MODULE I Ɗ MERCANTILE LAW OR

BUSINESS LAW
I LAW & SOCIETY OR WHY DO WE NEED
LAWS?
1. WITHOUT LAW THERE WILL BE CHAOS
AND CONFUSION IN SOCIETY
2. TODAY LAW PERVADES ALMOST EVERY
FACET OF HUMAN LIFE
3. IT IS ALSO SAID- IGNORANCE OF LAW
IS NOT AN EXCUSE
|
II. WHAT IS MEANT BY LAW OR DEFINITIONS
OF LAW
1. OXFORD DICTIONARY DEFINES THE TERM
ƌLAWƍ AS ƏTHE RULE MADE BY AUTHORITIES
FOR THE PROPER REGULATION OF A
COMMUNITY OR SOCIETY OR FOR CORRECT
CONDUCT OF LIFEƐ
2. ACCORDING TO JURIST- AUSTIN Ə A LAW IS
A RULE OF CONDUCT IMPOSED AND
ENFORCED BY THE SOVEREIGNƐ
3. ACCORDING TO JURIST Ɗ SALMOND ƏLAW IS
THE BODY OF PRINCIPLES RECOGNISED
AND APPLIED BY THE STATE IN THE
ADMINSTRATION OF JUSTICEƐ
4. LAW ACCORDING TO HOLLAND ƏLAW IS
RULE OF EXTERNAL HUMAN ACTIONS
ENFORCED BY SOVEREIGN POLITICAL j
AUTHORITYƐ
III. WHAT ARE THE BRANCHES OF LAW?
OR
WHAT ARE THE CLASSIFICATION OF
LAWS?
1. PUBLIC LAW & PRIVATE LAW
2. CRIMINAL LAW & CIVIL LAW
3. SUBSTANTIVE LAW & PROCEDURAL
LAW
4. INTERNATIONAL LAWS & NATIONAL
LAWS
5. PUBLIC INTERNATIONAL LAW &
PRIVATE INTERNATIONAL LAW
[MS = 12, SG=16 Ɗ 18, PG= 4 ]

IV. WHAT IS BUSINESS OR MERCANTILE LAW
1. THE TERM MERCANTILE OR BUSINESS LAW
DEALS WITH THAT BRANCH OF LAW
REGULATING TRADE, INDUSTRY AND
COMMERCE
2. IT PRESCRIBES RULES FOR THE
GOVERNANCE OF RELATIONS BETWEEN:
(a) BUSINESS PERSONS TO BUSINESS
PERSONS
(b) BUSINESS PERSONS AND THEIR
CUSTOMERS, DEALERS, SUPPLIERS ETC.,
(c) BUSINESS PERSONS AND THE STATE
þ
CONTƕ
3. IN PARTICULAR IT IS CONCERNED WITH
THE FOLLOWING LEGISLATIONS:
a) INDIAN CONTRACT ACT 1872
b) SALE OF GOODS ACT 1930
c) INDIAN PARTNERSHIP ACT 1932
d) NEGOTIABLE INSTRUMENTS ACT 1881
e) INDIAN COMPANIES ACT 1956
f) THE DEPOSITORIES ACT 1996
g) THE CONSUMER PROTECTION ACT 1986
h) THE FOREIGN EXCHANGE MGT- ACT 1999
i) INFORMATION TECHNOLOGY ACT 2000
j) THE PATENTS ACT 1957
k) THE COPY RIGHT ACT 1957
l) THE COMPETITION ACT 2000
m) TRADE MARKS ACT 1999 h
V. WHAT ARE THE SOURCES OF BUSINESS LAW IN
INDIA
SOURCES OF INDIAN LAWS ARE

ENGLISH JUDICAL TRADE INDIAN

LAW DECISIONS CUSTOMS STATUTES
OR &
CASE LAWS USAGE

ENGLISH EQUITY LAW MERCHANT STATUTE

COMMON OR LAW
LAW MARITIME
USAGE
[MS = 14 Ɗ 15, PG=5 Ɗ 6, MK=2- 3 AP=1- 2
_
SG=24 Ɗ 25]
 MODULE II Ɗ LAW OF CONTRACT
I WHAT IS THE MEANING OF THE TERM
CONTRACT
1. THE WORD CONTRACT IS DERIVED
FROM LATIN WORD ƌCONTRACTUMƍ-
MEANING TOGETHER
2. ƏA CONTRACT IS AN AGREEMENT
ENFORCEMENT AT LAW MADE BETWEEN
TWO OR MORE PERSONS BY WHICH
RIGHTS ARE ACQUIRED BY ONE OR
MORE TO ACT OR FOREBEARANCE ON
THE PART OF OTHER OR OTHERSƐ
[SIR WILLIAM ANSON]
CONTƕ. Ö
3. EVERY AGREEMENT AND PROMISE
ENFORCEABLE AT LAW IS A CONTRACT Ə[SIR
FEDRICK POLLOCK]
4. ACCORDING TO SECTION 2 (h) OF THE
INDIAN CONTRACT ACT 1872 Ə AN
AGREEMENT ENFORCEABLE BY LAW IS A
CONTRACTƐ
5. AN ANALYSIS OF THESE DEFINITIONS SHOW
THAT A CONTRACT MUST HAVE THE
FOLLOWING TWO ELEMENTS:
(a) AN AGREEMENT AND
(b) IT MUST BE LEGALLY ENFORCEABLE
CONTRACT=AN AGREEMENT +ITS
ENFORCEABILITY v
II. WHAT IS MEANT BY THE TERM AGREEMENT?
1. AS PER SECTION 2 (e): Ə EVERY PROMISE
AND EVERY SET OF PROMISES, FORMING
CONSIDERATION FOR EACH OTHER IS AN
AGREEMENTƐ
2. WHAT IS ƏPROMISEƐ-ACCORDING TO
SECTION 2 (b) ƏA PROPOSAL WHEN
ACCEPTED BECOMES A PROMISEƐ
3. RAM OFFERS TO SELL HIS CAR TO SHYAM
FOR RS. 2 LAKHS. SHYAM ACCEPTS THIS
OFFER. THIS OFFER WHEN ACCEPTED
BECOMES A PROMISE AND THIS PROMISE IS
TREATED AS AN AGREEMENT BETWEEN THE
TWO
CONTƕ. ]
4. AS PER SECTION 2 (c) THE PERSON
MAKING THE PROPOSAL IS CALLED
ƏPROMISORƐ AND THE PERSON
ACCEPTING THE PROPOSAL IS CALLED
ƏPROMISEEƐ

|

III. WHEN DOES AN AGREEMENT BECOME
A CONTRACT?
1. ACCORDING TO SECTION 2 (h) ONLY
THOSE AGREEMENTS WHICH ARE
ENFORCEABLE BY LAW IS A CONTRACT
2. AGREEMENTS INTENDED ONLY TO
CREATE MORAL, RELIGIOUS OR
SOCIAL OBLIGATION AND NOT
INTENDED TO CREATE LEGAL
OBLIGATIONS ARE NOT TREATED AS
ƌCONTRACTSƍ
||
CONTƕ.
[EX(i) A PROMISE TO HOST A LUNCH FOR A
FRIEND ON HIS BIRTHDAY IS NOT LEGALLY
ENFORCEABLE (AS IT IS ONLY A SOCIAL
OBLIGATION)
(ii) ANTONY PROMISES A PRIEST THAT HE
WOULD DONATE RS. 10,000/- IF HE GETS A
FIRST CLASS [ONLY A MORAL OBLIGATION]
(iii) A HUSBAND PROMISED HIS WIFE TO
PAY RS. 500 PM AS POCKET MONEY. HE
LATER STOPPED PAYING IT.
BOTH THESE AGREEMENTS ARE SOCIAL /
RELIGIOUS / FAMILY OBLIGATIONS AND
ARE NOT ENFORCEABLE IN LAW
3. THEREFORE IT IS SAID THAT ALL
CONTRACTS ARE AGREEMENTS BUT ALL
AGREEMENTS ARE NOT CONTRACTS
[BECAUSE SOME OF THEM ARE NOT LEGALLY
ENFORCEABLE] |j
IV. WHAT ARE THE INGREDIENTS OR ESSENTIAL
REQUIREMENTS FOR AN AGREEMENT TO
BECOME A CONTRACT
1. SECTION 10 PRESCRIBES TEN
REQUIREMENTS FOR AN AGREEMENT TO
BECOME A CONTRACT
2. IF ANY ONE OF THE REQUIREMENTS ARE
NOT MET, THE AGREEMENT WOULD NOT BE
ENFORCEABLE IN LAW AND HENCE WOULD
NOT BECOME A CONTRACT
3. THE TEN REQUIREMENTS ARE:
(i) THERE SHOULD BE A PROPER PROPOSAL
(OFFER) AND ITS PROPER ACCEPTANCE
(ii) THERE MUST BE AN INTENTION TO
CREATE LEGAL RELATIONS
(iii) THERE MUST BE A LAWFULL
CONSIDERATION |
CONTƕ
(iv) THE PARTIES SHOULD HAVE LEGAL
CAPACITY OR COMPETENCY TO ENTER INTO
A CONTRACT
(v) THEIR CONSENT MUST BE FREE ([WITHOUT
COERCION]
(vi) THE OBJECT OF THE AGREEMENT SHOULD BE
LAWFULL
(vii) IF THE LAW REQUIRES IT TO BE IN
WRITING OR REGISTERED IT SHOULD BE
COMPLIED WITH
(vii) THERE SHOULD BE CERTAINITY OF
MEANING
(ix) THERE SHOULD BE POSSIBILITY IF
|þ
PERFORMANCE CONTƕ
(x) IT SHOULD NOT FALL UNDER CERTAIN
CATEFORIES OF AGREEMENTS WHICH
HAVE BEEN EXPRESSLY PROHIBITED
OR DELCARED AS ILLEGAL
[MS=2.4 PG = 30-33 SG = 38-42 CB=4-5
MK=8-13

|h
V. WHAT ARE THE CLASSIFICATION OF
CONTRACTS?
(1) ON THE BASIS OF ENFORCEABILITY:
(a) VALID CONTRACTS [MA=2.4, MK-13
(b) VOID CONTRACTS [MS=2.9 MK-14
(c) VOIDABLE CONTRACTS [MS=2.9,
MK=13
(d) ILLEGAL CONTRACTS [MS=2.9,
MK=17

CONTƕ.. |_
(2) ON THE BASIS OF MODE OF CREATION/
FORMATION:
(a) EXPRESS CONTRACT [MS=2.10, MK=18
(b) IMPLIED CONTRACT [MS=2.11, MK=18
(c) QUASI CONTRACT [NOT STRICTLY A
CONTRACT]
(3) ON THE BASIS OF EXTENT OF PERFORMANCE:
(a) EXECUTED CONTRACT [MS=2.11 MK=19
(b) EXECUTORY CONTRACT [MS=2.11 MK=19
(4) ON THE BASIS OF OBLIGATIONS:
(a) UNILATERAL (2) BILATERAL (3)
MULTILATERAL
[MS=2.9 to 2.12 PK=34, SG=42-43, CB=6-8
MK =13-20] |Ö
VI. WHAT IS MEANT BY VOID AGREEMENTS,
VOID CONTRACTS, VOIDABLE CONTRACTS
1) VOID AGREEMENT Ɗ ACCORDING TO
SECTION 2(g) Ə AN AGREEMENT NOT
ENFORCEABLE BY LAW IS VOID [ VOID
MEANS EMPTY]
AN AGREEMENT NOT SUPPORTED BY :
(a) CONSIDERATION (b) FREE CONSENT
(c) COMPETENT PARTIES (d) WHEN THE
OBJECT IS UNLAWFULL
[A VOID AGREEMENT IS AB-INIT10 VOID
[MS=2.9 MK=15 SG=46]
|v
2) VOID CONTRACT
ACCORDING TO SECTION 2 (j) A CONTRACT
WHICH WAS INITIALLY VALID, BUT BECAME
SUBSEQUENTLY INVALID IS A VOID
CONTRACT FROM THE DATE IT BECOME
INVALID.
[MS=2.9, MK=14 S=46, ]
[AN AGREEMENT WITH A FOREIGN NATIONAL
BECOMES VOID WHEN WAR IS DECCARED
BETWEEN THE TWO COUNTRIES]
3) VOIDABLE CONTRACT Ɗ ACCORDING TO
SECTION 2(i) ƏAN AGREEMENT WHICH IS
ENFORCEABLE BY LAW AT THE OPTION OF
ONE OR MORE OF THE PARTIES THERETO,
BUT NOT AT THE OPTION OF THE OTHER OR
|]
OTHERS CONTƕ
[EX Ɗ A PARTY WHO HAS GIVEN HIS
CONSENT TO AN AGREEMENT BY
MISTAKE, MISREPRESENTATION,
FRAUD, COERCION OR UNDER UNDUE
INFLUENCE HAS THE OPTION TO
RESCIND OR CANCEL OR AVOID THE
CONTRACT. ONLY HE HAS THE OPTION
TO AVOID AND NOT THE OTHER PARTY
Ɗ IF THE WISHES, HE CAN PROCEED
WITH THE CONTRACT]
[MS=29 MK=14 ]
j

VII.WHAT IS MEANT BY ILLEGAL
AGREEMENTS, UNLAWFULL
AGREEMENTS, UN-ENFORCEABLE
CONTRACTS?
(1) ILLEGALAGREEMENT AN AGREEMENT
IS SAID TO BE ILLEGAL WHEN THE
PURPOSE OR OBJECT FOR WHICH IT
HAS BEEN FORMED IS BASED ON
COMMITTING A CRIME
[MS=2.10 MK=17]

j|
(2) UNLAWFULL AGREEMENT Ɗ AN
AGREEMENT IS SAID TO BE
UNLAWFULL, WHEN IT HAS BEEN
ENTERED INTO AMONG PARTIES
CONTRARY TO THE PROVISIONS OF
LAW. SUCH AN AGREEMENT IS ONLY
UNLAWFULL AMONG THE PARTIES TO
THE AGREEMENT AND NOT AGAINST A
STRANGER
[MS=2.10 MK=17]

jj
(3) WHAT IS MEANT BY UNENFORCEABLE
CONTRACT
AN AGREEMENT WHICH IS OTHERWISE
VALID BUT CANNOT BE ENFORCED FOR
WANT OF PROCEDURAL FORMALITIES
OR TECHNICAL FAULTS LIKE WRITTEN
ON INSUFFICIENT STAMP PAPER.
[MS=2.10 MK=17]

j
VIII.WHAT IS MEANT BY EXPRESS
CONTRACT OR IMPLIED CONTRACT?
(1) CONTRACTS WHICH ARE EXPRESSED
ORALLY OR IN WRITING ARE CALLED
EXPRESS CONTRACTS
(2) WHERE THE OFFER AND ACCEPTANCE
ARE MADE OTHERWISE THAN IN
WORDS IT IS CALLED IMPLIED
CONTRACTS Ɗ IT IS IMPLIED FROM
THE BEHAVIOUR OR BODY LANGUAGE
OF THE PARTIES
[MS 2.10 & 2.11 , MK = 18-19 ] jþ
IX. WHAT IS MEANT BY QUASI CONTRACT
OR CONSTRUCTIVE CONTRACTS
(1) SUCH CONTRACTS DO NOT EMENATE
OUT OF ANY AGREEMENTS AND HENCE
ARE NOT CONTRACTS IN THE STRICT
SENSE OF THE TERM ƌ CONTRACTƍ
(2) THE REALITY IS, IN CERTAIN SPECIAL
CIRCUMSTANCES COURTS INTERPRET
IT AS IF THERE WAS AN AGREEMENT
(3) IT IS BASED ON THE PRINCIPAL OF
EQUITY
jh
(4) SECTION 68-72 OF THE ICA DESCRIBES
THE CASES WHICH WILL BE DEEMED
AS QUASI- CONTRACTS
(5) EX. (i) LIABILITY OF A FINDER OF
LOST GOODS TO RETURN IT TO THE
OWNER
(ii) IF MONEY IS PAID BY MISTAKE TO
THE WRONG PERSON HE IS
OBLIGATED TO RETURN IT
[MK-19 ]

j_
X. WHAT IS MEANT BY EXECUTED, EXECUTORY
CONTRACTS
1. EXECUTED CONTRACT Ɗ WHEN THE
OBLIGATIONS UNDER THE CONTRACT HAVE
BEEN DISCHARGED IT BECOMES AN
EXECUTED CONTRACT
2. EXECUTORY CONTRACT Ɗ A CONTRACT IN
WHICH THE OBLIGATIONS BY EITHER PARTY
ARE TO BE PERPORMED AT A FUTURE DATE
3. EX. ƌ Aƍ AGREES TO SELL HIS CAR TO ƌBƍ FOR
RS 1LAKH AND RECIEVES AN ADVANCE OF
RS.1,000/- AND GIVE DELIVERY WHEN THE
BALANCE IS PAID
jÖ
XI. WHAT IS MEANT BY THE TERMS ƏOFFERƐ
(OR PROPOSAL) AND ƏACCEPTANCEƐ
UNDER ICA 1872 ?
1. SECTION 2(a) DEFINES ƌOFFERƍ OR
ƌPROPOSALƍ AS FOLLOWS:
(i) WHEN A PERSON SIGNIFIES HIS
WILLINGNESS TO ANOTHER PERSON
(ii) IN RESPECT OF DOING OR ABSTAINNG
FROM DOING SOMETHING
(iii) WITH A VIEW TO OBTAINING THE
ASSENT OF THE OTHERƐ
HE IS SAID TO BE MAKING A PROPOSAL
jv
[EX- RAM CONVEYS HIS INTENTION TO
SELL HIS HOUSE NO 27 ON HOSUR
ROAD FOR RS. 10 LAKHS TO SITA, MADE
WITH AN INTENTION TO OBTAIN
HER ASSENT Ɗ IDEA CONVEYED IS
KNOWN AS A ƌPROPOSAL OR OFFERƍ
2. THERE ARE CERTAIN RULES FOR MAKING
A VALID OFFER LIKE:
i. A STATEMENT OF INTENTION IS NOT AN
OFFER AS IT IS NOT INTENDED TO
CREATE LEGAL OBLIGATIONS [I AM
MULLYING THE IDEA OF SELLING MY
LAPTOP TO PROF. RAM]
IT MUST BE INTENDED TO CREATE LEGAL
OBLIGATIONS CONTƕ. j]
ii. IT CAN BE BY WORDS OR BY CONDUCT
[EXPRESS OR IMPLIED]
EXPRESS Ɗ RAM SAYS TO SHYAM I WILL
SELL MY CAR TO YOU FOR RS. 3
LAKHS
IMPLIED Ɗ BMTC RUNS BUSES ON
ROADS, IT IS IMPLIED THAT
PASSANGERS USING IT MUST PAY
iii. THE TERMS OF OFFER MUST BE CERTAIN OR
CAPABLE OF BEING MADE CERTAIN [IT
SHOULD NOT BE AMBIGOUS]
EX- RAM SAYS TO SHAYM Ə I WILL SELL YOU A
CAR, RAM HAS THREE CARS. THE PROPOSAL
IS NOT CERTAIN AS TO WHICH CAR.
CONTƕ.


iv. AN OFFER MUST BE DISTINGUISHED FROM
AN INVITATION TO OFFER OR A QUOTATION
[AN AUCTIONER OFFERING A GOOD ON
AUCTION, OR BARGAIN ADVERTISEMENTS/
PRICE CATALOGUES ARE NOT OFFERS, BUT
THE PERSON RESPONDING IS SAID TO BE
MAKING AN OFFER AND NOT THE
AUCTIONER.
v. IF THERE ARE SOME SPECIAL CONDITIONS
ATTACHED TO THE OFFER IT SHOULD BE
NOTIFIED. [QUOTATION INVITED WITHIN 3
DAYS OF ADVERTISEMENT Ɗ APPLY
THROUGH E-MAIL ETC]

[MS=3.2-3.3 PG=34-35 SG=47-48 CB=13-14 ]

3.8 MK=22-30
|
XII.WHAT IS MEANT BY ƏACCEPTANCEƐ
AND WHAT ARE THE ESSENTIALS OF A
VALID ACCEPTANCE
SECTION 8 & 9 LAY DOWN THE RULES
TO CONVERT A PROPOSAL INTO A
PROMISE
i. ACCEPTANCE MUST BE ABSOLUTE AND
UNQUALIFIED [SUBJECT TO OR
CONDITIONAL ACCEPTACE NOT
ALLOWED]
ii. MODE OF ACCEPTANCE MUST BE IN
SOME USUAL OR REASONABLE MODE
OR IN THE PRESCRIBED MODE
iii. MERE MENTAL ACCEPTACE IS NOT
ENOUGH IN LAW j
iv. ACCEPTANCE MUST BE
COMMUNICATED TO THE PROPOSER
v. ACCEPTANCE MUST BE GIVEN WITHIN
REASONABLE TIME AND BEFORE THE
PROPOSAL LAPSES OF IS REVOKED
vi. ACCEPTANCE OF THE PROPOSAL MUST
BE TOTAL (OF ALL THE TERMS)
vii. ACCEPTANCE MUST BE BY A CERTAIN
PERSON [NOT BY AN ANONYMOUS
PERSON]
viii. ACCEPTANCE NEED NOT NECESSARILY
BE IN WORDS [INSURANCE COMPANY
ENCASHING A CHEQUE IS ENOUGH
PROOF OF ACCEPTANCE]
CONTƕ 
ix. AN ACCEPTANCE GIVEN IN
IGNORANCE OF OFFER WILL NOT
BE VALID
[SERVANT TRACED MASTORS SON Ɗ
WITHOUT KNOWING THE REWARD
OFFER]
[MS=4.1-4.9 PG=38-39, SG=52-55
CB=15-18 MK=28-34]

þ
XIII.WHAT ARE REQUIREMENTS OF
COMMUNICATING A: A PROPOSAL AN
ACCEPTANCE OR A REVOCATION?
1. COMMUNICATION OF A PROPOSAL IS
COMPLETE WHEN IT COMES TO THE
KNOWLEDGE OF THE PERSON TO WHOM IT
IS MADE [WHEN THE LETTER CONTAINING
THE PROPOSAL REACHES THE PROPOSEE]
2. THE COMMUNICATION OF ACCEPTANCE IS
COMPLETE:
a) AS AGAINST THE PROPOSER WHEN IT IS
PUT IN COURSE OF TRANSMISSION AND IS
GONE OUT OF THE REACH OF THE PROPOSER
[WHEN THE PROPOSAL LETTER IS PUT IN
THE POST BOX]
CONTƕƕ
h
b) AS AGAINST THE ACCEPTOR WHEN IT
COMES TO HIS KNOWLEDGE [WHEN THE
LETTER REACHES HIM]
3. COMMUNICATION OF REVOCATION
(WITHDRAWAL OF OFFER) IS COMPLETE:
a) AS AGAINST THE PERSON WHO MAKES IT,
WHEN IT IS PUT INTO A COURSE OF
TRANSMISSION TO THE PERSON TO WHOM
IT IS MADE SO AS TO GO OUT OF THE REACH
OF THE PERSON REVOKING. [WHEN
REVOCATION LETTER IS POSTED]
b) AS AGAINST THE PERSON TO WHOM IT IS
MADE, WHEN IT COMES TO HIS KNOWLEDGE
[WHEN LETTER IS RECEIVED BY HIM]

CONTƕƕ _
4. TIME DURING WHICH AN OFFER OR
ACCEPTANCE CAN BE REVOKED
a) A PROPOSAL CAN BE REVOKED AT ANY
TIME BEOFRE THE COMMUNICATION
OF ITS ACCEPTANCE
b) ACCEPTANCE MAY BE REVOKED AT ANY
TIME BEFORE THE COMMUNICATION
OF ACCEPTANCE IS COMPLETE AS
AGAINST THE ACCEPTOR BUT NOT
AFTERWARDS

