Indian Contract Act Section 231 — Rights of parties to a contract made by agent not disclosed

CHAPTER X AGENCY — Effect of agency on contracts with third persons

Commercial / Corporate

Summary

If an agent makes a contract with someone who does not know, and has no reason to suspect, that the agent is acting for someone else, the principal (the person the agent is acting for) can step in and require the contract to be performed. However, the other party to the contract has the same rights against the principal as they would have had against the agent if the agent had been the actual principal.

If the principal reveals their identity before the contract is completed, the other party may refuse to go through with the contract, but only if they can show that they would not have entered into the contract had they known who the principal was, or had they known that the agent was not the principal.

Official Text

If an agent makes a contract with a person who neither knows, nor has reason to suspect, that he is an agent, his principal may require the performance of the contract; but the other contracting party has, as against the principal, the same rights as he would have had as against the agent if the agent had been principal. If the principal discloses himself before the contract is completed, the other contracting party may refuse to fulfil the contract, if he can show that, if he had known who was the principal in the contract, or if he had known that the agent was not a principal, he would not have entered into the contract.