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THE CONTRACT ACT, 1872

ACT NO. IX OF 1872


[25th April, 1872]
WHEREAS it is expedient to define and amend certain parts of the law relating to contracts:
It is hereby enacted as follows:PRELIMINARY
1. Short title. Extent Commencement.
This Act may be called the Contract Act, 1872. It extends to the whole of Bangladesh; and it shall come
into force on the first day of September, 1872. Nothing herein contained shall affect the provisions
of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor
any incident of any contract, not inconsistent with the provisions of this Act.
2. Interpretation clause,
In this Act the following words and expressions are used in the following senses, unless a contrary
intention appears from the text:(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)

When one person signifies to another his willingness to do or to abstain from doing anything,
with a view to obtaining the assent of that other to such act or abstinence, he is said to make a
proposal:
When the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted. A proposal, when accepted becomes a promise:
The person making the proposal is called the "promisor" and the person accepting the
proposal is called the "promisee:
When at the desire of the promisor, the promisee or any other has done or abstained 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 the promise :
Every promise and every set of promises, forming the consideration for each other, is an
agreement
Promises which form the consideration or part of the consideration for each other are called
reciprocal promises:
An agreement not enforceable by law is said to be void:
An agreement enforceable by law is a contract:
An 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, is a voidable contract:
A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.
CHAPTER I
OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS

3. Communication, acceptance and revocation of proposalsThe communication of proposals, the acceptance of proposals, and the revocation of proposals and
acceptances, respectively, are deemed to be made by any act or omission of the party proposing,
accepting or revoking by which he intends to communicate such proposal, acceptance or revocation, or
which has the effect of communicating it.
4. Communication when completeThe communication of a proposal is complete when it comes to the knowledge of the person to whom
it is made.
The communication of an acceptance is complete,as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of
acceptor ;
as against the acceptor, when it comes to the knowledge of the proposer.

The communication of a revocation is complete,as against the person who makes it when it is put into course of transmission to the person to whom it is
made, so as to be out of the power of the person who makes it ;
as against the person to whom it is made, when it comes to his knowledge.
5. Revocation of proposals and acceptancesA proposal may be revoked at any time before the communication of its acceptance is complete as
against the proposal, but not afterwards.
An acceptance may be revoked at any time before the communication of the acceptance is complete as
against the acceptor, but not afterwards.
6. Revocation how madeA proposal is revoked (1) By the communication of notice of revocation by the proposer to the other party;
(2) By the laps of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed,
by the lapse of a reasonable time, without communication of the acceptance;
(3) By the failure of the acceptor to fulfil a condition precedent to acceptance; or
(4) By the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge
of the acceptor before acceptance.
7. Acceptance must be absoluteIn order to convert a proposal into a promise, the acceptance must (1)
Be absolute and unqualified;
(2)

Be expressed in some usual and reasonable manner, unless the proposal prescribes the manner
in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted,
and the acceptance is not made in such manner, the proposer may, within a reasonable time
after the acceptance is communicated to him, insist that his proposal shall be accepted in the
prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance.

8. Acceptance by performing conditions or receiving considerationPerformance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal
promise which may be offered with a proposal, is an acceptance of the proposal.
9. Promises express and impliedIn so far as the proposal or acceptance of any promise is made in words, the promise is said to be
express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said
to be implied.
CHAPTER II
OF CONTRACTS, VOIDABLE CONTRACTS AND AGREEMENTS
10. What agreements are contractsAll agreements are contracts if they are made by the free consent of parties competent to contract, for a
lawful consideration and with a lawful object, and are not hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in Bangladesh, and not hereby expressly
repealed, by which any contract is required to be made in writing or in the presence of witnesses, or
any law relating to the registration of documents.

11. Who are competent to contractEvery person is competent to contract who is of the age of majority according to the law to which he is
subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is
subject.
12. What is a sound mind for the purposes of contractingA 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 of forming a rational judgment as to its effect upon his
interests.
A person, who is usually of unsound mind, but occasionally of sound mind, may make a contract when
he is of sound mind,
A person, who is usually of sound mind, but occasionally of unsound mind, may not make a contract
when he is of unsound mind.
13. "Consent definedTwo or more persons are said to consent when they agree upon the same thing in the same sense.
14. "Free consent" definedConsent is said to be free when it is not caused by (1) Coercion, as defined in section 15, or
(2) Undue influence, as defined in section 16, or
(3) Fraud, as defined in section 17, or
(4) Misrepresentation, as defined in section 18, or
(5) Mistake, subject to the provisions of sections 20, 21, and 22.
Consent is said to be so caused when it would not have been given but for existence of such coercion,
undue influence, fraud, misrepresentation or mistake.
15. "Coercion" defined"Coercion is the committing, or threatening to commit, any act forbidden by the *1[Penal Code] 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 agreement.
Explanation. - It is immaterial whether the Penal Code is or is not force in the place where the coercion
is employed.
16. "Undue influence" defined(1) A contract is said to be induced by "undue influence" where 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 uses that
position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed
to be in a position to dominate the will of another(a)

Where he holds a real or apparent authority over the other or where he stands in a fiduciary
relation to the other; or
(b)
Where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.
(3) Where a person who is in position to dominate the will of another, enters into a contract with him,
and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, burden
of proving that such contract was not induced by undue influence shall lie upon the person in a position
to dominate the will of the other.
Nothing in this sub-section shall affect the Provisions of section 111 of the Evidence Act, 1872]
17. "Fraud" defined-

"Fraud" means and includes any of the following acts committed by a party to a contract, or with his
connivance, or by his agent, with intent to deceive another party there to or his agent, or to induce him
to enter into the contract :(1) The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
(2) The active concealment of a fact by one having knowledge or belief of the fact;
(3) A promise made without any intention of performing it;
(4) Any other act fitted to deceive;
(5) Any such act or omission as the law specially declares to be fraudulent.
Explanation. - Mere silence as to facts likely to affect the willingness of a person to enter into a
contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is
the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.
18. "Misrepresentation" defined"Misrepresentation" means and includes(1) The 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;
(2) any breach of duty which without an intent to deceive, gains an advantage to the person committing
it, or any one claiming under him, misleading another to his prejudice or the prejudice of any one
claiming under him ;
(3) Causing, however innocently, a party to an agreement to make a mistake as to the substance of the
thing which is the subject of the agreement.
19. Voidability of agreements without free consentWhen consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a
contract voidable at the option of the party whose consent was so caused.
A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit,
insist that the contract shall be performed, and that he shall be put in the position in which he would
have been if the representations made had been true.
Exception.
If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of
section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the
means of discovering the truth with ordinary diligence.
Explanation.
A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such
fraud was practiced, or to whom such misrepresentation was made, does not render a contract voidable.
19A. Power to set a side contract induced by undue influenceWhen consent to an agreement is caused by undue influence, the agreement is a contract voidable at
the option of the party whose consent was so caused.
Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has
received any benefit thereunder, upon such terms and conditions as to the Court may seem just.
20. Agreement void where both parties are under mistake as to matter of factWhere both the parties to an agreement are under a mistake as to a matter of fact essential to the
agreement, the agreement is void.
Explanation. - An erroneous opinion as to the value of the thing which forms the subject-matter of the
agreement is not to be deemed a mistake as to a matter of fact.
21. Effect of mistakes as to law-

A contract is not voidable because it was caused by a mistake as to any law in force in Bangladesh; but
a mistake as to a law not in force in Bangladesh has the same effect as a mistake of fact.
22. Contract caused by mistake of one party as to matter of factA contract is not voidable merely because it was caused by one of the parties to being under a mistake
as to a matter of fact.
23. What considerations and objects are lawful and what notThe consideration or object of an agreement is lawful, unless* It is forbidden by law; or
* is of such a nature that, if permitted, it would defeat the provisions of any law; or
* is fraudulent; or
* Involves or implies injury to the person or property of another; or the Court regards it as
immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every
agreement of which the object or consideration is unlawful is void.
25. Agreement without consideration void, unless it is in writing and registered, or is a promise to
Compensate for something done, or is a promise to pay a debt barred by limitation lawAn agreement made without consideration is void, unless (1) it is expressed in writing and registered under the law for the time being in force for the registration
of documents, and is made on account of natural love and affection between parties standing in a near
relation to each other ; or unless
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done
something for the promisor, or something which the promisor was legally compellable to do, or unless
(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent
generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor
might enforced payment but for the law for the limitation of suits.
In any of these cases, such an agreement is a contract.
Explanation 1.
Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually
made.
Explanation 2.
An agreement to which the consent of the promisor is freely given is not void merely because the
consideration is inadequate; but the inadequacy of the consideration may be taken into account by the
Court in determining the question whether the consent of the promisor was freely given.
26. Agreement in restraint of marriage voidEvery agreement in restrain of the marriage of any person, other than a minor, is void.
27. Agreement in restraint of trade voidEvery agreement by which any one is restrained from exercising a lawful profession, trade or business
of any kind, is to that extent void.
Exception 1.
One who sells the good-will of a business may agree with the buyer to refrain from carrying on a
similar business, within specified local limits, so long as the byre, or any person deriving title to the
good-will from him, carries on a like business therein: Provided that such limits appear to the Court
reasonable, regard being had to the nature of the business.
28. Agreement in restraint of legal proceedings void-

Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or
in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the
time within which he may thus enforce his rights, is void to that extent.
Exception 1.
This section shall not render illegal a contract by which two or more persons agree that any dispute
which may arise between them in respect of any subject or class of subjects shall be referred to
arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the
disputed so referred.
When such a contract has been made, a suit may be brought for its specific performance, and if a suit,
other than for such specific performance, or for the recovery of the amount so awarded, is brought by
one party to such contract against any other such party in respect of any subject which they have so
agreed to refer, the existence of such contract shall be a bar to the suit.
Exception 2. Nor shall this section render illegal any contract in writing, by which two or more persons agree to
refer to arbitration any question between them which has already arisen, or affect any provision of any
law in force for the time being as to references to arbitration
29. Agreements void uncertaintyAgreements, the meaning of which is not certain, or capable of being made certain, are void.
30. Agreements by way of wager voidAgreements by way of wager are void; and no suit shall be brought for recovering anything alleged to
be own on any wager, or entrusted to any person to abide the result of any game or other uncertain
event on which wager is made.
The section shall not be deemed to render unlawful a subscription, or contribution or agreement to
subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the
value or amount of five hundred taka or upwards, to be awarded to the winner or winners of any horse
race.*
Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to
which the provisions of section 294A of the Penal Code apply.
CHAPTER III
OF CONTINGENT CONTRACTS
36. Agreement contingent on impossible events voidContingent agreements to do or not to do anything, if an impossible event happens, are void, whether
the impossibility of the event is known or not to the parries to the agreement at the time when it is
made.

CHAPTER IV
OF THE PERFORMANCE OF CONTRACTS
Contracts which must be performed
37. Obligation of parties to contractsThe parties to a contract must either perform, or offer to perform, their respective promises, unless
such performance is dispensed with or excused under the provisions of this Act, or of any other law.
Promises bind the representatives of the promisors in case of the death of such promisors before
performance, unless a contrary intention appears from the contract.
38. Effect of refusal to accept offer of performance-

Where a promisor has made an offer of performance to the promisee, and the offer has not been
accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights
under the contract.
Every such offer must fulfil the following conditions:(1) it must be unconditional :
(2) it must be made at a proper time and place, and under such circumstances that the person to whom
it is made may have 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 :
(3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable
opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to
deliver.
An offer to one of several joint promisees has the same legal consequences as an offer to all of them.
39. Effect of refusal of party to perform promise whollyWhen a party to a contract has refused to perform, or disabled himself from performing his promise in
its entirety the promisee may put an end to the contract, unless he has signified by words or conduct,
his acquiescence in its continuance.
40. Person by whom promise is to be performedIf it appears from the nature of the case that it was the intention of the parties to any contract that any
promise contained in it should be performed by the promisor himself, such promise must be performed
by the promisor. In other cases, the promisor or his representatives may employ a competent person to
perform it.
41. Effect of accepting performance from third personWhen a promisee accepts performance of the promise from a third person, he cannot afterwards
enforce it against the promisor.
55. Effect of failure to perform at fixed time, in contract in which time is essential.
Effect of such failure when time is not essential.
Effect of acceptance of performance at time other than that agreed upon.
When a party to a contract promises to do a certain thing at or before a specified time; and fails to do
any such thing at or the specified time, the contract, or so much of it as has not been performed,
becomes voidable at the option of the promisee, if the intention of the parties was that time should be
of the essence of the contract.
If it was not the intention of the parties that time should be of the essence of the contract, the contract
does not become voidable by the failure to do such thing at or before the specified time ; but the
promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.
If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time
agreed, the promisee accepts performance of such promise at any time other than that agreed, the
promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at
the time agreed, unless, at the time of such acceptance he gives notice to the promisor of his intention
to do so.

56. Agreement to do impossible Act. Contract to do act afterwards becoming impossible or


unlawful.
Compensation for loss through non-performance of act known to be impossible or unlawfulAn agreement to do an act impossible in it self is void.

A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some
event which the promissor could not prevent, unlawful, becomes void when the act becomes
impossible or unlawful.
Where one person has promised to do something which he knew, or, with reasonable diligence, might
have known, and which the promisee did not know to be impossible or unlawful, such promisor must
make compensation to such promisee for any loss which such promisee sustains through the nonperformance of the promise.
62. Effect of notation, rescission and alteration of contractIf the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original
contract need not be performed.
63. Promisee may dispense with or remit performance of promise.
Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to
him or may extend the time for such performance, or may accept inside of it any satisfaction which he
thinks fit.
64. Consequences of rescission of voidable contractWhen a person at whose option a contract is voidable rescinds it, the other party thereto need not
perform any promise therein contained in which he is promisor. The party rescinding a voidable
contract shall, if he have received any benefit thereunder from another party to such contract, restore
such benefit, so far as may be, to the person from whom it was received.
65. Obligation of person who has received advantage under void agreement or contract that
becomes voidWhen an agreement is discovered to be void, or when a contract becomes void, any person who has
received any advantage under such agreement or contract is bound to restore it, or to make
compensation for it to the person from whom he received it.
CHAPTER V
OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT
68. Claim for necessaries supplied to person incapable of contracting, or on his account.
If a person, incapable of entering into a contract, or any one whom he is legally bound to support, is
supplied by another person with necessaries suited to his condition in life, the person who has furnished
such supplies is entitled to be reimbursed from the property of such incapable person.
CHAPTER VI
OF THE CONSEQUENCES OF BREACH OF CONTRACT
75. Party rightfully rescinding contract entitled to compensation
A person who rightly rescinds a contract is entitled to compensation for any damage which he has
sustained through the non-fulfilment of the contract.

CHAPTER X
AGENCY
Appointment and Authority of Agents
182. "Agent" and "principal" defined
An "agent" is a person employed to do any act for another or to represent another in dealings with third
persons. The person for whom such act is done, or who is represented, is called the "principal".
183. Who may employ agent

Any person who is of the age of majority according to the law to which he is subject, and who is of
sound mind, may employ an agent.
184. Who may be an agent
As between the principal and third persons any person may become an agent, but no person who is not
of the age of majority and sound mind can become an agent, so as to be responsible to his principal
according to the provisions in that behalf herein contained.
185. Consideration not necessary
No consideration is necessary to create an agency.
186. Agent's authority may be expressed or implied
The authority of an agent may be expressed or implied.
187. Definitions of express and implied authority
An authority is said to be express when is given 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.
188. Extent of agent's authority
An agent having an authority to do an act has authority to do every lawful thing which is necessary in
order to do such act.
An agent having an authority to carry on a business has authority to do every lawful thing necessary for
the purpose, or usually done in the course of conduction such business.
189. Agent's authority in an emergency
An agent has authority, in an emergency; to do all such acts for the purpose of protecting his principal
from loss as would be done by a person of ordinary prudence, in his own case, under similar
circumstances.
Ratification
196. Right of person as to acts done for him without his authority.
Effect of ratification.
Where acts are done by one person on behalf of another, but without his knowledge or authority, he
may elect to there, but without his knowledge or authority, he may elect to ratify or to disown such
acts. If he ratifies them, the same effects will follow as if they had been performed by his authority.
197. Ratification may be expressed or implied
Ratification may be expressed or may be implied in the conduct of the person on whose behalf the acts
are done.
198. Knowledge requisite for valid ratification
No valid ratification can be made by a person whose knowledge of the case is materially defective.

201. Termination of agency


An agency is terminated by the principal revoking 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 adjudicated an insolvent under the
provisions of any Act for the time being in force for the relief of insolvent debtors.
205. Compensation for revocation by principal or renunciation by agent

Where there is an express or implied contract that the agency should be continued for any period of
time, the principal must make compensation to the agent, or the agent to the principal, as the case may
be, for any previous revocation or renunciation of the agency without sufficient cause.
206. Notice of revocation of renunciation
Reasonable notice must be given of such revocation or renunciation; otherwise the damage thereby
resulting to the principal or the agent, as the case may be, must be made good to the one by the other.
208. when termination of agent's authority takes effect as to agent, and as to third persons
The termination of the authority of an agent does not so far as regards the agent, take effect before it
becomes known to him, or, so far as regards third persons, before it becomes known to them.
209. Agent's duty on termination of agency by principal's death or insanity
When an agency is terminated by the principal dying or becoming of unsound mind, the agent is bound
to take, on behalf of the representatives of his late principal, all reasonable steps for the protection and
preservation of the interests entrusted to him.
Effect of agency on contract with third persons
226. Enforcement and consequences of agent's contracts
A contract entered into through an agent, and obligations arising from acts done by an agent, may be
enforced in the same manner, and will have the same legal consequences, as if the contracts had been
entered into and the acts done by the principal in person.
227. Principal how far bound, when agent exceeds authority.
An agent does more than he is authorized to do, and when the part of what he does, which is within his
authority, can be separated from the part which is beyond his authority, so much only of what he does
as is within his authority is binding as between him and his principal.
228. Principal not bound when excess of agent's authority is not separable.
An agent does more than he is authorized to do, and what does beyond the scope of his authority
cannot be separated from what is within it, the principal is not bound to recognize the transaction.
237. Liability of principal inducing belief that agent's unauthorized acts were authorized-When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his
principal, the principal is bound by such acts or obligations if he believe that such acts and obligations
were within the scope of the agent's authority.
238. Effect, on agreement, of misrepresentation or fraud by agent.
Misrepresentations made, or frauds committed, by agents acting in the course of their business for their
principals, have the same effect on agreements made by such agents as if such misrepresentations or
frauds had been made, or frauds committed, by agents, in matters which do not fall within their
authority, do not affect their principals.

10

Sale of Goods Act, 1930


(III of 1930)
[15th March, 1930]
An Act to define and amend the law relating to the sale of goods
Whereas it is expedient to define and amend the law relating to the sale of goods;
It is hereby enacted as follows-Chapter I
Preliminary
1. Short Title, Extent and Commencement
(1) This Act may be called the Sale of Goods Act, 1930.
(2) It extends to the whole of Bangladesh.
(3) It shall come into force on the first day of July, 1930.
2. Definitions
In this Act, unless there is anything repugnant in the subject or context,-(1)
"Buyer" means a person who buys or agrees to buy goods;
(2)"
delivery" means voluntary transfer of possession from one person to another;
(3)
Goods are said to be in a "deliverable state" when they are in such state that the buyer would
under the contract be bound to take delivery of them;
(4)
"document of title to goods" includes a bill of lading, dock-warrant, warehouse keeper's
certificate, wharfingers' certificate, railway receipt, warrant or order for the delivery of goods
and any other document used in the ordinary course of business as proof of the possession or
control of goods, or authorising or purporting to authorise, either by endorsement or by
delivery, the possessor of the document to transfer or receive goods thereby represented;
(5)
"Fault" means wrongful act or default;
(6)
"Future goods" means goods to be manufactured or produced or acquired by the seller after
the making of the contract of sale;
(7)
"goods" means every kind of moveable property other than actionable claims and money; and
includes 5[electricity, water, gas,] stock and shares, growing crops, grass, and things attached
to or forming part of the land which are agreed to be severed before sale or under the contract
of sale;
(8)
a person is said to be "insolvent" who has ceased to pay his debts in the ordinary course of
business, or cannot pay his debts as they become due, whether he has committed an act of
insolvency or not;
(10)
"Price" means the money consideration for a sale of goods;
(11)
"Property" means the general property
in
goods, and not merely a special
property;
(12)
"Quality of goods" includes their state or condition;
(13)
"Seller" means a person who sells or agrees to sell goods;
(14)
"Specific goods" means goods identified and agreed upon at the time a contract of sale is
made; and
(15)
Expressions used but not defined in this Act and defined in the Contract Act, 1872, (IX of
1872) have the meanings assigned to them in that Act.
Chapter II
Formation of the Contract
Conditions and warranties
12. Condition and Warranty
(1) A stipulation in a contract of sale with reference to goods which are the subject thereof may be a
condition or a warranty.

