Date: 08 May 2014

LAWS OF CONTRACT & AGENCIES

IMPORTANT QUESTIONS FOR CONTRACT ACT FOR NEXT TEST & FINAL
EXAM
1 C!""#$%&at%!$ %' (!) %"*!+ta$t t! "a,e & +e-!,e *+!"%'e.
- Communication of a proposal is complete when it comes to the knowledge of
the party to whom the proposal is made.
For example, if A sends a proposal in the mail to B and if the mail is lost, it can be
held that the communication of the proposal is not complete.
- Communication of the acceptance is complete, as against the promisor, when
it is put in course of transmission to the promisor so as to be out of the power
of the acceptor, as against the acceptor, when it comes to the knowledge of
the promisor.
For example, as soon as B drops a letter of acceptance in mail back to A, A is bound
by the promise. Howeer, B is not bound by it unless A receies the acceptance
letter.
- Communication of a reocation is complete as against the party who makes it
when it is put in course of transmission to the party to whom it is made, so as
to be out of the power of the party who makes it! as against the party to
whom it is made, when it comes to the knowledge of the party to whom it is
made.
For example, if A sends a letter reoking his proposal, it will be complete against A
as soon as the letter is dropped in the mailbox and is out of his control. Howeer,
the reocation will be held complete against B only when B receies the letter.
Further, if B reokes his acceptance by telegram, it will be deemed complete
against B as soon as he dispatches the telegram. "t will be held complete against A,
when A receies the telegram.
2 W(at a/+ee"e$t' a+e &!$t+a&t'. P0ea'e 1e2$e
#An agreement is a contract if it is made by the free consent of the parties,
competent to contract, for a lawful consideration and for a lawful ob$ect.#
%he direct conditions laid down in &ec.'( and few deried condition are called
#)ssentials of a alid Contract#.
E''e$t%a0' !3 a -a0%1 C!$t+a&t* For an agreement to become a contract! it must
satis+es the following conditions*
A/+ee"e$t: ,-er by one party, and the acceptance by other party.
C!$'e$'#' a1 I1e": Consensus an idem means that both the parties agree
on the same thing in the same sense.
Le/a0 Re0at%!$'(%*: "t arises when both the parties know that they would be
attended by legal conse.uences if they default.
La)3#0 C!$'%1e+at%!$: Consideration means #&omething in return#. For a
alid contract, consideration must be lawful.
For example, A agrees to sell his house to B for /s.0(((((. Here, for A, the
consideration is /s.0((((( and for B, the consideration is House.
Ca*a&%ty !3 Pa+t%e': 1arties must be competent to contract, that is, any
party must not a minor, detain person etc.
F+ee C!$'e$t: Consent must be free, that is, it must not cause by coercion,
misrepresentation, fraud, undue in2uence etc.
La)3#0 !45e&t: %he ob$ect of contract must not be*
o "llegal or unlawful
o "mmoral
o ,pposed to public policy
Contract must be certain and capable of being performed.
Appropriate legal formalities must be performed like writing, registration,
witnesses, attestation etc.
6 De2$e C!"*ete$&%e' !3 t(e *e+'!$ )(! "a,e &!$t+a&t
&ec.'( de+nes that parties to contract must be competent to contract. Competency
is de+ned by &ec.'' as, #)ery person is competent to contract if he is of the age of
ma$ority according to the law to which he is sub$ect, is of sound mind and is not
dis.uali+ed from contracting by any law to which he is sub$ect#
%hus, to be competent to contract one must be of*
Age of ma$ority* Before completion of '3 years a person is a minor. ,nce he
has completed '3 years, he is of the age of ma$ority.
&ound mind* A person4s soundness of mind depends on two facts* His ability
to understand the business concerned, and His ability to form a rational
$udgement as to its e-ect on his interests. 5nsoundness of mind may arise
from lunacy, idiocy, or drucness etc. Contracts with such persons are oid
when entered into at a time when the person was in an unsound state of
mind.
