Chapter X - Agency
Section 231
Section 231: Rights involving undisclosed principals
An undisclosed principal may seek performance, subject to the counterparty’s preserved rights and the stated right to refuse.
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This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
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.
Rule and business relevance
The counterparty must neither know nor have reason to suspect the agency. If the principal discloses before completion, refusal is possible on showing that knowledge of the principal or agency status would have prevented the contract.
Limits and related provisions
Do not assume discovery alone automatically cancels every contract. The specific conditions and counterparty’s showing matter.
Hypothetical business example
Hypothetical example: A purchaser believes the seller is acting personally. Before completion, an undisclosed principal appears; the purchaser assesses the preserved rights and whether the statutory refusal condition can be shown.
Practical decision flow
Establish the counterparty’s knowledge or reason to suspect agency.
Identify rights the counterparty would have against the apparent principal.
Assess timing of disclosure and grounds for refusing performance.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- Establish the counterparty’s knowledge or reason to suspect agency.
- Identify rights the counterparty would have against the apparent principal.
- Assess timing of disclosure and grounds for refusing performance.
Avoid
- Do not assume discovery alone automatically cancels every contract. The specific conditions and counterparty’s showing matter.
Glossary
- Undisclosed principal
- The principal behind an agent whose agency was not known or reasonably suspected in the stated setting.
- Preserved rights
- Rights the counterparty would have if the agent had been principal.
Frequently asked questions
Can an undisclosed principal ever demand performance?
Yes, subject to the stated protections.
Does disclosure alone always permit refusal?
No. The counterparty must make the showing specified by the second paragraph.
Why does completion timing matter?
The second paragraph addresses disclosure before the contract is completed.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026