THE INDIAN CONTRACT ACT 1872

• contract
– meaning
– characteristics
– kinds
• essentials of valid contract
– offer and acceptance
– consideration
– contractual capacity
– free consent
– legality of objects
• void agreements
• discharge of contract
– modes of discharge
– breach of contracts and its remedies
• contract of indemnity and guarantee
• contract of bailment
• contract of agency
 MEANING OF CONTRACT
• an agreement enforceable by law
• two components
– agreement
– enforceable by law
 MEANING OF CONTRACT
• agreement
– section 2©-every promise and every set of promises
forming the consideration for each other is an agreement
– promise-a proposal when accepted becomes a promise
• enforceability of agreement
– agreement is enforceable by law if it creates legal
obligation-commercial or business agreements
– social and domestic agreements do not intend to create
legal relations e.g. invitation for dinner to a friend or
commitment by husband to pay wife every month rs. 5000
 CLASSIFICATION OF CONTRACTS
• on the basis of creation
– express contracts
– implied contracts-by conduct or circumstances inferred
• on the basis of execution
– executed contracts
– executory contracts
– partly executed and partly executory
• on the basis of enforceability
– valid contracts
– void agreement-void ab-initio agreement with minor or with
person of unsound mind
– voidable contracts-enforceable at the option of aggrieved party
– illegal agreement
 ESSENTIALS OF VALID CONTRACT
• all agreements are contracts
• if they are made by the free consent
• of the parties competent to contract
• for a lawful consideration-drop prosecution for robbery unlawful
• and with a lawful object-giving a flat on hire to a prostitute is
unlawful object
• and are not hereby expressly declared to be void-agreement in
restraint of marriage, trade, legal proceedings or wagering
agreements
• certainty of meaning
• possibility of performance-discover treasure by magic against
consideration of rs. 1000 is an agreement to do impossible act
• legal formalities
 OFFER AND ACCEPTANCE
• offer –a person is said to have made an offer
when he signifies his willingness to another
person to do or to abstain from doing anything
with a view to obtaining the assent of other
person to such offer or abstinance
– two persons
– willingness to do or abstain
– made to obtain consent
– express/ implied offer
– specific/ general offer
 OFFER AND ACCEPTANCE
• legal rules for valid offer
– intention to create legal relationship
– certain and unambiguous terms
– different from a mere declaration of intention
– different from invitation to offer
– communication
– no term the non compliance of which amounts to
acceptance
– communication of special terms or standard form
contracts
 OFFER AND ACCEPTANCE
• acceptance-a proposal (offer) is said to be accepted
when the person to whom the proposal is made
signifies his assent thereto. proposal when accepted
becomes a promise
– express/ implied
– absolute and unqualified
– in a manner desired
– communicated-mere determination in mind not enough
– by authorised person
– to authorised person
– within time prescribed/ reasonable time
– before lapse of offer
 OFFER AND ACCEPTANCE
• communication of offer and acceptance
– communication of offer
• when it comes to the knowledge of person to whom it
is made
– communication of acceptance
• against proposer-when it is put in a course of
transmission to him so as to be out of power of
acceptor
• against acceptor-when it comes to knowledge of
proposer
 OFFER AND ACCEPTANCE
• revocation of offer and acceptance
– offer –at any time before communication of
acceptance is complete against proposer
– acceptance-at any time before communication of
acceptance is complete against acceptor but not
afterwards
 OFFER AND ACCEPTANCE
• lapse of offer
– by revocation
– by lapse of time
– by death or insanity of offeror/ offeree
– by failure to accept condition precedent
– by counter offer
– by not accepting in prescribed mode
– by rejection of offer by offeree
– by subsequent illegality or destruction of subject
matter
 WHO IS COMPETENT TO CONTRACT
• attained age of majority
• is of sound mind
• not disqualified from contracting by any law to
which he is subject
 WHO IS COMPETENT TO CONTRACT
• position of agreements by a minor
– validity-void ab-initio- leading case law “ mohiri bibee v. dharmodas
ghosh (minor)
– no estoppel
– fraudulent representation of age
– ratification on attaining the age of majority-no
– minor’s agreement jointly with major
– minor as partner-cannot but with consent of all partners admitted to
share profits
– as agent-yes without personal liability
– shareholder or member of company-yes provided shares are fully paid
up and articles do not prohibit
– insolvent-cannot because he is not competent to contract
– contract for benefit of minor-yes
– contract for supply of necessaries-reimbursement from his property
 WHO IS COMPETENT TO CONTRACT
• persons of sound min d-when making
contract
– understands the terms of contract
– forms rational judgement as to its effects on his
interests
 WHO IS COMPETENT TO CONTRACT
• persons disqualified by law to enter into
contract
– alien enemies
– foreign sovereigns-can contract and sue in our
courts but can be sued only with central govt.
permission unless they choose to submit
themselves to the jurisdiction to our courts
– convicts-called convict during sentence
– insolvents-till discharged
 CONSIDERATION
• when at the desire of the promisor
• the promisee or any other person
• has done or abstained from doing
• or does or abstain from doing
• or promises to do or abstain from doing
• something
• such act or abstinence or promise is called
consideration for promise
– it should be real not illusiory, something other than
promisor’s existing obligation and lawful
 CONSIDERATION
• CONTRACTS WITHOUT CONSIDERATION-SECTION 25 , AN AGREEMENT MADE WITHOUT CONSIDERATION IS VOID
– GRATUITOUS PROMISE TO TEMPLE MANAGEMENT
• IF PROMISEE ON THE FAITH OF THIS PROMISE SUFFER SOME LIABILITY THEN THAT IS TO BE MADE GOOD AS DECIDED IN “KEDARNATH VS. GORIE MOHD.
