Chapter X - Agency
Section 218
Section 218: Paying the principal’s balance
After the permitted deductions, an agent must pay the principal all sums received on the principal’s account.
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Need advice on Section 218?
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
Subject to such deductions, the agent is bound to pay to his principal all sums received on his account.
Rule and business relevance
This obligation follows the retention rule in section 217 and requires an accurate net balance.
Limits and related provisions
Do not withhold all receipts merely because one deduction is disputed. Establish the lawful deductions and payment obligations on the actual accounts.
Hypothetical business example
Hypothetical example: An agent collects customer payments and deducts only supported amounts due under section 217, then pays over and reconciles the balance.
Practical decision flow
Total receipts on the principal’s account.
Verify deductions allowed by the preceding provision.
Pay and document the balance due to the principal.
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
- Total receipts on the principal’s account.
- Verify deductions allowed by the preceding provision.
- Pay and document the balance due to the principal.
Avoid
- Do not withhold all receipts merely because one deduction is disputed. Establish the lawful deductions and payment obligations on the actual accounts.
Glossary
- Net balance
- Receipts remaining after the permitted deductions.
- Principal’s account
- Money received for the principal through the agency.
Frequently asked questions
Can the agent keep all collected sums?
No. The section requires payment subject to the stated deductions.
Which deductions are referred to?
The retainer categories in section 217.
Why reconcile receipts separately?
It makes the principal’s gross receipts, deductions and net payment clear.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026