11

(2) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives
rise to a right to treat the contract as repudiated.
(3) A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives
rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.
(4) Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the
construction of the contract. A stipulation may be a condition, though called a warranty in the contract.
Chapter III
Effects of the Contract
Transfer of Property as between Seller and Buyer
18. Goods must be ascertained
Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to
the buyer unless and until the goods are ascertained.
19. Property Passes when Intended to Pass
(1) Where there is a contract for the sale of specific or ascertained goods the property in them is
transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the
contract, the conduct of the parties and the circumstances of the case,
(3) Unless a different intention appears, the rules contained in sections 20 to 24 are rules for
ascertaining the intention of the parties .as to the time at which the property in the goods is to pass to
the buyer.
20. Specific Goods in a Deliverable State
Where there is an unconditional contract for the sale of specific goods in a deliverable state, the
property in the goods passes to the buyer when the contract is made, and it is immaterial whether the
time of payment of the price or the time of delivery of the goods, or both, is postponed.
21. Specific Goods to be put into a Deliverable State
Where there is a contract of the sale of specific goods and the seller is bound to do something to the
goods for the purpose of putting them into a deliverable state, the property does not pass until such
thing is done and the buyer has notice thereof.
22. Specific Goods in a Deliverable State, when the Seller has to do anything thereto in order to
Ascertain Price
Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to
weigh, measure, test or do some other act or thing with reference to the goods for the purpose of
ascertaining the price, the property does not pass until such act or thing is done and the buyer has
notice thereof.
23. Sale of Unascertained Goods and Appropriation
(1) Where there is a contract for the sale of unascertained or future goods by description and goods of
the description and in a deliverable state are unconditionally appropriated to the contract, either by the
seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods
thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either
before or after the appropriation is made.
Delivery to Carrier
(2) Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other
bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not

12

reserve the right of disposal he is deemed to have unconditionally appropriated the goods to the
contract.
24. Goods Sent on Approval" or "On Sale or Return
When goods are delivered to the buyer on approval or "on sale or return" or other similar terms, the
property therein passes to the buyer(a) When he signifies his approval or acceptance to the seller or does any other act adopting the
transaction;
(b) If he does not signify his approval or acceptance to the seller but retains the goods without giving
notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such
time, and, if no time has been fixed, on the expiration of a reasonable time.
26. Risk Prima Facie Passes with Property
Unless otherwise agreed, the goods remain at the seller's risk until the property therein is transferred to
the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer's risk
whether delivery has been made or not.
Provided that, where delivery has-been delayed through the fault of either buyer or seller, the goods are
at the risk of the party in fault as regards any loss which might not have occurred but for such fault :
Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as
a bailee of the goods of the other party.
Transfer of Title
27. Sale by Person not the Owner
Subject to the provisions of this Act and of any other law for the time being in force, where goods are
sold by a person who is not the owner thereof and who does not sell them under the authority or with
the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the
owner of the goods is by his conduct precluded from denying the seller's authority to sell :
Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or
of a document of title to the goods, any sale made by him, when acting in the ordinary course of
business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the
goods to make the same; provided that the buyer acts in good faith and has not at the time of the
contract of sale notice that the seller has not authority to sell.
28. Sale by one of Joint Owners
If one of several joint owners of goods has the sole possession of them by permission of the co-owners,
the property in the goods is transferred to any person who buys them of such joint owner in good faith
and has not at the time of the contract of sale notice that the seller has not authority to sell.
29. Sale by person in Possession under Voidable Contract
When the seller of goods has obtained possession thereof under a contract voidable under section 19 or
section 19A of the Contract Act, (IX of 1872), but the contract has not been rescinded at the time of the
sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without
notice of the seller's defect of title.
Chapter IV
Performance of the Contract
31. Duties of Seller and Buyer
It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in
accordance with the terms of the contract of sale.
32. Payment and Delivery are Concurrent Conditions
Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that
is to say, the seller shall be ready and willing to give possession of the goods to the buyer in exchange
for the price, and the buyer shall be ready and willing to pay the price in exchange for possession of the
goods.

13

33. Delivery
Delivery of goods sold may be made by doing anything which the parties agree shall be treated as
delivery or which has the effect of putting the goods in the possession of the buyer or of any person
authorised to hold them on his behalf.
39. Delivery to Carrier or Wharfinger
(1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to
the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer, or delivery of the goods to a wharfinger for safe custody, is prima facie
deemed to be a delivery of the goods to the buyer.
(2) Unless otherwise authorised by the buyer, the seller shall make such contract with the carrier or
wharfinger on behalf of the buyer as may be reasonable having regard to the nature of the goods and
the other circumstances of the case. If the seller omits so to do and the goods are lost or damaged in
course of transit or whilst in the custody of the wharfinger, the buyer may decline to treat the delivery
to the carrier or wharfinger as a delivery to himself, or may hold the seller responsible in damages.
(3) Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea
transit, in circumstances in which it is usual to insure, the seller shall give such notice to the buyer as
may enable him to insure them during their sea transit, and if the seller fails so to do, the goods shall be
deemed to be at his risk during such sea transit.
40. Risk Where Goods are delivered at Distant Place
Where the seller of goods agrees to deliver them at his own risk- at a place other than that where they
are when sold, the buyer shall, nevertheless, unless otherwise agreed, take any risk of deterioration in
the goods necessarily incident to the course of transit.
41. Buyer's Right of Examining the Goods
(1) Where goods are delivered to the buyer which he has not previously examined, he is not deemed to
have accepted them unless and until he has had a reasonable opportunity of examining them for the
purpose of ascertaining whether they are in conformity with the contract.
(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on
request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of
ascertaining whether they are in conformity with the contract.
42. Acceptance
The buyer is deemed to have accepted the goods when he intimates to the seller, that he has accepted
them, or when the goods have been delivered to him and he does any act in relation to them which is
inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains
the goods without intimation to the seller that he has rejected them.
43. Buyer not Bound to Return Rejected Goods
Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having
the right so to do, he is not bound to return them to the seller, but it is sufficient if he intimates to the
seller that he refuses to accept them.
63. Reasonable Time A Question of Fact
Where in this Act any reference is made to a reasonable time, the question what is a reasonable time is
a question of fact.

14

THE COMPANIES ACT 1994


(Published by Notification No. SRO 177-law dated 1-10-95. of
Ministry of Commerce)
An Act to consolidate and amend the law relating to companies and certain other associations.
WHEREAS it is expedient to consolidate and amend the law relating to companies and certain other
Associations;
It is hereby enacted as follows:
PART-I
PRELIMINARY
1. Short title and commencement
(1) This Act may be called the Companies Act, 1994.
(2) It shall come into force on such rate as the Government may, by notification in the Official,
Gazette, appoint.
2. Definitions
(1) In this Act, unless there is anything repugnant in the subject or context,(a)
"articles" means the articles of association of a company including, so far as they apply to the
company, the regulations contained in Schedule I to this Act. :
Provided that the article of association of a company framed under any law relating to
companies at any time in force before the commencement of this Act shall, so far as they are
not inconsistent with the provisions of this Act, be deemed to be the articles of association of
that company framed in
accordance with the provisions of the Act:
(c)
"company" means a company formed and registered under this Act or an existing company;
(e)
"debenture" includes debenture stock, bonds and any other securities of a company, whether
constituting a charge on the assets of company or not;
(f)
"director" includes any person occupying the position of director by whatever name called;
(h)
"existing company" means a company formed and registered under any law relating to
companies in force at any time before the commencement of this Act, and is in operation after
commencement of this Act,
(k)
"manager" means an individual who, subject to the superintendence, control and direction of
the Board of Directors, has the management of the whole, or substantially the whole, of the
affairs and business of a company, and includes a director or any other person occupying the
position of a manager, by whatever name called, and whether under a contract of service or
not;
(l)
"managing agent' means a person, firm or company by whatever name called, who or which
is entitled to the management of the whole affairs and business of a company by virtue of an
agreement with the company, and under the control and direction of the directors except to the
extent, if any, otherwise provided for in the agreement;
(m)
"managing director" means a director who, by virtue of an agreement with the company or of
a resolution passed by the company in its general meeting or by its directors or by virtue of its
memorandum or articles of association, is entrusted with the substantial powers of
management which
would not otherwise be exercisable by him and includes a director
occupying the position of a managing director by whatever name called; Provided that the
powers to do administrative acts of a routine nature when so authorised by the directors such
as the power to affix common seal of the company to any document or to draw and endorse
any cheque on the account of the company in any bank or to draw and endorsed negotiable
instrument or to sign any certificate of share or to direct registration of transfer of any shares
shall not be deemed to be included within the substantial powers of management: Provided
further that a managing director of a company shall exercise his powers subject to the
superintendent control and direction of the directors.
(n)
"Memorandum" means the memorandum of association of a company as originally framed or
as altered in pursuance of the provisions of this Act;
(i)
Where the managing agent is a firm any partner in the firm;

15

(ii) Where the managing agent is a body corporate, any director or manager of the body
corporate;
(iii) Where the secretary is a body corporate;
Provided that. except for the purpose of sections 331, 332, and 333, the form "officer" shall
not include an auditor.;
(q)
"private company" means a company which by its articles-- (i) restricts the right to transfer its
shares, if any; (ii) prohibits any invitation to the public to subscribe for its shares or
debenture, if any;
(iii) limits the number of its members to fifty not including persons who
are in its employment;
Provided that where two or more persons hold one or more shares in
a company jointly, the shall, for the purposes of this definition be treated as a single member;
(r)
"public company" means a company incorporated under this Act or under any law at any time
in force before the commencement of this Act and which is not a private company;
(s)
"Registrar" means a Registrar or any other officer, by whatever designation, performing under
this Act the duty of registration of companies;
(v)
"Share" means a share in the capital of the company, and includes stock except when a
distinction between stock and shares is expressed or implied.
(2) For the purposes of this Act, a company shall subject to the provisions sub-section (4), be deemed
to be a subsidiary of another, if-(a)
That other controls the composition of Board of Directors of the first mentioned company.
(b)
the first mentioned company, being an existing company, has before the commencement of
this Act, issued preference shares the holders of which have the same voting right in all
respects as the holders of equity shares and that other company exercises or controls more
than half of the total
voting power of the first mentioned company; or
(c)
the first mentioned company is not a subsidiary within the meaning of clause (b), but that
other company holds more than half in nominal value of its equity share-capital; or
(d)
The first mentioned company is a subsidiary of a third company with that other's subsidiary.
(3) For the purposes of sub-section (2), the composition of a company's Board of Directors shall be
deemed to be controlled by another company if, that other company, by the exercise of some power
exercisable by it at its discretion without the consent or concurrence of any other person, can
appoint or remove the holders of all or a majority of the directors, and for the purposes of this subsection that other company shall be deemed to have power to appoint to a directorship with respect to
which any of the following conditions is satisfied, that is to say-(a)
That power of appointment cannot be exercised except in favour of an individual,
(b)
That an individuals appointment thereto follows necessarily from his appointment as director,
managing agent, secretary or manager of or to any other office of employment in, that other
company; or
(c)
That the directorship is held by an individual nominated by that other company or a
subsidiary thereof.
(4) In determining whether one company is a subsidiary of another the following conditions shall be
applicable namely:-(a)
Any shares held or power exercisable by that other company in a fiduciary capacity shall be
treated as not held or exercisable by it.
(b)
Subject to the provisions of clauses (c) and (d) any shares held or power exercisable shall be
deemed to be the shares held or power exercisable by that other company, if-(i)
The shares are held or the power is exercisable by a person as a nominee and on
behalf of that other company, but this clause shall not apply to the holding of such
shares or to the exercise of such powers by such person where that other company is
concerned in a fiduciary capacity.
(ii)
the shares are held or the power is exercisable by a subsidiary of that other company
or by a nominee of such subsidiary, but this clause shall not apply to the holding of
such shares or to the exercise of such powers by the subsidiary or by its nominee
where the subsidiary is concerned in a fiduciary capacity;
(c)
Any shares held or power exercisable by any person by virtue of the provisions of any
debentures of the first-mentioned company or of a trust deed for securing any issue of such
debentures shall disregard;
(d)
if any shares are held or power is exercisable, not being held of exercisable as mentioned in
clause (c),--

16

(i)

By that other company or by its subsidiary or by a nominee of that other or its subsidiary as
the case may be, and
(ii)
The ordinary business of that other company or as the case may be of its subsidiary includes
the lending of money and such shares are held or the power is exercisable by way of security
of the loan [then such power shall not be treated as being held or exercisable by such company
or its
nominee.]
(5) For the purposes of this Act' a company shall be deemed to be the holding company of another if,
and only if, that other is its subsidiary.
3. Jurisdiction of the Court.
(1) The Court having jurisdiction under this Act shall be High Court Division;
Provided that the Government may by notification in the Official Gazette and subject to such
restrictions and conditions as it thinks fit, empower any District Court to exercise all or any of the
jurisdiction by this Act conferred upon the Court, and in that case such District Court shall as
regards the jurisdiction so conferred, be the Court in respect of all companies having their registered
office in the district.
Explanation.
For the purposes to wind up companies the expression "registered office" means the place where the
registered office of the company, during the six months immediately preceding the presentation of
the petition of winding up was situated.
(2) Nothing in this section shall invalidate a proceeding by reason of its being taken in a wrong Court
Memorandum of Association
5. Mode of forming incorporated company:Any seven or more persons or, where the company to be formed will be a private company, any two or
more persons associated for any lawful purpose may, by subscribing their names to a memorandum of
association and otherwise with the requirements of this Act in respect of registration form an
incorporated company, with or without limited liability, that is to say, either
a) company limited by shares, that is to say, a company having the liability of its member limited by the
memorandum to the amount, if any, unpaid on the shares respectively held by them; or
b) a company limited by guarantee, that is to say, a company having the liability of its members limited
by the memorandum to such amount as the members may respectively thereby undertake to contribute
to the assets of the company on the event of its being wound up; or
c) An unlimited company, that is to say, a company having no limit on the liability of its members.
6. Memorandum of company limited by shares:In the case of a company limited by shares
(a) The memorandum shall state
(i) The name of the company, with "limited" as the last word in its name;
(ii) The address of the registered office;
(iii) The objects of the company, and, except in the case of trading companies, the territories to which
they extend;
(iv) That the liability of the members is limited;
(v) The amount of share capital with which the company proposes to be registered, and the divisions
thereof into shares of a fixed amount;
(b) Each subscriber of the memorandum shall take at least one share;
(c) Each subscriber shall write opposite to his name the number of shares he takes.
9. Printing and signature of memorandum:The memorandum of every company shall
(a) Be printed;
(b) Be divided into paragraphs numbered consecutively; and
(c) Be signed by each subscriber, who shall add his address and description in the presence of at least
two witnesses who shall attest the signature.
11. Name of company and change of name:(1) A company shall not be registered by a name identical with that by which a company in existence
is already registered, or so nearly resembling the name that there is likelihood of using the name to

17

deceive, except where the company in existence is in the course of being dissolved and signifies its
written consent in such manner as the Registrar requires.
(2) If a company, through inadvertence or otherwise, is, without the consent referred to in sub-section
(1), registered by a name identical with that by which a company in existence is previously registered,
or so nearly resembling the name that there is likelihood of using the name to deceive, the first
mentioned company shall, on the direction of the Registrar, change its name within a period of one
hundred and twenty days.
(3) If a company makes a default in complying with the direction made under sub-section (2), the
company shall be punishable with fine of five hundred taka for every day during which the default
continues and every officer who is in default shall be punishable with fine of one hundred taka for
every day during which the default continues.
(4) Except with the previous consent in writing of the Government, no company shall be registered by
a name which is declared by the Government by notification in the official Gazette, as undesirable:
Provided that nothing in this sub-section shall apply to companies registered before the commencement
of this Act.
(5) No company shall be registered by a name containing in any form the name or any abbreviation of
the name of the United Nations or of any subsidiary body set up by the United Nations or of the World
Health Organisation unless the company has obtained the previous authorisation in writing of the
Secretary General in the case of the United Nations or the subsidiary body as aforesaid or of the
Director General of the World Health Organisation in the case of that Organisation.
(6) Any company may, by special resolution and subject to the approval of the Registrar signified in
writing, change its name.
(7) Where a company changes its name, the Registrar shall enter the new name on the register in place
of the former name, and shall issued a certificate of incorporation in its new name to meet the
circumstances of the case and on the issue of such a certificate, the Change of name shall be complete.
(8) The change of name shall not change any rights or obligations of the company, or render defective
any legal proceedings by or against the company; and any legal proceedings that might have been
continued or commenced against it by its former name may be continued or commenced against it by
its new name.
(9) A company may, on payment of such fee as may be prescribed, apply to the Registrar for
information whether any company is registered or proposed to be registered by a name specified in the
application and the Registrar shall furnish the required information within a period of thirty days from
the date of receipt of the application.
12. Alteration of memorandum:(1) Subject to the provisions of this Act, a company may, by special resolution, alter the provisions of
its memorandum with respect to the objects of the company, so far as may be required to enable it
(a) To carry on its business more economically or more efficiently; or
(b) To attain its main purpose by new or improved means; or
(c) To enlarge or change the local area of its operations; or
(d) To carry on some business which, under the existing circumstances, may conveniently or
advantageously be combined with the business of the company; or
(e) To restrict or abandon any of the objects specified in the memorandum; or
(f) To sell or dispose of the whole or any part of the undertaking of the company; or
(g) To amalgamate with any other company or body of persons.
(2) The alteration shall not take effect until and except in so far it is confirmed by the Court on petition.
(3) Before confirming the alteration, the Court must be satisfied
(a) that sufficient notice has been given to every holder of debentures of the company, and to any
person or class of persons whose interest Will, in the opinion of the Court, be affected by the alteration
; and
(b) that, with respect to every creditor who in the opinion of the Court is entitled to object, and who
signifies his objection in manner directed by the Court, either his consent to the alteration has been
obtained or his debt or claim has been discharged or has been determined, or has been secured to the
satisfaction of the Court;
Provided that the Court may, in the case of any person or class, for special reasons, dispense with the
notice required by this section.
13. Power of Court when confirming alteration:The Court may make an order confirming the alteration either wholly or in part, and on such terms and
conditions as it thinks fit, and may make such order as to costs as it thinks proper.

18

15. Procedure on confirmation of the alteration:A certified copy of the order confirming the alteration, together with a printed copy of the
memorandum as altered, shall be filed by the company with the Registrar within ninety days from the
date of the order or within such time as may be extended by the court, and the Registrar shall register
the same, and shall certify the registration under his hand, and the certificate shall be conclusive
evidence that all the requirements of this Act, with respect to the alteration and the confirmation
thereof, have been complied with, and henceforth the memorandum so altered shall be the
memorandum of the company.
16. Effect of failure to register within extended time:No such alteration shall have any operation until registration thereof has been duly effected in
accordance with the provisions of section 15, and if such registration is not effected within the period
specified in that section such alteration and the order of the Court confirming the alteration, and all
proceedings connected therewith shall, at the expiration of the period specified under that section
become absolutely null and void:
Provided that the Court may, on sufficient cause shown, revive the Order on application made within a
further period of thirty days after the said period.
Articles of Association
17. Registration of articles:(1) A company limited by guarantee and an unlimited company shall, and a company limited by shares
may, have an article of association wherein provision shall be made for regulating the affairs of the
company; and the articles shall be signed by the subscribers of the memorandum and be registered
together with the memorandum.
(2) Articles of association may adopt all or any of the regulations contained in Schedule 1, and shall in
any event be deemed to contain regulations identical with or to the same effect as regulation 56, 66, 71,
78, 79, 80, 81, 82, 95, 97, 105, 108, 112, 113, 114, 115 and 116 contained in that Schedule :
Provided that regulations 78, 79, 80, 81 and 82 shall not be deemed to be included in the articles of any
private company except a private company which is the subsidiary company of a public company :
Provided further that regulation 108 shall be deemed to require that a statement of the reasons why of
the whole amount of any item of expenditure which may in fairness be distributed over several, years,
only a portion thereof is charged against the income of the year, shall be shown in the profit and loss
account, unless the company in general meeting shall determine otherwise.
(3) In the case of an unlimited company or a company limited by guarantee, the articles, if the company
has a share capital, shall state the amount of share capital with which the company proposes to be
registered.
(4) In the case of an unlimited company or a company limited by guarantee, if the company has not a
share capital, the articles shall state the number of members with which the company proposes to be
registered; and on the basis of such number the Registrar shall determine the fees payable on
registration.
19. Form and signature of articles:Articles shall(a) Be printed;
(b) Be divided into paragraphs numbered consecutively;
(c) Be signed by each subscriber of the memorandum, who shall add his address and description in the
presence of" at least two witness who shall attest the signature.
20. Alteration of articles by special resolution:Subject to the provisions of this Act and to conditions contained in its memorandum, a company may
by special resolution alter, exclude from or add to its articles: and any alteration, exclusion or addition
so made shall be as valid as if originally contained in the articles, and be subject in like manner to
alteration, exclusion or addition by special resolution.
21. Effect of alteration in memorandum or articles:Notwithstanding any thing in the memorandum or articles of a company, no member of the company
shall be bound by an alteration made in the memorandum or articles after the date on which he
becomes member, if and so far as the alteration requires him to take or subscribe for more shares than

19

the number held by him at the date on which the alteration is made, or in any way increases his liability
as at that date to contribute to the share capital of, or otherwise to pay money to the company.
General Provisions
22. Effect of memorandum and articles:(1) The memorandum and articles shall when registered bind the company and the members hereof to
the same extent as if they respectively had been signed by each member, and contained a covenant on
the part of each member his heirs and legal representatives to observe all the provisions of the
memorandum and of the articles subject to the provisions of this Act.
(2)All money payable by any member to the company under the memorandum or articles shall be a
debt one from him to the company.
23. Registration of memorandum and articles:
(1) The memorandum and articles if any shall be filed with the Registrar who if satisfied that the
requirements of this Act have been complied with shall retain and register them within thirty days from
the date of their receipt and in the event of refusal he shall communicate the grounds thereof within ten
days after. That period to the company.
(2) Any person on being aggrieved by a refusal of the Registrar under sub-section (1) may make an
appeal to the Government. Within thirty days of the receipt of the refusal order.
(3) The petition of appeal shall be accompanied by a treasury chalan showing of a fee of two hundred
fifty taka to be credited under the head of account specified in this behalf.
(4)The decision of the Government in an appeal under this section shall be final.
24. Effect of registration:(1) On the registration of the memorandum of a company the Registrar shall certify under his hand that
the company is incorporated and in the case of a limited company that the company is limited.
(2)From the date of incorporation mentioned in the certificate of incorporation the subscribers of the
memorandum together with such other persons as may from time to time, become members of the
company shall be a body corporate by the name contained in the memorandum capable forthwith of
exercising all the functions of an incorporated company and having perpetual succession and a
common seal but with such liability on the part of the members to contribute to the assets of the
company in the event of its being wound up as is mentioned in this Act.

PART III
SHARE CAPITAL, REGISTRATION OF UNLIMITED COMPANY AS LIMITED AND
UNLIMITED LIABILITY OF DIRECTORS
32. Definition of Member.
(1) Every subscriber of the memorandum of company shall be deemed to have
agreed to become a
member of the company and on its registration shall be entered as a member in its register of members.
(2) Every other person who agrees to become a member of a company, and whose name is entered in
its register of members shall be a member of the company.
34. Register of member
(1) Every company shall keep in one on or more books of register of its
members, and enter therein
the following particulars:-(i) The name and addresses, and the occupations, if any of the members;
(ii) in the case of a company having a share capital, a statement of the shares held by each member,
distinguishing each share by its number, and of the amount paid or agreed to be considered as paid on
the shares of each member;
(iii) The date at which each person was entered in the register as a member;
(iv) The date at which any person ceased to be a member.
(2) If a company makes default in complying with the requirements of this section. It shall be liable to
as fine not exceeding one hundred taka for everyday during which the default continues and every
officer of the company who knowingly and willingly authorise or permits the default shall also be
liable to a like penalty.

