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Section 226: Enforcement and consequences of agent's contracts

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 225 All 266 Sections of Indian Contract Act Section 227

Legal Commentary & Landmark Judgments: Section 226

Section 226 embodies the foundational maxim 'qui facit per alium facit per se', providing that contracts entered into through an authorized agent, and obligations arising from his acts, may be enforced in the same manner and carry identical legal consequences as if entered into by the principal in person.

  • Creation of Direct Contractual Privity: Authorized contracts executed by an agent operate directly between the principal and the third party, binding the principal to all covenants, representations, and warranties.
  • Imputation of Rights and Obligations: All benefits, liabilities, statutory notices, and waivers executed by the agent within actual or ostensible authority are legally deemed the personal acts of the principal.
  • Agent's Presumptive Immunity: Read with Section 230, once direct privity attaches between the principal and the third party, the agent drops out of the transaction and incurs no personal liability, absent contrary agreement.
Key Landmark Precedents:
  • Harshad J. Shah v. LIC of India (1997) 5 SCC 64: The Supreme Court held that an insurance agent accepting premium by bearer cheque without express authority does not bind LIC under Section 226 unless actual authority or ostensible authority under Section 237 is established.
  • Radhakrishna Sivadutta Rice Mill v. Union of India AIR 1954 SC 596: The Supreme Court held that contracts entered into by authorized purchasing agents within their delegated authority bind the government/principal directly under the rules of agency.
  • Bowstead & Reynolds on Agency principles: Recognized authoritatively across Indian courts: authorized acts of an agent create direct privity of contract between principal and third party, completely extinguishing agent's personal involvement.
Courtroom Practice & Strategic Litigation Guidance:

In enforcement proceedings against a disclosed principal, sue the principal directly under Section 226 without making the agent a party, unless the agent signed in a personal capacity. If the principal denies the agent's authority, lead evidence of course of dealing, ratifying board resolutions, or holding out.

Section 225 All 266 Sections of Indian Contract Act Section 227