Chapter X - Agency
Section 234
Section 234: Reliance on exclusive liability
A counterparty cannot reverse an exclusive-liability position after inducing the agent or principal to act on it in the stated way.
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Need advice on Section 234?
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
When a person who has made a contract with an agent induces the agent to act upon the belief that the principal only will be held liable, or induces the principal to act upon the belief that the agent only will be held liable, he cannot afterwards hold liable the agent or principal respectively.
Rule and business relevance
If the agent is induced to act believing only the principal will be liable, the agent cannot later be held liable; the converse applies where the principal acts believing only the agent will be liable.
Limits and related provisions
Identify inducement and action on the belief. A casual statement without the statutory reliance circumstances should not be treated as automatically releasing everyone.
Hypothetical business example
Hypothetical example: A creditor induces the agent to act on an assurance that only the principal will be pursued. The creditor later considers a claim against that agent and must assess section 234.
Practical decision flow
Identify the representation about exclusive liability.
Establish who was induced and how that person acted.
Match the later claim to the restriction stated in the section.
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
- Identify the representation about exclusive liability.
- Establish who was induced and how that person acted.
- Match the later claim to the restriction stated in the section.
Avoid
- Identify inducement and action on the belief. A casual statement without the statutory reliance circumstances should not be treated as automatically releasing everyone.
Glossary
- Induced belief
- The belief in exclusive liability on which the relevant person was caused to act.
- Exclusive liability
- Liability asserted as resting only on the principal or only on the agent.
Frequently asked questions
Does the rule operate in both directions?
Yes, with the agent and principal positions separately stated.
Is reliance in action relevant?
Yes. The person must have been induced to act on the belief.
Does it necessarily release both parties?
No. It restricts the later claim against the person identified in the relevant limb.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026