20

35. Index of members of company:-(1) Every company having more than fifty member shall, unless the register of members is in such a
form as to constitute in itself an index, keep an index of the names of the members of the company and
shall within fourteen days after the date on which any alteration is made in the register members make
any necessary alteration in the index.
(2) The index which may be in the form of a card index shall in respect of each member contain a
sufficient indication to enable the account of that member to be readily found.
(3) If default is made in complying with the section the company shall be liable to a fine not exceeding
five hundred taka and every officer of the company who is knowingly and willingly in default shall be
liable to a like penalty.
36. Annual list of members and summary
(1) Every company having a share capital shall within eighteen months from its incorporation and
thereafter once at least in every year make a list of all persons who on the day of the first or only
ordinary general meeting in the year are members of the company, and of all persons who have ceased
to be members since the date of the last return or in the case of the first return of the incorporation of
the company.
(2) The following shall be stated in the list namely:-(a) the names, addresses, nationality and occupation of all past and present members;
(b) the number of shares held by each of the existing members at the date of return specifying the
shares transferred since the date of last return or, in the case of first return, since the date of
incorporation, by persons who are still members and by persons who have ceased to be members
respectively and also the dates of registration of such transfer; and
(c) a summary distinguishing between shares issued for cash and shares issued as fully or partly paid
up otherwise than in cash and specifying the following:(1) The amount of the share capital of the company, and the number of the shares into which it is
divided;
(2) The number of shares taken from the commencement of the company up to the date of the
return;
(3) The amount called up on each share;
(4) The total amount of calls received;
(5) The total amount of calls unpaid;
(6) The total amount of the sums, if any, paid by way of commission in respect of any share or
debentures, or allowed by way of discount, in respect of any shares or debentures, since the
date of the last return or so much thereof as has not been written of at the date of the return.
(7) The total number of shares forfeited;
(8) The total amount of shares or stock for which share warrants are outstanding at the date of the
last return;
(9) The total amount of share-warrants issued and surrendered respectively since the date of the
last return;
(10) The latest date on which the general meeting should have been held and whether it was
actually so held;
(11) The number of shares or amount of stock comprised in each share warrant;
(12) the names and addresses of the persons who at the date of return are the directors of the
company and of the persons, if any, who at the said date are the managers managing agents or
auditors of the company, and the changes in the personnel of the directors, managers
managing agents since the last return together with the dates on which the took place; and
(13) The total amount of debt due from the company in respect of all mortgages and charges
which are required to be registered with the Registrar under this Act.
(3) The above list and summary shall be contained in a separate part of the register of members, and
shall be completed within twenty-one days after the day of the first or only ordinary general meeting in
the year; and the company shall, within that period file with the Registrar a copy signed by two
directors, including the managing director, or where there is no managing director, by a director, and
managing agent or manager or secretary of the company together with a certificate from such persons
that the list and summary state the facts as they stood on the day aforesaid.
(4) A private company shall send with the annual return required by subsection (1) a certificate signed
by a director or other officer of the company that the company has not, since the date of the last return
or in the case of a first return since the date of the incorporation of the company, issued any invitation
to the public to subscribe for any shares or debentures of the company, and where the annual return

21

discloses the fact that the number of members of the company exceeds fifty, also a certificate so signed
that the excess consists wholly of persons who under sub-clause (ii) of clause (g) of sub-section (1) of
section 2 are not be included in reckoning the number o fifty.
(5) If a company makes default in complying with the requirements of this section, it shall be liable to
a fine not exceeding two hundred taka for every day during which the default continues, and every
officer of the company who knowingly and wilfully authorises or permits the default shall be liable to
the like penalty.
40. Inspection of register of members.
(1) The register of members commencing from the date of the registration of the company and where
section 35 applies also the index of members shall be kept at the registered office of the company, and
such register and index shall, except when closed under the provisions of this Act shall during business
hours subject to such reasonable restrictions as the company in general meeting impose, so that not less
than two hours in each day be allowed for inspection, be kept open to the inspection of any member
free of cost and to the inspection of any other person on payment of one hundred taka or such less sum
as the company may prescribe for each inspection, and any such member or other person may make
extract thereform.
(2) Any member or other person may require a copy of the register or of any part thereof or of the list
and summary required by this Act or any part thereof, on payment of five taka for every hundred words
or fractional part thereof required to be copied and the company shall cause any copy so required by
any person to be sent to that person within a period of ten days commencing on the day next after the
day on which the requirement is received by the company.
Explanation :
For the purpose of this sub-section in reckoning the ten working days, the non-working days and days
on which the transfer books of the company remain closed shall be excluded.
(3) If any inspection required under this section is refused or if any copy required under this section is
not sent within the proper period the company and every officer of the company who is in default shall
be liable in respect of each offence to a fine not exceeding one hundred taka and to a further fine not
exceeding one hundred taka for everyday during which the refusal or default continues, and the Court
may by an order compel an immediate inspection of the register and index or direct that copies
required shall be sent to the persons requiring them.
42. Power to close register.
A company may on giving seven day's previous notice by advertisement in some newspaper circulating
in the district in which the registered office of the company is situated close the register of members for
any time or times not exceeding in the whole forty-five days in each year but not exceeding thirty days
at a time.
PART IV
MANAGEMENT AND ADMINISTRATION
Meeting and Proceeding
81. Annual general meeting
(1) Every company shall in each year of the
Grogorian calendar hold in addition to any other
meetings a general
meeting as its annual general meeting and shall specify the meeting as
such in
the notices calling it; and not more than fifteen months shall
elapse between the date of one annual
general meeting of a company and
that of the next:
Provided that a company may hold its first annual general meeting within a
period of not more than
eighteen months from the date of its
incorporation; and if such general meeting is held within that
period, it
shall not be necessary for the company to hold any annual general meeting
in the year
of its incorporation or in the following year;
Provided further that the Registrar may, on an
application made by a
company within thirty days from the date of expiry of the period specified
for holding the annual general meeting as aforesaid, extend the time
within which any annual
general meeting, not being the first annual
general meeting shall be held, by a period not exceeding
ninety days or
not exceeding the 31st December of the calendar year in relation to which
the
annual general meeting is required to be held, whichever is earlier.
(2) If a company defaults in complying with the provisions of sub-section
(1), the Court may, on the
application of any member of the company, call
or direct the calling of a general meeting of the

22

company and give such


ancillary or consequential direction as the Court thinks expedient in
relation to the calling holding and conducting of the meeting.
83. Statutory meeting and statutory report of company
(1) Every company limited by shares and every company limited by guarantee and having a
share
capital shall, within a period of not less than one month and not more than six months from the date at
which the company is entitled to
commence business, hold a general meeting of the members of the
company; in this Act such meeting is referred to as "the statutory meeting".
(2) The Board of Directors shall, in accordance with the other provision of this Act, prepare a report,
in this Act referred to as 'statutory report" and shall at least 21 days before the day on which the
statutory meeting is not be held, forward the report to very member of the company:
Provided that if the report is forwarded later than the time as is required above, it shall notwithstanding
that fact, be deemed to have been duly forwarded if any member entitled to attend and vote at the
meeting does not object to such forwarding.
(3) The statutory reports shall set out the following namely-(a) the total number of shares allotted, distinguishing the shares allotted as fully or partly paid-up,
otherwise than in cash, and stating in the case of shares partly paid-up, the extent to which they are so
paid up, and in either case, the consideration for which they have been allotted;
(b) The total amount of cash received by the company in respect of all the shares allotted,
distinguished as aforesaid;
(c) Showing under separate proper headings-(i) An abstract of receipts of the company and of the payments made thereout up to a date within
seven days prior to the date of the report;
(ii) The receipts of the company from the shares and debentures and other sources, the payments
made thereout and particulars of the concerning balance remaining in hand;
(iii) Any commission or discount paid or to be paid on the issue or sale of shares or debentures;
and
(iv) An account or estimate of the preliminary expenses of the company;
(d) The names, addresses and occupations of the directors of the company and of its auditors; and
also, if there be any, of its managing agent, manager and secretary. and the change, if any
which have occurred in such names addresses in and occupations since the date of the
incorporation of the company;
(e) The particulars of any contract which, or the modification or the proposed modification of
which is to be submitted to the meeting for its approval, together with the particulars of the
modification or proposed modification of such contract;
(f) the extent, if any, due on calls from every director, from managing agent, every partner of the
managing agent, every firm in which the managing agent is a partner, and where the managing
agent is a private company, every director thereof;
(h) the particulars of any commission or brokerage paid or to be paid in connection with the issue
or sale of shares or sale of shares or debentures to any director, or to the managing agent, any
partner of the managing agent, any firm in which the managing agent is a partner and,
where the managing agent is a private company, to any director thereof.
(4) The statutory report shall be certified as correct by not less than two directors of the company, one
of whom shall be the managing director where there is one.
(5) After the statutory report has been certified as required by sub-section (4), the Board of Directors
the company shall, in so far as the report relates to the shares allotted by the company, the cash
received in respect of such shares and the receipts and payments of the company, get it certified as
correct by the auditors of the company.
(6) The Board of Director shall cause a copy of the statutory report certified as if required by this
section to be delivered to the Registrar for registration forthwith, after copies thereof have been sent to
the members of the company.
(7) The Board of Directors shall prepare a list showing the names, addresses and occupation of the
members of the company, and the number of shares held by them respectively, to be produced at the
commencement of the statutory meeting and to remain open and accessible to any member of
the
company during the continuance of the meeting.
(8) The members of the company present at the meeting shall be at liberty to discuss any matter
relating to the formation of the company or arising out of the statutory report, whether previous notice
has been given or not; but no resolution may be passed of which notice has not been given in
accordance with the provisions of this Act.

23

(9) The meeting may adjourn from time to time and at any adjourned meeting, any resolution of which
notice has been given in accordance with the provisions of this Act, Whether before or after the former
meeting, may be passed; and the adjourned meeting shall have the same powers as an original meeting.
(10) If a petition is presented to the Court in the manner provided by Part V for winding up of the
company on the ground of default in filing the statutory report or in holding the statutory meeting the
court may, instead of directing that the company be wound up, give directions for the presentation of
the report or for holding the meeting or make such other
order as may be just.
(11) If default is made in complying with the provisions of this section, every director or other officer
of the company who is in default shall be punishable with fine which may extend to five thousand taka.
(12) Nothing in this section shall apply to a private company.
84. Calling of extraordinary general meeting on requisitions
(1)
Notwithstanding anything contained in the articles, the directors of a company which has a share
capital, shall on the requisition of the holders of not less than one tenth on the issued share capital of
the company upon which all calls or other sums then due have been paid, forthwith proceed to call an
extraordinary general meeting of the company, and in the case of a company not having a share capital
the directors thereof shall call such meeting on the requisition of such members as have, on the date of
submitting the requisition, not less than one tenth of the total voting power in relation to the issues on
which the meeting is called.
(2) The requisition must state the objects of the meeting and must be signed by the requisitioned and
deposited at the registered office of the company, and may consist of several documents in like form,
each signed by one or more requisitioned.
(3) If the directors do not, within twenty one days from the date of deposit of the requisition, proceed
duly to call a meeting on a day not later than forty-five days from the date of the deposit of the
requisition, then the requisitioned, or a majority of them in value, may themselves call the meeting, but
any meeting so called shall be held before the expiration of three months from the date of the deposit of
the requisition.
(4) Any meeting called under this section by the requisitionnists shall be called in the same manner, as
nearly as possible, as that in which meetings are to be called by directors.
(5) Any reasonable expenses incurred by the requisitioned by reason of the failure of the directors duly
to call a meeting shall be repaid to the requisitionists by the company, and any sum so repaid shall be
retained by the company, out of any sums due or to become due from the company by way
of fees
or other remuneration for their services to such of the directors as were in default.
89. Minutes of proceedings of general meeting and of its directors
(1)
Every company shall cause minutes of all proceedings of general meeting and meetings of its
directors to be entered in books kept for that purpose.
(2) Any such minute, if purporting to be signed by the chairman of the meeting at which the
proceedings were had. or by the chairman of the next succeeding meeting shall be evidence of the
proceedings.
(3) Until the contrary is proved-(a) A general meeting of the company or a meeting of its directors, in respect of the proceedings of
which minutes have been made, shall be deemed to have been duly called and held: and
(b) the proceedings of such meeting shall be deemed to have been held as described in the minutes and
the appointments of directors or liquidators at such meeting shall be deemed to be valid:
(4) The books containing the minutes of proceedings of any general meeting of a company shall be
kept at the registered office of the company and shall during business hours a subject to such
reasonable restrictions as the company may by its article or in general meeting impose so that no
less than two hours in each day be allowed for inspection be open to the inspection of any member
without charge.
(5) Any member shall at any time after fourteen days from the meeting, be entitled to be furnished
within seven days after he has made a request in that behalf to the company with a copy of any minutes
referred to in subsection (4) at a change not exceeding ten taka for every hundred words.
(6) If any inspection required under sub-section (4) is refused, on if any copy required under subsection (5), is not furnished within the time specified in sub-section (5), the company and every officer
of the company who is knowingly and wilfully in default or who authorises or permits default shall be
liable in respect of each offence to a fine not exceeding taka one hundred and to a further fine not
exceeding one hundred taka for every day during which the default continues.

24

(7) In the case of any such refusal or default the Registrar may by order compel an immediate
inspection of the books in respect of all proceedings of general meeting or direct that the copies
required shall be sent to the person requiring them.
Directors
90. Directors obligatory
(1) Every public company and a private company which is a subsidiary of a public company shall have
at least three directors.
(2) Every private company other than a private company mentioned in sub-section (1) shall have at
least two directors;
(3) Only a natural person may be appointed a director.
91. Appointment of directors: (1) Notwithstanding anything contained in the articles of a company-(a) The subscribers of the memorandum shall be deemed to be the directors of the company until
the first director are appointed.
(b) The directors of the company shall be elected by the members from among their number in
general meeting; and
(c) any casual vacancy occurring among the directors may be filled in by the other directors but
the person to be appointed shall be a person qualified to be elected a director under clause (b) and shall
be subject to retirement at the same time as if he had become a director on the day on which the
director in whose place he is appointed was last appointed a director.
(2) Notwithstanding anything contained in the articles of a company other than a private company
not less than one third of the whole number of directors shall be persons whose period of office is liable
to determination at any time by retirement of directors rotation.
94. Disqualifications of directors
(1) A person shall not be capable of being appointed director of a company, if (a) He has been found to be of unsound mind by a competent court and the finding is in force; or
(b) He is an undischarged insolvent; or
(c) He has applied to be adjudicated as an insolvent and his application is pending; or
(d) he has not paid any call in respect of shares of the company held by him, whether alone or
jointly with others, and six months have elapsed from the last day fixed for the payment of the call; or
(e) He is a minor.
(2) A company may in its articles provide additional grounds for disqualification of a director.
97. Qualification of Director:-(1) Without prejudice to the restrictions imposed by section 92, it shall be the duty of every director
to hold qualification share to be specified in the articles and, if he is not already qualified, he shall
obtain his qualification within sixty days after his appointment, or such shorter time as may be fixed by
the articles.
(2) If, after the expiration of the period mentioned in sub-section (1) any unqualified person acts as a
director of the company, he shall be liable to a fine not exceeding two hundred taka for every day
between the expiration of the said period and the last day on which it is proved that he acted as a
director (both days inclusive).
106. Removal of directors
(1) The company may by extraordinary resolution remove any share-holder director before the
expiration of his period of office and may by ordinary resolution appoint another person in his stead
and the person so appointed shall be subject to retirement at the same
time as if he had become a
director on the day on which the director in
whose place he is appointed was last elected director.
(2) A director so removed shall not be re-appointed a director by the Board of Directors.
107. Restrictions on power of directors
The directors of a company or of
a subsidiary company of a public company shall not, except with
the consent of the company concerned in general meeting-(a) Sell or dispose of the undertaking of the company; and
(b) Remit any debt due by a director.

25

109. Restriction on Managing Director--(1) No public company and no private company which is a subsidiary of public company shall, after
the commencement of this Act, appoint any person as managing director, if he is a managing director or
manager of an other company.
Provided the no appointment under this section shall be made without the consent of the company in a
general meeting.
(2) Notwithstanding anything contained in sub-section (1) the government may, by order, permit any
person to be appointed as a managing director of more than two companies if the government is
satisfied that it is necessary that the companies should, for their proper working, function as a single
unit and have a common managing director.
110. Managing director not to be appointed for more than five years at a time.
(1) No company shall, after the commencement of this Act, appoint or employ any individual as its
managing director for a term exceeding five years at a time.
(2) Any individual holding, at the commencement of this Act, the office of the managing director in a
company shall, unless his term expires earlier, be deemed to have vacated his office immediately on the
expiry of five years from the commencement of this Act.
(3) Nothing contained in sub-section (1) shall be deemed to prohibit the re-employment or the
extension of the term of office of any person as managing director for a further period not exceeding
five years on each
occasion.
Provided that no such re-appointment, re-employment or extension of term of office shall be made
without the consent of the company in general meeting.
115. Register of directors, managers and managing agents
(1) Every company shall keep at its registered office a register of its directors, manager and managing
agents containing with respect to each of them the following particulars, that is to say-(a) in the case of an individual, his present name in full, any former name or surname in full, his
usual residential address, his nationality and, if that nationality is not the nationality of origin, his
nationality of origin and his business, occupation, if any, and if he holds any other directorship or
directorships the particulars of such
directorship or directorships;
(b) in the case of a body corporate its corporate name and registered or
principal office, and the
full name address and nationality of each of its directors; and
(c) in the case of a firm, the full name, address and nationality of each partner, and the date on which
each became a partner.
(2) The company shall within the periods specified below send to the Registrar a return in the
prescribed form containing the particulars specified in the said register and a notification in the
prescribed form of any change among its directors, managers or managing agents or in any of the
particulars contained in the register-(a) in the case of the particulars specified in sub-section (1), within a period of fourteen days from the
appointment of the first directors of the company; (b) in the case of any change in such particulars,
within a period of fourteen days from the day change takes place.
(3) The register to be kept under this section shall, during business hours and subject to such
reasonable restriction, as the company may by its articles or in general meeting impose so that not less
than two hours in each day be allowed for inspection, be open to the inspection of any member of the
company without charge and of any person on payment of ten taka or such less sum as the company
may impose for each inspection.
(4) If any inspection required under this section is refused or if default is made in complying with subsection (1) or (2) of this section, the company and every officer of the company who is knowingly and
wilfully in default shall be liable to a fine of five hundred taka.
(5) In the case of any such refusal, the Court, on application made by the
person to whom
inspection has been refused and upon notice to the company, may, by order, direct an immediate
inspection of the register.
Winding up by Court
241. Circumstances in which company may be wound up by Court.
A company
may be wound up by the Court; if--

26

(i) if the company has by special resolution resolved that the company be wound up by the Court; or
(ii) if default is made in filing the statutory report or in holding the statutory meeting; or;
(iii) if the company does not commence its business within a year from its incorporation, or suspends
its business for a whole year; or
(iv) if the number of members is reduced, in the case of a private company below two, or, in the case
of any other company, below seven; or
(v) if the company is unable to pay its debts; or
(vi) if the Court is of opinion that it is just and equitable that the company should be wound up.
286. Circumstances in which company may be wound up voluntarily:-(1) A
company may be wound up voluntarily-(a) when the period, if any, fixed for the duration of the company by the
articles expires, or the
even, if any occurs, on the occurrence of which
articles provide that the company is to be dissolved
and the company in
general meeting has passed a resolution requiring the company to be wound
up voluntarily;
(b) if the company resolves by special resolution that the company be
wound up voluntarily;
(c) if the company resolves by extraordinary resolution to the effect that
it cannot by reason of its
liabilities continue its business, and that it
is advisable to wind up.
(2) The expression "resolution for voluntarily winding up" when used
hereafter in this Part means a
resolution passed under clause (a), clause
(b), or clause (c) of this section.
346. Registrar may strike defunct company off Registrar:-(1) where the
Registrar has reasonable cause to believe that a company is not carrying
on
business or in operation, he shall send to the company by post a letter
inquiring whether the
company is carrying on business or in operation;
(2) If the Registrar does not within thirty days of sending the letter
receive any answer thereto, he
shall within fourteen days, after the
expiration of the said thirty days send to the company by post a
registered letter referring to the first letter and stating that no answer
thereto has been received and
that if an answer is not received to the
second letter with thirty days from the date, thereof, a notice
will be
published in the official Gazette with a view to striking the name of the
company off the
register;
(3) If the Registrar either receives an answer from the company to the
effect that it is not carrying
on business or in operation, or not within
thirty days after sending the second letter receive any
answer, he may
publish in the Official Gazette and send to the company by post a notice
that at
the expiration of ninety days from the date of that notice, the
name of the company mentioned
therein will, unless cause is shown to the contrary, be struck off the register and the company will be
dissolved and
in such a case the Registrar may send a copy of the notice to the company
while in
sending it to the concerned authority for its publication in official Gazette;
(4) If, in any case where a company is being wound up, the Registrar has
reasonable cause to
believe either that no liquidator is acting or that
the affairs or the company are fully wound up and
the returns required to
be made by the liquidator have not been made for a period of six
consecutive months after notice by the Registrar demanding the returns,
has been sent by post to the
company or to the liquidator at his last
known place of business, the Registrars may publish in the
official
Gazette and sent to the company a like notice as is provided in the
sub-section (3);
(5) At the expiration of the time mentioned in the notice the Registrar
may unless cause to the
contrary is previously shown by the company,
strike its name from the register and on the the
publication in the official
Gazette of a notice to the effect the company shall be dissolved:
Provided that the liability, if any, of every director and member of the
company shall continue and
may be enforced as if the company had not been
dissolved.
(6) If a company or any member or creditor thereof feels aggrieved by the
company having been
struck off the register, the Court on the application
of the company or member or creditor, may if
satisfied that the company
was at the time of the striking off carrying on business or in operation
or other wise that it is just that the company be restored, to the
register, and thereupon the company
shall be deemed to have continued in
existence as its name had not been struck off; and the Court
may by order
give such directions and make such provisions as seem just for placing the
company and all other persons in the same positions as nearly as may be as
if the name of the
company has not been struck off;
(7) A letter or notice under this section may be addressed to the company
at its registered office, or
if no office has been registered, to the care
of some director, manager or other officer of the
company or, if there is
no director, manager or other officer of the company whose named and

27

address are known to the registrar such letter or notice may be sent to
each of the persons who
subscribed the memorandum, at the address
mentioned in the memorandum.

