Question

A person represented to be on agent of a credit card company for collecting the dues. The person was authorized only to remind the persons of the dues and not collect the payment. A customer gave a cheque to the person towards the credit card bill. The person forgot to deposit it and the credit card company levied a charge of Rs. 500 on the customer as the damages for not paying the bill in time . the customer claims that he had paid the fill in time to the agent and therefore, the charger by the credit cared company is without basis. Explore the relationships between the parties.

Answer 1

In this relation there are three parties involved which are

• Principal (the credit card company)
• agent
• third party(customer)

In these two types of relation can be showed in this case

• Apparent Authority
• Ratification Authority

These are as:

• Apparent Authority: In dealing with third party the legal rights of the principal are taken into consideration. This authority arises when the third party has the reason to believe that possibly the agent has that authority. The third party will believe and decide on the agent's action and performance of task as he or she has nothing to do between the terms and conditions agreed between the agent and the principal. Moreover, in this type of authority Principal of Estoppel takes places. It means when you by your actions or by performance make other person believe that you have the authority.

In this case as well when the customer was giving the dues to agent and was asking him to deposit the same with bank the agent didn't refused or avoid instead he took the amount which clearly shows and makes believe to customer that agent have the authority to collect the payment as well.

• Ratification Authority: In this if although the agent does not have authority to go beyond something and make third party rely yet in that case the principal ratifies the agents acts and consider it the part of performance.

In this clause the authority is been created post the occurrence of the event. This is basically the type of indemnification clause where the ratification helps the party to be in that situation where they should be and amending the agent's mistakes

In this case as well although the agent was not having authority to take payment yet he took payment from customer and failing to deposit the same with bank initiated the penalty on the customer. This act can be rectified by the bank where after the occurrence of this event they will waive the penalty Rs.500 so charged to the customer's bill which automatically rectify and amend the performance that agent had authority to collect payment as well.