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Section 230: Agent cannot personally enforce, nor be bound by, contracts on behalf of principal

Indian Contract Act • Official Statutory Text & Practice Guide

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Act 1872
Section 229 All 266 Sections of Indian Contract Act Section 231
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Contract Sec 2(h)

Legal Commentary & Landmark Judgments: Section 230

In the absence of any contract to that effect, an agent cannot personally enforce contracts entered into by them on behalf of their principal, nor is the agent personally bound by them. However, such a contract of personal liability is legally presumed where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad, where the agent does not disclose the name of their principal, or where the principal, though disclosed, cannot be sued.

  • Agent's Immunity from Personal Liability: Section 230 establishes that in the absence of any contract to that effect, an agent cannot personally enforce contracts entered into on behalf of the principal, nor is the agent personally bound by them.
  • Statutory Presumptions of Personal Liability: A contract of personal liability is presumed where the contract is made for the sale or purchase of goods for a merchant abroad, where the principal is undisclosed, or where the principal cannot be sued.
Key Landmark Precedents:
  • Prem Nath Motors Ltd v. Anurag Mittal (2009) 16 SCC 274: The Supreme Court held that an authorized dealer who executes a sale contract purely as an agent of a disclosed automobile manufacturer cannot be held personally liable for manufacturing defects under Section 230.
  • Radhakrishna Sivadutta Rai v. Tayeballi Dawoodbhai (AIR 1962 SC 538): The Supreme Court held that when an agent contracts for an undisclosed or foreign principal, the presumption under Section 230 arises, entitling the third party to hold the agent personally liable on the contract.
Legal Commentary:

Commercial agents must always disclose their principal's full identity and sign contracts explicitly 'for and on behalf of [Principal Name] as Agent'. Failure to disclose the principal triggers personal liability under Section 230(2), exposing the agent to direct breach of contract lawsuits.

Section 229 All 266 Sections of Indian Contract Act Section 231