Home  /  Indian Contract Act  /  Section 206

Section 206: Notice of revocation or renunciation

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 205 All 266 Sections of Indian Contract Act Section 207

Legal Commentary & Landmark Judgments: Section 206

Section 206 mandates that reasonable notice must be given of any revocation of agency by the principal or renunciation by the agent; otherwise, the party suffering damage from the abrupt termination is entitled to be made good by the other party.

  • Statutory Requirement of Reasonable Notice: Notice of termination is mandatory for both principal and agent, regardless of whether the contract contains an express notice clause, where the agency is for an indefinite duration.
  • Determination of 'Reasonable' Period: What constitutes reasonable notice is a question of fact, determined by the duration of agency, capital invested by agent, exclusivity, and time required to find alternative arrangements.
  • Damages for Abrupt Termination: Failure to give reasonable notice renders the revoking or renouncing party liable in damages for the financial loss suffered during the period that reasonable notice ought to have covered.
Key Landmark Precedents:
  • Indian Oil Corporation Ltd. v. Amritsar Gas Service (1991) 1 SCC 533: The Supreme Court affirmed that where an agency agreement is terminable on notice, damages for wrongful termination without notice are restricted to the earnings the agent would have realized during the requisite notice period.
  • Martin-Baker Aircraft Co. Ltd. v. Canadian Flight Equipment Ltd. [1955] 2 QB 556: The Queen's Bench held that a commercial agency contract of indefinite duration can be terminated only upon reasonable notice, holding that twelve months was reasonable given the scale of investment.
  • Decro-Wall International S.A. v. Practitioners in Marketing Ltd. [1971] 1 WLR 361: The Court of Appeal held that reasonable notice for terminating a long-standing sole concessionaire agency had to be substantial to allow the agent to re-deploy resources.
Courtroom Practice & Strategic Litigation Guidance:

When terminating an agency or distributorship that has no explicit notice clause, never terminate with immediate effect. Compute a reasonable notice window (typically 3 to 6 months depending on commercial scale) and serve formal written notice citing Section 206. If representing an abruptly terminated agent, claim compensation calculated as net average monthly profits multiplied by the reasonable notice period.

Section 205 All 266 Sections of Indian Contract Act Section 207