6ust not dis.uali+ed from contracting by any law to which he is sub$ect
4 W(at a+e t(e e''e$t%a0 !3 &!$t+a&t. De2$e 4+%e7y
E''e$t%a0' !3 a -a0%1 C!$t+a&t* For an agreement to become a contract! it must
satis+es the following conditions*
A/+ee"e$t: ,-er by one party, and the acceptance by other party.
C!$'e$'#' a1 I1e": Consensus an idem means that both the parties agree
on the same thing in the same sense.
Le/a0 Re0at%!$'(%*: "t arises when both the parties know that they would be
attended by legal conse.uences if they default.
La)3#0 C!$'%1e+at%!$: Consideration means #&omething in return#. For a
alid contract, consideration must be lawful.
For example, A agrees to sell his house to B for /s.0(((((. Here, for A, the
consideration is /s.0((((( and for B, the consideration is House.
Ca*a&%ty !3 Pa+t%e': 1arties must be competent to contract, that is, any
party must not a minor, detain person etc.
F+ee C!$'e$t: Consent must be free, that is, it must not cause by coercion,
misrepresentation, fraud, undue in2uence etc.
La)3#0 !45e&t: %he ob$ect of contract must not be*
o "llegal or unlawful
o "mmoral
o ,pposed to public policy
Contract must be certain and capable of being performed.
Appropriate legal formalities must be performed like writing, registration,
witnesses, attestation etc.
8 De2$e I"*0%e1 & E9*+e''e1 C!$t+a&t'
E9*+e'' C!$t+a&t' "n an express contract, the parties state the terms, either orally
or in writing, at the time of its formation. %here is a de+nite written or oral o-er that
is accepted by the o-eree 7i.e., the person to whom the o-er is made8 in a manner
that explicitly demonstrates consent to its terms.
I"*0%e1 C!$t+a&t' Although contracts that are implied in fact and contracts
implied in law are both called implied contracts, a true implied contract consists of
obligations arising from a mutual agreement and intent to promise, which hae not
been expressed in words. "t is misleading to label as an implied contract one that is
implied in law because a contract implied in law lacks the re.uisites of a true
contract. %he term .uasi-contract is a more accurate designation of contracts
implied in law. "mplied contracts are as binding as express contracts. An implied
contract depends on substance for its existence! therefore, for an implied contract
to arise there must be some act or conduct of a party, in order for them to be
bound.
: W(at a+e t(e &!$t%$/e$t &!$t+a&t'. E9*0a%$
"n case where there is condition, then such contract is called Contingent Contract.
%herefore Contingent Contract means Conditional Contract. 9hen imposed and
condition is ful+lled, the Contingent Contract becomes alid and then parties hae
to perform their obligations. "f imposed and Condition is not ful+lled, the Contingent
Contract become :oid and then it need not be performed. &o Contingent Contract is
to be performed under some circumstances only.
Example: %here is a Contract between A and B according to which A has to sell his
goods which are in oyage, to B if the ship reaches the harbor safely. Here condition
can be seen and it is Contingent Contract. All indemnity contracts, guarantee
contracts and insurance contracts are Contingent Contracts. According to &ec. ;' of
"ndian Contracts Act, a Contract performance of which depends upon happening or
non happening of an un-certain eent is called Contingent Contract.
; De2$e !40%/at%!$ a$1 *e+3!+"a$&e !3 &!$t+a&t <!) *a+t%e' &a$
1%'&(a+/e 3+!" !40%/at%!$
8 P0ea'e 1e2$e t(e e=e&t' !3 +e3#'a0 a$1 a&&e*t t(e !=e+ !3
*e+3!+"a$&e A0'! 1e2$e t(e &!$1%t%!$' !3 !=e+
9here a promisor has made an o-er of performance to the promisee, and the o-er
has not been accepted, the promisor is not responsible for non-performance, nor
does he thereby lose his rights under the contract.
)ery such o-er must ful+ll the following conditions*-
"t must be unconditional!
