Indian Contract Act Section 237 — Liability of principal inducing belief that agent’s unauthorized acts were authorized
CHAPTER X AGENCY — Effect of agency on contracts with third persons
Commercial / Corporate
Summary
When an agent acts without authority or takes on obligations for the principal with a third party, the principal is still legally bound by those acts or obligations if the principal, through their own words or behaviour, led the third party to reasonably believe that the agent had the authority to do those things. In other words, if the principal creates the impression that the agent’s actions were authorised, the principal cannot later deny responsibility for them.
Official Text
When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations, if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent’s authority. Illustrations sale is good.