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

Vikram, agent of Sharma Pharma, contracts with Delta Distributors, who have reason to suspect that Vikram is acting for someone else. Sharma wants to enforce the contract under Section 231 as an undisclosed principal. Which analysis is most accurate?

The first paragraph of Section 231 operates only when the other party neither knows nor has reason to suspect that the person is an agent. Because Delta had reason to suspect, the condition is not met and Sharma cannot rely on that paragraph.

  1. ASection 231 applies fully, because the agent never named the principal
  2. BSection 231 first paragraph applies only where the other party neither knows nor has reason to suspect the agency, so reason to suspect takes the case outside its scopeCorrect
  3. CSection 231 applies only if Delta actually knew of the agency
  4. DSection 231 is irrelevant because Vikram would be personally bound under Section 230

Explanation

The first paragraph of Section 231 is conditioned on the other party neither knowing nor having reason to suspect the agency. Since Delta had reason to suspect, the condition fails. Option C reverses the test, and option D wrongly dismisses the section.

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