EXCEPTIONS:

*agreements made in writing and registered out of

natural love and affection amongst near relations
*promise to compensate wholly or in part to person who
has already done somethingvoluntarily or has done
something which the promisor was legally bound to do
*promise to pay time barred debts if made in writing by
debtor or his agent and it related to debt which became
time barred
*completed gifts
*agency creation
 FREE CONSENT
• consent: sec.13-two or more person are said to consent
when they agree upon the same thing in the same sense
• thus identity of minds in respect of the subject matter of
the contract is necessary
• free consent: sec.14- consent is free when it is not caused
by
– coercion
– undue influence
– fraud
– misrepresentation
– mistake
if consent is not free, contract usually voidable at the option of
party whose consent was so caused
 FREE CONSENT
• COERCION: compelling a person to enter into
contract under pressure or threat
• sec.15 contract is caused by coercion if
– commiting act forbidden by the indian penal code
– threaten to commit act forbidden by the indian penal code
– unlawful detaining any property
– threatening to detain any property
coercion may proceed from any person and may be directed
against any person
burden of proof of coercion is on party wanting to avoid the
contract
 FREE CONSENT
• effect of coercion
– contract voidable at the option of the party whose
consent was so obtained
– party rescinding the contract to restore benefits
derived under contract
– a person to whom monet has been paid or
anything delivered under coercion, must repay or
return it
 FREE CONSENT
• undue influence: means dominating the will of other
person to obtain unfair advantage over the other
• so, relations subsisting between parties are such that one
of them is in a position to dominate the will of there, and
• the dominant party uses that position to obtain an unfair
advantage over the other
• examples: master and servant, parent and child, ito and
assessee, principal and temporary teacher, trustee and
beneficiary, spiritual adviser and his disciple, solicitor and
client, guardian and ward, medical attendant and patient
whose mental capacity is temporarily or permanently
affected by reason of age, illness, or mental or bodily
distress
 FREE CONSENT
• no presumption in following cases based on judgements
– husband and wife, landlord and tenant, creditor and debtor

effect of undue influence is that contract voidable at the option of

party whose consent was so obtained
• contract with pardanashin woman is presumed to have
been induced by undue influence
– unless other party proves that full disclosure of facts was made
to her,
– she understood the contract and its implications
– she was in receipt of independent competent advice before
entering into contract
 FREE CONSENT
• fraud: false representation of fact made by a party or
his agent in his conniavance wilfully to deceive other
party or his agent or to induce him to enter into
contract and other party has actually been deceived
and has suffered loss
• following acts are included
– suggestion about a fact which is not true
– active concealment of fact
– promise made without intention of performing
– any such act or omission which law specially declares
fraudulent
– any other act fitted to deceive
 FREE CONSENT
• effects of fraud
– where silence amounts to fraud , aggrieved party
cannot rescind the contract if he had means of
discovering the truth with ordinary diligence
– where party gave consent in ignorance of fraud
– where party after becoming aware of fraud takes
benefit under the contract
– where innocent third party acquires for consideration
some interest in the property before the contract is
rescinded
– where the parties cannot be restored to their original
position
 FREE CONSENT
• the aggrieved party may insist that contract be
performed and he be put in same position in
which he would have been had the fraud not
committed-purchase of mortgaged property
• the aggrieved party can claim damages if he
suffers some loss
 FREE CONSENT
• silence as to fraud
– mere silence as to facts likely to affect the
willingness of a person to enter into a contract is
not fraud except
• where parties stand in fiduciary relationship like parent
child, trustee- beneficiary
• where silence is equivalent to speech
• half truth average dividend in prospectus in last 5 years
instead of showing declining dividend
 FREE CONSENT
• misrepresentation: false representation of fact
made innocently or non disclosure of material
fact without intention to deceive other party
• x to y to sell land with representation that land
produces 2 tons of rice per acre
• essential elements
– by a party to contract or his agent
