Section 211 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 211 opens the Act's set of duties of an agent to his principal. The basic duty is to follow directions: the principal's, or if there are none, the custom that prevails in similar business at the place where the agent conducts it. An agent who acts otherwise makes good any loss and accounts for any profit.
An agent must conduct the principal's business according to the directions given by the principal, or, in the absence of any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and if any profit accrues, he must account for it. The Act's illustrations: an agent who omits the customary investment of idle money, and a broker who sells on credit against the custom.
The text
"An agent is bound to conduct the business of his principal according to the directions given by the principal, or, in the absence of any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and if any profit accrues, he must account for it."
The structure of the duty
| Step | What the section says |
|---|---|
| First choice | The principal's directions |
| If there are none | The custom which prevails in doing business of the same kind at the place where the agent conducts such business |
| If the agent acts otherwise | Loss: he must make it good. Profit: he must account for it |
The order matters. Directions come first; custom fills the gap only "in the absence of any such directions". The custom is measured by "business of the same kind" and "at the place where the agent conducts such business", so the custom of one place or trade does not automatically apply to another.
Note also that the consequence runs both ways. If the agent departs from the directions or custom and a loss follows, he must make it good. If a profit follows, he must account for it. He cannot keep the profit from a departure while the principal bears the loss. Section 215 and section 216 go further on dealing on own account; our article on sections 215 and 216 covers them.
Where an agent also gets to know confidential information of the principal, the duty of confidentiality is not stated in section 211; if you want an express obligation to keep your business information confidential, a written non-disclosure agreement is the usual way to record it. Section 211 itself is silent on confidentiality.
The Act's own illustrations
(a) A, an agent engaged in carrying on for B a business, in which it is the custom to invest from time to time, at interest, the moneys which may be in hand, omits to make such investment. A must make good to B the interest usually obtained by such investments.
(b) B, a broker, in whose business it is not the custom to sell on credit, sells goods of A on credit to C, whose credit at the time was very high. C, before payment, becomes insolvent. B must make good the loss to A.
Illustration (a) shows an omission against the custom. Illustration (b) shows an act against the custom. In (b) the Act notes that C's credit was very high at the time, yet the broker must still make good the loss: the point is the departure from the custom, not whether the choice seemed sensible at the time.
A modern example (ours, not the Act's)
Sharma Spices appoints Neelam, a commission agent in Kochi, to sell its pepper. Sharma gives a direction: sell only against payment on delivery. Neelam, wanting to win a new buyer, sells on thirty days' credit to Verma Foods. Verma defaults. Under section 211, Neelam acted otherwise than according to the directions and must make good the loss.
Had Sharma given no direction about credit, the question would be the custom of selling pepper at Kochi. If the custom there is not to sell on credit, the broker in the Act's illustration (b) is the model. If the custom allows credit sales, the agent who follows it has done what section 211 requires.
Suppose Neelam, against the direction, instead sells pepper at a higher price than Sharma set, by selling in a nearby market. If a profit results from acting otherwise, section 211 says she must account for it. The text does not say anything more about how such a profit is to be treated, so a clear contract term helps.
What can the parties change?
The section starts with the principal's directions. That means the principal and agent can shape the duty by giving instructions: what to sell, to whom, on what terms, at what minimum price. The custom applies only in the absence of directions. A contract can also record that certain departures are permitted, which is a matter of the contract's wording and outside what section 211 says.
Practical points
- Principals: give directions in writing, particularly on credit, price and who may be sold to.
- Agents: if you cannot follow a direction, ask. Section 214 (our article on sections 213 and 214) speaks of communicating with the principal in cases of difficulty.
- Know the local custom: if there are no directions, you may need to show what custom prevails at your place for business of that kind.
- Keep records: loss or profit from departures must be traced.
Need help recording what your agent must and must not do?
If you rely on agents or commission sellers, a written set of directions saves argument about what the section means in practice. Our non-disclosure agreement drafting service can add a confidentiality undertaking alongside your agency terms. Other laws may also apply to your trade.
Key takeaways
- An agent must conduct the principal's business according to the principal's directions, or, absent directions, the custom prevailing for business of the same kind at the place (s.211).
- If he acts otherwise, he makes good any loss and accounts for any profit.
- The Act's illustrations: omitting the usual investment of idle funds, and selling on credit against the custom.
- Section 211 says nothing about confidentiality.
Read next
- Section 212: skill and diligence required from agent
- Sections 213 and 214: agent's accounts and duty to communicate
- Specimen agency contract: format and key provisions
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.