Section 230 of The Indian Contract Act, 1872
Agent cannot personally enforce, nor be bound by, contracts on behalf of principal.
n the absence of any contract to that effect, an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them. Presumption of contract to contrary—Such a contract shall be presumed to exist in the following cases:—
- (1)where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad;
- (2)where the agent does not disclose the name of his principal;
- (3)where the principal, though disclosed, cannot be sued.
Summary
- As a general rule under Indian agency contracts, an agent cannot personally enforce contracts made on behalf of their principal.
- The agent is also not personally bound by contracts entered into on behalf of the principal.
- A contract allowing the agent to sue or be sued is legally presumed if the principal is a merchant living abroad.
- This presumption of personal liability also arises if the agent does not disclose the principal's name.
- If the principal cannot be sued in court, the agent is presumed to be personally bound and able to enforce the contract.
Practical examples
FAQ
1. Can a third party hold an agent personally liable for a contract under the Indian Contract Act, 1872, Section 230?
Generally, no. Under Section 230 of the Indian Contract Act, 1872, an agent can neither personally enforce nor be personally bound by contracts made on behalf of a principal, unless there is a contract stating otherwise.
2. When does Section 230 of the Indian Contract Act, 1872 presume that an agent is personally bound?
Under Section 230 of the Indian Contract Act, 1872, personal liability is presumed if the principal resides abroad, if the principal's name is not disclosed, or if the principal cannot be legally sued.
3. If an agent discloses they act for a principal but does not name them, what is the agent's liability under the Contract Act, Section 230?
Under Section 230 of the Contract Act, because the agent does not disclose the name of the principal, a contract to the contrary is presumed, making the agent personally liable and able to personally enforce the agreement.
Test yourself
1.Under Section 230 of the Indian Contract Act, 1872, what is the general rule regarding an agent's personal liability on contracts made on behalf of their principal?
2.Under Section 230 of the Indian Contract Act, 1872, in which of the following scenarios is a contract presumed to exist making the agent personally liable?
3.Under Section 230 of the Indian Contract Act, 1872, if an agent signs a contract on behalf of a principal whose identity they disclose, but the principal is a minor who cannot be sued, what is the legal presumption?
4.Under Section 230 of the Indian Contract Act, 1872, what is the effect if an agent enters a contract stating "I am acting as agent for an unnamed client" and the client fails to perform?