Agent’s capacity to bind the principal is his authority. Agent does certain acts on behalf of the principal. His authority extends to such acts authorized. The authority of an agent may be express or implied (Sec 186). 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 spoken or written, or by the ordinary course of dealings (Sec 187).
A owns a shop in Serampore, himself living in Calcutta, and visiting the shop occasionally. The shop is managed by B, and he is in the habit of ordering goods from C in the name of A for the purposes of the shop, and of paying for them out of A’s funds with A’s knowledge. B has an implied order from A to order goods from C in the name of A for the purpose of the shop.
An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business (Sec 188).
1) A is employed by B, residing in London, to recover at Bombay 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.
2) 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.
Agent’s authority extends: (1) every lawful thing: (2) such a lawful thing as necessary for the purpose; or is usually done in the course of conducing such business; (3) such act is according to the custom and usage of a particular market or trade. Custom or usage must not be unlawful.
The agent’s authority may be excluded or limited either expressly or impliedly by the terms of the agency. An authority to borrow must be expressly given, except in case of the nature of business like banking, where the authority of an agent to borrow is implied. The power to draw or endorse bills or notes does not include the power to borrow. Principal is not bound by any act done by his agent, which he has authorized. Principal will be liable only when the act is done by the agent within the scope of his authority and in the course of his employment. Where the property of the principal is disposed off by an agent not authorized, the principal is entitled to recover it, where so ever it may be found.
Where acts and deeds of the officials are not only beyond their authority but are done with malafied intent, it may not be just and fair to bind the principal with such malafide acts and deeds.
An implied authority of an agent depends on the usages and customs of the particular business which must be well known and reasonable. If the principal carries on the business of money-lending, the authority of an agent will extend to pledge the principal’s credit. Similarly, if the business requires drawing and accepting of bills, the agent’s authority will extend to such an act in the ordinary course of dealing. However, an agent directed to take possession of land on expiry of lease has no authority to accept payment of rent. Where broker was authorized to sell his principal’s property, collected deposit from the purchaser and misappropriated it, principal was held liable as broker had an implied authority to take deposit.
Implied authority between husband and wife: Between husband and wife, the authority may be express or implied, or that of necessity. As a rule, husband can be held liable only for what he has expressly or impliedly sanctioned. Wife has an implied authority by necessarily to pledge her husband’s credit under following circumstances.
(1) When she is living with her husband; (2) the wife is living separate and claiming maintenance (3) the wife pledges her husband’s credit to a reasonable extent and in reasonable manner for ordinary household expenses; (4) wife can pledge her husband’s credit only for necessaries.
Ultimately, it depends on circumstances of each case whether the wife can pledge her husband’s credit. However, under following circumstances, wife has no implied authority.
1) to borrow money to pay previous debts; (2) when husband has expressly forbidden his wife to pledge his credit as he has been remitting sufficient sums for her maintenance; (3) wife living separate from her husband because of his second marriage as it does not justify separation.