Sections 217 to 221 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.
These five sections deal with money between agent and principal. Section 217 lets the agent retain what is due to him out of sums he receives for the principal. Section 218 requires him to pay over the rest. Section 219 says when remuneration becomes due. Section 220 takes away remuneration for the part of the business he misconducted. Section 221 gives him a lien on the principal's property until he is paid.
An agent may retain, out of sums received for the principal, moneys due to himself for advances, expenses properly incurred, and remuneration (s.217). Subject to those deductions, he must pay the principal all sums received (s.218). In the absence of a special contract, payment is not due until completion of the act, but the agent may detain moneys received on goods sold even if not all the goods are sold (s.219). An agent guilty of misconduct is not entitled to remuneration for that part of the business misconducted (s.220). In the absence of a contract to the contrary, he may retain the principal's goods, papers and other property until paid for commission, disbursements and services (s.221).
Section 217: retainer
"An agent may retain, out of any sums received on account of the principal in the business of the agency, all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business, and also such remuneration as may be payable to him for acting as agent."
Three items can be retained: advances, expenses "properly incurred", and "such remuneration as may be payable". The source is money "received on account of the principal in the business of the agency". The section does not say the agent may retain amounts due under other dealings.
Section 218: paying over the balance
"Subject to such deductions, the agent is bound to pay to his principal all sums received on his account."
The duty to pay over is the counterpart of the right of retainer: "subject to such deductions". Proper accounts (section 213) show the principal what was deducted. See our article on sections 213 and 214.
Section 219: when remuneration becomes due
"In the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of such act; but an agent may detain moneys received by him on account of goods sold, although the whole of the goods consigned to him for sale may not have been sold, or although the sale may not be actually complete."
Two rules sit in the sentence. First, absent a special contract, payment for an act is not due until the act is completed. Second, an agent may detain moneys received on account of goods sold, even though not all consigned goods have been sold or the sale is not actually complete. The first is a default the parties can change by a special contract (staged commission, advance, monthly retainer). The second is the agent's right to detain the sale money against what is due to him.
If you are agreeing commission terms with a sales agent, a service agreement can set when each instalment of remuneration falls due so that you are not left with only this default.
Section 220: misconduct
"An agent who is guilty of misconduct in the business of the agency, is not entitled to any remuneration in respect of that part of the business which he has misconducted."
The Act's illustrations.
(a) A employs B to recover 1,00,000 rupees from C, and to lay it out on good security. B recovers the 1,00,000 rupees, and lays out 90,000 rupees on good security, but lays out 10,000 rupees on security which he ought to have known to be bad, whereby A loses 2,000 rupees. B is entitled to remuneration for recovering the 1,00,000 rupees and for investing the 90,000 rupees. He is not entitled to any remuneration for investing the 10,000 rupees, and he must make good the 2,000 rupees. (The source prints "to B" at the end of the illustration, which is evidently a misprint; the loss is A's.)
(b) A employs B to recover 1,000 rupees from C. Through B's misconduct the money is not recovered. B is entitled to no remuneration for his services, and must make good the loss.
The loss of remuneration is limited to "that part of the business which he has misconducted". Illustration (a) shows a split; illustration (b) shows the whole task misconducted.
Section 221: the agent's lien
"In the absence of any contract to the contrary, an agent is entitled to retain goods, papers and other property, whether movable or immovable of the principal received by him, until the amount due to himself for commission, disbursements and services in respect of the same has been paid or accounted for to him."
The lien covers "goods, papers and other property, whether movable or immovable". It is a right to retain, not to sell. It holds "in the absence of any contract to the contrary". It secures "commission, disbursements and services in respect of the same", meaning in respect of that property. A footnote in the source, in the part of the Act on bailees' liens, says "As to lien of an agent, see s. 221".
| Section | What it gives or requires | Can contract change it? |
|---|---|---|
| 217 | Retain advances, expenses properly incurred and remuneration out of sums received | Not stated |
| 218 | Pay over all sums received, subject to deductions | Not stated |
| 219 | Remuneration due on completion of the act; detain sale money | "In the absence of any special contract" |
| 220 | No remuneration for the part misconducted | Not stated |
| 221 | Lien on principal's goods, papers and property | "In the absence of any contract to the contrary" |
A modern example (ours, not the Act's)
Kulkarni Handlooms engages Salma, a commission agent in Hyderabad, to sell 200 sarees on consignment. She sells 120 and receives Rs 1,20,000 on account of Kulkarni. She has advanced Rs 5,000 for transport and properly incurred it; her commission on the 120 sold is also payable under the contract. Under section 217 she may retain those sums out of the money received, and under section 218 she must pay over the rest. Under section 219, even though 80 sarees remain unsold, she may detain moneys received on account of goods sold.
If Salma sold ten sarees to a buyer she knew to be unreliable, against the agreement, and Kulkarni lost the price, section 220 would deny her remuneration for that part of the business she misconducted, in the manner of the Act's illustration (a). If Kulkarni refuses to pay her commission on the 120 sarees and Salma holds the remaining 80 sarees and the sales papers, section 221 lets her retain them until the amount due for commission, disbursements and services in respect of the same is paid or accounted for, unless the contract says otherwise.
The principal's own duties to the agent, such as indemnity, are in sections 222 to 225.
What can the parties change?
Section 219 starts "in the absence of any special contract", and section 221 starts "in the absence of any contract to the contrary", so the parties can agree otherwise: advance payments, staged commission, no lien. Sections 217, 218 and 220 do not carry such opening words, though a contract can still describe commission and expenses clearly. Where you do not want an agent to hold goods or papers as security, say so in the contract.
Practical points
- Principals: record in the contract what is retainable, when commission falls due and whether any lien is excluded.
- Agents: keep proof of advances and of expenses "properly incurred".
- Misconduct: a principal who wants to withhold remuneration should be able to show which part of the business was misconducted.
- Lien: it is a right to retain, tied to amounts due "in respect of the same" property; take advice before holding property in a dispute.
Need help fixing remuneration terms for an agent?
Our service agreement drafting service can help you set out the commission, the advances, the timing and any lien so that the default rules in sections 217 to 221 do not decide a dispute for you. Other laws may also apply to your trade.
Key takeaways
- An agent may retain advances, expenses properly incurred and remuneration out of sums received for the principal (s.217) and must pay over the rest (s.218).
- Absent a special contract, payment is not due until completion of the act; the agent may detain moneys received on goods sold (s.219).
- An agent guilty of misconduct loses remuneration for the part misconducted (s.220).
- Absent a contract to the contrary, he has a lien on the principal's goods, papers and property for commission, disbursements and services (s.221).
Read next
- Sections 215 and 216: agent dealing on own account
- Sections 222 to 225: principal's duty to indemnify agent
- Section 170: bailee's particular lien
- Section 171: general lien of bankers, factors, wharfingers, attorneys and policy-brokers
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.