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Section 208: When termination of agent's authority takes effect as to agent, and as to third persons

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 207 All 266 Sections of Indian Contract Act Section 209

Legal Commentary & Landmark Judgments: Section 208

Section 208 establishes the crucial bifurcated rule on the effective date of agency termination, providing that termination takes effect as against the agent only when it becomes known to him, and as against third persons only when it becomes known to them.

  • Effective Date as to Agent: Termination does not divest the agent of authority until the fact of revocation, renunciation, or death/insanity becomes known to the agent.
  • Effective Date as to Third Parties: Termination is completely ineffective against third parties who deal with the agent in good faith without notice; the agent's ostensible authority continues to bind the principal until actual or constructive notice is given to third parties.
  • Protection of Commercial Reliance: Enacts a statutory shield protecting innocent third parties who rely on the apparent continuity of an established agency relationship against undisclosed internal revocations.
Key Landmark Precedents:
  • Trueman v. Loder (1840) 11 Ad & El 589: The Court established that a principal who allows an agent to act in commercial trade remains bound by the agent's contracts even after revoking the authority, unless and until the revocation is made known to third-party traders.
  • Syndicate Bank v. Official Liquidator (1985) 58 Comp Cas 259 (Del): The High Court recognized that third parties dealing with an agent without notice of revocation are fully protected under Section 208, and the principal remains bound by the transaction.
  • Chairman, Life Insurance Corporation of India v. Rajiv Kumar Bhaskar (2005) 6 SCC 188: The Supreme Court emphasized that apparent and ostensible authority protects innocent citizens dealing with an institutional representative in the absence of notice of termination.
Courtroom Practice & Strategic Litigation Guidance:

Whenever a company revokes the authority of a director, branch manager, or procurement executive, private communication to the executive is not enough under Section 208. The company must immediately publish a public notice in newspapers, notify banks, inform regular trade partners, and revoke digital credentials. Otherwise, any commitment made by the ex-agent to a third party remains binding on the company.

Section 207 All 266 Sections of Indian Contract Act Section 209