"t must be made at a proper time and place, and under such circumstances
that the person to whom it is made may hae a reasonable opportunity of
ascertaining that the person by whom it is made is able and willing there and
then to do the whole of what he is bound by his promise to do
"f the o-er is an o-er to delier anything to the promisee, the promisee must
hae a reasonable opportunity of seeing that the thing o-ered is the thing
which the promisor is bound by his promise to delier. An o-er to one of
seeral $oint promisees has the same legal conse.uences as an o-er to all of
them,
I00#'t+at%!$
A contracts to delier to B at his warehouse, on the 'st 6arch, '3<;,'(( bales of
cotton of a particular .uality. "n order to make an o-er of a performance with the
e-ect stated in this section, A must bring the cotton to B4s warehouse, on the
appointed day, under such circumstances that B may hae a reasonable opportunity
of satisfying himself that the thing o-ered is cotton of the .uality contracted for,
and that there are '(( bales.
> De2$e ?!%$t L%a4%0%t%e'
9hen two or more persons hae made a $oint promise, then, unless a contrary
intention appears by the contract, all such persons, during their $oint lies, and,
after the death of any of them, his representatie $ointly with the surior or
suriors, and, after the death of the last surior, the representaties of all $ointly,
must ful+ll the promise.
10 I$ *e+3!+"a$&e !3 &!$t+a&t@ )(at %' %"*!+ta$&e !3 t%"e &
*0a&e. P0ea'e 1e2$e
11 <!) &!$t+a&t +e'&%$1 a$1 )(at a+e &!$'eA#e$&e' !3 +e'&%''%!$
!3 -!%1a40e &!$t+a&t.
%he contract will be rescind by following*
- By agreement* 6utual rescission, or rescission by agreement, is a discharge of
both parties from the obligations of a contract by a new agreement made after the
execution of the original contract but prior to its performance.
- By wrong or default of aderse party* A contract, whether oral or written, can be
rescinded on the ground of fraud.
- =on performance or breach* ,ne party to a contract can rescind it because of
substantial nonperformance or breach by the other party. %he party who knowingly
and willfully fails to perform cannot complain that the other party to the contract
has in$ured him or her by terminating the contract.
- %ime* A right to rescind must be exercised promptly or within a reasonable time
after the discoery of the facts that authori>e the right. A reasonable time is de+ned
by the circumstances of the particular case. %he rule that rescission must be prompt
does not operate where an excuse or $usti+cation for a delay is shown.
9hen a person at whose option a contract is oidable rescinds it, the other party
thereto need not perform any promise therein contained in which he is promisor.
%he party rescinding a oidable contract shall, if he hae receied any bene+t there
under from another party to such contract, restore such bene+t, so far as may be, to
the person from whom it was receied.
12 P0ea'e 1e2$e 4+ea&( !3 &!$t+a&t
B+ea&( !3 &!$t+a&t is a legal cause of action in which a binding agreement or
bargained-for exchange is not honored by one or more of the parties to the contract
by non-performance or interference with the other party4s performance. "f the party
does not ful+ll his contractual promise, or has gien information to the other party
that he will not perform his duty as mentioned in the contract or if by his action and
conduct he seems to be unable to perform the contract, he is said to breach the
contract.
16 <!) t! e't%"ate 1a"a/e' a$1 )(! &a$ 1! %t.
"n estimating the loss or damage arising from a breach of contract, the means
which existed of remedying the inconenience caused by the non-performance
of the contract must be taken into account.
14 Ca$ &!$t+a&t#a0 +%/(t' 4e +e'!0-%$/ 4y &!$'t%t#t%!$a0 5#+%'1%&t%!$ !3
<%/( C!#+t.
=o, because the contract lies between the parties.
18 P0ea'e 1e2$e C!$t+a&t !3 %$1e"$%ty
A contract, by which one party promises to sae the other from loss caused to him
by the conduct of the promisor himself, or by the conduct of any other person, is
called a #contract of indemnity#.
