Sections 200 and 201 of the Indian Contract Act, 1872: Ratification and Termination of Agency
Sections 200 and 201 form part of the law of agency under the Indian Contract Act, 1872. Section 200 protects third persons from prejudicial retrospective ratification of an unauthorized act, while Section 201 states the principal modes by which an agency comes to an end.
Section 200 - Ratification of unauthorized act cannot injure third person
Meaning: Ratification generally allows a principal to adopt an act that another person performed on the principal's behalf without prior authority. Section 200 places an important limit on that doctrine: ratification cannot retrospectively make a third person liable for damages or terminate a right or interest belonging to that third person where the unauthorized act would have produced that consequence only if it had originally been authorized.
Statutory text of Section 200
An act done by one person on behalf of another, without such other person's authority, which, if done with authority, would have the effect of subjecting a third person to damages, or of terminating any right or interest of a third person, cannot, by ratification, be made to have such effect.
Illustrations to Section 200
- A person without authority demands delivery of the principal's chattel from a third person in possession. The principal cannot later ratify that demand so as to make the third person liable in damages for the earlier refusal to deliver.
- Where an unauthorized person gives notice purporting to terminate another person's lease, the lessor cannot subsequently ratify that notice so as to make the earlier unauthorized notice binding on the lessee.
In practical terms, Section 200 prevents ratification from being used retrospectively to prejudice an accrued right or impose a liability upon a third party.
Section 201 - Termination of agency
Meaning: Section 201 identifies events by which the authority of an agent may end. Termination can result from an act of the principal or agent, completion of the agency business, specified personal events affecting either party, or insolvency of the principal.
Statutory text of Section 201
An agency is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated an insolvent under the provisions of any Act for the time being in force for the relief of insolvent debtors.
Modes of termination under Section 201
The section therefore covers revocation by the principal, renunciation by the agent, completion of the business for which the agency was created, death or unsoundness of mind of the principal or agent, and adjudication of the principal as an insolvent. These rules should be read with the succeeding provisions of the Act, particularly Sections 202 to 210, which regulate matters such as an agency coupled with interest, the stage at which authority may be revoked, compensation, notice and the point at which termination becomes effective.
Difference between Sections 200 and 201
Section 200 concerns the effect and limit of ratification of an unauthorized act where a third person's rights may be harmed. Section 201 concerns the termination of an existing agency relationship. The provisions address different stages of agency law but appear consecutively because Section 200 concludes the statutory rules on ratification and Section 201 begins the rules on revocation and termination of authority.
Related provisions
For a fuller understanding, read Sections 196 and 197 on ratification, Sections 198 and 199 on valid ratification, and Sections 202 and 203 on termination where the agent has an interest and revocation of authority.
Legal information: This page explains the statutory provisions in general terms. The application of agency law depends on the facts, the contract between the parties and other applicable law.