The excess and the transaction structure both matter
Contract Act sections 227–228 distinguish an agent's separable authorised act from an inseparable excess of authority. Under section 227, the part within authority is binding in the stated relationship where it can be separated. Under section 228, where the excess cannot be separated, the principal is not bound to recognise the transaction. A spreadsheet allocation alone does not establish legal separability. This guide assumes an actual excess has been established and leaves other authority and ratification grounds for separate review.
Read the applicable text: Government-hosted Indian Contract Act: sections 227–228 and illustrations.
Prove the original mandate
Retain the agency agreement, instructions, monetary or quantity limits, dates and amendments. Distinguish internal instructions from the full legal assessment of authority relevant to the particular dispute. A principal's later dissatisfaction does not itself prove that the agent exceeded authority. Identify the exact promise, goods, insurance or other commitment alleged to go beyond the established mandate.
Compare the actual contracts and obligations
Obtain the executed agreement, schedules, prices, parties, conditions and performance records. Separate contracts with independently enforceable terms may support a different analysis from a single indivisible bargain. The Act illustrates separate insurance policies for authorised ship cover and unauthorised cargo cover, and a single-price purchase combining authorised sheep and additional lambs. These are statutory illustrations, not universal rules that any separate invoice proves severability.
Do not manufacture severability after the event
A supplier's later quotation, a management ratio or a unit-cost estimate may explain arithmetic without proving that the agreed bargain can legally be separated. Consider cross-conditions, package pricing and whether the authorised portion has its own supported obligations. Conversely, one payment or administrative invoice does not necessarily prove legal indivisibility. The conclusion needs the actual contractual structure.
Keep other routes and consequences separate
Review any legally relevant ratification, representations or other authority grounds independently before concluding the principal can reject a transaction. Sections 227–228 do not by themselves settle every claim against the agent, supplier, insurer or principal. Do not assume that rejection of the whole bargain automatically makes the principal liable for an arbitrary proportion or automatically awards damages against the agent.
Prepare an obligation and performance bridge
Map authorised obligation, alleged excess, separability conclusion, agreed price and actual payments or deliveries. Explain the asserted result on the stated legal assumptions. Preserve unresolved components rather than presenting a percentage as a legal holding. Then obtain appropriate directions on performance, notices and dispute handling; this article supplies no universal notice deadline or cancellation form.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Separate policies
Assume authority to arrange ship insurance, with an actual ship policy premium ₹40,000 and a genuinely separate unauthorised cargo policy premium ₹25,000. On established separability and no other binding ground, the authorised premium is ₹40,000 out of ₹65,000 total. The cargo obligation requires separate analysis.
Illustrative example 2: One inseparable bargain
Assume authority to buy 100 specified units, but the agent agrees an indivisible package of those units and 50 unauthorised extras for ₹3 lakh. One hundred divided by 150 is 66.67% rounded; allocating ₹2 lakh by that ratio does not prove the principal must recognise that proportion under section 228.
Illustrative example 3: Separate orders
Assume an authorised independently enforceable order for ₹5 lakh and a genuinely separate unauthorised order for ₹2 lakh. The total commitment is ₹7 lakh; the excess order is ₹2 lakh. The example assumes the separability and authority conclusions, rather than deriving them from two order numbers alone.
Illustrative example 4: Price limit is not an automatic partial contract
Assume authority to enter one indivisible ₹4 lakh maximum contract, but the actual contract price is ₹5 lakh and the excess of authority is legally established. The ₹1 lakh arithmetic excess does not itself permit enforcement of only ₹4 lakh; review the applicable authority and separability grounds.
Illustrative example 5: Payment does not prove separability
Two independently established contracts total ₹6 lakh and ₹4 lakh, paid through one ₹10 lakh transfer. The one payment does not itself merge their legal obligations. Determine authority and contract effects separately, and trace the payment allocation.
Illustrative example 6: Different proposed allocations
An indivisible ₹9 lakh package is proposed to be split 60:40 or 70:30. Those methods produce ₹5.4 lakh/₹3.6 lakh and ₹6.3 lakh/₹2.7 lakh. The authorised-side estimates differ by ₹90,000, illustrating why an unsupported ratio is not a substitute for the legal contract analysis.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Establish the agency | Principal, agent and relevant transaction. |
| 2 | Recover the mandate | Scope, limits, dates and amendments. |
| 3 | Identify the alleged excess | Exact obligation outside established authority. |
| 4 | Read executed documents | Actual contracts and cross-conditions. |
| 5 | Test separability | Supported independently identifiable obligations. |
| 6 | Reject unsupported allocations | Arithmetic distinguished from contractual severability. |
| 7 | Review other authority grounds | Ratification and representations where legally relevant. |
| 8 | Map performance and price | Payments, deliveries and remaining commitments. |
| 9 | Record the asserted consequence | Section 227 or 228 conclusion on stated assumptions. |
| 10 | Close the dispute file | Evidence, unresolved issues and appropriate next legal action. |
Sixteen practitioner FAQs
1. Does overspending alone settle the whole dispute?
No. Establish actual authority, excess, separability and other relevant grounds.
2. What does section 227 address?
The authorised part that can be separated from the excess on the stated facts.
3. What does section 228 address?
An excess inseparable from the authorised act, where the principal is not bound to recognise the transaction.
4. Can a percentage spreadsheet prove separability?
No. Arithmetic allocation is not contractual analysis.
5. Does a separate invoice always prove a separate legal bargain?
No. Review the executed obligations and conditions.
6. Does one bank payment prove indivisibility?
No. Payment administration and legal structure are separate facts.
7. Does a quantity limit automatically create a right to take part of a package?
No. Assess the actual bargain and authority.
8. Can the principal simply pay its internal price limit?
Not automatically where the actual contract is indivisible and other grounds need review.
9. Why preserve instructions and dates?
They help establish the mandate effective when the agent acted.
10. Does later dissatisfaction prove excess of authority?
No. Establish the actual legal and factual scope.
11. Can a later supplier quotation settle severability?
It may be evidence, but does not alone rewrite the original bargain.
12. Can package cross-conditions matter?
Yes. They may affect whether obligations can genuinely be separated.
13. Can ratification change the analysis?
Review any relevant ratification independently; this guide does not assume it away in real cases.
14. Do these sections automatically determine agent damages?
No. Other liability and remedy questions require their own supported analysis.
15. Does the guide set a notice deadline?
No universal deadline is supplied here.
16. What is the central review result?
A supported mandate, exact excess, legal separability conclusion and transaction-by-transaction consequence.
Official sources
Government-hosted Indian Contract Act: sections 227–228 and illustrations