Section 232 The Indian Contract Act, 1872
Section 232 – The Indian Contract Act, 1872
📘 Title: Performance of contract with agent supposed to be principal
🔹 Bare Act Language:
"Where one man makes a contract with another, neither knowing nor having reasonable ground to suspect that the other is an agent, the principal, if he requires performance of the contract, can only obtain such performance subject to the rights and obligations subsisting between the parties to the contract."
🔍 Explanation:
This section addresses a situation where:
A person enters into a contract with someone,
Without knowing that person is acting as an agent,
And believes he is contracting with a principal.
👉 In such a case, if the real principal later wants to enforce the contract, he can only do so subject to the original terms and rights that existed between the agent and the third party.
✅ Example:
B, an agent, buys goods from C without revealing he is acting on behalf of A (the principal).
C thinks he is dealing with B as the actual buyer (principal).
Later, A steps in and asks C to perform the contract (i.e., deliver goods to A).
👉 C can enforce against A all the rights he would have had against B, such as right to payment, set-off, or even rescission, because he didn’t know A was the real party at the time of the contract.
📌 Key Points:
Applies when the agent does not disclose agency.
Protects the third party’s rights based on how the contract was formed.
The principal cannot claim better rights than the agent had under the contract.
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