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CS Professional · Drafting, Pleadings and Appearances · Commercial Contract Management

Agent Rohit buys machinery for his undisclosed principal, Anand Industries, from Verma Engineering, which did not know of the agency. Before the contract is completed, Anand discloses himself. Verma proves that he would not have contracted had he known Anand was the principal, because of a long-standing dispute with Anand. What is the position under Section 231?

Verma may refuse to fulfil the contract. Where the principal discloses himself before completion, the other party can refuse if he shows he would not have entered the contract had he known the real principal. The principal's consent or the agent's excess of authority is irrelevant.

  1. AVerma must perform because the contract was already made with Rohit
  2. BVerma may refuse to fulfil the contract, since he shows he would not have entered into it had he known who the principal wasCorrect
  3. CVerma may refuse only if Anand consents to the cancellation
  4. DVerma may refuse only if Rohit was acting beyond his authority

Explanation

The second paragraph of Section 231 lets the other party refuse to fulfil the contract if the principal discloses himself before completion and the party shows he would not have contracted had he known who the principal was. No consent of the principal and no excess of authority is needed. Option A ignores this right.

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