BUSINESS LAW SUBJECT CODE : CCR8C52

CLASS : III B.Com

SYLLABUS
UNIT I
LAW OF CONTRACT NATURE- DEFINITION-
ESSENTIAL ELEMENTS CLASSIFICATION OF
CONTRACT.
UNIT II
OFFER ACCEPTANCE - LEGAL RULES
CONSIDERATION CONSENT- FREE CONSENT
COERCION UNDUE INFLUENCE
MISREPRESENTATION MISTAKE FRAUD
DISTINGUISH BETWEEN FRAUD AND
MISREPRESENTATION.
UNIT III
PERFORMANCE DISCHARGE REMEDIES FOR
BREACH OF CONTRACT AND QUASI CONTRACT
VOID AGREEMENT WAGERING - RULES
CONTINGENT CONTRACT WHICH NEED NOT BE
PERFORMED PERFORMANCE OF CONTRACT.
UNIT IV
SPECIAL CONTRACT INDEMNITY AND GUARANTEE
KINDS RIGHTS AND DISCHARGE OF SURETY-
RIGHTS AND DUTIES OF BAILOR AND BAILEE
UNIT V
AGENT PRINCIPLES CREATION OF AGENCY
CLASSIFICATION OF AGENT RELATIONS DUTIES
AND RIGHTS OF AN AGENT WITH PRINCIPAL
DELEGATION OF AUTHORITY - TERMINATION OF
AGENCY




UNIT - I

CONTRACT - NATURE DEFINITION ESSENTIAL ELEMENTS OF
CONTRACT AND CLASSIFICATION OF CONTRACT

Introduction

The law of Contract forms the oldest branch of the law relating to business
transaction. The law of contracts is applicable not the business community but others.

Before going to discuss about the business law. Let us discuss briefly about the law.

Law is a body of rules which is used for regulation the contract of the members of a
society.

Need for Law :

To maintaining of peace recognize the right of other, life cannot be live peacefully and
business cannot be carried out smoothly without law to regulate the conduct of people and
protect their property and contract rights.

Meaning of Law :
Principal and sales that regulate social conduct and the observance of with can be
unforced in counts.

Definition of Law :

Law is a rule of external human action enforced by the sovereign political
authority by Holland.

Law is a rule of civil conduct prescribed by the supreme power of a state
commending what is right and probability what is wrong.

To Control all kinds of activates of people through a set of rules and principals
likewise different set of rules and principals is enforce for different kinds of social
behavior.
There are several branches of law civil law, constitutional law international Law,
Industrial and mercantile Law.

Mercantile Law / Business Law:

Mercantile Law known as commercial law or business law. It is a branch of law
in order to governs and regulates trade and commerce.

Slater says The Phase mercantile Law or commercial law is generally used to
denote that portion of the law which deals with right and obligations arising out of
transactions between mercantile persons.


Mercantile Person :

Mercantile person means one who enter into business transitions, they may be
individual, an association of partnership company.
Source of Mercantile Law :

The Laws used in India mostly derived from British law. But we made some
modifications for the local Usages of trade and commerce.

The Important sources of Mercantile law is as follows :

I. English Mercantile Law
a. English Common Law
b. Principal of Equity.
c. Law merchant.
II. Precedents : (Post Indicial Decisions of court)
III. Indian State Law (Act of Indian Legislature)
IV. Local Customs at Usages.

I. English Mercantile Law :

a. The English Common Law :

The Term Common Law is used to denote the case law based upon English
customs, usages, usages and traditions. Customs, usages which is evolved, recognized and
adopted as rules of conduct by the English community, acquire the name common law.
This is also called as Unwritten Law and it is not contained in any act of the legislature.

b. Principal of English :

English Law of equity is another guideline for Indian Courts. Branch of English
Law which is based on Principal of equity, Justice and good conscience. It is also a
unwritten law and developed from the common law, separately.

This law compensate the common law where the common law worked harshly.
Therefore, law based on equity was feasible as compared to the common law.

C. Law Merchant :

One of the most importance sources of English mercantile law is the law merchant
(Or) Lese Moratoria based on customs usages. At beginning it is not recognized by the
court, but later on, in the beginning of the 17
th
century, the common law court recognize
the rules of law merchant.

The traders established their own tribunals consisting of merchants themselves.
The rules pronounced by the tribunal, became the law popularly Known as the law
merchant or lese moratoria, which was an independent law till it was accepted and
recognized by the common law.

II. Precedent (Past Judicial Decisions of Courts).

Precedent referees to the past Judicial decisions of court, are an important of
courts, are an important sources of law. In India, the supreme court is the highest Court. Its
decisions have binding force on all court subordinate to it.

III. Indian State Law : (act of Indian Legislate)

The Legislature is the main source of Law in modern times.

In India, the central and state legislature posses law making powers and excised their
powers.

The important acts passed by the Indian legislature are

Indian contract act 1872.
The Negotiable instruments act 1881
The Sale of goods act 1930
The Indian Partnership Act 1932
The Companies Act 1956

V. Local Customs and usages :

The Customs and usages of Particular trader are impotent sources of Indian
mercantile Law. They play an important role in regulating business details and guide the
courts, in deciding disputer arising out of mercantile transactions.

CONTRACT
Name of Contract :

Everyone of us enters into a number of contract almost every day. When a person
a seat in a bus (or) deposits his hug gages in a railway clock room (or) entrust his car to
the mechanic for repaired etc., he enters into a contract, through he may not be aware of
this fact.

When people entered into a contract they made a piece of private law binding on each
other and beneficed to themselves and in a wider sends to the community at large. When
contract were entered into freely and voluntary they would be held enforceable by court of
justices. Legally enforceable premieres are termed contract.
DEFINE THE TERM CONTRACT (OR) WHAT DO YOU MEAN BY
CONTRACT? (OR) GIVE A SHORT NOTE ON INDIAN CONTRACT ACT 1872.
The Law of Contract is the most important branch of Business Law. The Law of
Contract introduces definiteness in business transactions. The purpose of Law of Contract
is to ensure the realization of reasonable expectation of the parties who enter into a
contract.
The Law relating to Contract is contained in the Indian Contract Act 1872. The Act
deals with the various stages in the formation of a contract, its essential elements, its
performance or breach, the remedies for the breach of the contract and special contracts
viz., Indemnity and Guarantee, Bailment and Pledge, Agency etc.
Indian Contract Act 1872, Sec.2 (h) defines a contract as an agreement enforceable
by law.
According to Salamond, a Contract is, an agreement creating and defining obligations
between the parties.

In Indian, the law relating to contract is continued in the Indian Contract Act 1872.
The Indian contract Act may be derived into the path.

1. Gender Principal of Contract (Section 1 t 72)
2. Special type of Contract (Section 124 to 238)

Definition of Contract : (Under Section 2 (h):

Under section 2 (h) of Indian contact Act 1872 defines contact.
An Agreement enforceable by law is a contract

In a simple word we can say an agreement which can be enforced in a curt of law is
known as contract.

Contact consist of two elements.
1. Agreement
2. Enforceable by law.

Definition for agreement (U/s 2(e))

Every promise and every set of premise, forming consideration for each other is an
agreement.

Defecation for Promise (u/s. 2(b))

Section 2(b) defines promise as A Proposal when accepted became a promise.
An agreement consist of proposal (Offer) from are person and its acceptance by the other.

Simply, we can arrive the following
Agreement = Offer + Acceptance

An agreement of purely social (Or) demotic nature is not a contact.

Essential Enlacements of Contract U/s. 10

I. Offer and acceptance
II. Intention to create legal relations
III. Lawful consideration.
IV. Capacity of parties.
V. Free and of genuine constant.
VI. Lawful object.
VII. Agreement not declared video.
VIII. Certainly and Possibility of performance
IX. Legal formalities.

I. Offer and Acceptance :

Definition of Offer : U/s : 2 (a)

When are person signifies to another his willingness to do or abstain from doing
anything with a view to obtaining the assent of that to act or abstinence, he is said to make
a proposal.


Offer or/ Proposer / Promiser

Offer or means the person who making a proposal.

Offence / Acceptor / Promidser

Offeree means the person to when offer is made.
Here, offer we can simply say A request by the offeror to offence.


Acceptance

As per section 2(b) defines when one person to whom the process is made
signifies his as sent (consent) there to the proposed is said to be acceptance.


II. Intention to Create Legal Relations :

There must be an intention among the parties to create legal relationship by making
an agreement.

III. Lawful Consideration :

Consideration means the price for permission. The Technical world s Quid Pre-
quo it means something in return. The something may be benefit, right interest and
profit.

Agreement must given something or receive something in return.

For Example :

A offers to B. To Sell the scooter for Rs. 10.000/- B. is accepts it.

Here As consideration Rs. 10,000/- (Return for scooter)
Bs Consideration is Scooter ( Return n for Rs, 10,000/-

IV. Capacity of Patties :

It means the payment capacity of party. The following person is not consider as
capacity person. Minor lunatics, Drunkards, Idiots are incompetent to contract to u/s. 11 of
the act. Every person is competent to contract who is age of majority according to the
law to which he is subject and who is of sound mind and is not disqualified he is subject.

V. Free and genuine consent :

The agreement must be free and genuine by the consent of the parties. The
agreement should not get by fraud coercion, mistake, undue influence, Misrepresentation

Vi. Lawful Objective :

The agreement must not be illegal posed (Opposite) to public. That means any
activities disapproves by the court of law.

VII. Agreement Not declared Void :

The Agreement made by expression it will become void.

As per the act, the following are expressly declared to be void.
1. Agreement in Restraint to marriage (See 26)
2. Agreement in restraint of trade (See 27)
3. Agreement in restraint of proceeding(See 28)
4. Agreement in having (Un certain meaning ) (See 29)
5. Wagering agreement (See 30).

Meaning :

Restraint Keep under contort
- Stop some one moving freely
Presiding an event of action (or)
- action taken in a law
- Court to settle a dispute.
Wager Bet (Rise of money against some one else on the basis of the unexpected events)

Example : (Cricket Match)

VIII. Certainty and possibility of Performance :

To make a contract valid there must be certain . the agreement must be possible, is not
possible, is will because void contact.

