Question

Where a principal, by his word or conduct, induces some third person to believe that acts or obligations of his agent were within his authority, he shall be estopped from denying it later. This known as _____.

• A. Agency of necessity
• B. Agency by estoppel
• C. Agency by operation of law
• D. Agency by ratification

Answer 1

The correct option is C Agency by operation of law

An agency by estoppel is based on the principle of 22 estoppel. The principle of estoppel lays down that when one person by declaration, act or omission has intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, he shall not be allowed to deny his previous statement or he shall be stopped to deny his previous statement or conduct. This agency is implicit under section 237 of the Indian Contract Act. Section 237 of "the Contract Act says : When an agent has without authority done acts or incurred obligations to third persons on behalf of his principal the principal is bound by such acts or obligations if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent's authority.