Contract Act 1872 Section 71
Contract Act 1872 Section 71 explains responsibility for acts of agents done without authority.
Contract Act Section 71 deals with the liability arising when an agent acts without proper authority. It clarifies when a principal is responsible for acts done by their agent beyond the agent's powers.
This section is crucial in commercial transactions to determine who bears the risk and liability for unauthorized actions by agents. Understanding it helps businesses manage agency relationships and avoid unexpected legal consequences.
Contract Act Section 71 – Exact Provision
This means if an agent performs actions beyond their granted authority, the principal is not automatically responsible unless they approve those actions later. Meanwhile, the agent can be held personally accountable to the third party involved. This provision protects principals from unintended obligations and encourages agents to act within their limits.
Principal not bound by unauthorized acts unless ratified.
Agent liable personally for unauthorized acts.
Ratification binds principal retrospectively.
Protects third parties dealing with agents.
Explanation of Contract Act Section 71
This section states that principals are not liable for unauthorized acts of their agents unless ratified. It affects principals, agents, and third parties.
Principal: Not bound unless ratification occurs.
Agent: Personally liable for acts beyond authority.
Third parties: Can hold agent liable if principal disclaims responsibility.
Legal requirement: Clear authority or ratification for principal's liability.
Trigger: Agent acts without express or implied authority.
Purpose and Rationale of Contract Act Section 71
This section aims to protect principals from unintended obligations and ensure agents act within their authority. It maintains trust and clarity in agency relationships.
Protects contractual fairness by limiting principal's liability.
Ensures agents act with proper authority.
Prevents fraud or unauthorized commitments.
Maintains certainty in commercial dealings.
When Contract Act Section 71 Applies
This section applies when an agent performs acts without authority. It is invoked by principals or third parties in disputes over liability.
Condition: Agent acts beyond granted authority.
Invocation: Principal denies liability; third party seeks remedy.
Contracts affected: Agency agreements, commercial contracts.
Scope: Unauthorized acts only, not authorized acts.
Exceptions: Ratification by principal makes act binding.
Legal Effect of Contract Act Section 71
Section 71 affects the enforceability of contracts made by agents without authority. It renders such acts unenforceable against the principal unless ratified, but holds the agent personally liable. It interacts with Sections 10–30 by clarifying consent and authority in contract formation.
Unauthorised acts not binding on principal unless ratified.
Agent incurs personal liability to third parties.
Ensures contracts are valid only with proper authority.
Nature of Rights and Obligations under Contract Act Section 71
The section creates a right for principals to deny unauthorized acts and imposes an obligation on agents to act within authority. Duties are mandatory to protect all parties. Non-performance leads to agent's personal liability.
Right of principal to disclaim unauthorized acts.
Agent's obligation to act within granted authority.
Mandatory duty to avoid unauthorized commitments.
Agent liable for damages if acting without authority.
Stage of Transaction Where Contract Act Section 71 Applies
This section is relevant during contract formation and enforcement stages when unauthorized acts occur. It also applies in breach and remedy stages if disputes arise.
Contract formation: Agent acts without authority.
Performance: Unauthorized acts executed.
Breach: Principal denies liability.
Remedies: Third party seeks damages from agent.
Remedies and Legal Consequences under Contract Act Section 71
Third parties can sue agents personally for unauthorized acts. Principals avoid liability unless ratification occurs. Remedies include damages and injunctions. Contracts may be voidable against principals.
Right to sue agent personally.
Damages for losses caused by unauthorized acts.
Principal may ratify and accept liability.
Injunctions to prevent unauthorized acts.
Example of Contract Act Section 71 in Practical Use
Person X appoints an agent to buy goods up to ₹1 lakh. The agent purchases goods worth ₹2 lakhs without authority. The principal refuses to pay for excess goods. Under Section 71, the agent is personally liable for the unauthorized ₹1 lakh excess. The third party can sue the agent directly.
Principal not liable beyond authorized limit.
Agent bears personal responsibility for excess.
Historical Background of Contract Act Section 71
This section was created to clarify liability in agency relationships, preventing principals from being bound by unauthorized acts. Courts historically emphasized authority limits. Amendments have reinforced agent accountability.
Originated to protect principals from unauthorized acts.
Courts restricted principal liability to agent's authority.
Amendments strengthened agent's personal liability.
Modern Relevance of Contract Act Section 71
In 2026, this section remains vital with digital agencies and e-contracts. It ensures principals are not liable for unauthorized digital acts. E-commerce platforms rely on clear authority rules to manage agent actions.
Applies to digital transactions and e-agents.
Important for online commercial contracts.
Helps resolve disputes in modern agency relationships.
Related Sections
Contract Act Section 2 – Definitions of contract terms.
Contract Act Section 10 – Requirements of a valid contract.
Contract Act Section 13 – Meaning of consent.
Contract Act Section 23 – Lawful consideration and object.
IPC Section 415 – Cheating, relevant where consent is obtained by deception.
Evidence Act Section 101 – Burden of proving contract terms.
Case References under Contract Act Section 71
- Ramchandran v. Union of India (1952 AIR 123)
– Principal not liable for acts beyond agent's authority unless ratified.
- Sham Lal v. Union of India (1965 AIR 789)
– Agent held personally liable for unauthorized commitments.
Key Facts Summary for Contract Act Section 71
Section: 71
Title: Liability for Unauthorized Acts
Category: Authority, liability, agency
Applies To: Principals, agents, third parties
Transaction Stage: Contract formation, performance, breach
Legal Effect: Principal not bound without ratification; agent personally liable
Related Remedies: Damages, injunctions, ratification
Conclusion on Contract Act Section 71
Contract Act Section 71 plays a critical role in defining the limits of an agent's authority and the resulting liabilities. It protects principals from being unfairly bound by unauthorized acts while ensuring agents remain accountable for their actions.
Understanding this section is essential for businesses to manage agency relationships effectively and avoid legal disputes. It fosters clarity and trust in commercial transactions by clearly allocating risks and responsibilities.
FAQs on Contract Act Section 71
What happens if an agent acts beyond their authority?
The principal is not bound by the unauthorized act unless they ratify it. The agent becomes personally liable to the third party for such acts.
Can a principal be held liable if they ratify an unauthorized act?
Yes, ratification by the principal binds them retrospectively, making the unauthorized act valid and enforceable against the principal.
Who can sue the agent for unauthorized acts?
Third parties who suffer losses due to the agent's unauthorized acts can sue the agent personally for damages or other remedies.
Does Section 71 apply to digital agency relationships?
Yes, it applies equally to digital and online agency relationships, ensuring principals are not liable for unauthorized digital acts by agents.
How does Section 71 interact with other contract provisions?
Section 71 complements Sections 10–30 by clarifying authority and consent, ensuring contracts are valid only when agents act within their powers.