I. Legal formalities :

An agreement may be by oral or writing. Contact is required by the law to be
writing. The agreement must be fulfill the formalities which is given the contract act.

To be in writing, registration and 21 attestation etc., Indian contract act contains
rules regarding each and every elements discusses above.



CLASSIFICATION OF CONTRACT (TYPE / KINDS)

I. According to enforceability (ie. Legal Validity)

1. Valid contract
2. Void Agreement
3. Void Contact
4. Violable contract
5. Illegal agreement
6. Unenforceable contract

II. According to formation : (i.e. mode of creation)
1. Express contract
2. Implied contract
3. Quasi contract

III. According to performance :
1. Executed contract
2. Executory contract
3. Unilateral contract
4. Bilateral contract


I. According to enforce ability (i.e. legal validity)

1. Valid contract
A contract must be satisfied all the elements of contract given under section 10 of
the Indian Contract Act, 1812 is called as valid contract.

2. Void Agreement
A agreement not enforceable by law is said to be void u/s 2 (g). A void
agreement has no legal effect.

3. Void Contract
An agreement which is not enforceable by law is called void contact. A contract
which is ceases void contract. A contract which is ceases to be enforceable by law
becomes void when it ceases to be enforceable.

Example:
A promised to marry B. Later on B died. In this case, the contract between void on
the death of B.

4. Voidable contract:
An agreement which is enforceable by law at the option of one or more of the
parties thereon, but not at the option of the other (or) others, is a Voidable Contract

Example :
A agreed to sell his car to B for Rs.50,000/- but the consent is get by force. The
contract is voidable at the option of A. Because, A can take decision to sell the car to
others. Therefore to sell the car to others. Therefore, it will become Voidable Contract.
5. Illegal Agreement
An agreement is illegal, when it is
i) Forbidden by law
ii) Fraudulent
iii) One who is involve injury to get consent

6. Unenforceable contract
It is a contract which is not enforceable by law, because of same technical defects.
The law requires some formalities to be fulfilled for a void contract. A contract must be in
writing, Registered Properly stamped or to be attested etc.,

If the aforesaid formalities not followed, the contract cannot enforceable by law.

II. According to formation (i.e Mode of creation)
I. Express contract
As per section 9 of the Act, offer or acceptance of promise is made in words. The
promise said to be express.
A writes a letter to B that he offers to sell his car. B reply to A, that he is accept the
offer. It is called as an express contract.

2. Implied Contract:
As per section 9, also says when an offer or acceptance is made otherwise than in
words, the promise is called implied contract.

Example:

X went to a restaurant and take a cup of coffee. He must pay unless otherwise expressed.

3. Quasi Contract
An obligation which the law creates in the absence of any agreement. A person
shall not be allowed to enrich himself unjustly at the expense of another.

Finder of lost goods is under an obligation to find out the true owner return the goods.

III. According to performance
I. Executed contract
If both the parties (i.e. offeror and offeree) perform completely in respect of their
obligation under the contract.

Example: Cash sale Perform simultaneously.

2. Executory Contract:
If the obligation of the parties are to be performed at a later time.
Mr. A agrees to sell bus and delivery made to B. The payment made by B is in the
following months is called executory contract.



3. Unilateral contract:

If the obligation fulfilled by one party at the time of contract such a contract is
called unilateral contract.

It is also called as One saided contract (or) Contract with executed consideration.
Therefore, in the executed contract, the obligation is outstanding only against one of the
parties at the time of contract formation.

4. Bilateral contract :

If the obligation is not executed at the time of contract formation. That is the
obligation on the part of both the parties to the contract are outstanding at the time of
contract.

Bilateral contract is similar to executory contract.

Example :

Mr. X promised to paint Ys house for a sum of Rs.500. It is bilateral contract as
there is exchange of promises and obligations of both the parties are outstanding at the
time of formation of the contract.

IV. Classification of contracts
English law :
1. Formal Contract
2. Simple Contract

1. Formal Contract :

English contract act recognized formal contracts. Validity of these contracts
depends upon their form and they are valid even without consideration.

They are two types
i. Contract under seal
ii. Contracts of records

The following contracts should be under seal, otherwise they will not be valid

i. Contract with consideration
ii. Lease of land for period of more than three years.
iii. Contract by corporations and
iv. Contracts with British shipping

Contracts of records include the court judgments and recognizes obligations in such cases
arises out of court judgments and not under contracts.

II. Simple contracts:

All contract other than the formal ones are called simple contract or parole
contract. They may be made
i. Orally ii. In writing iii.Implied by conduct

UNIT II

I. OFFER


Definition of Offer : U/s : 2 (a)

When are person signifies to another his willingness to do or abstain from doing
anything with a view to obtaining the assent of that to act or abstinence, he is said to make
a proposal.


Offer or/ Proposer / Promiser

Offer or means the person who making a proposal.

Offence / Acceptor / Promidser

Offeree means the person to when offer is made.
Here, offer we can simply say A request by the offeror to offence.

Offer Classified into Two Types :
1. Expressed offer
2. Implied Offer

1. Expressed Offer :
Expressed by world of mouth, spoken or written is called an expressed offer.

2. Implied Offer :
Expressed by conduct is called implied offer.
3.Specific Offer
When an offer is made to a definite person, it is called as a specific offer.
4.General Offer
When an offer is made to the world at large, it is called as a general offer.

ESSENTIALS AND LEGAL RULES FOR A VALID OFFER

II. The offer must be communicated to other party.
III. The term of the offer must be definite and clear.
IV. The offer must be made with a view to obtain acceptance.
V. An offer must be made with a view to obtain acceptance.
VI. An offer may be positive or negative.
VII. The offer should not contain any term the non-compliance of which amounts to
acceptance.
VIII. Special terms and conditions of the offer be communicated.
IX. Two identical cross offer do not result in a contract.


I. THE OFFER MUST BE COMMUNICATED TO THE PARTY:

An offer is effective only when it is communicated to the offer. Until the offer is
made known to the offer. There can be no acceptance and no contract.

An offer is completed only when it has been communicated to the offer. According
to section 4of the act, the communication of a proposal is complete when it comes to the
knowledge of the person to whom it is made.


II. THE TERMS OF THE OFFER MUST BE DEFINITE AND CLEAR :

Anson says The law requires the parties to make their own contract : it will not
make contract for them out of terms which are indefinite or illusory. The offer must be
reasonably definite and requires nothing to complete it except acceptance.

III. THE OFFER MUST BE CAPABLE OF CREATING LEGAL
RELATIONSHIP:
If the offer does not create any legal consequences, it is not a valid offer in the eye
of law. An offer must be accepted then only it will result in a valid contract.

IV. THE OFFER MUST BE MADE WITH A NEW TO OBTAIN ACCEPTANCE :
When a person making an offer it means that he is making it with a view to obtain
the consent of the offer.
Under section 2(a) of the act lays down, when one person signified to another his
willingness to do or abstain from doing anything with a view to obtaining the absent of the
other to such act or abstinence, he is said to make a proposed.
In offer, there should not be contain any confusion.
Catalogue and price list is not a offer. It is only an invitation to receive offer from
his customer.
Advertisement given in a paper for a job is not an offer.

V. AN OFFER MAY BE POSITIVE OR NEGATIVE
As per section 2(a), we know that the offer meant for acceptance and during
something. Therefore, an offer may to do something or not to do something.
An offer to do something is a positive offer. An offer not to do something is
negative offer.

VI. THE OFFER SHOULD NOT CONTAIN ANY TERM THE NON-
COMPLIANCE OF WHICH AMOUNT TO ACCEPTANCE:

In an offer the offer or cannot say that if the acceptance is not communicated up to
a certain time or date, the offer would be assumed to have been accepted. If the offer does
not reply, there is no contract, because no obligation to reply can be imposed on him, on
the grounds of justice.

VII. SPECIAL TERMS AND CONDITIONS OF THE OFFER BE
COMMUNICATED :

The acceptor may know or may not know about the things, which is offered.
Therefore, in an offer must contain special terms, before or at the term of contract.

VIII. TWO IDENTICAL (OFFER) CROSS OFFER DO NOT RESULT IN A
CONTRACT

When an offer made by each other is called cross offer. Cross offer do not
constitute acceptance of ones offer by the other and as such there is no completed
agreement.

Example :

A offer B to sell a (Hero Honda)

Scooter and B offer A to sell a scooter (Say Splender)

The exchange of things between the parties without any exchange of money value
is called cross offer.

WHEN DOES AN OFFER COME TO AN END?
An offer may come to an end by revocation or lapse, or rejection.
Revocation or lapse of offer
Sec.6 deals with various modes of revocation of offer. According to it, an offer is
revoked
i. By communication of notice of revocation by the offeror at any time before his
acceptance is complete [Sec.6(1)].
ii. By lapse of time, if it is not accepted within the prescribed time; If no time is
prescribed, it lapses by the expiry of a reasonable time [Sec.6(2)].
iii. By the non-fulfillment by the offeree of a condition precedent to acceptance
[Sec.6(3)].
Example
S, a seller, agrees to sell certain goods subject to the condition that B, the buyer, pays
the agreed price before a certain date. If B fails to pay the price by that date, the offer
stands revoked.
iv. By death or insanity of the offeror, the offeree comes to know of it before
acceptance [Sec.6(4)].
v. If a counter - offer is made to it
When an offer is accepted with some modification in the terms of the offer or with
some other condition not forming part of the offer, such qualified acceptance amounts to
a counter offer.
Example
W offered to sell a farm to H for Rs.1000. H offered Rs.950. W refused the offer.
Subsequently H offered to purchase the farm Rs.1000. Held, there was no contract as H by
offering Rs.950 had rejected the original offer.
vi. If an offer is not accepted according to the prescribed or usual mode
vii. If the law is changed
Rejection of Offer
i. Express Rejection
The offeree may reject the offer expressly i.e., by words, written or spoken.

ii. Implied Rejection
When the offeree makes a counter offer
Where the offeree gives a conditional acceptance

II. ACCEPTANCE

As per section 2(b) defines when one person to whom the process is made
signifies his as sent (consent) there to the proposed is said to be acceptance.

