Page 121 - DMGT102_MERCANTILE_LAWS_I

Unit 9: Law of Agency

9.2.3 Agency by Estoppel Notes

When a person has, by his conduct or statements, induced others to believe that a certain person is
his agent, he is estopped from subsequently denying it. The principal is precluded from denying
the truth of agency which he himself has represented as a fact, although it is not a fact.

Examples:
1. Prakash allows Anand to represent as his agent by telling Cooper that Anand is Prakash’s
agent. Later on, Cooper supplied certain goods to Anand thinking him to be Prakash’s
agent. Prakash shall be liable to pay the price to Cooper. By allowing Anand to represent
himself as his agent, Prakash leads Cooper to believe that Anand is really his agent.
2. Anand owns a shop in Serampur, living himself in Calcutta and visiting the shop
occasionally. The shop is managed by Bharat and he is in the habit of ordering goods from
Cooper in the name of Anand for the purposes of the shop and of paying for them out of
Anand’s funds with Anand’s knowledge. Bharat has an implied authority from Anand to
order goods from Cooper in the name of Anand for the purposes of the shop.
9.2.4 Agency by Holding Out

Though part of the law of estoppel, some affirmative conduct by the principal is necessary in

creation of agency by holding out.

Example: Puran allows his servant Amar to buy goods for him on credit from Komal and
pay for them regularly. On one occasion, Puran pays his servant in cash to purchase the goods.
The servant purchases good on credit pocketing the money. Komal can recover the price from
Puran since through previous dealings Puran has held out his servant Amar as his agent.

9.2.5 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.

9.2.6 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

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