The primary piece of legislation governing Principal-Agent relationships in Pakistan is The Contract Act, 1872. In terms of the authority and powers of the agent, Section 187 defines the express and implied authority of the agent and Section 188 of the Contract Act relates to the extent of the agent’s authority. Express authority is given through spoken or written words and implied authority can be inferred from “the circumstances of the case” or “the ordinary course of dealing”. Such implied authority does not extend or apply to actions of the agent that have been clearly and specifically excluded in the agency agreement and these actions cannot be considered incidental to the exercise of the agent’s express authority. Therefore, it is important to clearly define the scope and limits of the agent’s authority/powers in the agreement to ensure that neither the agent misconstrues its own powers nor a third party infers or implies any authority or power of the agent that the agent does not have.