ESSENTIAL AND LEGAL RULES FOR A VALID ACCEPTANCE:
i. Acceptance must be absolute and unqualified (u/s7(1))
ii. Acceptance must be communicated to the offeror
iii. The acceptance must be in the prescribed manner
iv. The acceptance must be in responsible to offer
v. The acceptance must be the offer
vi. The acceptance must be given before the offer lapses or is revoked.
vii. Acceptance may be expressed or implied.

I. ACCEPTANCE MUST BE ABSOLUTE AND UNQUALIFIED

In order to make legal effect, the acceptance must be absolute and unqualified
acceptance of all the terms of the offer.
Acceptance should not carry any condition. A qualified or a conditional acceptance
is not a acceptance at all. It is only a counter offer. Acceptance gives an end to the original
offer.

II. ACCEPTANCE MUST BE COMMUNICATED TO THE OFFEROR
The acceptance comes to an end when it is communicated to the offeror. It does
not create any legal relationship. A mental acceptance is not a acceptance.

FOR EXAMPLE:

Brogden vs. Metropolitan Railway Co, (1877). An agreement sent to the manager
for supply of coal. The manager offers a seal Approval on the offer letter and kept in to
his table, this is not a acceptance.
Therefore, in this case, the manager office the seal with a intention of sending the letter,
but not sent to the offer the not communication there is no creation of legal relationship
there is no contact.

III. The acceptance Must be in the prescribed Manner :

If the mode of acceptance prescribed by the offeror, the acceptor must follow the
mode. If the acceptor follow the mode, other then the given by the offered that acceptance
may not accept by the offered.

If prescribed time is not given , the acceptance to be communicated within
reasonable time.

IV. The Acceptance must be in Response to offer :
There is no acceptance carried \ out within the offer for example.

A Company contact allot any share within offer ( ie Application) from the public, so
acceptance should follow the offer and not precede it.

V. The Accepted must be by the offence :

An offer must be accepted by the person to whom it is made. A valid contract arts
only when acceptance Powel Vs Lea (1908).

In this case, A applied for a post of Head master, in a school.


The appointing committee select him but 17 it is not communicated to him. At the
same time, a person who is member of the communicated to him. At the same time a
person who is members of the committee. But he has no power (Authorization)
Communicate the selection to Mr. A. Due to this the committee contact the selection. Mr.
A. Make suit against the school,

In court the suit rejected for the information is given by the Unauthorized person.

VI. The acceptance must be given before the offer lapses or revoked :

Acceptance must be given within the specified time any. If the time is not maintained, then
the acceptance must be given within a reasonable time.

Example :

Ramsgate Victoria Gotel Co Vs Montefiore (In 1866)

The defondance (Application) for shares in June and the Allotment is made in
November. Then the applicant refuse to accept the allotment. The company make suit
against him. In court applicant (defendant) says the shave is not allotted within the period
(Reasonable time).

VII. Acceptance may be express or implied :

An acceptance expressed by word written or spoken is called expressed
acceptance. The acceptance is expressed by conduct is called implied contact.

II. Intention to Create Legal Relations :

There must be an intention among the parties to create legal relationship by making
an agreement.

III. Lawful Consideration :

Consideration means the price for permission. The Technical world s Quid Pre-
quo it means something in return. The something may be benefit, right interest and
profit.

Agreement must given something or receive something in return.

For Example :

A offers to B. To Sell the scooter for Rs. 10.000/- B. is accepts it.

Here As consideration Rs. 10,000/- (Return for scooter)
Bs Consideration is Scooter ( Return n for Rs, 10,000/-

IV. Capacity of Patties :

It means the payment capacity of party. The following person is not consider as
capacity person. Minor lunatics, Drunkards, Idiots are incompetent to contract to u/s. 11 of
the act. Every person is competent to contract who is age of majority according to the
law to which he is subject and who is of sound mind and is not disqualified he is subject.

V. Free and genuine consent :

The agreement must be free and genuine by the consent of the parties. The
agreement should not get by fraud coercion, mistake, undue influence, Misrepresentation

Vi. Lawful Objective :

The agreement must not be illegal posed (Opposite) to public. That means any
activities disapproves by the court of law.

VII. Agreement Not declared Void :

The Agreement made by expression it will become void.

As per the act, the following are expressly declared to be void.
6. Agreement in Restraint to marriage (See 26)
7. Agreement in restraint of trade (See 27)
8. Agreement in restraint of proceeding(See 28)
9. Agreement in having (Un certain meaning ) (See 29)
10. Wagering agreement (See 30).

Meaning :

Restraint Keep under contort
- Stop some one moving freely
Presiding an event of action (or)
- action taken in a law
- Court to settle a dispute.
Wager Bet (Rise of money against some one else on the basis of the unexpected events)

Example : (Cricket Match)




VIII. Certainty and possibility of Performance :

To make a contract valid there must be certain . the agreement must be possible, is not
possible, is will because void contact.

X. Legal formalities :

An agreement may be by oral or writing. Contact is required by the law to be
writing. The agreement must be fulfill the formalities which is given the contract act.

To be in writing, registration and 21 attestation etc., Indian contract act contains
rules regarding each and every elements discusses above.

III. CONSIDERATION

An agreement made without consideration is nudum pactum ( a nude contract) and is
void. When a party to an agreement promises to do something, he must get Something in
Return i.e., Quid pro Quo. It also means something advantage moves from one party to
another.
Example
A agrees to sell his car to B for Rs.10000. Car is the consideration for B and price is
the consideration for A.
Definition
Sec.2(d) defines consideration as follows: When at the desire of the promisor, the
promisee or any other person has done or abstained from doing, or does or abstains from
doing, or promises to do or to abstain from doing something, such act, abstinence or
promise is called a consideration for the promise.
ESSENTIALS LEGAL RULES AS TO CONSIDERATION
i It must move at the desire of the promisor
- An act constituting consideration must be done at the desire or request of the promisor.
Example
A saves Bs goods from fire without being asked to do so. A can not demand
payment for his services.
ii. It may move from the promise or an other person
It is to be noted here that the stranger to consideration will be able to sue only if he
is a party to the contract.
iii. It may be an act, abstinence or forbearance or a return promise
An Act
- doing something (affirmative form)
An abstinence or forbearance
- Abstaining from doing something (negative form)
Example
A promises B not to file a suit against him if he pays him Rs.500. The abstinence
of A is the consideration for Bs payment.
A return promise
Example
A agrees to sell his horse to B for Rs.10000. Here, Bs promise to Rs.10000 is the
consideration to A; As promise to sell the horse is the consideration to B.
iv. It may be past, present and future
Past Consideration
- Before the date of promise
Present Consideration
- At the time of Promise
Future Consideration
- Subsequently to the making of the contract.
v. It need not be adequate
This something in return need not necessarily be equal in value to something
given.
vi. It must be real and illusory
vii. It must be something which the promisor is not already bound
Example
A promise to perform a public duty by a public servant is not a consideration.
viii. It must not be illegal, immoral or opposed to a public policy (Sec.23)
NO CONSIDERATION, NO CONTRACT WHAT ATE THE EXCEPTIONS FOR THIS RULE
(OR) EXPLAIN THE AGREEMENTS THAT ARE ENFORCEABLE EVENTHOUGH THEY ARE
AGREEEMENTS WITHOUT CONSIDERATION.

The general rule is Ex nudo non oritur actio i.e, an agreement made without
consideration is void. Sec.25 and 185 dealt with the exceptions to this rule.
i. Love and Affection [Sec.25(1)]
A written and registered agreement based on natural love and affection between
near relatives is enforceable even if it is without consideration [Ram Dass Vs.Krishan
Dev.(1986)].
ii. Compensation for voluntary services [Sec.25(2)]
A promise to pay for a past voluntary service is binding.
Example
A supports Bs infant son. B promises to pay As expenses in so doing. This is a
contract.
iii. Promise to pay a time barred [Sec.25(3)]
A promise by a debtor to pay a time-barred debt, is enforceable that is made in
writing and signed by the debtor. The promise may be to pay whole or part of the debt.
iv. Agency [Sec.185]
No consideration is necessary to create an agency.
v. Completed Gift [Expl.1 to Sec.25]
According to Expl.1 to Sec.25, Nothing in Sec.25 shall affect the validity between
the donor and the donee of any gift actually made
vi. Charitable subscriptions


A. COERCION B. UNDUE INFLUENCE C. MISREPRESENTATION D.
FRAUD AND E.MISTAKE.
Sec. 10 says that all agreements are contracts if they are made by the free consent
of the parties. The consent is to be free and real. The parties to the contract is to be ad-
idem.
Meaning of consent and Free consent (Sec.13 & 14)
Consent
It means acquiescence or act of assenting to an offer. Two or more persons are said
to consent when they agree upon the same thing in the same sense [Sec.13].

