LAW 416 BUSINESS LAW

ASSIGNMENT 2

NAME

: NURSYAMIM BINTI ISMAIL

ID NUMBER : 2015747091
GROUP

: NBMFF2A

MODULE (PAGE 136)

5(b) Afedah has been instructed by Azliza to buy a computer for a price not
exceeding RM6000. Afedah ordered a computer from Ariff Communication in her
own name for a price of RM6500 since that was the lowest price in the market. When
Ariff Communication delivered the computer, Azliza accepted it even though the price
exceeded the amount she had authorized. When Ariff Communication demanded
payment, Azliza refused to pay on the ground that the price of the computer was too
expensive and furthermore that it was bought by Afedah herself.
Discuss the position of all parties involved.
Afedah Agent
Azliza Principal
Ariff Communication Third Party
The issue is whether Afedah fulfilled the conditions of being an agent to be
ratified by Azliza because of her mistakes bought the exceeding price of computer
from Ariff Communication.
Agency by ratification can arise in any one of the following situation, an agent
who was duly appointed has exceeded his authority or a person who has no
authority to act for the principal has acted as if he has the authority. According to
Section 149 of Contracts Act 1950, provides that a principal may either reject or
confirm such contract and acceptance by the principal of such contract is called
ratification. Ratification can be either express or implied ratification under Section
150. When the principal accepts and confirm such a contract, the acceptance is
called ratification. Ratification may be expressed or implied. There are two
circumstances that can arise ratification. Firstly, an agent duly appointed has
exceeded authority. For example, Ali has been appointed as agent to with the
authority to spend no more than RM10, 000. Ali however ordered goods from a
supplier amounting to RM 12, 000. Here Ali has exceeded his authority and will be
responsible for payment unless his principal ratify such contract. Second, a person
who has no authority acted as if he/she has the authority. For example, A is an agent
and B is a principal. A lends Bs money to C. C then pays interest to B and B

accepted the payment. Here the act of B accepting the payment is called ratification.
The effect of ratification is that the contract is binding on the principal as if the agent
has been given the authority from the beginning under Section 149 as retrospective
effect. There are 7 conditions stated that must be fulfilled before a principal can ratify
the contract. First, Act/contract must be unauthorized. Second, must expressed act
as an agent. Third, principal must be in actual existence. The case that can be
referred is Keighley Maxted v Durrant. An agent has been authorized to buy wheat at
certain price. Agent bought the wheat at a higher price in his own name although it
was intended for the principal. The principal agreed to take the wheat at a higher
price but later refused to take it. It was held because the principal was not liable
since the agent did not express himself as an agent at the time of the transaction.
Third, principal must be in actual existence. The case that can be referred is Kelner v
Baxter. A contract was made by an agent on behalf of a company, which was yet to
be formed, and the court held that the principal (company) couldnt ratify the contract
since it was not yet in existence when the contract was made. Fourth, the principal
must have full knowledge of all material facts unless intend to ratify whatever facts
and must be made within reasonable time to constitute a valid ratification the
principal must at the time of ratification have full knowledge of all material facts. Fifth,
the principal must have contractual capacity at time contract made and at time of
ratification as the principal must at the time of activity as well as at the time of
ratification. Sixth, the whole contract must be ratified, a contract must be ratified as a
whole and not in part. There cannot be a partial ratification and a partial rejection.
Lastly, ratification must not injure third party as ratification should not lean to breach
of contract that may be harmful to third party.
Based on the question given, as we know Afedah was instructed by Azliza to
buy computer for a price not exceeding RM 6000 and she ordered a computer for a
price RM 6500 from Ariff Communication in her own name. This can be referred to
Section 149 and case Keighley Maxted v Durant where the principal agreed to take a
higher price but later refused to take it. It suit with Afedah case without acted as an
agent to Ariff Communication, when Azliza agreed and accepted the price even
exceeded the amount she authorized, but when Ariff Communication demanded
payment and computer price turned into expensive, Azliza refused to pay and
furthermore it was under Afedah herself.

In conclusion, Azliza was not liable since Afedah did not express herself as an
agent at the time of the transaction.