Section 218 The Indian Contract Act, 1872
📜 Section 218 – The Indian Contract Act, 1872
🔍 Section 218 – Agent’s Duty to Pay Sums Received for Principal
"Subject to such deductions, if any, as may be lawfully made by him, an agent is bound to pay to his principal all sums received on his account."
✅ Explanation:
This section imposes a duty on the agent to hand over all money or property received on behalf of the principal.
The agent must account for and deliver all amounts collected during the agency.
However, the agent may deduct:
Lawful expenses, or
Remuneration due (if agreed upon).
🔑 Key Points:
Agent is a trustee of the money collected for the principal.
Agent cannot withhold or use the funds for personal benefit.
Deductions must be lawful and authorized (e.g., commissions, expenses incurred in the course of agency).
🧠 Illustration:
If B is A’s agent and sells goods worth ₹1,00,000 on A's behalf, and earns ₹5,000 as agreed commission, then B must pay ₹95,000 to A and is entitled to keep ₹5,000 as lawful deduction.
🧑⚖️ Relevant Case Law:
In Pannalal Jankidas v. Mohanlal (1951 AIR 144), the court held that an agent must faithfully account for all amounts received and cannot mix principal’s funds with his own.
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