Indian Contract Act,1872

Act No : 9

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Section : Liability of principal induving belief that agent'sunauthorised acts were authorized

237.Liability of principal induving belief that agent'sunauthorised acts were authorized.-When an agent has, withoutauthority, done acts or incurred obligations to third persons onbehalf of his principal, the principal is bound by such acts orobligations, if he has by his words or conduct induced such thirdpersons to believe that such acts and obligations were within thescope of the agent's authority. Illustrations(a) A consiggns goods to B for sale, and gives him instructions not tosell under a gixed price. C, being ignorant of B's instructions,enters into a contract with B to buy the goods at a price lower thanthe reserved price. A is bound by the contract.(b) A entrusts B with negotiable instruments endorsed in blank. Bsells them to C in violation of private orders from A. The sale isgood.

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