[MS=4.7 PG=40 SG=54-55 CB=18-21

MK=34-35]
Ö
XIV.WHAT IS ƏCONSIDERATIONƐ AND WHAT
ARE THE ESSENTIALS OF VALID
CONSIDERATION
1. SECTION 2 (d) OF ICA DEFINES
CONSIDERATION AS ƏWHEN AT THE
DESIRE OF THE PROMISOR, THE
PROMISEE OR ANY OTHER PERSON HAS
DONE OR ABSTRAINED FROM DOING, OR
DOES OR ABSTAINS FROM DOING, OR
PROMISES TO DO OR TO ABSTAIN FROM
DOING SOMETHING, SUCH ACT OR
ABSTINENCE OR PROMISE IS CALLED A
CONSIDERATION FOR MAKING THE
PROMISEƐ
v
CONTƕ.
2. ƌCONSIDERATIONƍ IS ALSO KNOWN AS ƌQUID
PRO QUOƍ THAT IS SOMETHING IN RETURN
FOR SOMETHING DONE OR FOR ABSTAINING
FROM DOING SOMETHING
[RAM AGREES TO PAY SHYAM RS. 10,000/- IF
HE DOES NOT PRESS THE SUIT FILED AGAINST
RAM OR WITHDRAWS THE POLICE
COMPLAINT]
3. THAT SOMETHING IN RETURN IS CALLED
ƏCONSIDERATIONƐ
4. CONSIDERATION IS THE PRICE FOR WHICH
THE OTHER PERSONƍS PROMISE IS BOUGHT.
5. AS PER SECTION 10 & 25 A CONTRACT
WITHOUT CONSIDERATION IS HELD TO BE
VOID AND NOT ENFORCEABLE
[HOWEVER THERE ARE A FEW EXCEPTIONS TO
THIS RULE]
[MS=51 MK=40 CB=23 PG=41 SG=67]
]
XV. WHAT ARE ESSENTIALS OF A VALID
CONSIDERATION ?
1. CONSIDERATION SHOULD HAVE BEEN
PROVIDED AT THE DESIRE OF THE
PROMISOR ONLY
a) ACT OR ABSTINENCE BY MR. ƌBƍ SHOULD
HAVE BEEN AT THE REQUEST OF MR. ƌAƍ
b) VOLUNTARY OR GRATUITOUS ACTS BY ƌBƍ
NOT REQUESTED BY ƌAƍ WOULD NOT
AMOUNT TO CONSIDERATION
c) DESIRE OF THE PROMISOR COULD BE
EXPRESS OR IMPLIED
CONTƕƕ.
þ

d) ACT OR ABSTYNENCE BY ƌBƍ COULD BE
FOR THE BENEFIT OF ƌAƍ OR ANY THIRD
PERSON
[EX. MR. ƌDƍ CONSTRUCTED A MARKET AT
THE REQUEST OF THE COLLECTOR MR ƌAƍ
THE SHOP KEEPERS USING THE MARKET
PROMISED ƌDƍ TO PAY A COMMISSION TO
ƌDƍ ON THE BASIS OF THEIR GOODS SOLD.
IF HE LATER BACK-TRACKED, MR ƌDƍ
CANNOT ENFORCE PAYMENT BECAUSE
THE MARKET WAS NOT CONSTRUCTED AT
THE REQUEST OF THE SHOP KEEPERS-
SHOE SHINE BOYS IN THE TRAIN
POLISHED SHOES WITHOUT BEING
ASKED ƊCOCONUT PLUCKER PLUCKED
NUTS WITHOUT BEING ASKED]
þ|
CONTƕƕ.
2. CONSIDERATION MAY MOVE FROM THE
PROMISEE OR ANY OTHER THIRD PERSON:
a) THE RETURN PROMISE (CONSIDERATION)
MAY BE PERFORMED BY THE PROMISEE
HIMSELF OR BY ANY THIRD PARTY
b) HOWEVER THE THIRD PARTY (MR ƌCƍ)
CANNOT SUE MR ƌA FOR NON PERFORMANCE
AS HE IS NOT A PARTY TO THE CONTRACT
[FLOWER BOQUET DELIVERY]
A BEQUEATED RS. 10 LAKHS TO HIS
DAUGHTER ON CONDITION THAT SHE WILL
GIVE AN ANNUITY OF RS 1 LAKH TO HIS
SISTER (GIRLƍS AUNT. SHE SIGNED AN
AGREEMENT WITH HER ANUTY TO THIS
EFFECT.
CONTƕƕ.þj
 AND AFTER HER FATHERƍS DEATH SHE
REFUSED TO PAY THE ANNUITY TO THE AUNTY
ON THE GROUND THAT AUNTY HAD NOT
OFFERED HER ANY ƏCONSIDERATIONƐ AND
HENCE THERE IS NO VALID CONTRACT
BETWEEN HER AND HER AUNTY. COURTS
HLED THOUGH THE AUNTY HAD NOT GIVEN
ANY ƏCONSIDERATIONƐ TO THE NEICE, THE
CONSIDERATION [PAYMENT OF 10 LAKHS
WAS MADE BY A THIRD PERSON-HER
BROTHER AND HENCE THE CONTRACT
BETWEEN AUNT AND NIECE IS VALID AND
ENFORCEABLE]
3. CONSIDERATION NEED NOT BE IN CASH OR
KIND
a) EVEN ACTS OF ABSTAINING OR FOREBEARING
LIKE PROMISE OF NOT TO SUE OR
WITHDRAWAL OF SUIT IS HELD TO BE VALID
CONSIDERATION CONTƕƕ.þ
4. CONSIDERATION COULD BE PAST,
PRESENT OR FUTURE
a) CONSIDERATION RECEIVED BEFORE
EXECUTION OF CONTRACT (PAST)
[REWARD FOR SAVING FROM
DROWNING]
b) WHEN CONSIDERATION IS FOR A
CURRENT FAVOUR (PRESENT)
c) CONSIDERATION MAY BE TO DO A
FUTURE ACT OR NOT TO DO A FUTURE
ACT
[A PROMISES NOT TO COMPETE
AGAINST B IN NEXT YEARS SPORTS]
CONTƕƕ.
þþ
5. CONSIDERATION NEED NOT BE FULL OR
ADEQUATE
a) IT NEED NOT BE ADEQUATE OR EQUIVALENT
TO THE VALUE OF THE PROMISE
[MR A AGREES TO SELL HIS BIKE COSTING
RS 1 LAKH TO HIS NEPHEW B FOR RS
10,000/- AND AƍS CONSENT WAS GIVEN
FREELY. THE AGREEMENT IS VALID AND
ENFOCEABLE THOUGH THE CONSIDERATION
IS INADEQUATE
b) HOWEVER INADEQUATE CONSIDERATION
COULD GIVE RISE TO LITIGATION WHETHER
THE CONSENT WAS ƏFREE OR NOTƐ
6. CONSIDERATION MUST BE REAL AND NOT
ILLUSORY
CONTƕƕ.
þh
a) CONSIDERATIONS WHICH CANNOT BE
PHYSICALLY OR LEGALLY ACHIEVED WOULD
NOT BE PROPER CONSIDERATION
[(1) A PROMISES TO REVIVE ƌBƍS DEAD WIFE
FOR RS 10,000 AND RECEIVES AN ADVANCE
(2) A JUDGEƍS SON AGREED TO GET A
FAVOURABLE JUDGEMENT FROM HIS
FATHER IN FAVOUR OF ƌBƍ FOR
CONSIDERATION OF RS 10,000. B REFUED
TO PAY]
b) CONSIDERATION SHOULD NOT BE
UNCERTAIN OR ILLUSORY
[A AGREES TO PAY A ƏREASONABLE
COMMISSIONƐ TO B]
CONTƕƕ.
þ_
7. CONSIDERATION MUST NOT BE
FOR SOMETHING WHICH THE
OTHER IS LEGALLY BOUND TO DO
[A AGREED TO PAY B THE RTO THE
FEE FOR THE DRIVING LICENCE +
RS 1000/-]
[MS=5.1& 5.2, CB=24-25, SG=68
MK=41-46 PK=41- 42]

þÖ
XVI. AN AGREEMENT WITHOUT CONSIDERATION
IS VOID [ACCORIDNG TO SECTION 25] Ɗ
WHAT ARE THE EXCEPTIONS TO THIS RULE?
1. CONSIDERATION BEING ONE OF THE
ESSENTIAL INGREDIENTS OF A VALID
CONTRACT, AS A GENERAL RULE AN
AGREEMENT MADE WITHOUT
CONSIDERATION IS VOID AND NOT
ENFORCEABLE
2. THERE ARE 7 EXCEPTIONS TO THIS RULE
AND THE EXEPTIONS ARE:
a) AS PER SECTION 25 (1) AN AGREEMENT
MADE OUT OF LOVE AND AFFECTION
WITHOUT ANY CONSIDERATION IS VALID IF
IT MEETS ALL THE FOLLOWING
CONDITIONS:
i. IT MUST BE EXPRESSED IN WRITING þv
CONTƕƕ
ii. IT MUST BE REGISTERED UNDER THE LAW
OF REGISTRATION
iii. MADE ON ACCOUNT OF NATURAL LOVE AND
AFFECTION
iv. IT MUST BE BETWEEN PARTIES WHO ARE
NEAR RELATIONS TO EACH OTHER
[(1) A AGREES TO PAY HIS SONƍS DEBT TO
THE SONƍS DEBTORS
(2) A AGREES TO PAY HIS QUARRELLING
WIFE TO STAY AWAY FROM HIM HELD NOT
VALID AS THE AGREEMENT WAS NOT FOR
LOVE AND AFFECTION
(3) NON WRITTEN OR NON REGISTERED
WOULD ALSO NOT BE VALID IF
REGISTRATION IS MANDATORY]
CONTƕƕ
þ]
3. AS PER SECTION 25 (2) AN AGREEMENT TO
COMPENSATE FOR PAST VOLUNTARY
SERVICE IS VALID EVEN IF THERE IS NO
CONSIDERATION
A RESCUED B FROM DROWING. ON
RETURNING HOME, ƌBƍ PROMISES TO PAY A
RS 1000/- THIS IS A VALID CONTRACT
THOUGH A HAD DONE IT WITHOUT ANY
EXPECTATION. [ PAST CONSIDERATION]
4. AS PER 25 (3) AGREEMENTS TO PAY TIME
BARRED DEBT IS VALID EVEN WITHOUT ANY
FRESH CONSIDERATION
5. EXPLANATION TO SECTION 25 (1) SAYS A
GIFT IF ALREADY MADE BY DONOR TO
DONEE SHALL BE VALID EVEN WITHOUT
CONSIDERATION
CONTƕƕ
h

 [IN THIS CASE DONEE NEED NOT BE A
RELATIVE]
[I GAVE ALL MY STAMP / COIN COLLECTIONS
TO A STUDENT IN THE COLLEGE]
6. ACCORDING TO SECTION 63 FOR REMISSION
OR COMPROMISING A DEBT NO
CONSIDERATION IS NECESSARY
[AGREEING TO EXTEND TIME FOR REPAYMENT
AGREEING TO CLOSE DEBT FOR A LOWER
AMOUNT]
7. ACCORDING TO SECTION 185 NO
CONSIDERATION IS REQUIRED FOR
EXECUTING AN AGREEMENT OF AGENCY
8. NO CONSIDERATION REQUIRED FOR MAKING
CONTRIBUTIONS TO CHARITY
[MS 5.6 Ɗ 5.7, MK= 47 Ɗ 50, CB= 29 Ɗ 30, PG=42
SG= 67 Ɗ 68]
h|
XVII.WHAT IS MEANT BY PRIVITY TO
CONTRACT?
[ ONLY PARTIES TO A CONTRACT CAN SUE
OR BE SUED- ARE THERE ANY EXCEPTIONS
TO THIS RULE] OR A STRANGER TO A
CONTRACT CANNOT SUE
1. IT IS A FUNDAMENTAL PRINCIPLE OF LAW
OF CONTRACT THAT A STRANGER TO A
CONTRACT CANNOT SUE, ONLY A PERSON
WHO IS A PARTY TO A CONTRACT CAN SUE
OR BE SUED.
EX. ƌAƍ MORTGAGES HIS PROPERTY TO ƌBƍ IN
CONSIDERATION OF BƍS PROMISE TO ƌAƍ TO
PAY AƍS DEBTS TO ƌCƍ. B DID NOT KEEP HIS
PROMISE. C CANNOT SUE B AS C IS NOT A
PARTY TO THE AGREEMENT BETWEEN A & B
hj
CONTƕƕ
2. THE RULE THAT STRANGER TO A CONTRACT
CANNOT SUE HAS THE FOLLOWING
EXCEPTIONS:
a) IN CASE OF CREATION OF A TRUST A
BENEFICIARY CAN SUE THE TRUSTEES FOR
DEMANDING HIS BENEFITS THOUGH HE IS
NOT A PARTY TO THE TRUST AGREEMENT]
b) IN CASE OF FAMILY ARRANGEMENTS OR
SETTLEMENTS
[WHEN A FAMILY PARTITION AGREEMENT
PROVIDED FOR THE MARRIAGE EXPENSES
OF FEMALE MEMBER EVEN WHEN SHE IS
NOT A PARTY TO THE AGREEMENT]

CONTƕƕh
c) WHEN THE DEPENDANT ADMITS HIMSELF TO
BE AGENT OF THE THIRD PARTY
[ƌAƍ RECEIVES SOME MONEY FROM ƌBƍ TO BE
PAID TO ƌCƍ AND HE ADMITS THIS TO C. ƌCƍ
CAN THEN SUE ƌAƍ TO RECOVER THIS AMOUNT
FROM A]
d) IN CASE OF AGREEMENTS SIGNED BY AGENTS
THE PRINCIPAL CAN SUE THE THIRD PARTY
ON AN AGREEMENT SIGNED BY HIS AGENT
AND THE THIRD PARTY [PROVIDED
AGREEMENT IS WITHIN THE SCOPE OF
AGENCY]
e) IN CASE OF ASSIGNMENT OF RIGHTS UNDER A
CONTRACT
[AN ASSIGNEE/ NOMINEE CAN SUE FOR
BENEFIT, THOUGH HE IS NOT A PARTY TO THE
CONTRACT]
[MS=5.4 Ɗ 5.5, MK=43 Ɗ 44, CB= 27 Ɗ 28, SG=40]
hþ
XVIII.WHAT IS MEANT BY ƌCOMPETENCYƍ OR
CAPACITY TO CONTRACT?
1. AN ESSENTIAL INGREDIENT OF A VALID
CONTRACT IS THAT IT SHOULD HAVE BEEN
EXECUTED BY COMPETENT PERSONS OR
PERSONS WHO HAVE THE LEGAL CAPACITY TO
ENTER INTO LEGAL OBLIGATIONS [SN Ɗ 10]
2. SECTION 11 SPELLS OUT THE CRITERIA FOR
DETERMINING THE ƌCOMPETENCYƍ OR THE
ƏCAPACITYƐ FOR ENTERING INTO CONTRACTS
3. SECTION 11 DECLARES THE FOLLOWING
PERSONS AS INCOMPETENT TO ENTER INTO
CONTRACTS:
i. A MINOR ACCORDING TO THE LAW TO WHICH
HE IS SUBJECT TO,
ii. IF HE IS OF UNSOUND MIND, AND
iii. IF HE IS SPECIFICALLY DISQUALIFIED FROM
ENTERING INTO A CONTRACT BY LAW hh
XIX.WHO IS A MINOR?
1. ACCORDING TO SECTION 3 OF
THE INDIAN MAJORITY ACT
1875, AN INDIAN NATIONAL IS
A MINOR TILL HE COMPLETES
18 YEARS
2. IF HE IS A WARD COMING
UNDER THE GUARDIAN AND h_
WARDS ACT, HIS MINORITY
XX. WHAT IS THE LEGAL IMPLICATIONS OF
AGREEMENTS INVOLVING MINORS
1. AN AGREEMENT WHICH PUTS OBLIGATION
ON A MINOR IS VOID AND NOT
ENFORCEABLE
[A MINOR AGREED TO MORTGAGE HIS
HOUSE TO MR B FOR RS 20,000AND
RECEIVED AN ADVANCE OF RS 8000/- MR B
CAN NEITHER ENFORCE THE MORTGAGE OR
DEMAND REFUND OF THE ADVANCE]
2. AN AGREEMENT CONFERING BENEFITS ON
THE MINOR IS A VALID AGREEMENT AND IS
ENFORCEABLE BY THE MINOR
[A MINOR PAID AN ADVANCE FOR THE hÖ
PURCHASE OF AN IMMOVABLE PROPERTY
3. AGREEMENTS OF APPRENTICESHIP OR
SERVICE BY MINORS
a) AN AGREEMENT SIGNED ON BEHALF OF A
MINOR (BY PARENT / GUARDIAN) TO
UNDERGO APPRENTICESHIP (FOR THE
DEVELOPMENT & EMPLOYABILITY OF THE
MINOR) IS VALID AND ENFORCEABLE
AGAINST THE MINOR
b) AN AGREEMENT ON BEHALF OF MINOR
SIGNED BY PARENTS / GUARDIANS TO
RENDER SERVICE IN AN ORGANISATION IS
NOT VALID AND NOT ENFORCEABLE
4. RATIFICATION ON ATTAINING MAJORITY
WILL NOT VALIDATE THE AGREEMENT hv
AN AGREEMENT ENTERED INTO WHILE A
5. THE RULE OF ESTOPPEL DOES NOT APPLY TO
A MINOR
a) RULE OF ESTOPPEL SAYS A PERSON CANNOT
GO BACK ON HIS ADMISSIONS
b) THIS RULE IS NOT APPLICABLE TO MINORS
c) A MINOR ENTERED INTO AN AGREEMENT
DECLARING THAT HE IS A MAJOR. WHEN HE
LATER DECLARED THAT HE WAS A MINOR
THE OPPOSITE PARTY TRIED TO APPLY THE
RULE OF ESTOPPEL. COURTS REFUSED TO
APPLY RULE OF ESTOPPEL ON THE MINOR
6. MINORƍS LIABILITIES FOR RECEIPT OF
NECESSITIES
h]
a) A MINOR RECEIVED NECESSITIES FROM A
SHOP KEEPER [FOOD, CLOTHING, SHELTER]
b) COURTS HELD THE MINOR HAS NO
PERSONAL OBLIGATION TO PAY, BUT
IF THE MINOR HAS ANY PROPERTY,
THE SHOP KEEPER CAN RECLAIM THE
AMOUNT FROM ANY SUCH PROPERTY
7. AN AGREEMENT ENTERED ON BEHALF
OF A MINOR BY HIS GUARDIAN OR
MANAGER OF THE ESTATE IS BINDING
ON THE MINOR
a) IT CAN BE ENFORCED AGAINST THE
MINOR AS WELL AS HIS PROPERTY
PROVIDED THEY WERE SIGNING _

AGREEMENTS WHICH THEY WERE
8. STATUS OF MINOR AS A PARTNER
a) MINOR CAN NOT SIGN A PARTERSHIP
AGREEMENT
b) HOWEVER SECTION 30 OF THE ACTS SAYS
A MINOR CAN RECEIVE BENEFITS UNDER
A PARTNERSHIP AGREEMENT SIGNED ON
HIS BEHALF BY HIS GUARDIAN
c) HOWEVER THE GUARDIAN CANNOT
ENTER INTO ANY AGREEMENT CASTING
OBLIGATIONS ON THE MINOR [MINOR
CAN RECEIVE PROFITS OF PARTNERSHIP
FIRMS BUT MINOR CANNOT BE MADE
RESPONSIBLE TO SHOULDER LOSSES
INCURRED BY THE FIRM]
CONTƕ.
_|
9. CAN A MINOR ACT AS AN AGENT AND SIGN
CONTRACTS ON BEHALF OF ANOTHER
a) ACCORDING TO SECTION 184 A MINOR CAN
SIGN AN AGREEMENT AS AN AGENT
CASTING OBLIGATIONS ON HIS MASTER OR
PRINCIPAL
10. MINOR AND INSOLVENCY
a) MINOR CAN NEVER BE DECLARED
INSOLVENT
b) IF ANY NECESSITIES ARE SUPPLIED TO HIM
AND HE CANNOT PAY, HE CANNOT BE
DECLARED AN INSOLVENT
[AT BEST RECOVERY CAN BE ENFORCED
AGAINST HIS PROPERTY FOR NECESSITIES
SUPPLIED TO HIM]
CONTƕ. _j
11. A CONTRACT JOINTLY ENTERED INTO BY A
MINOR AND MAJOR ON ONESIDE
a) IN SUCH A CONTRACT THE MINOR WILL
HAVE NO OBLIGATION, BUT THE MAJOR
WILL BE HELD LIABLE
[A MAJOR STOOD SURETY FOR A MINOR TO
OBTAIN A STUDY LOAN FROM A BANK]
12. POSITION OF MINORS PARENTS
a) PARENTS OF A MINOR ARE NOT LIABLE FOR
AGREEMENTS SIGNED BY THE MINOR
b) HOWEVER IF THE MINOR HAS SIGNED THE
AGREEMENTS AS THE AGENT OF THE
PARENTS, THE PARENTS ARE LIABLE
CONTƕ. _
13. MINORS LIABILITY FOR TORT
a) A TORT IS A CIVIL WRONG AND NOT A
CONTRACTUAL WRONG
b) MINOR IS NOT LIABLE FOR DAMAGE
ARISING OUT OF CONTRACT BUT IS LIABLE
FOR DAMAGE ARISING OUT OF TORT
[A HORSE HIRER GAVE A HORSE TO A
MINOR TO RIDE ON CONDITION THAT HE
SHALL NOT MAKE THE HORSE JUMP. THE
BOY GAVE THE HORSE TO HIS FRIEND WHO
MADE THE HORSE JUMP AND INJURED THE
HORSE. THE MINOR HAD DONE AN ACT NOT
_þ
VISUALISED IN THE CONTRACT AND THIS IS
A TORT FAULT AND THE MINOR IS LIABLE TO
XXI.WHAT IS THE LEGAL STATUS OF
AGREEMENTS EXECUTED BY PERSONS OF
ƌUNSOUND MINDƍ ?
1. WHAT IS MEANT BY ƌUNSOUND MINDƍ
SECTION 12 DEFINES ƌUNSOUND MINDƍ
AS FOLLOWS:
Ə A PERSON IS SAID TO BE OF SOUND
MIND FOR THE PURPOSE OF MAKING A
CONTRACT, IF AT THE TIME WHEN HE
MAKES IT, HE IS CAPABLE OF
UNDERSTANDING IT AND FORMING A_h
RATIONAL JUDGEMENT AS TO ITS
2. THIS SECTION FURTHER STATES THAT A PERSON
WHO IS USUALLY OF UNSOUND MIND, BUT
OCCASIONALLY OF SOUND MIND CAN SIGN A VALID
CONTRACT DURING THE SPELL HE WAS OF SOUND
MIND
[A PATIENT IN A LUNATIC ASSYLUM CAN SIGN]
3. A PERSON WHO IS USUALLY OF SOUND MIND, BUT
OCCASSIONALLY OF UNSOUND MIND CAN NOT
MAKE A CONTRACT DURING THE SPELLS HE IS OF
UNSOUND MIND. [MR. A IS SOBER DURING DAY
TIME AND DEAD DRUNK AFTER 8PM TILL 6 AM
CANNOT BIND HIMSELF WHEN HE IS DRUNK OR A
PERSON UNDER HYPNOTISM]
4. UNSOUNDNESS OF MIND MAY BE DUE TO IDIOCY.
SUCH PERSONS ARE HELD TO BE PERPETUALLY__
UNSOUND AND CANNOT SIGN ANY CONTRACTS [EX
MENTALLY DEFORMED PERSONS]
XXII.WHAT ARE THE CATEGORIES OF PERSONS
LEGALLY DECLARED TO BE INCOMPETENT TO
SIGN CONTRACTS
1. AN ALIEN ENEMY CANNOT
a) AN ALIEN IS A CITIZEN OF A FOREIGN
COUNTRY
b) AN ALIEN FRIEND CAN EXECUTE
c) AN ALIEN ENEMY (A NATIONAL OF COUNTRY
AGAINST WHOM INDIA HAS DECLARED A
WAR) CANNOT ENTER INTO A CONTRACT
DURING THE PERIOD OF SUCH
DECLARATION
d) VALID CONTRACT ENTERED BEFORE THE_Ö
WAR WILL STAND SUSPENDED DURING THE
WAR AND CAN BE RESUMED AFTER THE WAR
2. AGREEMENTS SIGNED BY SOVEREIGNS
AND AMBASSADORS
a) WHILE THEY CAN SUE OTHERS THEY
CANNOT BE SUED FOR CONTRACTS
ENTERED INTO BY THEM
b) IF THEY ARE TO BE SUED, PRIOR
PERMISSION HAS TO BE OBTAINED FROM
THE CENTRAL GOVERNMENT
3. A CONVICT
a) A CONVICT CANNOT ENTER INTO
CONTRACT DURING HIS PERIOD OF
IMPRISONMENT OR
_v
b) CANNOT SUE ON ANY CONTRACT SIGNED
BEFORE IMPRISONMENT DURING THE
4. A MARRIED WOMAN
a) SHE CAN ENTER INTO CONTRACT ONLY ON HER
OWN PROPERTIES
b) SHE CANNOT CONTRACT ON ANY PROPERTY
BELONGING TO HER HUSBAND
5. AN INSOLVENT
a) AN INSOLVENT CAN INCUR DEBTS, BUT HE CANNOT
SELL HIS PROPERTY
b) IF HE OBTAINS A DISCHARGE THEN HIS RIGHTS
ARE REVIVED
6. JOINT STOCK COMPANIES & INCORPORATED
COMPANIES
a) THEY CAN ENTER INTO CONTRACTS ONLY IN AREAS
OR SUBJECTS SPECIFICALLY APPROVED UNDER
THEIR MEMORANDUM OF ASSOCIATION (UNDER _]
THE COMPANIES ACT 1956)
b) ANY CONTRACTS SIGNED BY THE DIRECTORS ON
XXIII.WHAT IS THE LEGAL STATUS OF
AGREEMENTS WITHOUT ƌFREE CONSENTƍ?
1. WHAT IS ƌCONSENTƍ?
a) SECTION 13 OF THE ICA DEFINES THE TERM
CONSENT AS Ə TWO OR MORE PERSONS ARE
SAID TO CONSENT WHEN THEY AGREE UPON
THE SAME THING IN THE SAME SENSEƐ
(CONSENT INVOLVES IDENTITY OF MINDS
OR ƏCONSENSUS AD-IDEMƐ)
b) CONSENT SIGNIFIES AN ACT DONE BY A
PERSON KNOWINGLY + FEELINGLY +
WILLINGLY
c) BOTH PARTIES MUST AGREE UPON THE
SAME THING IN THE SAME SENSE
CONTƕ.. Ö

2. WHAT IS THE SIGNIFICANCE OF FREE
CONSENT?
a) AN AGREEMENT IS ENFORCEABLE AND
BECOMES A CONTRACT ONLY WHEN THE
CONSENT TO THE AGREEMENT IS ƏFREEƐ
b) SECTION 14 DEFINES ƌFREE CONSENTƍ
c) CONSENT IS SAID TO BE ƌFREEƍ WHEN IT IS
NOT CAUSED BY:
i. ƌCOERCIONƍ AS DEFINED IN SECTION 15, OR
ii. ƌUNDUE INFLUENCEƍ AS DEFINED IN
SECTION 16, OR
iii. ƌFRAUD AS DEFINEDƍ IN SECTION 17, OR
iv. ƌMISREPRESENTATIONƍ AS DEFINED IN
SECTION 18, OR
v. ƌMISTAKEƍ, SUBJECT TO SECTIONS 20,21&22
Ö|
[MK= 64 Ɗ 65 MS= 7.1 & 8]
XXIV.WHAT IS THE IMPACT OF COERCION
ON ENFORCEABILITY OF AN
AGREEMENT
1. WHAT IS ƌCOERCIONƍ?
a) ACCORDING TO SECTION 15,
ƌCOERCIONƍ IS ƏTHE COMMITTING OR
THREATENING TO COMMIT ANY ACT
FORBIDDEN BY THE INDIAN PENAL
CODE (IPC), OR THE UNLAWFUL
DETAINING OR THREATENING TO
DETAIN, ANY PROPERTY, TO THE
PREJUDICE OF ANY PERSON
WHATEVER, WITH THE INTENTION OF
CAUSING ANY PERSON TO ENTER INTO
AN AGREEMENTƐ.
CONTƕ Öj
b) THE EXPLANATION TO SECTION 15 SAYS IT
IS IMMATERIAL WHETHER THE IPC IS OR IS
NOT IN FORCE IN THE PLACE WHERE THE
COERCION IS EMPLOYED
EX: (i) RELATIVES COMPEL A WIDOW TO ADOPT
A CHILD OR ELSE WILL NOT ALLOW THE
HUSBANDƍS BODY TO BE REMOVED FOR
CREMATION. WIDOW LATER BACKED OUT.
COURTS HELD HER CONSENT WAS UNDER
COERCION
(ii) A POINTS A PISTOL AND COMPELS A
LAND LORD TO RENT HIS HOUSE
[MS= 8.6 Ɗ 8.7 MK= 65 Ɗ 67 ]
2. WHAT IS THE EFFECT OF COERCION
a) THE AGREEMENT / CONTRACT IS NOT
TOTALLY VOID
Ö
CONTƕ
b) IT IS VOIDABLE (OBLIGATIONS
AVOIDABLE) BY THE PERSON
WHOSE CONSENT WAS
OBTAINED BY COERCION
c) THE BURDEN OF PROOF OF
THAT COERCION WAS USED
WILL REST ON THE PARTY
WHO WANTS TO ESCAPE THE
OBLIGATIONS UNDER THE
CONTRACT
[MS= 8.6 Ɗ 8.7 MK= 66 Ɗ 67 ]
Öþ
XXV.WHAT IS THE IMPACT OF
ƌUNDUEINFLUENCEƍ ON THE
ENFORCEABILITY OF AN AGREEMENT?
1. WHAT IS MEANT BY UNDUEINFLUENCE?
a) SECTION 16 (1) DEFINES THE TERM
ƌUNDUEINFLUENCEƍ AS FOLLOWS:
ƏA CONTRACT IS SAID TO BE INDUCED BY
UNDUEINFLUENCE WHERE:
(i) THE RELATIONS SUBSISTING
BETWEEN THE PARTIES ARE SUCH THAT
ONE OF THE PARTIES IS IN A POSITION
TO DOMINATE THE WILL OF THE OTHER
AND
(ii) HE USES THE POSITION TO OBTAIN
AN UNFAIR ADVANTAGE OVER THE
OTHERƐ Öh