– false representation
– of fact
– object not to deceive
– other party actually acted
 FREE CONSENT
• effects of misrepresentation
– right to rescind contract , but cannot in following
circumstances
• where other party had means of discovering truth with
ordinary diligence
• other party gave consent in ignorance of misrepresentation
• party takes benefit under contract after becoming aware of
misrepresentation
• innocent 3rd party acquires interest in property subject to
contract
• where parties cannot be restored to their original position
– right to insist upon performance
 FREE CONSENT
• difference between fraud and
misrepresentation;
– intention-wilful/innocent
– knowledge of falsehood
– claim of damages
– availability of means to discover the truth
 FREE CONSENT
• mistake: where parties while intending to do
something do something else
• mistake of law
– indian law-contract not voidable
– foreign law-both parties at mistake-contract void
• mistake of fact
– bilateral
• both parties at mistake relating to essential fact or possibility of
performance-void
– unilateral
• void where unilateral mistake pertains to identity of person
contracted with or as to nature of contract
legality of object and consideration and agreements opposed to
public policy

• circumstances under which object or

consideration is deemed to be unlawful
– forbidden by law
– defeats the provision of any law
– fraudulent
– involves or implies injury to a person or property
of another
– court regards it as immoral or opposed to public
policy
 legality of object and consideration and agreements
opposed to public policy

• agreements opposed to public policy

– trading with enemy
– stifling prosecution
– sale/ transfer of public offices and titles
– agreements in restraints of parental rights
– agreements in restraints of personal liberty
– agreement to create monopoly
– agreement interfering with course of justice
– marriage brokerage contracts
– agreement in restraint of marriage
– agreement in restraint of trade
– agreement in restraint of legal proceedings
 PERFORMANCE OF THE CONTRACT
• the parties to the 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
 PERFORMANCE OF THE CONTRACT
• types of performance
– actual performance-offer for performance made
by promiser and accepted by promisee
– attempted performance-offer for performance
made by promisor but not accepted by promisee
 PERFORMANCE OF THE CONTRACT
• Effects Of Tender
– Tender Of Money
• Promisor Not Discharged From The Liability To Pay
• Promisor Will Not Be Liable To Pay Interest From The Date Of The
Valid Tender
– Tender Of Goods Or Services
• Goods Or Services Need Not Be Offered Again
• Promisor May Sue Promisee For Non Performance
• Promisor Is Discharged From His Liability
 PERFORMANCE OF THE CONTRACT
• Essential Of Valid Tender
– Unconditional
– At Proper Time
– At Proper Place
– Reasonable Opportunity To Promisee
– For Whole Obligation
– To Proper Person
– Of Exact Amount
PERFORMANCE OF THE CONTRACT
• Effect Of Refusal Of Party To Perform Promise
Wholly
– Promisee May Pur An End To Contract Unless He
Has Expressed His Desire By Words Or Conduct To
Continue
PERFORMANCE OF THE CONTRACT
• Persons Who Can Demand Performance
– Promisee
– Legal Representative
– Third Party
– Joint Promisees
PERFORMANCE OF THE CONTRACT
• Persons Who Must Perform
– Promisor
– Promisor’s Agent
– Legal Representatives
– Third Party
– Joint Promisors
PERFORMANCE OF THE CONTRACT
• Devolution Of Joint Liabilities And Joint Rights
– Joint And Several Liabilities Of Joint Promisors
– Right To Claim Contribution
– Sharing Loss By Default In Contribution
– Effect Of Release Of One Joint Promisor
PERFORMANCE OF THE CONTRACT
• Time And Place Of Performance
– Time For Performance Without Application Of Promisee
• Time Not Specified-reasonable Time
• Time Specified-usual Hours Of Business
– Time For Performance With Application Of Promisee
• Time Specified-promisee To Apply During Usual Business Hours At A
Proper Place
– Place Of Performance Without Application Of Promisee
• Place Not Specified-promisor To Apply To Promisee To Appoint Proper
Place For Performance
– Where Promisee Prescribes Manner Or Time
• As Prescribed By Promisee
PERFORMANCE OF THE CONTRACT
• Time As Essence Of Contract-cases
– Where Parties Expressly Agreed
– Where Non Performance At Agreed Time Operates
As Injury To Party
– Where Nature And Necessity Of Contract Requires
Performance Within Specified Time
PERFORMANCE OF THE CONTRACT
• Consequences Of Non Performance Of Contract
Within Specified Time
– When Time Is Not Essence
• Contract Not Voidable
• Promisee Entitled To Claim Damages For Any Loss For No
Performance At Agreed Time
– When Time Essence
