3.

2 ISSUE 2

Rao gave Chow RM 600 as a commission for purchasing the car from him.

LAW 2

First and foremost, according to Section 168 of the Contract Act 1950, it states that
“Right of principal when an agent deals, on his own account, in business of the agency
without the principal's consent.” It means that 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.

As example, in the case of Andrews v Ramsay and Co [1903] 2 KB 635, the principal
may refuse to pay the agent his commission or other remuneration. In this case, Andrews as
the principal or plaintiff had decided to instructed the defendant or agent which is Ramsay
and Co in order to sell his property. The plaintiff also has agreed to pay 50 pounds as a
commission to the defendant. The defendant received 100 pounds from a purchaser as
deposits for the property. The defendant paid 50 pounds to the plaintiff and kept the other 50
pounds in payment of his commission with the plaintiff's consent. Later, the plaintiff
discovered that the defendant received 20 pounds as commission from the purchaser. The
plaintiff sued to recover the 20 pounds and also the 50 pounds he had paid the defendant. It
was held that he could recover both sums.

Besides, according to Section 169 of Contract Act 1950, it states that “Principal’s
right to benefit gained by agent dealing on his own account in business of agency”. It means
that 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.

As example, in the case of Tan Kiong Hwa v Andrew S.H.Chong [1974] 2 MLJ 188,
it shows that it shows that it is the duty of an agent to not receive any secret profits in any
way. In this case, Tan Kiong Hwa is the principal who is the plaintiff while Andrew
S.H.Chong is the agent who is the defendant. The defendant was the managing director of
house agency company. The plaintiff has brought a flat from that company. The plaintiff later
authorized the defendant as his agent to seek the flat for 45,000 pounds. However, the
defendant sold the flat for higher price in 54,000 pounds. The difference of 9,000 pounds was
credited to the company. In the principle of law, the court held that the plaintiff was entitled
to recover 9,000 pounds from the defendant as the defendant has breached his duty as agent.

APPLICATION 2

As an agent, Chow is not permitted to receive any commission or secret profits from
any third party while acting on behalf of his principal, Salim, without the principal's
knowledge. When Chow becomes greedy and accepts commission from Chow, he fails to
protect his principal's interests and violates his responsibility as an agent. Nonetheless, if the
principle knows or is aware of the agent's profit and consents to it, it is no longer a hidden
profit, and the agent has not breached his duty. According to Section 168 of the Contract Act
1950, if an agent acts on his own account in the agency's business without first obtaining
approval from his principle and informing him of any important circumstances that have
come to his attention on the issue, Salim may reject the transaction. Salim must demonstrate
that either any important information was dishonestly kept from him by the Chow or that the
Chow's conduct resulted in an unfavourable situation for him. Furthermore, Chow derives
any covert benefit from the execution of his duties, Salim may remove the agent for breach of
duty. Besides, according to Section 169 of the Contract Act 1950, if Chow receive any
commission or secret profits without the knowledge of Salim, Salim is entitled to claim from
Chow any benefit which may have resulted to him from the transaction.

Conclusion

In conclusion, it is possible for Salim to take legal action against to Chow when Chow
received commission from Rao without informing Salim any prior notice. This is because the
commission received by Chow can be considered as secret profits as he was acting as the
agent of Salim and Chow should not receive any form of secret profits for personal gain
which will bring disadvantage to his principal. Chow as an agent to his principal, he is
responsible not to make any secret profit out of the performance of his duty. Secret profit can
be defined as a bribe such as payment of a secret commission or a kick back. It does not have
the necessity to prove dishonest action or improper use of position of the agent. If Salim
knows about the commission from Rao and Salim agree to it, then only Salim was entitled to
keep the commission from Rao.
3.4 Overall Conclusion for Question 2

In conclusion, Salim who was the principal and Chow who was the agent that was
employed by Salim to buy a car not exceeding RM 90000. Salim appointed Chow to buy a
car at the price not exceeding RM 90000, but Chow booked a car at the price of RM 110000,
it shows that Chow as an agent has performed exceeded the authority given by Salim. As the
result, Salim has the right to reject car purchase made by Chow because Chow exceeds his
authority, Salim will not be obligated, and the Chow will be individually accountable to the
third party for breach of the guarantee of authority. Besides, Chow received commission from
the Rao for purchasing the car from him. The commission received by Chow can be
considered as a secret profit because he did not inform Salim of the commission. Thus, Salim
has the legal right to sue Chow because Chow unresponsible make any secret profit out of the
performance of his duty without requesting permission from Salim.