CONTƕ.
b) SECTION 16 (2) SAYS A PERSON IS DEEMED
TO BE IN A POSITION TO DOMINATE THE
WILL OF THE OTHER WHEN:
(i) HE HOLDS A REAL OR APPARENT
AUTHORITY OVER THE OTHER
[RELATIONSHIP BETWEEN POLICE OFFICER
& ACCUSED, MASTER & SERVENT]
(ii) WHERE HE STANDS IN A FIDUCIARY
RELATION WITH THE OTHER (FIDUCIARY
MEANS RELATIONSHIP OF MUTUAL TRUST &
CONFIDENCE)
[FATHER & SON / DAUGHTER, GUARDIAN &
WARD, SOLICITOR & CLIENT, DOCTOR &
PATIENT, GURU & DISCIPLE, TRUSTEE &
BENEFICIARY]
OR
CONTƕ.. Ö_
 (iii) HE MAKES A CONTRACT WITH A
PERSON WHOSE MENTAL CAPACITY IS
TEMPORARILY OR PERMANENTLY AFFECTED
BY REASON OF AGE, ILLNESS, MENTAL OR
BODILY DISTRESS, OR ILLITERACY
c) THE ONUS OF PROVING NO UNDUE
INFLUENCE WAS USED WILL REST ON THE
SHOULDERS OF THE PERSON WHO WAS IN A
POSITION TO DOMINATE
d) HOWEVER THERE IS NO PRESUMPTION OF
UNDUE INFLUENCE IN THE CASE OF THE
FOLLOWING RELATIONSHIPS:
(a) HUSBAND & WIFE
(b) PARENTS & CHILDREN
(c) LANDLORD & TENET
(d) CREDITOR & DEBTOR
CONTƕ.. ÖÖ
2. WHAT IS THE EFFECT OF
UNDUEINFLUENCE
a) THE CONTRACT IS NOT TOTALLY VOID
b) IT IS VOIDABLE BY THE WEAKER
PARTY IF THEY ESTABLISH THAT
UNDUEINFLUENCE WAS USED

[MS = 8.8 Ɗ 8.10 MK= 67 Ɗ 71 ]

Öv
XXVI.WHAT IS THE DISTINCTION BETWEEN
COERCION & UNDUEINFLUENCE

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XXVII.WHAT IS THE LEGAL STATUS OF
AGREEMENTS (OR CONSENT) OBTAINED BY
FRAUD?
1. WHAT IS MEANT BY THE TERM ƏFRAUDƐ
a) ACCORDING TO SECTION 17 ƏFRAUD MEANS
AND INCLUDES ANY OF THE FOLLOWING
ACTS COMMITTED BY A PARTY TO THE
CONTRACT OR WITH HIS CONNIVANCE OR
BY HIS AGENT TO INDUCE ANOTHER TO
ENTER INTO THE CONTRACT
b) IT INCLUDES THE FOLLOWING ACTS:
i. SUGGESTING SOMETHING AS TRUE WHEN IT
IS NOT TRUE BY ONE WHO DOES NOT
BELIEVE IT TO BE TRUE
ii. ACTIVE CONCEALMENT OF FACT BY A
PERSON WHO HAS KNOWLEDGE OR BELIEF
OF THE FACT vj
CONTƕ.
iii. A PROMISE MADE WITHOUT ANY INTENTION
OF PERFORMING IT
iv. ANY OTHER ACT FITTED TO DECEIVE
v. ANY OTHER ACT OR OMISSIONS AS THE LAW
SPECIFICALLY DECLARES TO BE FRAUD
2. CAN MERE SILENCE AMOUNT TO FRAUD
a) SECTION 17 OUT LINES WHEN SILENCE
AMOUNTS TO FRAUD
b) AS A GENERAL RULE SILENCE IS NOT FRAUD
c) SILENCE IS FRAUDULENT IF THE
CIRCUMSTANCES OF THE CASE ARE SUCH
THAT IT IS THE DUTY OF THE PERSON
KEEPING SILENCE TO SPEAK:
[A BROKER SOLD HIS OWN SHARES TO A
BUYER WITHOUT DISCLOSING THAT IT WAS
HIS OWN SHARES Ɗ BUYER CAN REFUSE TO
TAKE IT] CONTƕ. v
d) THERE IS A DUTY TO SPEAK ON THE PART OF
THE PERSON KEEPING SILENCE IN THE
FOLLOWING TYPES OF CONTRACTS:
i. IN CONTRACTS OF GOOD FAITH LIKE:
CONTRACTS OF INSURANCE / SALE OF
IMMOVEABLE PROPERTY/CONTRACTS OF
MARRIAGE / CONTRACTS FOR PURCHASE OF
SHARES & FAMILY CONTRACTS
ii. CONTRACTS OF PARTNERSHIP (PARTNERS
SHOULD BE JUST & FAITHFUL TO EACH
OTHER)
iii. CONTRACTS OF GUARANTEE (THE CREDITOR
MUST DISCLOSE ALL MATERIAL FACTS
ABOUT THE DEBTOR TO THE SURETY
iv. WHERE THE PARTIES STAND IN FIDUCIARY
(TRUST) RELATIONSHIP TO EACH OTHER
CONTƕ. vþ
v. CONTRACTS TO MARRY
vi. CHANGE OF CIRCUMSTANCES (WHEN A
STATEMENT MADE WAS TRUE AT TIME OF
MAKING BUT CHANGE IN CIRCUMSTANCES
MADE IT UNTRUE)
e) IN CERTAIN CIRCUMSTANCES SILENCE IS
EQUIVALENT TO SPEECH
[IF YOU DO NOT DENY IT, I SHALL PRESUME
THAT THE HORSE IS SOUND. A SAYS
NOTHING. AƍS SILENCE IS EQUAL TO SPEECH
3. WHAT IS THE EFFECT OF FRAUD
THE PARTY DEFRAUDED HAS THE
FOLLOWING REMEDIES:
a) SUIT FOR RECISION PROVIDED THE SUIT IS
FILED WITHIN REASONABLE TIME
CONTƕ.
vh
b) SUIT FOR SPECIFIC PERFORMANCE AND TO
REQUIRE OTHER PARTY TO PUT HIM IN A
POSITION IN WHICH HE WOULD HAVE BEEN IF
THE REPRESENTATION MADE HAD BEEN TRUE
c) SUE THE OTHER PARTY FOR DAMAGES
4. THE RIGHT OF RECISION (AVOIDING) IS LOST
IN THE FOLLOWING CASES:
a) WHEN THE DEFRAUDED PARTY PROCEEDS WITH
THE CONTRACT EVEN AFTER BECOMING AWARE
OF THE FRAUD
b) THE PARTIES CANNOT BE RESTORED TO THEIR
ORIGINAL POSITIONS
c) THE THIRD PARTIES HAVE ACQUIRED RIGHTS
IN GOOD FAITH AND AFTER PAYING GOOD
CONSIDERATION (PRICE)
d) THE AGRIEVED PARTY COULD HAVE
DISCOVERED THE TRUTH BY ORDINARY
DILIGENCE [ v_
[MS = 8.3 Ɗ 8.5, MK=75 Ɗ 78, CB=44- 46]
XXVIII.WHAT IS THE LEGAL STATUS OF
AGREEMENTS OR CONTRACTS
OBTAINED BY MISREPRESENTATION?
1. WHAT AMOUNTS TO MISREPRESENTATION
ACCORDING TO SECTION 18
MISREPRESENTATION MEANS AND
INCLUDES THE FOLLOWING:
a) A POSITIVE ASSERTION, IN A MANNER NOT
WARRANTED BY THE INFORMATION OF THE
PERSON MAKING IT, OF THAT WHICH IS NOT
TRUE, THOUGH HE BELIEVES IT TO BE TRUE
b) ANY BREACH OF DUTY WITHOUT AN INTENT
TO DECIEVE BY WHICH THE PERSON GETS
AN ADVANTAGE BY MISLEADING ANOTHER
TO HIS DISADVANTAGE
CONTƕ vÖ
c) CAUSING, HOWEVER INNOCENTLY, A
PARTY TO AN AGREEMENT TO MAKE A
MISTAKE AS TO THE SUBSTANCE OF THE
THING WHICH IS THE SUBJECT MATTER
OF THE AGREEMENT
d) THE MISREPRESENTATION MAY BE
CAUSED BY ANY ONE OF THE FOLLOWING
WAYS: -
i. BY MAKING UNWARRANTED STATEMENTS
[A TELLS B, WITHOUT CHECKING
RECORDS THAT IN HIS FACTORY
1000TONS OF ICE IS PRODUCED EVERY
MONTH. A BELIEVES THIS TO BE TRUE.
THE ACTUAL PRODUCTION IS ONLY 800
TONS. A= IS GUILTY OF
MISREPRESENTATION] vv
CONTƕ
ii. BREACH OF DUTY
COMMITTING A BREACH OF DUTY WITHOUT
INTENTION TO DECIEVE [ A TELLS THE
INSURANCE AGENT THAT HE IS 25 YEARS
OLD AND LIC ISSUES HIM A POLICY BASED
ON WHICH PREMIUM COMPUTED ON 25. A
IS ACTUALLY 27 (HE DID NOT KNOW HIS
CORRECT AGE)
iii. INNOCENTLY INDUCING MISTAKE ABOUT
THE SUBJECT MATTER. PRODUCER TELLS
BUYER THERE IS MOTORABLE ROAD TO
CARRY OUR MACHINERY TO YOUR PLANT.
THERE WAS A WEAK BRIDGE ON THE WAY
WHICH WAS NOT COMMUNICATED
e) MISREPRESENTATION CAN ARISE NOT ONLY
FROM MISSTATEMENT OF FACTS, BUT ALSO
FROM SUPRESSION OF FACTS (THOUGH
MADE INNOCENTLY) v]

CONTƕ
2. WHAT IS THE EFFECT OF
MISREPRESENTATION ON THE
ENFORCEABILITY OF THE AGREEMENT
i. THE AGGRIEVED PARTY HAS 2 COURSES OF
ACTION:
a) HE CAN RESCIND (REFUSE TO PROCEED
WITH THE CONTRACT), OR
b) PROCEED WITH THE CONTRACT AND INSIST
ON RESTITUTION THAT IS TO BE PUT IN A
POSITION HE WOULD HAVE BEEN, IF THE
REPRESENTATION MADE WOULD HAVE BEEN
TRUE [SECTION 19 (2)]
ii. THE CONTRACT WILL NOT BE VOIDABLE IF
THE PARTY ALLEGING MISREPRESENTATION
COULD HAVE DISCOVERED THE TRUTH WITH
ORDINARY DILIGENCE
[MS= 8.1 & 8.2, MK= 72 Ɗ 74 , CB= 46 Ɗ ]
47 ]
XXIX.WHAT IS THE DISTINCTION BETWEEN
FRAUD AND MISREPRESENTATION?

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XXX.WHAT IS THE LEGAL STATUS OF
AGREEMENTS / CONTRACT BROUGHT ABOUT
BY ƌMISTAKEƍ?
1. WHAT IS ƌMISTAKEƍ?
MISTAKE MAY BE DEFINED AS ERRONEOUS
BELIEF CONCERNING SOMETHING. IT MAY
BE OF 2 KINDS:
a) MISTAKE OF LAW
b) MISTAKE OF FACT
2. WHAT IS MEANT BY MISTAKE OF LAW?
a) THIS AGAIN CAN BE OF 2 TYPES:
i. MISTAKE OF LAW OF ONES OWN COUNTRY
ii. MISTAKE OF FOREIGN LAW
b) MISTAKE OF OWN LAW IS NOT EXCUSABLE

CONTƕ.. ]þ
c) MISTAKE OF FOREIGN LAW VITIATES THE
CONTRACT AND RENDERS IT VOID (IT HAS
THE SAME EFFECT AS MISTAKE OF FACT)
3. WHAT IS MEANT BY MISTAKE OF FACT?
a) THIS AGAIN CAN BE OF 2 TYPES:
i. BILATERAL MISTAKE OR
ii. UNILATERAL MISTAKE
b) WHEN BOTH PARTIES TO A CONTRACT
MISUNDERSTOOD THE FACTS THERE IS A
BILATERAL MISTAKE AND HENCE THERE IS
NO PROPER OFFER OR ACCEPTANCE.
4. WHAT ARE THE CONTINGENCIES OF
BILATERAL MISTAKES [BOTH MAKING
MISTAKES] THAT MAKE THE AGREEMENT
VOID?
CONTƕ. ]h
a) MISTAKE AS TO THE EXISTENCE OF THE
SUBJECT MATTER
[X AGREED TO BUY FROM Y 100 TONNES OF
WHEAT ARRIVING BY SHIP HIMALAYA FOR
RS 1 LAKH. UNKNOWN TO BOTH THE SHIP
HAD SUNK-THE CONTRACT IS VOID]
b) MISTAKE AS TO IDENTITY OF THE SUBJECT
MATTER. X AGREED TO BUY FROM Y 100
TONNES OF WHEAT ARRIVING FROM
CANADA BY SHIP-CANBARA. UNKNOWN TO
BOTH THERE WERE TWO SHIPS BY THE
SAME NAME ONE LEAVING IN SEPTEMBER
AND OTHER IN DECEMBER Ɗ DUE TO
MISTAKE IN IDENTITY Ɗ AGREEMENT NOT
ENFORCEABLE
CONTƕ.
]_
c) MISTAKE REGARDING THE QUALITY OF THE
SUBJECT MATTER
(IF THE QUALITY OF SUBJECT MATTER HAS
BEEN MUTUALLY MIS UNDERSTOOD)
[X AGREED TO BUY AT AN AUCTION THE
PAINTING OF PICASSO SUBSEQUENTLY IT
CAME TO BE KNOWN THAT IT WAS NOT THE
ORIGINAL PAINTING THE AGREEMENT IS
VOID]
d) MISTAKE REGARDING QUANTITY OF THE
SUBJECT MATTER
(WHERE THE QUANTITY PURCHASED WAS
DIFFERENT FROM WHAT WAS INTENDED)
[X INSPECTED 50 RIFLES PUT UP BY Y FOR
SALE. X SEND A TELEGAM ƏSUPPLY THREE
RIFLESƐ. THE TELEGRAM WAS RECEIVED Y
AS ƏSUPPLY THE RIFLESƐ. ]Ö
CONTƕ.
 Y SHIPPED ALL 50 RIFLES. HELD THERE WAS
NO CONTRACT THOUGH THE MISTAKE WAS
CAUSED BY A THIRD PARTY]
e) MISTAKE RAGARDING PRICE OF THE
SUBJECT MATTER
[X OFFERED TO BUY YƍS CAR FOR RS.
75000/- Y DECLINED THE OFFER ON THE
GROUNDS THAT THE PRICE WAS TOO LESS.
AFTER A MONTH X RECEIVED A TELEGRAM
AGREEABLE TO SELL FOR RS. 7500/-. X
IMMEDIATELY ACCEPTED THE OFFER. THE
AGREEMENT WAS HELD NOT ENFORCEABLE
AS X KNEW VERY WELL THAT THE PRICE
QUOTED WAS A MISTAKE]
f) MISTAKE REGARDING TITLE (OWNERSHIP)
OF THE SUBJECT MATTER
CONTƕ. ]v
 [X AGREED TO PURCHASE A PROPERTY
FROM Y FOR RS. 10 LAKHS
UNKNOWING THAT PROPERTY HAD
REALLY BELONGED TO HIM. HELD THE
AGREEMENT WAS VOID]
g) MISTAKE REGARDING PHYSICAL OR
LEGAL POSSIBILITY OF PERFORMANCE
[AN AGREEMENT,TO HIRE ROOMS TO
WATCH THE KINGS CORONATION
CEREMONY. UNKNOWN TO BOTH
PARTIES THE ROAD PARADE OF THE
CORONATION WAS CANCELLED FOR
SECURITY REASONS. AGREEMENT WAS
HELD TO BE VOID FOR PHYSICAL
IMPOSSIBILITY OF PERFORMANCE
]]
CONTƕ.
5. WHAT IS THE EFFECT WHEN THE MISTAKE IS
ONLY UNILATERAL OR BY ONE OF THE
PARTIES ONLY
a) SECTION 22 LAYS DOWN THAT A CONTRACT
WILL NOT BECOME VOID MERELY BECAUSE
ONE OF THE PARTIES TO THE AGREEMENT IS
UNDER A MISTAKE ON THE SUBJECT MATTER
OF THE AGREEMENT. THUS UNILATERAL
MISTAKES DO NOT EFFECT THE VALIDITY OF
THE CONTRACT
[X AGREED TO LEND HIS LAPTOP TO Y FOR 3
TRIMESTERS. Y ACCEPTED IT BY MISTAKE
THINKING IT IS FOR 3 SEMESTERS. Y
CANNOT REFUSE TO HAND OVER THE
LAPTOP AFTER 3 TRIMESTERS OR REFUSE TO
PAY THE AGREED RENT]
[MS= 7.1 Ɗ 7.10, MK=80 Ɗ 86, CB=48 Ɗ 52]
|


XXXI.WHAT IS MEANT BY UNLAWFUL
AGREEMENTS?
1. AN AGREEMENT BECOMES VALID AND
ENFORCEABLE ONLY IF BOTH THE
CONSIDERATION AND THE OBJECT OF THE
AGREEMENT ARE LAWFUL
2. SECTION 23 STIPULATES THAT THE OBJECT AND
CONSIDERATION OF AN AGREEMENT SHALL BE
UNLAWFUL IN THE FOLLOWING CASES IF:
i. IT IS FORBIDDEN BY LAW [SELLING
CONTROLLED ARTICLES ABOVE THE PRICE
FIXED BY ESSENTIAL COMMODITIES ACT 1956]
ii. IT IS OF SUCH A NATURE THAT IF PERMITTED IT
WOULD DEFEAT THE PROVISIONS OF LAW [ AN
AGREEMENT BY A DEBTOR NOT TO RAISE THE
PLEA OF LIMITATION IN A SUIT FILED BY THE
CREDITOR]
CONTƕ. |
|
iii. IT IS FRAUDULENT (AN AGREEMENT TO
DIVIDE THE GAINS ACQUIRED BY FRAUD)
iv. IT INVOLVES OR IMPLIES INJURY TO THE
PERSON OR PROPERTY OF ANOTHER
[AN AGREEMENT TO INDEMNIFY A
PERSON AGAINST THE CONSEQUENCES
OF PUBLICATION OF SCANDALOUS OR
LIBEL MATERIAL]
v. THE COURTS REGARD IT AS IMMORAL OR
OPPOSED TO PUBLIC POLICY
[AN AGREEMENT TO HIRE A HOUSE FOR
PROMOTING PROSTITUTION OR
STORING SMUGGLED GOODS]
[MS MK= 49 Ɗ 90]
|
j
XXXII.WHAT ARE THE KINDS OF AGREEMENTS
HELD TO BE OPPOSED TO PUBLIC POLICY?
1. THE FOLLOWING TYPES OF AGREEMENTS
HAVE BEEN HELD TO BE OPPOSED TO
PUBLIC POLICY AND THEREFORE ARE VOID:
i. TRADING WITH ENEMY DURING WAR
ii. STIFLING PROSECUTION
[AGREEMENTS WHICH SEEK TO ABSOLVE AN
OFFENDER OR TO WITHDRAW A CRIMINAL
PROSECUTION]
iii. MAINTENANCE & CHAMPERTY
a) MAINTENANCE Ɗ AGRGEEMENTS THAT
SEEKS TO PROVIDE FINANCIAL ASSISTENCE
TO BRING OR DEPEND A LAW SUIT OR TO
FOMENT LITIGATION
|

CONTƕ..
b) CHAMPERTY Ɗ AN AGREEMENT TO SHARE
THE BENEFIT TO BE DERIVED FROM A
LAW SUIT
c) COURTS WILL NOT ENCOURAGE AN
AGREEMENT THAT IS EXTORTIONATE [AN
AGREEMENT TO PAY THE LAWYER
ACCORDING TO THE RESULT OF THE
CASE]
iv. FOR INTEREFERING WITH THE COURSE
OF JUSTICE
[AGREEMENTS FOR USING ANY KIND OF
IMPROPER INFLUENCE ON JUDGES AND
LAW ENFORCEMENT OFFICERS]
v. FOR TRAFICKING IN PUBLIC OFFICES
AND TITLES
CONTƕ..|
þ
 [AGREEMENT FOR PURCHASE OR SALE OF
PUBLIC OFFICES, APPOINTMENTS,
PROCUREMENT OF REWARD OR TITLES Ɗ
Ə PADMASHREEƐ, DRONACHARYA
AWARDS ETC]
vi. MARRIAGE BROKERAGE AGREEMENTS
[AGREEMENTS TO PROCURE MARRIAGES
FOR REWARD OR AGREEMENTS TO PAY
MONEY TO PARENT OR GUARDIAN TO
GIVE A MINOR DAUGHTER IN MARRIAGE]
vii. AGREEMENTS RESTRICTING PERSONAL
LIBERTY
[X BORROWED MONEY FROM Y AND
SIGNED AN AGREEMENT NOT TO CHANGE
HIS ADDRESS TILL THE MONEY IS FULLY
PAID] |
h
CONTƕ..
viii. AGREEMENTS IN RESTRAINT OF PARENTAL
RIGHTS
[RIGHT OF PARENT / GUARDIANSHIP
CANNOT BE SOLD THROUGH AN
AGREEMENT]
ix. AN AGREEMENT WITH A PUBLIC OFFICIAL
TO DO SOMETHING OPPOSED TO HIS DUTY
x. AGREEMENTS INTERFERING WITH MARITAL
RIGHTS
[LENDING MONEY TO A WOMAN TO OBTAIN
DIVORCE AND THEREAFTER TO MARRY HIM]
xi. AGREEMENTS TO INCREASE OF REDUCE THE
PERIOD OF LIMITATION
xii. AGREEMENTS TO DEFRAUD CREDITORS OR
REVENUE AUTHORITIES
CONTƕ.. |
_
2. EFFECT OF UNLAWFUL AGREEMENTS: -
i. EVERY AGREEMENT WITH THE OBJECT
OR CONSIDERATION WHICH IS
UNLAWFUL IS AB-INITIO-VOID
ii. ANY COLLATERAL TRANSACTION TO
SUCH AGREEMENTS IS ALSO VOID
iii. IN CASE THE PARTIES ARE EQUALLY
GUILTY, THE DEPENDENT IS IN A
BETTER POSITION
iv. AN AGREEMENT IS VOID EVEN IF ONLY
A PART OF THE OBJECT OR
CONSIDERATION IS UNLAWFUL
[MS= 9.1 Ɗ 9.19, MK=92 Ɗ 98, CB= 55 Ɗ 58]
|
Ö
XXXIII.WHAT ARE TYPES OF AGREEMENTS
THAT HAVE BEEN EXPRESSLY DECLARED
AS VOID UNDER THE ICA? [ WHAT ARE
VOID AGREEMENTS]
1. WE HAVE ALREADY SEEN THAT
AGREEMENTS WITH MINOR OR UNSOUND
PERSONS WITH BILATERAL MISTAKE,
WITH UNLAWFUL CONSIDERATION OR
WITH NO CONSIDERATION ARE NOT
LEGALLY ENFORCEABLE. IN ADDITION TO
THESE ICA EXPRESSLY DECLARES 7
TYPES OF AGREEMENTS AS AB Ɗ INITIO -
VOID
2. THE FOLLOWING AGREEMENTS ARE
EXPRESSLY DECLARED AS VOID UNDER
THE ICA: |
v
CONTƕ..
i. AGREEMENTS IN RESTRAINT OF
MARRIAGE (SEC Ɗ 26)
ii. AGREEMENTS IN RESTRAINT OF TRADE
(SEC Ɗ 27)
iii. AGREEMENTS IN RESTRAINT OF LEGAL
PROCEEDINGS (SEC Ɗ 28)
iv. AGREEMENTS THE MEANING OF WHICH
IS UNCERTAIN (SEC Ɗ 29)
v. AGREEMENTS BY WAY OF WAGER (SEC Ɗ
30)
vi. AGREEMENTS CONTINGENT ON
IMPOSSIBLE EVENTS (SEC Ɗ 36)
vii. AGREEMENTS TO DO IMPOSSIBLE ACTS
(SEC Ɗ 56)
CONTƕ.. |
]
3. WHAT IS THE DIFFERENCE BETWEEN
ILLEGAL AGREEMENTS & VOID
AGREEMENTS
i. COLLATERAL AGREEMENTS TO AN
ILLEGAL AGREEMENT ARE ALWAYS VOID
ii. COLLATERAL AGREEMENTS TO THE 7
CATEGORIES LISTED ABOVE NEED NOT
NECESSARILY BE ILLEGAL
4. WHAT IS MEANT BY AGREEMENT IN
RESTRAINT OF MARRIAGE IS VOID?
a) EVERY ADULT ENJOYS THE FREEDOM TO
MARRY
b) SECTION 26 DECLARES THAT THE
FOLLOWING KINDS OF AGREEMENTS
PUTTING IMPEDIMENTS ON THIS RIGHT
IS VOID: ||

CONTƕ..
i. AN AGREEMENT AGREEING NOT TO
MARRY AT ALL OR A CERTAIN PERSON
OR FROM A PARTICULAR SECT / CASTE
/ RELIGION
ii. OR MARRIAGE ONLY FOR A FIXED
PERIOD
c) HOWEVER AGREEMENTS RESTRAINING
CHILD MARRIAGE IS NOT VOID
[MS= 9.11 MK=101 CB=63]

|||
5. WHAT IS MEANT BY AGREEMENT IN
RESTRAINT OF TRADE IS VOID?
a) THE CONSTITUTION OF INDIA
GUARANTEES THE FREEDOM TO
CONDUCT TRADE & BUSINESS TO
EVERY CITIZEN
b) SECTION 27 DECLARES THAT EVERY
AGREEMENT RESTRAINING ANOTHER
PERSON FROM EXERCISING A LAWFUL
PROFESSION, TRADE OR BUSINESS TO
THAT EXTENT IS VOID
c) HOWEVER THIS SECTION PROVIDES
THE FOLLOWING EXCEPTIONS:
i. SALE OF GOODWILL
CONTƕ ||j
ii. AGREEMENT RESTRAINING PARTNERS
NOT TO CARRY ON INDEPENDENT
BUSINESS IN COMPETITION WITH THE
PARENT FIRM WHILE THEY REMAIN AS
PARTERS IS NOT VOID
iii. A TRADE ASSOCIATION AGREEMENT
INTENDED TO REGULATE AND NOT
RESTRAINT TRADE IS NOT VOID
iv. NEGATIVE STIPULATIONS IN SERVICE
AGREEMENTS NOT TO SERVE ANOTHER
MASTER WHILE SERVING THE MAIN
MASTER IS NOT VOID
[MS = 9.12 MK=102 Ɗ 103 CB=63 ]
CONTƕ
||
6. WHAT IS MEANT BY AGREEMENTS IN
RESTRAINT OF LEGAL PROCEEDINGS IS
VOID
i. SECTION 28 DECLARES THE FOLLOWING
KINDS OF AGREEMENTS AS VOID: -
a) ABSOLUTE RESTRICTION ON LEGAL
PROCEEDINGS
b) AGREEMENTS CURTAILING THE
LIMITATION PERIOD
c) EXINGUISHMENT OF CONTRACTUAL
RIGHTS AFTER EXPIRY OF SPECIFIED
PERIOD
d) AGREEMENTS DICHARGING A PARTY
FROM LIABILITY AFTER EXPIRY OF
SPECIFIED PERIOD
CONTƕ ||þ
ii. THERE ARE TWO EXCEPTIONS TO THIS RULE:
a) AN AGREEMENT TO REFER THE PRESENT
DISPUTE TO ARBITRATION
b) AN AGREEMENT TO REFER A FUTURE DISPUTE
TO ARBITRATION
[MS MK=104 Ɗ 105 CB=66]
7. AGREEMENTS THE MEANING WHICH IS
UNCERTAIN IS VOID [SN 29]
i. COURTS WILL NOT ENFORCE AGREEEMNTS
WHICH ARE NOT CERTAIN (VAGUE) OR WHICH
IS NOT CAPABLE OF BEING MADE CERTAIN
ii. ƌXƍ AGREES TO SELL TO Y 100 TONNES OF OIL
[NO INDICATION OF WHAT KIND OF OIL.
HOWEVER IF HE WAS A DEALER ONLY IN ||h
COCONUT OIL, IT WOULD NOT BE A VAGUE
8. WAGERING AGREEMENTS ARE VOID (Sn 30)
i. WHAT IS WAGER (GAMBLING)
ƏWAGER IS A PROMISE TO GIVE MONEY OR
MONEYƍS WORTH UPON DETERMINATION
OR ASCERTAINMENT OF AN UNCERTAIN
EVENT
[X & Y MAKE AN AGREEMENT THAT X SHALL
PAY Y RS. 500 IF IT RAINS ON MONDAY Y
SHALL PAY X RS. 500 IF IT DOES NOT RAIN
ON MONDAY]
ii. WHAT ARE ESSENTIAL INGREDIENTS OF A
WAGER
a) THERE MUST BE PROMISE TO PAY MONEY
OR MONEYƍS WORTH
b) THE PROMISE MUST BE CONDITIONAL ON
THE HAPPENING OR NOT HAPPENING OF AN
EVENT CONTƕ ||_
c) THE AGREEMENT MUST BE CONDITIONAL
UPON THE HAPPENING OF AN UNCERTAIN
EVENT
d) BOTH PARTIES MUST STAND AN EQUAL
CHANCE TO WIN OR LOSE ON
DETERMINATION OF THE CONTEMPLATED
EVENT
e) NEITHER PARTY SHOULD HAVE CONTROL
OVER THE HAPPENING OR NOT HAPPENING
OF THE EVENT
f) NEITHER PARTY SHOULD HAVE ANY
INTEREST OTHER THAN THE SUM OR STAKE
THAT HE STANDS TO WIN OR LOSE
iii. THE FOLLOWING ARE EXCEPTIONS TO THE
WAGERING AGREEMENTS:
a) HORSE RACING
CONTƕ ||Ö
b) CROSSWORD COMPETITIONS
c) GAMES OF SKILL
d) SHARE MARKET TRANSACTIONS
e) CONTRACTS OF INSURANCE
f) CHIT FUNDS
iv. WHAT IS THE DIFFERENCE BETWEEN
WAGERING AGREEMENTS & INSURANCE
CONTRACTS
  