• Contract Voidable At Option Of Promisee
• If Performance Accepted By Promisee Beyond Specified Time
Damages Cannot Be Claimed Unless Expressed At The Time Of
Acceptance Of Performance
PERFORMANCE OF THE CONTRACT
• Assignment Of Contracts-transfer Of
Contractual Rights And Liabilities To A Third
Party
– Assignment By Act Of Parties
– Assignment By Operation Of Law
• In Case Of Death Of Any Party
• In Case Of Insolvence Of Any Party
PERFORMANCE OF THE CONTRACT
• Appropriation Of Payment
– Where Discharge Indicated-adjustment Of Debt As
Indicated By The Party
– Where Discharge Not Indicated-any Debt
Adjustment Including Time Barred Debt But Not
Disputed Debt
– Where Neither Party Makes Any Appropriation-
payment Applied In Order Of Time Including Time
Barred Debt
 DISCHARGE OF CONTRACT
• Means Termination Of Contractual
Relationship Between Parties To Contract
• Contract Is Said To Be Discharged When Rights
And Obligations Of Parties Under Contract
Come To An End
 DISCHARGE OF CONTRACT
• Modes Of Discharge
– By Performance
– By Attempted Performance
– By Mutual Agreement
• Novation-subsitution Of Original Contract Between
Same Or Any One New Party
• Rescission By Any Or All Parties
• Alteration-change In Terms Of Contract With Mutual
Consent-parties Do Not Change
• Remission-lesser Fulfilment Of Promise
• Waiver-intentional Relinquishment Of Right Under
 DISCHARGE OF CONTRACT
• Modes Of Discharge
– By Operation Of Law
• By Death Of Promiser- Where Personal Skill Of Promiser
Involved
• By Insolvency
• By The Identity Of Promisor And Promisee-x Draws Bill
On Y Who Accepts Then X Endorses To Z And Z To Y –Y
Is Both Promisor And Promisee
 DISCHARGE OF CONTRACT
• Modes Of Discharge
– By Impossibility Of Performance
• Initial Impossibility
– When Promisor And Promisee Knows
– When They Do Not Know
– When One Party Knows-polygamy

• Supervening Impossibility
– Destruction Of Subject Matter
– Death Or Personal Incapacity
– Declaration Of War
– Change Of Law
– Non Existence Or Non Occurance Of Particular State Or Things For Performance-promise
To Marry-x Goes Mad
– Not Discharged On Supervening Impossibility When
» Difficulty Of Performance/ Commercial Impossibility/ Default Of Third Party/ Strike
Lockout Civil Disturbance/ Partial Impossibility
 DISCHARGE OF CONTRACT
• Modes Of Discharge
– By Lapse Of Time-law Of Limitation
– By Breach Of Contract
• Anticipatory Breach
• Actual Breach
– On Due Date Of Performance
– During The Course Of Performance
 REMEDIES FOR BREACH OF
CONTRACT
• In Case Of Anticipatory Breach
– Rescind Contract By Agreeved Party And Claim
Damages
– Or Wait Till Performance Date And Then Claim
Damages
 REMEDIES FOR BREACH OF
CONTRACT
• In Case Of Actual Breach
– When Time Is Essence Contract Voidable At The
Option Of Promisee
– When Time Is Not Essence Contract Is Not
Voidable At The Option Of Promisee
– In Both The Above Cases
• Damages Can Be Claimed By Promisee Where
Performance Beyond Stipulated Time Not Accepted
• No Damages Where Such Performance Accepted Unless
Notice Of Intention To Claim Damages Is Given
 REMEDIES FOR BREACH OF
CONTRACT
• Rescission Of Contract
• Suit For Damages
– Ordinary
– Special
– Liquidated Damages And Penalty
– Forfeiture Of Security Deposit
• Suit For Specific Performance
• Suit For Injunction-singing For X By Y And Then Also
Contracting With Z
• Suit Upon Quantum Meruit-as Much As Is Earned
 CONTRACT OF INDEMNITY AND
GUARANTEE-SEC. 124-147
• Where One Party Promises To Save The Other
From Loss Caused To Him By The Conduct Of
The Promisor Or Any Other Person
• May Be Express Or Implied
• All Essentials Of Valid Contract Must Be
Present
 CONTRACT OF INDEMNITY AND
GUARANTEE-SEC. 124-147
• Contracts Of Guarantee-is A Contract To
Perform A Promise Or Discharge The Liability
Of A Third Person In Case Of His Default
• Three Parties
– Principal Debtor
– Creditor
– Surety
 CONTRACT OF INDEMNITY AND
GUARANTEE-SEC. 124-147
• Essential Features Of Contract Of Guarantee
– Tripartite Agreement
– Consent Of All Three Parties
– Existence Of A Liability
– Essentials Of Valid Contract
– Guarantee Not To Be Obtained By
Misrepresentation Or By Concealment Of
Material Facts By The Creditor
 CONTRACT OF INDEMNITY AND
GUARANTEE-SEC. 124-147
• Extent Of Surity’s Liability-co-extensive With
Principal Debtor Unless Otherwise Agreed
• Kinds Of Guarantee
– Specific
– Continuing
 CONTRACT OF INDEMNITY AND
GUARANTEE-SEC. 124-147
• Revocation Of Continuing Guarantee
– By Notice Of Revocation
– By Death Of Surety
– By Modes Of Discharging Surety
• Novation
• Variance In Terms Of Contract
• Release Or Discharge Of Principal Debtor
• Creditor Entering Into Arrangement With Principal Debtor
• Creditor’s Act Or Omission Impairing Surety’s Eventual Remedy