28

THE NEGOTIABLE INSTRUMENTS ACT, 1881.


x Act No. XXVI of 1881
[9th December, 1881]
An Act to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques.
Preamble:
Whereas it is expedient to define and amend the law relating to promissory notes, bills of exchange and
cheques; It is hereby enacted as follows :-3. Interpretation of clauses
In this Act, unless there is anything repugnant in the subject or context,--(
(c)
(d)
(e)

"Bearer" means a person who by negotiation comes into possession of a negotiable


instrument, which is payable to bearer;
"Delivery" means transfer of possession, actual or constructive, from one person to another;
"Issue" means the first delivery of a promissory note, bill of exchange or cheque complete in
form to a person who takes it as a holder;
Chapter II
Of Notes, Bills and Cheques

4. "Promissory note"
A "promissory note" is an instrument in writing (not being a bank-note or a currency- note) containing
an unconditional undertaking, signed by the maker, to pay 1[on demand or at a fixed or determinable
future time] a certain sum of money only to, or to the order of, a certain person, or to the bearer of the
instrument.
5. "Bill of exchange"
A "bill of exchange" is an instrument in writing containing an unconditional order, signed by the maker,
directing a certain person to pay2 [on demand or at a fixed or determinable future time] a certain sum
of money only to, or to the order of, a certain person or to the bearer of the instrument.
6. "Cheque"
A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand.
7. "Drawer." "Drawee."
The maker to a bill of exchange or cheque is called the "drawer", the person thereby directed to pay is
called the "Drawee."
"Payee.".- The person named in the instrument, to whom or to whose order the money is by the
instrument directed to be paid, is called the "payee."
8. "Holder"
The "holder" of a promissory note, bill of exchange or cheque means the payee or indorsee who is in
possession of it or the bearer thereof but does not include a beneficial owner claiming through a
benamidar.
Explanation Where the note, bill or cheque is lost and not found again, or is destroyed, the person in
possession of it or the bearer thereof at the time of such loss or destruction shall be deemed to continue
to be its holder]
13. "Negotiable instrument"
(1) A "negotiable instrument" means a promissory note, bill of exchange or cheque payable either to
order or to bearer.
Explanation (i) ---

29

A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable
or which is expressed to be payable to a particular person, and does not contain words prohibiting
transfer or indicating an intention that it shall not be transferable.
Explanation (ii)
A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable
or on which the only or last endorsement is an endorsement in blank.
Explanation (iii)
Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed
to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable
to him or his order .at his option.]
(2) A negotiable instrument may be made payable to two or more payees jointly or it may be made
payable in the alternative to one of two, or one or some of several payees.]
14. Negotiations.
When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute that
person the holder thereof, the instrument is said to be negotiated.
15. Endorsement
When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for
the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs
for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to
indorse the same, and is called the "endorser."
18. Where amount is stated differently in figures and words
If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount
stated in words shall be the amount undertaken or ordered to be paid 1[:]
2[Provided that if the words, are ambiguous or uncertain, the amount may be ascertained by referring
to the figures.]
19. Instruments payable on demandA promissory note or bill of exchange is payable on demand(a) Where it is expressed to be so, or to be payable at sight or on presentment; or
(b) Where no time for payment is specified in it; or
(c) Where the note or bill accepted or indorsed after it is overdue, as regards the person accepting or
indorsing it.]
138. Dishonour of cheque for insufficiency, etc. of funds in the account.(1) Where any cheque drawn by a person on an account maintained by him with a banker for payment
of any amount of money to another person from out of that account or the discharge, in whole or in
part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of
money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the
amount arranged to be paid from that account by an agreement made with that bank, such person shall
be deemed to have committed an offence and shall, without prejudice to any other provision of this Act,
be punished with imprisonment for a term which may extend to one year, or with fine which may
extend to thrice the amount of the cheque, or with both :
Provided that nothing contained in this section shall apply unless-a) The cheque has been presented to the bank within a period of six months from the date on which it is
drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the
payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within
30 days of the receipt of information by him from the bank regarding the return of the cheque as
unpaid, and
(c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or,
as the case may be, to the holder in due course of the cheque, within 30 days of the receipt of the said
notice.

30

(1A) the notice required to be served under clause B of sub-section (1) shall be served in the following
manner:
(a) By delivering it to the person to whom it is to be served or
(b) by sending it by registered post with acknowledgement due to that person at his usual or last known
place of abode or business in Bangladesh
(c) by publication in a daily Bangla national newspaper having wide circulation.
138A. Restriction in respect of appeal
Notwithstanding anything contained in the Code of Criminal Procedure, 1898 no appeal against any
order of sentence under sub-section (1) of section 138 shall lie, unless an amount of not less than fifty
percent of the amount of the dishonoured cheque is deposited before filing the appeal in the Court
which awarded the sentence.
(2) Where any fine is realized under subsection (1), any amount up to the face value of the cheque as
far as is covered by the fine realized shall be paid to the holder. (Added by the Repealing Act, 2000)
(3) Notwithstanding anything contained in subsections (1) and (2). the holder of the cheque shall retain
his right to establish his claim through civil court if whole or any part of the value of the cheque
remains unrealized. (Added by the Repealing Act, 2000)
140. Offences of companies
(1) If the person committing an offence under section 138 is a company, every person who, at the time
the offence was committed, was in charge of, and was responsible to, the company for the conduct of
the business of the company, as well as the company, shall be deemed to be guilty of the offence and
shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any person liable to punishment if he
proves that the offence was committed without his knowledge, or that he had exercised all due
diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in subsection (1), where any offence under this Act has been
committed by a company and it is proved that the offence has been committed with the consent or
connivance of, or is attributable to, any neglect on the part of any director, manager, secretary or other
officer of the company, such director, manager, secretary or other officer shall also be deemed to be
guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation--For the purposes of this section
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "director" in relation to a firm, means a partner in the firm.
141. Cognizance of offences
Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (Act V of 1898)-(a) no Court shall take cognizance of any offence punishable under section 138 except upon a
complaint, in writing, made by the payee or, as the case may be, the holder in due course of the
cheque:
(b) such complaint is made within one month of the date on which the cause of action arises under
clause (c) of the proviso to section 138;
(c) No Court inferior to that of a Court of Sessions shall try any offence punishable under section 138.

31

The Carriage of Goods by Sea Act, 1925


1Act No. XXVI of 1925
[21st September, 1925]
An Act to amend the law with respect to the carriage of goods by sea
WHEREAS at the International Conference on Maritime Law held at Brussels in October, 1922, the
delegates at the Conference, including the delegates representing His Majesty, agreed unanimously to
recommend their respective Governments to adopt as the basis of a convention a draft convention for
the unification of certain rules relating to bills of lading;
AND
WHEREAS at a meeting held at Brussels in October, 1923, the rules contained in the said draft
convention were amended by the Committee appointed by the said Conference;
AND
WHEREAS provision has been made by the Carriage of Goods by Sea Act, 1924, the said rules as so
amended and as set out with modifications in the Schedule shall, subject to the provisions of that Act,
have the force of law with a view to establishing the responsibilities, liabilities, rights and immunities
attaching to carriers under bills of lading;
AND
WHEREAS it is expedient that like provisions should be made in 2[Bangladesh]; it is hereby enacted
as follows:--1. Short title, and extent
(1) This Act may be called the "Carriage of Goods by Sea Act, 1925.
(2) It extents to the whole of Bangladesh.
2. Application of Rules
Subject to the provisions of this Act, the rules set out in the Schedule (hereinafter referred to as "the
Rules") shall have effect in relation to and in connection with the carriage of goods by sea in ships
carrying goods from any port in Bangladesh to any port whether in or outside Bangladesh.
6. Modification of Rules 4 and 5 of Article III in relation to bulk cargos-Where under the custom of any trade the weight of any bulk cargo inserted in the bill of lading is a
weight ascertained or accepted by a thirdpardy other than the carrier or the shipper and the fact that the
weight is so ascertained or accepted is stated in the bill of lading, then, notwithstanding anything in the
Rules, the bill of lading shall not be deemed to be prima facie evidence against the carrier of the
receipt of goods of the weight so inserted in the bill of lading, and the accuracy thereof at the time of
shipment shall not be deemed to have been guaranteed by the shipper.
SCHEDULE
RULES RELATING TO BILLS OF LADING
Article I
In this convention the following words are employed with the meanings set out below:
(a)
(b)

"Carrier" includes the owner or the charterer who enters into a contract of carriage with a
shipper.
"Contract of carriage" applies only to contracts of carriage covered by a bill of lading or any
similar document of title, in so far as such document relates to the carriage of goods by sea,
including any bill of lading or any similar document as aforesaid issued under or pursuant to a
charter party from the moment at which such bill of lading or similar document of title the
relations between a carrier and a holder of the same.

32

(c)
(d)
(e)

"Goods" includes goods, wares, merchandise, and articles of every kind whatsoever except
live animals and cargo which by the contract of carriage is stated as being carried on deck and
is so carried.
"Ship" means any vessel used for the carriage of goods by sea.
"Carriage of goods" covers the period from the time when the goods are loaded on to time
they are discharged from the ship.

Article 3
1. The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to(a) Make the ship seaworthy;
(b) Properly man, equip and supply the ship;
(c) Make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are
carried, fit and safe for their reception, carriage and preservation.
2. Subject to the provisions of Article 4, the carrier shall properly and carefully load, handle, stow,
carry, keep, care for, and discharge the goods carried.
3. After receiving the goods into his charge the carrier or the master or agent of the carrier shall,
demand of the shipper, issue to the shipper a bill of lading showing among other things(a)

The leading marks necessary for identification of the goods as the same are furnished in
writing by the shipper before the loading of such goods starts, provided such marks are
stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings
in which such goods are contained, in such a manner as should ordinarily remain legible until
the end the voyage;
(b)
Either the number of packages or pieces, or the quantity, or weight, as the case may be, as
furnished in writing by the shipper;
(c)
The apparent order and condition of the goods.
Provided that no carrier, master or agent of the carrier shall be bound to state or show in the bill lading
any marks, number, quantity, or weight which he has reasonable ground for suspecting accurately to
represent the goods actually received, or which he has had no reasonable means of checking.
4. Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein
described in accordance with paragraph 3(a), (b) and (c).
5. The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of
the marks, number, quantity and weight, as furnished by him, and the shipper shall indemnify the
carrier against all loss, damages and expenses arising or resulting from inaccuracies in such particulars.
The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the
contract of carriage to any person other than the shipper.
6. Unless notice of loss or damage and the general nature of such loss or damage be given in writing to
the carrier or his agent at the port of discharge before or at the time of the removal of the goods the
custody of the person entitled to delivery thereof under the contract of carriage, or, if the loss or
damage be not apparent, within three days, such removal shall be prima facie evidence of the delivery
by the carrier of the goods as described in the bill of lading.
(1) If the loss or damage is not apparent, the notice must be given within three days of the delivery of
the goods.
(2) The notice in writing need not be given if the state of the goods has, at the time of their receipt, the
subject of joint survey or inspection.
[3] In any event the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods or the date when the goods
should have been delivered.

33

In the case of an actual or apprehended loss or damage the carrier and the receiver shall give all
reasonable facilities to each other for inspecting and tallying the goods.
7. After the goods are loaded the bill of lading to be issued by the carrier, master, or agent of the carrier,
to the shipper shall, if the shipper so demands, be a "shipped" bill of lading, provided that if the shipper
shall have previously taken up any document of title to such goods, he shall surrender the same as
against the issue of the "shipped" bill of lading, but at the option of the carrier such document of title
may be noted at the port of shipment by the carrier, master, or agent with the name or names of the ship
or ships upon which the goods have been shipped and the date or dates of shipment, and when so noted,
if it shows the particulars mentioned in paragraph 3 of Article 3, shall for the purpose of this article be
deemed to constitute a "shipped" bill of lading.
8. Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from
liability for loss or damage to, or in connexion with, goods arising from negligence, fault, or failure in
the duties and obligations provided in this article or lessening such liability otherwise than as provided
in this convention, shall be null and void and of no effect. A benefit of insurance in favour of the carrier
or similar clause shall be deemed to be a clause relieving the carrier from liability.

34

Uniform Customs and Practice for Documentary Credits


2007 REVISION
Implementtation Date
July 1, 2007
ARTICLE 1 Application of UCP
The Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication No.
600 ("UCP") are rules that apply to any documentary credit ("credit") (including, to the extent to which
they may be applicable, any standby letter of credit) when the text of the credit expressly indicates that
it is subject to these rules. They are binding on all parties thereto unless expressly modified or excluded
by the credit.
ARTICLE 2 Definitions
For the purpose of these rules:
Advising bank means the bank that advises the credit at the, request of the issuing bank.
Applicant means the party on whose request the credit is issued.
Banking day means a day on which a bank is regularly open at the .place at which an act subject to
these rules is to be performed.
Beneficiary means the party in whose favour a credit is issued.
Complying presentation means a presentation that is in accordance with the terms and conditions of
the credit, the applicable provisions of these rules and international standard banking practice.
Confirmation means a definite undertaking of the confirming bank, in addition to that of the issuing
bank, to honour or negotiate a complying presentation.
Confirming bank means the bank that adds its confirmation to a credit upon the issuing bank's
authorization or request.
Credit means any arrangement, however named or described, that is irrevocable and thereby
constitutes a definite undertaking of the issuing bank to honour a complying presentation.
Honour means:
a. to pay at sight if the credit is available by sight payment.
b. to incur a deferred payment undertaking and pay at maturity if the credit is available by deferred
payment.
c.

to accept a bill of exchange ("draft") drawn by the beneficiary and pay at maturity if the credit is
available by acceptance.

Issuing bank means the bank that issues a credit at the request of an applicant or on its own behalf.
Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the
nominated bank) and/or documents under a complying presentation, by advancing or agreeing to
advance funds to the beneficiary on or before the banking day on which reimbursement is due to the
nominated bank.
Nominated bank means the bank with which the credit is available or any bank in the case of a credit
available with any bank.
Presentation means either the delivery of documents under a credit to the issuing bank or nominated

35

bank or the documents so delivered.


Presenter means a beneficiary, bank or other party that makes a presentation.
ARTICLE 4 Credits v. Contracts
a. A credit by its nature is a separate transaction from the sale or other contract on which it may be
based. Banks are in no way concerned with or bound by such contract, even if any reference
whatsoever to it is included in the credit. Consequently, the undertaking of a bank to honour, to
negotiate or to fulfil any other obligation under the credit is not subject to claims or defences by
the applicant resulting from its relationships with the issuing bank or the beneficiary.
A beneficiary can in no case avail itself of the contractual relationships existing between banks or
between the applicant and the issuing bank.
b. An issuing bank should discourage any attempt by the applicant to include, as an integral part of the
credit, copies of the underlying contract, Performa invoice and the like.
ARTICLE 5 Documents v. Goods, Services or Performance
Banks deal with documents and not with goods, services or performance to which the documents may
relate.
ARTICLE 9 Advising of Credits and Amendments
a. A credit and any amendment may be advised to a beneficiary through an advising bank. An advising
bank that is not a confirming bank advises the credit and any amendment without any undertaking
to honour or negotiate.
b. By advising the credit or amendment, the advising bank signifies that it has satisfied itself as to the
apparent authenticity of the credit or amendment and that the advice accurately reflects the terms
and conditions of the credit or amendment received.
c. An advising bank may utilize the services of another bank ("second advising bank") to advise the
credit and any amendment to the beneficiary. By advising the credit or amendment, the second
advising bank signifies that it has satisfied itself as to the apparent authenticity of the advice it has
received and that the advice accurately reflects the terms and conditions of the credit or
amendment received.
d. A bank utilizing the services of an advising bank or second advising bank to advise a credit must use
the same bank to advise any amendment thereto.
e. If a bank is requested to advise a credit or amendment but elects not to do so, it must so inform,
without delay, the bank from which the credit, amendment or advice has been received.
f. If a bank is requested to advise a credit or amendment but cannot satisfy itself as to the apparent
authenticity of the credit, the amendment or the advice, it must so inform, without delay, the bank
from which the instructions appear to have been received. If the advising bank or second advising
bank elects nonetheless to advise the credit or amendment, it must inform the beneficiary or
second advising bank that it has not been able to satisfy itself as to the apparent authenticity of the
credit, the amendment or the advice.
ARTICLE 12 Nominations
a. Unless a nominated bank is the confirming bank, an authorization
to honour or negotiate does not impose any obligation on that nominated bank to honour or negotiate,
except when expressly agreed to by that nominated bank and so communicated to the beneficiary.
b. By nominating a bank to accept a draft or incur a deferred payment undertaking, an issuing bank
authorizes that nominated bank to prepay or purchase a draft accepted or a deferred payment
undertaking incurred by that nominated bank.
c. Receipt or examination and forwarding of documents by a nominated bank that is not a confirming
bank does not make that nominated bank liable to honour or negotiate, nor does it constitute
honour or negotiation.

36

ARTICLE 14 Standards for Examination of Documents


a.
b.

d.
e.
f.

g.
H
i.
j.

A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank
must examine a presentation to determine, on the basis of the documents alone, whether or
not the documents appear on their face to constitute a complying presentation.
A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank
shall each have a maximum of five banking days following the day of presentation to
determine if a presentation is complying. This period is not curtailed or otherwise affected by
the occurrence on or after the date of presentation of any expiry date or last day for
presentation.
A presentation including one or more original transport documents subject to articles 19, 20,
21, 22, 23, 24 or 25 must be made by or on behalf of the beneficiary not later than 21 calendar
days after the date of shipment as described in these rules, but in any event not later than the
expiry date of the credit.
Data in a document, when read in context with the credit, the document itself and
international standard banking practice,' need not be identical to, but must not conflict with,
data in that document, any other stipulated document or the credit.
In documents other than the commercial invoice, the description of the goods, services or
performance, if stated, may be in general terms not conflicting with their description in the
credit.
If a credit requires presentation of a document other than a transport
document, insurance document or commercial invoice, without
stipulating by whom the document is to be issued or its data
content, banks will accept the document as presented if its
content appears to fulfil the function of the required document and
otherwise complies with sub-article 14 (d).
A document presented but not required by the credit will be disregarded and may be returned
to the presenter.
. If a credit contains a condition without stipulating the document to indicate compliance with
the condition, banks will deem such condition as not stated and will disregard it.
A document may be dated prior to the issuance date of the
credit, but must not be dated later than its date of
presentation.
When the addresses of the beneficiary and the applicant appear in any stipulated document,
they need not be the same as those stated in the credit or in any other stipulated document, but
must be within the same country as the respective addresses mentioned in the credit. Contact
details (telefax, telephone, email and the like) stated as part of the beneficiary's and the
applicant's address will be disregarded. However, when the address and contact details of the
applicant appear as part of the consignee or notify party details on a transport document
subject to articles 19, 20, 21, 22, 23, 24 or 25, they must be as stated in the credit.

ARTICLE 15 Complying Presentations


a.
b.
c.

When an issuing bank determines that a presentation is complying, it must honour.


When a confirming bank determines that a presentation is complying, it must honour or
negotiate and forward the documents to the issuing bank.
When a nominated bank determines that a presentation is complying and honours or
negotiates, it must forward the documents to the confirming bank or issuing bank.

ARTICLE 16 Discrepant Documents, Waiver and Notice


a.
b.
c.

When nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank
determines that a presentation does not comply, it may refuse to honour or negotiate.
When an issuing bank determines that a presentation does not comply, it may in its sole judgement
approach the applicant for a waiver of the discrepancies. This does not, however, extend the period
mentioned in sub-article 14 (b).
When nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank
decides to refuse to honour or negotiate, it must give a single notice to that effect to the presenter.

37

The notice must state:


i. that the bank is refusing to honour or negotiate; and
ii. Each discrepancy in respect of which the bank refuses to honour or negotiate; and
iii. a) that the bank is holding the documents pending further instructions from the presenter; or
b) that the issuing bank is holding the documents until it receives a waiver from the applicant
and agrees to accept it, or receives further instructions from the presenter prior to agreeing
to accept a waiver; or
c) That the bank is returning the documents; or
d) That the bank is acting in accordance with instructions previously received from the
presenter.
d.

The notice required in sub-article 16 (c) must be given by telecommunication or, if that is not
possible, by other expeditious means no later than the close of the fifth banking day following
the day of presentation.

e.

A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank
may, after providing notice required by sub-article 16 (c) (iii) (a) or (b), return the documents
to the presenter at any time.
If an issuing bank or a confirming bank fails to act in accordance with the provisions of this
article, it shall be precluded from
claiming that the documents do not constitute a complying
presentation.
When an issuing bank refuses to honour or a confirming bank refuses to honour or negotiate
and has given notice to that effect in accordance with this article, it shall then be entitled to
claim a refund, with interest, of any reimbursement made.

f.

g.

38

Harvey v Facie
[1893] AC 552
The plaintiffs telegraphed to the defendants, writing: 'Will you sell us Bumper Hall Pen ? Telegraph
lowest cash price.' The defendants replied, also by a telegram: 'Lowest price for Bumper Hall Pen,
900. The plaintiffs immediately sent their last telegram stating: 'We agree to buy Bumper Hall Pen for
900 asked by you.' The defendants, however, refused to sell the property at that price.
This was contented by The plaintiffs that by quoting their minimum price in response to the inquiry, the
defendants had made an offer to sell at that price. But the Privy Council turned down the suggestion.
Their Lordships pointed out that in their first telegram, the plaintiffs had asked two questions, ,first, as
to the willingness to sell and, second, as to the lowest price. The defendants answered only the second
question and gave the lowest price. They reserved their answer as to the willingness to sell. Thus they
had made no offer. The last telegram of the plaintiffs was an offer to buy, but that was never accepted
by the defendants. "Their Lordships are of opinion that the mere statement of the lowest price at which
the vendor would sell contains no implied contract to sell at that price to the person making the
inquiry."