%his de+nition proides the following e''e$t%a0 e0e"e$t' -
'. %here must be a loss.
?. %he loss must be caused either by the promisor or by any other person.
;. "ndemni+er is liable only for the loss.
%hus, it is clear that this contract is contingent in nature and is enforceable only
when the loss occurs.
1: P0ea'e 1e2$e t(e +%/(t' !3 I$1e"$%ty (!01e+
%he promisee in a contract of indemnity, acting within the scope of his authority, is
entitled to recoer from the promisor-
7'8 all damages which he may be compelled to pay in any suit in respect of any
matter to which the promise to indemnify applies!
7?8 all costs which he may be compelled to pay in any such suit if, in bringing or
defending it, he did not contraene the orders of the promisor, and acted as it
would hae been prudent for him to act in the absence of any contract of indemnity,
or if the promisor authori>ed him to bring or defend the suit!
7;8 all sums which he may hae paid under the terms of any compromise of any
such suit, if the compromise was not contrary to the orders of the promisor, and was
one which it would hae been prudent for the promisee to make in the absence of
any contract of indemnity, or if the promisor authori>ed him to compromise the suit.
1; <!) "a$y *a+t%e' a+e %$ &!$t+a&t !3 /#a+a$tee. P0ea'e $a"e t(e"
A #contract of guarantee# is a contract to perform the promise, or discharge the
liability, of a third person in case of his default. %he person who gies the guarantee
is called the #surety#* the person in respect of whose default the guarantee is gien
is called the #principal debtor#, and the person to whom the guarantee is gien is
called the #creditor#. A guarantee may be either oral or written.
18 P0ea'e 1e2$e Ba%0ee 1#ty a$y 6 !3 t(e"
"n all cases of bailment the bailee is bound to take as much care of the goods
bailed to him as a man of ordinary prudence would, under similar
circumstances, take of his own goods of the same bulk, .uality and alue as the
goods bailed.
"f the bailee makes any use of the goods bailed, which is not according to the
conditions of the bailment, he is liable to make compensation to the bailor for
any damage arising to the goods from or during such use of them.
"f the bailee, without the consent of the bailor, mixes the goods of the bailor with
his own goods, in such a manner that it is impossible to separate the goods
bailed from the other goods and delier them back, the bailor is entitled to be
compensated by the bailee for the loss of the goods.
"f, by the default of the bailee, the goods are not returned, deliered or tendered
at the proper time, he is responsible to the bailor for any loss, destruction or
deterioration of the goods from that time.
1> <!) t! te+"%$ate t(e 4a%0"e$t 1e2$e &!$1%t%!$'
A gratuitous bailment is terminated by the death either of the bailor or of the
bailee.
20 P0ea'e 1e2$e t(e +%/(t' !3 2$1e+ /!!1'
%he +nder of goods has no right to sue the owner for compensation for trouble
and expense oluntarily incurred by him to presere the goods and to +nd out
the owner! but he may retain the goods against the owner until he receies such
compensation! and, where the owner has o-ered a speci+c reward for the return
of goods lost, the +nder may sue for such reward, and may retain the goods
until he receies it.
9hen a thing which is commonly the sub$ect of sale is lost, if the owner cannot with
reasonable diligence be found, or if he refuses, upon demand, to pay the lawful
charges of the +nder, the +nder may sell it@
7'8 when the thing is in danger of perishing or of losing the greater part of its alue,
or,
7?8 when the lawful charges of the +nder, in respect of the thing found, amount to
two-thirds of its alue.
21 P0ea'e 1e2$e &!$t+a&t !3 /#a+a$tee
A #contract of guarantee# is a contract to perform the promise, or discharge the
liability, of a third person in case of his default. %he person who gies the guarantee
is called the #surety#* the person in respect of whose default the guarantee is gien
is called the #principal debtor#, and the person to whom the guarantee is gien is
called the #creditor#. A guarantee may be either oral or written.
