Employment

Agent Definition: Indian Contract Act 1872 (Section 182 to 238)

January 24, 2026 • 6 min read

What is an Agent under Section 182?

According to India code Indian Contract Act 1872 Section 182 agent definition, an agent is a person employed to do any act for another, or to represent another in dealings with third persons.

Understanding Agency (Sections 182 to 238)

The law of agency in India is governed by agency section 182 to 238 of the Indian Contract Act, 1872. This framework establishes the relationship between the Principal (who delegates authority) and the Agent.

Types of Agent in Contract Law

• General Agent: Authorized to perform all acts related to a specific trade or business.
• Special Agent: Appointed for a single specific act or transaction.
• Mercantile Agent: Has authority to sell goods, consign goods, or raise money on the security of goods.
• Sub-Agent: Appointed by the original agent to assist in the agency's business.

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Section 182, Indian Contract Act: The Definition of Agent and Principal

Section 182 of the Indian Contract Act, 1872 provides the foundational definition of agency in Indian law: "An 'agent' is a person employed to do any act for another, or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the 'principal'."

This definition is deliberately broad — it captures formal business agents, sales representatives, brokers, lawyers acting for clients, company directors acting for companies, and even employees acting within the scope of their employment. The key elements are: (a) an act done on behalf of another, and (b) that act affecting the principal's legal relations with third parties.

How Agency Is Created Under Indian Law

Under Sections 185–190 of the Indian Contract Act, agency can be created in four ways:

• Express Agency (Section 186): Created by words — written or spoken. A formal agency agreement, a power of attorney, or even a verbal authorisation qualifies. Most commercial agency relationships are created this way.
• Implied Agency (Section 187): Arises from the conduct, situation, or relationship of the parties. A manager of a shop has implied authority to bind the owner in transactions within the ordinary scope of the business, even without explicit authorisation.
• Agency by Ratification (Section 196): If a person acts on behalf of another without authority, and the principal subsequently ratifies (approves) the act, the agency is deemed to have existed from the time of the original act.
• Agency by Necessity (Section 188): Arises in emergency situations where someone must act on another's behalf to protect their interests without time to obtain consent. Rare in commercial practice.

The Agent's Authority: Express vs. Implied vs. Ostensible

A critical commercial issue is determining the extent of an agent's authority to bind the principal:

• Express Authority: What the agency agreement or power of attorney explicitly says the agent can do.
• Implied Authority (Section 188): Authority to do everything necessary to carry out the express mandate — e.g., an agent authorised to sell goods has implied authority to give receipts and collect payment.
• Ostensible/Apparent Authority: Authority that a third party reasonably believes the agent has based on the principal's representations — even if the agent has in fact exceeded their actual authority. Indian courts hold the principal liable to bona fide third parties who relied on apparent authority.

Agent's Duties Under the Indian Contract Act

Principal's Liability for Agent's Acts

Under Section 226 of the Indian Contract Act, the principal is bound by the acts of an agent acting within the scope of their authority. The key scenarios of principal liability:

• Acts within authority: Principal is directly bound as if they performed the act themselves
• Acts within apparent authority: Principal is bound to bona fide third parties even if the agent exceeded actual authority
• Fraudulent acts: If an agent commits fraud in the course of their agency — even without the principal's knowledge — the principal can be held liable to an innocent third party under Section 238
• Notice to agent = notice to principal: Under Section 229, notice given to an agent in the course of business is deemed notice to the principal

Agency Agreements in Commercial Practice

Commercial agency agreements in India — covering distributors, sales agents, commission agents, and business correspondents — should clearly document:

• The scope and territory of the agent's authority
• Commission structure and payment timeline
• Whether the agent is an independent contractor or an employee (critical for GST and labour law)
• Restriction on the agent representing competing principals (non-compete/exclusivity clauses)
• Term, termination notice period, and post-termination obligations
• The governing law and dispute resolution mechanism

In India, commission agents and sales agents are also regulated by the GST Act — they are required to register for GST regardless of their turnover if they supply goods or services on behalf of other taxable persons.