The lightcurve of PA-99-N2, one of the recently announced microlensing candidates towards M31, shows small deviations from the standard Paczynski form. We explore a number of possible explanations, including correlations with the seeing, the parallax effect and a binary lens. We find that the observations are consistent with an unresolved RGB or AGB star in M31 being microlensed by a binary lens. We find that the best fit binary lens mass ratio is about one hundredth, which is one of most extreme values found for a binary lens so far. If both the source and lens lie in the M31 disk, then the standard M31 model predicts the probable mass range of the system to be 0.02-3.6 solar masses (95 % confidence limit). In this scenario, the mass of the secondary component is therefore likely to be below the hydrogen-burning limit. On the other hand, if a compact halo object in M31 is lensing a disk or spheroid source, then the total lens mass is likely to lie between 0.09-32 solar masses, which is consistent with the primary being a stellar remnant and the secondary a low mass star or brown dwarf. The optical depth (or alternatively the differential rate) along the line of sight toward the event indicates that a halo lens is more likely than a stellar lens provided that dark compact objects comprise no less than 15 per cent (or 5 per cent) of haloes