• Loss Of Security
 CONTRACT OF INDEMNITY AND
GUARANTEE-SEC. 124-147
• Rights Of Surety
– Rights Against Principal Debtor
• Right To Subrogation
• Right To Indemnity
– Rights Against Creditor
• Right To Securities
• Right To Claim Set Off
– Rights Against Co-sureties
• Right To Claim Contribution
 CONTRACT OF INDEMNITY AND
GUARANTEE-SEC. 124-147
• Discharge Of Surety
– By Revocation
– By Conduct Of Creditor
– By Invalidation Of Contract
 CONTRACT OF INDEMNITY AND
GUARANTEE-SEC. 124-147
• Discharge Of Surety By Revocation
– By Notice
– By Death Of Surety
– By Novation
 CONTRACT OF INDEMNITY AND
GUARANTEE-SEC. 124-147
• Discharge Of Surety By Conduct Of Creditor
– By Variance In Terms Of Contracts
– By Release Or Discharge Of Principal Debtor
– By Arrangement
– By Creditor’s Act Or Omission Impairing Suret’s
Eventual Remedy
– Loss Of Security
 CONTRACT OF INDEMNITY AND
GUARANTEE-SEC. 124-147
• Discharge Of Surety By Invalidation Of
Contract
– Guarantee Obtained By Misrepresentation
– Guarantee Obtained By Concealment
– Failure Of Co-surety To Join A Surety
 Contract of Bailment
• Sec. 148-bailment Is Delivery Of Goods
• By One Person To Another Person
• For Some Purpose Upon A Contract
• That Goods Shall Be Returned When Purpose
Is Accomplished
• Or Otherwise Disposed Off According To The
Directions Of Person Delivering Them
 Contract of Bailment
• Essentials Of Bailment
– Agreement-express Or Implied
– Actual Or Constructive Delivery Of Goods
– Delivery Of Goods For Intending Purpose
– Same Goods Or In Different Form Have To Be
Returned To Bailor On Accomplishment Of
Purpose Or Completion Of Period
 Contract of Bailment
• Kinds Of Bailment
– Gratuitous/ Non Gratuitous Depending Upon No
Consideration/ Consideration
– Bailment For Exclusive Benefit Of Bailor
– Bailment For Exclusive Benefit Of Bailee
– Bailment For Mutual Benefit
 Contract of Bailment
• Duties Of Bailor
– To Disclose Defects
– To Bear Expenses
– Indemnify Bailee On Premature Termination/
Defective Title Of Bailor
– To Receive Back Goods
– To Bear Risk Of Loss
 Contract of Bailment
• Duties Of Bailee
– Take Care Of Goods
– Not To Make Unauthorised Use
– Not To Mix Bailor Goods With His Own Goods
– To Return Goods
– Return Accretions To Goods
– Not To Set Up Any Adverse Title
 Contract of Bailment
• Finder Of Goods-rights
– Right To Lien To Claim Compensation
– Right To Sue For Reward
– Right To Sell
• Owner With Reasonable Diligence Cannot Be Found
• Owner Refuses To Compensate
• Goods In Danger Of Perishing Or Losing Greater Part Of
Their Value
• Lawful Charges Of Finder Are 2/3rd Of Value Of Goods
 Contract of Bailment
• Finder Of Goods –Duties
– Reasonable Care
– Not To Use For Personal Purpose
– Not To Mix With His Own Goods
– To Find Owner And Return Goods
 Contract of Bailment
• Termination Of Bailment-every Type
– On Expiry Of Fixed Period
– On Fulfilment Of Purpose
– Inconsistence Use Of Goods By Bailee
– Destruction Of Subject Matter Of Bailment
 Contract of Bailment
• Termination Of Bailment-gratuitous
– Before The Expiry Of Period
– On Death Of Bailor/ Bailee
 PLEDGE OR PAWN-SEC.172
• Bailment Of Goods As Security For Payment Of
A Debt Or Performance Of A Promise Is Called
Pledge
• Pledge Vs. Bailment
– Pledge Is Bailment Of Goods For Specific Purpose-
repayment Of Debt/ Performance Of Promise
– Bailment Is For Any Purpose
– Pawnee Cannot Use The Goods/ Bailor Can
– Pawnee Can Sell/ Bailor Can Retain Or Sue
 PLEDGE
• Special Features Of Pledge
– Special Property In Goods (Possession) And Not
General Property (Ownership) In Goods Passes To
Pawnee
 PLEDGE
• Rights Of Pawnee
– Rights Of Retainor
– Reimbursement Of Extraordinary Expenses
– Sue Pawnor
– Sell Goods Pledged
– Right Against True Owner
 PLEDGE
• Duties Of Pawnee
– Take Reasonable Care Of Goods Pledged
– Not Yo Make Unauthorised Use Of Goods
– Not To Mix Goods With Own Goods
– Return Accretions To Goods
 PLEDGE
• Rights Of Pawnor
– Right To Get Pawnee’s Duties Duly Enforced
– Right To Redeem Goods At Subsequent Date
 PLEDGE
• Duties Of Pawnor
– Comply With Terms Of Pledge
– Compensate Pawnee For Extraordinary Expenses
 PLEDGE
• Pledge By Non Owners
– By Mercantile Agents
– By Person In Possession Under Voidable Contract
– Where Pawnor Has Limited Interest-finder Of
Goods, Mortgagee, Lien Holder
– By Co Owner In Possession
– By Seller Or Buyer In Possession
 CONTRACT OF AGENCY
• A Person Employs Another Person
• To Do Any Act For Him
• Or To Represent Him In Dealing With Third
Persons
• So As To Bind Himself
• By The Acts Of Such Other Person
 CONTRACT OF AGENCY
• General Rule Of Law Of Agency
– Work Which Can Be Done By Self Can Be Got Done
Through Agent Except Work Of Personal Nature Like To
Marry, To Become Insolvent Etc.
