Principal
Also called: Principal (agency)
The person for whom an act is done by an agent, or who is represented by an agent in dealings with third persons. Section 182 of the Indian Contract Act, 1872.
Explained
Section 182 of the Indian Contract Act, 1872 defines an agent as a person employed to do any act for another, or to represent another in dealings with third persons, and says that the person for whom such act is done, or who is so represented, is called the principal. Under Section 183, any person who is of the age of majority according to the law to which he is subject and of sound mind may employ an agent. Under Section 184, any person may become an agent as between the principal and third persons, but a minor or person of unsound mind is not responsible to the principal.
The central rule is Section 226: contracts made and acts done by an agent may be enforced, and have the same consequences, as if made or done by the principal in person. The principal is bound by acts within the agent's actual authority, express or implied (Sections 186 to 188), by acts he later ratifies (Section 196), and under Section 237 by unauthorised acts which he has, by words or conduct, induced third persons to believe were authorised. Misrepresentation or fraud by an agent acting in the course of business binds the principal under Section 238.
Ordinarily the agent cannot personally enforce or be bound by such contracts (Section 230), but a contrary contract is presumed where the agent contracts for a merchant resident abroad, does not disclose the principal's name, or acts for a principal who cannot be sued. Where the third party neither knows nor suspects the agency, Section 231 allows the undisclosed principal to require performance, subject to the third party's rights against him as if he were the agent.
Do not confuse the agency 'principal' with the 'principal debtor' in a contract of guarantee under Section 126, or with the GST meaning in Section 2(88) of the CGST Act. Examiners test capacity under Sections 183 and 184, the Section 230 presumptions and ratification.
What the law says
An “agent” is a person employed to do any act for another, or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the “principal”.
Defines agent and principal
Any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent.
Who may employ an agent
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.
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.
Agent's contracts enforceable as the principal's
In the absence of any contract to that effect, an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them.
Presumption of contract to contrary—Such a contract shall be presumed to exist in the following cases:—
(1) where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad;
Agent not personally liable, with presumptions to the contrary
When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations, if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent’s authority.
Illustrations
(a) A consigns goods to B for sale, and gives him instructions not to sell under a fixed price. C, being ignorant of B’s instructions, enters into a contract with B to buy the goods at a price lower than the reserved price. A is bound by the contract.
Principal bound by acts he induced third persons to believe authorised
Where acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts. If he ratify them, the same effects will follow as if they had been performed by his authority.
Ratification by the principal
Example
For example, P authorises A to buy 100 bags of rice for him from S. A contracts with S in P's name. P, as principal, can sue S for delivery and S can sue P for the price, as if P had contracted personally.
For the exam
- Principal: person for whom the agent acts or who is represented (Section 182 ICA).
- Only a major of sound mind may employ an agent (Section 183); a minor may be an agent but is not liable to the principal (Section 184).
- Agent's authorised contracts bind the principal as if made in person (Section 226).
- Section 230 presumes the agent bound: merchant abroad, principal's name undisclosed, or principal cannot be sued.
- Principal debtor (Section 126) is a different concept from principal in agency.
795 questions in the Law Maker question bank use this term. Practise Contract Law questions
Related terms
- AgentA person employed to do any act for another, or to represent another in dealings with third persons; the person represented is the principal. Section 182 of the Indian Contract Act, 1872.
- Sub-agentA person employed by, and acting under the control of, the original agent in the business of the agency (Section 191, Contract Act). He answers to the agent, not to the principal, save for fraud or wilful wrong.
- Qui facit per alium facit per seHe who does a thing through another does it himself. The act of an agent or servant, done within his authority, is treated as the act of the principal or master.
- Respondeat superiorA master or employer is liable for the wrongs of his servant committed in the course of employment, even though he did not himself commit them.
- Contract of guaranteeUnder Section 126 of the Contract Act, a contract to perform the promise, or discharge the liability, of a third person in case of his default. It may be oral or written.
Further reading
Checked 6 November 2026. Statutory text is quoted from the Bare Acts library, taken from India Code. See the full glossary.