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Business Law(BBS 2nd Year)

CHAPTER-1

Introduction to Business Law:

There are different types of activity in a society. Business is also a part of social activity, regulated by the law. Business refers to the economic activities in which goods and service are supplied in exchange for some payment. It includes buying and selling, manufacturing products, extracting natural resources. Business law is the law concerned with business activity. Business law is an aggregate of those rules, which are connected with trade, commerce and industry. It is also known as commercial or mercantile law. It is the law which provides the different provisions to the commercial community and regulates their activities relating to the trade and commerce. Which includes the law relating to contract, sale of goods, agency, industry, guarantee, insurance and banking, arbitration, foreign investment and technology transfer etc? Business law is not separate discipline, it is a part of civil law, which deals with the right and obligation of business firms that arises from their business activity. There are different laws in which the significant provisions are made to regulate the business related activities, and these laws are known as business law. According to N.D Kapoor: "Mercantile law is also used to denote the aggregate body of those legal rules which are connected with trade, industry and commerce."

Features of Business Law i) Regulates industry, trade and commerce. ii) Regulates every business activity of business community. iii) It has no watertight demarcation with the other branches of law. iv) Promotes rights and interest of business community. v) this is the most important means to create positive environment for the prosperity of business.

With the increasing complexities and technologies of the modern business, the scope of business law is automatically extended.

Importance of Business Law: The business law leads the prosperity of a country. It regulates...... and affect the business since before the establishment of business firm, while conducting the business and to its final stage. The role of business law is vital in the business sector, but it is guided by the economic policy of the state. A business person must know all the concerned laws. Such laws play vital role for the formation and commencement, running, adapting, establishing, giving dynamism and expansion of the business as well as fulfilling business goals and maintaining social responsibilities. The importance of business law can be viewed on the following grounds: a) proteb) Regulation and Systematization of business c) Commencement and development of business d) Enforcement of business Contract e) Delivery of Justics ( you can consult with your book for the brief explanation of the above points)

Sources of Business Law

A source means an origin or resources or cause or place from where law emanates. The term source of Nepalese business law denotes two meaning. Firstly the place or point from where the law begins and secondly the place from where the rules of business activities get legal authority. The main sources of business law are discussed below:

a) Custom and Usage: The custom is known as particular way of life or behavior. If such behavior is followed continuously by the people in the society, it becomes a customs or usages which are important sources of law. This types of custom should not oppose to statutory law, mortality and public welfare. If there is no legislation, no precedents the matter is to be decided by the custom or usage of that particular. b) Statutes/ Legislation: The legislatory law comes from parliament or law making body of the nation. This types of law is the outcome of demand of people and need of the time. It is made after fulfilling a

series of discussion by lawmakers. Now a days most of business activities are regulated by the law made by parliament.

c) Judicial Decision: Judicial decision is known as precedent. Precedent is a judicial decision which contains in itselfs a principle. In other words it is the earlier decision of Supreme Court which is taken as a rule while deciding the later cases. Where there is no law to deal the problems in such cases the court can make decision in the light of justice and equity such decision are treated as law for that matter. It is the one of the major sources of modern business law.

Other Sources ( this should be included in your answer the difference is that the above are the main sources)

d) English Mercantile law: business law was developed in England. It is the pioneer of business law in the world. Nepal is conjoined influenced by the British rule since year.

e) Professional Opinion of experts: Lawyers and critics may play significant role creating good legal environment. The opinion and explanation made by such professional may give proper instruction and better contribution to the development of law.

f) Business Agreement, Conventions: Conventional law refers to any rule or system of rule agreed upon by the parties to regulate their business conduct. International business organization are more active in national, region and world business nowadays. Examples: ( WTO, SAFTA) . And bilateral agreement between the nations and conventions of business communities are the main sources of national and international business law.

Legal Environment

Legal environment of business refer to the aggregate of surrounding connected with the law that influence the business activities and business firms. It refers to the aggregate of all types of law, regulation. Acts and precedents intended to encourage, protect, and guide the business activities. Such law are made and enforced by the state for the prosperity of every aspect of business.

