Sections 203 to 206 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.
When can a principal take back an agent's authority? Section 203 says at any time before the authority has been exercised so as to bind him; section 204 says not once it has been partly exercised, so far as concerns what has already been done. Sections 205 and 206 then deal with compensation for premature revocation or renunciation and with the notice that must be given.
The principal may revoke at any time before the authority has been exercised so as to bind him, except where the agent has an interest in the subject-matter (s.203). He cannot revoke after the authority has been partly exercised, so far as regards acts and obligations arising from acts already done (s.204). Where there is an express or implied contract that the agency continue for a period of time, the principal or agent must make compensation for revocation or renunciation without sufficient cause (s.205). Reasonable notice must be given, otherwise the resulting damage must be made good (s.206).
Section 203: when the principal may revoke
"The principal may, save as is otherwise provided by the last preceding section, revoke the authority given to his agent at any time before the authority has been exercised so as to bind the principal."
Two limits are in the section itself: the cut-off, "before the authority has been exercised so as to bind the principal", and the carve-out "save as is otherwise provided by the last preceding section". The preceding section is section 202, the case of an agent with an interest in the property; see our article on section 202.
Section 204: after partial exercise
"The principal cannot revoke the authority given to his agent after the authority has been partly exercised, so far as regards such acts and obligations as arise from acts already done in the agency."
The words "so far as regards" matter. The principal's inability to revoke is limited to the acts and obligations that arise from acts already done.
The Act's illustrations.
(a) A authorizes B to buy 1,000 bales of cotton on account of A, and to pay for it out of A's moneys remaining in B's hands. B buys 1,000 bales of cotton in his own name, so as to make himself personally liable for the price. A cannot revoke B's authority so far as regards payment for the cotton.
(b) The same authority; but B buys the 1,000 bales in A's name, and so as not to render himself personally liable for the price. A can revoke B's authority to pay for the cotton.
The two illustrations differ on one fact: whether B made himself personally liable. Where he did, the obligation has arisen from an act already done and A cannot revoke as regards payment. Where he did not, A can.
If you are about to revoke and want to be sure of the position, a legal notice drafting adviser can help you prepare a notice that fits.
Section 205: compensation for revocation or renunciation
"Where there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause."
The section has a condition and a consequence.
| Element | Words |
|---|---|
| Condition 1 | An express or implied contract that the agency should be continued for any period of time |
| Condition 2 | A previous revocation (by principal) or renunciation (by agent) |
| Condition 3 | Without sufficient cause |
| Consequence | The principal compensates the agent, or the agent the principal, as the case may be |
The section does not define "sufficient cause" and does not set an amount. It operates both ways: the agent who walks away from a fixed-period agency without sufficient cause owes the principal compensation just as the principal who dismisses him does.
Section 206: reasonable notice
"Reasonable notice must be given of such revocation or renunciation, otherwise the damage thereby resulting to the principal or the agent, as the case may be, must be made good to the one by the other."
The text does not say how long "reasonable" is. It depends on the agency. It also does not say that notice in a particular form is needed. The remedy for lack of notice is that "the damage thereby resulting" must be made good. Sections 205 and 206 are separate: section 205 asks whether there was a contract for a period and a revocation or renunciation without sufficient cause; section 206 asks whether reasonable notice was given.
A modern example (ours, not the Act's)
Jain Distributors appoints Kavya as its sales representative in Nagpur for a two-year term under a written agency contract. After six months the company ends her authority, with no complaint about her work and no notice. On the words of section 205, there is an express contract that the agency should continue for a period; the revocation was without sufficient cause; the company must compensate her. Under section 206, reasonable notice should have been given; if it was not, the resulting damage must be made good.
If instead Kavya had left after six months to take another job with no reason connected with Jain Distributors, the same sections run in the other direction: she would owe compensation to Jain Distributors for renunciation without sufficient cause, and any damage from no reasonable notice.
Separately, suppose Jain Distributors had authorised Kavya to buy 1,000 units of stock from a supplier and she had already placed the order in her own name so as to be personally liable for the price. Under section 204 and illustration (a), the company cannot revoke her authority as regards payment for that stock.
What can the parties change?
Section 205 speaks of "an express or implied contract" for a period, so the parties can set the period. They can define in the contract what counts as sufficient cause for ending early, and how much notice is reasonable (for example, thirty days). The text does not say that a fixed notice period replaces the statutory requirement of reasonable notice, but a clear contract term is strong evidence of what the parties regarded as reasonable.
Practical points
- Principals: before revoking, check whether the agent has an interest (s.202), whether the authority has been partly exercised (s.204), and whether the contract fixes a period (s.205).
- Agents: if you want to renounce a fixed-period agency, make sure you have sufficient cause and give reasonable notice.
- Put notice in writing and keep proof of delivery. Section 208, covered in our article on sections 207 to 210, makes knowledge important.
- Record the term and the grounds for early ending in the contract.
Need help with a revocation or renunciation notice?
Our legal notice drafting service can help you prepare a revocation or renunciation notice that states the grounds, gives the notice period and records the delivery. Other laws may also apply to your arrangement.
Key takeaways
- A principal may revoke at any time before the authority has been exercised so as to bind him, subject to section 202 (s.203).
- After partial exercise, he cannot revoke as regards acts and obligations arising from acts already done (s.204).
- Where the contract is for a period, revocation or renunciation without sufficient cause calls for compensation, by principal or agent as the case may be (s.205).
- Reasonable notice must be given; otherwise the resulting damage must be made good (s.206).
Read next
- Section 201: termination of agency
- Section 202: termination where the agent has an interest in the subject-matter
- Sections 207 to 210: when revocation takes effect and death of principal
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.