Distinction between Sec 187 and 237 of ICA

Home Forums Agent’s Responsibility for unauthorised acts – Sec 237 and 188 Distinction between Sec 187 and 237 of ICA

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    • #588
      Shruti Kulshrestha

      According to Section 188 of Indian Contract Act an agent who has the authority to perform or do one act has an implied or obvious authority to do any necessarily lawful thing which is directly or indirectly associated with the performance of the actual act.
      For example if an agent wants to establish a school so he has an authority to do any lawful act which is important or usually done or required in the course of establishment of that school.
      Whereas, according to section 237 of ICA states that the principle will be liable for the unauthorized acts of his agent. If a principle has said something to agent like to do things in a certain manner during the course of his business and the agent has without authority incurred obligations to third party on behalf of his principle, then in such cases the principle is bound by such acts, if the agent has induced the third party by his acts or words to believe that he is within the scope of his authority. For example if a principle instructs his agent to sell a product only at a price of 200 or above and the agent sells the product to C at a price of 150, here the principle is bound by the act of the agent. The distinction between two articles is that in section 237 the principle is clearly stating the agent what to do and if he did anything to keep that specific instruction in mind then the principle will not be liable. Section 237 is a bit specific than section 188.

    • #618
      Aribba Siddique

      1. Section 188 of the Indian Contract Act, 1872 states extent of agent’s authority. Section 237 of the Indian Contract Act, 1872 states third party right and liability of principal.

      2. Section 188 describes how agency can be created by necessity. Section 237 describes how agency can be created by estoppel

      3. Section 188 mentions that if an agent is bound to perform some act, he can lawfully take up necessary measures required in completion of the task.
      Whereas section 237 mentions that if an agent performs acts exceeding his authority, the principal is bound by such acts moreover, the sections also mentions that the principal induces the other party to
      believe that the agent is performing under his authority limit and thus the principal would be liable.

      4. Example:
      Section 188: A is employed by B, residing in Canada, to recover at Kolkata 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
      Section 237: A consigns goods to B for sale, and gives him instructions not to sell under a fixed price say, rs 1000. C, being ignorant of B’s instructions, enters into a contract with B to buy the goods for 800, lower than the reserved price. A is bound by the contract.

    • #625
      Nikita Soni

      The basic difference between Section 187 and Section 237 of ICA is the definition
      Section 187 says, ” Definitions of express and implied authority.—An authority is said to be express when it is given by words spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case; and things are spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case”.
      and Section 237 says, “Liability of principal inducing belief that agent’s unauthorized acts were authorized.— 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
      Section 187 talks about two-party only: one Principal and other Agent
      and Section 237 talks about three-party: one Principal and second Agent and third is the third party
      The difference between both the sections is of purpose

    • #705
      Nancy nelson

      In S.187 of ICA In this case chairman L.I.C v. Rajiv Kumar Bhaskar, as per the salary saving scheme of L.I.C, the boss was supposed to subtract the premium from the employee’s salary and credit it with L.I.C. Upon the demise of the employee, it was found by his successors that the employer has evaded in doing so, causing the policy to delay. A clause in the receipt letter was discussed, in which the boss had said that he would act as the manager of the employee and not as that of L.I.C. It was held that the employer was acting as the manager of the company, thereby creating the company (L.I.C) accountable as a Principal due to the mistake of the Agent (the employer)

      Contracts creating a connection of the agency is very common in business law. It can be express or implied. An agency is shaped when a person delegates his power to another person, that is, employs them to do some precise job or a number of them in specified areas of the job. Formation of a Principal-Agent relationship consults rights and obligations upon both parties. There are numerous instances of such a relationship: Insurance agency, advertising agency, travel agency, factors, brokers, etc.

      So in S.237 of ICA When supposedly P allows third parties to trust that A is acting as his official agent, he will be prohibited from refuting the agency if such third-parties trusting on it make a contract with an even when A had no power at all. Similarly, where an individual is held out by another as his agent, the third-party can hold that person accountable for the acts of the alleged agent, or the agent by holding out. Associates are each other’s agents for building contracts in the normal course of the partnership business.

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