– Principal Binds Himself By Agent’s Work
– True Test Of Agency Is Whether Person So Appointed Has
Capacity To Create Contractual Relationship Between
Principal And Third Party
– No Consideration Necessary To Create Agency
 CONTRACT OF AGENCY
• Agent
– Person Employed To Do Act Of Another
– Or To Represent Another In Dealings With Third
Persons
– Any Person Whether Having Contractual Capacity
Or Not Can Be Agent
– Agent Who Is Minor Or Of Unsound Mind Is Not
Responsible To His Principal
 CONTRACT OF AGENCY
• Principal
– Who Appoints Agent
– Person Competent To Contract Can Only Appoint
Agent
 CONTRACT OF AGENCY
• Creation Of Agency
– By Express Authority
– By Implied Authority
• By Estoppel Or By Holding Out
• By Necessity
– By Ratification
– By Operation Of Law
• In Case Of Partnership Each Partner Is Agent Of Another
Partner
 CONTRACT OF AGENCY
• Agent And Servant
– Authority To Create Contractual Relationship
– Work Of Several Persons
– Remuneration
 CONTRACT OF AGENCY
• Agent And Independent Contractor
– Control And Supervision
– Personal Liability
– Remuneration
 CONTRACT OF AGENCY
• Classification Of Agents
– Basis-extent Of Authority
• General
• Special
• Universal
– Basis-nature Of Work
• Mercantile
• Non Mercantile
 CONTRACT OF AGENCY
• Mercantile Agent
– Broker
– Factor
– Auctioneer
– Commission Agent
– Del Credere Agent-guarantees Third Pary
Performance Like Recovery From Debtors
– Banker Agent
 CONTRACT OF AGENCY
• Non Mercantile Agent
– Attorneys
– Solicitors
– Wife
– Insurance Agent
– Election Agent
 CONTRACT OF AGENCY
• Can Agent Delegate Authority- No Except
– Custom Of Trade-article Clerks By Ca
– Nature Of Agency Requires Delegation
– Principal Permits
– Principal Knows Delegation But Does Not Object
– Emergency Requires Delegation
– Work Of Routine Nature And Does Not Require
Special Skills Of Agent
 CONTRACT OF AGENCY
• Substituted Agent-person Named By Agent
Holding Express Or Implied Authority From
Principal And Later Is Agent Of Principal For
Such Part Of Authority As Entrusted
• Sub Agent
 CONTRACT OF AGENCY
• Rights Of Agent
– Right Of Retainer
– Remuneration
– Lien-when No Contract To Contrary, Against Lawfully Acquired
Properties Against Which Amount Due
– Right To Indemnify Against Consequences Of Lawful Act
– Right To Be Indemnified Against Consequences Of Acts Done In Good
Faith-ceizing Goods Of A Wrong Person By Court Officer (Agent)
– Receive Compensation For Injury Caused By Principal’s Neglect
No Liability Of Employer Of Agent To Do A Criminal Act
 CONTRACT OF AGENCY
• Duties Of Agent
– To Act According To Directions Or Customs
– Act With Reasonable Care And Skills
– To Render Account
– Communicate With Principal And Obtain Instructions
– Disclose Personal Dealings
– Pay Sum Received For Principal
– Protect And Preserve Interest Entrusted To Him
– Not To Delegate
 THE SALE OF GOODS ACT 1930
• Contract Of Sale
– Contract Whereby Seller Transfers
– Or Agrees To Transfer The Property In Goods
– To The Buyer
– For A Price
 THE SALE OF GOODS ACT 1930
• Essentials
– Seller And Buyer
– Goods
– Transfer Of General Property
– Price
– Essential Elements Of Valid Contract
 THE SALE OF GOODS ACT 1930
• Sale And Agreement To Sale
– Transfer Of Ownership
– Executed/ Executory Contract
– Enjoyment Of Property
– Transfer Of Risk
– Rights Of Seller Against Buyer Breach
– Right Of Buyer Against Seller Breach
– Effect Of Insolvency Of Seller Having Possession Of Goods
– Effect Of Insolvency Of Buyer Before Paying Price
 THE SALE OF GOODS ACT 1930
• Hire Purchase-anagreement To Sell-
– Under This Goods Are Let On Hire
– And Hirer Has Option To Purchase Them In Accordance
With Terms Of Agreement
– Goods Delivered To Hirer
– Hirer To Pay All Agreed Instalments
– Property In Goods Passes On Payment Of Last Instalment
– Hirer Has Right To Terminate Contract Before Passes To
Him
 THE SALE OF GOODS ACT 1930
• Goods Exclude
– Actionable Claims
– Money-legal Tender
– Immovable Property
 THE SALE OF GOODS ACT 1930
• Types Of Goods
– Existing
• Specified
• Ascertained
• Unascertained
– Future
– Contingent-contingency Which May Or May Not
Happen
 THE SALE OF GOODS ACT 1930
• Conditions And Warranties
– Condition
• A Stipulation Essential To Main Purpose Of Contract
And
• Breach Of Which Gives Right To Aggrieved Party To
Terminate Contract
• Ex. Asking To Suggest A Car For Touring Purpose
 THE SALE OF GOODS ACT 1930
• Warranty
– A Stipulation Which Is Collateral To Main Purpose
Of Contract And
– Breach Of Which Gives Right To Aggrieved Party To