 
 
 

 
 

 
 

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[MK= 106 Ɗ 107 CB= 67 Ɗ 69 ]

v. AGREEMENTS TO DO IMPOSSIBLE ACTS ARE
VOID (Sn 56)
a) X AGREES WITH B TO TURN SILVER INTO
GOLD BY MAGIC
b) X AGREES WITH B TO RUN 100 KM IN 1 HOUR

[MS MK= 109 CB-69] |j

XXXIV.WHAT IS THE LAW PERTAINING TO
CONTINGENT CONTRACTS [ Sn 31]
1. CONTRACTS MAY BE ƌABSOLUTEƍ OR
ƏCONTINGENTƐ
a) ABSOLUTE CONTRACT: A CONTRACT IN
WHICH PARTIES PERFROM THEIR
RECIPROCAL PROMISES IN ALL EVENTS
b) CONTINGENT CONTRACT : A CONTRACT TO
DO OR NOT TO DO SOMETHING IF SOME
EVENT COLLATERAL TO SUCH CONTRACT
DOES OR DOES NOT HAPPEN
2. AN ORDINARY CONTRACT CAN BE CHANGED
INTO A CONTINGENT CONTRACT IF ITS
PERFORMANCE IS MADE DEPENDENT UPON
THE HAPPENING OR NON-HAPPENING OF AN
UNCERTAIN EVENT
CONTƕ. |j|
3. CONTRACTS OF INSURANCE, CONTRACTS OF
GUARANTEE ARE POPULAR INSTANCES OF
CONTINGENT CONTRACTS
[1) X PROMISES TO SELL TO Y 100 TONNES OF
COTTON IF HIS SHIP REACHES BOMBAY
SAFELY
2) X PROMISES TO GIVE Y A LOAN IF HE IS
ELECTED PRESIDENT OF THE COOPERATIVE
SOCIETY]
4. THE FOLLOWING ARE THE ESSENTIAL
REQUIREMENTS OF A CONTINGENT CONTRACT
[ Sn 32 & 33]
a) THE PERFORMANCE OF THE CONTRACT
DEPENDS UPON THE HAPPENING OR NOT
HAPPENING OF SOME FUTURE UNCERTAIN
EVENT
b) THE FUTURE UNCERTAIN EVENT SHOULD BE
COLLATERAL OR INCIDENTAL TO THE MAIN |jj
CONTRACT CONTƕ.
5. WHAT IS THE DIFFERENCE BETWEEN
WAGERING AGREEMENTS (GAMBLING)
AND CONTINGENT CONTRACTS
@


   


    


      
 
  
  

 




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[MS = 10.3 Ɗ 10.7 MK=110 Ɗ 114 CB= 73 Ɗ 76]

|jh
XXXV.WHAT IS MEANT BY QUASI Ɗ
CONTRACT AND WHAT IS THE EXTENT
OF ITS ENFORCEABILITY?
1. WHAT IS MEANT BY QUASI- CONTRACT
a) UNDER THE LAW OF CONTRACTS
OBLIGATIONS ARE VOLUNTARILY
CREATED UPON EACH OTHER BY
PARTIES TO THE CONTRACT
b) IN CERTAIN CIRCUMSTANCES
OBLIGATIONS MAY BE CREATED OR
IMPOSED BY LAW EVEN WITHOUT THE
EXISTENCE OF A CONTRACT
c) SUCH IMPOSED OBLIGATIONS ARE
CALLED QUASI- CONTRACTUAL
OBLIGATIONS CONTƕ.
|j_
d) SUCH OBLIGATIONS ARE IMPOSED BY
COURTS ON THE EQUITY PRONCIPLE
THAT NO MAN SHOULD GROW RICH AT
THE COST OF ANOTHER
e) QUASI- CONTRACTS ARE NOT
CONTRACTS, BUT THE RELATIONSHIP
OR OBLIGATIONS RESEMBLE THE
RELATIONS/ OBLIGATIONS ARISING
OUT OF CONTRACTS
f) THE 5 TYPES OF QUASI-CONTRACTUAL
OBLIGATIONS ARE OUTLINED IN
SECTIONS 68 Ɗ 72 OF THE ICA 1872
2. THE 5 TYPES OF QUASI- CONTRACT
OBLIGCATIONS ARE DESCRIBED
BELOW: |jÖ
CONTƕ.
a) CLAIMS FOR REIMBURSEMENT OF COST OF
NECESSITIES SUPPLIED (Sn 68)
i. IF A PERSON INCAPABLE OF ENTERING INTO
A CONTRACT OR SOMEONE WHO IS LEGALLY
BOUND TO SUPPORT SUCH HELPLESS
PERSON IS SUPPLIED LIFE SUPPORTING
ESSENTIALS, THE SUPPLIER IS ENTITLED TO
BE REIMBURSED THE COST FROM THE
PROPERTY OF THE INCAPABLE PERSON
[X SUPPLIES FOOD AND MEDICINES TO A
LUNATIC OR HIS GUARDIAN. THE SUPPLIER
CAN CLAIM REIMBURSEMENT]
NOTE: HE CAN ONLY CLAIM REIMBURSEMENT OF
NECESSITIES AND NOT LUXURY ITEMS
SUPPLIED [COST OF SCENTS, LIQUOR ETC
WILL BE LUXURIES]
CONTƕ. |jv
b) REIMBURSEMENT TO A PERSON PAYING
MONEY DUE BY ANOTHER, IN THE
PAYMENT OF WHICH THE PAYER IS
INTERESTED (Sn 69)
1. THE OBLIGATIONS OR RIGHT TO
REIMBURSEMENT UNDER SECTION 69
WILL ARISE ONLY IF THE FOLLOWING
CONDITIONS ARE FULFILED:
i. THE PLAINTIFF (PETITIONER CLAIMING
REIMBURSEMENT MUST HAVE AN
INTEREST IN PAYING THE DEBT OWED BY
THE DEPENDENT TO ANOTHER PARTY
ii. THE DEFENDENT SHOULD HAVE A
STATUTORY OR CONTRACTUAL LIABILITY
TO PAY THE DEBT
CONTƕ. |j]
iii. THE PLAINTIFF (CLAIMANT) SHOULD
HAVE ACTUALLY MADE THE PAYMENT TO
THE OTHER PARTY
[X BOUGHT A HOUSE FROM Y AND PAID
HIM THE FULL PRICE IN 2008. AFTER AN
YEAR MUNICIPAL AUTHORITIES SENT A
NOTICE FOR ARREARS HOUSE TAX FOR
THE EARLIER YEARS IN THIS HOUSE
ADDRESS WITH A THREAT THAT THE
HOUSE WILL ATTACHED / AUCTIONED IF
THE ARREARS IS NOT PAID WITHIN 1
MONTH. X PAID THE TAX WHICH Y
SHOULD HAVE PAID TO SAVE HIS
PROPERTY FROM ATTACHMENT. X CAN |

SUE Y FOR REIMBURSEMENT OF THE

c) OBLIGATION OF A PERSON ENJOYING THE
BENEFIT OF NON-GRATITOUS ACT (Sn 70)
i. IF A PERSON LAWFULLY DOES SOMETHING
FOR ANOTHER PERSON OR DELIVERS
ANYTHING TO HIM, NOT INTENDING TO DO
SO GRATUITOUSLY (NOT FREE), AND SUCH
OTHER PERSON HAS ENJOYED THE BENEFIT,
THE LATER (ENJOYER) IS BOUND TO MAKE
COMPENSATION TO THE FORMER (SUPPLIER)
OR TO RESTORE OR RETURN THE THING
SUPPLIED
[SHOP KEEPER X SENT A SUPPLY OF PIZA TO A
MR. REDDY ON THE THIRD FLOOR OF A
BUILDING. THE DELIVERY BOY SUPPLIED THE
PIZA BY MISTAKE TO ANOTEHR MR REDDY || ON

THE SECOND FLOOR. THE SECOND FLOOR

d) RESPONSIBILITY OF FINDER OF GOODS (Sn-
71)
i. ACCORDING TO SECTION 71 A PERSON WHO
FINDS GOODS BELONGING TO ANOTHER
AND TAKES THEM INTO HIS CUSTODY, IS
SUBJECT TO THE RESPONSIBILITIES OF A
BAILEE (CUSTODIAN)
ii. THE RESPONSIBILITIES ARE AS FOLLOWS:
l TO TAKE REASONABLE CARE OF THE GOODS,
WHICH A MAN OF ORDINARY PRUDENCE
WOULD TAKE
l TAKE REASONALBE STEPS TO TRACE THE
OWNER
|j
l NOT TO MAKE UNAUTHORISED USE OF THE
GOODS
iii. THE FINDER HOWEVER WILL HAVE THE
FOLLOWING RIGHTS IN RESPECT OF THE
GOODS FOUND:
l TO RECEIVE COMPENSATION FOR THE
EXPENSES INCURRED BY HIM IN
PRESERVING THE GOODS OR EXPENSES ON
FINDING THE TRUE OWNER
l TO RETAIN POSSESSION UNTIL THE OWNER
PAYS THE RIGHTFUL EXPENSES
l TO SELL THE GOODS IF THE TRUE OWNER
CANNOT BE FOUND AFTER A REASONABLE
SEARCH OR THE OWNER REFUSES TO PAY
THE LAWFUL CHARGES
l AND WHEN THE GOODS ARE IN DANGER|OF
PERISHING OR THE CHARGES PAYABLE TO
e) LIABILITY OF THE PERSON TO WHOM
MONEY HAS BEEN PAID OR ANYTHING
DELIVERED BY MISTAKE [Sn 72]
[X & Y JOINTLY OWES RS 100 TO Z. X
PAYS THE FULL AMOUNT TO Z. Y NOT
KNOWING THIS FACT PAYS ANOTHER
RS. 100 TO Z. Z IS BOUND TO REFUND
THE RS 100 TO Y]
[MS 13.1 Ɗ 13.7, MK=142 Ɗ 147, CB=109 Ɗ
112, PG = 56 -57]
3. WHAT IS THE DISTINCTION BETWEEN |þ

A CONTRACT AND A QUASI- CONTRACT

 

   


  

 
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|_
XXXVI.WHAT IS MEANT BY DISCHARGE OF
CONTRACT AND WHAT ARE VARIOUS
MODES OF DISCHARGE?
1. WHAT IS MEANT BY DISCHARGE?
A CONTRACT IS SAID TO BE
DISCHARGED WHEN:
a) THE PARTIES TO THE CONTRACT HAVE
PERFORMED THEIR OBLIGATIONS
RESPECTIVELY WITH THE TERMS OF
THE AGREEMENT, OR
b) THEY HAVE BEEN RELIEVED FROM
FULFILLING THEIR OBLIGATIONS
UNDER LAW
CONTƕ.. |Ö
2. WHAT ARE THE METHODS UNDER
WHICH A CONTRACT WILL STAND
DISCHARGED?
a) DISCHARGE BY PERFORMANCE
b) DISCHARGE BY AGREEMENT
c) DISCHARGE BY LAPSE OF TIME
d) DISCHARGE BY OPERATION OF LAW
e) DISCHARGE BY IMPOSSIBILITY &
f) DISCHARGE BY BREACH OF CONTRACT
[MS=10 Ɗ 10.2 MK=129 CB=76-77]
|v
XXXVII.WHAT IS MEANT BY DISCHARGE BY
PERFORMANCE?
1. PERFROMANCE IS THE USUAL MODE OF
DISCHARGE OF A CONTRACT
2. SECTION 37 & 38 PROVIDE THAT THE
PARTIES MUST EITHER PERFORM, ATTEMPT
TO PERFORM OR ATLEAST OFFER TO
PERFORM UNLESS SUCH PERFORMANCE IS
DISPENSED WITH OR EXCUSED UNDER THE
PROVISIONS OF ICA OR ANY OTHER LAW
3. IF THE PROMISOR DIES BEFORE
PERFORMANCE, HIS LEGAL
REPRESENTATIVES MUST PERFORM UNLESS
THE CONTRARY INTENTION APPEARS FROM
THE CONTRACT
CONTƕƕ |]
4. AN OFFER TO PERFORM OR TENDER MUST
SATISFY THE FOLLOWING REQUIREMENTS:
a) IT MUST BE UNCONDITIONAL [Sn 38 (1)]
b) IT SHOULD BE MADE AT FIXED OR PROPER
TIME AND PLACE [Sn 38 (2)]
c) REASONABLE OPPORTUNITY MUST BE GIVEN
TO THE OTHER PARTY TO INSPECT AND
SATISFY THAT THE PERFORMANCE IS IN
ACCORDANCE WITH THE TERMS OF
CONTRACT
d) WHERE THERE ARE SEVERAL JOINT
PROMISEES THE TENDER MADE TO ANY ONE
OF THE JOINT PROMISEES WILL HAVE THE
SAME AFFECT AS AN OFFER TO ALL OF THEM
CONTƕƕ |þ

e) TENDER CAN BE MADE TO THE PROMISEE OR
HIS DULY AUTHORISED AGENT
f) IT SHOULD BE AN OFFER TO PERFORM IN
FULL
g) IT SHOULD BE FOR DELIVERY OF GOODS OF
THE RIGHT QUALITY AND QUANTITY
h) IN CASE OF PAYMENT OF MONEY, THE
TENDER MUST BE OF THE PRECISE AMOUNT
AND IN TERMS OF LEGAL CURRENCY [ AN
OFFER TO GIVE IN CHEQUE INSTEAD OF
CASH MAY NOT SATISFY THE REQUIREMENT
IF TURNED DOWN BY THE OTHER PARTY]
CONTƕƕ
|þ|
5. THERE ARE TWO KINDS OF TENDER:
a) TENDER OF MONEY OR
b) TENDER OF GOODS
6. IN CASE OF PAYMENT OF MONEY,
WHO SHOULD PERFORM Ɗ CAN
SOMEBODY OTHER THAN PROMISOR
OR PROMISEE PERFORM?
a) IF THE PROMISE TO PERFORM IS OF
PERSONAL NATURE [SING, DANCE,
SPEAK ETC] OR IF THE CONTRACT
SPECIFICALLY INSISTS SO, THE
PROMISOR HIMSELF MUST PERFORM
CONTƕƕ|þj
b) CONTRACTUAL OBLIGATIONS WHICH ARE
NOT OF PERSONAL IN NATURE COULD BE
PERFORMED BY AN AGENT OF THE
PROMISOR
c) ON THE DEATH OF A PROMISOR,
OBLIGATIONS NOT OF PERSONAL NATURE
COULD BE PERFORMED BY THE LEGAL
REPRESENTATIVES OF THE PROMISOR
d) THIRD PARTIES MAY PERFORM THE
PROMISE WHEN THEY ARE MADE
ASSIGNS/NOMINEES BY THE PARTIES OR BY
OPERATION OF LAW
[X OWS Y RS 5000. Z A FRIEND OF X OFFERS
RS 4000 TO Y AND HE ACCEPTS IT IN FULL
SATISFACTION. Z CANNOT SUBSEQUENTLY
SUE X FOR THE BALANCE]
CONTƕƕ |þ
7. WHAT IS THE IMPORTANCE OF TIME &
PLACE OF PERFORMANCE OR WHAT IS
MEANT BY TIME IS THE ESSENCE OF A
CONTRACT
a) CONTRACTING PARTIES MUST PERFORM
THEIR PROMISES WITHIN THE TIME
SPECIFIED OR AGREED
b) IN COMMERCIAL TRANSACTIONS TIME IS
TREATED AS AN ESSENTIAL INGREDIENT,
WHILE IN NON-COMMERCIAL CONTRACTS,
THERE IS NO SUCH PRESUMPTION
c) WHEN TIME IS AN ESSENTIAL INGREDIENT,
NON PERFORMANCE ON TIME MAKES THE
CONTRACT VOIDABLE IN THE HANDS OF THE
AGGRIEVED (Sn 55)
CONTƕƕ |þþ
d) WHEN TIME IS NOT THE ESSENCE OF
THE CONTRACT, THE AGGRIEVED CAN
SUE FOR COMPENSATION
e) IF THE PROMISEE ACCEPTS
ALTERNATE TIME OR PLACE OF
DELIVERY, HE CANNOT THEN CLAIM
COMPENSATION
[MS=10.3 Ɗ 10.11 MK=114 Ɗ 12
CB=76 Ɗ 84 PG=57 Ɗ 58]
|þh
XXXVIII.WHAT IS MEANT BY DISCHARGE OF
CONTRACT BY AGREEMENT [Sn 62]
1. SINCE A CONTRACT IS CREATED BY
AGREEMENT, IT MAY BE TERMINATED BY THE
SAME METHOD OR MUTUAL CONSENT
2. THE DISCHARGE OF A CONTRACT BY
AGREEMENT CAN TAKE THE FOLLOWING
SHAPES:
a) NOVATION
(i) WHEN ALL PARTIES TO A CONTRACT AGREE
TO REPLACE THE OLD CONTRACT WITH NEW
CONTRACT
(ii) IT MUST BE DONE BEFORE THE BREACH OR
EXPIRY OF THE OLD CONTRACT
b) RECISSION
(i) IT TAKES PLACE WHEN ALL OR SOME OF
THE TERMS OF THE CONTRACT ARE
CANCELLED CONTƕƕ. |þ_
c) REMISSION
(i) IT MEANS THE ACCEPTANCE OF A
LESSER SUM THAN WHAT WAS
CONTRACTED OR A LESSER FULFILLMENT
OF THE PROMISE MADE
(ii) IT MAY CONSIST OF EXTENTION OF
TIME FOR PERFORMANCE OR
ACCEPTANCE OF ALTERNATIVE
SATISFACTION INSTEAD OF THE
ORIGINAL PERFORMANCE
d) WAIVER
IT MEANS DELIBERATE / INTENTIONAL
ABANDONMENT OR RELINQUISHMENT OF
THE RIGHTS BY THE PARTIES TO A
CONTRACT
CONTƕƕ. |þÖ
e) MERGER
IT TAKES PLACE WHEN AN INFERIOR RIGHT
ACCRUING TO A PARTY UNDER A CONTRACT
MERGES INTO A SUPERIOR RIGHT
ACCRUING TO THE SAME PARTY UNDER THE
SAME OR SOME OTHER CONTRACT [A
TENENT GIVING UP HIS TENENCY RIGHTS
WHEN HE BUYS UP THE SAME HOUSE]
f) ALTERATION
WHEN ONE OR MORE OF THE TERMS OF THE
CONTRACT IS / ARE ALTERED BY MUTUAL
CONSENT OF THE PARTIES TO THE
CONTRACT. THE OLD CONTRACT IS
DISCHARGED AND THE PARTIES BECOME
BOUND BY A NEW CONTRACT
[MS=10.12 Ɗ 10.16 MK= PG=59 CB=88]
|þv
XXXIX.WHAT IS MEANT BY DISCHARGE OF
CONTRACT BY IMPOSSIBILITY OF
PERFORMANCE?
1. ACCORDING TO SECTION 56 OF ICA,
AN AGREEMENT TO DO AN ACT
IMPOSSIBLE ON THE FACE OF IT IS
VOID [X PROMISES Y AN INDIAN
NATIONAL TO GET HIM ELECTED AS
PRESIDENT OF PAKISTAN]
2. IMPOSSIBILITY MAY BE OF 3 KINDS:
a) IMPOSSIBILITY KNOWN TO THE
PARTIES AT THE TIME OF MAKING THE
CONTRACT. IN SUCH CASES THE
AGREEMENT IS AB- INITIO Ɗ VOID AS
BOTH KNOW OF THE IMPOSSIBILITY |þ]
CONTƕ
b) IMPOSSIBILITY UNKNOWN TO BOTH
PARTIES AT THE TIME OF MAKING THE
CONTRACT. IN SUCH CASE ALSO THE
CONTRACT IS VOID DUE TO
MUTUALITY OF THE MISTAKE [A
SUPPLIER AGREES TO SHIP MATERIAL
TO US ON SHIP WHICH SANK Ɗ THE
FACT OF SINKING SHIP WAS NOT
KNOWN TO BOTH]
c) IMPOSSIBILITY OR ILLEGALITY
WHICH AROSE SUBSEQUENT TO THE
FORMATION OF THE CONTRACT. IN
SUCH CASE ALSO THE CONTRACT
BECOMES VOID DUE TO
IMPOSSIBILITY OF PERFORMANCE
CONTƕ |h

3. CASES COVERED UNDER SUPERVENING
IMPOSSIBILITY ARE AS FOLLOWS:
a) DESTRUCTION OF THE SUBJECT MATTER
[DEATH, SINKING, FIRE ETC]
b) NON Ɗ OCCURRENCE OF CONTEMPLATED
STATE OF THINGS
[X HIRED A FLAT IN LONDON TO VIEW THE
CORONATION OF THE KING FROM A
VANTAGE POSITION. THE CORONATION AND
STREET PROCESSION WAS CANCELLED]
c) UNANTICIPATED CHANGE OF
CIRCUMSTANCES
[CRICKET TICKET SALES. TOUR OF
AUSTRALIANS CALLED OFF DUE TO TERROR
THREAT] OR FUNCTION CANCELLED DUE TO
BANDH]
CONTƕ |h|
d) DEATH OR INCAPACITY OF A PARTY
[ARTIST WHO WAS TO SING DIED OR GOT
PARALYSED]
e) CHANGE OF LAW
[SALE OF LIQUOR AND INTRODUCTION OF
PROHIBITION IN A STATE]
f) OUTBREAK OF WAR
[DURING THE CONTINUANCE OF THE WAR THE
CONTRACT REMAINS SUSPENDED]
4. HOWEVER THERE ARE SOME EXCEPTIONS TO
THE DOCTRINE OF SUPERVENING
IMPOSSIBILITY LIKE:
a) IF PERFORMANCE BECAME CUMBERSOME OR
DIFFICULT IT IS NOT SUFFICIENT GROUNDS TO
ESCAPE LIABILITY
[WEDDING CATEROR AGREED AT RS X PER
PLATE. INFLATION AND COST OF INGREDIENTS
GOING UP. CATERER HAS TO BEAR IT] |hj
CONTƕ
b) DUE TO REDUCTION IN ANTICIPATED
PROFITS [GOVERNMENT RAISED THE
MINIMUM WAGES Ɗ CONTRACTOR MUST
COMPLETE THE JOB]
c) SELF INDUCED IMPOSSIBILITY
d) STRIKES, LOCKOUTS AND CIVIL
DISTURBANCE IS NOT GROUNDS FOR
ESCAPING LIABILITY
e) PARTIAL IMPOSSIBILITY Ɗ WILL NOT
TERMINATE THE WHOLE CONTRACT
5. EFFECT OF SUPERVENING IMPOSSIBILITY
a) THE CONTRACT BECOMES VOID AND
PARTIES ARE RELEASED FROM FURTHER
PERFORMANCE
b) IF ANY PERSON HAS RECEIVED ANY BENEFIT
HE MUST RESTORE IT TO THE OTHER PARTY
OR MAKE COMPENSATION FOR IT |h
[SN 56 & 65]
XL. WHAT IS MEANT BY DISCHARGE BY LAPSE
OF TIME?
1. IF A CONTRACT IS NOT PERFORMED WITHIN
THE PERIOD PRESCRIBED UNDER THE
INDIAN LIMITATION ACT 1963, IT LAPSES.

XLI. WHAT IS MEANT BY DISCHARGE BY

OPERATION OF LAW?
1. A CONTRACT IS DISCHARGED BY
OPERATION OF LAW IN THE FOLLOWING
WAYS:
a) DEATH OF THE PROMISOR
b) INVOLVENCY OR MERGER
c) UNAUTHORISED ALTERATION IN THE TERMS
OF CONTRACT OR MATERIAL WITHOUT THE
CONSENT OF THE OTHER PARTY [SUPPLY OF
BASMATI WITH SOME OTHER RICE] |hþ
XLII.WHAT IS MEANT BY DISCHARGE BY
BREACH?
1. WHEN A PARTY FAILS TO PERFORM HIS
OBLIGATION UNDER A CONTRACT, HE IS
SAID TO HAVE COMMITTED A BREACH OF
CONTRACT
2. BREACH CAN BE OF 2 TYPES:
(a) ANTICIPATED BREACH & (b) ACTUAL
BREACH
3. REMEDIES AGAINST ANTICIPATORY BREACH
[Sn 39]
l AGGRIEVED PARTY CAN TREAT IT AS ACTUAL
BREACH AND SUE FOR DAMAGES OR
l WAIT FOR THE DUE DATE AND SUE FOR
DAMAGES THEREAFTER
[MS= 11.2 Ɗ 12.6 MK= 128 Ɗ 140 PK=59
CB=94] |hh
XLIII.WHAT IS THE DIFFERENCE BETWEEN
SUPERVENING IMPOSSIBILITY AND
DOCTRINE OF FRUSTRATION?

