Section 240 The Indian Contract Act, 1872
Section 240 of the Indian Contract Act, 1872 deals with the payment of amount due to the principal by an agent.
📜 Section 240 – Payment to Principal by Agent
"Where an agent receives money or other property on account of the principal, he must pay it to the principal, and if he wrongfully applies it to his own use, he is liable to the principal."
🔍 Explanation:
If an agent receives money or goods on behalf of the principal, the agent must hand over or pay that money/property to the principal. If the agent misappropriates or uses it for personal benefit, the agent is liable for breach of trust.
✅ Key Points:
The agent acts as a custodian of the principal’s money/property.
Misapplication or wrongful use by the agent is a breach.
The agent must account fully to the principal.
💡 Example:
A is an agent for B and collects ₹50,000 from a customer on B’s behalf. If A keeps the money for himself instead of paying B, A is liable under Section 240.
RELATED Blog
0 comments