Q.
If you have pretended to be the person calling the shots for a property transaction, what happens to its effect onto the principal and 3rd person?
Jone is a new comer to the community. He wanted to buy a property for his own stay while starting a new life in this township.
You happened to meet Jone and you immediately got him to view Albert's house which happens to be your current place. Albert entrusted most of the things to you as he is working in KL.
Jone, being unsure of the local property price, trusted you to the maximum and bought the place with a minor request, i.e. to have the whole house painted.
You being sure of the easy profit of RM30k, agreed with him on the spot!
Discuss the consequences of this transaction.
A.
The trust of Albert to you as a care taker seems to give you the authority to act on his behalf. This authority is ostensible or apparent. Thus, by estoppel, or s.190 you have the reason to see this transaction as between Jone and Albert, as a proper contract. This is the principle of Estoppel. Albert is being estopped to refuse selling the house to Jone.
However, the relationship of Albert to you is a mere friend, at best a tenuous one in the context of law. He has not appointed you as an agent - at least not expressly so in the storyline above. Moreover, he might never want to sell the house. You have acted in your personal capacity to sell the house to Jone. It is beyond your power as you never owned the house or were given the authority to transact the house. You have acted in your own personal capacity, thus Albert is never in the picture. This action cannot be ratified, as one of the elements of ratification is that there had been a agency relationship between Albert and you, which in this case was never present.
Though, it is hard to prove this element of agent-principal relationship between you and Albert. Being close friends - thus apparent or ostensible authority might be in place to foster the transaction later on - as Albert might as well choose to ratify the transaction saying that he indeed were contemplating to sell the house.
Therefore, a test of such motive is to see how the request for painting is done. The painting of the whole house as asked by Jone might provide a clue.
If you have decided on the painting without asking Albert, then it is seen that you have acted in person. However, if your decision is to let Albert know about it while talking through to Albert on the sale, you have illustrated the process of agency relationship to exist. There is a meeting of mind between Albert and you.
In the second scenario, you will be able to ratify the agreement to form a contract of agency between you and Albert, thereafter Jone can thus proceed to acquire the house from Albert which is a duly agreed contract between Albert and Jone, with you as agent.
On the other hand, if you have acted on your own without asking Albert - to paint the house on your own expense as you intend to make the profit of RM30k, then the contract cannot be ratified. It is your own contract with Jone and not of Albert. This is explained in s.184, s.185 and s.186.
Rights of parties to a contract made by agent not disclosed
184. (a) If an agent makes a contract with a person who neither knows, nor has reason to suspect, that he is an agent, his principal may require the performance of the contract; but the other contracting party has, as against the principal, the same rights as he would have had as against the agent if the agent had been principal.
Performance of contract with agent supposed to be principal
185. Where one man makes a contract with another, neither knowing nor having reasonable ground to suspect that the other is an agent, the principal, if he requires the performance of the contract, can only obtain the performance subject to the rights and obligations subsisting between the agent and the other party to the contract.
Right of person dealing with agent personally liable
186. In cases where the agent is personally liable, a person dealing with him may hold either him or his principal, or both of them, liable.
The case law on this issue was S.R.M Meyappa Chettiar v Lim Lian Koo (1954), see link provided here.
On the part of Jone, who later found out that he had to deal with Albert and not you, he has the right to refuse performance of the agreement as per s.189.
189. A person with whom a contract has been entered into in the character of agent is not entitled to require the performance of it if he was in reality acting, not as agent, but on his own account.
As well as if there were any losses on Jone, Jone has the right to claim against you if Albert never ratify this transaction. Based on s.186, Jone can hold you, Albert or both you and Albert liable for any losses incurred.
Over and above, if the value of the house is indeed exorbitantly over-priced, and Jone can show proof of such intend to cheat him, he can invoke s.153 on the ratification of contract by Albert. Section 153 says ratification of an unauthorized act cannot injure 3rd person. In this case, Albert who ratify the transaction has to make sure the price is as agreed and not with intention of misrepresentation or fraud on the part of you as agent as observing the element of free consent in the formation of the contract.
Ref:
Own account
S. 149, s.153, s.184 - 190. Contracts Act 1950.