 

 

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[MS = 11.7 ] |hÖ
XLIV. WHAT ARE THE REMEDIES AVAILABLE
TO THE AGGRIEVED FOR BREACH OF
CONTRACT BY THE OTHER PARTY?
1. THE ICA PROVIDES FOR THE FOLLOWING
REMEDIES:
a) SUIT FOR RECISION OF THE CONTRACT
b) SUIT FOR CLAIMING DAMAGES
c) SUIT OF CLAIMING QUANTUM MERUIT
d) SUIT FOR SPECIFIC PERFORMANCE
e) SUIT FOR INJUNCTION
2. WHAT IS MEANT BY SUIT FOR RECISION
THE COURT MAY GRANT RECISION
(PERMISSION NOT TO PERFORM ANY
MORE OBLIGATIONS) IN THE FOLLOWING
CASES: |hv
CONT ƕƕ
a) WHERE THE CONTRACT IS VOIDABLE AT THE
OPTION OF THE PLAINTIFF
b) THE COURT MAY HOWEVER REFUSE
RECISION IN THE FOLLOWING CASES:
i. WHERE THE PLAINTIFF HAS EXPRESSLY OR
IMPLIEDLY RATIFIED THE CONTRACT
ii. DUE TO CHANGE IN CIRCUMSTANCES, THE
PARTIES CANNOT BE RESTORED TO THEIR
ORIGINAL POSITION
iii. WHERE THIRD PARTIES HAVE OBTAINED
RIGHTS UNDER THE CONTRACT IN GOOD
FAITH
iv. WHERE ONLY A PART OF THE CONTRACT IS
SOUGHT TO BE RESCINDED AND SUCH PART
IS NOT SEVERABLE FROM THE REST OF THE
CONTRACT [Sn 27 OF THE SPECIFIC RELIEF
ACT 1963] |h]
CONT ƕƕ
3. WHAT IS MEANT BY SUIT FOR DAMAGES
AND WHAT ARE THE VARIOUS TYPES OF
DAMAGES:
i. WHAT IS DAMAGES
a) DAMAGES ARE THE MONETARY
COMPENSATION ALLOWED TO THE INJURED
PARTY FOR THE LOSS OR INJURY SUFFERED
BY HIM AS A RESULT OF THE BREACH OF
CONTRACT
b) DAMAGE IS NOT PUNISHMENT OR PENALTY
IT IS AIMED AT PUTTING THE INJURED
PARTY INTO A SITUATION THE AGGRIEVED
WOULD HAVE BEEN HAD THE CONTRACT
BEEN FULFILLED
c) DAMAGES AWARDED BY COURT COULD BE
ANY ONE OF THE FOLLOWING:
CONT ƕƕ|_

l ORDINARY OR GENERAL OR
COMPENSATORY DAMAGE FOR THE
ACTUALLY QUANTIFIED DAMAGE
l SPECIAL DAMAGES (DAMAGES AS
CONTEMPLATED BY THE PARTIES AT THE
TIME OF EXECUTING THE CONTRACT)
l EXEMPLARY, PUNITIVE OR VINDICTIVE
DAMAGES
(WHERE AGGRAVATED SITUATION EXISTS)
iv. NOMINAL DAMAGES (ONLY TOKEN DAMAGE
FOR MERE TECHNICAL VIOLATIONS)
d) SECTION 73 OF THE ICA PRESCRIVE THE
RULES REGARDING QUANTIFICATION OF
THE DAMAGES TO BE AWARDED AS
FOLLOWS:
CONT ƕƕ|_|
l ONLY DAMAGE DIRECTLY OR NATURALLY
ARISING OUT OF THE BREACH IS TO BE
COMPENSATED
l REMOTE OR INDIRECT DAMAGES ARE
NORMALLY NOT GRANTED UNLESS THE
PARTIES HAD INDICATED THE SAME IN THE
CONTRACT
e) WHAT IS MEANT BY LIQUIDATED DAMAGES
IF THE PARTIES HAD INDICATED IN THE
CONTRACT ITSELF THE QUANTUM OF
DAMAGES PAYABLE IT IS CALLED
LIQUIDATED DAMAGES
f) WHAT IS MEANT BY ƏQUANTUM MERUITƐ?
i. ANOTHER REMEDY AVAILABE IS TO FILE A
SUIT FOR GRANT OF ƏQUANTUM METUITƐ
CONT ƕƕ |_j
ii. THE PHARSE ƏQUANTUM MERUITƐ MEANS
ƏAS MUCH AS EARNEDƐ
iii. IN CASE A CONSTRUCTION CONTRACT IS
UNDERTAKEN AND LATER THE WORK HAD
TO BE STOPPED FOR SOME LEGAL
REASON AND THE CONTRACT HAS
BECOME VOID, THE PARTY WHO HAS
DONE PART WORK CAN SUE FOR
RECOVERING CHARGES FOR THE
PROPORTION OF WORK ALREADY
COMPLETED
iv. THE CLAIM FOR ƏQUANTUM MERUITƐ CAN
BE OVER AND ABOVE THE CLAIM FOR
DAMAGES
g) WHAT IS MEANT BY ƏEARNEST MONEYƐ
AND ƏSECURITY DEPOSITƐ |_

CONT ƕƕ
l SOMETIMES A PARTY MAY BE REQUIRED TO
DEPOSIT SOME MONEY WITH THE OTHER
PARTY TO THE CONTRACT AND IT MAY BE IN
THE NATURE OF ƏEARNEST MONEYƐ OR
ƏSECURITY DEPOSITƐ
l EARNEST MONEY CAN BE ADJUSTED
AGAINST PURCHASE PRICE AND IS
FOREFEITED IF THE CONTRACT FALLS
THROUGH OR IS NOT ENTERED INTO
l SECURITY DEPOSIT ON THE CONTRARY IS
FOR ENSURING PERFORMANCE. IT IS NOT
PART OF THE PURCHASE PRICE AND IS ALSO
NOT ADJUSTED AGAINST PAYMENTS TO BE
MADE. IT CANNOT BE FOREFEITED AS ITS
FOREFEITURE WILL AMOUNT TO PENALTY
WHICH ONLY COURS CAN AWARD
CONT ƕƕ |_þ
4. WHAT IS MEANT BY SUIT FOR SPECIFIC
PERFORMANCE?
a) IF THE COURTS FEEL MONETARY
COMPENSATION IS NOT THE ADEQUATE
REMEDY IT MAY COMPEL THE PARTY
COMMITTING THE BREACH TO DO WHAT HE
HAD PROMISED TO DO
b) CIRCUMSTANCES WHEN COURT WOULD
ORDER SPECIFIC PERFORMANCE COULD BE
AS FOLLOWS:
i. WHERE THE CONTRACT IS SUCH THAT
MONEY WOULD NOT BE THE ADEQUATE
RELIEF
ii. WHERE THERE ARE NO STANDARDS FOR
ASCERTAINING THE ACTUAL DAMAGE
CAUSED BY THE NON-PERFORMANCE OF THE
AGREED ACT |_h
CONT ƕƕ
iii. WHEN IT IS PROBABLE THAT
COMPENSATION IN MONEY CANNOT
BE GOT FOR THE NON - PERFORMANCE
OF THE CONTRACT.
c) HOWEVER SPECIFIC PERFORMANCE IS
NOT ORDERED IN THE FOLLOWING
CASES:
i. MONEY IS AN ADEQUATE REMEDY
ii. IT WILL BE INEQUITABLE (UNFAIR) TO
EITHER PARTY
iii. THE CONTRACT IS OF PERSONAL
NATURE (EX CONTRACT TO MARRY)
iv. THE COURT CANNOT SUPERVISE ITS
EXECUTION
|__
CONT ƕƕ
5. WHAT IS MEANT BY SUIT FOR
INJUNCTION?
a) INJUNCTION IS AN ORDER FROM A
COURT TO RESTRAIN A PERSON FROM
DOING A PARTICULAR ACT
b) WHERE A PARTY TO A CONTRACT IS
ATTEMPTING TO DO SOMETHING THAT
WILL DEFEAT THE EXECUTION OF THE
CONTRACT, THE COURT MAY ORDER
THE RESTRAINT OF THE OPPOSING
ACTION WHEN PETITIONED BY THE
OTHER PARTY TO THE CONTRACT
[MS 14.1 Ɗ 14.11 MK = 149 Ɗ 160 CB=
99 Ɗ 106]
|_Ö
 MODULE III A Ɗ SPECIAL CONTRACTS
[CONTRACT OF INDEMNITY & GUARANTEE,
CONTRACT OF BAILMENT & PLEDGE,
CONTRACT OF AGENCY]

I. WHAT IS MEANT BY CONTRACT OF

INDEMNITY & WARRANTY AND WHAT ARE
THE PROVISIONS REGULATING THEM
1. WHAT IS MEANT BY CONTRACT OF:
INDEMNITY:
ACCORDING TO SECTION 124 A CONTRACT
OF INDEMNITY MEANS Ə A CONTRACT BY
WHICH ONE PARTY PROMISES TO SAVE THE
CONTƕ. |_v
OTHER FROM LOSS CAUSED TO HIM BY THE
CONDUCT OF THE PROMISER HIMSELF OR BY THE
CONDUCT OF ANY OTHER PERSON
[X TAKES HIS FRIEND Y TO A HOTEL AND TELLS
THE OWNER GIVE Y WHAT EVER FOOD HE WANTS,
I WILL SEE THAT YOU ARE PAID]
GUARANTEE:
ACCORDING TO SECTION 126 A CONTRACT OF
GUARANTEE MEANS Ə A CONTRACT TO PERFORM
THE PROMISE OR DICHARGE THE LIABILITY OF A
THIRD PERSON IN CASE OF HIS DEFAULTƐ
[X TAKES Y TO A HOTEL AND TELLS THE OWNER
GIVE Y WHAT EVER FOOD HE WANTS, IF HE DOES
NOT PAY YOU, I WILL PAY]
|_]
CONTƕ
2. WHO ARE THE PARTIES TO:
CONTRACT OF INDEMNITY:
a) THE PERSON WHO PROMISES TO MAKE
GOOD THE LOSS IS CALLED THE
INDMNIFIER (PROMISOR) [Mr X]
b) AND THE PERSON WHOSE LOSS IS TO BE
MADE GOOD IS CALLED THE INDEMNIFIED
OR INDEMNITY HOLDER (PROMISEE)
[HOTEL OWNER]
c) TOTALLY 2 PARTIES
CONTRACT OF GUARANTEE:
a) THE PERSON IN RESPECT OF WHOSE
DEFAULT THE GUARANTEE IS GIVEN IS
CALLED THE ƌPRINCIPAL DEBTORƍ [Mr Y]
CONTƕ |Ö

b) THE PERSON TO WHOM THE GUARANTEE
IS GIVEN IS CALLED THE ƌCREDITORƍ
[HOTEL OWNER]
c) THE PERSON WHO GIVES THE
GUARANTEE IS CALLED THE ƌSURETYƍ [Mr
X]
d) TOTALLY 3 PARTIES
3. WHAT ARE THE RIGHTS OF THE
INDEMNITY HOLDER
SECTION 125 ENTITLES THE INDEMNITY
HOLDER TO RECOVER THE FOLLOWING
FROM THE PROMISOR:
a) ALL DAMAGES WHICH HE MAY BE
COMPELLED TO PAY IN A SUIT IN
RESPECT OF ANY MATTER TO WHICH THE
PROMISE TO INDEMNIFY APPLIES |Ö|

CONTƕ
b) ALL COSTS WHICH HE MAY BE
COMPELLED TO PAY IN BRINGING OR
DEPENDING SUCH SUITS PROVIDED HE
ACTS AS A PRUDENT MAN
c) ALL SUMS WHICH HE MAY HAVE PAID
UNDER THE TERMS OF ANY COMPROMISE
OF ANY SUCH SUIT
4. WHAT ARE THE KINDS OF GUARANTEES
a) RETROSPECTIVE GUARANTEE Ɗ IT IS A
GUARANTEE FOR AN EXISTING DEBT
b) PROSPECTIVE GUARANTEE Ɗ IT IS A
GUARANTEE FOR A FUTURE DEBT
c) SPECIFIC GUARANTEE Ɗ A GUARANTEE
WHICH EXTENDS TO A SINGLE DEBT OR
SPECIFIC TRANSACTION
CONTƕ |Öj
d) CONTINUING GUARANTEE Ɗ A GUARANTEE
THAT EXTENDS TO A SERIES OF
TRANSACTIONS
5. CAN A GUARANTEE BE REVOKED OR WHEN
CAN A SURETY STAND DISCHARGED?
a) BY NOTICE (SECTION 130): A SURETY CAN
AVOID THE LIABILITY IN RESPECT OF
FUTURE TRANSACTIONS BY NOTICE OF
REVOCATION. BUT THE GUARANTOR
REMAINS LIABLE FOR ALL TRANSACTION
PRIOR TO SUCH NOTICE
b) BY DEATH OF SURETY (SECTION 131).
DEATH OF THE SURETY OPERATES AS
TERMINATION OF CONTINUING GUARANTEE
WITH REGARD TO FUTURE TRANSACTIONS.

[MS = MK CB= 115 Ɗ 120 PG= 61 -62]

|Ö
II. WHAT IS THE NATURE AND EXTENT OF A
SURETYƍS LIABILITY
1. COEXTENSIVE WITH THE PRINCIPLE
DEBTOR
a) SURETYƍS LIABILITY ARISES ONLY WHEN
THE PRINCIPAL DEBTOR FAILS TO HONOUR
HIS OBLIGATION. ONCE THE LIABILITY
ARISES IT IS JOINT OR COEXTENSIVE WITH
THAT OF THE PRINCIPAL DEBTOR. A
SURETYƍS LIABILITY IS NEITHER MORE NOR
LESS THAN THAT OF THE PRINCIPAL
DEBTOR
2. SECONDARY LIABILITY
a) SURETYƍS LIABILITY IS SECONDARY AND
ARISES ONLY IF THE PRINCIPLE DEBTOR
FAILS TO PERFORM [PRIMARY
RESPONSIBILITY REMAINS WITH THE
PRINCIPAL DEBTOR] CONTƕ. |Öþ
3. SURETY IS A FAVOURED DEBTOR
NO NEW LIABILITY CAN BE THRUST ON
THE SURETY WHICH IS NOT COVERED
IN THE ORIGINAL CONTRACT. ON ANY
ALTERATION OF THE CONTRACT
WITHOUT SURETYƍS CONSENT, THE
SURETY CEASES TO BE LIABLE
4. NO PRIVITY OF CONTRACT
THOUGH THE OBLIGATIONS OF THE
SURETY & PRINCIPAL DEBTOR AR CO-
EXTENSIVE, THEY DO NOT
CONSTITUTE A SINGLE LEGAL PERSON.
ACCORDINGLY THE SURETY IS NOT
BOUND BY THE ADMISSIONS MADE BY
THE PRINCIPAL DEBTOR
|Öh
[MS MK= CB=120 Ɗ 121]
III. WHAT ARE RIGHTS OF A SURETY?
1. RIGHTS AGAINST THE PRINCIPAL
DEBTOR (Sn 145)
a) IN A CONTRACT OF GUARANTEE THERE IS
AN IMPLIED PROMISE OF THE PRINCIPAL
DEBTOR TO INDEMNIFY THE SURETY
b) ON DEFAULT, AFTER PAYING OF THE
DEBTS OF THE PRINCIPAL DEBTOR,
SURETY CAN CLAIM ALL THOSE RIGHTS
THE CREDITOR HAD AGAINST THE
PRINCIPAL DEBTOR. THAT IS THE
SURETY STEPS INTO THE SHOES OF THE
CREDITOR. THERE IS NO NEED OF
ASSIGNMENT OR TRANSFER OF RIGHTS
FROM THE CREDITOR TO THE SURETY.
THE SUBROGATION IS AUTOMATIC
|Ö_
CONTƕƕ
2. RIGHTS AGAINST THE CREDITOR
a) BEFORE MAKING PAYMENT OF THE
GUARANTEED DEBT THE SURETY CAN
ASK THE CREDITOR TO FILE A SUIT
AGAINST THE DEBTOR
b) RIGHT TO SECURITIES. THE SURETY
ENTITLED TO THE BENEFIT OF EVERY
SECURITY HELD BY THE CREDITOR AT
THE TIME OF MAKING THE CONTRACT.
IF ANY SUCH SECURITY IS LOST
WITHOUT THE CONSENT OF THE
SURETY, THE LIABILITY OF THE
SURETY WILL STAND REDUCED TO
THAT EXTENT.
CONTƕƕ |ÖÖ
c) RIGHT OF SUBROGATION ON PAYING
OF THE DEBT, THE SURETY WOULD BE
AUTOMATICALLY INVESTED WITH ALL
THOSE RIGHTS WHICH THE CREDITOR
HAD AGAINST THE PRINCIPAL DEBTOR
3. RIGHT OF THE SURETY AGAINST CO-
SURETIES
a) CO-SURETIES ARE LIABLE TO PAY
THEIR SHARE TO THE SURETY WHO
PAID THE DEBT
[MS MK= CB=124 Ɗ 125]
|Öv
IV. BRING OUT THE DISTINCTION BETWEEN A
CONTRACT OF INDEMNITY & CONTRACT OF
GUARANTEE


  

 


      



 
  
 
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CB=118 Ɗ 119 PG=63
 MODULE III B Ɗ BAILMENT & PLEDGE

I. WHAT ARE THE LAWS GOVERNING THE

CONTRACT OF BAILMENT & PLEDGE
1. WHAT IS MEANT BY ƌBAILMENTƍ
ACCORDING, TO SECTION 148 OF THE ICA
ƌBAILMENTƍ IS DEFINED AS ƏTHE DELIVERY
OF GOODS BY ONE PERSON TO ANOTHER,
FOR SOME PURPOSE, UPON A CONTRACT
THAT THEY SHALL, WHEN THE PURPOSE IS
ACCOMPLISHED, BE RETURNED OR
OTHERWISE BE DISPOSED OF ACCORDING
TO THE DIRECTION OF THE PERSON
DELIVERING THEMƐ
CONTƕ. |v
2. WHO ARE THE PARTIES TO THE CONTRACT?
a) THE PERSON DELIVERING THE GOODS IS
CALLED THE ƌBAILORƍ
b) THE PERSON TO WHOM THE GOODS ARE
DELIVERED IS CALLED THE ƏBAILEEƐ
3. EXAMPLES OF BAILMENT
a) X LENDS HIS MOTOR CYCLE TO Y FOR HIS
USE
b) X GIVES HIS MOTOR CYCLE TO Y FOR
REPAIRS
c) ƌXƍ GIVES HIS MOTOR CYCLE TO Y ON HIRE
d) ƌXƍ GIVES 2 METRES OF CLOTH TO A TAYLOR
TO STITCH A PANT
e) ƌXƍ GIVES HIS SHIRT TO Y FOR IRONING

CONTƕ
|vþ
4. WHAT ARE THE ESSENTIAL INGREDIENTS OF
A BAILMENT SEEN IN THE DEFINITION
a) THERE MUST BE DELIVERY OF ƌCHATTELƍ
[MOVEABLE GOODS OTHER THAN MONEY]
TO ANOTHER PERSON [WHO SHOULD NOT
BE YOUR SERVANT]
b) DELIVERY SHOULD BE BASED ON A
CONTRACT [IN CERTAIN CIRCUMSTANCES IT
COULD ALSO BE NON CONTRACTUAL Ɗ WHEN
CUSTOMS SIEZED A PASSENGERS GOODS IT
WAS HELD THAT CUSTOMS DEPARTMENT
BECOMES A BAILEE EVEN THOUGH
THERE IS NO CONTRACT BETWEEN THE
PERSON AND THE CUSTOMS AUTHORITIES]
CONTƕ
|vh
c) DELIVERY MUST BE WITH SOME PURPOSE [IT
COULD BE LENDING, CUSTODY, REPAIR,
SECURITY DEPOSIT FOR DEBT ETC]
d) THERE SHOULD BE RETURN OF GOODS OR
DISPOSAL OR ALTERATION OF GOODS AS
DESIRED BY THE BAILOR
e) IT MUST BE ONLY MOVEABLE GOODS [CASH IS
NOT TREATED AS MOVEABLE FOR PURPOSE OF
BAILMENT]
f) THERE SHOULD BE NO TRANSFER OF
OWNERSHIP [THE BAILOR CONTINUES TO BE
THE OWNER AND ONLY TEMPORARY
POSSESSION IS TRANSFERRED TO THE BAILEE]
5. WHAT ARE THE KINDS OF BAILMENT
a) ON THE BASIS OF CHARGES BAILMENTS COULD
BE OF 2 TYPES:
(i) GRATUITOUS (ii) NON- GRATUITOUS
CONTƕ
|v_
b) ON THE BASIS OF BENEFITS IT COULD BE OF
3 TYPES
(i) BAILMENT FOR EXCLUSIVE BENEFIT OF
BAILOR ONLY
[X WHILE GOING ABROAD GIVES HIS
JEWELS TO Y FOR SAFE KEEPING]
(ii) BAILMENT FOR EXCLUSIVE BENEFIT OF
BAILEE ONLY
[X GIVES HIS CAR TO Y FOR USE AT HIS
DAUGHTERƍS WEDDING FREE OF CHARGE]
(iii) BAILMENT FOR MUTUAL BENEFIT
[BOTH]
[X GAVE HIS CAR ON HIRE TO Y]
[MS= 16.1 Ɗ 16.3 MK= 180 Ɗ 182 CB=129 -
130]
|vÖ
II. WHAT ARE THE DUTIES OF A BAILOR
1. TO DISCLOSE FAULTS IN THE GOODS BAILED
a) DUTY OF GRATUITOUS BAILOR Ɗ IS BOUND TO
DISCLOSE TO BAILEE THE FAULTS IN THE GOODS,
HE IS AWARE WHICH COULD EXPOSE THE BAILEE
TO RISKS. IF THE BAILEE FAILS TO MAKE SUCH
DISCLOSURE HE WILL HAVE TO COMPENSATE THE
BAILEE FOR ANY DAMAGE SUFFERED
[X LENDS HIS CAR TO Y WITHOUT DISCLOSING
THAT ITS BREAKS ARE NOT OK]
b) DUTY OF NON- GRATUITIOUS BAILOR- SINCE THE
BAILOR IS COLLECTING HIRE CHARGES, HE IS
DUTY BOUND TO ENSURE THAT THE GOOD IS
REASONABLY SAFE. BAILOR WOULD BE LIABLE
FOR DAMAGES TO THE BAILEE WHETHER OR NOT
HE WAS AWARE OF THE DEFECT
[X LENT A BIKE TO Y ON HIRE. Y SUFFERED
INJURY DUE TO POOR BREAKS. X MUST PAY FOR
YƍS MEDICAL EXPENSES]
CONTƕ. |vv
2. TO PAY NECESSARY EXPENSES TO THE
BAILEE
i. IN CASE OF NON Ɗ GRAUITOUS BAILMENT
MUST PAY REASONABLE MAINTENANCE
EXPENSES TO THE BAILEE
[X LEFT HIS PET DOG WITH Y WHEN HE
WENT ABROAD FOR A MONTH THE DOG FELL
ILL Y INCURRED MEDICAL EXPENSES ON
THE DOG]
ii. IN CASE OF GRATUITOUS BAILMENT, HE
SHOULD PAY THE BAILEE ANY EXTRA -
ORDINARY EXPENDITURE INCURRED
[X GAVE HIS BIKE TO Y FOR FREE USE FOR 2
DAYS. Y HAD TO PAY A FINE OF RS 100/-
FOR THE VEHICLE NOT HAVING A SMOKE
EMISSION CERTIFICATE TO THE COPS]
CONTƕ. |v]
3. TO INDEMNIFY THE BAILEE FOR ANY BREACH
OF WARRANTY AS TO TITLE
[X STOLE A HORSE BELONGING TO Z AND GAVE
IT TO Y ON HIRE. Y HAD TO PAY DAMAGE OF RS.
1000/ - X HAS TO PAY RS. 1000/ - TO Y]
4. TO INDEMNIFY BAILEE FOR PREMATURE
TERMINATION OF GRAUITOUS BAILMENT
[X LENT HIS OLD BIKE TO Y FOR USE FOR 3
MONTHS. Y SPEND RS 500/- TO MAKE IT
USEABLE. AFTER ONE MONTH X ASKED FOR THE
RETURN OF THE BIKE X MUST PAY THE COST OF
REPAIR]
5. TO RECEIVE BACK THE GOODS AFTER THE
BAILMENT PERIOD IS OVER OR ON THE
ACCOMPLISHMENT OF THE PURPOSE
[X GAVE HIS SARI FOR DRY CLEANING BUT WAS
NOT COLLECTING IT BACK]
[MS=16.3 Ɗ 16.5 MK=185 Ɗ 186 CB=132 Ɗ
133 ] |]