Free Consent
- Consent is said to be free when it is caused by
1. Coercion (Sec.15)or
2. Undue influence (Sec.16)
3. Fraud (Sec.17)
4. Misrepresentation (Sec.18) and
5. Mistake - subject to the provisions of Secs.20, 21 and 22 (Sec.14)
1.Coercion
When a person is compelled to enter into a contract by the use of force, by the
other party or under threat Coercion is said to be employed.
Coercion is the committing or threatening to commit any act forbidden by the
Indian Penal Code 1860 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 (Sec.15)
A threat to commit suicide amounts to coercion. Coercion includes
Fear
Physical compulsion and
Menance to goods
Example
A threatens to kill B if he does not lend Rs. 1000 to C. B agrees to lend the amount to
C. The agreement is entered into under coercion.
2. Undue influence (Sec.16)
If a party is compelled to enter into an agreement against his will as a result of unfair
persuasion by the other party, it is called as Undue influence.
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. [Sec.16(1)].
Example
A spiritual guru induced his devotee to gift to him the whole of his property in return of
a promise of salvation of the devotee. Held, the consent of the devotee was given under
undue influence [Mannu singh Vs.Umadat Pandey (1890)].
a. Misrepresentation and Fraud
Misrepresentation is a misstatement of a material fact made innocently with an
honest belief as to its truth or non-disclosure of a material fact, without any intent to
deceive the other party.
Fraud exists when is shown that a false representation has been made, i.
knowingly ii. without belief in its truth iii. Recklessly, not caring whether it is true or
false and iv. Maker intended the other party to act upon it. It also exists where there is a
concealment of material facts.
b. Mistake
Mistake may be defined as an erroneous belief about something. It may be mistake of
law or mistake of fact.
Briefly Explain The Mistake Of Law
Mistake means an erroneous belief about something which may either be mistake
of law or mistake of fact.
i. Mistake of law of the country
It may be a
Mistake of law of the country and
Mistake of law of a foreign country
Mistake of law of the country
The general rule as regards mistake of law of the country is that ignorance of law is no
excuse
Example
A and B enters into a contract on the erroneous belief that a particular debt is barred by
the Indian Law of limitation. The contract is not voidable.
Mistake of law of the country
Such a mistake is treated as a mistake of fact and the agreement in such a case is void
(Sec.21).
ii. Mistake of Fact
It may be
A bilateral mistake or
A unilateral mistake
A. Bilateral Mistake
- When both the parties to an agreement are under a mistake as to a matter of
fact essential to the agreement, there is a bilateral mistake. In such a case,
agreement is void [Sec.20].
Various cases which fall under bilateral mistake
i. Mistake as the subject matter
- When both the parties to an agreement are working under a mistake relating to
the subject matter, the agreement is void. It covers the following cases:
a. Mistake as the existence of the subject matter
- If both the parties believe the existence of subject matter of the contract, which in
fact, at the time of contract is non-existent, the contract is void.
b. Mistake as to the identity of the subject matter
- It usually arises where one party intends to deal in one thing and the other intends
to deals in another.
c. Mistake as to the quality of subject matter
- If the subject matter is something essentially different from what the parties
thought it to be, the agreement is void.
d. Mistake as to the quantity of the subject matter
- If both the parties are working under a mistake as to the quantity of the subject
matter, the agreement is void.
e. Mistake as to the title of the subject matter
- If the seller is selling a thing which he is not entitled to sell and the both parties
act under a mistake, the agreement is void.
ii. Mistake as the possibility of performing contract
- The agreement is void on the ground of impossibility when both the parties
believe that the agreement is capable of being performed but actually not possible [Sec.56,
para 1]. It may be -
Physical or
Legal impossibility
B. Unilateral Mistake
Where only one of the parties is under a mistake as to a matter of fact, the contract
is not voidable [Sec.22]. There are however two exceptions to this rule.
i. Identity of the person contracted with
- If A intends to enter into a contract with B, C can not give himself any right in
respect of the contract by accepting the offer. In such a case, the contract is void.
ii. Nature of contract
- Where a person is made to enter into a contract through the inducement of
another but through no fault of his own, there is a mistake as to the nature of
the contract, and the contract is void.




UNIT - III

Discharge by Performance

Actual performance Attempted performance

I. Discharge by Performance :

Performance means the doing of that which is required by a
contract. Discharge by performance takes place when the parties to
the contract fulfill their obligations arising under the contract within
the time and in the manner prescribed. In such a case, the parties
are discharged and the contract comes to an end.
It may be two performance: 1. Actual
2. Attempted

1. Actual Performance:

When both the parties perform their promises, the contract is
discharged. Performance should be complete precise and according
to the terms of the agreement.

2. Attempted Performance or Tender:

Tender is not actual performance but is only an offer to perform
the obligation under the contract where the promisor offers to
perform his obligation but the promise refuses to accept the
performance, tender is equivalent to actual performance, except in
case at tender of money.
II. Discharge by Agreement or consent


By Express consent By implied consent



Novation Rescission Attemation Remission waiver merger
III. Discharge by Agreement or consent:

As it is the agreement of the parties which binds them, so by
their further agreement or consent the contract may be terminated.
The rule of law in this regard is as follows Eodem modo quo quid
constituitur. Eodem modo destruitur
By Implied consent:
a. Novation:
Novation takes place when i) a new contract is substituted for
an existing one between the same parties, or ii) a contract
between two parties is rescinded iin consideration of a new
contract being entered into on the same terms between one of
the parties and a third party.
b. Rescission :
Rescission of a contact takes place when all or some of the
terms of the contract are cancelled. It may occur
i) by mutual consent of the parties. or
ii) Where one party fails in the performance of his obligation .
in such a case, the other party may rescind the contract
without proud the right to claim compensation for the
breach of contract.
c. Alternation :
Alteration of a contract may take place when one or more of the
terms of the contract is/ are altered by the mutual consent of the
parties to the contract. In such is case, the old contract is
discharged.
d. Remission:
Remission means acceptance of less fulfillment of the promise
made, e.g acceptance of a lesser sum than what was contracted for
in discharged of the whole of the debt. It is not necessary that there
must be some consideration for the remission of the part of the deid.
e. Waiver:
Waiver takes place when the pxrties to a contract agree that
they shall no longer be bound by the contract. This amounts to a
mutual abandonment of rights by the parties to the contract.
Consideration is not necessary for waiver.
f. merger:
Merger takes place when an inferior right accruing to a party
under a contract merges into a superior right accruing to the same
party under the same or some other contract.
III Discharge By Impossibility of performance

1. Known to the 2. Unknown to 3. Supervening
parties the parties impossibility


An execuse Not on
execuse


a. Destruction of a. Difficulty of
subject perfoumance
b. Non-existence of b. commercial
a state of things impossibility
c. Death or incapacity c. Failure of a
for personal serious third party
d. change of law d. Strides, lockouts
and civil
disturbances
e. outbreak of war e. Failure of one of the
objects
1. Known to the parties:
This is known as absolute impossibilities. In case of absolute
impossibility, the agreement is voluable mitio. For exmple, when
A agrees with B to discover treaswre by magic, or undertakes to
put life into the dead wife of B, the agreement is void.
2. Unknown to the parties:

i. where at the time of making the contract both the parties are
ignorant of the impossibility, as in the case of destruction of
subject-matter to the ignorance of both the parties, the contract is
void on the ground of mutual mistake.
ii. Impossibility arising subsequent to the formation of
contract impossibility which arises subsequent to the formation of a
contract is called post-contractual or supervenins impossibility.
3. Supervening impossibility:
A contract is discharged by supervising impossibility in the
following case.
a. An exec use:
a. Destruction of subject matter:
When the subject- matter of a contract subsequent to its
formation, is destroyed without any fault of the parties to the
contract the contract is discharged.
b. Non-existence of a state of things:
sometimes, a contract is entered into between two parties on
the basis of a continued existence or occurrence of a particular state
of things. If there is any change in the state of things which formed
the basis of the contract, or if the state of things which ought to
have occurred does not occur, the contract is discharged.
c. Death or incapacity for personal Services:
Where the performance of a contract depends on the personal
skill or qualification of a party, the contract is discharged on the
illness or incapacity or death of that party. The mans life is an
implied condition of the contract.


d. Change of law:
When, subsequent to the formation of a contract, change a law
takes place, or the government takes some power under some
ordinance or special Act, as F.eg, the Defence of India Act, so that
the performance of the contract becomes impossible, the contract is
discharged.
e. Outbreak of war:
A contract entered into with an alien enemy during war is
unlawful and therefore impossible of performance contracts entered
into before the outbreak of war are suspended during the war and
may be revived after the war is over.

B. Impossibility of performance:
B. Not an excuse:
Impossibility of performance is, as a rule, not an excuse for
non-performance
1. Difficulty of performance:
A contract is not discharged by the more fact that it has
become more difficult of performance due to some uncounted plated
events or delays.
2. Commercial impossibility:
A contract is not discharged merely because expectation of
higher profits is not realized, or the necessary raw material is
available at a higher price because of the outbreak of war, or there
is a sudden depreciation of currency.
3. Impossibility due to failure of a third person:
Where a contract could not be performed because of the
default by a third person on whose work the promisor rolled, it is
not discharged.

4. Strikes, lock-outs and civil disturbances:-
Events such as these do not discharge a contract unless the
parties have specifically agreed in this regard at the time of
formation of the contract.

5. Failure of one of the objects:
When a contract is entered into for several objects, the failure
of one of their does not discharge the contract.
IV. Discharge by Lapse of Time
The limitation Act, 1963 days down that a contract should be
performed within a specified period, called period of limitation. If it
is not performed and if no action is taken by the promise within the
period of limitations, he is deprived of his remedy at law. In other
words, we may say that the contract is terminated if the price is not
paid and creditor does not file a suit against the buyer for the
recovery of price within there years, the debt becomes time-barred
and here irrecoverable.
V. Discharge by Operation of Law

Death Merger Insolvency Unauthorised rights in
liabilities
alteration of vesturing the
same
terms of contract the same person

1. Death:
In contracts involving personal skill or ability the contract is
terminated on death of the promisor. In other contracts, the rights
and liabilities of a decreased person pass on to the legal
representatives of the deceased person.
b. Merger:
Merger takes place when an inferior right accruing to a party
under a contract merges into a superior right acoruing to the same
party under the same or some other contract.
c. Insolvency;
When a person is adjudged insolvent, he is discharged form all
liabilities incurred prior to his adjudication.
d. Unauthorized attraction of the terms of a written agreement:
Where a party to a contract makes any material alteration in
the contract without the consent of the other party the other party
can avoid the contract.
e. Right and liabilities vesting in the same person:
Where the rights and liabilities under a contract vest in the
same person, for eg, when a bill gets into the hands of the acceptor,
the other parties are discharged. This is to avoid clarify of action
VI. Discharge by Breach of contract

Actual Anticipatory
1. At the time of 1. By an act of the primer
The performance making performance impossible
ie. Implied repudiation
2. During the 2. By renunctation of the
obligation
performance ie. Express repudiation
1. Actual breach of contract:

a. At the time of the performance:

Actual breach of contract occurs, where at the time when the
performance is due, one party fails or refuses to perform his
obligation under the contract.
b. During the performance:
Actual breach of contract also occurs who during the
performance of the contract one party fails or refuses to perform his
obligation under the contract. This refusal to perform may be by
1. Express repudiation
2. Implied repudiation
2. Anticipatory breach of contract:
It occurs when a party to an exeutory contract declares his
intention of not performing the contract before the performance is
due. He may do so.
1. By an act of the promisor making performance impossible i.e.
implied repudiation :
By expressly renouncing his obligation under the contract. By
an act of the promisor making performance impossible ie. Implied
repudiation.
2. By renunciation of the obligation ie. Exp repudiation.
By expressly renouncing his obligation under the contract by
doing renunctation of the obligation ie. Express repudiation.
For eg:
A undertakes to supply certain goods to B on 1
st
January.
Before this date, he informs B that he is not going to supply the
goods. This is anticipatory breach of contract by express
repudiation.

