CPT LAW : EXAM REVIEWER

CHAPTE -1 :INDIAN CONTRACT ACT, 1872

1. Indian contract Act, 1872 came into force on 1st September, 1872.
2. It applies to whole of India except the state of J & K.
3. The provisions related to contracts are contained in Indian Contract Act, 1872.
4. The provisions related to sale of goods wee originally contained in Indian contract act, 1872.
5. The provision related to sale of goods are contained in the Sale of Goods Act, 1930.
6. The Sale of Goods Act came into force on 1st July, 1930.
7. Indian Partnership Act come into force on 1st October, 1932.
8. The provisions related to partnership are contained in Indian partnership Act, 1932.
9. Contract [Sec.2(h)] An agreement enforceable by law.
10. Agreement [Sec 2(e)] Every promise & every set of premises forming consideration for each other.
11. Promise, [Sec2 (b)] A proposal when accepted becomes a promise.
12. An agreement is an accepted proposal.
13. Consideration, Quid pro quo i.e., something in return.
14. Enforceability by law Agreements which creates legal obligation on the part of parties.
[Balfour Vs. Balfour]
15. Essential elements of a valid contract [Section 10]
(1) All agreements are contracts if they are made by
(2) Free consent of the parties
(3) Competent to the contract for
(4) A lawful consideration & with
(5) A lawful object & are
(6) Not hereby expressly declared to be void.
(7) Intention to create legal relationship
(8) Certainty of meaning (e.g. Oil)
(9) Possibility of performance
(10) Legal formalities.

16. Types of Contracts

(1) Void Contracts
A contract which does not content all the essential elements.
(2) Void Contract [Sec2(j)]
A contract which ceases to be enforceable by law becomes void
when it ceases to be so enforceable. It is a contract which is valid in the beginning but later
on due to some reasons it becomes void.
(3) Void Agreement [Sec 2(g) – An agreement not enforceable by law. It is voide-ab-initio ie.,
void from the very beginning when it is made.
(4) Voidable contract [Sec 2(i)] – A contract which is enforceable by law at the option of one
party but not at the option of others. Here, only one party can go to the court of law, other
party cannot go to the court of law.
(5) Illegal Agreement – An agreement the consideration of object of which is unlawful [Sec. 23]
• All illegal agreements are void, but all void agreements are not necessarily illegal.
• Collateral transactions to an illegal agreement are void.
• Collateral transactions to a void agreement (not illegal) are not affected.
(6) Unenforceable contract – It is one which is good in substance but due to some technical
defect such as absence in writing, signing one or more parties cannot see upon it.
(7) Unilateral Contract – Obligation is pending on the part of one of the parties to the contract.
(8) Bilateral Contract – obligation is pending on the parties of both of the parties to the
contract.
(9) Executed Contract – A contract which is completed where parties to the contract have
performed their respective obligations.
 (10) Executory contract – A contract which is to be performed in future.

English Law
Classifications

Simple contract Formal Contract

Contract of Record Contract under seal

Acknowledgement of Judgement of Court

debt due to state
Recognisation

Obligation imf by court

upon one or more parties
in favour of other

17. Time barred debt

• Indian limitation act, 1963 – A debt is said to be time barred on expiry of 3 years
from the due date, if the amount has not been recovered and also no action has been
taken for recovery of the amount.
• A time barred debt is not recovereable.
• A written promise to pay time barred debt & signed by the premisor or his duly
authorized agent is valid.
• A person who pay time barred debt, in ignorance of Indian Limitation Act, 1963
(Indian Law), cannot recover it back.
• In case of appropriation of payment, if debtor does not mention the debt against
which payment is to be adjusted, then creditor may appropriate it to the debt first in
time, whether time barred or not.
18.
Contract

