Section 226 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 226 opens the last group in the agency chapter, on the effect of agency on contracts with third persons. Its rule is simple: a contract made through an agent, and obligations arising from an agent's acts, are enforced and have the same legal consequences as if the principal had made the contract or done the act in person.
Contracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner, and will have the same legal consequences, as if the contracts had been entered into and the acts done by the principal in person (s.226). The Act's illustrations: a buyer who knows he is dealing with an agent but not who the principal is cannot set off a debt owed to himself by the agent against the principal's claim; and a person who pays money to an agent authorised to receive it is discharged.
The text
"Contracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner, and will have the same legal consequences, as if the contracts had been entered into and the acts done by the principal in person."
What the section does
The section ties the agent's acts to the principal. Two things are covered:
- Contracts entered into through an agent. The contract is treated as the principal's.
- Obligations arising from acts done by an agent. The consequences of the act fall as if the principal had done it.
Both are enforced "in the same manner" and have "the same legal consequences". The section does not say what happens where the agent acted outside his authority; later sections do (see sections 227 to 229, and ratification in sections 196 to 200). Our article on sections 227 and 228 explains the excess of authority. Section 226 assumes the agent acted within authority, as the section's title, "agent's contracts", and its place in the chapter suggest.
If you deal through agents and want the consequences to be clear, an agreement drafting adviser can help you set out who is the principal, what the agent may sign and in whose name.
The Act's own illustrations
(a) A buys goods from B, knowing that he is an agent for their sale, but not knowing who is the principal. B's principal is the person entitled to claim from A the price of the goods, and A cannot, in a suit by the principal, set off against that claim a debt due to himself from B.
(b) A, being B's agent, with authority to receive money on his behalf, receives from C a sum of money due to B. C is discharged of his obligation to pay the sum in question to B.
| Illustration | Point |
|---|---|
| (a) | The principal can claim the price. The buyer knew the seller was an agent, so he cannot set off a personal debt owed to him by the agent against the principal's claim |
| (b) | Payment to an agent authorised to receive money discharges the payer's obligation to the principal |
In illustration (a), the key fact is that A knew B was an agent. Section 232 deals with the opposite case, where the third person does not know; our article on sections 231 to 233 covers it.
A modern example (ours, not the Act's)
Chopra Electronics authorises Gaurav, its sales representative in Lucknow, to sign supply contracts with schools for classroom projectors. Gaurav signs a contract with Sunrise School in the company's name. Section 226 says the contract may be enforced in the same manner and has the same legal consequences as if Chopra Electronics had signed it in person. The school may look to the company for delivery and warranty, and the company may sue the school for the price.
Sunrise School also pays the first instalment to Gaurav, who has authority to receive money for the company. As in illustration (b), the school is discharged of that part of its obligation.
If Gaurav were also in debt to the school for an unrelated sum and the school knew Gaurav was selling for a principal, illustration (a) says the school cannot set off Gaurav's personal debt against the company's claim for the price.
What can the parties change?
Section 226 sets the general rule. The contract between principal and third person can define who is bound and what the terms are, including whether the agent signs in the principal's name. Section 230 says that in the absence of a contract to that effect the agent is not personally bound or entitled, and it lists cases where a contrary contract is presumed; our article on section 230 explains them. How the parties describe the agent's role in the contract matters.
Practical points
- Principals: you are bound by contracts made through your agent within authority; keep control over who signs and on what terms.
- Third persons: pay the agent only if he has authority to receive money, because illustration (b) is about an agent with that authority.
- Set-off: if you know you are dealing with an agent, do not plan on setting off the agent's personal debt against the principal's claim.
- Check authority: the section assumes the agent acted within authority.
Need help with contracts made through agents?
Our agreement drafting service can help you prepare contracts that make clear who the principal is, who signs for him and what authority the agent has. Other laws may also apply to authorised signatories and your sector.
Key takeaways
- Contracts through an agent and obligations from his acts are enforced in the same manner and have the same legal consequences as if the principal had acted in person (s.226).
- The Act's illustrations: no set-off of the agent's personal debt where the buyer knew he dealt with an agent; payment to an agent authorised to receive money discharges the payer.
- The section assumes the agent acted within authority; later sections deal with excess.
Read next
- Sections 227 and 228: principal bound when agent exceeds authority
- Section 230: agent cannot personally enforce or be bound by principal's contracts
- Sections 222 to 225: principal's duty to indemnify agent
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.