A. VOID AGREEMENT
B. WAGERING AGREEMENTS AND
C. CONTINGENT CONTRACTS

A Void Agreement
- A void agreement is one which is not enforceable by law [Sec.2(g)]. Such an
agreement does not give rise to any legal consequences and void-ab-initio.



Meaning:
According to sec. 2 (9) An agreement not enforceable by law is said to be
void. Thus a void agreement does not give rise to any legal consequences and is
void ab-initic. A void agreement does not create any legal rights and obligations.
The courts will enforce only those agreements which fulfill the conditions of
enforceability as laid down in sec 10 of the Indian Contract Act. An agreement
though it might have all the essentials of a valid contract must not have been
expressly declared void by any law in force in the country. The contract Act has
specifically declared certain agreements as void.
An agreement can be void because of mistake, lack of consideration, want of
capacity etc. A list of such agreement is given below:
1. Agreements by persons who are not competent to contract (sec 11)
2. Agreements made under a bilateral mistake of fact (sec 20)
3. Agreement with unlawful consideration and object (sec 23)
4. Agreements of which the consideration or object is unlawful in part (sec 24)
5. Agreements without consideration (sec 25)
B Wagering Agreements or Wager (Sec.30)
- A wager is an agreement between two parties by which one promises to pay
money or moneys worth on the happening of some uncertain event in
consideration of the other partys promise to pay if the event does not happen.
Example
A enters an agreement with B that A shall pay B Rs.100 if it rains on Monday and
B shall pay A the same amount if it does not rain on Monday. It is a wagering agreement.
C Contingent Contract
A contract may be
An absolute contract or
A contingent contract
An absolute contract is one in which the promisor binds himself to the performance
in any event without any conditions.
Contingent contract is a contract to do or not to do something, if some event,
collateral to such contract, does or does not happen [Sec.31].
Example
Goods are sent on approval; It is the contingent contract depending on the act of
buyer to accept or reject it.







STATE THE DIFFERENCES BETWEEN A WAGERING AGREEEMENTS AND
CONTINGENT CONTRACTS.

Basis of Difference Wagering Agreements Contingent Contracts
1. Reciprocal
promises
It consists of reciprocal
promises
It may not contain reciprocal
promises
2. Nature Contingent in nature It may not be a wagering in
nature
3. Validity Void Valid
4. Gamble Game of Chance Not a game of chance
5. Determining factor Future event is the determining
factor.
Future event is only collateral.

1. Difference between void Agreement and void contract:

Void Agreement Void Contract
1. A void agreement is one which is not
enforceable at law and does not give rise
to any legal consequence.


2. It is void ab-initio (from the very
beginning) and no contract comes into
existence at all.


3. A void agreement is never valid.

Void contract is one which is valid when
it is entered into, but subsequent to its
formation it becomes unforceable
because of one reason of one other.

A contract which is enforceable by law,
may sometimes cease to be enforceable
subsequently for such reasons as
impossibility or illegality.

A void contract is valid till it ceases to
be valid contract

3. Difference between wagering Agreement and contract of Insurance

1. It is valid and can be enforced in court
of law.

2. Contracts of insurance re regarded as
beneficial to the public
It is void, under sec. 30 without any
legal effect.

Wagering agreements do not serve any
useful purpose.

3. Contracts of insurance are based on
scientific and actuarial calculation of
risk.

4. The holder of an insurance policy
must have an insurable interest in the
event upon which the insurance money
becomes payable contracts are entered
into to protect an interest.

5. It is a contract of indemnity. Because
the underlying idea of the contract is to
indemnify the insured person i.e. to
compensate him for the loss suffered by
him. However, the life insurance
contracts are not the contracts
indemnity.

6. The amount which is to be paid to the
insured person is not fixed. Only the
actual lose suffered by him is to be
compensated. However, in case of life
insurance, the amount may be treated as
fixed.

Wagering agreements are gamble
without any scientific calculation or risk.

In a wagering agreement there is no
interest to protect and the parties bet
exclusively because they can there by
make some easy money.


It is not contract of indemnity because
the amount to be paid to the winner is
not part as a compensation of loss.




The amount is fixed which is to be paid
to the winner on the conclusion of the
uncertain event.







UNIT IV
INDEMNITY AND GUARANTEE

1. Contract of Indemnify
To indemnify means to compensate or make good the loss. The contract of
indemnity is entered into with the object of protecting the promise against
anticipated loss. The contingency upon which the whole contract of indemnity
depends is the happening of loss section (12$) of the Indian Contract Act.

A contract, by which one party promises to save the other from loss caused
to him by the conduct of the promisor himself or by the conduct of any other
person, is called a contract of indemnity.
A contract of indemnity is a contract in which one person. Promises to
protect or compensate the other for the loss suffered by him due to the conduct of
the promisor or any of the person.
Indemnifier:
A person who promises to make good the loss, that is the promisor is called
the indemnifier.
Indemnified:
The person whose loss is to be made good, that is, the promise is called the
indemnity-holder or the person who is indemnified.
The definition of contract of indemnity,
A. Only express promises to indemnify, and
B. Only those cases where the loss arises from the conduct of the promisor
or of any other person.
The selection does not include:
a. Implied promises to indemnify,
b. Cases where loss arises from accidents and events not depending on the
conduct of the promisor or any other person.


2. Essentials of a valid Contract of Indemnity,
The analyses of the definition of contract of indemnity, the following are the
essentials for a valid contract of indemnity:

1. The contract of indemnity must contain all the essentials of valid
contract-competition of the parties, free consent, consideration,
legality of the object etc.
2. It is a contract between two parties one person promises to save the
other from any loss, which he may suffer.
3. The loss may be caused by the conduct of the promisor himself or
any other person.
4. The contract of indemnity may be express or implied.

An express promise is one where a person promises in express them to
compensate the other from the loss. That is an express contract is by words or by
writing.
3. Rights of Indemnity-holder (Indemnified) Sec - 125
The promise in a contract of indemnity acting within the scope of his
authority, is entitled to recover from the promisor.
1. All damages which he may be compelled to pay in any suit in respect of any
matter to which the promise to indemnify applies.
1. All costs which he may be compelled to pay in any such suit if, in bringing
or defending it, he did not contravene the orders of the promisor, and acted
as it would have been prudent for him to act in the absence of any contract
of indemnity.
2. All sums which he may have paid under the terms of any compromise of any
such suit, if the compromise was not contrary to the orders of the promisor,
if the promisor authorized him to compromise the suit.
4. Rights of Indemnifier (Promisor)
The act makes no mention of the rights of an indemnifier. It has been held
however, that his rights, in such cases are similar to the rights of a surety, under
sec. 141 of the Indian Contract Act. That is the rights of the promisor are virtually
the same as those of the surety in a contract of guarantee.
5. Contract of Guarantee:
According to sec 126. a contract of guarantee is a contract to perform the
promise or discharge the liability of their person in case of his default. A
guarantee may be either oral or written.
In a contract of guarantee there are three separate agreements.
One between the principle debtor and the creditor.
The second between the creditor and the surety and
The third between the surety and the principle debtor.
Essentials of a contract of Guarantee:
The following conditions are to be fulfilled for a contract of guarantee:
1. A contract of guarantee must satisfy all the essential elements of a valid
contract such as there must be lawful consideration and object, there must be
free consent.
2. There must be atleast three parties: 1. Surety (Guarantor), 2. Principle
Debtor, 3. creditor. All the parties must join the contract.
3. A contract of guarantee pre-supposes the existence of a liability
enforceable at law. It is the essence of a contract of guarantee that there
should be a liability , existing or future enforceable at law.
4. There are two types of liability: 1. Primary liability 2. Secondary liability.
The Primary liability is on the principle debtor.
5. It is an undertaking to perform the promise of other on his failure to do so
that is the surety undertakes to perform the promise of the principle debtor in
the event of letters failure to perform his promise.
6. A contract of guarantee may be oral or written. The contract may be
express or even implied from the conduct of the parties.
7. A contract of guarantee, like every other contract, must satisfy all the
essential elements of a valid contract. However, special features are to be
noticed with reference to consideration and capacity to contract.
a. Sec.127 of the act clearly provides that Anything done, or any promise
made, for the benefit of the principal debtor may be a sufficient
consideration to the surety for giving the guarantee.
6. Parties to a contract of guarantee must be competent to contract. However
the incapacity of the principal debtor does not affect the validity of a
contract of guarantee. The creditor and the surety must be competent to
enter into a valid contract.
Comparison between contract of Indemnity and contract of Guarantee:
The following are the points of distinction between the two:
Contract of Indemnity Contract of Guarantor
1. There are two parties the indemnifier
and the Indemnity holder.

2. The liability of the indemnifier is
primary and independent.



3. There is only one contract (i.e.)
between indemnifier and indemnified.




4. Indemnifier need not act on the
request of the indemnified.


5. The liability of indemnifier arises on
the happening of a contingent contract.

There are three parties the creditor the
principal debtor and the surety.

The liability of the principal Debtor is
primary. The liability of the surety is
secondary; it is the surety is liable only
if the principal debtor fails.

There are three contracts i.e. first
between the creditor and the principal
debtor, second between the creditor and
the surety and third between the surety
and the principal debtor.

Surety gives guarantee on the request of
the principal debtor.

There is an existing debt or duty, the
performance of which is guaranteed by
the surety.

