Section 202 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 201 lists how an agency ends. Section 202 makes an exception for the agent who has himself an interest in the property that the agency is about. In that case the agency "cannot, in the absence of an express contract, be terminated to the prejudice of such interest". The Act's two illustrations show what that means for death, insanity and revocation.
Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest (s.202). The Act's illustrations: an agent authorised to sell land and pay himself out of the proceeds the debts due to him, and an agent who made advances on cotton and is to repay himself from its sale. In each, the principal cannot revoke the authority, and insanity or death of the principal does not terminate it.
The text
"Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest."
Reading the section phrase by phrase
| Phrase | What it tells you |
|---|---|
| "the agent has himself an interest" | The agent's own interest, not merely his commission or fee |
| "in the property which forms the subject-matter of the agency" | The interest is in the very property the agency concerns |
| "cannot ... be terminated to the prejudice of such interest" | Termination that would harm that interest is not permitted |
| "in the absence of an express contract" | The rule gives way where there is an express contract to the contrary |
Notice what is protected: "such interest", the agent's interest in the property. The section does not say the agency can never end for any reason, or that the agent keeps the whole authority for every purpose. It says the agency cannot be terminated to the prejudice of that interest.
If you are an agent who has advanced money against goods, or a principal who has given such an authority, a legal consultation can help you see where you stand under this section and under your own contract.
The Act's own illustrations
(a) A gives authority to B to sell A's land, and to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority, nor can it be terminated by his insanity or death.
(b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself out of the price, the amount of his own advances. A cannot revoke this authority, nor is it terminated by his insanity or death.
In both illustrations the agent is to be paid from the property's proceeds for money A owes him. His interest is in the sale proceeds of that very property. The Act's conclusion is the same each time: the principal cannot revoke, and neither insanity nor death of the principal terminates the authority. This ties back to section 201, which lists revocation and the death or unsound mind of either party as modes of termination. Section 202 carves out the interest protected.
How it fits with sections 201 and 203
Section 201 states the general modes of termination. Section 203 gives the principal the right to revoke "save as is otherwise provided by the last preceding section", that is, section 202. So the structure is: general rule (ss.201, 203), exception for the agent with an interest (s.202). Our article on section 201 lists the modes, and our article on sections 203 to 206 covers revocation.
What the section does not say
- It does not define "interest in the property".
- It does not say whether the agent's interest must be of a particular kind or size.
- It does not say how the agent may enforce his protection.
- It is silent on the agent's renunciation. The protection is described against termination "to the prejudice of such interest".
A modern example (ours, not the Act's)
Meenakshi Traders advances money to Ghosh, a tea grower, against his next harvest. Ghosh authorises Meenakshi Traders in writing to sell the harvested tea at auction and to repay its advances out of the sale price. Before the sale, Ghosh tries to cancel the authority and sell to someone else. On the reasoning of the Act's illustration (b), Ghosh cannot revoke the authority, because Meenakshi Traders has its own interest in the property which forms the subject-matter of the agency, and an express contract to the contrary is absent.
If the arrangement had been different, say Meenakshi Traders was a commission agent who held the tea only for sale and for a fixed fee, with no advance against it, the agent's own interest in the property would not be in the picture, and section 202 would not be the section to rely on. A clause in the written agreement may also change the position, because the section operates "in the absence of an express contract".
What can the parties change?
The section itself says "in the absence of an express contract". That tells you the parties may agree otherwise by an express contract. Whether a clause that permits termination affects the interest is a matter of the wording of the clause. A careful agent who has an interest should make sure the contract records that interest and states plainly whether and when revocation is allowed. A principal should read any clause that gives the agent a security-like interest before signing.
Practical points
- Agents with advances: record the interest in writing, tie the authority to the repayment, and keep proof of the advance.
- Principals: do not assume you can revoke when the agent has an interest in the property; read section 202 and your contract.
- Express terms: the section operates "in the absence of an express contract", so wording matters.
- Other laws: security over goods or land may also be governed by other laws.
Need help with an agency where the agent has an interest?
Our legal consultation service can review the agreement and the facts and explain how section 202 may apply, including what an express contract may change. Other laws may also apply.
Key takeaways
- Where the agent has himself an interest in the property forming the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of that interest (s.202).
- The Act's illustrations: land sold to pay the agent's debts, and cotton sold to repay the agent's advances. The principal cannot revoke, and his insanity or death does not terminate the authority.
- The rule gives way to an express contract.
- The section does not define "interest".
Read next
- Section 201: termination of agency
- Sections 203 to 206: revocation of authority, compensation and notice
- Section 141: surety's right to the benefit of creditor's securities
Disclaimer: Based on the text of the Indian Contract Act, 1872 as consulted on 1 October 2026. Many questions under this Act turn on case law and on the wording of the particular contract, which this article does not cover. It is general information, not legal advice; check the official text and take advice before acting.