Gibson v Manchester City Council


[1979] 1 WLR 294 (HL)
The City Council adopted a policy of selling council houses to tenants. The respondent tenant applied
on a printed form for details of the price and mortgage terms. The city treasurer wrote to the respondent
that the Council 'may be prepared to sell the house to you at the purchase price of 2,725 less 20% =
2,180'. The letter gave details of the mortgage likely to be made available and stated 'If you would like
to make a formal application to buy.., please complete the enclosed application form and return it to me
as soon as possible.' The respondent completed the application form and returned it on 5 March. He
wrote again on 18 March, requesting the Council to carry on with the purchase in accordance with his
application. Before contracts were prepared and exchanged, political control of the Council changed
and the Council decided to proceed with sales only where contracts had already been exchanged. The
respondent sought specific performance of the contract, claiming that the offer in the city treasurer's
letter had been accepted by him in his letters of 5 and 18 March. Held: there was no binding contract
because no offer capable of acceptance had been made by the Council. The statements in the city
treasurer's letter that the Council 'may be prepared to sell' and inviting Mr Gibson 'to make a formal
application to buy' -were not an offer to sell but merely an invitation to treat.
LORD DIPLOCK: My Lords, the words I have italicised [see facts, above] seem to me, as they seemed
to Geoffrey Lane LJ, to make it quite impossible to construe this letter as a contractual offer capable of
being converted into a legally enforceable open contract for the sale of land by Mr Gibson's written
acceptance of it. The words 'may be prepared to sell' are fatal to this; so is the invitation, not, be it
noted, to accept the offer, but 'to make formal application to buy' upon the enclosed application form. It
is, to quote Geoffrey Lane L J, a letter setting out the financial terms on which it may be the council
will be prepared to consider a sale and purchase in due course.

Harris v Nickerson
(1873) LR 8 QB 286 (QB)
The defendant auctioneer advertised that lots including certain office furniture would be sold by him at
Bury St Edmunds on specified days. The plaintiff had a commission to buy this furniture and travelled
from London for the sale. However, the lots were withdrawn from sale. The plaintiff brought an action
against the defendant to recover for his loss of time and expenses.
Held: he had no such right of action. The advertisement was only an invitation to treat and did not
amount to a promise that all the articles advertised would be put up for sale.

39

NOTE
What if the auction is advertised as being 'without reserve' (i.e., there is to be no reserve price and the
property will be sold to the highest bidder)?

Warlow v Harrison
(1859) 1 E & E 309; 120 ER 925 (Exchequer Chamber)
The defendant, an auctioneer, advertised the sale without reserve of a horse by public auction. The
plaintiff attended the sale and bid 60 guineas. The horse's owner bid 61 guineas. The plaintiff refused to
make any further bid and the defendant (who, it appears, did not know that the bidder was the owner)
knocked down the horse to the owner for 61 guineas. The plaintiff claimed that the horse was his since
he was the highest bona fide purchaser at an unreserved sale. In his pleadings the plaintiff alleged that
the defendant was the plaintiff's agent to complete this contract. Held: on the pleadings the plaintiff had
no claim since there was no agency relationship between the plaintiff and the defendant. The pleadings
required amendment.
MARTIN B (obiter):... The sale was announced.., to be 'without reserve.' This, accordin to all the cases
both at law and equity, means that neither the vendor nor any person in his behalf shall bid at the
auction, and that the property shall be sold to the highest bidder, whether the sum bid be equivalent to
the real value or not. We cannot distinguish the case of an auctioneer putting up property for sale upon
such a condition from the case of the loser of property offering a reward ....
Upon the same principle, it seems to us that the highest bona fide bidder at an auction may sue the
auctioneer as upon a contract that the sale shall be without reserve. We think the auctioneer who puts
the property up for sale upon such a condition pledges himself that the sale shall be without reserve; or,
in other words, contracts that it shall be so; and that this contract is made with the highest bona fide
bidder; and, in case of a breach of it, that he has a right of action against the auctioneer.
NOTES
There were two agreements. First, the plaintiff's bid was an offer, but since his bid was not accepted he
was not entitled to the horse which was knocked down to the owner. However, the advertisement of an
auction sale without reserve is a unilateral offer by the auctioneer. Martin B indicates that only the
highest bona fide bidder can accept this unilateral offer. The plaintiff clearly accepted this offer and the
auctioneer would be liable in damages for breach of his promise that there would be no reserve.

Executive Engineer . . .Petitioner-Defendant Vs Asob Ali . . .Opposite


Party-Plaintiff
58 DLR (2006) HCD 236
Faisal Mahmud Faizee J
Judgment August 17th, 2005
The opposite party as plaintiff instituted the instant title suit for a decree of permanent injunction
restraining the defendant-petitioner from selling in auction the suit materials to anyone else as
attempted by the defendant-petitioner by announcing auction sale for the fourth time. The case of the
plaintiff as made out in the plaint, in short, is that the plaintiff as a trader of rods, CI sheets, etc.
participated through submission of quotations in the auction invited by the defendant-petitioner for
selling some steel materials vide Auction Notice No. 6/2001-2002 published in the local newspaper
named "Sylheter Dak" dated 11-9-2003 and became the highest bidder among five bidders; for this he
deposited 10% of his bid amount as security in favour of the defendant -petitioner; and that the
defendant-petitioner accepted the earnest money and gave assurance to the plaintiff-opposite-party that
the auctioned materials would be handed over to him within a short time subject to receiving survey
report from the higher authority; subsequently, the-defendant-petitioner failed to hand over the
materials to the plaintiff for which the plaintiff served a legal notice to the defendant- petitioner on 149-2003; in reply, the defendant- petitioner vide Memo No. 4146 dated 16-9-2003 informed the plaintiff
that the value of the goods quoted by him was found unsatisfactory and, as such, the authorities did not

40

accept his quotation and proceeded for fresh auction in public interest; at this the plaintiff suffered loss
of business as he could not invest the amount of the earnest money in his business; the. defendantpetitioner called fresh auction without giving any notice to the plaintiff.
The petitioner as defendant contested the suit by filing a written statement denying all the material
allegations made in the plaint and contending, inter alia, that as per conditions Nos. 6 and 9 of the
auction notice the validity of the quotation submitted by the plaintiff expired on the expiry of three
months; the authorities reserved the right to accept or reject the quotation of the plaintiff if not found
satisfactory; the quotation of the plaintiff was neither accepted nor approved by the authorities nor any
letter of acceptance was issued to the plaintiff; neither the plaintiff deposited nor the defendant
accepted any amount of his bid money; as such the plaintiff acquired no right, title, interest or
possession over the steel materials described in the schedule of the plaint.
The learned Assistant Judge of Sylhet dismissed the suit of plaintiff, The plaintiff preferred an
appeal .which was contested by the defendant-petitioner. The learned Additional District Judge allowed
the appeal setting aside the judgment and decree of the learned Assistant Judge and decreed the suit in
favour of the plaintiff. Hence this civil revision by the defendant-respondent- petitioner, and the Rule.
Relevant clauses of the Auction Notice No. 6 of 2001-2002 are as follows:
"(4). Bank draft covering 10% of quoted value in favour of the Executive Engineer, Sylhet PWD
Division, Sylhet from any schedule Bank of Bangladesh should be enclosed with offers as security,
failing which their offer will be rejected. "
"(3). The successful bidder whose offer is approved by the competent authority of PWD wiil be
informed by the undersigned, he will have to deposit the rest 90% of his/their quoted amount including
3% of the bid money as income tax within 7(seven) days from date of issue of such order, failing which
his/their offer shall be liable for rejection including forfeiture of the security money to the Government
without further notice."
"(6). If fresh auction is invited for those materials for any reason whatsoever the bid of the highest
bidder shall remain valid either for 3 months or till the date of disposal of fresh auction whichever is
earliest."
"(9). The competent authority of this department reserves the right to accept or reject any or all offers
without assigning any reason."
There is the Contract Act, 1872. Clause(a) of section 2 of the Contract Act provides that when one
person signifies to another his willingness to do or to abstain from doing anything with a view to
obtaining the assent of that other to such act or abstinence, he is said to make a proposal; and clause(b)
provides that when the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted, and a proposal when accepted, becomes a promise; Clause(e) provides that every
promiseand every set of promises, forming the consideration for each other, is an agreement; and
Clause (h) provides that an agreement enforceable by law is a contract. Section 10 of the Contract Act
provides that all agreements are contracts if they are made by the free consent of parties competent to
contract, for a lawful consideration and with a lawful object, and are not, by the Contract Act, expressly
declared to be void.
The feature, that distinguishes a sale of goods in auction from a sale of goods in market, is that, in an
ordinary sale in market the seller offers to sell his goods at a specific price and the buyer accepts the
offer occasioning a contract of sale or makes a counter-offer with a price convenient to him which, in
turn, is for the seller to accept or not, and if the seller accepts, a contract for sale is made, otherwise
not; and, on the other hand, in a sale of goods in auction, the seller, instead of making an offer to sell
his good at a specific price, extends an invitation to the members of the public in general for
individually offering or quoting prices to buy his goods and each of the intending buyers individually
offers or quotes price which, in turn, is for the seller to accept or not.
Therefore, an auction notice means only an invitation extended to the public in general for making
individual offers. The auction notice does not amount to an offer or proposal and the quotation of raes
or price offered by an intending buyer does not amount to an acceptance of offer or proposal thereby
creating any promise or agreement. It is by the acceptance by the seller of any of these offers or
proposals of the persons submitting quotations that it becomes a promise or an agreement. Thus, the
mere fact that a person made a certain quotation in respect to the auction notice, even granting that it

41

was the highest quotation, will not, in any manner, create on the person who issued the auction notice,
an obligation to accept the quotation.
. So, in view of the provisions of the Sale of Goods Act and the Contract Act, a party coming out to be
the highest bidder or a party offering the highest price for the goods in auction does not, per se, acquire
any legal right in the goods for sale in auction, and for the same reason the auction seller neither
becomes legally obliged to accept the highest bidder as the auction purchaser nor becomes legally
retarded from holding a fresh auction. That being the position of law, in the instant case no legal right
in respect of the goods in auction had accrued in favour of the plaintiff-opposite party; and the
defendant petitioner was under no legal obligation to accept the bid or quotation of the plaintiffopposite party and sell him the goods, although his quotation was the highest.
Concluding the discussion as above, I am inclined to hold that the impugned judgment and decree of
the appellate Court below are not sustainable. Accordingly, the impugned judgment and decree passed
by the learned Additional District Judge are set aside and those of the learned Assistant Judge restored.

Carlill. . .Plaintiff v Carbolic Smoke Ball Company. . .Defendant


1893] 1 QB 256
The defendants, who were the proprietors and vendors of a medical preparation called "The Carbolic
Smoke Ball," inserted in the Pall Mall Gazette of November 13, 1891, and in other newspapers, the
following advertisement:
"100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the
increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball
three times daily for two weeks according to the printed directions supplied with each ball. 1000 is
deposited with the Alliance Bank, Regent Street, shewing our sincerity in the matter.
The plaintiff, a lady, on the faith of this advertisement, bought one of the balls at a chemist's, and used
it as directed, three times a day, from November 20, 1891, to January 17, 1892, when she was attacked
by influenza. She made a demand for the award but the company denied.
Hawkins, J., held that she was entitled to recover Pound 100. The defendants (company) appealed. The
Court of Appeal upheld the judgment of the trial court.
Judgment by Court of Appeal:
per LINDLEY, L.J.
We must first consider whether this was intended to be a promise at all, or whether it was a mere puff
which meant nothing. Was it a mere puff? My answer to that question is No, and I base my answer
upon this passage: "1000 is deposited with the Alliance Bank, shewing our sincerity in the matter."
Now, for what was that money deposited or that statement made except to negative the suggestion that
this was a mere puff and meant nothing at all? The deposit is called in aid by the advertiser as proof of
his sincerity in the matter - that is, the sincerity of his promise to pay this 100 in the event which he has
specified. I say this for the purpose of giving point to the observation that we are not inferring a
promise; there is the promise, as plain as words can make it.
Then it is contended that it is not binding. In the first place, it is said that it is not made with anybody in
particular. Now that point is common to the words of this advertisement and to the words of all other
advertisements offering rewards. They are offers to anybody who performs the conditions named in the
advertisement, and anybody who does perform the condition accepts the offer. In point of law this
advertisement is an offer to pay 100 to anybody who will perform these conditions, and the
performance of the conditions is the acceptance of the offer.
But then it is said, "Supposing that the performance of the conditions is an acceptance of the offer, that
acceptance ought to have been notified." Unquestionably, as a general proposition, when an offer is

42

made, it is necessary in order to make a binding contract, not only that it should be accepted, but that
the acceptance should be notified. But is that so in cases of this kind? I apprehend that they are an
exception to that rule, or, if not an exception, they are open to the observation that the notification of
the acceptance need not precede the performance. This offer is a continuing offer. It was never revoked,
and if notice of acceptance is required - which I doubt very much, for I rather think the true view is that
which was expressed and explained by Lord Blackburn in the case of Brogden v. Metropolitan Ry. Co.
2 App. Cas. 666, 691 - if notice of acceptance is required, the person who makes the offer gets the
notice of acceptance contemporaneously with his notice of the performance of the condition. If he gets
notice of the acceptance before his offer is revoked, that in principle is all you want. I, however, think
that the true view, in a case of this kind, is that the person who makes the over shews by his language
and from the nature of the transaction that he does not expect and does not require notice of the
acceptance apart from notice of the performance.
We, therefore, find here all the elements which are necessary to form a binding contract enforceable in
point of law, subject to two observations. First of all it is said that this advertisement is so vague that
you cannot really construe it as a promise - that the vagueness of the language shews that a legal
promise was never intended or contemplated. The language is vague and uncertain in some respects,
and particularly in this, that the 100 is to be paid to any person who contracts the increasing epidemic
after having used the balls three times daily for two weeks. It is said, When are they to be used?
According to the language of the advertisement no time is fixed, and, construing the offer most strongly
against the person who has made it, one might infer that any time was meant. I do not think that was
meant, and to hold the contrary would be pushing too far the doctrine of taking language most strongly
against the person using it. I do not think that business people or reasonable people would understand
the words as meaning that if you took a smoke ball and used it three times daily for two weeks you
were to be guaranteed against influenza for the rest of your life, and I think it would be pushing the
language of the advertisement too far to construe it as meaning that. But if it does not mean that, what
does it mean? It is for the defendants to shew what it does mean; and it strikes me that there are two,
and possibly three, reasonable constructions to be put on this advertisement, any one of which will
answer the purpose of the plaintiff. . . . .It strikes me, I confess, that the true construction of this
advertisement is that 100 will be paid to anybody who uses this smoke ball three times daily for two
weeks according to the printed directions, and who gets the influenza or cold or other diseases caused
by taking cold within a reasonable time after so using it; and if that is the true construction, it is enough
for the plaintiff.
I come now to the last point which I think requires attention - that is, the consideration. It has been
argued that this is nudum pactum - that there is no consideration. We must apply to that argument the
usual legal tests. Let us see whether there is no advantage to the defendants. It is said that the use of the
ball is no advantage to them, and that what benefits them is the sale; and the case is put that a lot of
these balls might be stolen, and that it would be no advantage to the defendants if the thief or other
people used them. The answer to that, I think, is as follows. It is quite obvious that in the view of the
advertisers a use by the public of their remedy, if they can only get the public to have confidence
enough to use it, will react and produce a sale which is directly beneficial to them. Therefore, the
advertisers get out of the use an advantage which is enough to constitute a consideration.But there is
another view. Does not the person who acts upon this advertisement and accepts the offer put himself to
some inconvenience at the request of the defendants? Is it nothing to use this ball three times daily for
two weeks according to the directions at the request of the advertiser? Is that to go for nothing? It
appears to me that there is a distinct inconvenience, not to say a detriment, to any person who so uses
the smoke ball. I am of opinion, therefore, that there is ample consideration for the promise.
It appears to me, therefore, that the defendants must perform their promise, and, if they have been so
unwary as to expose themselves to a great many actions, so much the worse for them.
per BOWEN, L.J.
It was argued by the defendants that the contract is made with all the world - that is, with everybody;
and that you cannot contract with everybody. It is not a contract made with all the world. There is the
fallacy of the argument. It is an offer made to all the world; and why should not an offer be made to all
the world which is to ripen into a contract with anybody who comes forward and performs the
condition? It is an offer to become liable to any one who, before it is retracted, performs the condition,
and, although the offer is made to the world, the contract is made with that limited portion of the public

43

who come forward and perform the condition on the faith of the advertisement. It is not like cases in
which you offer to negotiate, or you issue advertisements that you have got a stock of books to sell, or
houses to let, in which case there is no offer to be bound by any contract. Such advertisements are
offers to negotiate - offers to receive offers - offers to chaffer, as, I think, some learned judge in one of
the cases has said. If this is an offer to be bound, then it is a contract the moment the person fulfils the
condition.
Then it was said that there was no notification of the acceptance of the contract. One cannot doubt that,
as an ordinary rule of law, an acceptance of an offer made ought to be notified to the person who makes
the offer, in order that the two minds may come together. Unless this is done the two minds may be
apart, and there is not that consensus which is necessary according to the English law - I say nothing
about the laws of other countries - to make a contract. But there is this clear gloss to be made upon that
doctrine, that as notification of acceptance is required for the benefit of the person who makes the offer,
the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so,
and I suppose there can be no doubt that where a person in an offer made by him to another person,
expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain
binding, it is only necessary for the other person to whom such offer is made to follow the indicated
method of acceptance; and if the person making the offer, expressly or impliedly intimates in his offer
that it will be sufficient to act on the proposal without communicating acceptance of it to himself,
performance of the condition is a sufficient acceptance without notification.
The definition of "consideration" as accepted by judiciary is "Any act of the plaintiff from which the
defendant derives a benefit or advantage, or any labour, detriment, or inconvenience sustained by the
plaintiff, provided such act is performed or such inconvenience suffered by the plaintiff, with the
consent, either express or implied, of the defendant." Inconvenience sustained by one party at the
request of the other is enough to create a consideration. I think, therefore, that it is consideration
enough that the plaintiff took the trouble of using the smoke ball. But I think also that the defendants
received a benefit from this user, for the use of the smoke ball was contemplated by the defendants as
being indirectly a benefit to them, because the use of the smoke balls would promote their sale.
In the result the Appeal is dismissed.

Lalman v Gauri Datta


[1913] 11AIILJ489. Allahabad High Court
1

The defendant's nephew absconded from home. He sent his servant in search of the boy. When the
servant had left, the defendant by hand-bills offered to pay Rs 501 to anybody discovering the boy. The
servant came to know of this offer only when he had already traced the missing child. Accordingly, his
claim for the award was refused. He, however, brought an action to recover the reward. But his action
failed. Explaining the principle Court observed that in order to constitute a contract, there must be an
acceptance of an offer and there can be no acceptance unless there is knowledge of the offer.

Gibbons v Proctor
(1891) 64 LT594
On 29 May, the defendant instructed handbills to be printed offering a reward of 25 to the person who
gave information, leading to the conviction of the perpetrator of a particular crime, to police
Superintendent Penn. The plaintiff, a police officer, had already communicated the required
information to a colleague, named Coppin, with instructions to forward it to Superintendent Penn.
Coppin had communicated the information to his superior, Inspector Lennan, who had passed it on to
Superintendent Penn. The information reached Penn on 30 May, which was after the time when the
handbills had been distributed to police stations.
Held: the plaintiff was entitled to the reward. Coppin and Lennan were the plaintiff's agents for the
purposes of conveying the information. The terms of the offer required the information to be given to
1

Lalman v Gauri Datta [1913] 11AIILJ489.

44

Penn. The acceptance was the supply of the information to Penn, and at that time the plaintiff knew that
a reward had been offered.

Felthouse v Bindley
(1862) 11 CB (US) 869; 142 ER 1037 (CP)
The plaintiff and his nephew were negotiating for the sale of a horse. The plaintiff wrote to the nephew
stating 'If I hear no more about him, I consider the horse is mine at 30 15s'. The nephew did not
respond but did instruct the defendant, an auctioneer, to reserve the horse in question as it had already
been sold. By mistake the defendant put the horse up for sale and it was sold. The plaintiff sued the
auctioneer for the conversion of the horse (which meant that he had to show that the horse was his
property at the time that it was sold). Held: the plaintiff did not have property in the horse.
WILLES J: ... tilt is clear that the uncle had no right to impose upon the nephew a sale of his horse for
30/. 15s. unless he chose to comply with the condition of writing to repudiate the offer. The nephew
might, no doubt, have bound his uncle to the bargain by writing to him: the uncle might also have
retracted his offer at any time before acceptance. It stood an open offer: and so things remained until
the 25th of February, when the nephew was about to sell his farming stock by auction. The horse in
question being catalogued with the rest of the stock, the auctioneer (the defendant) was told that it was
already sold. It is clear, therefore, that the nephew in his own mind intended his uncle to have the horse
at the price which he (the uncle) had named,-- 30/. 15s.: but he had not communicated such his
intention to his uncle, or done anything to bind himself. Nothing, therefore, had been done to vest the
property in the horse in the plaintiff down to the 25th of February, when the horse was sold by the
defendant. It appears to me that, independently of the subsequent letters, there had been no bargain to
pass the property in the horse to the plaintiff...

