 167 CA 1950: communicate with principal; use all r/able
diligence & discretion if x contact – s 142 CA 1950
S 143 CA 1950: Not delegate his authority to oths
 Maxim: delagatus non potest delegare
 Exceptions:
1.
2.
3.
4.
5.
6.
Principal approves to the delegation
It is presumed that the agent have power to delegate
Custom & usage permits so
Nature of the agency requires another person
Necessity for unforeseen emergency
Act done is purely clerical and not discretion
 Fiduciary Duties
1. X disclose confidential info
2. X secret profit
 Remedy if happen
1. S 168 CA 1950: Voidable
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.
2.
S 169 CA 1950: claim secret profit
If an agent, without the 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 to him from the transaction.
3.
4.
5.
Refuse to pay commission
Agency revoked without notice
Sue 3rd party for damage / loss
Duties of principal to his agent
 S 172 CA 1950: pay commission (loss or profit)
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.
 S 173 CA 1950: losses his right if performed his duty
negligently
An agent who is guilty of misconduct in the business of the agency is not
entitled to any remuneration in respect of that part of the business which he
has misconducted.
Right to indemnification : Recover commission & money paid
(on behalf of principal) & all losses suffered by him.
1. S. 175
 The employer of an agent is bound to indemnify him against the
consequences of all lawful acts done by the agent in exercise of the
authority conferred upon him.
2.
S.176 CA 1950
 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 cause an injury to the rights of third
persons.
3.
When?
 acted according to instruction & auth
 turbulence while on duty
Termination
 2 ways:
1. the act of the parties
2. by operation of law
3. by frustration
1. act of the parties
 S 154 - 163 CA 1950:
 Revocation by Principal: S 154 CA 1950
An agency 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 dying or becoming of unsound mind; or by the
principal being adjudicated or declared a bankrupt or an insolvent.
 Revocation (notice) by Agent: s 159 CA 1950
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.
 S 158 CA 1950 – premature termination:
 Loss his commission
 Expenses
 Damages
 S 154 CA 1950: termination by performance
2. by operation of law
 S 154 – revokes
a) Principal/Agent dies (s 154 CA 1950)
b) Principal/Agent becomes insane (s 154)
c) Principal bankrupt
d) Amendment of relevant law
3. by frustration
a)
Unlawful agency
Insurance
Introduction
 Insurance Act 1996
 Common Law (S 5 Civil Law Act 1956)
 Definition of insurance contract:
One person (Insurer) agrees to indemnify another person (the insured)
against a loss which may arise on the occurrence of some event or to pay a
certain definite sum of money on the occurrence of the particular event.
Nature of Insurance
 Premium – the consideration paid to the insurer by the
insured either as lump sum or periodically.
 Risk – is the loss which is being insured against, eg: theft,
fire, accident etc.
 Policy – document issued by insurer (terms &
conditions) when parties enter into a contract of
insurance.
 Classifications:
 S 4(1) IA 1996 – 2 classes: life business & general business
(a) life business, which in addition to all insurance business
concerned with life policies shall include any type of insurance
business carried on as incidental only to the life insurer’s business;
and
(b) general business, which means all insurance business which is
not life business. (all insurance business example: marine, fire,
accident, motor & aviation).
 Contract of indemnity – the insured entitled to be
indemnified, i.e. be compensated or recover actual loss.
 Indemnity – actual loss only, not making money.
Elements of Insurance Contract
1. offer & acceptance
 offer – the insured fill the proposal form
 Acceptance : insurer agrees n satisfies material fact given
 Premium & policy as agreed by the insurer
2. consideration
 Premium paid without fail.
 Insurer: ready to indemnify
3. Intention
 4. Capacity
 Minor 10 – >16 yrs may affect a life policy upon his own life.
 16 yr & below: writing consent from parent
 16 yr & above: as adult.
 S 153(1) IA 1996 – Capacity of minor to insure
(1) Notwithstanding any law to the contrary, a minor who has attained the age of ten
years but has not attained the age of sixteen years, with the consent in writing of his
parent or guardian—
(a) may effect a life policy upon his own life or upon another life in which he has an
insurable interest; or
(b) may assign the life policy on his own life.
(2) A minor who has attained the age of sixteen years—
(a) may effect a life policy upon his own life or upon another life in which he has an
insurable interest; or
(b) may assign the life policy on his own life, and is as competent in all respects to
have and exercise the powers and privileges of a policy owner in relation to a life
policy of which he is the owner as he would be if he had attained the age of majority.
 5. certainty
 Risk very uncertain, ordinary contract= voidable
 Insurance contract? To protect risk.
 Cover note = actual policy
 Chop Eng Thye v MNI (1977): fire, claim after 1 year.
 S 2 IA 1996
 Policy – insurance policy and includes a cover note or a
contract of insurance, whether or not embodied in or evidenced
by an instrument in the form f an insurance policy & references
to:
 Issuing policy (formal or not)
 A policy of the insurer (liability, transfer of liability etc)
 Borhanuddin v AIA (1987)
 Paid 1st month with proposal form, policy still not documented
 Held; insurer liable, payment was premium & policy will be
sent.
