Sections 186 and 187 of the Indian Contract Act, 1872: Express and Implied Authority of an Agent
Sections 186 and 187 explain how an agent receives authority from a principal. The authority may be expressly conferred by spoken or written words, or it may arise by implication from the circumstances, conduct of the parties, or their ordinary course of dealing.
Section 186: Agent's authority may be express or implied
Section 186 establishes the two basic ways in which authority may arise. An agent need not always hold a formal written authority. Depending on the facts, authority may be created expressly or inferred from the relationship and surrounding circumstances.
Section 187: Definition of express and implied authority
Express authority: Authority is express when it is given by words spoken or written.
Implied authority: Authority is implied when it is inferred from the circumstances of the case. Things spoken or written and the ordinary course of dealing may form part of those circumstances.
Difference between express and implied authority
| Basis | Express authority | Implied authority |
|---|---|---|
| How it arises | By spoken or written words. | By inference from circumstances. |
| Evidence | A letter, agreement, power of attorney, oral instruction or other express communication may show the authority. | Conduct, surrounding facts and the ordinary course of dealing may show the authority. |
| Key question | What authority did the principal expressly give? | What authority can reasonably be inferred from the relevant circumstances and dealings? |
Illustration under Section 187
The statutory illustration describes A as the owner of a shop in Serampore while living in Calcutta. B manages the shop and habitually orders goods from C in A's name for the shop, paying for them from A's funds with A's knowledge. In those circumstances, B has implied authority from A to order goods from C in A's name for the purposes of the shop.
Meaning and practical effect
The provisions recognize that commercial and agency relationships frequently operate through established conduct rather than through a fresh written authorization for every act. Whether implied authority exists therefore depends on the circumstances proved in the particular case, including communications between the parties and their ordinary course of dealing.
Sections 186 and 187 should also be read with the succeeding provisions governing the extent of an agent's authority and authority in an emergency. See Sections 188 and 189 of the Indian Contract Act, 1872.
Key takeaway
Section 186 recognizes both express and implied authority. Section 187 explains the distinction: express authority comes from spoken or written words, while implied authority is inferred from the circumstances, including what has been said or written and the ordinary course of dealing.