Household Fire and Carriage Accident Insurance Company (Ltd) v


Grant
(1879) 4 Ex D 216 (CA)
The defendant applied for shares in the plaintiff company. The company allotted the shares to the
defendant, and addressed to him and posted a letter containing the notice of allotment, but the letter
was never received by him. Held: (Thesiger and Baggally LJJ, Bramwell LJ dissenting) the defendant
had become a shareholder. Acceptance was complete when the letter of allotment was posted and it was
irrelevant that it never arrived.
THESIGER L J: ... An acceptance, which only remains in the breast of the acceptor without being
actually and by legal implication communicated to the offerer, is no binding acceptance. How then are
these elements of law to be harmonised in the case of contracts formed by correspondence through the
post? I see no better mode than that of treating the post office as the agent of both parties, and it was so
considered by Lord Romilly in Hebb's Case (1867) LR 4 Eq 9, when in the course of his judgment he
said: 'Dunlop v Hi,gins {1848) 1 HLC 381 decides that the posting of a letter accepting an offer
constitutes a binding contract, but the reason of that is, that the post office is the common agent of both
parties.' Aiderson, B., also in Stocken v Coffin (1841) 7 M & W 515, a case of notice of dishonour,..,
says: 'If the doctrine that the post office is only the agent for the delivery of the notice were correct no
one could safely avail himself of that mode of transmission.' But if the post office be such common
agent, then it seems to me to follow that, as soon as the letter of acceptance is delivered to the post
office, the contract is made as complete and final and absolutely binding as if the acceptor had put his
letter into the hands of a messenger sent by the offerer himself as his agent to deliver the offer and
receive the acceptance. What other principle can be adopted short of holding that the contract is not
complete by acceptance until and except from the time that the letter containing the acceptance is
delivered to the offerer, a principle which has been distinctly negatived?... The acceptor, in posting the
letter, has, to use the language of Lord Blackburn, in Brogden v Directors of Metropolitan Rt Co.
(1877) 2 App Cos 666, 'put it out of his control and done an extraneous act which clenches the matter,
and shews beyond all doubt that each side is bound.' How then can a casualty in the post, whether
resulting in delay, which in commercial transactions is often as bad as no delivery, or in non-delivery,
unbind the parties or unmake the contract? To me it appears that in practice a contract complete upon
the acceptance of an offer being posted, but liable to be put an end to by an accident in the post, would

45

be more mischievous than a contract only binding upon the parties to it upon the acceptance actually
reaching the offorer, and I can see no principle of law from which such an anomalous contract can be
deduced ........
There is no doubt that the implication of a complete, final, and absolutely binding contract being
formed, as soon as the acceptance of an offer is posted, may in some cases leadto inconvenience and
hardship. But such there must be at times in every view of the law. It is impossible in transactions
which pass between parties at a distance, and have to be carried on through the medium of
correspondence, to adjust conflicting rights between innocent parties, so as to make the consequences
of mistake on the part of a mutual agent fall equally upon the shoulders of both. At the same time I am
not prepared to admit that the implication in question will lead to any great or general inconvenience or
hardship. An offerer, if he chooses, may always make the formation of the contract which he proposes
dependent upon the actual communication to himself of the acceptance. If he trusts to the post he trusts
to a means of communication which, as a rule, does not fail, and if no answer to his offer is received by
him, and the matter is of importance to him, he can make inquiries of the person to whom his offer was
addressed. On the other hand, if the contract is not finally concluded, except in the event of the
acceptance actually reaching the offerer, the door would be opened to the perpetration of much fraud,
and, putting aside this consideration, considerable delay in commercial transactions, in which despatch
is, as a rule, of the greatest consequence, would be occasioned; for the acceptor would never be entirely
safe in acting upon his acceptance until he had received notice that his letter of acceptance had reached
its destination.

Mohoribibee. . .Defendant/petitioner v Dharmodas Ghose. .


.Plaintiff/respondent
1903) 30 IA 114. 30Ca1539.
The plaintiff, a minor, mortgaged his houses in favour of the defendant, a money-lender, to secure a
loan of Rs 20,000. A part of this amount was actually advanced to him. While considering the proposed
advance, the attorney, who was acting for the money-lender, received information that the plaintiff was
still a minor. Subsequently, the infant commenced this action stating that he was under age when he
executed the mortgage and the same should, therefore, be cancelled.
The money lender's only request was that the relief should be made subject to the condition of the
minor repaying to him the sum of Rs 10,500 advanced as part of the consideration for the mortgage. He
first relied upon Section 64 of the Contract Act, according to which, a person who, having the right to
do so, rescinds a voidable contract, shall have to restore to the other party any benefit received by him
under the contract.
The Privy Council held that this section applies only to voidable contracts and cannot apply to the
agreement of a minor, which is absolutely void. Similarly, no relief was allowed under Section 65 of
the Act, as this section applies only to contracts which subsequently either become void or are
discovered to be void. "This section like Section 64, starts from the basis of there being an agreement
or contract between competent parties, and has no application to a case in which there never was, and
never could have been any contract."
Sir Lord NORTH observed: looking at Section 11 their Lordships are satisfied that the Act makes it
essential that all contracting parties should be competent to contract and expressly provides that a
person who by reason of infancy is incompetent to contract cannot make a contract within the meaning
of the Act. The question whether a contract is void or voidable presupposes the existence of a contract
within the meaning of the Act, and cannot arise in the case of an infant.

Ashraf Ali. . . Petitioner V Etim Ali and Others . . . Opposite parties


11 DLR 185 1959
Judgment: August 27, 1956

46

Abed Ali the predeceasor of the defendants had a raiyati holding comprising of disputed land where he
had homestead. The plaintiff purchased the raiyati holding in Mortgage Execution Case no. 209 of
1919 of the Sixth Court of the Munsif Commilla and obtained the delivery of possession of the holding
and got it in his khash possession.
Abed Ali took settlement of his homestead portion the suit land on an annual jama of rs. 3/2 by
executing a registered kabuliyat dated 25th of Posh 1326 BS which corresponds to the year 1919 to
1920 in favour of the plaintiff. At the time the kabuliyat was executed the plaintiff was a minor. The
plaintiff has filed the present suit for arrears of rent for the years 1357 to 1360 BS against the
defendants on this basis of these kabuliyat.
The defendants in their defence of want of relationship of landlord and tenant not only denied the
execution of kabuliyat by their predeceasor Abed Ali but also assailed it as void being a contract with a
minor and for want of reciprocity and mutuality.
The Trial court dismissed the suit holding that there existed no relationship of landlord and tenant
between the parties on the basis of an illegal and invalid kabuliyat which had never been acted upon.
The plaintiff moved the Court of learned District judge by filing a revisional application. The learned
District Judge in revision set aside the judgment and decree of the trial court and decreed the suit
holding that the plaintiff had acquired title by the court- sale purchase and got possession of the suit
land and that lease created by the registered kabuliyat executed by the defendants predecessor was
valid and binding on the defendants. Hence this rule is at the instance of the defendants
Dhaka High Court upheld the judgment of the learned District Court and assigned following reasons.
There is difference between executory contract and executed contract. If in executed contract the
minors part has been performed and nothing is left to be executed by the minor, i.e., no obligation left
to be discharged by the minor and to be enforced against him, such is a contract is enforceable by the
minor as it is a contract for the benefit of the minor, such as completed by sale of mortgage in favor of
the minor and is enforceable in law. There may be some difficulty in case of a transfer by way of lease
to a minor. It is because of the obligation to pay rent by the minor or other covenants in the lease
creating obligations yet to be discharged by the minor. Sections 10 and 11 of the Contract Act enacted
for the benefit and protection of the minor cannot be made to operate against the minor. It is true the
contract in which the minor is a party cannot be enforced against the minor, but that does not mean
that the major party who with his eyes wide open to the fact of the minority of the other side entered
into a contract with him, and, after taking advantage of such a contract, cannot be allowed to go back
from his part of the contract and repudiate it. This is a well recognized principle, and was unanimously
recognized by the full Bench of the Madras High Court consisting of judges like Sir John Wallis, Kt.,
Chief Justice, Mr. Justice Abdur Rahim and Mr. Justice Srinivasa Ayyanger in the case of A.T. Raghare
Chariar V. O.M. Srinivasa Raghava Chariar (ILR 40 Mad. 308 (F.B>.) where Their Lordships
explained and distinguished the decision of the Privy Council in the case of Mohoribibee V.Dharmodas
Ghose relied on by the learned advocate for the petitioner.

Nash V Inman
1908 March 5
The action was brought by a tailor carrying on business in Savile Row, London, for Pound 145. 10s. 3d.
for clothes supplied to the defendant while an undergraduate at Cambridge University between October
29, 1902, and June 16, 1903. The defendant was an infant at the time of the sale and delivery of the
goods. He had been at school at Uppingham, and in October, 1902, he went up as a freshman to Trinity
College,*2 Cambridge. He was the son of an architect of good position, who had a town house at
Hampstead, and a country establishment, called Wade Court, near Havant. The clothes supplied to the
defendant included, among other things, eleven fancy waistcoats at two guineas each, or Pound 1. 15s.
for cash.
Upon an application for judgment the defendant set up the plea of infancy, and the action was
adjourned into Court and was tried before Ridley J. and a special jury. At the trial the plaintiff claimed
only Pound 122. 19s. 6d., the cash price of the goods, in lieu of Pound 145. 10s. 3d., the credit price.

47

The trial court gave judgment in favour of the defendant and the Court of Appeal, on an appeal,
affirmed the judgment and assigned the following reasons.
COZENS-HARDY M.R.
The plaintiff sues the defendant for goods sold and delivered. The defendant pleads infancy at the date
of the sale, and his plea is proved. What is the consequence of that? The consequence of that is that the
Infants' Relief Act, 1874, becomes applicable. Under that Act all contracts for goods supplied are
absolutely void, the only exception being contracts for necessaries. Then s. 2 of the Sale of Goods Act,
1893, provides as follows: "Capacity to buy and sell is regulated by the general law concerning
capacity to contract, and to transfer and acquire property." That, of course, includes the Act of 1874.
Then follows this proviso: "Provided that where necessaries are sold and delivered to an infant, or
minor, or to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he
must pay a reasonable price therefor." The section then defines necessaries as follows: "Necessaries in
this section mean goods suitable to the condition in life of such infant or minor or other person, and to
his actual requirements at the time of the sale and delivery." What is the effect of that? The plaintiff
sues for goods sold and delivered. The defendant pleads infancy. The plaintiff must then reply, "The
goods sold were necessaries within the meaning of the definition in s. 2 of the Sale of Goods Act,
1893."
There is another branch of the definition which cannot be disregarded. Having shewn that the goods
were suitable to the condition in life of the infant, he must then go on to shew that they were suitable to
his actual requirements at the time of the sale and delivery. Unless he establishes that fact, either by
evidence adduced by himself or by cross-examination of the defendant's witnesses, as the case may be,
in my opinion he has not discharged the burden which the law imposes upon him.
FLETCHER MOULTON L.J.
An infant, like a lunatic, is incapable of making a contract of purchase in the strict sense of the words;
but if a man satisfies the needs of the infant or lunatic by supplying to him necessaries, the law will
imply an obligation to repay him for the services so rendered, and will enforce that obligation against
the estate of the infant or lunatic. The consequence is that the basis of the action is hardly contract. Its
real foundation is an obligation which the law imposes on the infant to make a fair payment in respect
of needs satisfied. The consequence of necessaries sold and delivered to an infant is that he must pay a
reasonable price therefor.
The Sale of Goods Act, 1893, gives a statutory definition of what are necessaries in a legal sense,
which entirely removes any doubt, if any doubt previously existed, as to what that word in legal
phraseology means. [The Lord Justice read the definition.] Hence, if an action is brought by one who
claims to enforce against an infant such an obligation, it is obvious that the plaintiff in order to prove
his case must shew that the goods supplied come within this definition. That is to say, the plaintiff has
to shew, first, that the goods were suitable to the condition in life of the infant; and, secondly, that they
were suitable to his actual requirements at the time--or, in other words, that the infant had not at the
time an adequate supply from other sources. Therefore there is no doubt whatever that in order to
succeed in an action for goods sold and delivered to an infant the plaintiff must shew that they satisfy
both the conditions I have mentioned. Everything which is necessary to bring them within s. 2 it is for
him to prove.
The evidence for the plaintiff shewed that one of his travellers, hearing that a freshman at Trinity
College was spending money pretty liberally, called on him to get an order for clothes, and sold him
within nine months goods which at cash prices came*11 to over Pound 120., including an extravagant
number of waistcoats and other articles of clothing, and that is all that the plaintiff proved. The
defendant's father proved the infancy, and then proved that the defendant had an adequate supply of
clothes, and stated what they were. That evidence was uncontradicted. Not only was it not contradicted
by any other evidence, but there was no cross-examination tending to shake the credit of the witness,
against whose character and means of knowledge nothing could be said. On that uncontradicted
evidence the judge came to the conclusion that the dresses supplied were not his basic necessary and
therefore this appeal must be dismissed.

48

BUCKLEY L.J.
The defendant, having been at school at Uppingham, went as a freshman to Trinity College,
Cambridge, in October, 1902. The plaintiff, who was a tailor carrying on business in Savile Row, sent a
traveller to Cambridge to solicit orders. The traveller has stated in evidence that he was told there was a
young man spending money there very freely, so he called upon him. At first he got no order, but he
pressed for orders, and subsequently got orders, with the result that between October 29, 1902, and
June 16, 1903, the defendant had run up a bill of Pounds 145. odd for clothing of an extravagant and
ridiculous style having regard to the position of the boy. The tailor now sues the defendant for Pounds
145. The defence is infancy.
The plaintiff, when he sues the defendant for goods supplied during infancy, is suing him in contract on
the footing that the contract was such as the infant, notwithstanding infancy, could make. The
defendant, although he was an infant, had a limited capacity to contract. To render an infant's contract
for necessaries an enforceable contract two conditions must be satisfied, namely, (1.) the contract must
be for goods reasonably necessary for his support in his station in life, and (2.) he must not have
already a sufficient supply of these necessaries.
The plaintiff called his traveller, who gave evidence as to the goods supplied. At the conclusion of that
evidence Mr. Atkin, for the defendant, submitted that, subject to his proving that the defendant was an
infant, there was no evidence to go to the jury. He put the father in the box to prove the infancy, and
then he put some further questions to the witness addressed to the point whether the boy was already
sufficiently supplied with clothing, and the evidence of the father on that point was taken and it was
not contradicted by the plaintiff in cross examination.

Chikham Amiraju v Chikham Seshamma


(1912) 16 IC 344 Madras High Court
By threat of suicide, a Hindu induced his wife and son to execute a release in favour of his brother in
respect of certain properties which they claimed as their own.
It was held by a majority that the threat of suicide amounted to coercion within Section 15 of the
Contract Act inasmuch as the attempting to commit suicide is an offence under section 309 of the Penal
Code, 1860 and by committing the offence he obtained consent from his wife and son to the contract.
The release deed was, therefore, voidable.
Couturier v Hastie
(185) 5 HLCas 673; 10 ER 106 (HL)
In May 1848, the parties entered into a contract for the sale of corn which was believed to be in transit
from Salonica to the UK. Shipment had occurred in February 1848 and, unknown to both parties,
before the contract was made in May, the corn had deteriorated to such an extent that the master of the
ship had sold it at Tunis. When he discovered this fact the English buyer repudiated the contract but the
seller argued that the buyer was still liable for the price.
Held: the contract contemplated that there was an existing commodity to be sold and bought. Since this
was not the case at the time of the sale to the buyer, he was not liable to pay the price.
NOTES
Couturier v Hastie is often quoted as authority for the fact that a mistake by both parties as to the
existence of the subject matter of the contract renders the contract void.

Taylor v Caldwell
(1863) 3 B & S 826; 122 ER 309 (QB)
On 27 May 1862, the plaintiffs entered into a contract with the defendants by which defendants agreed
to let the plaintiffs have the use of the Surrey Gardens and Music Hall on 17 June, 15 July, and 5 and

49

19 August for the purpose of giving a series of four grand concerts and fetes. On 11 June (before the
first of these dates on which a concert was to be given), the Hall was destroyed by fire, without the
fault of either party. The concerts could not be given as intended. The plaintiffs argued that the
defendants were in breach of contract in failing to supply the Hall and they sought damages for their
wasted advertising expenditure.
Held: the continuation of the contract was subject to an implied condition that the parties would be
excused if the subject matter was destroyed. Therefore, the contract was discharged by frustration and
both parties were released.
BLACKBURN J
Where, from the nature of the contract, it appears that the parties must from the beginning have known
that it could not be fulfilled unless when the time for the fulfilment of the contract arrived some
particular specified thing continued to exist, so that, when entering into the contract, they must have
contemplated such continuing existence as the foundation of what was to be done; there, in the absence
of any express or implied warranty that the thing shall exist, the contract is not to be construed as a
positive contract, but as subject to an implied condition that the parties shall be excused in case, before
breach, performance becomes impossible from the perishing of the thing without default of the
contractor.
The excuse is by law implied, because from the nature of the contract it is apparent that the parties
contracted on the basis of the continued existence of the particular person or chattel in the present
case, looking at the whole contract, we find that the parties contracted on the basis of the continued
existence of the Music Hall at the time when the concerts were to be given; that being essential to their
performance. We think, therefore, that the Music Hall having ceased to exist, without fault of either
party, both parties are excused, the plaintiffs from taking the gardens and paying the money, the
defendants from performing their promise to give the use of the Hall and Gardens and other things ....
However, the implied term theory was rejected by the House of Lords in the context of frustration in
Davis Contractors v Fareham U.D.C.

Davis Contractors Ltd v Fareham Urban District Council


[1956] AC 696 (HL)
OnJuly 9 1946, the contractors entered into a building contract to build 78 houses for a local authority
for 92,425 within a period of eight months. Without the fault of either party, adequate supplies of
labour were not available and the work took 22 months to complete. The contractors argued that the
contract was frustrated and they could therefore claim on a quantum merit basis (which would be more
than the contract price) for the houses they completed.
Held: the contract had not been frustrated. The shortage of labour had rendered the contract more
onerous than expected but had not altered the fundamental nature of the contractual performance.
LORD REID:
Frustration has often been said to depend on adding a term to the contract by implication: for example,
Lord Loreburn in A. Tamplin Steamship Co. Ltd v Anglo-Mexican Petroleum Products Co. Ltd [1916]
2 AC 397, after quoting language of Lord Blackburn, said:
That seems to me another way of saying that from the nature of the contract it cannot be supposed the
parties, as reasonable men, intended it to be binding on them under such altered conditions. Were the
altered conditions such that, had they thought of them, they would have taken their chance of them, or
such that as sensible men they would have said 'if that happens, of course, it is all over between us'?
What, in fact, was the true meaning of the contract? Since the parties have not provided for the
contingency, ought a court to say it is obvious they would have treated the thing as at an end?

50

I find great difficulty in accepting this as the correct approach because it seems to me hard to account
for certain decisions of this House in this way....
The parties did not anticipate fully and completely, if at all, or provide for what actually happened. It is
not possible, to my mind, to say that, if they had thought of it, they would have said: 'Well, if that
happens, all is over between us.' On the contrary, they would almost certainly on the one side or the
other have sought to introduce reservations or qualifications or compensations.
It appears to me that frustration depends, at least in most cases, not on adding any implied term, but on
the true construction of the terms which are in the contract read in light of the nature of the contract and
of the relevant surrounding circumstances when the contract was made ....

Tsakiroglou & Co. Ltd. Appellants; v. Noblee Thorl G.m.b.H.


Respondents.
House of Lords
Judgment: 1961 Feb. 15, 16, 20, 21; Mar. 28.
By a contract in writing dated Hamburg, October 4, 1956, between Tsakiroglou & Co. Ltd. of
Khartoum as sellers, and the respondents, Noblee Thorl G.m.b.H. of Hamburg/Harburg as buyers,
through agents, the sellers agreed to sell and the buyers to buy about 300 tons of Sudanese groundnuts
in the Shell basis 3 per cent. admixture new crop 1956/57 at 50 per 1,000 kilos including bags c.i.f.
Hamburg. Shipment November/December, 1956, with payment cash against documents on first
presentation for 95 per cent. of the amount of provisional invoice, balance to be paid after the analysis
on final invoice. The contract form was to be the Incorporated Oil Seed Association Contract No. 38
(hereinafter called "I.O.S.A. Contract No. 38") with arbitration in London, and that contract was signed
by the Hamburg agents. Clause 1 of I.O.S.A. Contract No. 38 provided for "Shipment from a West
African port ... by steamer or steamers (tankers excluded) direct or indirect with or without
transhipment. " It was found as a fact in the case stated that both parties contracted on the basis that the
goods would be shipped from Port Sudan. Clause 6 of the contract provided: "In case of prohibition of
import or export, blockade or war, epidemic or strike, and in all cases of force majeure preventing the
shipment within the time fixed, or the delivery, the period allowed for shipment or delivery shall he
extended by not exceeding two months. After that, if the case of force majeure be still operating, the
contract shall be cancelled."
On October 29 1956, the Israelis invaded Egypt; on November 1 Britain and France commenced
military operations, and on November 2 the Suez Canal was blocked to shipping and remained blocked
until April 9 1957.
No goods were shipped under the contract, the sellers claiming that they were prevented from doing so
by events which had occurred in the Middle East.
When the contract of October 4, 1956, was entered into the usual and normal route for the shipment of
Sudanese groundnuts from Port Sudan to Hamburg was via the Suez Canal. After the closing of the
Canal the shortest and a practicable route to Hamburg was via the Cape of Good Hope. The sea route
via Suez to Hamburg was approximately 4,386 miles, and via the Cape 11,137 miles.
From November 10, 1956, a 25 per cent. freight surcharge was placed on goods shipped on vessels
proceeding via the Cape of Good Hope and this was increased to 100 per cent. on December 13, 1956.
The sellers' claim that the contract was at an end because of the closure of the Suez Canal was not
accepted by the buyers.
The appellants contended, inter alia, that by virtue of this event the contract became impossible of
performance, or alternatively, that the happening of the event destroyed a basic but tacit assumption of
the contract (namely, that the Suez Canal would at all material times remain open for shipping), which
thereby became discharged through the operation of the doctrine of frustration. The umpire to whom
the dispute was originally referred, the board of appeal, Diplock J. and the Court of Appeal, all rejected

51

this contention and held the appellants liable to the respondents, i.e., sellers were in default and should
pay to the buyers as damages the sum of 5,625 together with 79 15s.
APPEAL was preferred from the judgment of the Court of Appeal before the House of Lords. Decision
of the Court of Appeal was affirmed assigning following reasons:
(1) that a term that shipment should be (a) via Suez, or (b) by the usual and customary route at the date
of the contract, should not be implied into the contract.
(2) That since the Suez Canal was unusable during the relevant period the sellers' duty was to ship the
goods to the required port by a reasonable and practicable route if available.
(3) That although the route via the Cape involved a change in the method of performance of the
contract, it was not such a fundamental change from that undertaken under the contract as to entitle the
sellers to say that the contract was frustrated.
(4) That the shipment was not prevented by war or force majeure within the meaning of the contract;
placing the goods on board a vessel for the right destination was not prevented.

Sims & Co v Midland Rly Co


A quantity of butter was consigned with the defendant railway company. It was delayed in transit
owing to a strike. The goods being perishable the company sold them. The sale was held binding on the
owner, The company's action was justified by the necessities of the case and it was also not practicable
to get instructions from the owner.

Great N Rly Co v Swafield:


A horse, having been consigned with the defendant company, was not received by anyone at the
destination. The company had no arrangement of its own to keep animals and, therefore, placed the
horse with a livery stable-keeper. The company's action was held to be reasonably necessary in the
circumstances and, therefore, the company was allowed to recover the charges of the stable-keeper.

