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

Section 211 of Indian Contract Act: Agent's duty in conducting principal's business

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

An agent is bound to conduct the business of his principal according to the directions given by the principal, or, in the absence of any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business.

When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and if any profit accrues, he must account for it.

Statutory Defined Terms in this Section: (Click any term for official legal definition)

Contract Sec 2(h)

Legal Commentary & Landmark Judgments: Section 211

An agent is bound to conduct the business of their principal according to the directions given by the principal, or, in the absence of any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, they must make it good to their principal, and, if any profit accrues, they must account for it.

Statutory Rights & Obligations: This provision establishes the agent's strict fiduciary duty of obedience.
Evidentiary Proof & Admissibility: In stockbroking, commodity trading, and portfolio management, an agent who disregards express client instructions—such as executing trades outside limit prices, investing in unauthorized securities, or extending unapproved credit—is strictly liable for all resulting capital losses, while any windfall gains belong exclusively to the principal without deduction.

Key Landmark Precedents:

Pannalal Jankidas v. Mohanlal (AIR 1951 SC 144): The Supreme Court held that an agent instructed to insure goods who failed to do so was liable under Section 211 to compensate the principal for the full value of the goods destroyed in a dock explosion.
Lilley v. Doubleday (1881) 7 QBD 510: The Court held that an agent who departed from the principal's instruction to store goods in a specific warehouse was strictly liable for their destruction by fire in another warehouse, irrespective of negligence.

Legal Commentary:

Section 211 imposes strict liability for deviation from instructions. The agent cannot defend non-compliance by arguing that their deviation was well-intentioned or intended to benefit the principal; any unauthorized deviation makes the agent an insurer against resulting losses.

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

Section 211 of Indian Contract Act: Agent's duty in conducting principal's business

Legal Commentary & Landmark Judgments: Section 211