22 W(at %' 1%=e+e$&e 4et)ee$ %$1e"$%ty & G#a+a$tee.
26 P0ea'e 1e2$e &!C'#+et%e' a$1 t(e%+ 0%a4%0%t%e'
9here two or more persons are co-sureties for the same debt or duty, either
$ointly or seerally, and whether under the same or di-erent contracts, and
whether with or without the knowledge of each other, the co-sureties, in the
absence of any contract to the contrary, are liable, as between themseles, to
pay each an e.ual share of the whole debt, or of that part of it which remains
unpaid by the principal debtor.
24 P0ea'e 1e2$e &!$t%$#%$/ /#a+a$tee a$1 (!) %t &a$ +e-!,e
A guarantee which extends to a series of transactions is called a #continuing
guarantee#.
A continuing guarantee may at any time be reoked by the surety, as to future
transactions, by notice to the creditor.
%he death of the surety operates, in the absence of any contract to the contrary,
as a reocation of a continuing guarantee, so far as regards future transactions.
28 P0ea'e 1e2$e )(at 0%a4%0%ty %'
9here two persons contract with a third person to undertake a certain liability, and
also contract with each other that one of them shall be liable only on the default of
the other, the third person not being a party to such contract,
the liability of each of such two persons to the third person under the +rst contract
is not a-ected by the existence of the second contract, although such third person
may hae been aware of its existence.
2: P0ea'e 1e2$e *0e1/e & )(at &a00e1 t(e *a+t%e'.
%he bailment of goods as security for payment of a debt or performance of a
promise is called #pledge#. %he bailor is in this case called the #pawnor#. %he bailee
is called the #pawnee#.
2; W+%te t(+ee +%/(t' !3 Pa)$ee
1awnee4s right of retainer
'<;. %he pawnee may retain the goods pledged, not only for payment of the debt or
the performance of the promise, but for the interest of the debt, and all necessary
expenses incurred by him in respect of the possession or for the preseration of the
goods pledged.
1awnee not to retain for debt or promise other than that for which goods pledged
1resumption in case of subse.uent adances
'<A. %he pawnee shall not, in the absence of a contract to that e-ect retain the
goods pledged for any debt or promise other than the debt or promise for which
they are pledged! but such contract, in the absence of anything to the contrary,
shall be presumed in regard to subse.uent adances made by the pawnee.
1awnee4s right as to extraordinary expenses incurred
'<0. %he pawnee is entitled to receie from the pawnor extraordinary expenses
incurred by him for the preseration of the goods pledged.
1awneeBs right where pawnor makes default
'<C. "f the pawnor makes default in payment of the debt, or performance, at the
stipulated time of the promise, in respect of which the goods were pledged, the
pawnee may bring a suit against the pawnor upon the debt or promise, and retain
the goods pledged as a collateral security! or he may sell the thing pledged, on
giing the pawnor reasonable notice of the sale. "f the proceeds of such sale are less
than the amount due in respect of the debt or promise, the pawnor is still liable to
pay the balance. "f the proceeds of the sale are greater than the amount so due, the
pawnee shall pay oer the surplus to the pawnor.
28 W(at 1!e' a "ea$ *0e1/e 4y "e+&a$t%0e a/e$t.
9here a mercantile agent is, with the consent of the owner, in possession of
goods or the documents of title to goods, any pledge made by him, when acting
in the ordinary course of business of a mercantile agent, shall be as alid as if
he were expressly authori>ed by the owner of the goods to make the same!
proided that the pawnee acts in good faith and has not at the time of the
pledge notice that the pawnor has not authority to pledge.
2> De2$e Pa)$!+ a$1 )+%te (%' a$y t(+ee 1#t%e'
60 De2$e A/e$&%e' <!) t! a**!%$t a$ a/e$t.
As between the principal and third persons any person may become an agent,
but no person who is not of the age of ma$ority and of sound mind can become
an agent, so as to be responsible to his principal according to the proisions in
that behalf herein contained.
61 E9*0a%$ t(e a/e$t a#t(!+%t%e'
An authority is said to be express when it is gien by words spoken or written.
