LAW OF AGENCY: SECRET PROFIT

Question 1

What refers to secret profit?

Answer 1

• Refers to a bribe such as payment of secret commission received by the agent over and above the commission or other remuneration agreed by the principal and his agent.

Question 2

What is a secret profit?

Answer 2

• Secret profit means any payment received by an agent from the third party without the principal’s knowledge or consent.

Question 3

What must an agent do?

Answer 3

• The agent must disclose to the principal about any secret profit that he received even though there is no fraud, corruption or bribe with the third party.
• In Section 168, it is stated that if the principal knows about the secret profit and consents to it, the agent may keep the secret profit.
• It is longer becomes a secret profit.
• However, if the principal knows about the secret profit and does not consent to it, he may seek the following remedies.

Question 4

What are the remedies in secret profit?

Answer 4

• 1.The principal may repudiate the contract, particularly if he feels it is to his disadvantageous.
• 2. In Section 169, it is stated that the principal may recover the amount of bribe from the agent.
• 3. The principal may refuse to pay for the agent’s commission or other remunerations.
• 4. The principal may dismiss the agent for breach of duty.
• 5. The principal may sue the agent and the third party for giving the bribe for the damages for any loss that he may have sustained though entering the contract.

Question 5

What are the cases in secret profit?

Answer 5

1. Tan Kiong Hwa v Andrew S.H. Chong
2. Andrews v Ramsay and Co

Question 6

What happened in Tan Kiong Hwa v Andrew S.H. Chong?

Answer 6

• The plaintiff bought a flat from a company where the defendant was the managing director.
• The plaintiff then authorised the defendant as his agent to sell the flat for $45,000.
• The defendant sold the flat for $54,000.
• The difference, which was $9,000, was not credited to the company.
• Later, the company went into liquidation.
• It was held that the plaintiff was entitled to recover $9,000 from the defendant as the defendant breached his duty as an agent.

Question 7

What happened in Andrews v Ramsay and Co?

Answer 7

• The plaintiff instructed the defendant to sell his property and agreed to pay the defendant £50 as commission.
• The defendant then received £100 from the purchaser as deposit for the property.
• The defendant gave £50 to the plaintiff and kept the other £50 with the plaintiff’s consent.
• Later, the plaintiff discovered that the defendant had also received £20 from the purchaser as commission.
• Therefore, he sued to claim the £20 and the £50 he had paid the defendant.
• It was held that the plaintiff was entitled to recover both sums, which was the commission he paid to the defendant and the secret commission received by the third party.