According to Prem R Panta" The legal environment refers to the framework of laws, regulation are court decision, intended to encourage, guide and control business activities.

CHAPTER2- CONTRACT

(Define contract)

A contract is an agreement enforceable by law. The law of contract is the basis of business. Every business activity is determined and guided by the agreement of the concerned parties. In fact, the law of contract is concerned with everybody and every aspect of the business to perform any kind of act. And it is concerned with the rights and obligation of the parties entering into it. According to A.J Salmond: "An agreement creating and defining obligation between two or more parties is a contract. Supreme court of Nepal: "An agreement of two or more parties with condition is contract.

In short the contract includes the following: - two or more parties - an agreement on the ground of free consent - exchange of promise by meeting the minds - enforceable by law. In short the right and liabilities that are created reciprocally between the concerned parties can be called contract.

Nature of Contract:

A contract is an agreement which is enforceable by the law. The above definition have cleared that an agreement between two or more parties concluded with their consent, creates rights and liabilities between them. Such consent of the parties creates contract. An agreement is regarded as a contract where there are the main characteristics of valid contract presented in it. There should be the certain characteristics to be the contract determined by the law. The nature of law can be discussed in the following grounds:

1) Agreement/ Promissory Nature: Contract is a private legislation, which is formed and binding between the concerned parties on the ground of their agreement. Agreement has two element one is there should be two parties making an agreement, one cannot enter into a contract alone. Another is..... meeting of minds of concerning parties. An agreement is the outcomes of consenting minds of the parties. The contracting parties must meet their minds as regards the subject matter of the contract, in the same sense, upon the same thing and at the same time. 2) Private legislation: A contract is a private legislation binding from those parties who are involved in it. When any one breches the contract the other party becomes victimize financially. Therefore, the victim party may enforce by the court. 3) Legal Obligation: There must be legal obligation in an agreement to become a contract. Usually it is presumed that the parties entering into a commercial agreement intend to create a legal relationship between them. The agreement which do not establish a legal relationship are not contracts. Contract = legality + Obligation + Business Matter 4) Freedom/ Autonomy of parties: The parties of contract must be autonomous to deliver their genuine consent at the time of concluding contracts. It is also known as a freedom of contracts. The concerning parties of the contract should be free to choose the form of contract, its subject and determine consideration and its extent as well as the term of condition. 5) purity of Contract: Sanctiteness is another nature of contract. The common law system protects contract from commission of fraud, mispresentation, mistake, coercion and undue influence and effort to control the economic exploitations of employee by the doctrine of restraint of trade. 6) Function of Contract: Contract is a means for the achievement of purpose of the parties. The following function are performed by nature through the contract. - to facilitate forward planning of transaction and to make provision for future contingencies. - to establish the respective responsibilities of the parties and performance to be expected from them. - To enable the economic risks involved in the transaction to be allocated in advance between the parties. - To provide alternative way or remedy if thing go wrong. - Creation of legal rights to protect own interest.

Essential Elemnt of A valid Contract Contract and agreement:

(IQ) 20

In general contract is an agreement between two or more parties. In fact such agreement are not contract. Only those agreement which are enforceable by the law are contract. In the agreement, the parties of it make promises about something which is to be performed, when such promises or expectation of the parties become an agreement and when this agreement is backed up by law it becomes a contract which creates legally binding obligation between the parties. The scope of an agreement is wider than of contract because a contract must fulfill some essential elements. It has limited scope which exists within the limitation of legality. Thus all contract are agreements but all agreement are not contract. Thus contract essentially consists of two element first is agreement and second is its enforceability. Where certain duties or obligation are created by agreement between the parties, contract law deals with , where as an agreement which does not create obligation is not the subject matter of contract law. The essential elements of a valid contract are as follows: 1) Offer and Acceptance: There must be an agreement between two parties to create a contract. The agreement involves a valid offer by one party and valid acceptance of the offer by other party. Therefore the journey of contract always starts with offer and acceptance. 2) Consideration: Consideration means something in return. It has motivation power to fulfill the promise. The agreement born when contracting parties are giving and getting something in return. It is not necessary to be cash or kind, it may be a promise to do or not to do something. But it must be real and lawful, which may be in past, present and future. 3) Legal Relationship: At the time of entering into an agreement the parties should have the intention to create legal relationship between them to avoid all types of conflicts. This types of legal relationship helps victim party to have legal remedy in case of failure of either party. Agreement without legal relation can not be enforced. For example: The relationship between a loaner and borrower can not attract the law of contract. The father promise his son to get a cycle if he passed the exam. Son passed the exam, The son claims for his prize. In such matter , father not bound to take cycle for his son, because they had no such intention to create legal relationship while making the promises. To be fallen in contract law the agreements parties must have the intention to establish legal relationship between them. 4) Free Consent: When the parties of contract agrees upon same thing in the same sense, their consent must be free from oppression , under influence, mispresentation, fraud and mistake of law. The consent must be made with knowingly and freely. If the consent is not free the parties can avoid the contract. 5) Meeting of Minds: To be a contract, two or more than two persons must agree upon same thing in the same sense. If 'A' want to purchase 'X' but B want to sell 'Y' than there is no contract raised between 'A' and 'B' because there is no meeting of minds.

6) Competent ( Capable) parties: the parties who are involved in the agreement must be competent to contract. If incompetent parties are in a contract, it is not valid. The parties not capable to contract are minor person of unsound mind and legally disqualified person. 7) Lawful Objectives: The objectives of agreement must be lawful to be a valid contract. If the subject matter of agreement are not lawful ( illegal, immoral and oppose to public policy) are not contract, and the agreement having this types of objectives are not enforced by law. 8) Not declared to be void: Those agreements which are expressly declared void by the contract and other law force are not the contract. Agreement to kill the life of other or agreement to steal goods are illegal and void. Similarly agreement in restraint marriage, or profession are void by NCA. 9) Certainty: The objectives of an agreement must be certain and clear and practical. The contract which is uncertain due to lack of providing reasonable meaning is void. For example: A agrees B that he will purchase another car if the first car becomes lucky to him. Such agreement can not enforce against A, and B can not claim for another purchase by A. Because the term ' lucky' does not have any certain and clear meaning in practical life. 10) Possibility of performance: The objectives or the action to complete the agreement must be possible to perform. Any act which can not be done or is non- performable does not create legal obligation to the contracting parties.

11) Legal formalities: the contract must be in written form and comply with other legal provision such as registration in government office

Chapter-6

OFFER AND ACCEPTANCE

Define Offer: To offer means to present something so that it may be accepted or rejected. Offer is the proposal of the first party to another parties. NCA defines offer as " An offer is a proposal presented by one person to another with the intention of obtaining his assent for performing any work" And this types of proposal creates a legal obligation if it is accepted by the acceptance parties. A valid offer may be expressed or implied.

i) Specific and general offer: Where an offer is made to a particular person there is a specific offer and where it is made to the general public there is a general offer.

ii) Cross and counter offer: Where both parties make their offer to each other at the same time, there is a cross offer. Such types of offer is not a valid offer for the contract because to create a contract there must be an offer from one side and acceptance from other side. Where an offeree intends to accept the offer after alteration in any term of offer, there is a counter offer.

Note : ( the above types of offer is just for understanding purpose that may unnecessary for exam)

Rules Regarding the valid offer

(important question)

i) Creating a legal relationship: the offerer must have intention of creating legal relationship. After the acceptance of the offer it must create some legal obligation.

ii) Offer should not be certain and should be made to a definite person.

iii) Offer may be conditional: An offer may be made subject to conditional and that must be clearely conveyed to the offeree. An unreasonable treatment and ignorance of offeree to the conditions are not valid.

iv) Offer and offree must be communicated.

v) The offer can be expressed in different for written, spoken) and implied vi) Offer is seeking acceptance of other party vii) offer may be specific to the person or be to general public or globally. viii) Offer should not contain the term that non-communication or rejection would amount to an acceptance.

ix) Invitation to offer is not an offer. x) Advertisement is not the offer. xi) Catalogue is not the valid offer.

