Section 181 The Indian Contract Act, 1872
Section 181 of the Indian Contract Act, 1872 relates to the effect of the agent’s dealing with the principal without authority.
🔹 Section 181 – Effect of agent’s unauthorized acts
"An agent who deals with a principal without authority, or beyond the scope of his authority, shall be personally liable to the other party for any loss caused by such unauthorized act."
✅ Explanation:
If an agent acts without the principal’s authority or exceeds the authority given, the agent is personally liable for any loss caused.
The principal is not bound by such unauthorized acts unless they later ratify them.
The other party dealing with the agent can sue the agent directly for damages.
📌 Example:
B is authorized by A to buy goods up to ₹10,000.
B buys goods worth ₹20,000 without A’s permission.
If the seller suffers loss because of this unauthorized transaction, B (agent) will be personally liable, not A.
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