III. WHAT ARE THE DUTIES OF A BAILEE
1. TO TAKE REASONABLE CARE OF THE GOODS
[THE EXTENT OF CARE A MAN OF ORDINARY
PRUDENCE WOULD TAKE IF THE GOODS WERE
HIS OWN] [BAILEE MUST PROVE THAT HE HAD
TAKEN REASONABLE CARE]
2. NOT TO MAKE ANY UN Ɗ AUTHORISED USE OF
THE GOODS BAILED Ɗ IF HE MISUSES HE WILL
HAVE TO PAY DAMAGES
[ X LENT HIS HORSE TO Y FOR HIS OWN USE
ONLY. Y ALLOWED HIS SON TO RIDE THE HORSE
AND THE HORSE GOT INJURED. Y MUST
COMPENSATE X]
3. BAILEE NOT TO MIX THE GOODS OF BAILOR
WITH HIS OWN GOODS
a) WHEN MIXING IS WITH BAILORƍS CONSENT
BOTH PARTIES SHALL HAVE PROPORTIONATE
INTEREST IN THE MIXED GOODS |]|
CONTƕƕ
b) WHEN MIXING IS WITHOUT BAILORƍS
CONSENT AND GOODS CAN BE SEPARATED
BAILEE MUST PAY EXPENSES OF
SEPARATION AND ANY LOSS SUFFERED IN
THE PROCESS OF SEPARATION
c) WHEN MIXING IS WITHOUT CONSENT AND
GOODS CANNOT BE SEPARATED THE BAILEE
HAS TO COMPENSATE THE BAILORƍS FOR
HIS LOSS
4. TO RETURN THE GOODS
TO RETURN THE GOODS TO THE BAILOR AT
THE END OF THE BAILMENT PERIOD OR
DISPOSE IT AS DIRECTED BY THE BAILOR Ɗ
HE CANNOT RETAIN POSSESSION
CONTƕƕ |]j
5. TO RETURN ANY INCREASE OR PROFIT THAT
ACCRUED TO THE GOODS DURING THE
BAILEEƍS CUSTODY
[X GIVES HIS COW FOR SAFE KEEPING FOR
SIX MONTHS. THE COW GAVE BIRTH TO A
CALF. Y SHOULD RETURN THE COW & CALF]
6. NOT TO DO ANY ACT THAT WILL PREVENT
THE GOODS GOING BACK TO THE BAILOR Ɗ
THIS RULE HAS AN EXCEPTION LIKE Ɗ IF A
LORRY OWNER TRANSPORT XƍS GOOD AND
THE CENTRAL EXCISE AUTHORITIES
CONFISCATES THE GOODS THE LORRY
OWNER IS NOT LIABLE FOR THE LOSS OF
GOODS
[MS=16.5 Ɗ 16.6 MK= 185 - 186
CB=134 Ɗ 135]
|]
IV. WHAT ARE THE RIGHTS OF A BAILEE
1. TO CLAIM COMPENSATION IN CASE OF
FAULTY GOODS
[HIRING OF DEFECTIVE CAR]
2. TO CLAIM REIMBURSEMENT OF
EXPENSES
[BAILE HAD TO PAY EMISSION TEST
FINE ON CAR GIVEN BY BAILOR]
3. TO CLAIM LOSS ARISING OUT OF
PREMATURE DEMAND FOR RETURN OF
GOODS BY THE BAILOR
4. TO SUE ANY THIRD PARTY WHO
INTERFERES WITH THE BAILEEƍS
RIGHT TO USE THE GOODS
CONT.... |]þ
5. BAILEES RIGHT TO LIEN [TO HOLD ON
TO THE GOODS] IN CASE BAILOR HAS
TO MAKE ANY PAYMENT TO THE
BAILEE, BAILEE CAN RETAIN
POSSESSION TILL SUCH PAYMENT OR
LOSS IS MADE GOOD
6. RIGHT TO RETURN THE GOODS TO ANY
ONE OF SEVERAL JOINT BAILORS
7. RIGHT TO BE INDEMNIFIED DUE TO
ANY LOSS SUFFERED BY BAILEE WHEN
BAILOR DID NOT HAVE THE
AUTHORITY TO BAIL THE GOODS
[MS= 16.7 Ɗ 16.8 MK=186 Ɗ 189
CB=|]h
136]
V. WHAT IS MEANT BY ƌLIENƍ AND WHAT ARE
THE VARIOUS TYPES OF LIEN
1. WHAT IS MEANT BY LIEN - ƏIT IS THE RIGHT
OF ANY PERSON TO RETAIN POSSESSION OF
THE GOODS BELONGING TO ANOTHER,
UNTIL THE PRESENT AND ACCRUED CLAIMS
OF THE PERSON IN POSSESSION ARE
SATISFIED BY THE OTHER PARTYƐ
2. SINCE THIS RIGHT ARISE BY POSSESSION
IT IS CALLED ƏPOSSESSORY LIENƐ
3. WHAT ARE THE DIFFERENT TYPES OF LIEN
a) PARTICULAR LIEN Ɗ IF BAILEE HAS SEVERAL
GOODS AND PAYMENTS ARE DUE ONLY ON A
PARTICULAR GOOD, HE CAN RETAIN ONLY
THAT GOOD AND NOT ANY OTHER GOODS
CONTƕ.|]_
b) GENERAL LIEN Ɗ IT IS THE RIGHT OF THE
BAILEE TO RETAIN ANY GOODS OF THE
BAILOR FOR ANY MONIES DUE TO HIM
[SEE WHAT IS MEANT BY FACTORS/
ƏWHARFINGERSƐ Ɗ MK Ɗ 189 ]
4. HOW ARE LIENS TERMINATED
a) ON SURRENDER OF POSSESSION Ɗ IF
BAILEE LOSES POSSESSION. HE LOSES HIS
LIEN
b) ON PAYMENT OF OUTSTANDING DUES IF
DUES ARE PAID BAILEE LOSES HIS RIGHT TO
LIEN
c) ON WAIVER Ɗ BAILEE MAY WAVE HIS LIEN
UPON AN EXPRESS OR IMPLIED AGREEMENT
[MS= 16.8 Ɗ 16.9 MK= 187 Ɗ 189 CB= 137-
138]|]Ö
VI. WHAT ARE THE RIGHTS OF A BAILOR
1. RIGHT TO TERMINATE THE BAILMENT Ɗ IF
BAILEE DOES NOT FULFILL THE CONDITIONS
OF BAILMENT
2. RIGHT TO DEMAND RETURN OF GOODS Ɗ IF
BAILMENT WAS GRATUITOUS BAILOR CAN
DEMAND PREMATURE RETURN
[HOWEVER IF BAILEE SUFFERS ANY LOSS
DUE TO PREMATURE RETURN IT HAS TO BE
COMPENSATED BY THE BAILOR]
3. TO SUE THIRD PARTY IF HE CAUSES
DAMAGE OR OBSTRUCTS THE BAILEEƍS USE
OF THE GOODS
4. RIGHT TO DEMAND PROFITS ARISING OUT
OF GOODS BAILED
5. RIGHT TO ENFORCE BAILEEƍS OBLIGATIONS
|]v
[MS=16.5 MK= 189 Ɗ 190 CB= 138 ]
VII. WHAT ARE THE RIGHTS AND LIABILITIES OF
A FINDER OF GOODS
1. WHO IS A FINDER
SECTION 71 OF ICA PROVIDES THAT ƏA
PERSON WHO FINDS THE GOODS
BELONGING TO ANOTHER AND TAKES IT
INTO HIS POSSESSION IS CALLED THE
FINDER OF GOODSƐ
2. WHAT ARE HIS DUTIES & LIABILITIES
a) TO TAKE REASONABLE CARE OF THE GOODS
b) TO USE REASONABLE DILIGENCE TO FIND
THE TRUE OWNER
c) TO RESTORE THE GOODS TO THE REAL
OWNER
d) NOT TO USE THE GOODS FOR HIS OWN
PURPOSE |]]
CONTƕ..
VIII.WHAT IS MEANT BY ƌPLEDGEƍ OR ƏPAWNƐ
AND WHAT ARE THE LAWS GOVERNING THE
CONTRACT OF PLEDGE
1. PLEDGE OR PAWN IS A SPECIAL KIND OF
BAILMENT
2. ACCORDING TO SECTION 172ƍPLEDGEƍ IS
ƏTHE BAILMENT OF GOODS AS A SECURITY
FOR PAYMENT OF DEBT OR PERFORMACE OF
A PROMISEƐ
[PLEDGING JEWELS IN A BANK TO GET A
LOAN]
3. THE BAILOR IN THIS CASE IS CALLED THE
ƏPAWNERƐ AND THE BAILEE IS CALLED THE
PAWNEE
4. PLEDGE CAN BE MADE ONLY OF MOVEABLE
PROPERTIES
CONTƕ.. j


4. WHAT ARE THE RIGHTS OF A PAWNEE
a) RIGHT TO RETAINEER UNTIL DEBT IS PAID
b) RIGHT TO RECEIVE EXTRA ORDINARY
EXPENSES IF ANY INCURRED
c) IN CASE OF FAILURE OR DEFAULT BY
PAWNEE:
i. TO SUE TO RETAIN THE GOODS AS
COLLATERAL SECURITY
ii. TO SELL THE GOODS AFTER GIVING
REASONALBE NOTICE
[BANKS CAN AUCTION THE GOLD
ORNAMENTS IF PAWNER DOES NOT
RECLAIM THE GOLD AFTER EXPIRY OF
PERIOD Ɗ WITH DUE NOTICE TO PAWNEE]
[MS= 16.11 Ɗ 16.14 MK=193 CB= 139 Ɗ 140 ]
CONTƕ.. j
|
5. WHAT ARE THE DUTIES OF A PAWNEE
a) TO TAKE REASONABLE CARE OF THE GOODS
PLEDGED
b) NOT TO MAKE UNAUTHORISED USE OF THE
GOODS PLEDGED
c) NOT TO MIX THE GOODS WITH HIS OWN
d) NOT TO DO ANY ACT IN VIOLATION OF THE
TERMS OF PLEDGE
e) TO RETURN THE GOODS ON PAYMENT OF
HIS DUES
f) TO DELIVER ANY ACCRETION TO THE GOODS
WHILE IN HIS CUSTODY
[A COW GIVING CALF, ISSUE OF BONUS
SHARES TO SHARES PLEDGED]
CONTƕ.. j
j
6. WHAT ARE THE RIGHTS OF A PAWNER
a) TO ENFORCE THE PAWNEEƍS DUTIES
b) A DEFAULTING PAWNER HAS RIGHT TO PAY
AND RECLAIM HIS GOODS BEFORE PAWNEE
SELLS IT
7. WHAT ARE THE PAWNERƍS DUTIES
a) TO COMPENSATE THE PAWNEE FOR ANY
EXTRA ORDINARY EXPENSES
b) TO MEET HIS OBLIGATIONS ON THE
STIPULATED DATE AND COMPLY WITH THE
TERMS OF CONTRACT
[MS = 16.12 Ɗ 16.14 MK= 193 Ɗ 194 ]

j

IX. WHAT IS THE DIFFERENCE BETWEEN
ƌBAILMENTƍ & ƌPLEDGEƍ

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[MS= 16.12 MK= 193 CB=139]
j
h
 MODULE III C Ɗ LAW OF AGENCY

I. WHAT IS MEANT BY ƌAGENCYƍ

1. SECTION 182 OF ICA DEFINES AN ƌAGENTƍ
AS ƏA PERSON EMPLOYED TO DO ANY ACT
FOR ANOTHER OR REPRESENT ANOTHER IN
DEALINGS WITH THIRD PERSONSƐ.
2. PARTIES
a) PRINCIPAL Ɗ THE PERSON FOR WHOM SUCH
ACT IS DONE OR FOR WHOM THE
REPRESENTATION IS MADE IS CALLED THE
ƌPRINCIPALƍ
b) AGENT Ɗ THE OTHER PERSON CALLED UPON
TO REPRESENT THE PRINCIPAL IN
DEALINGS WITH THIRD PARTIES IS CALLED
THE ƌAGENTƍ
j
_
CONTƕ.
c) RELATIONSHIP- THE RELATIONSHIP
BETWEEN THE PRINCIPAL AND THE AGENT IS
CALLED ƌAGENCYƍ
3. GENERAL PRINCIPALS OF AGENCY
a) WHATEVER A PERSON IS COMPETENT TO
CONTRACT HE MAY GET IT DONE THROUGH
ANOTHER (AGENT) EXCEPT FOR ACTS
INVOLVING PERSONAL SKILL AND
QUALIFICATIONS [ MARRIAGE, PAINTING,
SINGING]
b) HE WHO GETS IT DONE THROUGH ANOTHER
(AGENT) IS DEEMED TO HAVE DONE IT
HIMSELF (ACTS OF AGENTS ARE CONSIDERED
ACTS OF THE PRINCIPAL)
4. WHAT ARE THE ESSENTIALS OF A VALID
CONTRACT OF AGENCY
a) EXISTENCE OF AN AGREEMENT (EXPRESS OR
IMPLIED) APPOINTING A PERSON AS AGENT
j
Ö
CONTƕ.
b) THE ƌPRINCIPALƍ MUST BE A PERSON
ƌCOMPETENT TO CONTRACTƍ
c) THE AGENT NEED NOT NECESSARILY HAVE
THE COMPETENCY TO CONTRACT
[EVEN A MINOR CAN BE A VALID AGENT]
d) NO CONSIDERATION IS REQUIRED FOR
CREATING A CONTRACT OF AGENCY
5. AN AGENT IS DIFFERENT FROM A SERVANT
AND ALSO FROM AN INDEPENDENT
CONTRACTOR
6. WHAT ARE THE KINDS OF AGENTS
a) GENERAL AGENT- ONE WHO IS EMPLOYED
TO DO ALL ACTS CONNECTED WITH A
PARTICULAR BUSINESS OR EMPLOYMENT
[EX Ɗ A MANAGER]
CONTƕ. j
v
b) SPECIAL AGENT Ɗ ONE WHO IS APPOINTED
TO DO A PARTICULAR ACT Ɗ AS SOON AS
THAT PARTICULAR ACT IS COMPLETED THE
AGENCY COMES TO AN END
c) UNIVERSAL AGENT Ɗ AN AGENT WHOSE
AUTHORITY IS UNLIMITED. HE CAN DO ALL
ACTS WHICH HIS PRINCIPAL CAN LAWFULLY
DO. HE ENJOYS EXTENSIVE POWERS TO
TRANSACT ANY KIND OF BUSINESS ON
BEHALF OF THE PRINCIPAL
d) MERCANTILE AGENTS Ɗ AN AGENT WHO IS
EITHER AUTHORISED TO SELL OR BUY
GOODS OR RAISE OR COLLECT MONEY FOR
THE MASTER AND SUCH AGENTS ARE
FURTHER CLASSIFIED AS FOLLOWS:
CONTƕ.
j
]
i. FACTOR AN AGENT TO WHOM GOODS ARE
ENTRUSTED FOR SALE. HE SELLS THE GOODS IN
HIS OWN NAME AND AT SUCH TERMS AS HE
THINGS FIT. HE COULD ALSO PLEDGE THE
GOODS
ii. COMMISSION AGENT AN AGENT WHO BUYS OR
SELLS GOODS FOR HIS PRINCIPAL ON THE BEST
POSSIBLE TERMS IN HIS OWN NAME AND WHO
RECEIVES COMMISSION FOR HIS LABOUR. HE
MAY HAVE POSSESSION OF THE GOODS
iii. DEL CREDERE AGENT Ɗ AN AGENT WHO FOR
SOME ADDITIONAL PAYMENT GUARANTEES
THAT THE PRINCIPAL WILL RECEIVE SUMS DUE
FROM THIRD PARTIES OR WILL ENSURE THAT
THE THIRD PARTIES WILL PERFROM THEIR
OBLIGATIONS TO THE PRINCIPAL. IF THIRD
PARTY DOES NOT PAY, HE WILL PAY IT. THUS
HE OCCUPIES THE POSITION OF SURETY AS
WELL AS AN AGENT
j|

CONTƕ.
iv. BROKER AN AGENT IS EMPLOYED TO
MAKE CONTRACTS FOR SALE OR
PURCHASE OF GOODS FOR THE
PRINCIPAL. HE IS NOT ENTRUSTED WITH
THE GOODS. HE MERELY ACTS AS A
CONNECTING LINK AND LETS THE THIRD
PARTY AND PRINCIPAL TO BARGAIN
DIRECTRLY. IF THE DEAL COMES
THROUGH HE WILL GET A COMMISSION
OR BROKERAGE. HE MAKES THE
CONTRACTS IN THE NAME OF THE
PRINCIPAL
e) NON Ɗ MERCANTILE AGENTS Ɗ THEY
INCLUDE ADVOCATES, ATTORNEYS,
INSURANCE AGENT, WIFE ETC.
[MS= 17.1 Ɗ 17.10 MK=202 Ɗ 203 ]
j||
II. HOW ARE AGENTS APPOINTED OR HOW ARE
AGENCIES CREATED
1. AGENCY BY EXPRESS AGREEMENT (SEC 187)
a) WHERE AN AGENCY IS CREATED BY THE
EXPRESS AGREEMENT OF THE PRINCIPAL
b) IT CAN BE BY WORD OF MOUTH OR IN
WRITING
c) HOWEVER FOR SALE OF IMMOVEABLE
PROPERTY [LAND & BUILDINGS] IT HAS TO
BE IN WRITING AND ON PROPER STAMP
PAPER Ɗ THIS IS CALLED POWER OF
ATTORNEY
2. AGENCY BY IMPLIED AGREEMENT
a) SUCH AGENCIES COULD TAKE THE
FOLLOWING FORMS:
CONTƕ. j|j
i. AGENCY BY ESTOPPEL
ii. AGENCY BY HOLDING OUT
iii. AGENCY BY NECESSITY
iv. WIFE AS IMPLIED AGENT OF HUSBAND
b) WHAT IS AGENCY BY ESTOPPEL
WHEN A PERSON KNOWINGLY AND
WITHOUT OBJECTION PERMITS ANOTHER
TO ACT AS HIS AGENT THE THIRD PERSONS
HAVE ACTED ON THIS BELIEF, THE FIRST
PERSON WHO DID NOT DENY OR DISCLAIM
THE RELATIONSHIP CANNOT GO BACK AND
SAY THAT THE SECOND PARTY WAS NOT HIS
AGENT. HE IS STOPPED FROM GOING BACK
ON HIS IMPLIED ADMISSION
c) WHAT IS MEANT BY AGENCY BY
HOLDINGOUT j|
CONTƕ.
i. UNLIKE THE IMPLIED ACT IN ESTOPPEL,
HERE THE PRINCIPAL BY HIS PAST DEEDS
HAS GIVEN A POSITIVE INDICATION THAT
THE SECOND PARTY IS HIS AGENT Ɗ HE HAS
HELD HIS NECK OUT AND MUST HONOUR
THE ACTION OF THE SECOND PARTY WITH
THIRD PARTIES
[A HAS ALLOWED HIS SERVANT TO BUY
GOODS FROM A SHOP AND ALWAYS PAID
FOR IT. HIS SERVANT WAS SACKED AND THE
MASTER HAD NOT INFORMED THE SHOP
KEEPER ABOUT HIS SACKING. MASTER
BOUND TO PAY FOR PURCHASES MADE BY
SERVANT AFTER TERMINATION]
d) WHAT IS MEANT BY AGENCY BY NECESSITY
j|þ
CONTƕ.
i. IN CERTAIN CIRCUMSTANCES (EMERGENCY)
THE LAW CONFERS AN AUTHORITY ON
CERTAIN PERSON TO ACT AS THE AGENT OF
THE PRINCIPAL (EVEN WITHOUT CONSENT
OF THE PRINCIPAL). SUCH AN AGENCY IS
CALLED AN AGENCY OF NECESSITY
ii. THE FOLLOWING CONDITIONS MUST BE
FULFILLED BEFORE A PERSON ACTS AS AN
AGENT OF NECESSITY:
l THERE MUST BE A REAL EMERGENCY TO ACT
ON BEHALF OF THE PRINCIPAL
l IT IS NOT POSSIBLE FOR THE AGENT TO
COMMUNICATE AND GET INSTRUCTIONS
FROM THE PRINCIPAL
l THE PERSON ACTING AS AGENT MUST DO SO
IN A BONA Ɗ FIDE MANNER AND IN THE
INTEREST OF THE PARTIES
j|h
CONTƕ.
l AGENT MUST TAKE REASONABLE AND A
PRACTICAL COURSE OF ACTION
[A FATHER SENT HIS 5 YEAR SON ON THE
FLIGHT AS AN UNACCOMPANIED
PASSENGER FROM LONDON TO MUMBAI. NO
RELATION CAME TO PICK UP THE CHILD AT
THE MUMBAI AIRPORT. AIRLINES PUT UP
THE CHILD IN A HOTEL AND FED THE CHILD.
FATHER BOUND TO PAY THE HOTEL BILL
AND EXPENSES INCURRED BY THE AIRLINE]
e) WIFE AS IMPLIED AGENT OF HUSBAND
i. WHERE A WIFE IS LIVING WITH HER
HUSBAND SHE CAN DRAW ON HER
HUSBANDƍS CREDIT FOR OBTAINING
NECESSITIES OF LIFE (FOOD, CLOTHING,
SHELTER ETC)
CONTƕ. j|_
ii.HOWEVER A HUSBAND NEED NOT HONOUR
(OR PAY FOR) HIS WIFEƍS ACTIONS IN THE
FOLLOWING CIRCUMSTANCES:
l HE HAS EXPRESSLY FORBIDDEN HIS WIFE
FROM DOING SO
l GOODS PURCHASED ARE NOT NECESSITIES
l HE HAS GIVEN SUFFICIENT FUNDS TO THE
WIFE FOR MEETING HER NECESSITIES
l THE CREDITOR HAS BEEN EXPRESSLY TOLD
NOT TO GIVE CREDIT TO HIS WIFE
NOTE: IF THE WIFE IS LIVING APART FROM THE
HUSBAND WITHOUT PROPER
JUSTIFICATION, SHE WILL NOT HAVE THE
AUTHORITY TO BIND OR DRAW ON HER
HUSBANDƍS CREDIT
CONTƕ. j|Ö
3. CREATION OF AGENCY BY RATIFICATION
[Sn 197]
i. IF A PERSON ACTS ON BEHALF OF ANOTHER
WITHOUT HIS AUTHORITY, THE LATTER MAY
EITHER DISOWN OR ACCEPT OR ADOPT IT
ii. THE SUBSEQUENT ADOPTION OR
ACCEPTANCE OF AN UNAUTHORISED ACT
DONE BY ANOTHER IS CALLED
RATIFICATION
iii. IF THE PRINCIPAL SUBSEQUENTLY
RATIFIES, IT IS TREATED AS IF IT WAS
DONE WITH HIS AUTHORITY
iv. RATIFICATION CAN BE EXPRESS OR
IMPLIED
j|v
[MS= 17.2 Ɗ 17.6 MK=206 Ɗ 208 CB=148 Ɗ
III. WHAT ARE THE REQUIREMENTS OF VALID
RATIFICATION (Sn 199, 200)
1. PRINCIPAL MUST BE ALIVE AT THE TIME THE
AGENT MADE THE CONTRACT
2. PRINCIPAL MUST HAVE HAD THE CAPACITY
TO CONTRACT AT THE TIME THE AGENT
ACTED OR MADE THE CONTRACT
3. THE PRINCIPAL SHOULD HAVE KNOWLEDGE
OF ALL FACTS OF THE MATERIAL BEFORE
ADOPTING
4. RATIFICATION MUST BE FOR THE WHOLE
AND NOT PART OF THE TRANSACTION
5. RATIFICATION MUST BE MADE WITHIN TIME
FIXED OR REASONABLE TIME
6. RATIFICATION MUST NOT CAUSE DAMAGE
TO THE INTEREST OF THE THIRD PERSON
j|]

CONTƕ..
7. THE ACT BEING RATIFIED MUST BE A
LAWFUL ONE
8. THE ACT TO BE RATIFIED MUST BE
WITHIN THE PRINCIPALƍS AUTHORITY
NOTE: A VALID RATIFICATION BINDS THE
PRINCIPAL WITH THE THIRD PARTIES
[MS=17.5 Ɗ 17.6 MK=206 Ɗ 208
CB=148 Ɗ 149 ]

jj

IV. WHAT ARE THE WAYS IN WHICH AN AGENCY
GETS TERMINATED
1. AN AGENCY CAN BE TERMINATE BY :
(a) ACTS OF THE PARTIES
OR
(b) BY OPERATION OF LAW
2. TERMINATION BY THE PARTIES
(a) BY MUTUAL AGREEMENT BETWEEN
PRINCIPAL AND AGENT
(b) REVOCATION BY PRINCIPAL (Sn 203 Ɗ
207) BY NOTICE EXCEPT WHEN THE
AGENCY WAS OF IRREVOCABLE NATURE
(Sn 201)
(C) REVOCATION BY AGENT AFTER GIVING
REASONABLE NOTICE TO THE PRINCIPAL
jj|

CONTƕ..
3. TERMINATION BY OPERATION OF LAW
(a) ON ACCOMPLISHMENT OR
COMPLETION
OF THE OBJECT OF THE AGENCY
(b) ON THE EXPIRY OF THE PERIOD OF
AGENCY
(c) ON THE DEATH OF THE PRINCIPAL OR
AGENT
(d) INSANITY OF THE PRINCIPAL OR AGENT
(e) INSOLVENCY OF THE PRINCIPAL
(f) DESTRUCTION OF THE SUBJECT MATTER
OF THE CONTRACT
jjj
CONTƕ..
 (g) DISSOLUTION OF THE COMPANY
(h) PRINCIPAL AGENT BECOMES ALIEN
ENEMY
(i) TERMINATION OF SUB Ɗ AGENTS
AUTHORITY
4. TERMINATION OF AGENCY COMES
INTO EFFECT ONLY WHEN IT COMES
TO THE NOTICE OF THE OTHER OR THE
THIRD PARTIES (Sn 208)
[MS= 18.11 Ɗ 18.14 MK=222 Ɗ 224
jj

CB= 158 Ɗ 159 ]

V. WHAT IS MEANT BY IRREVOCABLE AGENCY
1. WHEN AN AUTHORITY GIVEN TO AN AGENT
CANNOT BE REVOKED IT IS CALLED AN
IRREVOCABLE AGENCY
2. IT BECOMES IRREVOCABLE IN THE FOLLOWING
CASES:
a) WHERE AN AGENCY IS COUPLED WITH INTEREST
(Sn 202) Ɗ WHEN THE AGENT HAS AN INTEREST
IN THE PROPERTY WHICH FORMS THE SUBJECT
MATTER OF AGENCY
[X WHO OWES MONEY TO Y, ALLOWS Y TO
COLLECT THE RENT OF HIS PROPERTIES FROM XƍS
TENENTS]
b) WHERE THE AGENT HAS PARTLY EXERCISED HIS
AUTHORITY AND CREATED COMMITMENT TO
THIRD PARTIES (Sn 204)
c) WHERE THE AGENT HAS MADE PERSONAL
COMMITMENT TO THIRD PARTIES FOR jjþ
EXECUTING THE PRINCIPALƍS WORK
[MS=18.14 MK=225 Ɗ 226 CB= 159 Ɗ 160 ]
VI. WHAT IS MEANT BY ƌSUB Ɗ AGENTƍ &
ƏSUBSTITUTED AGENTƐ
1. AN AGENT CANNOT PASS ON HIS
RESPONSIBILITY TO ANOTHER PERSON UNLESS
THE PRINCIPAL PERMITS HIM OR THE CUSTOM
AND USAGE OF THAT BUSINESS PERMITS AN
AGENT TO APPOINT A SUB - AGENT
2. AN AGENT CAN APPOINT A SUB Ɗ AGENT IN THE
FOLLOWING CIRCUMSTANCES:
a) IF PERMITTED BY CUSTOM OF THE TRADE
b) IF THE NATURE OF BUSINESS MAKE IT
NECESSARY [ SHIPOWNERS, TRANSPORT
OPERATORS]
c) IF THE ACT DONE IS PURELY CLERICAL OR
MINISTERIAL
d) IF PERMITTED BY THE PRINCIPAL
e) IN CASE OF UNFORESEEN EMERGENCY jjh

CONTƕ.
3. COMPARISON AMONG, AGENT, SUB Ɗ AGENT &
SUBSTITUTED AGENT
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[MS = 17.6 Ɗ 17.8 MK=210 Ɗ 211

CB=152 Ɗjj]153
]
VII. WHAT ARE THE DUTIES OF AN AGENT TO A
PRINCIPAL
1. DUTY TO FOLLOW THE PRINCIPALƍS
DIRECTIONS OR TO ADHERE TO THE
ESTABLISHED CUSTOMS OF THAT TRADE OR
BUSINESS
2. DUTY TO CARRY OUT THE WORK WITH
REASONABLE SKILL AND DILIGENCE
3. DUTY TO RENDER PROPER ACCOUNTS
4. IN CASE OF DIFFICULTY TO PROMPTLY
COMMUNICATE TO THE PRINCIPAL AND
SEEK HIS GUIDANCE
5. DUTY NOT TO TRADE ON HIS OWN UNLESS
PERMITTED BY THE PRINCIPAL
CONTƕ.. j