Consideration

Define consideration and describe rules regarding consideration?

Consideration cab be defined as a price of promise, which is bought by the next parties (promise). When a party to an agreement promises to do something he/she must get something in return which must be valuable in the eye of law. This something is defined as consideration which may be price, reward, payment or value for which the promise of the other is carried.

According to Justice palterson : consideration means something, which is of some value in the eye of law, it may be some benefit to the planting or some detriment to the defendant. For example: A agree to sell a house to B for Rs 2 lakh. For As promise, the consideration is Rs. 2 lakh and for Bs promise, the consideration is the house. Rules Regarding consideration

a) Consideration must be real and something of valuable in the eye of law.

b) Consideration must move at the desire of the promisor: The act must be done at the desire of the promisor. Without the desire of the promisor no consideration can be valuable. It regards that the consideration must be moved from promise only not from other or stranger to contract.

c) Consideration may move from the promise or third persons: The act which constitutes a consideration may be moved by the promise or any other person on his behalf to enforce a promise. But in English law it must be from the promise not from other.

d) Consideration may be of past, present or future.

e) Consideration must be lawful: When a party to an agreement promises to do something the acceptors must get something in return which must be legal and have the values in the eye of law. An illegal consideration is not supposed to be a contract. It is void.

f) Consideration need not be adequate(satisfactory) : Consideration need not be adequate to the promise. The contract ....... is depend upon consideration. So quantum of the consideration is decided by the parties to the contract. The adequacy of consideration is determined by the facts, circumstances and necessities and nature of cases.

Chapter-9 ( Free Consent ) Define free consent

Consent means agree to do something. Two or more parties are said to consent when they agree upon the same thing in the same sense. It is the meeting of mind. The agreement without any control is free consent. Only meeting of minds are not sufficient to be the contract whether there must be the real and free consent of the parties. It is obtained by free and pure will of the parties from their own accord, consent is said to be free when it is not caused by coercion, fraud, undue influence, mispresentation and mistake. If there is no free consent then there will not be any contract, so it is created for the sake of due and lawful consideration, not to lose anything. Free consent provides meeting of minds, enforceability and legal remedy for the contracting parties on their agreement.

Define Coercion

Coercion is the act of forcing or threatening someone to do something against law. It is a threat or force used by one party against another for compelling to enter into an agreement. In such condition the consent is not free. NCA states that " When somebody has detained or threatened to detain property or

has threatened to commit any act forbidden by the law for causing any person to enter into contract against his will, the person is said to have caused coercion." If A compels B to enter into an agreement by causing harm or treating to commit harm as against the life and property of B or his persons or third person. The contract between A and B is caused by coercion.

Chapter-7

Consideration

Define consideration and describe rules regarding consideration?

Consideration cab be defined as a price of promise, which is bought by the next parties (promise). When a party to an agreement promises to do something he/she must get something in return which must be valuable in the eye of law. This something is defined as consideration which may be price, reward, payment or value for which the promise of the other is carried.

According to Justice palterson : consideration means something, which is of some value in the eye of law, it may be some benefit to the planting or some detriment to the defendant. For example: A agree to sell a house to B for Rs 2 lakh. For As promise, the consideration is Rs. 2 lakh and for Bs promise, the consideration is the house.

Rules Regarding consideration

a) Consideration must be real and something of valuable in the eye of law.

b) Consideration must move at the desire of the promisor: The act must be done at the desire of the promisor. Without the desire of the promisor no consideration can be valuable. It regards that the consideration must be moved from promise only not from other or stranger to contract.

c) Consideration may move from the promise or third persons: The act which constitutes a consideration may be moved by the promise or any other person on his behalf to enforce a promise. But in English law it must be from the promise not from other.

d) Consideration may be of past, present or future.

e) Consideration must be lawful: When a party to an agreement promises to do something the acceptors must get something in return which must be legal and have the values in the eye of law. An illegal consideration is not supposed to be a contract. It is void.

f) Consideration need not be adequate(satisfactory) : Consideration need not be adequate to the promise. The contract is depend upon consideration. So quantum of the consideration is decided by the parties to the contract. The adequacy of consideration is determined by the facts, circumstances and necessities and nature of cases.

