Sections 206 and 207 of Indian Contract Act 1872: Notice, Revocation and Renunciation of Agency

Sections 206 and 207 form part of the law governing termination of agency under the Indian Contract Act, 1872. Section 206 deals with reasonable notice when the principal revokes the agent's authority or the agent renounces the business of agency. Section 207 explains that revocation or renunciation may arise either expressly or by conduct.

Section 206 - Notice of revocation or renunciation

Statutory rule: Reasonable notice must be given of revocation or renunciation. If reasonable notice is not given, the party whose conduct causes resulting damage may be required to make good that damage to the other party.

Section 206 applies when an agency is being brought to an end by the principal or the agent. A principal may revoke the agent's authority, while an agent may renounce the agency. The provision requires reasonable notice so that an abrupt termination does not unfairly cause avoidable loss to the other side.

What does reasonable notice mean?

The Act does not prescribe a fixed number of days for every agency. Whether notice is reasonable depends on the circumstances, including the nature and duration of the agency, the work being performed, contractual terms, commercial practice and the likely consequences of sudden termination. Parties should therefore also check the agency agreement for an agreed notice period.

Consequence of failure to give reasonable notice

Failure to give reasonable notice does not merely raise a procedural issue. Section 206 expressly links inadequate notice with liability for the damage resulting from it. The recoverable claim therefore depends on loss caused by the absence of reasonable notice.

Section 207 - Revocation and renunciation may be express or implied

Statutory rule: Revocation by the principal and renunciation by the agent may be express, or they may be implied from the conduct of the principal or agent respectively.

An express termination is communicated directly, for example by a written notice clearly revoking authority or renouncing the agency. An implied termination is inferred from conduct that is inconsistent with continuation of the authority or agency relationship.

Illustration under Section 207

The statutory illustration explains that A authorises B to let A's house and A later lets the house himself. A's conduct amounts to an implied revocation of B's authority.

How Sections 206 and 207 work together

Provision	Purpose	Practical effect
Section 206	Requires reasonable notice of revocation or renunciation.	Damage resulting from failure to give reasonable notice may have to be compensated.
Section 207	Recognises express and implied termination.	Conduct may terminate authority even where no formal words of revocation or renunciation are used.

Related provisions on termination of agency

Sections 206 and 207 should be read with the surrounding provisions governing termination of agency. In particular, Section 208 addresses when termination of an agent's authority takes effect as against the agent and third persons, while Section 209 deals with an agent's duty on termination by the principal's death or insanity.

Practical point: A written notice is generally useful for evidentiary clarity even though Section 207 recognises implied revocation or renunciation. The terms of the particular agency agreement and the surrounding facts remain important.

Official text

For the authoritative Central Act text, refer to the Indian Contract Act, 1872 on India Code. The Act is Central Act No. 9 of 1872.

This page provides general legal information and should be read with the current statutory text and the facts of the particular agency relationship.