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Section 187: Definitions of express and implied authority

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 186 All 266 Sections of Indian Contract Act Section 188

Legal Commentary & Landmark Judgments: Section 187

Section 187 defines express authority as that given by spoken or written words, and implied authority as that inferred from the circumstances of the case, including things spoken or written and the ordinary course of dealing between the parties.

  • Express Authority by Direct Communication: Conferred by unambiguous written text (e.g., registered power of attorney, corporate authorization) or clear verbal instructions directly instructing the agent to act.
  • Implied Authority Inferred from Circumstances: Deduced from the factual context, position held by the agent (e.g., managing director, branch manager, shipmaster), and the ordinary course of commercial dealing.
  • Usual and Customary Business Powers: Implied authority encompasses all usual, customary, and necessary powers routinely exercised by persons occupying similar commercial offices in that trade or locality.
Key Landmark Precedents:
  • Chairman, Life Insurance Corporation of India v. Rajiv Kumar Bhaskar (2005) 6 SCC 188: The Supreme Court held that an employer collecting insurance premiums under a Salary Savings Scheme acted as the implied agent of LIC under Section 187; LIC was bound by the employer's defaults because the scheme's operation impliedly cloaked the employer with agency authority.
  • Harshad J. Shah v. LIC of India (1997) 5 SCC 64: The Supreme Court held that express regulations prohibiting life insurance agents from collecting renewal premiums precluded any inference of implied authority under Section 187, affirming that implied authority cannot contradict express prohibitions.
  • Delhi Development Authority v. Durga Chand Kaushish (1973) 2 SCC 825: The Supreme Court emphasized that authority must be gathered from the overall commercial context and construction of deeds, evaluating the reasonable understanding of third parties.
Courtroom Practice & Strategic Litigation Guidance:

In commercial litigation against corporate principals, rely on LIC v. Rajiv Kumar Bhaskar to establish implied agency. Demonstrate that the principal accepted the benefit of the agent's routine acts or permitted the agent to present himself to the public as having authority. To defeat implied agency, prove that the third party had actual or constructive notice of express limitations on the agent's powers.

Section 186 All 266 Sections of Indian Contract Act Section 188