Chapter-9 ( Free Consent ) Define free consent

Consent means agree to do something. Two or more parties are said to consent when they agree upon the same thing in the same sense. It is the meeting of mind. The agreement without any control is free consent. Only meeting of minds are not sufficient to be the contract whether there must be the real and free consent of the parties. It is obtained by free and pure will of the parties from their own accord, consent is said to be free when it is not caused by coercion, fraud, undue influence, mispresentation and mistake. If there is no free consent then there will not be any contract, so it is created for the sake of due and lawful consideration, not to lose anything. Free consent provides meeting of minds, enforceability and legal remedy for the contracting parties on their agreement.

Define Coercion

Coercion is the act of forcing or threatening someone to do something against law. It is a threat or force used by one party against another for compelling to enter into an agreement. In such condition the consent is not free. NCA states that " When somebody has detained or threatened to detain property or has threatened to commit any act forbidden by the law for causing any person to enter into contract against his will, the person is said to have caused coercion." If A compels B to enter into an agreement by causing harm or treating to commit harm as against the life and property of B or his persons or third person. The contract between A and B is caused by coercion.

Bailment and Pledge (chapter-20)

Define bailment and describes the essentials factors of bailment. Bailment is a kind of special contract, caused by the delivery of goods. However its not a transfer of ownership of goods rather it is the delivery of goods on a returnable basis. NCA defines bailment as A contract relating to bailment shall be deemed to have been concluded in case any person delivers any property to another person on a returnable basis or for handing it over to any other person or selling it as ordered by him. For eg: A gives his house to B on a rent for Rs. 2000 monthly, it is the bailment of building for hire, X gives his car to repair to Z. It is the bailment of a goods for repair. Essential factor of Bailment: i) Delivery of goods: Delivery of goods can be defined as the change of possession of goods from one person to another, but the ownership of the good remain same. It must be made on the ground of free consent. The delivery of goods may be actual and constructive. A gives his bike to B on hire for one day, B takes the bike immediately. It is an actual delivery of goods, however constructive delivery is not a change of the physical possession of goods. The goods remain in the same place but something is done that causes a change of its possession to the bailee. For example delivery of key of store or vehicles is the constructive delivery.

ii) Delivery for some special purpose: Delivery of goods must be made for some purpose through which the Bailee is bound to return the goods when the purpose is achieved. If goods are delivered by mistake than there is no contract of bailment. iii) Creation of Contract: The relationship between a bailor and a bailee is the creation of a contract. There must be a written document if delivery of good worth more than 200. Thus the both bailee and bailor are bound to create a contract and also they should be competent to create a contract. iv) The good must be return.

v) No transfer of ownership vi) Consideration is not necessary: the contract of bailment may be gratuitous or non- gratuitous. If bailment is made for the benefit of a bailor or of a bailee it is gratuitous. For ex: X lets his bike to A just for 10 minutes.

Rights and duties of Bailor What is bailor describes the right and duties of bailor. Bailor is a party or person on who agree to de4liver his goods to the bailee for some purpose for some period of time on a condition that the bailee shall ultimately return the goods to the bailor. For ex: If A delivers his car to B for a week, here A is bailor and the car may be delivered gratuitously or nongratuitously. The rights of bailor are given below: 1) enforcement of a bailees duties: Bailor can enforce the duties of bailee as his own right by suit in the following circumstances. i) To demand compensation, in case of damage of goods. ii) To demand damage in case of an unauthorized use of goods or breach of the terms, and unauthorized mixing of goods with other goods. iii) To return goods in the prescribed time. iv) To demand natural increment or profit in goods. 2) right to avoid or terminate the contract: The bailor has a right to terminate the contract........ at any time in the following circumstances: i) If the objectives of the contract can not be fulfilled. ii) if the contract has an illegal object. iii) If the thebaileebreaches the terms of contract. iv) If the bailment is gratuitous. 3) restoration of goods lent gratuitously: Where goods are lent gratuitously the bailor can demand their return at any time. 4) Right to receive compensation from wrong doer.

