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

Meera Textiles Pvt Ltd authorises its agent Karan to buy cotton bales. Karan buys 200 bales from Sundaram Traders in his own name. Sundaram neither knows nor has reason to suspect that Karan is an agent. Karan did not disclose Meera. Under Section 231 of the Indian Contract Act, 1872, which statement is correct?

Meera, the undisclosed principal, may require performance. Sundaram, who did not know of the agency, keeps against Meera the same rights he would have had against Karan as principal. Non-disclosure does not void the contract, and no ratification is required under Section 231.

  1. AOnly Karan can require performance, because the contract was made in his name
  2. BMeera may require performance, and Sundaram has against Meera the same rights he would have had against Karan if Karan were principalCorrect
  3. CMeera may require performance, but Sundaram has no rights against her until she ratifies the contract
  4. DThe contract is void because the agency was not disclosed

Explanation

Section 231 states that where the other party neither knows nor has reason to suspect an agency, the principal may require performance. The other party has against the principal the same rights he would have had against the agent if the agent were principal. Option C is wrong because no ratification is needed, and option D is wrong because non-disclosure does not make the contract void.

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