Claimm Damages But Not To Reject Goods And
Terminate Contract
– Ex. Earlier Example Car Dealer Suggests That Car
Would Run 20 Km/ Litre But It Runs 15
 THE SALE OF GOODS ACT 1930
• Express Conditions And Warranties
• Implied Conditions
– Condition As To Title
– Sale By Description
– Sale By Sample
– Condition As To Quality Or Fitness
• No Implied Condition-let The Buyer Beware But No Hidden Defects
– Condition As To Merchantable Quality
• Which Prudent Man Will Accept-no Hidden Defects
– Condition As To Wholesomeness
• In Case Of Eatables-implied Condition That Goods Shall Be Fit For Human Consumption
– Condition Implied By Custom-declaration Of Goods For Sea Damage-must
 THE SALE OF GOODS ACT 1930
• Implied Warranties
– As To Quiet Possession-stolen Radio Sold Caught
By Police-can Claim Damages
– Freedom From Encumbrances-can Claim Damages
– To Disclose Dangerous Nature Of Goods-opening
Of Tin Of Disinfectant Powder With Care
 THE SALE OF GOODS ACT 1930
• Meaning And Exception To Doctrine Of Caveat
Emptor-let The Buyer Beware
– Not Part Of Seller’s Duty To Point Out Defects Of Goods, Rather It Is Duty Of
Buyer To Satisfy Himself As To Quality And Suitability Of Goods
– Exceptions
• Misrepresentation By Seller
• Concealment Of Latent Defect By Seller
• Sale By Description
• Sale By Sample
• Fitness For Particular Purpose
• Merchantable Quality
 THE SALE OF GOODS ACT 1930
• Meaning And Significance Of Passing Of
Property
– Means Passing Of Ownership Not Physical Possession
– It Decides Various Rights And Liabilities Of Seller And Buyer
– Important To Know Time Of Transfer Of Property To Answer Following
• Who Shall Bear The Risk
• Who Can Take Action Against Third Party
• Whether Seller Can Sue For Price
• In Case Of Insolvency Of Buyer –Possession Of Goods
• In Case Of Insolvency Of Seller
 THE SALE OF GOODS ACT 1930
• Passing Of Property
– Specific Or Ascertained Goods
• Property Transferred At Such Time As Parties Intend
– Unascertained Goods
• Goods Ascertained And Goods Appropriated (Selected)
With The Consent Of The Other
– Goods Sent On Approval On Sale Or Return
• Buyer Signifies Approval/ Does Act To Adopt
Transaction/ Fails To Return In Time
 THE SALE OF GOODS ACT 1930
• Passing Of Risk
– With Property Except
• Agreement To Contrary
• Delayed Delivery
• Usage Of Trade
 THE SALE OF GOODS ACT 1930
• Sale By Non Owners
– No One Can Give What He Does Not Himself
Possess Except
• Sale By Mercantile Agent
• Sale By One Of Joint Owners
• Possession Under Voidable Contract
• Sale By Seller In Possession After Sale
• Sale By Buyer In Possession Before Transfer Of Ownership
• Sale By Unpaid Seller
• Sale By Finder Of Goods
• Sale By Official Receiver/ Assignee
• Sale By Owner By Estoppel
 THE SALE OF GOODS ACT 1930
• Delivery Of Goods-voluntary Transfer Of
Possession From One Person To Another
• Can Be Made By Doing
– Anything Which Parties Treat Delivery
– Anything Which Has Effect Of Putting Goods Into
Buyer’s Or His Agent’s Possession
 THE SALE OF GOODS ACT 1930
• Types Of Delivery
– Actual Delivery
– Symbolic Delivery
– Constructive
 THE SALE OF GOODS ACT 1930
• Rights Of Unpaid Seller-
• Against Goods
– Where Property In Goods Passed To Buyer
• Right To Lien
• Right Of Stoppage In Transit-when Buyer Becomes Insolvent
• Right Of Resale-goods Perishable/ Seller Reserve Right/ Stoppage In
Transit-notice To Buyer To Pay And Not Paid
– Where Property In Goods Not Passed
• Withholding Of Delivery
• + Above 3 As Above

• Against Buyer Personally

 THE SALE OF GOODS ACT 1930
• Rights Against Buyer Personally
– Suit For Price
– Suit For Damages For Non Acceptance
– Suit For Repudiation Of Contract Before Due Date
– Suit For Interest
 THE SALE OF GOODS ACT 1930
• Rights Of Buyers
– Suit For Damages For Non Delivery
– Suit For Specific Performance
– Suit For Breach Of Warranty
– Right To Treat Contract Rescinded Where
Repudiated Before Delivery Date By Seller And Sue
For Damages
– Suit For Interest For Payment Of Money
 THE SALE OF GOODS ACT 1930
• AUCTION SALE
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Negotiable Instrument-2 Features
– Right Of Ownership In Instrument Can Be Transferred By
Mere Delivery If Bearer And By Endorsement And Delivery
If Payable To Order
– Transferee Taking Instrument In Good Faith And For
Consideration Gets Good Title Even Though Title Of
Transferor Is Defective
– Instruments Are Cheques, Promisory Note And Bills Of
Exchange
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Essentials Of Negotiable Instruments
– Payable To Order Or Bearer
