A, who owes 500 rupees to B, sells 1,000 rupees' worth of rice to B. A is acting as agent for C, but B…
Section 232 provides that where a person contracts without knowing or having reason to suspect that the other party is an agent, the principal can obtain performance only…
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A, who owes 500 rupees to B, sells 1,000 rupees' worth of rice to B. A is acting as agent for C, but B has no knowledge nor reasonable ground of suspicion that this is so. C then demands that B take the rice and pay him the full 1,000 rupees. What is the legal position?
Answer and explanation
Correct answer B
Section 232 provides that where a person contracts without knowing or having reason to suspect that the other party is an agent, the principal can obtain performance only "subject to the rights and obligations subsisting between the agent and the other party". The Illustration to section 232 holds that C cannot compel B to take the rice without allowing him to set off A's debt. The contract is not void; C may enforce it, but subject to B's set-off.
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