Implied Express

Implied by law Implied by action Oral Written

Law imposed Inferred from

obligation conduct of parties

Quid Pro Tacit Contract

19. In commercial & Business Agreements, the intention of parties to create legal relationship is
presumed to exist.

CHAPTER-2 OFFER & ACCEPTANCE

1. Proposal [sec 2(a)] / offer – Where one person signifies to another his willingness to do or to abstain
from doing anything with a view to obtaining the consent of that either to such act or abstinence, he
is said to make a proposal.
2. Acceptance [Sec(b)] – Where the person to whom proposal is made signifies his assent thereto, the
proposal is said to be accepted.
3. Legal rules regarding offer
(1) Offer must be capable of creating the legal relationship.
(2) Offer must be certain, definite and not vague.
(3) Offer may be express or implied.
(4) Offer must be distinguish from an invitation to offers.
(5) Offer may be conditional.
(6) Offer may be specific or general
(7) Offer must be made with a view to obtaining the assent of the offeree.
(8) An offer should not contain a term of non compliance which may amounts to acceptance.
(9) Offer must be communicated to the person to whom it is made.
(10) Special terms to an offer must be communicated.
4. Types of offer
 (1) General offer – An offer made to the public at large. Anyone having knowledge of the offer
can accept this offer by complying with the terms of offer.
(2) Specific offer – An offer made to a specified person. This offer can be accepted only by the
person to whom it is made.
(3) Cross offers – When two persons exchange identical offer in ignorance of each others offer.
• Two cross offers cannot make a contract.

(4) Counter offer – Qualified acceptance to the offer & counter offer amounts to rejection of the
original offer.
(5) Standing / open / continuing offer – An offer which is allowed to remain open over a period
of time.
• Tender for supply of goods is an example of General offer & standing offer.

5. Examples of invitation to offer

(1) Advertisement
(2) Window display of goods by shopkeeper
(3) Quotations
(4) Catalogue
(5) Price list
(6) Advertisement in a newspaper for auction sale
(7) Initial public offer (IPO) of a company
(8) Prospectus issued by an institute.

6. Rules regarding valid acceptances

(1) Acceptance must be absolute and unqualified.
(2) Mere silence is not an acceptance.
(3) Acceptance must be communicated.

(4)
Mode of
Acceptance

Mode prescribed in No mode prescribed

the proposal in the proposal

According to mode According of some

prescribed usual or reasonable
mode

(5)
Time for
Acceptance

Time prescribed No time is

with proposal prescribed in the
proposal
 • An acceptance is to offer what is a lighted match is to a train of gunpowder
[Sir William Anson]

7. Communication of offer and acceptance

• Communication of offer is complete when it comes to the knowledge of the person to whom
it is made (i.e., when the letter of offer reaches to offeree).
• Communication of Acceptance is complete
a) As against the progress – When it is put into the course of transmission to him so as
to be out of power of the acceptor to withdraw the same 9i.e, when letter of
Acceptance posted).
b) As against the acceptor – When it comes to the knowledge of the proposer. (i.e, when
letter of Acceptance reached to proposer)

8. Communication of Revocation is complete:-

a) As against the person who makes it, when it is put into the course of transmission to
the another person so as to be out of power of the person making it.
b) As against the person to whom it is made, when it reaches to him.

9. Other Important Points

• A bid at an auction sale is an implied offer to buy.
• A proposal is revoked by death or insecurity of the proposer, if the fact of insanity or
death comes to the knowledge of the accepter before acceptance.
• An agreement to agree in future is invalid.

Meaning of Terms
• Offeror – The person who makes the offer.
• Offeree – The person to whom offer is made.
• Promisor – The person who makes the promise.
• Promisee – The person to whom promise is made.