Salomon v Salomon & Co Ltd


House of Lords (HL)
(1895)
One Salomon incorporated a company to take over his personal business of manufacturing boots and
shoes. The seven subscribers to the memorandum were all the members of his own family, each taking
only one share. The company's board of directors was composed of Mr. Salomon, as the managing
director, and his four sons. Through this board, Salomon's business was transferred to the company at
an agreed price in payment of which Mr. Salomon was allotted 20,000 shares of 1 each and
debentures worth 10,000 creating a charge on the company's assets. Within a year the company came
to be wound up and the state of affairs was like this. Assets: 6,000; Liabilities: (1) Debenture
Creditors 10,000, (2) Ordinary Creditors 7,000. It was argued on behalf of unsecured creditors that,
though incorporated under the Act, the company never had an independent existence. It was Mr.
Salomon himself trading under another name. But the House of Lords held that Salomon & Co must
be regarded as a separate person from Mr. Salomon .

Johnson Appellant; v. Taylor Bros. & Company, Limited


Respondents.
House of Lords HL
1919 Nov. 11.

52

By a contract of May 23, 1908, for the supply by the appellant to the respondents according to their
requirements of Swedish pig-iron during the years 1908 to 1920 inclusive, the appellant agreed to ship
the pig-iron from time to time upon the instructions of the respondents from the Baltic for delivery at
Manchester or at Leeds via Hull, on the terms that the pig-iron should be at the risk and account of the
respondents from the time of its shipment, and should be invoiced to the respondents at 97s. 6d. per ton
c.i.f. Leeds and 93s. 9d. per ton c.i.f. Manchester (subsequently increased to 5l. and 98s. 3d.
respectively).
On the refusal of the appellant to make any further deliveries under this contract, the respondents
applied for leave under Order XI., r. 1 (e), to serve notice of a writ of summons upon the appellant in
Sweden in an action for breach of contract.
Leave was obtained and service was effected accordingly. The appellant applied to set aside the writ
and the service thereof on the ground that the breach on which the action was founded was not within
the jurisdiction. Lord Coleridge J. refused the application, and his order was affirmed by the Court of
Appeal (Bankes, Warrington and Scrutton L.JJ.). The matter was finally brought before the House of
Lords which set aside the judgment of Court of Appeal.
LORD ATKINSON.
"My Lords, the authorities I shall presently cite establish clearly, I think, that when a vendor and
purchaser of goods situated as they were in this case enter into a c.i.f. contract, such as that entered into
in the present case, the vendor in the absence of any special provision to the contrary is bound by his
contract to do six things. First, to make out an invoice of the goods sold. *156 Second, to ship at the
port of shipment goods of the description contained in the contract. Third, to procure a contract of
affreightment under which the goods will be delivered at the destination contemplated by the contract.
Fourth, to arrange for an insurance upon the terms current in the trade which will be available for the
benefit of the buyer. Fifthly, with all reasonable despatch to send forward and tender to the buyer these
shipping documents, namely, the invoice, bill of lading and policy of assurance, delivery of which to
the buyer is symbolical of delivery of the goods purchased, placing the same at the buyer's risk and
entitling the seller to payment of their price. These authorities are Ireland v. Livingston [FN19] per
Blackburn J.; Biddell Bros. v. E. Clemens Horst Co. [FN20]; on appeal E. Clemens Horst Co. v.
Biddell Bros. [FN21]; and C. Sharpe & Co. v. Nosawa Co. [FN22] These cases also establish that if no
place be named in the c.i.f. contract for the tender of the shipping documents they must prima facie be
tendered at the residence or place of business of the buyer. In a case such as the present, where the
goods purchased were bought from a foreign seller and were to be shipped in a foreign country, it
cannot, I think, be doubted that a breach of the express or implied term of the contract that the shipping
documents should be tendered to the purchaser within the jurisdiction of the English Courts, would
enable a Court or judge, on the application of the purchasers, to make an order under Order XI., r. 1 (e),
for the service outside the jurisdiction of a writ of summons in which the cause of action was stated to
be the non-tender of these shipping documents. In such a case the breach of contract relied upon would
be a breach within the jurisdiction of a term of the contract which ought to be performed within that
jurisdiction."

Comptoir d'Achat et de Vente du Boerenbond Belge S/A Appellants;


v. Luis de Ridder Limitada Respondents. (the Julia)
House of Lords HL
1948 Nov. 9, 10, 11, 15; 1949 Jan. 19.
By a contract made in April, 1940, the sellers, an Argentine company, sold to the buyers, a Belgian
company, 500 tons of rye for shipment "c.i.f. Antwerp, " contract provided for payment "on first
presentation of and in exchange for first arriving copy/ies of bill/s of lading .... and/or delivery order/s
and policy/ies and/or certificate/s .... of insurance."
The rye sold was part of a larger parcel covered by a bill of lading signed before the contract was made
and the policies of insurance effected by the sellers covered a quantity different from that sold and that
covered by the bill of lading amount. Both the bill of lading and the policies remained throughout in the
possession of the sellers or their agents. The sellers exercised their option to demand payment in

53

exchange for a delivery order. The sum to be paid, by cable transfer to New York, against the delivery
order, was stated in a provisional invoice handed to the buyers to be $4,999.33, i.e., cost less freight
plus a proportion of insurance. A delivery order directed to the sellers' agents at Antwerp was handed to
the buyers against payment of this sum. It was indorsed by the agents with an undertaking to honour it.
The sellers delivered to their agents two certificates of insurance and the delivery order in terms
recognized the buyers' interest in these to the extent of their purchase.
The charterparty under which the ship sailed recognized no port of discharge but Antwerp. While she
was still at sea the Germans invaded Belgium and occupied that town. By arrangement between the
owners and the sellers as charterers, but without the buyers' consent the ship discharged her cargo at
Lisbon, where it was sold by the sellers. It was admitted that the property in the rye had never passed to
the buyers, who claimed total reimbursement of the sum paid by them.
Held by the House of Lords
(1) that despite the designation of the contract as "c.i.f." the true effect of all its terms must be taken
into account and, in the light of these, the contract was not "c.i.f." but a contract to deliver at Antwerp;
(2) that The payment made by the buyer was not for the documents as representing the goods but for
delivery of the goods themselves;
(3) that in a C.I.F. contract the property in the goods not only may but must pass by delivery of the
documents against which payment is made;
(4) that there was a frustration of the adventure and no part performance and the consideration had
wholly failed so that the buyers were entitled to recover the amount paid.
Lord Porter
My Lords, the obligations imposed upon a seller under a c.i.f. contract are well known, and in the
ordinary case include the tender of a bill of lading covering the goods contracted to be sold and no
others, coupled with an insurance policy in the normal form and accompanied by an invoice which
shows the price and, as in this case, usually contains a deduction of the freight which the buyer pays
before delivery at the port of discharge. Against tender of these documents the purchaser must pay the
price. In such a case the property may pass either on shipment or on tender, the risk generally passes on
shipment or as from shipment, but possession does not pass until the documents which represent the
goods are handed over in exchange for the price. In the result the buyer after receipt of the documents
can claim against the ship for breach of the contract of carriage and against the underwriter for any loss
covered by the policy.
In my opinion, the method by which the contract was customarily carried out supports this view. No
doubt the contract could have been so performed as to make it subject to the ordinary principles which
apply to a c.i.f. contract. The tender of a bill of lading or even of a delivery order upon the ship, at any
rate if attorned to by the master, and a policy or a certificate of insurance delivered to or even held for
them might well put it in that category. But the type of delivery order tendered in the present case was a
preliminary step only. A complicated procedure had to be followed before the goods would be released.
My Lords, the object and the result of a c.i.f. contract is to enable sellers and buyers to deal with
cargoes or parcels afloat and to transfer them freely from hand to hand by *312 giving constructive
possession of the goods which are being dealt with. Undoubtedly the practice of shipping and insuring
produce in bulk is to make the process more difficult, but a ship's delivery order and a certificate of
insurance transferred to or held for a buyer still leaves it possible for some, though less satisfactory,
dealing with the goods whilst at sea to take place. The practice adopted between buyers and sellers in
the present case renders such dealing well nigh impossible. The buyer gets neither property nor
possession until the goods are delivered to him at Antwerp, and the certificate of insurance, if it enures
to his benefit at all, except on the journey from ship to warehouse, has never been held for or delivered
to him. Indeed, it is difficult to see how a parcel is at the buyers' risk when he has neither property nor
possession.

54

The vital question in the present case, as I see it, is whether the buyers paid for the documents as
representing the goods or for the delivery of the goods themselves. In my view no further security
beyond that contained in the original contract passed to the buyers as a result of payment, where the
property and possession both remained in the sellers until delivery in Antwerp, where the sellers were
to pay for deficiency in bill of lading weight, guaranteed condition on arrival and made themselves
responsible for all averages, the true view, I think, is that it is not a c.i.f. contract even in a modified
form but a contract to deliver at Antwerp. Nor do I think it matters that payment is said to be not only
on presentation but "in exchange for " documents. There are many ways of carrying out the contract to
which that expression would apply, but in truth whether the payment *313 is described as made on
presentation of or in exchange for a document, the document was not a fulfilment or even a partial
fulfilment of the contract: it was but a step on the way. What the buyers wanted was delivery of the
goods in Antwerp. What the sellers wanted was payment of the price before that date, and the delivery
of the documents furnished the date for payment, but had no effect on the property or possession of the
goods or the buyers' rights against the sellers. If this be the true view there was plainly a frustration of
the adventure
Lord Simonds,
There is, however, one other matter to which I would briefly refer. The sellers, all else failing them,
urged that the risk in the goods had passed to the buyers, even if the property had not, and that the
insurance contract made by the sellers was available for the buyers. Assuming without deciding that
these propositions are well-founded, I am unable to see how they assist the sellers. If the contract is, as
I hold it is, a contract for the sale of rye to be performed by its physical or symbolical delivery what
relevance has it that the sellers say at a certain stage that the risk has passed and that the insurance is
available? It may well be that, if there is any validity in these propositions, the buyers, recovering upon
the insurance policies, would hold the proceeds for the benefit of the sellers, but this does not seem to
me to touch the question whether there has been a total failure of consideration. It is, I think, probable
that the insistence by the learned counsel for the sellers on this aspect of the case was bound up with
his reiterated plea that this was a c.i.f. contract. As I have ventured to point out, it is immaterial what
the contract may be called or to what category of contract it is nearest akin, if it lacks that salient
characteristic, which alone is relevant, namely, that the property in the goods not only may but must
pass by delivery of the documents against which payment is made.

Leduc & Co. v. Ward and Others


In the Court of Appeal CA
1888 Feb. 11, 13
The plaintiffs having purchased goods to be shipped from a foreign port on the terms that payment of
the price was to be made in exchange for shipping documents, the bill of lading signed upon the
shipment of the goods was, upon payment of the price, indorsed to them. The bill of lading, which
contained the usual exception of sea perils, stated that the goods were shipped for delivery at Dunkirk
on board a vessel lying at Fiume and bound for Dunkirk, with liberty to call at any ports in any order.
The ship, instead of proceeding direct for Dunkirk, sailed for Glasgow, and was lost, with her cargo, off
the mouth of the Clyde, by perils of the sea. In an action brought by the plaintiffs against the
shipowners for non-delivery of the goods, evidence was given to shew that the shippers of the goods, at
the time when the bill of lading was given, knew that the vessel was intended to proceed vi
Glasgow:-Held by Court of Appeal that such evidence was not admissible to vary the terms of the bill of lading,
which imported a voyage direct from Fiume to Dunkirk, subject to the liberty to call at any ports of call
substantially within the course of such voyage; that Glasgow, being altogether out of the course of such
voyage, was not such a port; and that the vessel was therefore lost while deviating from the voyage
contracted for, and the excepted perils clause did not exonerate the defendants from liability in respect
of non-delivery of the goods.
FRY, L.J.

55

Here the contract made between the merchants abroad and the plaintiffs being that the goods were to be
paid for in exchange for shipping documents, the property in the goods passed to the plaintiffs upon the
indorsement of the bill of lading. The law says that "every indorsee of a bill of lading to whom the
property in the goods therein mentioned shall pass upon or by reason of the indorsement shall have
transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such
goods as if the contract contained in the bill of lading had been made with himself." Here is a plain
declaration of the legislature that there is a contract contained in the bill of lading, and that the benefit
of it is to pass to the indorsee under such circumstances as exist in the present case.
I prefer to rest my judgment on the view that the provision of the statute making *485 the contract
contained in the bill of lading assignable is inconsistent with the idea that anything which took place
between the shipper and shipowner, not embodied in the bill of lading, could affect the contract. For
these reasons I think the appeal should be dismissed.
LORD ESHER, M.R.
the bill of lading is merely in the nature of a receipt for the goods, and that it contains no contract for
anything but the delivery of the goods at the place named therein. It is true that, where there is a
charterparty, as between the shipowner and the charterer the bill of lading may be merely in the nature
of a receipt for the goods, because all the other terms of the contract of carriage between them are
contained in the charterparty; and the bill of lading is merely given as between them to enable the
charterer to deal with the goods while in the course of transit; but, where the bill of lading is indorsed
over, as between the shipowner and the indorsee the bill of lading must be considered to contain the
contract, because the former has given it for the purpose of enabling the charterer to pass it on as the
contract of carriage in respect of the goods. Where there is no charterparty, as between the grantee of
the bill of lading and the shipowner, the bill of lading is no doubt a receipt for the goods, and as such,
like any other receipt, it is not conclusive, for it may be controverted by evidence shewing that the
goods were not received; the question whether it will be more than a receipt as between the shipper and
shipowner depends on whether the captain has received the goods, for he has no authority to make a
contract of carriage to bind the shipowner, except in respect of goods received by him. If the goods
have not been received, the bill of lading cannot contain the terms of a contract of carriage with respect
to them as against the shipowner.
But, if the goods have been received by the captain, it is the evidence in writing of what the contract of
carriage between the parties is; it may be true that the contract of carriage is made before it is given,
because it would generally be made before the goods are sent down to the ship: but when the goods are
put on board the *480 captain has authority to reduce that contract into writing: and then the general
doctrine of law is applicable, by which, where the contract has been reduced into a writing which is
intended to constitute the contract, parol evidence to alter or qualify the effect of such writing is not
admissible, and the writing is the only evidence of the contract, except where there is some usage so
well established and generally known that it must be taken to be incorporated with the contract. In the
case of Fraser v. Telegraph Construction Co. [FN10] Blackburn, J., held that a bill of lading must be
taken to be the contract under which the goods were shipped. In Chartered Mercantile Bank of India v.
Netherlands India Steam Navigation Co. [FN11] I expressed the same view that I am now expressing
as to the nature of a bill of lading. In Glyn, Mill & Co. v. East and West India Dock Co. [FN12] Lord
Selborne said, at p. 596, "Every one claiming as assignee under a bill of lading must be bound by its
terms, and by the contract between the shipper of the goods and the shipowner therein expressed. The
primary office and purpose of a bill of lading, although by mercantile law and usage it is a symbol of
the right of property in the goods, is to express the terms of the contract between the shipper and the
shipowner." The terms of the Bills of Lading Act shew that the legislature looked upon a bill of lading
as containing the terms of the contract of carriage.

Sze Hai Tong Bank V Rambler cycle Co. Ltd


An English company had sold bicycle parts to importers in Singapore; the goods were shipped in the
S.S. Glengarry, which belonged to the Glen Line Ltd. The sellers instructed the Bank of China to
collect the proceeds and release the bills of lading to the buyers on payment. The buyers, however,
induced the carriers to deliver the goods to them without bills of lading on an indemnity given by the
buyers and their bank, the Sze Hai Tong Bank. When the sellers discovered what had happened, they

56

brought proceedings in the courts of Singapore against the carriers for damages for breach of contract
and conversion, and the carriers brought in as third parties the Sze Hai Tong Bank, against which the
carriers claimed a declaration of indemnity. The High Court of Singapore held the carriers to be liable
and held further that the bank was obliged to indemnify them. The bank appealed without success to
the Court of Appeal in Singapore and eventually to the Judicial Committee of the Privy Council. Lord
Denning, who gave the judgment of the court, said:
"It is perfectly clear that a shipowner who delivers without production of the bill of lading does so at
his peril. The contract is to deliver, on production of the bill of lading, to the person entitled under the
bill of lading .... The shipping company did not deliver the goods to any such person. They are
therefore liable for breach of contract unless there is some term in the bill of lading protecting them.
And they delivered the goods, without production of the bill of lading, to a person who was not entitled
to receive them. They are, therefore, liable in conversion unless likewise protected."
The Judicial Committee rejected the argument that the carriers, and consequently the bank, were
relieved from liability by a clause in the bill of lading that the responsibility of the carriers should cease
absolutely after the goods were discharged from the ship, because that exemption clause was not
intended to protect a carrier who deliberately disregarded his obligation and committed a fundamental
breach of contract by releasing the goods without production of a bill of lading.
"If such an extreme width were given to the exemption clause, it would run counter to the main object
and intent of the contract. For the contract, as it seems to their Lordships, has as one of its main objects,
the proper delivery of the goods by the shipping company, unto order or his or their assigns, against
production of the bill of lading. It would defeat this object entirely if the shipping company was at
liberty at its own will and pleasure to deliver the goods to somebody else, to someone not entitled at all,
without being liable for the consequences."

New Chinese Antimony Company, Limited v. Ocean Steamship


Company, Limited.
Court of Appeal CA
1917 June 26, 27.
The plaintiffs were shippers of Chinese antimony oxide ore, and they sued the defendants (carrier of
steamship Tientsin, for damages for the short delivery of 76 tons shipped in bulk and received in China
for conveyance to London on a through bill of lading from Hankow.
The master of the steamship Tientsin, belonging to the defendants, had received on board a quantity of
antimony oxide ore, shipped by the plaintiffs at Hankow for conveyance to the Port of London. The bill
of lading, signed by the master, was in these terms:
*665 "shipped or delivered for shipment in apparent good order and condition by the New Chinese
Antimony Co., Ltd., on board the steamship Tientsin lying in or off the port of Hankow and bound for
Shanghai nine hundred and thirty-seven (937) tons antimony oxide ore in bulk, being marked and
numbered as per margin, the said goods to be delivered at the port of Shanghai to Messrs. Butterfield &
Swire, and to be by them numbered and re-shipped on board the steamship Peleus on or about the 22nd
December, 1914, and failing shipment by her by any prior or subsequent steamer ... ... for delivery at
the Port of London."
In the margin of the bill of lading was the following typewritten clause: "No mark. A quantity said to be
nine hundred and thirty-seven tons," while in the body of the bill of lading there was printed in
ordinary type the clause "weight, measurement, contents and value (except for purpose of estimating
freight) unknown."
It appeared from the evidence that the ore was mined at mines some 250 miles up country from
Hankow, being brought in lighters down the rivers to Hankow, where it was taken to a place called
Panoff's yard; there it was eventually loaded in lighters and shipped on board the Tientsin for
conveyance to Shanghai, where it was transhipped into another steamer for conveyance to London.
When shipped at the mines the ore weighed 960 tons, and prior to its shipment into lighters at Panoff's
yard it weighed 937 tons. On arrival at London the ore was transhipped into coasting vessels and taken
to Newcastle, and on delivery there it weighed 861 tons. There was evidence of the wasting nature of
the ore when carried in bulk; that in wet weather it stuck to the implements employed in its
transhipment, and that in dry weather it became very friable, and was liable to be blown away by the
wind. The plaintiffs sued the defendants to recover the value of 76 tons, being the difference between

57

937 tons, the weight when the ore left Panoff's yard at Hankow, and 861 tons, its weight at its final port
of destination. Sankey J. found that 53 tons of the deficiency was due to the wastage of the ore due to
ordinary causes in the process of handling and transhipment, and gave judgment for the plaintiffs for
529l., the value of the remaining 23 tons, which he held the defendants were not excused from
delivering under the bill of lading. The defendants appealed.
Held, that the bill of lading was not even prima facie evidence of the quantity of ore shipped, and that
in an action against the shipowners for short delivery the onus was upon the plaintiffs of proving that
937 tons had in fact been shipped.
VISCOUNT READING C.J.
Where in a bill of lading, which is prepared by the shippers for acceptance by the defendants' agent, the
agent accepts in the margin a quantity "said to be 937 tons," and in the body of the bill of lading there
is a clause "weight, &c., unknown," there is no prima facie evidence that 937 tons have been shipped.
I think that the true effect of this bill of lading is that the words "weight unknown" have the effect of a
statement by the shipowners' agent that he has received a quantity of ore which the shippers'
representative says weighs 937 tons but which he does not accept as being of that weight, the weight
being unknown to him, and that he does not accept the weight of 937 tons except for the purpose of
calculating freight and for that purpose only. That is the view taken in Jessel v. Bath where Martin B.
says:
"That is a common well-known trade, and it is obvious that goods must be shipped on board hastily,
and that goods shipped in bulk at a considerable distance from the shore, as is the case at Genoa, for
instance, cannot by possibility be weighed. The person, therefore,*670 signing the bill of lading, by
signing for the amount with this qualification 'weight, contents and value unknown' merely means to
say that the weight is represented to him to be so much, but that he has himself no knowledge of the
matter. The insertion of the weight in the margin, and the calculation of freight upon it, does not carry
the matter any further; he calculates the freight, as it is his duty to do, upon the weight as stated to him.
The qualification is perfectly reasonable; and I do not understand how a statement so qualified binds
any one."

Pyrene Co. LD. v. Scindia Navigation Co. LD.


