Section 187 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 187 defines the two words used in section 186. Authority is express when it is given by words spoken or written. It is implied when it can be inferred from the circumstances of the case, and the Act says that things spoken or written and the ordinary course of dealing may count as circumstances. The Act's illustration, a shop in Serampore, shows how a habit of dealing can create authority nobody wrote down.
Express authority is given by words spoken or written. Implied authority is inferred from the circumstances of the case, and "things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case". The Act's illustration: a shop manager who has been in the habit of ordering goods in the owner's name and paying from the owner's funds, with the owner's knowledge, has an implied authority to order goods for the shop.
The text
Section 187 reads: "An authority is said to be express when it is given by words spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case."
Express authority
Express authority is a matter of words. The Act mentions two forms: "spoken or written". A signed letter is covered; so is a telephone instruction. The Act does not say the words must follow any form, but a written statement is easier to prove later. Our article on section 186 explains why the Act treats both express and implied authority as real.
Implied authority
Implied authority is a matter of inference. The section says it is "to be inferred from the circumstances of the case". Then it explains what may count as circumstances:
- "things spoken or written", which means that even words that do not amount to a direct grant of power may help show that the agent had authority;
- "the ordinary course of dealing", which means a history of how the principal and agent have acted together.
| Type | Source | Example of proof |
|---|---|---|
| Express | Words spoken or written | The appointment letter, the email instruction |
| Implied | Inference from the circumstances, which can include things spoken or written and the ordinary course of dealing | A repeated pattern of orders placed in the principal's name with the principal's knowledge |
Notice that implied authority is not guesswork. The section says "to be inferred", so there must be circumstances from which a sensible inference follows.
If you manage agents and want a written scope that reduces arguments about inference, an agreement drafting adviser can help.
The Act's own illustration
The Serampore shop. A owns a shop in Serampore, living himself in Calcutta, and visiting the shop occasionally. The shop is managed by B, and he is in the habit of ordering goods from C in the name of A for the purposes of the shop, and of paying for them out of A's funds with A's knowledge. The Act says B has an implied authority from A to order goods from C in the name of A for the purposes of the shop.
Look at the facts the Act chose. A is absent and visits only occasionally; B manages the shop; B has been in the habit of ordering from C in A's name; B pays out of A's funds; and all this is "with A's knowledge". Each fact supports the inference. The authority was never stated in so many words, but the ordinary course of dealing, with A's knowledge, supports it. Take away A's knowledge and the inference is harder to draw, though the section does not itself discuss that case.
A modern example (ours, not the Act's)
Sunita owns a boutique in Jaipur and lives in Mumbai. Her manager Deepak has for two years been ordering fabric from Rathore Textiles in Sunita's name and paying from her business account. Sunita sees the statements and has never objected. Under the reasoning of the Act's illustration, Deepak has implied authority to order fabric from Rathore for the boutique.
Now suppose Deepak signs a one-off contract in Sunita's name to buy a delivery van. Nothing in the pattern of dealing involved vehicles. Whether authority can be inferred for that act depends on the circumstances; the section tells you the test (inference from circumstances) but not the answer for each case. Section 188 on the extent of authority is the next place to look, and our article on section 188 explains how.
What can the parties change?
Section 187 is a definition. The parties can create express authority by words and can limit it by words. A clear written limit is strong evidence of what the principal intended. The section does not state that a limit prevents an inference from other circumstances, so a principal who wants to stop a pattern of dealing should say so promptly rather than continue to watch it with knowledge.
Practical points
- Principals: if you do not want an agent to act in a certain way, say so, and do not let it continue with your knowledge.
- Agents: do not assume that one occasion creates a general power; the section looks at circumstances as a whole.
- Third persons: the ordinary course of dealing may help show authority, so ask for earlier correspondence if unsure.
- Record keeping: orders, statements and replies are the circumstances that later evidence is made from.
Need help documenting an agent's authority?
Disputes about implied authority tend to arise where nothing was written down. Our agreement drafting service can help you record clearly what an agent may and may not do, so the question does not rest on inference. Other laws may also apply to your sector.
Key takeaways
- Authority is express when given by words spoken or written (s.187).
- Authority is implied when it is to be inferred from the circumstances of the case.
- Things spoken or written, and the ordinary course of dealing, may be accounted circumstances.
- The Act's illustration: a shop manager in the habit of ordering goods in the owner's name, with the owner's knowledge, has implied authority to do so.
- The section is a definition; the extent of authority comes in later sections.
Read next
- Section 186: agent's authority may be expressed or implied
- Section 188: extent of agent's authority
- Sections 189 and 190: authority in an emergency and when an agent cannot delegate
Disclaimer: Based on the text of the Indian Contract Act, 1872 as consulted on 1 October 2026. Many questions under this Act turn on case law and on the wording of the particular contract, which this article does not cover. It is general information, not legal advice; check the official text and take advice before acting.