Tuesday, 25 October 2011 08:45am

The Star (Used by permission) Articles of Law By Bhag Singh When a contract to engage a foreign maid is pre-empted by a change in government policy, who bears the loss? MANY families are caught in a dilemma following reports that RM20mil has been paid out and Cambodia has decided to stop the supply of maids to Malaysia. Whilst the amount involved is huge, it is made up of smaller sums which have been paid by those who needed the services of a maid. For those who have paid upfront, the sum is by no means small to them. Where advances have been made by the employment agents to secure the maids, the loss would fall on them unless they have provided for themselves to be indemnified by their clients in such a situation. Otherwise it will be that they have been paid initial or entire amounts by individuals seeking the services of a maid. No doubt the players involved in securing maids will endeavour to ensure that at least those who have committed themselves to the transaction, would carry the arrangement through. However, this may not materialise depending on the situation at hand and the position taken by the authorities of the country involved. It is Cambodia now but it could be another country on another occasion. However, on the basis that the maid for whom payment has been made, does not arrive or cannot come in such circumstances, the prospective employer will ask the employment agent for a refund. This gives rise to the question as to whom the money has been paid. Payment in respect of securing a maid is invariably made to the employment agent who offers such services. Can the prospective employer then hold the agent responsible for the refund? Of course, this is what the prospective employers would like but the situation may not be as simple as it appears. Much would depend on the arrangements made and the agreement entered into with the employment agent. One would need to examine the contract that has been entered into between the prospective employer and the employment agent with regard to the obligations of the agent and the manner of dealing with the entire payment made to the agent. Foreign agent

Was the sum paid, the fee for the services of the agent for making the arrangement? Or could it be that part of the payment was for the employment agent to pay the foreign agent in the other country or partly for payment of stipulated fees or other statutory payments? It could be that part of the payment is meant for the agent and another part of it is to be disbursed to third parties. On this note, it would be relevant to consider that what has happened is the act of a foreign government which prevented the transaction from being entered into or implemented. If such a situation were anticipated, then it will depend again on what the contract provides for, following the occurrence of such an event. If no reference is made, it would be the position that if the contract says that the agent will be responsible for the refund of all amounts paid, then that will be the consequences. However, on the basis that the parties have not provided and stipulated in a detailed manner what the consequences would be in the case of each and every contingency arising, the general situation would be as outlined here. If a part of the amount deposited with the employment agent is meant to be paid to a foreign agent or as a statutory payment, then the question that arises is whether this sum has been disbursed. If such a sum has been disbursed, it would have been done with the authorisation of the prospective employer. In such a case, the local employment agent could not be held liable and be asked to refund such amount. However, if such sums intended to be disbursed to third parties are still with the agent, then in view of the fact that the transaction could not proceed, the prospective employer would be entitled to the refund of such amount as has not been disbursed. This would leave the amount that is paid as fees to the employment agent. The question that then arises is whether the amount is for the agents services. In the absence of any specific obligation, the agent is required to do the needful to get the maid. Here it would appear that the agent has done all that needs to be done to get the maid. It is the intervening act of a third party that has prevented the implementation and performance of the contract. This is a case of what is referred to as frustration. Unless the agent has undertaken that the fee is payable only upon bringing over the maid to the prospective employer, it would not be possible to deny the employment agent his fee or part of it, if it has already been paid. This creates an unsafe situation for everyone. Both the agent and prospective employer may ask themselves how their respective situations could be safeguarded. Exemption clause

The agent could, for example, protect himself by including an exemption clause. This clause could be total or partial. On the other hand, the prospective employer could seek a guarantee of the maid being made available for work as a condition of payment. However, this is more a matter of negotiation and the possible inclusion of an appropriate provision to safeguard the agent or employer as the case may be. Its inclusion would depend on which party is in a stronger negotiating position to have included its desired position. Of course, insurance would be another option in situations like this. However, the terms of an insurance cover to protect the prospective employer or the employment agent as the case may be, would have to be carefully considered in the light of possible exclusions.