Anyone can become a principal or agent as long as the person is of the age of majority (age 18 and above in Malaysia) and of sound mind, otherwise, that person is not liable towards their principal for acts done by them as “agent”.
An agency can be formed in many ways. The laws in Malaysia do not require that an agency or sub-agency agreement must be in writing. Hence, the appointment may either be expressed or implied depending on the circumstances. Unlike normal contracts, no consideration is required to create an agency. Likewise, the scope of agent’s authority by the principal can be given either expressly i.e. by words spoken or written, or impliedly when it is inferred from the circumstances of the case. Things spoken or written, or in the ordinary course of dealing, conduct of the parties may be accounted for in the circumstances of the case.
Therefore, in a usual commercial agency agreement, parties are encouraged to record a clear and unambiguous terms of authority, otherwise the contra proferentum rule will apply against the principal, depending on how the agent interprets or understands the authorities.
In so far as a foreign company is concerned, in order for a foreign company to carry on business in Malaysia, apart from registering the company under the Companies Act 2016 in Malaysia, it is also required to appoint a Malaysian resident as an agent under a memorandum of appointment or a power of attorney, coupled with a statement by the agent stating his consent on the appointment. Such agent will be answerable for all acts, matters and things that are required to be done by the foreign company under Companies Act 2016, and be personally liable to all penalties imposed on the foreign company for any contravention of the Companies Act 2016 unless the agent satisfies the Court hearing the matter that the agent should not be held responsible.
Apart from the above, the existence of an agency relationship can be inferred having regard to the surrounding circumstances. This agency arises where one person has acted by allowing the agent to hold himself out as having authority, so as to lead another to believe that he had authorised a third person to act on his behalf, and that other in such belief, enters into transactions with third persons within the scope of his ostensible authority. The burden rests on the person dealing with the agent to establish real and ostensible authority and the conduct said to amount to holding out must be proved affirmatively.
An agency can also be formed by way of ratification. It can arise in any one of the following situations:
- 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.
When the principal accepts and confirms such a contract, the acceptance is called ratification. Ratification may be expressed or implied. Ratification is retrospective i.e. the agent being treated as having been authorised from the very beginning to act in the manner in which he did and not from the date of the principal’s ratification. Under normal circumstances, a contract can be ratified in the following circumstances:
- the act must be authorised by the principal;
- the agent must, at the time of contract, expressly act as an agent for the principal i.e. he must not allow the third party to think that he is the principal.
In this case, the principal is bound by the act, whether it be for his detriment or his advantage, and whether it be founded on tort or on a contract, to the same effects as by, and with all the consequences which follow from the same act done by his previous authority. The agent must have a principal, who is in actual existence or capable of being ascertained, when a contract is made. No one can ratify a contract if he is not a party competent to a contract at the date of the contract. The principal must ratify the whole act or contract. The ratification must not injure the third party, i.e. it must not subject the third party to damages or terminate his right or interest.
 as provided for in ss. 136 and 137 CA.
 KGN Jaya Sdn Bhd v.v Pan Reliance Sdn Bhd [1996 1 MLJ 233 at 237.
 s. 140 CA.
 Where there is ambiguity in a contract terms or clause, the ambiguous contract term may be interpreted by the Courts against the person who drafted / tendered the document to the other contracting party, applying an interpretation of the contract term which is most favourable to the other party.
 s. 562 and s. 563 of the Companies Act 2016.
 Cheng Hang Guan & Ors v. Perumahan Farlim (Penang) Sdn Bhd & Ors  3 MLJ 352 at 400.
 s. 149 CA. The principal may elect to ratify or disown the acts done by another person without the principal’s knowledge or authority.
 Raju Rajaram Pillai (T/A Dhanveer Enterprise) v. MMC Power Sdn Bhd & Anor  6 MLJ 551 at 574.