6. An indemnifier cannot see a third
party for loss in his own name because
there are no privities of contract. He can
do so only if there is an assignment in
his favour.
A surety on discharging the debt due by
the principal debtor can take action
against the principal debtor for his own
recovery.
KINDS OF GUARANTEE

Kinds of Guarantee

Simple or specific guarantee Continuing
Guarantee


Revocation of Continuing
Guarantor

1. By Notice
2. By Death of Surety
Kinds of Guarantee:
1. A Guarantee may usually be given for:
2. The repayment of the price of goods sold on credit : and
3. Good conduct or honesty or a person employed with a particular person.
Guarantee may either be retrospective or prospective. The former is given
for an existing debt while the latter is given for some future agreement.
1. Simple or specific Guarantee:
Simple guarantee is one in which guarantee is given for a single specific
debt or transaction. It comes to an end as soon as the liability under that transaction
ends. A specific guarantee once given in irrevocable.
2. Continuing Guarantee:
According to sex 129, A guarantee which extends to a series of transactions
is called a continuing guarantee. It is a gurantee which is given for a series of
transactions of continuing nature.
Revocation of continuing Guarantee:
A continuing guarantee may be revokes as regards future transactions under
the following circumstances.
1. By Notice :
A continuing guarantee may at any time, be revoked by the surety as to
future transactions by notice to the creditors (sec.30). the liability of surety cases
from the date of his service of notice upon the creditor. However, surety remains
able for the transactions entered into by him before giving the notice.
2. By Death of surety:
The death of the surety operate in the absence of any contract to the
contrary, as revocation of continuing guarantee future transactions.
However, his estate shall not be liable for the transactions entered into after
his death, even if the creditor has no notice of the death.
RIGHTS OF SURETY
A surety has rights against:
1. The creditor
2. The Principal debtor
3. The co-sureties
1. Rights against creditors :
1. Before payment of the guaranteed debt.
2. Right of set-off
3. Payment of the guaranteed debt.
4. Right to equities
5. Right of subrogation
1. Before Payment of the guaranteed debt.
A surety may, after the guaranteed debt has become due and before he is
called upon to pay require the creditor to sue the principal debtor. However the
surety will have to indemnity the creditor for any expenses or loss resulting there
from.


2. Right of set-off:
On being sued by the creditor the surety can rely on any set-off or counter
claim which the debtors has against the creditor.
3. On payment of the guaranteed debt:
The surety is subrogated to all the rights of the creditor and gets the right to
demand from the creditor at the time of payment all the securities whether they had
been received before, at or after, the creation of the guarantees.
4. Right to equities:
On payment of the guaranteed debt, the surety is entitled to all equities
which the creditor could have enforced not only against the principal debtor
himself, but also against person claiming through him.
5. Right of subrogation:
Where a guaranteed debt has become due and the surety has paid all that he
is liable for, he is invested with all the rights which the creditor had against the
principal debtor (sec. 140).
Rights against principal debtor:
1. Right to be relieved of liability.
2. Right to indemnity.
1. Right to be relieved of liability:
Before the payment has been made, the surety can compel the principal
debtor to relieve him from liability by paying off the debt. But before he can do so,
the debt must be ascertained. Once the principal debtors liability accurse as a fixed
sum, the surety can ask him to exonerate him from that liability.
2. Right of Indemnity:
In every contract of guarantee there is an implied promise by the principal
debtor to indemnity the surety and the surety is entitled to recover from the
principal debtor all payments property made (sec. 145).
3. Rights against co-sureties:
Right of contribution:
When a debt is guaranteed by two or more sureties, they are called co-
sureties. The co-sureties are liable to contribute, as agreed towards the payment of
the guaranteed debt. When one of the co-sureties makes payment to the creditor, he
has a right to claim contribution applicable here is not founded on contract but on
equity, i.e. there is equality of burden and benefit as between c0-sureties. This rule
is contained in (secs.146 and 147).
1. Co-sureties liable to contribute equally (sec.146).
2. Liability of co-sureties bound in different sums (sec.147).
3. Release of a co-surety (sec.138).
1. Co sureties liable to contribute equally (sec.146)
Where there are two or more co sureties for the same debt or duty and the
principal debtor make a default, the co-sureties. In the absence of any contract to
the commentary, are liable to contribute equally to the extent of the default. This
principle will apply whether their liability is joint or several, and whether their
liability arises under the same or different contract, and whether with or without the
knowledge of each other.
2. Liability of o-sureties bound in difference sums:
Where the co-sureties have agreed to guarantee different sums, they have to
contribute equally subject to the maximum amount guaranteed by each one. The
fact that the sureties are liable jointly or severally under one contract or several
contracts, or without the knowledge of each other is immaterial.
3. Release of a co-surety:
Where there are co-surety a release by the creditor of one of them does not
discharge the other, neigh does it free the surety so released from his responsibility
to the other sureties.

By Revocation:
Revocation by Surety:
A specific guarantee cannot be revoked by the surety if the Liability has
already a continue at any e. Be revoked by the surety as to future transaction by the
revocation to the creation. But the surety remains liable for transactions already
entered into.


Death of Surety:
The death of surety operates in the absence of any contract to the country as
a revocation of a continuing guarantee. So for as regards future transactions. The
deceased sureties entered in to between the creditor and the principal debtor. After
the death of surety even if the creditor has the notice of the death.
Novation:
Novation means substitute and new contract of guarantee for an old one
either between the same parties of between the one of the old parties and a new
party the consideration for the new contract being mutual discharge of the old
contract.
2. By the conduct of the credition:
Variance in terms of contract:
Any variance of made with out the sureties consent in the terms of the
contract between the principal debtor and the creditor discharge the sureties has two
transaction to subsequent.
By Creditor with Principal debtor:
A contract between the creditor and the principal debtor, by which the
creditor makes a composition with, or promises to give time or not to sue, the
principal debtor, discharges the surety, unless the surety assents to such contact.
Loss of Security:
If the creditor losses or without the consent of the surety pacts with security
given to him the sureties discharged from liability to the extend of the value of
security.
3. By invalidation of contract:
Guarantee obtained by Misrepresentation:
Any Guarantee which has been obtained by means of Misrepresentation
made by the creditor or with his knowledge and assent, concerning a material part
of the transaction is invalid.
Guarantee Obtained by Concealment:
Any guarantee which the creditor has obtained by means of keeping silence
as to material circumstances is invalid.
Failure a Co-surety to join a surety:
Where a person gives a guarantee upon a contract that a creditor shall not act
upon it until another person has joined in it as co-surety.
Failure of consideration:
Where in a contract of guarantee there is a failure of consideration as
between the creditor and the principal debtors, the surety is discharged.
Conduct of the creditor:
Creditors act or omission impairing surety eventual remedy:
If the creditor does any act which is inconsistent with the cut of the surety,
or omits to which his duty to the surety requires him to do, and the eventual remedy
of the surety himself against the principal debtor is thereby impaired, the surety is
discharged (Sec.139)
BAILMENT AND PLEDGE
The word bailment is derived from the French word baillier which means
to deliver etymologically, it means any kind of handling over in legal sense. It
involves change of possession of goods from one person to another for some
specific purpose,(sec 148) defines bailment as the deliver of goods by one person to
another for some purpose upon a contract that they shall, when the purpose is
accomplished be returned or otherwise disposed of according to the directions of
the person delivering them. The person delivering the goods is called bailer and the
person to whom they are delivered is called the bailee.
Requisites of bailment
1. Contract:
A bailment is usually created by agreement between the bailer and the
bailee. The agreement may be express or implied. In certain expectional causes,
bailment is implied by law as between a finder of goods and the owner.
2. Delivery of possession:
A bailment necessarily involves delivery of possession of goods by bailer to
bailee. The basic features of possession are control and an intention to exclude
others. As such, more custody of goods does not create relationship of bailer and
bailee.
3. For some purpose:
The delivery of goods from bailer to bailee must be for some purpose. If
goods are delivered by mistake to a person, there is no bailment.
It is agreed between the bailer and bailee that is soon as the purpose is
achieved the goods shall be returned of disposed, According to the durations of the
bailer.
4. Return goods:
If the goods are not to be specifically returned there is no bailment.
Classification of Bailment:
Classification of Bailment

According to benefit According to consideration

1. Exclusive benefit of 1. Gratuitous bailment
the bailer
2. Exclusive benefit of 2. Non-gratuitous bailment or
the bailee bailment for reward
3. Mutual benefit of
the bailer and the bailee
Classification of bailment:
Bailment may be classified according to the benefit derived by the parties.
1. Exclusive benefit of the bailer:
As the delivery of some valuable to a neighbour for safe custody without
charge.
2. Exclusive benefit of the bailee:
As the lending of a bicycle to a friend for his use without charge.
3. Mutual benefit of the bailer and the bailee:
As the hiring of a bicycle or giving of a watch for repair. In these case
consideration passes between the bailer and the bailee.
According to consideration:
1. Gratuitous bailment
2. Non-Gratuitous bailment or bailment
1. Gratuitous bailment:
It is a bailment where no consideration passes between the bailer and the
bailee.
2. Non-Gratuitous bailment or bailment for reward:
It is a bailment where consideration passes between the bailer and bailee.
Duties of bailer:
1. To disclose known Faults:
(sec.150). It is the first and foremost duty of the bailer to disclose the known
faults about the goods bailed to the bailee. If he does not make such disclosure, he
is responsible for any damages caused to the bailee directly form such faults.
2. To bear extraordinary expenses of bailment:
The bailee is bound to bear ordinary and reasonable expenses of the
bailment but for any extra ordinary expenses the bailer is responsible.
3. To indemnify bailee for loss in case of premature termination of gratuitous
bailment:
A gratuitous bailment can be terminated by the bailer at any time even
though the bailment was for a specified time or purpose.
4. To receive back the goods:
It is the duty of the bailer to receive back the goods when the bailee returns
them after the expiry of the term of the bailment or when the purpose for which
bailment was created has been accomplished.
5. To indemnify the bailee:
Where the title of the bailer to the goods is defective and the bailee suffers as
a consequence, the bailer is responsible to the bailee for any loss which the bailee
may sustain by reason that the bailer was not entitled to make bailment (sec.164).
Duties of bailee:
1. To take reasonable care of the goods bailed:
In all cases of bailment the bailee is bound to take as much care of the goods
bailed to him as a man of ordinary prudence would, under similar circumstances
take of his own goods of the same bulk, quality and value as the goods bailed. If in
spite of the bailees reasonable care, goods, are damaged or destroyed in any way,
the bailee is not liable for the loss destruction of deterioration of the things bailed
(sec 151 and 152).
2. Not to make any unauthorized use of goods:
If the bailee uses the goods bailed in a manner which is inconstant with the
terms of the contract he shall be liable for any loss even though he is not guilty of
negligence and even if the damages the result of an accident (sec.154).
3. Not to setup an adverse title:
The bailee must hold the good on behalf of and for the bailer. He cannot do
the right of the bailer to ball the goods and receive them back (sec. 117).
4. To return any accretion to the goods:
In the absence of any contract to the contrary, the bailee is bound to deliver
to the bailer, or according to his directions any increase or profit which may have
accrued
5. To return the goods:
It is the duty of the bailee to return or deliver, according to the bailers
directions, the goods bailed, without demand as soon as the time for which they
were bailed has expired or the purpose for which they were bailed has been
accomplished.
Right of bailer:
1. Enforcement of rights:
The bailer can enforce by suit all the liabilities or duties of the bailee as his
rights.
2. Avoidance of contract:
The bailer can terminate the bailment if the bailee does, with regard to the
goods bailed any act which is in consistent with the terms of the bailment.
3. Return of goods lent gratuitously:
When the goods are lent gratuitously the bailer can demanded their return
whenever he pleases even though he lent them for a specified time or purpose.


