Skip to content

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

Sundaram Realty's agent, Nisha, with authority to receive money, collects Rs 12 lakh from buyer Vikram, who owed that sum to Sundaram Realty under the sale contract. Nisha later absconds with the money. While drafting an authority clause, which consequence should the drafter recognise?

Vikram is discharged of his obligation. Under Section 226, acts of an authorised agent have the same legal consequences as if the principal did them, so payment to an agent authorised to receive money discharges the payer, and the loss from the agent's default falls on the principal.

  1. AVikram remains liable to pay again because Nisha was only an agent
  2. BVikram is discharged of the obligation to pay that sum to Sundaram RealtyCorrect
  3. CVikram is discharged only if the contract was registered
  4. DSundaram Realty can recover from Vikram only half the sum

Explanation

Section 226 treats acts and contracts through an agent as if done by the principal personally; its illustration (b) says payment to an agent authorised to receive money discharges the payer. So Vikram is discharged and Sundaram bears the risk of Nisha's default. Requiring him to pay again wrongly treats the payment as not made to 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