The following are the duties of bailor: i) Duty to disclose the known defects of good: a bailor has to disclose the known defects of the...... goods for bailment. If the bailor does not do so, he will be responsible for the harm or the loss to bailee, but not for unknown defects. ii) Duty to bear extraordinary expenses: The bailor is responsible to bear the extraordinary expenses of goods eg: medical treatment of sick animals, or the expenses made for keeping the good safe. iii) Duty to indemnify the bailee: the bailor is responsible to the bailee for any loss due to his/ her imperfect or defective title of the goods and premature termination of the contract. iv) Duty to receive back the goods.

Define Bailee and describes the right and duties of bailee. Bailee is the party of a bailment contract to whom goods is delivered by bailor on the condition that after the completion of purpose of contract, or some period of time the bailee should return the goods to the bailor. If X gives his house on rent to Y. The Y is bailee. The right of bailee is given below: i) Right to be indemnified for the loss caused by lack of information about the goods, defective titles of good. ii) Right to deliver goods to one of the several(joint owners): If the bailment contract is concluded by several joint owner the bailee may deliver the goods back to one of the joint owners, without consent of other owner in the absence of any agreement to the contary. iii) Right of special lien: Special right is the right of a bailee that can keep the goods bailed in his/ her custody until the bailor does not pay all the necessary charges. The bailee even can recover the charge by selling the property. iv) Right to deliver the goods to bailor even though the real owner of goods is not the bailor. The duties of bailee is given below: i) Duty not to make unauthorized use of the good bailed. ii) Not to mix the bailed goods with other goods. iii) duty to take reasonable care of the goods bailed. iv) Duty to return the goods to the bailor in time.

v) To return the goods with their natural profit or increments. vi) To follow the terms and the instruction of the bailor. vii) Duty to compensate the loss or damage caused by him/ her.

Finder of Lost goods Define finder of lost goods and write the right and duties of finder. Finder of lost goods is the person who finds and keep the lost goods of another person in his own possession, the law implies that there is a contract of bailment between the owner and finder of the lost goods. By the law the finder is treated as the bailee who had agreed to keep the goods of bailor(the person whose good is lost) safely and promised to return back to the owner. The right and duties of finder of lost good is given below: Rights: i) Right of possession: a finder of lost goods has the right to keep it in his possession until the true owner is found. ii) Right of lien : the finder has the right to keep the goods in his custody until the owner pays the expenses ;incurred in keeping them safe, in repairing the goods and in searching the true owner. iii) Right to sue for reward: The finder can sue for any specific reward which the owner has offered for the return of the goods. He/She may also retain the goods until he received such reward. iv) Right to sell the goods: A finder of lost good can sell those dgoods in the following circumstance: - If the true owner can not be found. - If the bailor does not pay the expenses within a reasonable time. - If the goods naturally decrease or are destroyed within specific time. - If the lawful charges of the finder in respect of the goods found amount to 2/3 of the value of good. Duties: i) To search the real owner of the goods found. ii) Not to mix the found goods with other goods. iii) To return the goods to the real owner after receiving the necessary expenses. iv) To take care of good and not to make an unauthorized use of such goods.

Pledge or Pawn Define pledge and write the right and duties of pawaner. Pledge is a kind of bailment where the transfer of goods or bailment of goods are made as a security for the payment of debt, or performance of a promise. In such case, the person who gives goods as a security is called pledger or pawnor (bailor), and the person who receive the goods as a security is called pledgee or pawnee (bailee). The pledge is bound to return the pledged goods on the fulfillment of his debt or pledgors promise. Thus the contract, by which the possession of goods is transferred as a security is known as pledge. For ex: X borrows Rs. 50000 from Y and keep his gold as a security for the payment of that loan. Essentialities of pledge: i) Delivery of goods. ii) Delivery for security. iii) Lawful purpose. iv) Return of goods. v) The goods must be long lasting.

