Chapter X - Agency
Section 208
Section 208: Knowledge and effect of termination
Termination becomes effective against the agent and third persons when it becomes known to them, under the distinctions in this section.
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This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
The termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards third persons, before it becomes known to them.
Illustrations
(a) A directs B to sell goods for him, and agrees to give B five per cent. commission on the price fetched by the goods. A afterwards, by letter, revoke B’s authority. B, after the letter is sent, but before he receives it, sells the goods for 100 rupees. The sale is binding on A, and B is entitled to five rupees as his commission.
(b) A, at Madras, by letter, directs B to sell for him some cotton lying in a warehouse in Bombay, and afterwards, by letter, revokes his authority to sell, and directs B to send the cotton to Madras. B, after receiving the second letter, enters into a contract with C, who knows of the first letter, but not of the second, for the sale to him of the cotton. C pays B the money, with which B absconds. C’s payment is good as against A.
(c) A directs B, his agent, to pay certain money to C. A dies, and D takes out probate to his will. B, after A’s death, but before hearing of it, pays the money to C. The payment is good as against D, the executor.
Rule and business relevance
Sending a revocation is not necessarily enough for its effect against an unaware agent or counterparty. The illustrations address intervening sales, third-party payment and acts before knowledge of death.
Limits and related provisions
Do not merge the agent’s knowledge with a third person’s knowledge. Each must be assessed separately with evidence.
Hypothetical business example
Hypothetical example: A principal sends cancellation to a sales agent; before learning of it, the agent makes the authorised sale. The communication timeline affects whether the principal is bound.
Practical decision flow
Record the termination event and all communications.
Establish when the agent knew.
Separately establish when the relevant third person knew.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- Record the termination event and all communications.
- Establish when the agent knew.
- Separately establish when the relevant third person knew.
Avoid
- Do not merge the agent’s knowledge with a third person’s knowledge. Each must be assessed separately with evidence.
Glossary
- Knowledge of termination
- Awareness relevant to the statutory timing of effect.
- Third person
- The counterparty whose own knowledge requires separate assessment.
Frequently asked questions
Is sending a letter always enough?
No. The provision addresses when termination becomes known.
Is the counterparty’s knowledge separate from the agent’s?
Yes. The section expressly distinguishes them.
Can an act after death but before knowledge be relevant?
Yes. The third illustration addresses that situation.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026