Contract Act, 1872 — Section 236: Person falsely contracting as agent not entitled to performance

236. Person falsely contracting as agent not entitled to performance. A person with whom a contract has been entered into in the character of agent is not entitled to require the performance of it if he was in reality acting, not as agent, but on his own account. 237. Liability of principal inducing belief that agent’s unauthorized acts were authorized. 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. Illustrations

(a)A consigns goods to B for sale, and gives him instructions not to sell under a fixed price. C, being ignorant of B’s instructions, enters into a contract with B to buy the goods at a price lower than the reserved price. A is bound by the contract.

(b)A entrusts B with negotiable instruments endorsed in blank. B sells them to C in violation of private orders from A. The sale is good.