CHAPTER -3 : CONSIDERATION
1. Consideration [Sec 2(d)] – When at the desire of the promissee, the promise or any other person has
done or abstained from doing or, does or abstains from doing or promise to do or to abstain from
doing something. Such an act or abstinence or promise is called consideration for the promise.
Technical word “Quid pro quo” ie., something in return.
2. Legal rules regarding consideration
1. Consideration must move at the desire of the promisor.
2. Consideration may move from the promissee or any other person
3. Executed Consideration
Consideration which has been given
4. Executory Consideration
Consideration to be moved in future.
 5. Consideration may be past, present or future.
6. Consideration should be real & not illusory.
7. Consideration need not be adequate.
8. The performance of an act what one is legally found to perform is not consideration for the
contract.
9. Consideration must not be unlawful immoral or opposed to the public policy.
10. There can be a stranger to a consideration but there cannot be a stranger to a contract.

3. Exception to a third party or stranger to a contract cannot see.

1. Trust – Beneficiary can sue
2. Family Settlement – Other family members can sue.
3. Marriage contract – Female member for her marriage expenses on partition of HUF.
4. Acknowledgement of liability
5. Assignment – Assignee can enforce upon the contract.
6. Covenant – Running with laud

4. No Consideration, no contract (An agreement without consideration is void). [Section 25]

Exceptions:
1. Agreement on account of natural love and affection. This means there is a :-
a) Written legal agreement
b) On accounts of natural love & affection
c) Parties standing in near relative
2. Compensation for past voluntary services
3. Promise to pay time barred debt:-
a) In writing
b) Signed
4. Agency
5. Completed gift
6. Charity
7. Bailment

CHAPTER – 4 : CAPACITY TO THE CONTRACT

1. Parties competent to contract
1. Major
2. Sound mind
3. Person not disqualified by law from contracting
2. Parties incompetent to contract
1. Minor
2. Unsound mind person
3. Person disqualified by law from contracting
3. Age of majority is defined u/s 3 of Indian Majority Act, 1875
4. Major – A person who has completed 18 years of age
Exceptions
1. Guardian appointed – Appointed by court
2. Superintendent appointed – 21 years
5. A person who is usually of sound mind but occasionally of unsound mind cannot make contract
when he is of unsound mind.
6. A person who is usually of unsound mind but occasionally of sound mind may make a contract when
he is of sound mind.
7. Unsound Mind Persons – Drunkard, Idiot, Lunatic
8. Persons disqualified by Law
 1. Alien enemy
2. Statutory corporation
3. Municipal bodies
4. Sovereign status Ambassadors & Diplomatic couriers
5. Convict
6. Insolvent

9.
Alien Enemy

Contracts entered Contract entered

before war during war

With the permission Without the permission Suspended Dissolved

of Central Govt. of Central Govt.

10. A contract with incompetent person is void-ab-initio.

11. Position of Minor’s Agreement
1. An agreement entered into by or with a minor is void-ab-initio
[Mohiri Bibi Vs. Dharmodas Ghose]
2. Minor can be beneficiary
3. Minor cannot become a partner but he can be admitted to the benefits of partnership with the
consent of all partner.
4. Minor can always plead minority.
5. Ratification on attaining majority is not allowed.
6. Contract by minor’s guardian is valid if it is within the scope of guardian’s authority and it is
for the benefit of minor.
7. Minor is not personally liable for necessaries supply to him but minor’s property is liable, not
only for necessary goods, but also for necessary services. [Nath Vs. Inman]
8. Minor can be an agent but cannot be held personally liable for breach of duty or negligence.
9. A minor cannot be declared insolvent because he is incapable of contracting.

CHAPTER -5 : FREE CONSENT

1. Consent [Section 13]- Agreed upon something in the some sense
consensus-ad-idem
meeting /
Identity of mind.
2. Free Consent [Section 14] – A consent is said to be free if it is not caused by
a) Coercion or
b) Undue influence or
 c) Fraud or
d) Misrepresentation or
e) Mistake.
3. Coercion [Sec.15]- Coercion is committing or threatening to commit a act forbidden by IPC or the
unlawful detaining or threatening to detail any property to the prejudice of any person, whatever with
intention of causing him to enter into an agreement.
• A threat to commit suicide amounts to coercion.
• A person to whom money has been paid or anything delivered must repay or return it.