Agent
 Who? S 2 IA 1996 –
 a. solicits a proposal on behalf of the insurer
 b. offers to act on behalf of the insurer in negotiating a
policy
 c. does any act on behalf of insurer (issuance, renewal or
continuance)
 S 151(1) IA 1996 – knowledge of, and statement by
insurance agent: shall be deemed to be the kledge of insurer.
 effect: insurer liable.
 Agent filling proposal form, inaccurate statement or
misstatement?.
 Ong Eng Chai v China Insurance Co Ltd (1974): def (insurer)
pleaded the policy void as contained untrue statement. Held:
untrue statement avoid the contract
 China Insurance v Ngah ah Kau (1972): plaintiff left it to the
agent. Fact that he ever made a claim more that three yrs prior
to the proposal. Held; UNTRUE statement is condition but
subject to judge whether the question of material facts or not.
 S 151(3)(a) IA 1996 – no liability for insurer if collusion
between agent and proposer
 S 151(3)(b) IA 1996 – insurer must take duty of care to
inform , bring to the kledge (insured & public) if terminate
his agent
Insurable Interests
 A person is said to have insurable interest if he will suffer loss
in the event of property being destroy.
 Lucena v Craufurd (1806) – loss in term of financial
 Chong Soo Sin v I&C Insurance (1992) selling of car based on ‘Sale
or return’. Accident, whether still have insurable interest? Held:
yes, still x transfer.
S 152(1) IA 1996 – life insurance not affecting other person

A life policy insuring the life of anyone other than the person effecting the
insurance, or the life of a person mentioned in subsection (2), shall be void
unless the person effecting the insurance has an insurable interest in that life
at the time the insurance is effected and the policy moneys payable, or where
the policy moneys are payable in instalments, the discounted value of all
future instalments under the life policy, shall not exceed the amount of that
insurable interest at the time the event resulting in payment of policy moneys
occurs.
S 152(2) IA 1996 – except:

a.
b.
c.
spouse, child under the age of majority.
Employee
A person wholly or partly depends on him.
Ultimate Good Faith
 maxim: Uberrimae fidei – ultimate good faith: contracting
parties disclose to each other all info which would influence
either’s party decision to enter contract (material fact)
 S 150(1) IA – the insured disclose:(a) he knows to be relevant to the decision of the insurer on
whether to accept the risk or not and the rates to be applied;
(b) a reasonable person in the c/stances could be expected to
know to be relevant.
 S 150(4) IA – the insurer cannot:
 (a) make a statement which is misleading, false or deceptive;
(fraud or otherwise)
 (b) fraudulently conceal a material fact;
 (c) use sale brochure or sale illustration not authorised by the
insurer (by agent)
 I million ringgit penalty
 Asia Hotel Sdn Bhd v Malayan Insurance (M) Sdn Bhd (1992) – insurer
repudiate the contract if the insured refused to disclose.
 S 150(5) IA – if insurer fail to follow s 150(4) a –c, the insured
can avoid the contract.
No licensed insurer, insurance agent, licensed financial adviser or financial
adviser’s representative, in order to induce a person to enter into or offer to
enter into a contract of insurance with it or through him—
a)
shall make a statement which is misleading, false or deceptive, whether
fraudulently or otherwise;
b) shall fraudulently conceal a material fact; or
c)
in the case of an insurance agent, a licensed financial adviser or a financial
adviser’s representative, use sales brochure or sales illustration not
authorised by the licensed insurer.
 Fact must be material
 S 150(1) IA – so material as the insurer will decide to accept
the risk or not and the rates and terms to be applied.
(1) Before a contract of insurance is entered into, a proposer shall disclose
to the licensed insurer a matter that—
(a) he knows to be relevant to the decision of the licensed insurer on
whether to accept the risk or not and the rates and terms to be applied; or
(b) a reasonable person in the circumstances could be expected to know to
be relevant.
Material facts
 S 147(5)AI – means a matter of fact which, if known by the
insurer, would have led to its refusal to issue a life policy to
the owner OR would have led it to impose terms less
favourable to the policy owner than those imposed in the life
policy.
 Abu Bakar v Oriental Fire (1974) – fire of premises where
there were 4 grinding mills (x disclose). Held: proposer
in particular c/stances did not know / expect as material
fact. His failure to disclose shd x be regarded as breach
(reasonable man test)
 S 150(2) IA – proposer not have duty to disclose:
(a) diminishes the risk to the insurer
(b) is of common k/ledge;
(c) insurer knows or in the ordinary course of his business
ought to know;
(d) insurer has waived any requirement for disclosure
 S 147(1) IA – life insurer shall not dispute liability by reason
only a mis-statement of age.
 147(2) & (3) IA – may vary the sum insured by ; and the
bonuses allotted to (if any).
 S 147(4) IA – insurer shall not dispute the validity of life
insurance after 2 yrs
 Except: statement was material and was fraudulently made
by the owner.
 Subrogation :
 Insurer sue third party who cause the loss
 Teo Kim Kien v Lai Sen (1980) – accident by third party (who
service the car). Held: can claim.
 Exemption clause :
 Exempt the insurer from liability.
 Tan Keng Hong v Fatimah (1974) – death of forester (who was
getting a free lift) when the lorry overturned. Exemption clause
: x protection for death not employee.
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