4. Compensation from wrong-donnas:
If a third person wrong fully deprives the bailee of the use or possession of
the goods bailed or does them any injury the bailer or the bailee may bring a suit
against the third person for such deprivation or injury (sec.180)
Rights of bailee:
1. Delivery of goods to one of several joint bailers of goods:
If several joint owners of goods bail them the bailee may deliver them back
to or according to the directions of any joint owner without the consent of all in the
absence of any agreement to the
2. Delivery of goods to bailer without title:
If the bailer has not title to the goods and the bailee, in good faith delivers
them back to or according to the directions of the bailer, the bailee is not reasonable
to the owner in respect of such delivery (sec.166)
3. Right to apply to court to stop delivery:
If a person, other than the bailer claims goods bailed, the bailee may apply to
the court to stop the delivery of the goods to the bailer, and to decide the tile to the
goods (sec.167)
4. Right of action against trespassers:
If a third person wrongfully deprives the bailee of the use or possession of
the goods bailed to him he as the right to bring an action against that party. The
bailer can also bring a suit in response of the goods bailed.
5. Bailees lien:
Where the lawful charges of one bailee in respect of the goods bailed are not
paid he may retain the goods. This right of the bailee to retain the goods is known
as particular lien.
Termination of bailment

A contract of bailment is terminated in the following cases.
1. On the expiry of the period:
When the bailment is for a specific period, it terminates on the expiry of that
period.
2. On the achievement of the object:
When the bailment is for a specific purpose, it terminates as soon as the
purpose is achieved.
3. Inconsistent use of goods:
When the bailee uses the goods in a manner inconstant with the terms of the
contract, the bailment terminates (sec.154).
4. Destruction of the subject-matter:
A bailment is terminated when the subject-matter of the bailment (a) is
destroyed, or (b) by reason of a change in its nature becomes incapable of use of
the purpose of the bailment.
5. Gratuitous bailment:
It can be terminated any time subject to condition laid down in (sec.159).
6. Death of the bailer of bailee:
A gratuitous bailment is terminated by the bailee (sec.162).


Unit v
AGENCY
Agent:
The another person who acts on behalf of a businessman is known as an agent.
The principle:
The person to whom such act is done, or who is so represented is called the
principal.
An agency:
The contract which creates the relationship of principal and agent is called
an agency.
Rules of agency:
Agency axists whenever a person can bind another by acts done on his
behalf. That is when acted upon by the agent, it connects the principal with third
person.
Whatever a person can lawfully do himself he may also do the same through
an agent. In other words, Qui facit per alium facit per se is the principal of
agency, which means He does through another does by himself.
Who can appoint an agent?
According to sec 183, 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.
Who may be an agent:
Sec.184 lays down that As between the principal & third persons any
person may become and agent, but no person who is not of the age of majority and
of sound mind can become an agent.
Agent distinguished from other relations.
Agent Servant
An agent is authorized to act on
behalf of his principal and has
power to create legal relations
between the principal and third
persons.
An agent is not subject to the direct
control and supervision of the
principal.
An agent may work for several
principals.
The principal directs an agent as to
what is to be what is to be done.
An agent may be paid by way of
commission on the basis of work
due.
The principal is liable for only those
acts of his agent which are done
within the scope of authority and is
A servent has no representative
character he has no authority to
make contract on behalf of his
master.
A servant acts under the direct
control and supervision of his
employer.
A whole time servant serves only
one master.
The master has the right to direct
to direct the only what work is
to be done but also how the
work is to be done.
A servant is paid by way of salary
or wages.
An employee is liable for the
wrongful acts of the servant, if
such acts are committed in the
not liable for those acts of the agent
which are done outside the scope of
such authority.
course of employment.

Essentials of Agency:
1. The principal must be competent to enter into a valid contract:
Sec 183 clearly states that any person who is major and of sound mind can
employ on agent. An incompetent person i.e., a minor or lunatic, cannot appoint an
agent because they cannot act act principal.
2. Any person may become an agent:
The agent need not be competent to contract. Even a person having no
contractual capacity. Under (sec .184)
3. There should be an agreement between the principal and the agent:
The agreement may be expressed or implied. Agency depends an
agreement but not necessary on contract has between the principal and third person
only person make become an agent.
4. The agent must act in Representative capacity:
The essence of the matter is that the principal authorized the agent to
represent or act for him in bringing the Principal into contractual relationship with a
third person.
5. According to sec.185 no Consideration is required for the creation of a valid
agency relationship.
Creation of Agency

By express By implied By operation By ratification
agreement of law

Agency by Agency by Agency by
Stopped holding out necessity

Creation of agency:
The relationship of principal and agent may be created in the following
ways.


1. Agency by express agreement:
The authority of an agent may be oppressed or implied sec.186.
A contract of agency may be created by express words, written or oral,
normally, the authority given by a principal to his agent is express authority,
enabling the agent to bind the principal by acts done within the scope of that
authority. Generally, a written agreement is the power of attorney erected on a
stamped paper in favour of the agent.
2. Agency by implied Agreement:
According to sec. 187, an authority is said to be implied when it is to be
inferred from the circumstance of the case; and things spoken or written, or the
ordinary course of dealing, may be accounted circumstances of the case. Implied
agency arises when there is no express agreements appointing a person as agent.
A. Agency by estoppel:
Estoppel means to prevent a person from denying a fact when a person has
by his conduct a statement induced others to believe that a certain person is his
agent he is estopped from subsequently denying it sec 237.
B. Agency by Holding out :
Agency by holding out is a branch of the agency by estopped. Here, an
agency by holding out requires some affrinative or positive act or conduct by the
principal to establish agency subsequently.
C. Agency by Necessity:
Generally the authority given by a principal to his ageny is an express
authority. Enabling the agent to bind the principal by acts done within the scope of
that authority. But in certain circumstances the law confers on authority in one
person to act as agent for another without requiring the consent of the principal.

3. Agency by operation of law:
An agency is also constituted by operation of law. When a company is
formed its promoters are its agent by operation of law. A partner is the agent of the
firm for the purposes of the business of the firm.

4. Agency by ratification:
Ratification means subsequent acceptance by the principal in respect of an
act done by the agent without authority. In other words, ratification means the
subsequent adoption and acceptance of an act originally done without authority or
instructions ratification is an approval of a previous act or contract.

Essentials of valid Ratification :
An agent must contract as an agent. That is, if a person acts in his own
name, which does not indicate any agency relationship, his act is done on behalf of
the ratifies such act can be ratified by him.

1. The principal must be in existence at the time of contract:-
Another condition to ratification is that the principal claiming the ratification
must have been in existence on the day the act sought to be ratified was done.
2. The principal must have contractual capacity:
The principal must be competent to contract both at the time of original
contract and at the time of ratification.

3. The principal must have full knowledge of material facts.
The ratification must be made with the full rnowledge of all the material
facts. Sec. 198 states that. No valid ratification can be made by a person whose
knowledge of facts of the case is materially defective.

4. Whole transaction must be ratified:
A person cannot ratify a part of the transaction which is beneficial to him
and reject the rest. There cannot be partial ratification and partial rejection.
5. Ratification must be made within Reasonable
The ratification becomes valid only if it is made within a reasonable time
after the act to be ratified is done. Howener, where time to ratify is limited.
6. Act to be ratified should not be void or illegal:
Ratification can be made only of valid and lawful acts. An act which is void
from the very beginning cannot be ratified.
7. Ratification must not injure a third person:
Any act which would become injurious to others by ratification, cannot be
ratified sec 200.
8. Ratification may be express or implied:-
According to sec 197, Ratification may be expressed or may be implied in
the conduct of the person on whose behalf the acts are done.
Kinds of agents

By extent their authority By nature of work performed


General Special universal commercial non-commercial
agent agent agent agent agent


broker factor commission del credere
agency agent


Advocate insurance agent solicitor guardian wife

Kinds of agents:
According to the content of their authority, agents may be classified into
three categories & they are:
A. General Agent:
General agent is one who represents the principal in all matters concerning a
particular business Hi is appointed mostly by general police of attorney of a general
agent is continuous until it is terminated.

B. Special Agent:
Special agent is one who is appointed for a particular purpose. He has
limited authority. He represents the principal in some particular transaction.
C. Universal Agent :
A universal agent is on e who is authorized to transect all the business of his
principal of every kind and to do all the acts which the principal can lawfully do
and can delegate.
By nature of work payment; [commercial]
a. Broker;
A broker makes contracts in the name of his principal and not on his own
name. He is primarily employed to negotiate between two parties. He is usually
employed for sale of goods.
b. Factor:
A factor is a mercantile agent to whom the possession of the goods is given
for the purpose of selling the same. He has authority to sell in his own name.
c. Commission agent:
A commission agent is a mercantile agent who buys and sells the goods on
behalf of his principal & receives commission for his labour.
d. Del credere agent:
He is an agent who guarantees the solvency of the buyer. He occupies the
position of a guarantor as well as an agent
Non-Mercantile agent:
They includes advocates, insurance agents, solicitor, guardian, wife etc.
Duties of an agent towards the principal:
An agent has the following duites toward the principal.
1. Duty in conducting principals Business:
(sec.211) states that An agent is bound to conduct the business of his
principal according to the directions given by the principal or in the absence of any
directions, according to the custom which prevails, in doing business of the same
kind at the place where the agent conducts such business.

