Legal Relationship Between Agent And Principal In The Case Of Shanklin Pier Ltd.

3.2 Agency

An agent is a person authorized to negotiate and enter into contracts on behalf of another who is known as the principal in his dealings with a third party. The legal relationship between an agent and a principal is an agency. For examples, between a client as a principal (P) and lawyer as an agent(A), employer (P) and employee (A), house owner (P) and housing agent (A) and others. The principal and the agent are in an employment contract where the terms of appointment and authority have been set out. The effect is the principal will be bound by any contract the agent makes while acting within his authority For example, the agent is employed to sell the principal’s house. An agreement is made by the agent with the third party
For example, we can see as in the case of Shanklin Pier Ltd v Detel Products Ltd . In this case, Shanklin Pier Ltd hired a contractor to paint its plier. They spoke to a third party, Detel Products Ltd, about whether the particular paint is suitable to be used, and Detel assured them that it will be last long for up to seven years. Shanklin Pier Ltd relied on the conversation and instructed the contractor to use the paint. However, after three months, the paint started to peel off thus, Shanklin Pier Ltd sued Detel Products for breach of warranty. The court held that where there is an oral assurance or statement made by a thurd party and was relied upon by X when he entered into an agreement with Y, where the statement is untrue, X can sue the third party for breach of collateral contract and damages even though there is no contractual relationship between
By having this doctrine, a third party beneficiary could not take advantages from the contract to which he or she is not a party. This is because if the third part has been given the right, it would be hard for a promisor if he or she had to face actions for breach of contract from both the promisee and the third party. Not only that, the ability of the parties to vary or terminate the contract in enforcement of the contract would be affected if there is interfering from the third party. However, the strictness of the doctrine leads to commercial inconvenience. This may create great injustices to a third party who may be a victim or does not have a right in the contract. It defeats the intentions of the parties to the contract. For example, the insurance life which the purpose is to give a benefit to the policy family owner when the policy died but because of the strictness of doctrine of privity, it cannot be done. It creates uncertainty in contractual relationships given that the doctrine can be said that it is too harsh. Days by days, this rule has been criticised particularly in cases where the contract is for the benefit of the third party. At this time there has been no statute introduced and the rule persists in Malaysian Law to prevent a third-party enforcing contractual provisions made in their favour. It can be seen that thru this doctrine exist behind the rise in the