Skip to content

CS Professional · Drafting, Pleadings and Appearances · Drafting of Commercial Contracts

Lakshmi Pharma Ltd, a disclosed principal, contracts through its agent Mohan with Nair Distributors. The contract is silent on whether Mohan is personally liable. Mohan acts within authority and the principal can be sued. Nair Distributors claims against Mohan personally for breach. Which statement is correct under Sections 226 and 230?

Mohan is not personally liable. Section 230 says an agent is not bound by contracts made for the principal unless a contrary contract exists, and none of the presumption cases applies here, so under Section 226 the contract is enforced against Lakshmi Pharma.

  1. AMohan is personally liable, as the contracting signatory
  2. BMohan is not personally bound, as there is no contract to that effect and none is presumed; the contract is enforced against Lakshmi PharmaCorrect
  3. CMohan is liable jointly with the principal as a matter of course
  4. DMohan is liable because the contract was drafted by him

Explanation

Section 230 says that without a contract to that effect an agent cannot personally enforce, nor is he bound by, contracts for the principal. None of the presumed cases applies: no foreign merchant, the principal's name is disclosed, and the principal can be sued. Section 226 puts the consequences on the principal.

Did you get it right without looking?

One question tells you little. A timed set on Drafting of Commercial Contracts shows your real accuracy, how long you take and where you lose marks.

Practise Drafting of Commercial ContractsFree diagnostic mock

More Drafting of Commercial Contracts questions