An authority is said to be implied when it is to be inferred from the
circumstances of the case! and things spoken or written, or the ordinary course
of dealing, may be accounted circumstances of the case.
62 De2$e S#4 A/e$t t! )(!" (e %' a$')e+a40e.
A #sub-agent# is a person employed by, and acting under the control of, the
original agent in the business of the agency.
%he sub-agent is responsible for his acts to the agent, but not to the principal,
except in case of fraud or wilful wrong.
66 <!) 1!e' a/e$&%e' te+"%$ate.
An agency is terminated by the principal reoking his authority! or by the agent
renouncing the business of the agency! or by the business of the agency being
completed! or by either the principal or agent dying or becoming of unsound
mind! or by the principal being ad$udicated an insolent under the proisions of
any Act for the time being in force for the relief of insolent debtors.
64 W(! &a$ +e-!,e' a/e$t a#t(!+%ty.
%he principal may, sae as is otherwise proided by the last preceding section,
reoke the authority gien to his agent at any time before the authority has
been exercised so as to bind the principal.
68 W(at a+e t(e *+%$&%*0e' 1#t%e' t!)a+1' a/e$t.
A/e$t t! 4e %$1e"$%2e1 a/a%$'t &!$'eA#e$&e' !3 0a)3#0 a&t'
???. %he employer of an agent is bound to indemnify him against the conse.uences
of all lawful acts done by such agent in exercise of the authority conferred upon
him.
A/e$t t! 4e %$1e"$%2e1 a/a%$'t &!$'eA#e$&e' !3 a&t' 1!$e %$ /!!1 3a%t(
??;. 9here one person employs another to do an act, and the agent does the act in
good faith, the employer is liable to indemnify the agent against the conse.uences
of that act, though it cause an in$ury to the rights of third persons.
C!"*e$'at%!$ t! a/e$t 3!+ %$5#+y &a#'e1 4y *+%$&%*a0D' $e/0e&t
??0. %he principal must make compensation to his agent in respect of in$ury caused
to such agent by the principal4s neglect or want of skill.
Sa0e' !3 G!!1 A&t:
1C De2$e 'a0e a$1 a/+ee"e$t t! 'e00
A #sale# is 7collo.uially8 a completed transaction where the only remaining duties of
the buyer may be timely re$ection after inspection, and the only remaining duty of
seller is to honor any express or implied warranty. %his assumes the full price was
paid during the sale and the goods were deliered, otherwise, the sale is not
technically complete.
An #agreement to sell# is a contract that enisions 7or de+nes8 a future sale, thus all
conditions precedent and other terms 7deliery, payment, etc8, continue to be
#executory#, that is, are yet to be fully carried out. A breach of this contract could
result in a court order of speci+c performance, or for damages caused by the loss of
the opportunity to buy or sell.
2C W(at a+e t(e e''e$t%a0' !3 'a0e'.
%he essentials of a alid sale are as follows*-
'8 According to section <, the seller must be a competent person to transfer.
?8 According to section C, the transferee must be a competent person and must not
be a person dis.uali+ed to be a transferee.
;8 According to section C, the sub$ect matter should be transferable immoable
property.
A8 %he ownership must be transferred.
08 %he transfer of ownership must be in exchange for price.
C8 %he price must be paid or promised to pay or partly paid and partly promised to
pay .
<8 %he deed of coneyance must be registered in case of transfer of a tangible
immoable property of the alue of D /s. '(( E- and upwards.
38 "n case of tangible immoable property of a alue less than /s. '(( E- , there
must be either a registered deed of coneyance, or deliery of property.
6C W(at a+e t(e 1%=e+e$&e 4et)ee$ &!$1%t%!$' a$1 )a++a$t%e'.
CONDITION:C
"t is de+ned in the following words, #A condition is stipulation essential breach to the
main purpose of the contract, the breach of which gie rise to a right to treat the
contract as repudiated.#
&o according the aboe de+nition it is clear that condition is ery essential for the
performance of a contract. %he breach of condition will be regarded as the breach of
the whole contract.