6. DUTY NOT TO MAKE ANY PROFIT OUT OF HIS
AGENCY EXCEPT HIS AGENCY
REMUNERATION
7. ON AGENCY GETTING TERMINATED DUE TO
DEATH OR OF UNSOUND MIND TO PROTECT
AND PRESERVE THE INTEREST OF
PRINCIPAL OF THE PRINCIPAL ENTRUSTED
TO HIM
8. DUTY NOT TO DELEGATE AND MUST
PERFORM THE DUTY HIMSELF EXCEPT WHEN
HE IS PERMITTED BY CUSTOM OR USAGE TO
DELEGATE
[MS = 18.1 Ɗ 18.3 MK=212 Ɗ 214 ]

j|

[
VIII.WHEN DOES THE AGENT BECOME
PERSONALLY LIABLE
1. AGENT IS ONLY A CONNECTING LINK AND IN
THE NORMAL COURSE THE PRINCIPAL IS
LIABLE FOR THE ACTIONS OF HIS AGENT
2. HOWEVER SECTION 230 PROVIDES 12
EXCEPTIONS WHEN THE AGENT WILL BECOME
PERSONALLY LIABLE AND THEY ARE AS
FOLLOWS:
i. WHEN THE AGENT ACTS FOR A FOREIGN
PRINCIPAL
ii. WHEN THE AGENT ACTS FOR AN UNNAMED
PRINCIPAL
iii. WHERE THE PRINCIPAL THOUGH DISCLOSED
CANNOT BE SUED
iv. WHERE CONTRACT IS MADE FOR A jj
FICTITIOUS OR NON-EXISTENT PRINCIPAL
CONTƕ
v. WHERE AN AGENT ACTS FOR AN
UNDISCLOSED PRINCIPAL
vi. WHERE AGENT HAS EXPRESSLY AGREED TO
TAKE PERSONAL RESPONSIBILITY
vii. WHERE AGENT HAS A COUPLED INTEREST
WITH THE PRINCIPAL IN THE SUBJECT
MATTER OF AGENCY
viii. WHERE AGENT EXCEEDS HIS AUTHORITY
ix. WHERE AN AGENT RECEIVES MONEY BY
FRAUD OR MISTAKE
x. WHERE AN AGENT SIGNS A CONTRACT OR
NEGOTIABLE INSTRUMENT IN HIS OWN NAME
xi. WHERE THERE IS A CUSTOM OR USAGE
HOLDING THE AGENT LIABLE
xii. WHEN HE POSES OR PRETENDS TO BE THE
AUTHORISED AGENT OF ANOTHER j
[MS=18.10 Ɗ 18.11 MK=212 Ɗ 215 CB=156 Ɗ
158]
IX. WHAT ARE THE RIGHTS OF AN AGENT
1. RIGHT TO RECEIVE REMUNERATION
2. RIGHT TO RETAINER Ɗ TO ADJUST FROM
MONIES RECEIVED ANY AMOUNTS
LEGITIMATELY DUE TO HIM
3. RIGHT OF LIEN Ɗ RIGHT TO HOLD ON TO THE
GOODS UNTIL THE PRINCIPAL PAYS HIS DUES
TO HIM
4. RIGHT TO BE INDEMNIFIED AGAINST
CONSEQUENCES OF HIS LAWFUL ACTS
5. RIGHT TO BE INDEMNIFIED AGAINST
CONSEQUENCES OF ACTS DONE IN GOOD FAITH
6. RIGHT TO COMPENSATION FOR ANY INJURIES
SUFFERED BY HIM DUE TO PRINCIPALƍS
NEGLECT OR WANT OF SKILL
7. RIGHT TO STORAGE OF GOODS IN TRANSIT IF
HE HAS BOUGHT THE GOODS IN HIS OWN NAME
jþ
AND PRINCIPAL HAS BECOME INSOLVENT
X. WHAT IS THE LIABILITY OF THE PRINCIPAL
WHEN HE IS
(1) A NAMED PRINCIPAL
(2) UNNAMED PRINCIPAL
(3) UNDISCLOSED PRINCIPAL
(4) WHEN REPRESENTED BY A PRETENDED
AGENT
1. LIABILITY OF THE PRINCIPAL
a) AN AGENT BEING A CONNECTING LINK
BINDS THE PRINCIPAL FOR ALL HIS ACTS
DONE WITHIN THE SCOPE OF HIS
AUTHORITY AS AN AGENT
b) WHEN AN AGENT DOES SOME ACT, PART OF
WHICH IS AUTHORISED AND OTHER PART IS
NOT AND THEY ARE SEPARATABLE THE jh
PRINCIPAL IS RESPONSIBLE ONLY FOR THE
AUTHORISED PART CONTƕ
c) PRINCIPAL IS LIABLE FOR FRAUD
MISREPRESENTATIONS MADE WHICH FALL
WITHIN THE APPROVED SCOPE OF AGENTS
WORK
d) PRINCIPAL IS NOT LIABLE FOR
MISREPRESENTATION OR FRAUD
COMMITTED BY AGENT OUTSIDE THE SCOPE
OF THE AGENCY
2. LIABLITY OF A NAMED PRINCIPAL
a) WHEN THE AGENT REVEALS THE NAME AND
PARTICULARS OF THE PRINCIPAL, IT IS
CALLED NAMED PRINCIPAL
b) IN SUCH CASES THE PRINCIPAL IS LIABLE
TO THRID PARTIES FOR ACTS OF THE AGENT
(WITHIN THE SCOPE OF AGENCY) j_
CONTƕ
3. LIABLITY OF AN UNNAMED PRINCIPAL
a) WHEN AN AGENT KNOWING FULLY WELL
THE EXISTENCE AND IDENTITY OF THE
PRINCIPAL REFUSES TO REVEAL THE NAME,
THE PRINCIPAL IS CALLED THE UNNAMED
PRINCIPAL
b) HERE HE ADMITS THE EXISTENCE OF THE
PRINCIPAL BUT DOES NOT DISCLOSE HIS
IDENTITY
c) IF AGENT REFUSES TO REVEAL THE
IDENTITY, THE AGENT BECOMES LIABLE TO
THIRD PARTIES
4. LIABILITY OF AN UNDISCLOSED PRINCIPAL
a) WHEN NEITHER THE AGENT REVEALS HIS
IDENTITY NOR THAT OF THE PRINCIPAL, IT
IS CALLED AN UNDISCLOSED PRINCIPALjÖ
CONTƕ
b) THIRD PARTIES CAN REFUSE TO
PROCEED WITH THE CONTRACT OR
INSIST ON THE SUBSEQUENTLY
EXPOSED PRINCIPAL TO HONOUR
THEIR DEALINGS WITH THE HIDDEN
AGENT
5. LIABILITY OF PRINCIPAL FOR ACTS OF
PRETENDED AGENT
AGENT ALONE IS LIABLE AND NO
LIABILITY ON THE PRINCIPAL WHOM
THE AGENT PRETENDS TO REPRESENT

[MS=18.7 Ɗ 18.10 ] jv

[

XI. WHAT IS THE DISTINCTION IN THE ROLES OF

AN AGENT, SERVANT, INDEPENDENT
CONTRACTOR

 
   

  


 

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 MODULE IV Ɗ SALE OF GOODS ACT 1930

I. WHAT IS MEANT BY CONTRACT OF ƌSALEƍ

1. ACCORDING TO SECTION 4 OF THE SGA A
CONTRACT OF SALE MEANS ƏA CONTRACT
WHEREBY THE SELLER TRANSFERS OR
AGREES TO TRANSFER THE PROPERTY
(OWNERSHIP) IN THE GOODS TO THE BUYER
FOR A PRICEƐ
2. IT COULD BE ANY ONE OF THE FOLLOWING :
(a) A SALE OR (b) AN AGREEMENT TO SELL
3. THE CONTRACT OF SALE MAY BE ABSOLUTE
OR CONDITIONAL
4. THE TERM ƌPROPERTYƍ IN THE DEFINTION
HAS THE MEANING OF ƌOWNERSHIPƍ jþj
II. WHAT ARE ESSENTIAL ELEMENTS OF A
CONTRACT OF ƏSALEƐ
1. TWO PARTIES
a) THERE HAS TO BE A BUYER AND SELLER
[THE SAME PERSON CANNOT BE A ƌBUYERƍ
AS WELL AS SELLER]
2. MUTUAL AGREEMENT
a) THERE MUST BE A MUTUAL AGREEMENT TO
BUY AND SELL OR VICE VERSA AND THERE
MUST BE FREE MUTUAL CONSENT FOR THE
SAME
3. SALE MUST BE OF IMMOVABLE ƏGOODSƐ
a) ACCORDING TO THE SGA THE ƏGOODSƐ
INCLUDES THE FOLLOWING:
i. EVERY KIND OF IMMOVABLE PROPERTY
CONTƕ. jþ
ii. GOODWILL, TRADEMARK, COPY RIGHT,
WATER / GAS / ELECTRICITY / TELEPHONE
CONNECTIONS
iii. DECREE ORDERS PASSED BY COURTS
iv. STOCKS & SHARES
v. GROWING CROPS, GRASS, TREES ATTACHED
TO THE LAND WHICH THE PARTIES HAVE
AGREED TO BE CUT AND REMOVED UNDER
THE CONTRACT OF SALE
b) HOWEVER THE FOLLOWING ARE EXCLUDED
FROM THE TERM ƌGOODSƍ UNDER THE SGA:
i. ALL IMMOVABLE PROPERTY (LAND &
BUILDINGS)
ii. LAW SUITS OR ACTIONABLE CLAIMS
iii. TRANSACTIONS OF MONEY
iv. BARTER DEALS (GOODS FOR GOODS) jþþ
CONTƕ.
4. THERE MUST BE TRANSFER OF ƌPROPERTYƍ
a) SELLER MUST AGREE TO TRANSFER THE
ƌPROPERTYƍ OR ƌOWNERSHIPƍ OF THE
GOODS
b) THERE MUST BE TRANSFER OF ƌGENERAL
PROPERTYƍ [FULL OWNERSHIP] AND NOT
MORE TRANSFER OF ƌSPECIAL PROPERTYƍ
[POSSESSION ONLY]
[IN CASE ONLY POSSESSION IS
TRANSFERRED UNDER AN AGREEMENT IT
WILL ONLY MAKE THE AGREEMENT, A
CONTRACT OF BAILMENT]
5. CONSIDERATION CALLED ƌPRICEƍ MUST BE
IN MONEY
a) ONLY WHEN THE CONSIDERATION IS jþh
RECEIVED IN CASH WILL IT MAKE IT A
b) CONSIDERATION PARTLY IN CASH & PARTLY
IN KIND IS OK [X SOLD HIS CAR TO Y IN
EXCHANGE FOR A BIKE + RS 50,000]
c) EXCHANGE OF GOODS FOR GOODS WILL NOT
AMOUNT TO ƌSALEƍ AND IT WOULD ONLY
MAKE IT A BARTER
6. MEET ICA REQUIREMENTS
ALL ESSENTIAL ELEMENTS OF A VALID
CONTRACT UNDER ICA 1872 SHOULD ALSO
BE MET
7. A CONTRACT OF SALE COULD BE A
CONTRACT OF SALE (EXECUTED) OR A
CONTRACT TO SELL (EXECUTORY)
a) WHEN THE ƌPROPERTYƍ(OWNERSHIP) IN
THE GOODS IS IMMEDIATELY TRANSFERED jþ_

FROM SELLER TO THE BUYER IT IS CALLED A

b) WHEN THE TRANSFER OF THE
ƌPROPERTYƍ IN THE GOODS IS TO TAKE
PLACE AT A FUTURE DATE OR SUBJECT
TO SOME CONDITION TO BE FULFILLED
AFTER SIGNING THE AGREEMENT IT IS
CALLED AN AGREEMENT TO SELL OR IT
COULD BE CALLED A CONDITIONAL
SALE OR AN EXECUTORY CONTRACT
[MS=22 Ɗ 22.2 MK=231 Ɗ 234
CB=165 Ɗ 166 PG=79 Ɗ 81 ]
jþÖ
[

III. WHAT IS ƌPRICEƍ AND HOW IS IT FIXED

1. IN A CONTRACT OF SALE ƌPRICEƍ OR
EXCHANGE OF MONEY IS AN ESSENTIAL
CONSIDERATION
2. NORMALLY THE SELLER AND THE BUYER BY
MUTUAL CONSENT ARRIVE AT THE PRICE TO
BE PAID Ɗ IT MIGHT INVOLVE SOME
AMOUNT OF BARGAINING
3. HOWEVER IF THE SELLER AND BUYER HAVE
NOT FIXED THE PRICE IT HAS TO BE FIXED
REASONABLY BASED ON THE PREVAILING
MARKET POSITION
4. IN CERTAIN CASES INSTEAD OF THE
PARTIES GOVERNMENT FIXES THE PRICES
5. INSOME CASES THE MANUFACTURER jþv
DECIDES THE MAXIMUM RETAIL PRICE TO
IV. WHAT IS MEANT BY THE TERM ƏSTIPULATION
AS TO TIMEƐ
1. IN THE NORMAL COURSE THE PRICE MONEY
HAS TO BE PAID WHEN THE GOODS ARE
HANDED OVER TO THE BUYER
2. BUT PARTIES CAN ENTER INTO A CONTRACT OF
SALE STIPULATING A LATER DATE FOR
DELIVERY OF GOODS OR A LATER DATE FOR
PAYMENT OF PRICE
3. PARTIES CAN ALSO HAVE STIPULATION IN THE
CONTRACT OF SALE FOR INSTALMENT SUPPLY
AND INSTALMENT PAYMENT
4. HOWEVER IN CERTAIN KINDS OF GOODS
WHERE PRICES FLUCTUATE ON A DAY TO DAY
BASIS LIKE GOLD, SILVER, SHARES & EQUITY
SALE WHERE THE PRICE IS THE ESSENCE OF
THE CONTRACT THE PRICE PAYABLE WILL BE
THE PRICE APPLICABLE ON THE DATE OF SALE
jþ]

[MS= 22.8 & 24.2 MK=244]

V. WHAT IS MEANT BY THE TERM ƏEARNEST
MONEYƐ
1. IN ORDER TO ENSURE THAT THE
PROSPECTIVE BUYERS ARE SERIOUS ABOUT
THE PURCHASE AND THEY WILL KEEP THEIR
COMMITMENT TO BUY, THE SELLER MAY
INSIST ON A PORTION OF THE SALE VALUE TO
BE DEPOSITED IN ADVANCE. THIS PORTION
OF THE MONEY IS CALLED EARNEST MONEY
2. THIS MONEY IS RETURNED IF THE BUYER
PERFORMS HIS OBLIGATION WITH OUT ANY
HITCH
3. IF THE PARTIES AGREE IT COULD ALSO BE
ADJUSTED AGAINST THE PRICE PAYABLE
4. IF THE BUYER DEFAULTS AND THE FAILURE
ON THE PART OF THE BUYER IS ESTABLISHED
jh

THE SELLER MAY EVEN TAKE OVER THE

VI. WHAT IS THE DISTINCTION BETWEEN ƌSALEƍ
& ƌAGREEMENT



TO SELLƍ

  



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[MS=22.2 Ɗ 22.3 MK=234 Ɗ 236 CB=167 PG=82]

[

VII. WHAT IS THE DISTINCTION BETWEEN ƌSALEƍ

& ƌHIRE PURCHASEƍ


   
 

 

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j_|
[MS=22.5 MK=236 Ɗ 237 CB=168 PG=83]
VIII.WHAT IS THE DISTINCTION BETWEEN
AGREEMENT


 TO SELL & HIRE PURCHASE
  





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IX. WHAT IS THE DIFFERENCE BETWEEN A SALE
AND A CONTRACT FOR WORK AND LABOUR
1. CONTRACT OF WORK AND LABOUR CAN BE
OF 2 TYPES:
a) WHEN MATERIAL IS GIVEN BY X TO Y TO
USE LABOUR ON IT AND RETURN IT AS A
FINISHED GOOD. IN THIS CASE IT DOES NOT
AMOUNT TO A SALE AND NO SALES TAX IS
APPLICABLE AS IT IS ONLY A CONTRACT
FOR WORK
b) IF THE MATERIAL AND THE LABOUR BOTH
ARE SUPPLIED BY THE SAME PERSON IT
AMOUNTS TO CONTRACT FOR WORK &
LABOUR. IN THIS CASE IT AMOUNTS TO A
SALE AND THE SALES TAX WILL HAVE TO BE
PAID
j_þ
[MS=22.4 MK=237 Ɗ 238 CB=168]
X. WHAT IS MEANT BY ƌEXCHANGE OR BARTERƍ
AND ƌREGULATED SALE OR RATION SALEƍ
1. WHAT IS BARTER
a) WHEN ONE PARTY OFFERS GOODS TO
ANOTHER AND THE OTHER PARTY RETURNS
THE CONSIDERATION WITH SOME OTHER
GOODS WITHOUT ANY EXCHANGE OF MONEY
IT IS CALLED A BARTER DEAL
b) BARTER DEALS DO NOT COME UNDER THE
DEFINITION OF SALE
c) HOWEVER IF THE RETURN CONSIDERATION
INVOLVES SOME GOODS PLUS SOME MONEY
IT WOULD AMOUNT TO SALE j_h

[MS=22.5 ] CONT..
2. RATION SALE OR REGULATED SALE
a) UNDER STATUTORY PROVISION SOMETIMES
CIVIL SUPPLIES AUTHORITIES SELL
CERTAIN ESSENTIAL COMMODITIES TO
PEOPLE BELOW A CERTAIN INCOME LEVEL.
THIS IS KNOWN AS ƌRATION SALEƍ
b) IN THIS CASE AS THE BUYER DOES NOT
HAVE THE OPTION OF ASKING FOR MORE
QUANTITY OR BARGAINING ON THE PRICE
HENCE RATION SALES DO NOT SATISFY THE
REQUIREMENT OF ƌSALEƍ UNDER THE SG.
ACT 1930
[MS=22.5 ] j__

CONT..
3. WHAT IS FUTURE GOODS
i. GOODS THAT ARE TO BE MADE AFTER
MAKING THE CONTRACT
ii. WITH REGARD TO FUTURE GOODS THERE
CAN ONLY BE AN AGREEMENT TO SELL
iii. AN APPLICANT FOR SHARES IS A
PROSPECTIVE INVESTER IN FUTURE GOODS
4. WHAT IS MEANT BY CONTINGENT GOODS
i. WHEN THE ACQUISITION OF THE GOODS BY
THE SELLER DEPENDS UPON AN UNCERTAIN
CONTINGENCY THE GOODS ARE CALLED
CONTINGENT GOODS
[X AGREES TO SELL 100 UNITS OF AN
ARTICLE PROVIDED THE SHIP WHICH ISj_ÖTO
BRING THEM REACHES THE PORT SAFELY]
[

XI. WHAT ARE THE CLASSIFICATION OF GOODS

UNDER SGA 1930
1. GOODS (MOVEABLE) CAN BE CLASSIFIED
INTO THE FOLLOWING THREE TYPES:
(a) EXISTING GOODS (b) FUTURE GOODS
(c) CONTINGENT GOODS
2. WHAT IS EXISTING GOODS
a) GOODS WHICH ARE IN PHYSICAL
EXISTENCE IN THE POSSESSION OF THE
SELLER AT THE TIME OF ENTERING INTO
THE CONTRACT OF SALE IS CALLED
EXISTING GOODS
j_v
CONTƕƕ.
[

b) EXISTING GOODS CAN AGAIN BE

CLASSIFIED INTO 3 FOLLOWING TYPES:
i. SPECIFIC GOODS Ɗ IDENTIFIED AND
AGREED UPON AT THE TIME OF MAKING THE
CONTRACT
ii. UNASCERTAINED GOODS Ɗ GOODS ARE
EITHER NOT IDENTIFIED OR NOT AGREED
UPON AT TIME OF MAKING THE CONTRACT
iii. ASCERTAINED GOODS Ɗ GOODS IDENTIFIED
AND AGREED UPON SUBSEQUENT TO
MAKING OF THE CONTRACT OF SALE

j_]
[

XII. WHAT IS THE EFFECT OF GOODS PERISHING

1. THERE ARE THREE CONTINGENCIES:
a) GOODS PERISHING BEFORE MAKING THE
CONTRACT [Sn 7]
b) GOODS PERISHING BEFORE SALE BUT AFTER
AGREEMENT TO SELL
c) PERISHING OF FUTURE GOODS AFTER AN
AGREEMENT TO SELL
2. PERISHING BEFORE MAKING THE CONTRACT
(Sn - 7)
a) IF SELLER WAS UNAWARE OF ITS PERISHING
AT THE TIME OF COTNRACT, IT IS VOID
[CEMENT BECAME UNMERCHANTABLE DUE jÖ

TO
RAIN AND CAKING UP] CONTƕ
[

b) IN CASE ONLY PART OF THE GOODS PERISH OR

BECOME UNMERCHANTABLE THE NATURE OF
CONTRACT WILL DEPEND ON WHETHER THE
PERISHABLE AND NON Ɗ PERISHABLE ARE
SEPARATABLE OR DIVISIBLE. IF IT CANNOT BE
DIVISIBLE THE WHOLE CONTRACT IS VOID. THE
DIVISIBLE PART WHICH IS IN GOOD
CONDITION MUST BE ACCEPTED BY THE BUYER
Ɗ A BASKET OF MANGOES]
3. PERISHING BEFORE SALE BUT AFTER
AGREEMENT TO SELL (Sn Ɗ 8 )
THE CONTRACT OF SALE OF SPECIFIC GOODS
CAN BE AVOIDED ON THE GROUNDS OF
SUPERVENING IMPOSSIBILITY IF IT SATISFIES
jÖ|
THE FOLLOWING CONDITIONS:
[

i. THERE IS ONLY AN AGREEMENT TO SELL

ii. THE LOSS IS CAUSED TO SPECIFIC GOODS
iii. THE LOSS IS NOT ATTRIBUTABLE TO THE FAULT
OF ANY PARTY
iv. THE GOODS HAVE PERISHED BEFORE THE RISK
PASSES TO THE BUYER
[NOTE THIS SECTION 8 DOES NOT APPLY TO
UNASCERTAINED GOODS. HENCE DESTRUCTION
OF THE WHOLE OF THE GOODS WHILE IN THE
POSSESSION OF SELLER, WILL NOT DISCHARGE
HIM FROM HIS OBLIGATIONS]
4. EFFECT OF PERISHING OF FUTURE GOODS
IF THE FUTURE GOODS IS SUFFICIENTLY
IDENTIFIED AND PERISHES THE CONTRACT WILL
jÖj

BE TREATED AS VOID
[

XIII. WHAT IS MEANT BY THE TERMS ƏSTIPULATIONƐ,

ƏWARRANTYƐ & ƏCONDITIONƐ
1. ƌSTIPULATIONƍ
a) WITH A VIEW TO ACCOMPLISH A SALE A PERSON IS
LIKELY TO MAKE NUMBER OF STATEMENTS OR
REPRESENTATIONS. MERE PUFFING
REPRESENTATIONS NOT FORMING PART OF THE
CONTRACT OF SALE HAVE NO LEGAL SIGNIFICANCE
b) BUT REPRESENTATIONS FORMING AN INTEGRAL
PART OF THE CONTRACT OF SALE ARE CALLED
ƏSTIPULATIONSƐ
2. WHAT IS A ƏCONDITIONƐ
ACCORDING TO SECTION 12 (2) OF SGA ƏA
CONDITION IS A STIPULATION ESSENTIAL TO THE
MAIN PURPOSE OF THE CONTRACT, THE BREACHjÖ OF

WHICH GIVES A RIGHT TO REPUDIATE THE

[

3. WHAT IS ƏWARRANTYƐ
ACCORDING TO SECTION 12 (3) A
ƏWARRANTYƐ IS A STIPULATION
COLLATERAL TO THE MAIN PURPOSE OF THE
CONTRACT, THE BREACH OF WHICH GIVES
RIGHT TO A CLAIM FOR DAMAGES ONLY AND
NOT A RIGHT TO REJECT THE GOODS OR
REPUDIATE THE CONTRACTƐ
[WHETHER A STIPULATION IN A CONTRACT
OF SALE IS A ƏCONDITIONƐ OR ƏWARRANTYƐ
WILL DEPEND ON THE CONSTRUCTION OF
THE CONTRACT, A STIPULATION MAY BE A
ƌCONDITIONƍ EVEN THOUGH IT IS CALLED
jÖþ
A
ƏWARRANTYƐ IN THE CONTRACT
[

4. WHAT IS THE DISTINCTION BETWEEN A

ƌCONDITIONƍ AND A ƏWARRANTYƐ

 



 
 


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CONTƕ.
[

5. WHEN CAN A BREACH OF ƌCONDITIONƍ BE TREATED

AS A BREACH OF ƌWARRANTYƍ
a) IN THE FOLLOWING CASES THE BUYER MAY TREAT
THE BREACH OF ƌCONDITIONSƍ AS BREACH OF
WARRANTY:
i. WARRANTY WAIVER Ɗ WHEN A SELLER COMMITS A
BREACH OF CONDITION THE BUYER HAS THE
OPTION OF : (a) WAIVE THE CONDITION OR (b) TO
TREAT THE BREACH CONDITION AS A BREACH OF
WARRANTY. IN BOTH CASES BUYER CANNOT
REPUDIATE THE CONTRACT NOR LATER INSIST ON
TREATING IT AS A CONDITION
ii. COMPULSORY TREATMENT OF CONDITION AS
WARRANTY WERE THE GOODS IN THE CONTRACT IS
NOT SEVERABLE AND THE BUYER HAS ACCEPTED
PART OF THE GOODS THE BREACH OF ANY
CONDITION BY THE SELLERCAN ONLY BE TREATED
AS BREACH OF WARRANTY UNLESS THERE IS AN
EXPRESS OR IMPLIED TERM IN THE CONTRACT TO
THAT EFFECT [Sn 13 (2)] jÖÖ

[MS=23 Ɗ 2.3, MK=247 Ɗ 249, CB=173 Ɗ 174, PG=84 Ɗ

[

XIV.WHAT IS MEANT BY EXPRESS AND

IMPLIED CONDITIONS AND
WARRANTIES
1. CONDITIONS AND WARRANTIES ARE
TREATED AS EXPRESS WHEN THE
PARTIES HAVE EXPRESSLY INDICATED
THEM IN THE CONTRACT
2. HOWEVER UNDER SECTION 14 OF THE
SGA CERTAIN CONDITIONS AND
WARRANTIES ARE TREATED AS
IMPLIED EVEN IF THEY HAVE NOT
BEEN SPECIFICALLY INCORPORATED
IN THE CONTRACT OF SALE
jÖv
[

XV. WHAT ARE THE IMPLIED CONDITIONS TO BE

READ INTO EVERY CONTRACT OF SALE
UNLESS OTHERWISE AGREED, LAW
INCORPORATES INTO THE CONTRACT THE
FOLLOWING IMPLIED CONDITIONS:
1. CONDITION AS TO TITLE [Sn 14(a)]
(i) IN CASE OF CONTRACT OF SALE, THE
SELLER HAS A RIGHT TO SELL (OWNERSHIP)
AT THE TIME OF MAKING THE SALE
CONTRACT
(ii) INCASE OF AGREEMENT TO SELL HE WILL
HAVE THE RIGHT TO SELL AT TIME WHEN
THE AGREEMENT TO SELL IS TO BE
CONVERTED TO A SALE
(iii) BUYER CAN REPUDIATE THE CONTRACT
IF THE SELLER CANNOT SHOW PROOF OF jÖ]
TITLE CONTƕ.
[

2. WHEN SALE IS BY DESCRIPTION [Sn 15]

(i) THERE IS AN IMPLIED CONDITION THAT THE
GOODS SHALL CORRESPOND WITH THE
DESCRIPTION OF GOODS
(ii) THE DESCRIPTION COULD BE BY MEANS OF
WORDS, SYMBOLS, NUMBER, GRADE, BRAND, MODE
OF PACKING ETC
[NOKYA MOBILE 6630]
3. WHEN SALE IS BY IDENTIFIED SAMPLE [Sn 17]
THERE ARE THE FOLLOWING IMPLIED CONDITIONS:
(i) THE BULK SHALL CORRESPOND IN QUALITY
WITH THE IDENTIFIED SAMPLE
(ii) THE BUYER SHALL HAVE REASONABLE
OPPORTUNITY OF COMPARING THE BULK WITH THE
SAMPLE
(iii) THE GOODS SHALL BE MERCHANTABLE AND
SHOULD NOT HAVE ANY HIDDEN DEFFECTS WHICH
CANNOT BE DETECTED BY REASONABLE jv

EXAMINATION OF THE BULK OR SAMPLE
CONTƕ.
[
4. WHEN SALE IS BY SAMPLE AS WELL AS
DESCRIPTION [Sn 15]
THE IMPLIED CONDITION IS THAT THE BULK
GOODS SHALL CORRESPOND NOT ONLY WITH
THE SAMPLE BUT ALSO WITH THE DESCRIPTION
5. CONDITION AS TO FITNESS OR QUALITY [Sn 16]
(i) USUALLY THERE IS NO IMPLIED CONDITION
OR WARRANTY THAT THE GOODS ARE FIT FOR A
PARTICULAR PURPOSE WHICH THE BUYER HAS
IN MIND
(ii) IT IS FOR THE BUYER TO TAKE CARE AND
SATISFY HIMSELF (CAVEAT EMPTOR) THAT THE
GOODS WILL MEET HIS PARTICULAR PURPOSE
(iii) HOWEVER SECTION 16 PROVIDES 3
jv|
EXCEPTIONS TO THE RULE OF CAVEAT EMPTOR:
(a) THE BUYER EXPRESSLY OR IMPLIEDLY
[

