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Whose agent?
27/11/2007 The Star ARTICLES OF LAW by BHAG SINGH
ON many occasions, a person or an entity that carries on a business may hold
itself out as an agent, or even a sole agent or exclusive agent of another.
Sometimes this is done to associate oneself with a well-known brand or a
much sought after service or product.
However, being an agent has different consequences both for the party that
deals with the agent and the agent himself. There could be situations in
which a person may say that he is an agent, or otherwise, notwithstanding
earlier declarations to the contrary.
A problem arises when such a person who may have given all the assurances
earlier now refuses to take responsibility when there is a defect in the
goods or services he has provided.
A reader bought an expensive item from a dealer who held himself out as the
sole and exclusive agent for Malaysia in relation to the item purchased.
When our reader went back to him about serious defects in the product, the
dealer said he was only the agent and therefore not liable. The buyer was
told that if he was not happy, he could sue the foreign supplier of the
product, who was the principal.
Our reader was also told by his friends that he must sue the principal
because under the law involving principals and agents, only principals can
be sued.
As a general statement of law, it is true that where a principal-agent
relationship exists, only the principal can be sued and not the agent.
However, this has to be qualified by the fact that it is necessary to
ascertain whether the person concerned is indeed in law an agent.
The law relating to agency governs the relationship between agents and
principals as well as their rights and obligations in relation to third
parties. This is set out in the Contracts Act 1950 in Part X under the
heading of Agency.
In particular, Section 135 states that 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”.
It is therefore necessary to know whether the dealer is, based on legal
principles, to be regarded as an agent or not. If he is not an agent, then
he cannot avoid responsibility for the defects in the products or services.
If the matter in dispute were to go to court, the court will need to examine
the true nature of the agreement and the subsequent dealings between the
parties, and then decide whether it establishes a relationship of agency
under the law. The general principles are laid down in Halsbury’s Laws of
England:
“Depends on true nature of relationship in order to ascertain whether the
relation of agency exists, the true nature of the agreement or the exact
circumstances of the relationship between the alleged principal and agent
will be regarded and if it is found that such agreement in substance
contemplates the alleged agent acting on his own behalf, and not as an agent
in the agreement the relation of agency will not have arisen.”
As was said in the case of Loon Karan v John & Co, the word “agent” is
frequently used to describe a relationship which is not an agency in law. In
several cases, a person described as an agent in the agreement or his letter
of appointment was held to be not an agent according to the law.
There is a distinction between a person employed to carry out an act for
another and a person who does an act at the bidding of another. In the first
place, the act done is not that of the person employed, but of him who
employs him.
In the second, the act is that of the person himself. Again, in the first
case, the person employed is an agent of the employer; in the second, he
merely acts at the request of another.
Therefore, it is based on the consideration that the status of the dealer
has to be established. If the dealer is not in law an agent, then liability
and responsibility for the defective product or services cannot be avoided
or transferred to someone else.
However, the matter can be taken further even if the dealer is an agent.
This is because there are some situations in which the agent can be
personally liable and therefore can be sued to obtain the required relief.
One such example is where the contract is made by an agent for the sale of
goods for a merchant resident abroad. In fact this exception would apply in
the context of this discussion. But it ought to be noted that this is only
for goods.
However, this is again not an absolutely unqualified principle. This is a
presumption that the law stipulates. The effect would be that if the parties
expressly agree to the contrary, the presumption may not apply or may
expressly be excluded. In such a case the agent may not be liable even
though he is acting for a principal abroad.
As such it is important when entering into a contract to be sure and clear
on the contents of the documents being signed. Overlooking specific
provisions could have the effect of giving away rights otherwise conferred
by law on a consumer.
It is also relevant to add that personal liability could be also imposed on
an agent where he does not disclose the name of the principal, or where
although he did, the principal cannot be sued.
The task of determining whether a person is an agent or not is not always
easy. This is because no consideration is necessary to create an agency and
the authority of the agent may be express or implied. |