– Freely Transferable
– Presumption As To Holder
– Title Of Holder In Due Course Free From All
Defects
– Consideration
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Bearer Instruments-exception
– Promissory Note
– Bills Of Exchange Payable To Bearer On Demand
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Instruments Payable On Demand
– Cheque Always Payable On Demand
– A Bill Of Exchange And Pn Are Payable On Demand
• When Time For Payment Specified
• Or When It Is Expressed To Be Payable On Demand Or
Sight
• “I Promise To Pay B Rs. 500”
• “I Promise To Pay B Rs. 500 On Demand”
• “Pay B Rs 500 At Sight”
• “Pay B Rs. 500 On Presentment”
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Time Instruments
– Cheque Is Not Time Instrument
– Boe And Pn Are Such Instruments When It Is
Expressed To Be So Payable
• After A Specified Period
• On A Specified Day
• On Happening Of Event Which Is Certain To Happen
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Promissory Note (Pn)
– Instrument In Writing
– Not Being Bank Note Or Currency Note
– Containing An Unconditional Undertaking
– Signed By The Maker To Pay
– A Certain Sum Of Money
– Only To Or To The Order Of Certain Person
– Or To The Bearer Of The Instrument ( Inoperatve
Due To Rbi Directive )
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Essentials Of Pn
– In Writing
– Express Promise To Pay
– Definite And Unconditional
– Signed By Maker
– Promise To Pay Certain Sum
– Promise To Pay Money Only
– Certain Payee
– Dated, If Not Date Of Delivery Will Be Considered As Date
Of Writing
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Bill Of Exchange
– An Instrument In Writing
– Containing An Unconditional Order
– Signed By The Maker
– Directing A Certain Person
– To Pay A Certain Sum Of Money
– Only To Or To The Order Of Certain Person
– Or To The Bearer Of The Instrument
– It Can Not Be Payable To Bearer On Demand As Restricted
By Rbi
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Parties To Boe
– Drawer
– Drawee
– Payee
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Acceptance Of Boe
– Written
– Signed By Drawee Or By His Authorised Agent
– On The Front Or Back Of Bill
– Delivered Accepted Bill Or Given Notice Of
Acceptance To Holder Of Bill Or Some Other
Person On His Behalf
– If Not Accepted Bill Gets Dishonoured
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Distinction Between Boe And Pn
– No. Of Parties
– Promise/ Order
– Liability Of Drawer/ Maker
– Acceptance For Being Valuable Instrument
– Same Identity Of Payer And Payee
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Cheque
– Is Bill Of Exchange
– Drawn Upon A Specified Banker
– And Payable On Demand
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Essentials Of Cheque
– In Writing
– Express Order To Pay
– Definite And Unconditional Order
– Signed By Drawer
– Order To Pay Certain Sum
– Order To Pay Money Only
– Drawn Upon Specified Banker
– Payable On Demand
– Three Parties
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Cheque Vs. Bill Of Exchange
– Drawn On
– Payable On Demand
– Payable To Bearer On Demand
– Acceptance
– Stamping
– Three Days Of Grace
– Crossing
– Countermanding Of Payment
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Crossing Of Cheque
– An Instance Of Alteration Authorised By Act
– To Parallel Lines Usally Drawn On Left Hand Top
Corner Of Cheque
– Purpose Is To Pay Only To A Banker So That Payee
Can Be Easily Be Traced
– General Crossing/ Special Crossing/ Account Payee
Crossing
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Bouncing Or Dishonour Of Cheque
• Liability Of Drawer On Dishonour Of Cheque
– Punishable With Imprisonment Upto 2 Years Or Fine Upto Twice The
Amount Of Cheque Or Both If Following Conditions Met
• Cheque Drawn For Legally Enforceably Debt/ Liability
• Cheque Returned By Bank Due To Insufficient Funds
• Cheque Presented For Payment Within 6 Months From The Date Of Cheque
• Payee Gives Notice Of Dishonour To Drawer Within 30 Days Of Receipt Of
Information From Bank
• Drawer Failed To Pay Within 30 Days Of Receipt Of Such Notice
 THE NEGOTIABLE INSTRUMENT
ACT 1881
• Cases Under Which Bank Must Refuse To Pay
– Stop Payment
– Garnishee Order / Prohibiting Order Of Court
– Death Of Drawer
– Insolvency Of Drawer
– Insanity
– Notice Of Assignment Of Credit Balance From Customer
– Defect In Title Of Presenter
– Loss Of Cheque
– Material Alteration
– Different Signature/ Notice Of Closure Of Account/ Stale/ Post Dated/
Undated Cheque