Right and Duties of a pawner Rights: i) A pledgor has a right to enforce the following duties upon a pledge by a suit. ii) for reasonable care of goods. iii) for redemption of goods. iv) to receive the goods with accretion. v) To stop selling the goods by depositing dues. vi) Right to get surplus after the sale of goods bailed by the pledge. vii) Right to return the goods after the full payment of dues. Duties:

i) to compensate the extraordinary expenses incurred for necessary care of goods pledged. ii) to receive the goods after the full payment as per contract. iii) to pay the rest of the dues, if it is insufficient by the sale of the goods pledged. iv) to dispose the facts or defects and goodness of the goods pledged.

Indemnity and Guarantee

Introduction/ Definition of Indemnity Define Indemnity and write down the right and duties of Indemnity holder. Indemnify means to compensate or to make good of the loss and contract of indemnity means a promise or statement of liability to pay compensation for a loss or for a wrong in transaction. In the law of contract indemnity is the obligation, undertaken by one party to cover the loss or debt incurred by another. Indemnity is an assurance given by the promisor to promisee that he/ she will make good or save from loss which is raised from their contract for example: 'Samsung' company agreed to make hardware for 'Apple' company, and it will be responsible for the loss and make it for apple. If 'Samsung' sell the product made for apple. In such transaction, if any loss caused to 'Apple' , whatever may be the reason, 'Samsung' is bound to pay the compensation to 'Apple' and Insurance contract. Who gives such assurance known as indemnifier and to whom that assurance is given is known as indemnity holder or indemnified. Right and Duties of Indemnity Holder Indemnity holder is the party who has been assured of recovery of a loss by the indemnifier. NCA 2056 has made the provision regarding the rights of an indemnifier. The rights and duties of Indemnity holder is given below: # Rights: a) Indemnity holder can claim for compensation for damages suffered from the transaction. The indemnity.. holder can recover any or all of the amounts of compensation under the contract. b) He/She can recover all damages which he/ she may be compelled to pay in any suit in respect of any matter to which the promise to indemnity applies.

c) All the cost spent on the case filed or defended by him in connection relating to indemnity. d) He/ She can recover all the cost of legal action, if it becomes necessary to initiate such an action for a failure to pay the amount mentioned in all the above causes. Along with such rights But the indemnifier will not be liable for the loss in the following circumstances. # Duties: a) If He/ She works negligently. b) If he/she is acting with the intention of causing any loss or damage. c) If the indemnity holder is acting against the instruction of other party(Promisor) . note: he/she means indemnity holder. ( when writing duties you must write eg. Indemnity holder mustn't act and work negligently or something like that.) #Rights and Duties of an Indemnifier The above duties or liability of indemnity holder is the right of indemnifier. Thus the duties of indemnifier arises in the following circumstances: i) There must be a loss in accordance with the contract to make the indemnifier liable. ii) There must be an occurrence of the anticipated event. Without any occurrence of the prescribed contingent event, there is no indemnity by the indemnifier. iii) Where the right of indemnity is used by the indemnity holder prudently and the instruction of the indemnifier is not contravened or when there is no breach of contract. iv) If the cost demanded by the indemnifier are not caused by negligence, haphazard behavior.

Chapter- 21

Contract of sale of goods: When a seller transfer or agree to transfer his movable goods to buyer then there is the contract of sale of goods taken place on which the ownership of the good is transferred from seller to buyer for a certain price.

