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Section 204: Revocation where authority has been partly exercised

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 203 All 266 Sections of Indian Contract Act Section 205

Legal Commentary & Landmark Judgments: Section 204

Section 204 restricts the principal's power of revocation where the agent has already partly exercised his authority, prohibiting revocation so far as regards such acts and obligations as have already arisen from acts done in the agency.

  • Partial Exercise of Mandate: The agent has commenced performance and executed part of the authorized transaction, incurring personal liabilities or binding commitments toward third parties.
  • Irrevocability as to Past Acts and Arisen Obligations: Revocation operates only prospectively; the principal is legally precluded from revoking authority to escape obligations, debts, or indemnity liabilities already accrued from acts done.
  • Protection of Agent and Third Parties: Ensures that an agent who has committed funds, entered into forward contracts, or assumed personal liability within authorized scope cannot be left exposed by an abrupt cancellation.
Key Landmark Precedents:
  • Read v. Anderson (1884) 13 QBD 779: The Court of Appeal held that where an agent was authorized to place bets in his own name and incurred personal liability, the principal could not revoke the authority after the bet was placed so as to deprive the agent of his right to indemnity.
  • Chidambaram Chettiar v. P.S.A. Chinnaiya Chettiar AIR 1954 Mad 203: The High Court affirmed that once an agent has entered into binding transactions and incurred financial commitments within authority, the principal cannot revoke authority to defeat those acts under Section 204.
Courtroom Practice & Strategic Litigation Guidance:

When representing an agent whose authority was suddenly revoked after he had entered into procurement contracts or issued tenders, invoke Section 204. Establish that the obligations arose before revocation was communicated. The principal remains bound to indemnify the agent and fulfill the commitments entered into by the agent prior to revocation.

Section 203 All 266 Sections of Indian Contract Act Section 205