Section 230 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 an agent signs a contract for his principal, who is bound: the principal, the agent, or both? Section 230 gives the starting rule: in the absence of a contract to that effect, the agent can neither enforce the contract himself nor be personally bound by it. It then lists three cases in which such a contract to the contrary is presumed.
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. A contract to the contrary is presumed in three cases: (1) the agent makes the contract for the sale or purchase of goods for a merchant resident abroad; (2) the agent does not disclose the name of his principal; (3) the principal, though disclosed, cannot be sued. The Act prints no illustration under this section.
The text
"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;
(2) where the agent does not disclose the name of his principal;
(3) where the principal, though disclosed, cannot be sued."
The general rule
The first paragraph has two limbs:
- The agent "cannot personally enforce contracts entered into by him on behalf of his principal".
- He is not "personally bound by them".
Both limbs begin "in the absence of any contract to that effect". So the parties can make the agent personally bound or entitled by an express agreement, and the section then moves to the cases in which such a contract is presumed even without express words.
This follows section 226: contracts through an agent are enforced as if made by the principal in person. See our article on section 226.
If you are signing contracts as an agent, or contracting with someone who says he is an agent, a legal dispute resolution adviser can help you read the paperwork before a dispute arises.
The three presumed cases
| Case | Words in the section | Practical sense |
|---|---|---|
| 1 | "contract is made by an agent for the sale or purchase of goods for a merchant resident abroad" | An agent for an overseas merchant is presumed to have a contract making him personally bound or entitled |
| 2 | "the agent does not disclose the name of his principal" | Naming the principal matters |
| 3 | "the principal, though disclosed, cannot be sued" | If the third party has no one to sue but the agent, the agent is presumed to be bound |
The word is "presumed". The text sets up a presumption of a contract to the contrary; it does not say that it cannot be answered. How a presumption is displaced is a matter of evidence and is outside this article.
The section does not define when a "principal ... cannot be sued" (for instance, because of the principal's own status). It leaves that to the facts.
How the cases link to later sections
Section 231 deals with a contract made by an agent whose agency was not disclosed, and section 233 says that where the agent is personally liable, the person dealing with him may hold either him or his principal, or both, liable. Our article on sections 231 to 233 covers them. The Act's illustration under section 233 is a useful companion to the presumptions in section 230.
A modern example (ours, not the Act's)
Sagar, a procurement agent in Mumbai, signs a purchase order for packaging material with Patel Packaging in the name of "a client of ours" and does not disclose who the client is. Under case (2), a contract to the contrary is presumed to exist: Sagar is not treated as a mere conduit with no personal exposure. If Patel Packaging does not know who the principal is, the presumption gives it someone to look to.
In another case, Sagar signs in the name of his principal, Greenleaf Exports, a company whose name he states clearly and which can be sued. In the absence of any contract to the contrary, Sagar cannot enforce the order himself, and is not personally bound by it.
In a third case, Sagar acts for a merchant resident abroad in buying goods. Under case (1), a contract to the contrary is presumed. Whether the presumption is rebutted turns on the paperwork and facts.
What can the parties change?
The opening words of section 230, "in the absence of any contract to that effect", leave the parties room. The agent and the third person (and the principal) can agree in writing that the agent is, or is not, personally bound or entitled. The three presumptions operate where there is no express term. A clear clause stating whether the agent signs "as agent only" or "personally and as agent" avoids reliance on the presumptions.
Practical points
- Agents: sign "as agent for " and disclose the principal. If you do not want personal liability, say so in the contract.
- Third persons: ask for the principal's name and confirm that it can be sued; if you cannot identify one, you may need the agent's personal commitment.
- Contracts: state who is bound, in plain words, so that the presumptions need not be argued.
- Overseas principals: the presumption in case (1) covers contracts for the sale or purchase of goods for a merchant resident abroad.
Need help with an agent's personal liability?
Our legal dispute resolution service can help you review the contract and the dealings and explain how section 230 and its presumptions may apply to you, whether you are the agent, the principal or the third person. Other laws may also apply.
Key takeaways
- Without a contract to that effect, an agent cannot personally enforce contracts made on behalf of his principal and is not personally bound by them (s.230).
- A contract to the contrary is presumed in three cases: goods for a merchant resident abroad; agent does not disclose principal's name; principal, though disclosed, cannot be sued.
- The word is "presumed"; the section does not describe how a presumption is displaced.
- The section prints no illustration.
Read next
- Section 226: enforcement and consequences of agent's contracts
- Sections 231 to 233: undisclosed principal and third-party rights against agent
- Section 229: consequences of notice given to 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.