2. Use of ordinary skill and diligence:
(sec 212) states, an agent is bound to conduct the business of the agency
with as much skill as is generally possessed by persons engaged in similar business
unless the principal has notice of his want of skill.
3. Duty to render Accounts:
(sec.213) states that An agent is bound to render proper accounts to his
principal on demand. It is the duty of an agent to keep true and correct account of
all transactions.
4. To get directions of principal:
According to (sec 214) It is the duty of an agent in the case of difficulty, to
use all reasonable diligence in communicating with the principal.
5. duty not to deal on his own Account:
According to (sec 215) If an agent deals on his own account in the business
of the agency without first obtaining the consent of his principal and acquainting
his with all materials circumstances which have come to his own knowledge on the
subject, the principal may repudiate the transaction.
6. Duty not to make secret profits:
(sec.216) States that If an agent without the knowledge of his principal,
deals in the business of the agency on his own account instead of an account of his
principal is entitled to claim from, the agent any benefit which may be have
resulted to him from the transaction .
7. Duty to pay sums received for principal:
(sec.218) states that the agent is bound to pay to his principal all sums
received on his account after deducting there from his hues on account of
remuneration and expenses.
8. Not to delegate:
Accounting to (sec 190) that an agent cannot delegate his authority or emply
another to perform acts which he has experessly or impliedly undertaken to perform
personally. Ordinarily an agent cannot further delegate the authority .


9. Duty to protect the interest of the principal:
According to (sec 209) when an agency is terminated by the principal
saying or becoming of unsound mind, the agent is bound to take on behalf of the
representatives of his late principal.
10. Adverse title:
The agent must not set-up his own title or the title of third parties to the goods
received by him from the principal.
11. Naming an agent for principal:
(sec 195) states that in selecting an agent for his principal, an agent is bound
to exercise the same amount of discretion as a man of ordinary prudence would
exercise in his own case.
12. Liable for acts of sub-agent:
Where the sub- agent is appointed by the agent without authority, the agent
is responsible both the principal and the third party.
Right to retain money:
(Sec. 127) lays down that An agent may retain, out of any sums received on
account of the principal in the business of the agency, all moneys due to himself in
respect of advances made or expenses property.
2. Right to receive remuneration :
(sec 219) lays down that In the obscene of any special contract, payment
for the performance of any act is not due to the agent until the completion of such
act but an agent may detain moneys received by him on account of goods sold.
The agent is entitled to remuneration when the work is completed except
in the case of sale of goods and where there is an agreement to the country.
3. Effects of misconduct:
An agent who is guilty of misconduct in the business of the agency is not
entitled to any remuneration in respect of that part of the business which he has
misconduct.



4. Right of lien:
(sec221) lays down that In the absence of any contract to the contrary, an agent is
entitled to retain goods, papers and there property, whether movable or immovable,
of the principal received by him.
5. Right to be indemnified against consequence of lawful:
(sec. 222) lays down that The employer to an agent is bound to indemnify
him against the consequence of all lawful acts done by such agent in exercise of
the authority conferred upon him.
6. Right to be indemnified against consequence of acts done in good faith:
(sec 223) lays down that where one person employs another to do an act,
and the agent does the act in good faith. The employer is liable to indemnity the
agent against the consequences third person.
7. Right to compensation :
(Sec 225) lays down that The principal must make compensation to his
agent in respect of injury caused to such agent by the principals neglect or want of
skill.
8. To do lawful Acts:
According to (sec 188) An agent having authority to do an act has authority
to do every lawful thing which is necessary in order to do such act.
9. Right of stoppage of goods:
An agent has the right of stoppage of goods in transit if he has bought goods
either with his own money or by incurring a personal liability for the price and the
principal has become insolvent.








Termination of Agency



By act of the parties By operation of law





Agreement Revocation by the principal Revocation by the agent








Performance of Expiry of Death of Insanity of Insolvency Destruction Principal Dissolution Termination
the contract time either party either party of either of the subject becoming of a company of sub agents
party mater an alien enemy authority

Termination of agency
Sec.201 despises the modes of termination of agency. The section is not
apprehensive. The various modes of termination of agency as mentioned in sec.
201. In certain cases, the agency is irrecoverable.

1. Termination of agency by act of the parties:
1. Agreement
The relation of principal and agent like any other agreement may be
terminated at any time and at any stage by the mutual agreement between the
principal and the agent.

2. Revocation by the principal:
The principal may revoke the authority of the agent (sec 201) at any time
before the agent has exercised his authority 80 as to bind the principal unless the
agency is irrevocable (sec.203).

3. Revocation by the agent:
An agency may also be terminated by an express renunciation by the agent
after giving a reasonable notice to the principal (sec 201).

2. Termination of agency by operation of law:
1. Performance of the contract:
The most obvious mode of putting on end to the agency is to do what
the agent has under taken to do (sec. 201) Where the agency is for a particular
object, it is terminated when the object is accomplished or when the
accomplishment of the object becomes impossible.


2. Expiry of time:
When the agent is appointed for a fixed period of time, the agency
comes to an end after the expiry of that time even if the work is not completed.
3. Death and insanity:
When the agent or the principal dies or becomes of unsound mind, the
agency is terminated (sec. 201)

4. Insolvency:
The insolvency of the principal puts an end to the agency (sec.201)
though nothing is mentioned in sec. 201 as regards insolvency of the agent.
5. Destruction of subject matter:
An agency which is created to deal with a certain subject-matter
comes to an end by the destruction of the subject-matter.

6. Principal becoming an alien enemy :
When the agent and the principal are aliens, the contract of agency is
valid so long as the countries of the principal and the agent are at peace.














UNIT - V
SALE OF GOODS
Meaning:
The sale of goods is the most common of all commercial contracts. A
knowledge of its main principles is of the utmost importance to all classes of the
community. The law relating to it is contained in the sale of goods Act 1930.
Contract of sale of goods:
A contract of sale of goods is a contract where by the seller transfers or
agrees to transfer the property in goods to the buyer for a price. There may be a
contract of sales between one part owner and another [sec. 4(1)]. A contract of
sale may be absolute or conditional [sec. 4(2)].
The term contract of sale is a generic term and includes both a sale and an
agreement to sell.
Sale and agreement to sell:
Where under a contract of sale, the property in the goods is transferred from
Dissolution of a company:
When a company, whether principal or agent, is dissolved the contract of
agency with or by the company automatically comes to an end.
Termination of sub agents authority:
The termination of an agents authority puts an end to the sub agents
authority (sec.210).
ROC = Register of the company
The seller to the buyer, the contract is called a sale, but where the transfer of the
property in the goods is to take place at a future time or subject to some conditions
thereafter to be fulfilled, the contract is called an agreement to sell [sec.4(3)].
Essentials of a contract of sale
1. Two parties:
There must be two distinct parties i.e. a buyer and a seller, to affect a
contract of sale and they must be competent to contract. Buyer means a person
who buys or agrees to buy goods [sec. 2(1)] seller means a person who sells or
agrees to sell goods[sec. 2(13)]. These two terms are complimentary.
2. Goods:
There must be some goods the property in which is or is to be transferred
from the seller to the buyer. The goods which form the subject matter of the
contract of sale must be moveable. Transfer of immoveable property is not
regulated by the sale of goods Act.
3. Price:
The consideration for the contract of sale, called price, must be money.
When goods are exchanged for goods.
4. Transfer of general property:
There must be a transfer of general property as distinguished from special
property in goods from the seller to the buyer.
5. Essential elements of a valid contract:
All the essential elements of a valid contract must be present in the contract
of sale.
Sale and agreement to sell distinction:
1. Transfer of
property.



2. Type of goods.




3. Risk of loss.




4. Consequences of
In a sale, the property in the
goods passes from the seller to
the buyer immediately so that
the seller is no more the
owner of the goods sold.
A sale can only be in case of
existing and specific goods
only.


In a sale, if the goods are
destroyed, the loss falls on the
buyer even though the goods
are in the possession of the
seller.
In a sale, if the buyer fails to
In an agreement to sell, the transfer
of property in the goods is to take
place at a future time or subject to
certain conditions to be fulfilled.
An agreement to sell is mostly in
case of future and confident goods
although in some cases it may refer
to uncertain existing goods.
In an agreement sell, if the goods
are destroyed, the loss falls on the
seller, even though the goods are in
the possession of the buyer.
On an agreement to sell if there is a
breach of contract by the buyer, the
seller can only due for damages and
not for the price even though the
breach.





5. Right to re sell.






6. General and
particular property.



7. Insolvency of
buyer.



8. Insolvency of
seller.
pay the price of the goods or if
there is a breach of contract
by the buyer. The seller can
due for the price even though
the goods are still in this
possession.
In a sale, the seller cannot re-
sell the goods.






A sale is a contract plus
conveyance, and right to the
buyer to enjoy the goods as
against the world at large
including the seller.
In a sale, if the buyer becomes
insolvent before he pays for
the goods, the seller, in the
absence of a lien over the
goods.
If the seller becomes
insolvent, the buyer being the
owner is entitled to recover
the goods from the official
receiver.
goods are in the possession of the
buyer.

In an agreement to sell, in case of
re-sell, the buyer, who takes the
goods for consideration and
without notice of the prior
agreement, gets a good title. In
such a case, the original buyer can
only due the seller for damages.
An agreement to sell is merely a
contract, pure and simple, and a
right to the buyer against the seller
to due for damages.

In an agreement to sell, if the buyer
becomes insolvent and has not yet
paid the price, the seller is not
bound to part with the goods until
he is paid for.
In an agreement to sell, if the
buyer, who has paid the price, finds
that seller has