NCA 2056 states where a seller agrees to transfer any good immediately or in future against the price of that goods, there is a contract of sale of goods. Essential element of contract of sale of good i) Movable Goods/ property : Goods are fundamental factor of a contract of sale , which means every kind of movable goods or property except an actionable claim and money. The act does not apply to immovable property like building , land etc. ii) Two parties iii) Price : Price is the value (measured in terms of money), which is the medium of the exchange of goods. If goods are exchanged with goods not with price then there will be the barter system and there is no any contract of sale of goods. iv) Transfer of ownership : It is the transfer of legal rights over the good of owner. v) Terms of contract :Relevant conditions about the price, goods, mode of payment , place , time and mode of performance should be mentioned in a contract of sale of goods. vi) Essential element of valid contract : All the essential element of valid contract like offer and acceptance , legality of object and consideration , free consent must be fulfilled to be a contract of sale of goods. It may be written or implied. vii) Contract of sale include both Sale and agreement to sale . Conditions The condition are the factors or stipulation of the contract of sale, which are essential for the main purpose of the contract of sale. In case of breach of the conditions, the aggrieved party has the right to repudiate(refuse to accept). He/ She can demand the damage for the loss or price of goods on the ground of repudiation the whole contract. Kinds of Condition 1) Expressed condition: The condition which have been expressly (by using words in written form or oral) agreed upon by the contracting parties are called expressed conditions. 2) Implied condition: The condition that have not been expressly agreed but are implied or acted at the time of making the contract of sale of goods are the implied conditions , which are given below: i) Conditions as to title: The seller has the right to sell the goods to other and must transfer the pure title. But in case of defective title of the good sold , the buyer has the right to refund the price of those goods. Thats why the seller is impliedly liable to prove the legality of goods to be sold. ii) Condition In a sale by description : Where there is a contract of sale of goods by description, there is an implied condition that the goods must be as per the description in quantity and quality.

iii) Condition as to fitness or quality: Generally, the buyer must be aware of the fitness or quality of the selling goods. However, when the buyer is told by the seller about the fitness and quality of the goods for the particular purpose, there is the implied condition that the good shall be reasonably fit and qualitative for the purpose. Otherwise the seller will be responsible. iv) Conditions as to merchantability: The general rule is that the seller should have authority to sell the goods and they must be usable too. For example: the sold foods must be hygienic, medicine must not cross the expiry date etc. v) Condition as to wholesomeness: In case of eatable and provisions, in addition to the implied condition that the good shall be wholesome i.e they must be free from defects and must not be harmful for human health. vi) Condition as to price : the price of the sold goods also must be reasonable or comparable in price transected in the market currently. Because high price is also one of the essential elements of black marketing.

Warranties] Warranty is the stipulation which is collateral/auxiliary or relating factor for the main purpose of the contract. But it is not such a vital factor as a condition. In case of breach of warranty, the aggrieved party can only claim damage and cannot be treated as repudiated contract.

Caveat Emptor
Caveat emptor is one of the fundamental principles of the law of sale of goods which means let the buyer beware. It deals with the matter that a buyer must be aware and caution, whether the goods is fit for his/her purpose or not. It is no part of the sellers duty to point out the defects of his own goods. Its always the buyers responsibility to see such caution and other things. Therefore, when a person buys some goods, he must examine them thoroughly. If the goods turn out to be defective or do not suit buyers purpose, or if buyers depends upon his/her own skill or judgement and makes a bad selection, he /she cannot blame anybody. Thus the doctrine is applicable, whenever the buyer voluntarily chooses the goods he want to buy, but it is not applicable when the seller undertakes or the buyer has left the responsibility on the seller. Exception of doctrine of caveat emptor] The doctrine of caveat emptor has certain exceptions, these are follows: i) Mispresentation by the seller: When the seller makes any misrepresentation and the buyer realize on it at the time of contract of sale, that the contract is voidable and the buyer can rescind the contract. The doctrine of caveat emptor does not apply in such cases.

ii) Fraud by the seller: Where the seller, makes a misrepresentation with the intention to deceive the buyer amount to a fraud. If the sale is made on such types of fraud, this is voidable. iii) Fitness for buyers purpose : Where the buyers expressly or by implication , makes known to the seller the particular purpose for which he requires the goods and relies on the sellers skill or judgement and the goods are as of description, the seller must supply the goods which shall be fit for the buyers purpose. iv) Sale by description: Where the selling and buying act is performed on the basis of a description of the goods sold and they do not correspond with the description, such a contract is also voidable. v) Sale by the sample: When goods are sold by sample, the doctrine of caveat emptor does not apply if the goods supplied does not match with sample, the buyer is not given a chance to compare, there is any hidden defect in the goods. vi) Sale by trade uses: Where a trade usage is attached with an implied condition or a warranty as to the quality and fitness and the seller benefits from it, the doctrine is not applied. The seller is liable.

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