Section 205 The Indian Contract Act, 1872
Section 205 of the Indian Contract Act, 1872 deals with the compensation for premature revocation of an agent's authority.
🔹 Section 205 – Compensation for revocation by principal, or renunciation by agent
Where there is an express or implied contract that the agency should be continued for any period of time, the principal must compensate the agent, or the agent must compensate the principal, as the case may be, for premature revocation or renunciation of the agency without sufficient cause.
🔠Explanation:
This section protects both the principal and the agent in case one of them ends the agency before the agreed time without a valid reason.
➤ Two scenarios covered:
Principal revokes agency before the agreed period ends without sufficient cause → Principal must compensate the agent.
Agent renounces agency (quits) before the agreed period ends without sufficient cause → Agent must compensate the principal.
🧑â€âš–ï¸ Illustration:
A appoints B as his agent for 1 year to manage his business.
After 3 months, A revokes B’s authority without any valid reason.
B suffers loss due to this.
👉 A must compensate B under Section 205.
Similarly:
If B (agent) leaves the job without reason before the term ends, B must compensate A.
📌 Key Points:
Applies only when there is an express or implied agreement for a fixed duration.
Protects against unfair or abrupt termination.
"Sufficient cause" means valid and reasonable justification (e.g., fraud, breach of duty, etc.).
RELATED Blog
0 comments