Section 234 The Indian Contract Act, 1872
Section 234 of The Indian Contract Act, 1872 deals with the consequences of inducing a mistaken belief about liability.
📜 Section 234 – Consequence of inducing agent or principal to act on belief that principal or agent will be held exclusively liable
"When a person who has made a contract with an agent induces the agent to act upon the belief that the principal only will be held liable, or induces the principal to act upon the belief that the agent only will be held liable, he cannot afterwards hold liable the agent or principal respectively."
✅ Explanation:
This section protects both the agent and the principal from being unfairly made liable if they were misled by the other contracting party.
If a third party (say X) makes a person (agent or principal) believe that only one of them (not both) would be liable under the contract,
Then X cannot later change their position and hold the other (agent or principal) liable.
📌 Illustration:
A contracts with B, an agent, and tells B that only A’s principal will be held liable.
Based on that, B enters the contract.
Later, A cannot sue B personally because B acted on the belief that only the principal was liable.
🔐 Purpose:
To prevent unfair conduct and protect good faith dealings in agency relationships.
Encourages clarity and honesty during contract formation.
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