Queen's Bench Division QBD
1954 Mar. 15, 16, 17; Apr. 14.
The plaintiffs, Pyrene Co. Ld., contracted to sell a number of "Pyrene " airfield tenders to the
Government of India, which acted through a department known as I.S.D., for delivery f.o.b. London,
the price including dock and harbour dues and port rates to be paid by the sellers. Under the contract
freight was to be engaged by the buyer who was to give notice to the sellers when and on board what
vessel the goods were to be delivered. I.S.D. nominated the Jalazad, a vessel belonging to the
defendants, as the ship to be loaded under the contract of sale, and through their agents, Bahr Behrend
& Co., made all arrangements for the carriage of the goods from London to Bombay. In April, 1951,
the plaintiffs, in pursuance of instructions received from I.S.D., delivered the tenders at the Royal
Albert Docks in the Port of London for shipment on the Jalazad. On April 16 the Port of London
Authority delivered one of the tenders to the defendants alongside the Jalazad, which was lying in the
docks; but while the tender was being lifted onto the vessel by the ship's tackle the mast broke and the
tender, which had not crossed the ship's rail, was dropped and damaged. Under the contract of sale the
property in the tender had not then passed to I.S.D. and the tender was repaired by the plaintiffs and
subsequently shipped in another vessel.
The plaintiffs claimed 966 14s. 8d., the cost of repairing the tender, as damages for negligence by the
defendants as bailees of the plaintiffs. The defendants admitted negligence, but they claimed that their
liability was limited under article 4, rule 5, of the schedule to the Carriage of Goods by Sea Act, 1924,
[FN1] to the sum (both parties having accepted the British Maritime Law Association Agreement of
1950) of 200.
Held:

58

that the rights and liabilities under the rules did not attach to a period of time but attached to a contract
or part of a contract, their operation being determined by the limits of the contract of carriage by sea,
and however restricted a meaning were given to the words "carriage of goods by sea" the loading of the
goods related to the carriage on the voyage and therefore was within the contract of carriage; that the
reference to "loaded on" in article 1 (e) did no more than define the first of the operations in the series
which constituted the carriage of goods by sea to which article 2 applied; that "loading" in article 2 was
not confined to that stage of loading occurring after the goods had crossed the ship's rail but covered
the whole operation and, accordingly, the shipowners' rights and immunities under the rules extended
*404 to the operation of loading being carried out at the time of the casualty.
The contract of sale provided for delivery f.o.b. London, the price including dock and harbour dues and
port rates to be paid by the seller; and further expressly provided that freight was to be engaged by the
buyer, who was to give due notice to the seller when and on board what vessel the goods were to be
delivered. Payment was to be made twenty-one days after delivery and after *424 receipt of certain
documents for which the contract called, such as invoice, inspection certificate, etc., and of the dock
company's or mate's receipt. In the special circumstances of this case and because of delay in shipment,
payment was in fact made in advance, but on the terms that that should not affect the seller's
obligations as to delivery. As I have said, it was agreed that the property did not pass till delivery over
the ship's rail.

Pharmaceutical Society of Great Britain v. Boots Cash Chemists


Court of Appeal CA
1953 Feb. 5.
The defendants carried on a business comprising the retail sale of drugs at
premises at Edgware, which were entered in the register of premises kept
pursuant to section 12 of the Pharmacy and Poisons Act, 1933, and from which
they regularly sold drugs by retail. The premises comprised a single room, so
adapted that *402 customers might serve themselves, and the business there
was described by a printed notice at the entrance ag "Boot's Self-Service." On
entry each customer passed a barrier where a wire basket was obtained. Beyond
the barrier the principal part of the room, which contained accommodation for 60
customers, contained shelves around the walls and on an island fixture in the
centre, on which articles were displayed. One part of the room was described by a
printed notice as the "Toilet Dept." and another part as the "Chemists' Dept." On
the shelves in the chemists' department drugs, including proprietary medicines,
were severally displayed in individual packages or containers with a conspicuous
indication of the retail price of each. The drugs and proprietary medicines covered
a wide range, and one section of the shelves in the chemists' department was
devoted exclusively to drugs which were included in, or which contained
substances included in, Part I of the Poisons List referred to in section 17 (1) of
the Pharmacy and Poisons Act, 1933; no such drugs were displayed on any
shelves outside the section, to which a shutter was fitted so that at any time all
the articles in that section could be securely inclosed and excluded from display.
None of the drugs in that section came within Sch. I to the Poisons Rules, 1949
(S.I.
1949,
No.
539)
.
The staff employed by the defendants at the premises comprised a manager, a
registered pharmacist, three assistants and two cashiers,
and during the time when the premises were open for the sale of drugs the
manager, the registered pharmacist, and one or more of the assistants were
present in the room. Each customer selected from the shelves the article which
he wished to buy and placed it in the wire basket; in order to leave the premises
the customer had to pass by one of two exits, at each of which was a cash desk
where a cashier was stationed who scrutinized the articles selected by the
customer, assessed the value and accepted payment. The chemists' department

59

was under the personal control of the registered pharmacist, who carried out all
his duties at the premises subject to the directions of a superintendent appointed
by the defendants in accordance with the provisions of section 9 of the Act.
The pharmacist was stationed near the poisons section, where his certificate of
registration was conspicuously displayed, and was in view of the cash desks. In
every case involving the sale of a drug the pharmacist supervised that part of the
transaction which took place at the cash desk and was authorized by the
defendants to prevent at that stage of the transaction, if he *403 thought fit, any
customer from removing any drug from the premises. No steps were taken by the
defendants to inform the customers, before they selected any article which they
wished to purchase, of the pharmacist's authorization.
On April 13, 1951, at the defendants' premises, two customers, following the
procedure outlined above, respectively purchased a bottle containing a medicine
known as compound syrup of hypophosphites, containing 0.01% W/V strychnine,
and a bottle containing medicine known as famel syrup, containing 0.23% W/V
codeine, both of which substances are poisons included in Part I of the Poisons
List, but, owing to the small percentages of strychnine and codeine respectively,
hypophosphites and famel syrup do not come within Sch. I to the Poisons Rules,
1949.

The real question at issue in this appeal is whether under the self-service system
of trading devised by the defendants the sale in fact takes place at the point
where the customer removes from the shelves the article that he wishes to buy,
and puts it in the basket, or whether it takes place at the cash desk, where the
money is paid and the pharmacist is stationed.
SOMERVELL L.J
Whether the view contended for by the plaintiffs is a right view depends on what
are the legal implications of this layout - the invitation to the customer. Is a
contract to be regarded as being completed when the article is put into the
receptacle, or is this to be regarded as a more organized way of doing what is
done already in many types of shops - and a bookseller is perhaps the best
example - namely, enabling customers to have free access to what is in the shop,
to look at the different articles, and then, ultimately, having got the ones which
they wish to buy, to come up to the assistant saying "I want this"? The assistant
in 999 times out of 1,000 says "That is all right," and the money passes and
*406 the transaction is completed. I agree with what the Lord Chief Justice has
said, and with the reasons which he has given for his conclusion, that in the case
of an ordinary shop, although goods are displayed and it is intended that
customers should go and choose what they want, the contract is not completed
until, the customer having indicated the articles which he needs, the shopkeeper,
or someone on his behalf, accepts that offer. Then the contract is completed.
Plaintiffs argued that display of goods is an offer. If the plaintiffs are right, once
an article has been placed in the receptacle the customer himself is bound and
would have no right, without paying for the first article, to substitute an article
which he saw later of a similar kind and which he perhaps preferred. I can see no
reason for implying from this self-service arrangement any implication other than
that which the Lord Chief Justice found in it, namely, that it is a convenient
method of enabling customers to see what there is and choose, and possibly put
back and substitute, articles which they wish to have, and then to go up to the
cashier and offer to buy what they have so far chosen. On that conclusion the
case fails, because it is admitted that there was supervision in the sense required

60

by the Act and at the appropriate moment of time. For these reasons, in my
opinion, the appeal should be dismissed.
ROMER L.J.
I also agree. The Lord Chief Justice observed that, on the footing of the plaintiff
society's contention, if a person picked up an article, once having picked it up, he
would never be able to put it back and say that he had changed his mind. The
shopkeeper would say: "No, the property has passed and you will have to pay." If
that were the position in this and similar shops, and that position was known to
the general public, I should imagine that the popularity of those shops would
wane a good deal. In fact, I am satisfied that that is not the position, and that the
articles, even though they are priced and put in shops like this, do not represent
an offer by the shopkeeper which can be accepted merely by the picking up of the
article in question. I quite agree with the reasons on which the Lord Chief Justice
arrived at that conclusion and which Birkett L.J. has just referred to, and to those
observations I can add nothing of my own. I agree that the appeal fails.

The Ardennes
[1951] 1 KB 55
[f68]
Here the plaintiff exporter wished to ship a consignment of mandarin oranges from Cartegena to
London, where he was anxious they should arrive before 1 December in order to avoid a threatened rise
in import duty. He explained the position to shipping agents who gave an oral assurance that if the
cargo was loaded on 22 November the vessel would sail direct to London. In fact, the vessel on which
the oranges were shipped already had cargo on board destined for Antwerp, while the bill of lading
which was eventually issued included a liberty entitling the vessel to call at intermediate ports on the
voyage to London. As the result of calling in at Antwerp, the vessel did not reach London until 4
December by which time there had been an increase in import duty and a considerable fall in the
market price of oranges due to an influx of other cargoes. When the plaintiff sought to recover damages
for breach of contract, the shipowner pleaded in defence the liberty clause in the bill of lading. In
holding that oral evidence was admissible to establish the original terms of the contract, Lord Goddard
CJ had no doubts about the status of the bill of lading:
It is, I think, well settled that a bill of lading is not, in itself, the contract between the shipowner and
the shipper of goods, though it has been said to be excellent evidence of its terms ... The contract has
come into existence before the bill of lading is signed. The bill of lading is signed by one party only
and handed by him to the shipper, usually after the goods have been put on board. No doubt if the
shipper finds that it contains terms with which he is not content, or that it does not contain some term
for which he has stipulated, he might, if there were time, demand his goods back, but he is not in my
opinion thereby prevented from giving evidence that there was a contract which was made before the
bill of lading was signed and that it was different from that which is found in the document or
contained some additional term. He is not a party to the preparation of the bill of lading, nor does he
sign it. [f69]

Trang Ice and Cold Storage Company Limited Vs. Amin Fish Farm
and Industries Ltd. and others
HIGH COURT DIVISION
Judgment July 14th, 1993.
Rokonuddin Mahmood with Murad Reza and Raja Devasish Roy, Advocates For the DefendantAppellant.

61

Khondker Mahbubuddin Ahmed with Mustafa Niaz Mohammad, Advocates -- For the PlaintiffRespondent. .,
Judgment:
Md. Mozammel Hoque J :
1. This appeal at the instance of defendant No. 1 appellant is directed against the judgment and decree
passed in Money Suit No. 17 of 1984 (formerly MS No. 85 of 1980) by the learned Subordinate Judge,
2nd Court, Chittagong, decreeing the suit in favour of the plaintiff-respondent No. 1.
2. . The respondent No. 1 namely, Amin Fish Farmand Industries Limited being plaintiff instituted the
aforesaid suit alleging, inter alia, that the Government of Bangladesh signed an agreement with the
Government of the Kingdom of Thailand on 25.3.78 for setting up joint venture companies by
Bangladeshi parties with Thailand parties for exploration of living resources in the Bay of Bengal and
the plaintiff is one of such Bangladesh parties selected by the Government for establishing a joint
venture enterprise with a Thai party and ultimately an agreement was entered into on 8th day of
January, 1979 in between the plaintiff and defendant No. 1 which is called joint venture agreement with
the stipulation that they would form a joint venture company to be incorporated in Bangladesh with
51% shares to be assigned to the plaintiff and 49% shares shall be assigned to the defendant No. 1
appellant. In pursuance of the aforesaid agreement, a company named JV Amin Fishing Industries
Limited was created and registered in Bangladesh. All the termss and conditions for creating a joint
venture company were more or less incorporated in the aforesaid agreement. In pursuance of the terms
of the agreement, the defendant No. 1 would enter into charter party agreement with the joint venture
company. Accordingly, defendant No. 1 entered into four charter party agreements with the newly
formed JV Amin Fishing Industries Ltd. for providing four fishing trawlers for catching fishes in the
sea. It is alleged that for the formation of the company the plaintiff took all steps in the matter by
spending huge sum of money. The necessary employees were employed and all other incidental matters
Were provided by the plaintiff so that the joint venture company could be created and incorporated and
after the incorporation the plaintiff wrote so many letters and sent so many telexes to the defendant No.
1 for supplying four trawlers for fishing purpose of the joint venture company, But ultimately, the
defendant No. I failed, to provide even a single trawler for the purpose and thereby the defendant No. 1
violated the terms of the contract, namely, charter party agreement .and thereby caused loss to the
plaintiff Which led the plaintiff to institute the present suit against defendant No. 1 and others. The
plaintiff prayed for compensation for US $1,15,000.00 equivalent to Bangladesh Tk. 17.82,5000.00 on
different official exchange rates and for schedule No. 2 he claimed a compensation for Tk. 1,49,285.00
which the plaintiff claimed to invest in forming the joint venture company. The joint venture company
was named as M/s. JV Amin Fishing Industries Limited which was duly incorporated. So, schedule-1 is
for loss of business and schedule-2 was the expenses incurred by the plaintiff for formation of the
company. But due to negligence and total failure of the defendant No. 1 the company did not or could
not do any business of fishing for which the company was constituted and incorporated.
3. The defendant Nos, 1-6 contested the suit by filing joint written statement denying all the allegations
made in the plaint and also contending that the suit is not maintainable as it is barred by limitation and
principle of waiver, acquiescence and estoppel. In the written statement the contesting defendants
denied the allegations that the plaintiff suffered monetary loss as shown in schedules 1 and 2. It was
their further case that in the given time the weather was bad and unfavourable, and cyclonic weather
was running in the sea and so the defendant No. 1 could not supply the four trawlers as agreed in the
charter party agreements between them. In a word, the contesting defendants admitted everything as
regards the contract and the terms and conditions of the joint venture agreement as well as the four
charter party agreements in between the joint venture company and defendant No. 1; but they stated
that damage as claimed by the plaintiff was not supported by any evidence and it is purely hypothetical
and speculative without any basis at all. It was further alleged that the suit in its present form was not
maintainable as the joint venture company is not a party in this suit.
4. The learned Subordinate Judge entered the judgment in favour of the plaintiff and hence the
defendant no. 1 has filed this present appeal challenging the said judgment. The Honble High Court
Division allowed this appeal and the judgment and decree passed by the learned Subordinate Judge
were set aside and the suit was dismissed.

62

5. Mr. Rokonuddin Mahmood, the learned Advocate appearing for the defendant No. 1 appellant,
submits that in this appeal the following should be considered for decision :
(1) Whether the plaintiff was a party to the contract which was alleged to have been breached. If not,
whether the plaintiff can sue the defendant:
(2) whether there was any breach of contract in between the plaintiff and the defendant;
(3) if there is any breach of contract then what would be the quantum of damage
(4) whether the plaintiff has been able to prove that quantum of damage and (5) whether the damage as
claimed by the plaintiff is remote.
6. . At the very outset Mr. Rokonuddin Mahmood submitted that the defendant No. 1 never entered into
any contract as regards supplying of trawlers with the present plaintiff. It there is any grievance it
would be a grievance of the joint venture company, namely, the JV Amin Fishing Industries Limited,
and not of the plaintiff company and as such the present suit is not maintainable at all. The defendant
No. 1 was required to supply trawlers as per terms of the charter party agreement to the newly created
company and that is why no contract in between the plaintiff and the defendant No. 1 has been
violated. Mr. Rokonuddin Mahmood submits that in the eye of law this present plaintiff is a stranger, to
the contract viz, the charter party agreements. A person who is not party to the contract cannot enforce
the terms of the contracting parties. He submits that since the four charter party agreements clearly
show that the four agreements were in between the JV Amin Fishing Industries Limited and the
defendant No. 1 in respect of supplying the fishing trawlers, no contract with the plaintiff has been
violated,, as such the suit is liable to be dismissed. In of his contention Mr. Rokonuddin referred to the
cases of Tweddle Vs. (1861-73) AER, 369; Dunlop Vs. (1914-15) AER, 333; Middland Silicone Ltd.
Scruttons Ltd. (1959) 2 hER. 22 and Kapoor Vs. Union of India, AIR 1963 (Punj). The principle
settled in the aforesaid decisions have the effect that a stranger to a contract cannot sue other party.
Terms of the contract can be enforced only by the contracting parties and not by a stranger.
7. Mr. Rokonuddin Mahmood further submits that the company is a separate independent legal entity.
M/s. Amin Fish Farm and Industries Limited, namely, the plaintiff may be a share-holder and as soon
as the company, namely, JV Amin Fishing Industries Limited was constituted in pursuance of joint
venture agreement, the terms of joint venture agreement were completed and the plaintiff stands in the
category of a share-holder and nothing more. Mr. Mahmood, in support of his contentions has referred
to the cases of Salomon V Salomon & Co. (1895-99) AER, 33; EBM Co. Ltd. Vs. Dominion Bank,
AIR 1952 (Born), 337 and Punjab Ali's case reported in 29 DLR (SC) 185.
8. It is true that the present plaintiff is one of the share-holders of the newly created company, but the
plaintiff is not a contracting party as per charter party agreement. So the principle laid down in the
aforesaid cases is applicable in the present case. A share-holder in a company cannot sue the company
for wrong or damage or for any loss suffered by the company. If any wrong is done or damage is
caused to a company, the company is the only person who can claim for damage against the person
who has caused such damage.
9. It appears from the foregoing paragraphs that the plaintiff as such has no locus standi (right to sue)
to institute the present suit, inasmuch as this plaintiff is not the newly constituted company, namely,
JV Amin Fishing Industries Limited. If any damage was caused, it was caused to the JV Amin Fishing
Industries Limited. If the new company suffers loss due to the negligence of the defendant No. 1, then
that new company must sue for damage in a case like this, but a share-holder cannot sue. In future if
any legally competent person claims and files a suit in order to recover the damage and compensation
against the defendants, this judgment of ours with all its findings shall not be a bar to institute such a
suit, if it is not otherwise barred in law.
10. With the above observations, this appeal is allowed without any order as to costs and the judgment
and decree passed by the learned Subordinate Judge are hereby set aside and the suit is dismissed.

Mohammadi Trans Oceanic Steamship Co. Ltd. Vs Adamjee Insurance


Co. Ltd.
63

46 DLR HCD 23:


HIGH COURT DIVISION Judgment: November 23rd, 1993.
By this judgment a number of suits raising common question of law were disposed of. The facts of one
such suit is stated below:
1. Adamjee Insurance Company Ltd. As plaintiff filed the suit against defendant No. 1 Trans Oceanic
Steamship Co. Ltd.
2. Case of the plaintiff in Money Suit 171 of 1966 is that proforma defendant No. 3 National Trading
Company imported 24 bales of cotton piece goods from Karachi per SS Ocean Energy belonging to
defendant No. 1 Trans Oceanic Steamship Co. Ltd. under bill of lading dated 21.7.65 to be delivered at
Chittagong; that clearing agent of the importer having found the goods in damaged condition prayed
for joint survey; that according to survey report all the 24 bales were excessively water stained, wet and
damp, discoloured and badly rust stained and assessed loss at the rate of 20% amounting to Rs.
18,048.00. Further case of the plaintiff is that the said goods were insured with the plaintiff and
plaintiff paid the said amount of Tk. 18,048.00 to the proforma defendant No. 3 in two instalments and
subrogated in place of the proforma defendant No. 3 vide two letters of subrogation dated 13.12.65 and
9.6.66 of right, title, interest and remedies in respect of the damaged goods. The said goods were made
over to the defendant No. 1 in good order and condition at the port of shipment in Karachi and the
defendant No. 1 delivered the same in damaged condition at Chittagong and the damage was due to sea
water while the goods were in care and custody of defendant No. 1 who as carrier of the goods is
responsible for the damage and liable to compensate the loss of Rs. 18,048.00. But the defendant No. 1
to avoid liability as carrier inserted in the bill of lading an incorrect remark that 6 bales out of the entire
consignment of the shipper were wet stained by rain prior to loading but all the 24 bales were found
damaged by sea water at the time of taking delivery and surveyor could not ascertain the extent of
damage due to rain water but found the damage due to sea water by chemical test and the carrier cannot
escape liability due to the incorrect remark when the goods were damaged while in their custody in the
ship. The defendants having not satisfied the claim in spite of demand plaintiff as subrogate of
proforma defendant No. 3 filed the suit on 3.8.66 for recovery of the said amount of Rs. 18,048.00.
3. Clause (1) of Article III of the Carriage of Goods by Sea Act, 1925 states as follows:
1. The carrier shall be bound before and at the beginning of the voyage to exercise due
diligence to(a) Make the ship seaworthy;
(b) Properly man, equip and supply the ship;
(c) Make the holds, refrigerating and cool chambers, and all other parts of the ship in
which goods are carried, fit and safe for their reception, carriage and preservation.
4. This shows that the carrier will be responsible for making proper arrangement for the safe carriage of
the goods carded by it.
5. In the case of Muhammaadi Steamship Co. Ltd.Vs.ProvinceofEastPakistan
andothers reported in 22 DLR 96 a Division Bench,of the Dhaka High Court while dealing with
the question of onus held as follows :
"From a reading of the above decision and the provisions of the Carriage of Goods by Sea Act,
1925, it is to be found that the shipper or the consignee has the initial onus of proving that the
cargo carried under the bill of lading was delivered at the port of destination and delivered in
damaged condition and not in that apparent and good condition as it was loaded, and
thereafter the onus shifts on to the carrier first to prove that he took all reasonable care while
the cargo was in his custody and then to prove that the cargo nevertheless was damaged which
exonerated him from the liability of such damage under the provisions of the Act or contract
which again "must conform to the provisions of the said Act."
6. In all the cases under appeal plaintiff proved by oral evidence as well as survey report that the
shipper delivered the goods to the carrier in apparent good condition and the same were delivered to the
consignee in damaged condition and thus discharged the initial onus lying on the plaintiff. But the

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defendants utterly failed to discharge the onus that the defendants took due care and diligence to protect
the goods while in the ship or the damage was due to perils of the sea or act of God.
7. There is no onus under the law on the plaintiff to prove that the goods were damaged due to the
negligence of the employees of the carrier while in the ship. As soon as the shipper delivers the goods
to the carrier at the port of origin in good condition he is entitled to receive the goods at the port of
destination in the same good condition and the carrier will be held responsible for loss or damage, if
any, to the said goods while in his care and custody. It is not possible for the shipper to prove
negligence or misconduct of the employees of the carrier while the goods were in the ship in their care
and custody and it is for the carrier to show that his employees took due care and caution as reasonable
men of ordinary prudence for the protection and preservation of the goods.
8. In the result, all the appeals are dismissed. The claim of
upheld.

Adamjee Insurance Company Ltd. Is

Hind Construction Contractors v State of Maharashtra


(1979) 2 SCC 70.
In a building contract time was described to be as of the essence. The contractor,
however, was given the facility to seek extension of time in advance on
reasonable grounds, failing which a penalty was payable for each day of default.
These stipulations were regarded by the Supreme Court of India as being against
time being regarded as of the essence. The contractor's application for extension
was rejected and, on his failure to complete the works within the specified time,
the Department rescinded the contract. The rescission was not approved by the
Court which observed that some further period should have been allowed to the
contractor telling him that now time would be as of the essence and that it would
neither be extended, nor excusable on payment of fine. Then only it would have
been possible to rescind the contract.

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