Sections 210 and 211 of the Indian Contract Act, 1872: Termination of Sub-Agent Authority and Agent's Duty

Sections 210 and 211 form part of the law of agency under the Indian Contract Act, 1872. Section 210 deals with the effect of termination of an agent's authority on sub-agents, while Section 211 lays down the basic standard an agent must follow when conducting the principal's business.

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Section 210: Termination of sub-agent's authority

Statutory rule: The termination of the authority of an agent causes the termination, subject to the rules in the Act regarding termination of an agent's authority, of the authority of all sub-agents appointed by that agent.

In substance, a sub-agent normally derives authority through the agent who appointed the sub-agent. Consequently, when the appointing agent's authority terminates, the authority of the sub-agent also terminates, subject to the other statutory rules governing when termination becomes effective.

This provision should therefore be read with the surrounding provisions on revocation, renunciation and the time at which termination of agency takes effect, particularly Sections 201 to 209 of the Act.

Section 211: Agent's duty in conducting principal's business

Statutory rule: An agent must conduct the principal's business according to the principal's directions. If there are no directions, the agent must follow the custom prevailing in conducting business of the same kind at the place where the agent carries on that business. If the agent acts otherwise, the agent must make good any resulting loss to the principal and account to the principal for any resulting profit.

Section 211 therefore establishes two linked standards. The principal's lawful directions are the primary guide. Where no direction has been given on a matter, the relevant local business custom supplies the standard of conduct. Departure from that standard can create financial consequences for the agent.

Illustrations under Section 211

The Act illustrates the rule by referring, first, to an agent who fails to invest money in accordance with the customary practice of the business and must make good the interest ordinarily obtainable. It also gives the example of a broker who sells on credit where selling on credit is not customary; if the buyer becomes insolvent before payment, the broker must make good the loss.

Practical meaning of Sections 210 and 211

Section 210 concerns the continuation of delegated authority after the main agency ends. Section 211 concerns how an agent must perform while the agency continues. Together, the provisions help define both the chain of authority in an agency relationship and the agent's responsibility to follow the principal's instructions or, where instructions are absent, applicable business custom.

Current-law note: The Indian Contract Act, 1872 remains a Central Act. For the authoritative statutory text and amendments, users should verify the current text published by India Code before relying on any provision for a transaction or proceeding.

Sections 206 to 209 deal with notice of revocation or renunciation, express or implied revocation and renunciation, the point at which termination becomes effective, and an agent's duty on termination caused by the principal's death or insanity. Sections 212 onward deal with further duties and rights of agents and principals.