(b) THE BUYER SAYS HE RELIES ON THE SKILL

AND JUDGEMENT OF THE SELLER
(c) THE SELLER IS KNOWN TO BE A SUPPLIER
OF THAT SPECIFIC QUALITY OF GOOD
6. CONDITION AS TO THE MERCHANTABILITY OF
THE GOOD
ACCORDING TO SECTION 16(2) WHEN THE
GOODS ARE BOUGHT BY PRE Ɗ DESCRIPTION
THE SELLER WHO DEALS IN GOODS OF THAT
DESCRIPTION SHALL ENSURE
MERCHANTABILITY [FIT TO USE] OF THAT
GOOD [CEMENT GOT WET AND SOLIDIFIED]
7. CONDITION AS TO WHOLESOMENESS
IN CASE OF PROVISIONS AND FOODSTUFF IT
MUST NOT ONLY BE MERCHANTABLE BUT ALSO
BE WHOLESOME AND BE SUITABLE FOR HUMAN
CONSUMPTION jvj
[MS=23.3 Ɗ 23.7, MK=250 Ɗ 255, CB=175 Ɗ 178,
PG=86 Ɗ 87 ]
[

XVI. WHAT ARE THE IMPLIED WARRANTIES READ

INTO EVERY CONTRACT OF SALE
1. UNLESS SPECIFICALLY AGREED TO THE
CONTRARY BY THE PARTIES, THE LAW
(SECTION 14) RECOGNISES THE FOLLOWING
IMPLIED WARRANTIES IN EVERY CONTRACT OF
SALEƐ
2. WARRANTY OF QUIET POSSESSION -
THE BUYER SHALL HAVE THE RIGHT TO QUIET
POSSESSION WITHOUT DISTURBANCE /
INTERFERENCE FROM ANY THIRD PERSON OR
FROM THE SELLER
3. WARRANTY OF FREEDOM FROM
ENCUMBARANCES
THE GOODS ARE FREE FROM ANY
ENCUMBRANCE OR PRIOR CHARGE TO ANY
THIRD PARTY NOT SPECIFICALLY MADE KNOWN
jv
TO THE BUYER BY THE SELLER
CONTƕ.
[

4. WARRANTY IMPLIED BY USAGE OR TRADE

THE FITNESS OR QUALITY OF THE GOODS FOR A
PARTICULAR PURPOSE IS ESTABISHED BY LONG
STANDING TRADE CUSTOM
5. WARRANTY OF DISCLOSING DANGEROUS
NATURE OF THE GOODS
WHERE THE SELLER HAS KNOWLEDGE THAT THE
GOOD HAVE SOME INHERENT DANGER HE HAS
AN IMPLIED OBLIGATION TO MAKE IT KNOWN
TO THE BUYER OR WARN THE BUYER ABOUT
THE DANGER
[A TIN OF CHEMICALS REQUIRED CAREFUL
OPENING OR IT WOULD EXPLODE Ɗ MUST
WARN]
[MS= 23.8 Ɗ 23.10 MK=256 Ɗ 258
CB=178 Ɗ 179 PG=87 Ɗ 88]
jvþ
[

XVII.WHAT IS MEANT BY THE DOCTRINE OF CAVEAT

EMPTOR AND WHAT ARE THE SEVEN
EXCEPTIONS TO THIS RULE
1. THE EXPRESSION ƌCAVEAT EMPTORƍ MEANS THE
ƏLET THE BUYER BEWAREƐ
2. IT IS THE BUYERƍS DUTY TO THROUGHLY
EXAMINE THE GOODS HE IS GOING TO BUY
3. IF THE GOODS TURN OUT TO BE DEFECTIVE OR
NOT SUITABLE FOR HIS PURPOSE, HE HAS
NONE TO BLAME BUT HIMSELF
4. THE SELLER HAS NO OBLIGATION TO DISCLOSE
THE DEFECTS IN HIS GOODS OF WHICH HE MAY
BE AWARE
5. THERE IS NO IMPLIED UNDERTAKING THAT THE
SELLER SHALL SUPPLY GOODS SUITED TO THE
BUYERƍS PURPOSE
6. HOWEVER THE MATTER WOULD BE DIFFERENTjvh
IF THERE IS FRAUD OR MISREPRESENTATION
BY THE SELLER CONTƕƕ
[
7. THIS RULE WILL NOT APPLY IF THE BUYER HAD
SPECIFICALLY INDICATED HIS REQUIREMENTS AND
HAD LEFT IT TO THE SKILL AND EXPERTISE OF THE
SELLER TO SUPPLY GOODS OF THAT QUALITY
8. HOWEVER THE PRINCIPLE OF CAVEAT EMPTOR HAS
CERTAIN EXCEPTIONS AND IT WILL NOT APPLY IN
THE FOLLOWING CASES:
i. WHEN THE BUYER HAS INDICATED IT IS FOR A
PARTICULAR PURPOSE
ii. CONDITION AS TO THE GOODS MERCHANTABILITY
iii. GOODS SOLD BY SAMPLE AS WELL AS DESCRIPTION
iv. GOODS SOLD BY SAMPLE
v. CONDITIONS AS TO QUALITY OR FITNESS FOR
HUMAN USE
vi. WHERE THE CONSENT OF THE BUYER HAS BEEN jv_
OBTAINED BY FRAUD OR WHERE SELLER
KNOWINGLY CONCEALS DEFECTS NOT
[
XVIII.WHAT IS MEANT BY TRANSFEOR OR
PASSING OF PROPERTY IN THE GOODS
1. THE TERM ƏTRANSFER OF PROPERTYƐ
MEANS THE TRANSFER OF ƏOWNERSHIPƐ OF
THE GOODS
2. ƏPROPERTYƐ (OWNERSHIP) IN THE GOODS
MUST BE DISTINGUISHED FROM THE TERM
ƏPOSSESSIONƐ OF THE GOODS
3. POSSESSION REFERS TO THE CUSTODY OF
THE GOODS
4. ƏPROPERTYƐ IN THE GOODS (OWNERSHIP)
MAY PASS FROM SELLER TO BUYER BUT THE
GOODS MAY BE IN POSSESSION OF THE
BUYER OR SELLER AS A BAILEE jvÖ

5. IN SOME CASES THE POSSESSION OF THE

[
6. THE DETERMINATION OF THE EXACT TIME WHEN
THE ƏPROPERTY IN THE GOODSƐ PASSES [EVEN
WITHOUT POSSESSION SHIFTING] IS OF GREAT
IMPORTANCE AND SIGNIFICANCE IN A CONTRACT
OF SALE FOR DETERMINING THE FOLLOWING:
a) WHO WILL BEAR THE RISK OF DAMAGE OR LOSS
OF THE GOODS IF IT HAPPENS BEFORE THE
PHYSICAL TRANSFER OF THE GOODS Ɗ THE BUYER
OR SELLER
b) WHO CAN STOP [BUYER OR SELLER] WHEN THIRD
PARTIES ARE INTERFERING WITH THE GOODS
c) AT WHAT POINT CAN SELLER INSIST ON PAYMENT
OF PRICE WHEN BUYER IS REFUSING TO TAKE
POSSESSION OF THE GOODS
d) AT WHAT POINT CAN THE COURT RECEIVER TAKE
jvv
POSSESSION OF THE GOODS WHEN EITHER THE
SELLER OR BUYER BECOMES INVOLVENT
[
XIX. WHAT ARE THE RULES TO DETERMINE THE
EXACT TIME OF THE PASSING OF THE
OWNERSHIP OR TRANSFER OF PROPERTY FROM
THE SELLER TO THE BUYER OR THE NEW
OWNER
1. THE PRIMARY RULE IS IF THE PARTIES HAVE
SPECIFICALLY INDICATED THE TIME OF
PASSING IN THE CONTRACT OF SALE ITSELF
THAT IS TREATED AS FINAL
2. HOWEVER IF THE PARTIES HAVE NOT
INDICATED THE EXACT TIME OF SHIFTING OF
OWNERSHIP THE SECTIONS 20 TO 24 UNDER
THE S.G. ACT 1930 WILL DETERMINE THE ISSUE
3. BROADLY THERE ARE TWO SETS OF RULES:
a) RULES WHEN THE GOODS ARE ASCERTAINED jv] BY

THE BUYER & SELLER

[
4. WHAT ARE THE RULES TO ASCERTAIN TIME
OF TRANSFER WHEN THE GOODS HAVE
ALREADY BEEN IDENTIFIED AND MADE
SPECIFIC
a) ACCORDING TO SECTION 20, IF THE GOODS
HAVE BEEN ASCERTAINED AND ARE IN A
DELIVERABLE CONDITION, THE PROPERTY
PASSES FROM SELLER TO THE BUYER AS
SOON AS THE CONTRACT IS SIGNED (EVEN
IF PHYSICAL TRANSFER OF GOODS OR
PAYMENT IS DEFERED TO A FUTURE DATE)
[X SELLS HIS HORSE TO Y FOR RS. 10,000/-
AND AGREES TO DELIVER THE HORSE IN YƍS
HOUSE WITHIN 3 DAYS. Y HAS ALREADYj]

BECOME THE OWNER, AND IF THE HORSE
DIES BEFORE DELIVERY ƌYƍ HAS TO BEAR
[
b) WHEN THE GOODS ARE ASCERTAINED, BUT YET
TO BE PUT IN DELIVERABLE STATE [Sn 21]
IF THE SELLER HAS TO DO SOMETHING FOR
PUTTING THE GOODS IN A DELIVERABLE STATE,
THE PROPERTY DOES NOT PASS UNTIL SUCH
THING IS DONE BY THE SELLER AND HE
NOTIFIES THE BUYER ABOUT THE SAME
[THE ENTIRE QUANTITY OF OIL IN THE TANK
WAS SOLD, BUT X SELLER HAD AGREED TO PACK
IT IN 5 LITRE BAGS BEFORE DESPATCH TO Y.
BEFORE THE PACKING OR BEFORE THE
INTIMATION TO Y A FIRE DESTROYED THE
WHOLE STOCK Ɗ X HAS TO BEAR THE LOSS AND
RETURN THE PRICE MONEY]
c) WHEN THE GOODS HAVE BEEN ASCERTAINED j]|
HAS TO BE WEIGHED OR MEASURED FOR
ASCERTAINING THE TOTAL PRICE MONEY TO BE
[
ACCORDING TO SECTION 22 EVEN THOUGH THE
GOODS HAVE BEEN ASCERTAINED AND ARE IN
DELIVERABLE CONDITION, BUT THE ACTUAL
WEIGHING OR MEASURING FOR DETERMINING
TOTAL PRICE IS NOT COMPLETED, THE
TRANSFER DOES NOT TAKE PLACE TILL THAT
PROCESS IS COMPLETED AND SELLER GIVES
NOTICE TO THE BUYER ABOUT THE
COMPLETION OF WEIGHING PROCESS.
[IF DAMAGE OCCURS BEFORE NOTICE, SELLER
MUST BEAR THE LOSS, IF AFTER NOTICE BUYER
MUST BEAR THE LOSS]
5. WHAT ARE THE RULES FOR ASCERTAINING
TIME OF TRANSFER OF ƌPROPERTYƍ WHEN
GOODS ARE NOT YET ASCERTAINED j]j
a) ACCORIDNG TO SECTION 18 NO TRANSFER OF
PROPERTY (OWNERSHIP) TAKES PLACE UNTIL
[
b) ACCORDING TO SECTION 23 WHEN THE GOODS
ARE PURCHASED BY DESCRIPTION OR SAMPLE
IF THE BUYER OR SELLER PROVIDES THE OTHER
PARTY TO UNCONDITIONALLY TO APPROPRIATE
OR SEPARATE AND REMOVE THE REQUIRED
QUANTITY & QUALITY FROM THE
UNASCERTAINED BULK QUANTITY THE
TRANSFER TAKES PLACE WHEN THE OTHER
PARTY CARRIES OUT THE SEPARATION
PROCESS. APPORTIONING MAY HAPPEN IN ONE
OF THE FOLLWING MANNER:
i. SEPARATING THE GOODS WITH CONSENT OF
BUYER
ii. PUTTING THE QUANTITY IN SUITABLE
CONTAINERS WITH THE CONSENT OF THE j]
BUYER
iii. DELIVERING THE GOODS TO A COMMON
[
6. WHAT ARE THE RULES FOR DETERMINING TIME
OF TRANSFER WHEN SELLER SELLS GOODS TO
THE BUYER ON INSPECTION AND APPROVAL
BASIS
a) ACCORDING TO SECTION 24 WHEN GOODS ARE
SENT ON ƌAPROVAL OR RETURN BASISƍ THE
PROPERTY WILL PASS TO THE BUYER WHEN ANY
ONE OF THE FOLLOWING HAPPENS:
i. BUYER CONVEYS HIS APPROVAL
ii. WHEN BUYER DOES SOMETHING SIGNIFYING
TRANSACTION [BUYER RESELLS OR PLEDGES THE
GOODS TO SOMEONE ELSE]
iii. WHEN THE BUYER RETAINS THE GOODS BEYOND
THE TIME FIXED FOR RETURN OR ON THE EXPIRY
OF REASONABLE TIME WHEN NO TIME HAS BEEN
j]þ
FIXED FOR RETURN
[X GAVE A HORSE TO Y FOR TRIAL RETURNABLE IN 7
[
7. WHAT ARE THE RULES FOR DETERMINING TIME OF
TRANSFER WHEN SELLER IS DESPATCHING THE
GOODS BY SHIP OR
WHAT IS MEANT BY ƏF.A.S CONTRACTSƐ ƏF.O.B
CONTRACTSƐ AND ƏC.I.F COTNRACTSƐ
a) IF GOODS ARE SENT BY SHIP TO THE BUYER THE
ACTUAL TIME OF PASSING OF THE PROPERTY WILL
DEPEND ON WHETHER THE GOODS ARE SENT
UNDER ƌF.A.S CONTRACTSƍ OR F.O.B CONTRACTSƍ OR
ƌC.I.F. CONTRACTSƍ
b) WHAT IS ƌF.A.S. CONTRACTSƍ (FREE ALONGSIDE
SHIP)
i. IT MEANS THE SELLER IS RESPONSIBLE FOR
DELIVERING THE GOODS TILL THE PORT WHARF
(LOADING PLATFORM) AND INFORMING THE BUYER
ii. IMMEDIATELY ON COMMUNICATION THE SELLER j]h
PASSES ON THE PROPERTY TO THE BUYER
[
c) WHAT IS ƌF.O.B CONTRACTƍ (FREE ON BOARD)
i. HERE THE SELLER BEARS THE RISK TILL THE
GOODS ARE LOADED ON THE SHIP AND GIVES
NOTICE TO THE BUYER
ii. AFTER THE LOADING ANY DAMAGE OR LOSS IN
TRANSIT WILL HAVE TO BE BORNE BY THE BUYER
d) WHAT IS C.I.F. CONTRACTS (COST + INSURANCE
+ FREIGHT)
i. HERE THE SELLERƍS PRICE INCLUDES THE COST
OF THE GOODS + INSURANCE + FREIGHT
CHARGES
ii. ONCE SELLER COMPLETES ALL THE ABOVE
FORMALITIES AND INTIMATES THE BUYER THE
DETAILS OF SHIPPING PAPERS, INSURANCE ETC,
THE RISK PASSES ON TO THE BUYER j]_
iii. BUYER HAS TO MEET THE EXPENSES OF
UNLOADING, STACKING + WHRFAGE AT THE
[
I. UNDER WHAT CIRCUMSTANCES CAN NON Ɗ
OWNERS OF THE GOODS EXECUTE A
CONTRACT OF SALE. WHAT IS THE EXTENT
OF THE TITLE ACQUIRED BY THE BUYERS IN
SUCH COTRACTS OR
II. WHAT IS MEANT BY ƏNEMODAT QUAD NON
HABETƐ
1. THE ABOVE LATIN PHRASE MEANS Ɗ NO ONE
CAN CONVEY A BETTER TITLE THAN WHAT
HE HAS
2. NORMALLY ONLY AN OWNER OR HIS
AUTHORISED AGENT CAN SELL THE GOODS
AND A NON Ɗ OWNER EVEN IF HE SELLS
CANNOT CONVEY GOOD TITLE TO THE j]Ö
BUYER
[
a) MERCANTILE AGENTS SUCH AS DEALERS,
BROKERS, COMMISSION AGENTS,
ATTORNEYS, BANKERS, INSURANCE AGENTS,
WHARFINGERS AND FACTORS CAN CONVEY
GOOD TITLE IF THEY ARE IN POSSESSION
OF THE GOODS OR ANY DOCUMENT OF TITLE
TO THE GOODS
b) SALE BY A THIRD PERSON WHEN THE REAL
OWNER BY HIS CONDUCT DOES NOT DENY
THE THIRD PARTYƍS ATTEMPTS TO SELL THE
GOODS AND THE BUYER BUYS THE GOODS
IN GOOD FAITH AND FOR PRICE [NON Ɗ
ESTOPPEL BY OWNER]
c) SALE BY CO Ɗ OWNER j]v

ACCORDING TO SECTION 28 A BUYER CAN

[
i. THE CO Ɗ OWNER MUST BE IN SOLE
POSSESSION OF GOODS WITH THE CONSENT OF
CO - OWNERS
ii. THE BUYER SHOULD PURCHASE THE GOODS FOR
VALUE AND IN GOOD FAITH
iii. THE BUYER SHOULD NOT HAVE NOTICE OR
SUSPICION (AT THE TIME OF SALE) OF ANY
DEFECT IN THE SELLERƍS AUTHORITY TO SELL
4. SALE BY A PERSON IN POSSESSION UNDER A
VOIDABLE CONTRACT
AS PER SECTION 29 WHERE A PERSON IS IN
POSSESSION OF THE GOODS UNDER A
VOIDABLE CONTRACT (AS PER SECTIONS 19 &
19 A OF ICA) SELLS THE GOODS TO ANOTHER
BEFORE THE CONTRACT IS REPUDIATED AND j]]

THE BUYER PURCHASES THEM FOR VALUE, IN

[
5. SALE BY SELLER IN POSSESSION AFTER SALE
[Sn 30 (1) ]
A SELLER WHO SOLD THE GOODS AND
RETAINING POSSESSION PENDING PAYMENT
MAY SELL THE GOODS TO ANOTHER BUYER
WHO COULD GET GOOD TITLE PROVIDED THE
SECOND BUYER (1) ACTS IN GOOD FAITH (2)
DOES NOT HAVE NOTICE OF PRIOR SALE & (3)
OBTAINS POSSESSION OF GOODS OR
DOCUMENTS TO THE TITLE OF THE GOODS
6. SALE BY UNPAID SELLER (SECTION 54)
A BUYER FROM AN UNPAID SELLER IN
POSSESSION OF THE GOODS UNDER HIS RIGHT
OF LIEN OR STOPPAGE IN TRANSIT CAN
ACQUIRE GOOD TITLE IF HE BUYS IT IN GOOD



FAITH
[
XXI. WHAT ARE THE RULES REGARDING DELIVERY
OF GOODS OR PERFORMANCE OF THE
CONTRACT
1. DUTY OF SELLER
IT IS THE DUTY OF THE SELLER TO DELIVER THE
GOODS TO THE BUYER OR HIS AGENT
2. TYPES OF DELIVERY
a) ACTUAL DELIVERY Ɗ GOODS ARE PHYSICALLY
HANDED OVER
b) SYMBOLIC DELIVERY Ɗ WHERE GOODS ARE
BULKY A SYMBOLIC DELIVERY IS GIVEN LIKE:
KEY TO GODOWNS, BILL OF LADING, RAILWAY
RECEIPTS
c) CONSTUCTIVE DELIVERY Ɗ WHERE THIRD 
|
PERSON IN POSSESSION OF GOODS
ACKNOWLEDGES TO HOLD THE GOODS ON
[
XXII.WHAT ARE THE RULES REGARDING DELIVERY
OF GOODS
1. AS PER SECTION 32 DELIVERY AND PAYMENT
ARE CONCURRENT CONDITIONS. BOTH PARTIES
MUST PERFORM THEIR DUTIES.
2. DELIVERY TO THE BUYER COULD BE EITHER
ACTUAL, SYMBOLIC OR CONSTRUCTIVE
3. EFFECT OF PART DELIVERY
A DELIVERY OF PART OF THE GOODS, IN
PROGRESS OF DELIVERY AMOUNTS TO
DELIVERY OF THE WHOLE IF THERE IS NO
INTENTION OF SEVERING SUCH PART FROM
THE WHOLE
4. BUYER TO APPLY FOR DELIVERY

j
SELLER OF GOODS NOT BOUND TO DELIVER,
UNTIL THE BUYER APPLIES FOR DELIVERY
[
6. PLACE OF DELIVERY [Sn 36 (1) ]
(a) NORMALLY IT IS AT PLACE OF SALE
(b) GOODS NOT IN EXISTENCE ARE TO BE
DELIVERED AT THE PLACE AT WHICH THEY ARE
MANUFACTURED
7. TIME OF DELIVERY [ Sn 36 (2)]
WHERE NO TIME IS SPECIFIED, IT SHOULD BE
DELIVERED IN A REASONABLE TIME
8. DEMAND AT REASONABLE HOUR
BUYER SHOULD DEMAND DELIVERY AT
REASONABLE HOURS OF THE DAY
9. GOODS IN POSSESSION OF THIRD PARTIES [Sn
36 (3) ]
DELIVERY IS EFFECTIVE ONLY WHEN THE 

THIRD PARTY ACKNOWLEDGES TO THE BUYER
[
10. INSTALMENT DELIVERY [SN 37 (3)]
BUYER IS NOT BOUND TO ACCEPT THE GOODS
IN INSTALMENTS UNLESS THE BUYER HAS
AGREED TO IT
11. EXPENSES OF DELIVERY [36 (5)]
SELLER MUST PUT THE GOODS IN A
DELIVERABLE STATE
12. DELIVERY OF WRONG QUANTITY [S Ɗ 37 ]
(a) IN CASE OF SHORT DELIVERY, BUYER HAS
OPTION OF REJECTING IT
(b) EXCESS DELIVERY
BUYER HAS THE OPTION OF TAKING THE
REQUIRED QUANTITY AND REJECTING THE
EXCESS 
þ

(C) MIXED DELIVERY

[
13. DELIVERY TO CARRIER OR WHARFINGER
DELIVERY OF GOODS TO A CARRIER
(ARRANGED BY BUYER OR SY SELLER) AND
HANDING OVER OF GOODS FOR SAFE
CUSTODY TO THE WHARFINGER AMOUNTS
TO DELIVERY
14. SELLER TO INFORM BUYER IN TIME [ 39 (3)]
SELLER MUST INFORM BUYER IN TIME FOR
HIS TAKING POSSESSION
15. DETERIORATION OF GOODS IN TRANSIT [Sn
40]
WHERE THE BUYER WANTS GOODS TO BE
DELIVERED AT SOME DISTANT PLACE, 
h
BUYER SHALL BEAR THE RISK OF
DETERIORATION DURING TRANSIT
[
XXIII.WHAT ARE THE RIGHTS AND DUTIES OF THE
BUYER
1. RIGHTS
a) TO RECEIVE DELIVERY OF GOODS
b) TO REPUDIATE IF SELLER COMMITS BREACH
c) TO HAVE REASONABLE OPPORTUNITY TO
EXAMINE THE GOODS
d) TO SUE SELLER FOR DAMAGES FOR NON-
DELIVERY
e) TO RECOVER THE AMOUNT PAID IF SELLER FAILS
TO DELIVER
f) TO SUE SELLER FOR SPECIFIC PERFORMANCE
g) TO SUE SELLER FOR DAMAGES FOR BREACH OF
WARRANTY 
_
2. DUTIES
a) TO PAY AND TAKE DELIVERY
[
XXIV.WHAT ARE THE RIGHTS AND DUTIES OF THE SELELR
1. RIGHTS
a) TO RECEIVE THE PRICE
b) TO GET COMPENSATION FOR NEGLECT ON PART OF
BUYER
c) TO GET REASONABLE CHARGES FOR TAKING CARE OF
GOODS
d) IF HE IS UNPAID SELLER TO EXERCISE HIS RIGHT OF
LIEN
e) TO SUE FOR DAMAGES WHEN BUYER WRONGFULLY
REFUSES TO TAKE POSSESSION OF GOODS
f) TO SEU FOR PRICE OF GOODS
2. DUTIES
a) TO DELIVER GOODS WHEN DEMANDED BY BUYER
b) TO COMPENSATE BUYER IF SELLER COMMITS ANY BREACH
c) TO GIVE REASONABLE OPPORTUNITY FOR INSPECTION
Ö TO
BUYER
d) TO REFUND ANY ADVANCE IF SALE IS NOT PROCEEDED
[
XXV. WHAT ARE THE RIGHTS OF UNPAID SELELR
1. WHO IS AN UNPAID SELLER
SECTION 45 DEFINES UNPIAD SELLER AS
FOLLOWS:
a) WHEN THE WHOLE PRICE HAS NOT BEEN PAID
OR TENDERED IN FULL
b) WHEN A NEGOTIABLE INSTRUMENT HAS BEEN
RECEIVED AS CONDITIONAL PRECEDENT AND
THE SAME HAS BEEN DISHONOURED
c) THE FOLLOWING CHARACTERISTICS OF AN
UNPAID SELLER SHOULD BE THERE:
i. HE MUST SELL GOODS ON CASH TERMS AND
NOT ON CREDIT, AND MUST REMAIN UNPIAD
ii. HE MUST BE UNPAID EITHER WHOLLY OR 
v
PARTLY
[
XXVI.WHAT ARE THE RIGHTS OF AN UNPAID SELLER
1. THE UNPAID SELLER HAS TWO BROAD CATEGORIES
OF RIGHTS LIKE:
a) RIGHTS AGAINST GOODS
b) RIGHTS AGAINST THE BUYER PERSONALLY
2. WHAT ARE HIS RIGHTS AGAINST THE GOODS:
a) RIGHT OF LIEN [Sn 47, 48, 49]
b) RIGHT OF STOPPING THE GOODS Ɗ IN Ɗ TRANSIT
[Sn 50 TO 52]
c) RIGHT OF RESALE [Sn 54]
3. WHAT ARE HIS RIGHTS AGAINST THE BUYER
PERSONALLY
a) SUIT FOR PRICE [SEC Ɗ 55]
b) SUIT OF DAMAGES FOR NON Ɗ ACCEPTANCE [ Sn 56]

]
c) SUIT OF REPUDIATION OF CONTRACT BY THE
BUYER BEFORE DUE DATE OF DELIVERY [Sn 60]
[
XXVII.WHAT ARE THE REMEDIES AVAILABLE TO
A BUYER IN CASE SELLER COMMITS BREACH
OF CONTRACT
1. SUIT FOR DAMAGES FOR NON Ɗ DELIVERY
[Sn 57]
2. SUIT OF SPECIFIC PERFORMANCE [Sn 58]
3. SUIT OF DAMAGES FOR BREACH OF
WARRANTY [Sn 59]
4. SUIT FOR RECISSION OF CONTRACT AND
FOR BREACH OF CONDITION [Sn 60]
5. SUIT FOR SPECIAL DAMAGES CAN ALSO BE
FILED UNDER SECTION 73 OF ICA
6. SUIT FOR RECOVERY OF PRICE TOGETHER
|

WITH INTEREST [Sn 61]
[    
    


XXVIII.WHAT IS THE DIFFERENCE BETWEEN
|   
 

 

LIEN & STOPPAGE Ɗ IN Ɗ TRANSIT
     



 


 


  
  

 
 



 
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