WARRANTE :C
&ales act de+nes the warranty in the following words, #A warranty is a stipulation
collateral to the main purpose of the contract the breach of which gies rise to a
claim for damages but not to a right to re$ect the goods and treat the contract as
repudiated.#
%he aboe de+nition shows that for the implementation of a contract warranty is not
essential. For the breach of warranty only damages can be claimed.
D%=e+e$&e !+ D%'t%$&t%!$ 4et)ee$ C!$1%t%!$ a$1 Wa++a$ty
1 D%=e+e$&e I$ I"*!+ta$&e:C
C!$1%t%!$: A condition is essential to the main purpose of a contract.
Wa++a$ty: Breach of warranty gies right to the party to claim the damage only.
2 D%=e+e$&e %$ R%/(t':C
C!$1%t%!$: Breach of condition gies right to the party to re$ect the contract.
Wa++a$ty: Breach of warranty gies right to the party to claim the damages only.
6 S#*e+%!+%ty !3 C!$1%t%!$:C
C!$1%t%!$: A breach of condition may be treated as a breach of warranty.
Wa++a$ty: A breach of warranty may not be treated as a breach of condition.
4 L%$, )%t( C!$t+a&t:C
C!$1%t%!$: A condition has a direct link with the essential part of the contract.
Wa++a$ty: A warranty has no direct link with the essential part of the contract.
4C W(at %' t(e 1%=e+e$&e 4et)ee$ /#a+a$t%e' a$1 )a++a$t%e'.
A )a++a$ty is a promise or guarantee gien. A )a++a$ty is usually a written
/#a+a$tee for a product and declares the maker4s responsibility to repair or replace
a defectie product or its parts. A /#a+a$tee is an agreement assuming
responsibility to perform, execute, or complete something and o-ering security for
that agreement. "t is a promise or an assurance, especially one gien in writing,
which attests to the .uality or durability of a product or serice, or a pledge that
something will be performed in a speci+ed manner. A guaranty is an undertaking or
promise that is the answer to or payment for a debt or default. A guaranty is also
something gien or held as security until a debt is paid or the performance of a duty
is ful+lled. By the way, warrantee is the person to whom a warranty is made and
guarantee is one who makes a guaranty.
8C De2$e Ca-et e"*ta+.
Fet the buyer beware* the principle that the seller of a product cannot be held
responsible for its .uality unless it is guaranteed in a warranty.
:C Wa+1 F' <!!4' Ca'e@ +e0ate %t t! Ca-%t e"*ta+
9hile purchasing goods buyer must be ery careful, at his own interest, buyer has
to select such goods only which are not of defectie nature. "n case where buyer,
negligently purchases defectie goods, he cannot repudiate the contract of sale. "t
is caeat emptor rule.
A case on this point is 9ard :s Hobbs. "n this case a contract of sale gets formed
between A and B according to the terms of which A has to sell an animal from his
farm to B. =egligently B selects an animal which has been su-ering from some
sickness. %hat sickness is characteri>ed by propagation from one animal to the
other and the ultimate e-ect is death of the animal. "t should be noted that the
sickness is externally isible. B, negligently selects such animal and as a result all
animals present in BDs farm comes across death. B sues A. Court decides that B is
negligent, he cannot blame the seller for his 7A8 own negligence and therefore B
cannot claim any compensation. %hus cait emptor rule protects the seller. %his rule
is unfaorable to buyer.
;C De2$e 'a0e 4y 1e'&+%*t%!$ a$1 'a0e 4y 'a"*0e'
A sale that is made without the buyer seeing the goods and haing only a
description of them from the seller * "n sales by description , there is an implied
condition that the goods shall correspond with the description in the catalogue .
&ale by sample is a sale in which the buyer purchases goods under an agreed
condition that goods sold are as good as one shown to the buyer as a sample.
&ample is a part of transaction constituting express guarantee that whole goods
conform to the sample.
