Sections 208 and 209 of the Indian Contract Act, 1872: Termination of Agent's Authority and Duty After Principal's Death or Unsoundness of Mind

Sections 208 and 209 form part of the law of agency under the Indian Contract Act, 1872. Section 208 determines when termination of an agent's authority becomes effective against the agent and against third persons. Section 209 imposes a protective duty on the agent when the agency ends because the principal dies or becomes of unsound mind.

Updated: 21 September 2026

Key rule: termination is not effective against an agent until the agent knows of it, and it is not effective against a third person until that third person knows of it. Where the principal dies or becomes of unsound mind, the agent must take reasonable steps to protect and preserve the interests entrusted to the agent.

Section 208 - When termination of agent's authority takes effect

Section 208 deals with the point of time at which termination of an agent's authority becomes legally effective for two different classes of persons: the agent and third persons dealing through the agency.

Statutory rule: The termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to the agent; and, so far as regards third persons, it does not take effect before it becomes known to them.

Meaning and effect of Section 208

The provision protects transactions undertaken without knowledge that the agency has ended. Merely revoking authority is therefore not enough in every situation. As against the agent, knowledge of termination is material. As against third persons, their knowledge of termination is separately material.

This distinction is important where an agent continues to act after the principal has revoked authority, or where the agency has ended because of an event such as the principal's death but the agent or a third party has not yet learned of that event.

Illustrations under Section 208

A directs B to sell goods and agrees to pay B five per cent commission. A later revokes B's authority by letter. If B sells the goods after the revocation letter is sent but before B receives it, the sale binds A and B remains entitled to the agreed commission.
A directs B to sell cotton and later revokes the authority. If B has received the revocation but C, who deals with B, knows of the original authority and does not know of the revocation, the statutory illustration treats C's payment to B as good against A.
A directs B to pay money to C. A dies. If B, without knowledge of A's death, pays C, the statutory illustration treats the payment as good against the executor.

Section 209 - Agent's duty when agency ends by death or unsoundness of mind

Section 209 applies where the agency terminates because the principal dies or becomes of unsound mind. It requires the agent to act for the immediate protection of the principal's interests even though the agency itself has terminated.

Statutory rule: When an agency is terminated by the principal dying or becoming of unsound mind, the agent must, on behalf of the representatives of the late principal, take all reasonable steps for the protection and preservation of the interests entrusted to the agent.

What Section 209 requires from the agent

The duty is protective and preservative. Depending on the property, transaction and circumstances, reasonable steps may include securing property or documents, preventing avoidable loss, preserving records, and taking other proportionate measures necessary to safeguard interests already entrusted to the agent until the principal's representatives can take control.

Relationship with Sections 206 and 207

Sections 206 and 207 address notice of revocation or renunciation and the manner in which revocation or renunciation may be expressed or implied. Section 208 then determines when termination takes effect against the agent and third persons. Section 209 deals with the agent's protective obligation where termination results from the principal's death or unsoundness of mind.

Practical summary

For agency transactions, the legal effect of termination may depend on who had knowledge of the termination and when that knowledge arose. Principals should communicate revocation promptly to the agent and, where relevant, to persons who have been dealing with the agent. Agents who learn of the principal's death or unsoundness of mind should avoid entering fresh transactions under the former authority and should take reasonable steps to preserve the interests already entrusted to them.

Official text: The Indian Contract Act, 1872 is available from India Code, Government of India.