Page 117 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes Agency of Necessity

This arises where there is no express or implied appointment of a person as agent for another but
he is forced to act on behalf of a particular person.

Examples:

1. The Master of a ship, which is in distress and requires heavy and urgent repairs, can pledge
the ship or cargo (without express or implied authority) and raise money in order to execute
the voyage. He will be considered as the agent of the owner by necessity.

2. A horse is sent by rail and at the destination is not taken delivery by the owner. The station
master has to feed the horse. He has become the agent by necessity and hence the owner
must compensate him.
The doctrine of agency by necessity also extends to cases where agent exceeds his authority
provided (a) it was not reasonably possible to get the principal’s instructions, (b) the agent had
taken all reasonable and necessary steps to protect the interests of the principal and (c) he acted
bona fi de.

Agency by Ratifi cation

Where agent does an act for his principal but without knowledge of authority, or where he
exceeds the given authority, the principal is not held bound by the transaction. However, s.196
permits the principal, if he so desires, to ratify the act of the agent. If he so elects, it will have the
same effect as if the act was originally done by his authority. Agency in such a case is said to be

created by ratification. In other words, the agency is taken to have come into existence from the

moment the agent first acted and not from the date of principal’s ratification. The rule is that

every ratification relates back and is equivalent to a previous command or authority.
Example: Lallan makes an offer to Badal, Managing Director of a company. Badal accepts
the offer though he has no authority to do so. Lallan subsequently withdraws the offer, but

the company ratifies Badal’s acceptance. Lallan is bound by the offer. The ratification by the
company relates back to the time Badal accepted the offer, thus rendering the revocation of the
offer inoperative. An offer once accepted cannot be withdrawn.
However, for the rule of relation back to apply, the agent while accepting an offer should not

show lack of authority, e.g., where he accepts, ‘subject to ratification’, the rule of relation back
does not apply and revocation shall be valid, if communicated prior to such ratifi cation.
Express and Implied Ratifi cation

The ratification may be express or implied.

Examples:
1. Amar without Puran’s authority lends Puran’s money to Kamal. Later Puran accepts
interest on the money from Kamal. Puran’s conduct implies ratification of the loan.

2. Amar without Puran’s authority buys certain goods for him. Afterwards, Puran sells those
goods to Kamal. Puran’s conduct ratifies the purchase made by Amar.

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