The authority of an agent means his capacity to bind the principal to third parties. The agent can bind the principal only if he acts within the scope of his authority. The scope of an agent’s authority is determined by his:
1. Actual authority:
An agent can do all such acts as have been assigned to him either expressly or impliedly and thereby bind the principal to third parties by acts done within the scope of his ‘actual’ or ‘real’ authority (Sees. 186 and 226).
ADVERTISEMENTS:
The authority is said to be express when it is given by words spoken or written. The authority is said to be implied when it is inferred from the circumstances of the case or the ordinary course of dealings (Sec. 187).
2. Ostensible or apparent authority:
An agent can also bind the principal to third parties by acts done within his apparent authority; (although the act is in excess of his actual authority); provided the third party acts bona fide and without knowledge of the limitation of the agent’s apparent authority (Watteau vs Fenwick). Thus ‘actual’ and ‘apparent’ authority stands on the same footing.
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ADVERTISEMENTS:
Ostensible authority means an authority to do an act usually necessary in the course of conducting similar business in accordance with the customs and usages of the particular place, trade or market.
Thus if it is the usual practice of hotel managers to purchase liquors and cigarettes, then purchases of this nature shall be deemed within the scope of the manager’s apparent authority and the principal will be bound by such purchases, notwithstanding limitations, as between the principal and agent, put upon that authority (Watteau vs Fenwick).
Section 188 which deals with the extent of agent’s authority lays down the scope of an agent’s apparent authority in these words: “An agent having an authority to do an act or to carry on a business has authority to do every lawful thing which is necessary in order to do such act, or which is usually done in the course of conducting such business.” The following illustrations are appended to the Section:
Illustrations:
ADVERTISEMENTS:
(a) A, is employed by B, residing in London, to recover at Mumbai a debt due to B. A may adopt any legal process necessary for the purpose of recovering the debt, and may give a valid discharge for the same. (b) A constitutes B, his agent, to carry on his business of a ship-builder. B may purchase timber and other materials, and hire workmen, for the purpose of carrying on the business.
In normal times, therefore, the scope of an agent’s authority is determined by his ‘actual’ as well as ‘apparent’ authority. Although the apparent authority of an agent may be curtailed by the principal but such a curtailment is ineffective vis-a-vis the principal and third parties unless the third parties have notice of it.
Even if an act of the agent is in excess of his actual authority, the principal will be bound by the act if it is within the scope of the agent’s apparent authority, provided the third parties act bona fide.
3. Authority in emergency:
An agent has authority, in an emergency, to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence in his own case, under similar circumstances (Sec. 189).
The following illustrations are appended to the Section:
Illustrations:
(a) An agent for sale may have goods repaired if it be necessary.
(b) A consigns provisions to B at Kolkata, with directions to send them immediately to C at Cuttack. B may sell the provisions at Kolkata, if they will not bear the journey to Cuttack without spoiling.