Section 232 in The Indian Contract Act, 1872

Title: Performance of contract with agent supposed to be principal.

Description: 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 the performance of the contract, can only obtain such performance subject to the rights and obligations subsisting between the agent and the other party to the contract. Illustration A, who owes 500 rupees to B, sells 1,000 rupees worth of rice to B. A is acting as agent for C in the transaction, but B has no knowledge nor reasonable ground of suspicion that such is the case. C cannot compel B to take the rice without allowing him to set-off A's debt.

Title: Right of person dealing with agent personally liable.

Description: In cases where the agent is personally liable, a person dealing with him may hold either him or his principal, or both of them, liable. Illustration A enters into a contract with B to sell him 100 bales of cotton, and afterwards discovers that B was acting as agent for C. A may sue either B or C, or both, for the price of the cotton.

Title: Consequence of inducing agent or principal to act on belief that principal or agent will be held exclusively liable.

Description: 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.

Title: Liability of pretended agent.

Description: A person untruly representing himself to be the authorized agent of another, and thereby inducing a third person to deal with him as such agent, is liable, if his alleged employer does not ratify his acts, to make compensation to the other in respect of any loss or damage which he has incurred by so dealing.

Title: Person falsely contracting as agent, not entitled to performance.

Description: A person with whom a contract has been entered into in the character of agent, is not entitled to require the performance of it, if he was in reality acting, not as agent, but on his own account.

CHAPTER 10 AGENCY – EFFECT OF AGENCY ON CONTRACTS WITH THIRD PERSONS