8C Ge+ne deliery and part deliery.
>C De2$e +%/(t' !3 #$*a%1 'e00e+'
"n simple words, #5npaid seller# means a person who has sold the goods for a price
but price has not been paid to him.
&ales act de+nes the #unpaid seller# in the following word *
U$*a%1 Se00e+ I' A Pe+'!$: C
% %o whom the whole price has not been paid or tendered.
%% And where a bill of exchange or other negotiable instruments has been accepted
by him as a condition on which it was receied has not been ful+lled by reason of
dishonor of the instrument or otherwise.
"t is also declares that any person who is in the position of a seller like agent is also
considered seller.
Rights Of Unpaid Seller or Lien Of Unpaid Seller :-
He has following important rights against goods.
1 R%/(t !3 L%e$ :C
For the recoery of price an unpaid seller has a right to keep the goods in his own
possession.
E9a"*0e :C 6r. Hunny sells the goods to 6r. Abhi$it for /s. '( lac. 6r. Abhi$it pays 0
lac and promises to pay the remaining 0 lac after two month. 6r. Hunny has a right
of lien on the goods.
2 R%/(t !3 St!**%$/ :C
"f buyer becomes insolent, an unpaid seller has a right of stopping the goods in
transit.
E9a"*0e :C #H# sells '(( bales of cotton to #I# but deliery will be two stages. #H#
deliers 0( bales +rst. Fater on he comes know that #I# has become insolent. #H#
can stop deliery of bales in transit.
6 R%/(t !3 Re'a0e :C
An unpaid seller is considered the owner of the goods until he is not paid by the
buyer. &o he has a right to sell his goods sub$ect to few conditions.
E9a"*0e :C #H# sells one horse to #I# on credit. #I# does not pay. #H# can resell to
other person.
4 R%/(t !3 De0%-e+y:
%he unpaid seller has a right of withholding the deliery of goods where the
property in the goods has not passed to the buyer.
8 R%/(t !3 C0a%":
%he unpaid seller has also a right to claim the buyer for the prices of goods.
% S#%t F!+ P+%&e: C "f the goods hae passed to the buyer and buyer refuse to pay
the price, the seller can sue for price.
E9a"*0e: C #6# sells the goods to #I# for /s. 0 lac. #I# refuses to pay. #6# can sue
for price.
%% S#%t 3!+ Da"a/e' F!+ N!$ A&&e*ta$&e: C "f buyer refuses to accept and pay
for the goods, the seller has the right to sue him for damages non-acceptance. He
can recoer only damages and not full price.
%%% S#%t 3!+ I$te+e't & S*e&%a0 Da"a/e': C %he unpaid seller can recoer the
reasonable interest on the unpaid price goods sold. %he seller can also sue the
buyer for special damages where both the parties are aware of such loss at the time
of contract.
10C I$ *e+3!+"a$&e !3 &!$t+a&t )(at a+e t(e 1#t%e' !3 'e00e+ a$1
4#ye+'.
11C De2$e te+"%$at%!$ !3 0%e$
Termination Of Lien:- lien n. any oJcial claim or charge against property or funds
for payment of a debt or an amount owed for serices rendered. A lien is usually a
formal document signed by the party to whom money is owed, and sometimes by
the debtor who agrees to the amount due. A lien carries with it the right to sell
property, if necessary, to obtain the money.
An unpaid seller loses the lien in the following cases*
1 Te+"%$at%!$ By Wa%-e+:C "f an unpaid seller himself waies his right of lien then
it will be terminated.
2 G!!1' %$ B#ye+D' P!''e''%!$:C 9hen a buyer or his agent obtains the
possession for goods lawfully, unpaid seller lien terminates.
6 D!e' N!t Re'e+-e T(e R%/(t !3 D%'*!'a0:C 9hen unpaid seller fails to resere
the right of disposal of the goods at the times of deliery to the bailee for
transferring it to the buyer. %hen this right of lien terminates.
12C Ge+ne special demages.