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

Meera Traders, acting as agent for an undisclosed principal, Ghosh Exports, buys goods from Rathi Mills. Rathi had no reason to suspect an agency. Before the contract was completed, Ghosh disclosed himself. Rathi proves that had he known Ghosh was the principal, he would not have contracted. What may Rathi do?

Rathi may refuse to fulfil the contract. Section 231 allows the third party, where the principal discloses himself before completion, to decline performance if he can show he would not have contracted had he known who the principal was.

  1. ARefuse to fulfil the contractCorrect
  2. BOnly sue Meera Traders for damages
  3. CCancel the contract only after a Tribunal order
  4. DNothing, since the principal may always insist on performance

Explanation

Section 231 lets the principal require performance where the agency was undisclosed, but if the principal discloses himself before completion, the other party may refuse to fulfil the contract if he shows he would not have entered it had he known the principal. Rathi has shown this.

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