Section 242 The Indian Contract Act, 1872
Section 242 of the Indian Contract Act, 1872 relates to the agent’s authority to pledge principal’s goods in certain situations.
🔹 Section 242 – Agent’s authority to pledge principal’s goods
"An agent having authority to sell goods of the principal may pledge them for the purpose of the sale."
🔍 Explanation:
If an agent is authorized by the principal to sell goods, the agent also has the implied authority to pledge those goods.
This means the agent can give the goods as security (pledge) to a third party, usually to raise funds needed to complete the sale.
The principal is bound by such acts of the agent done in the course of sale.
📌 Example:
A authorizes B to sell A’s goods.
B pledges the goods with a third party to get money to pay for transportation costs related to the sale.
This act is within B’s implied authority, so A is bound by it.
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