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Chapter X - Agency

Section 226

Section 226: Effects of agency contracts

Agency contracts and obligations can be enforced with the same consequences as acts of the principal personally.

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Need advice on Section 226?

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.

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Statutory text

Bare law

Contracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner, and will have the same legal consequences, as if the contracts had been entered into and the acts done by the principal in person.

Illustrations

(a)A buys goods from B, knowing that he is an agent for their sale, but not knowing who is the principal. B’s principal is the person entitled to claim from A the price of the goods, and A cannot, in a suit by the principal, set-off against that claim a debt due to himself from B.

(b)A, being B’s agent, with authority to receive money on his behalf, receives from C a sum of money due to B. C is discharged of his obligation to pay the sum in question to B.

Rule and business relevance

This is the general effect of acting through an agent, read with authority and the surrounding qualifications. The illustrations address an undisclosed principal’s price claim and payment to an authorised receiving agent.

Limits and related provisions

Do not ignore whether the agent had authority or whether special rules on undisclosed principals and personal liability apply.

Hypothetical business example

Hypothetical example: A customer pays an agent authorised to receive the principal’s debt. The illustration treats that payment as discharging the customer’s obligation to the principal.

Practical decision flow

Establish the agency and relevant authority.

Identify the contract or obligation arising from the act.

Apply any particular rule affecting the counterparty or agent’s personal position.

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

  • Establish the agency and relevant authority.
  • Identify the contract or obligation arising from the act.
  • Apply any particular rule affecting the counterparty or agent’s personal position.

Avoid

  • Do not ignore whether the agent had authority or whether special rules on undisclosed principals and personal liability apply.

Glossary

Agency enforcement
Enforcement with the legal consequences described as if the principal acted personally.
Receiving authority
Authority to receive payment for the principal.

Frequently asked questions

Can payment to an authorised agent discharge the payer?

The second illustration expressly recognises that result.

Is authority still relevant?

Yes. The general rule must be read with the provisions defining and limiting authority.

Are undisclosed-principal situations always identical?

The later specific provisions must also be considered.

Need help applying this provision to your situation?

Contact Bizeneed

Last updated 10 October 2026