4. Undue influence [Sec.16] – A contract is said to be induced by undue influence where the relation
subsisting between the parties are such that one of the parties is in a position to dominate the will of
another and uses that position of obtain an unfair advantage over the other.
• A person is in a position to dominate the will of another where he holds real or apparent
authority over the other or stands in fiduciary relation to the other.

5. Fraud [Sec.17] (Intention To Deceive)

a) the suggestion as a fact which is not true by one now does not believes it to be true
b) Active concealment of fact by one having knowledge or belief of the fact
c) A promise mode without any intention of performing it
d) Any other act fitted to deceive
e) Any such act or omission as to law specially declared to be fraudulent
Exception :-
• Mere silence is not a fraud
• Where it is the duty of person to speak
• Where silence is equivalent to speech

6. Misrepresentation – Where a person asserts something which is not true though he believe it to be
true.
• A contract induced by Coercion, undue influence, fraud or misrepresentation is voidable.
7. Mistake
Mistake

Mistake of fact Mistake of Law

Unilateral Bilateral Indian Law Foreign Law

One party under Both parties under Valid Same as Mistake of

mistake mistake fact

Valid Mutual Mistake

of Fact
Some Other Important Points
1. Moral pressure is involved in case of undue influence
2. Ignorance of law is of no excuse.
3. A contract is not voidable if fraud or misrepresentation does not induce the other party to enter into
contract.
4. A party cannot complain of fraudulent silence if he has the means of discovering the truth with
ordinary.
5. Coercion must be exercised against promisor or any other person.
6. An attempt to deceive is not fraud unless the other party is actually deceived.

CHAPTER – 6 : LAWFUL CONSIDERATION OR OBJECT

1. Section 23 – Consideration or object is unlawful if it is :-
a) Forbidden by law or
b) Of such nature that if permitted, defeat the provision of any law or
c) Fraudulent
d) Involves injury to a person or property of another
e) Immoral or opposed to the public policy.

CHAPTER – 7 : VOID AGREEMENTS

1. Void Agreements
• Agreement without consideration
• Agreement with incompetent parties
• Uncertain Agreement
• Agreement made under mutual mistake of fact
• Agreement with unlawful consideration or object
• Illegal agreements
• Agreement to do an impossible act
• Wagering agreements
• Collateral transactions to a wagering agreement are valid.
• Speculative transactions are generally valid.

2. Agreements opposed to the public policy

• Trading with Alien enemy
• Champerty & maintenance
• Stifling prosecution
• Interference with the course of justice
• Marriage brokerage contracts
• Interest against obligation
• Sale of public office
• Agreement for creation of monopolies
• Agreement in restraint of trade
• Agreement in restraint of marriage
 • Agreement in restraint of legal proceeding

3. Consideration unlawful in part

Consideration
unlawful in part

Contract is Contract is
inseparable separable

Contract is Legal Part Illegal Part

altogether void

Valid Void
4. Wagering Agreement – It is an agreement involving payment of a sum of money upon the
determination of uncertain event.
5. Other Important points
• Compromise of public offence is illegal
• Maintenance - Promotion of litigation in which one has no interest.
• Champerity – It is a bargain whereby one party agrees to assist another in recovering
property, with a view to sharing the profits of litigation.
• All agreements on account of champerity and maintenance are neither void nor valid. Some
of them may be void, some of them are valid.
• An agreement which provides for a reference to arbitration instead of court of law is valid
even if it is in restraint of legal preceding.

CHAPTER – 8 : PERFORMANCE OF CONTRACT

1. Where contracts involves the exercise of personal skill and diligence, it must be performed by the
promisor himself.
2. In case of death of promisor, the liability of legal representative is limited to the value of the property
they inherited from the deceased.
3. Of all of the joint promisors dies, their legal representation are bound to perform the promise jointly
4. Succession – Both burden & benefits are transferred.
5. Assignment – Only benefits are transferred, not the liabilities there upon.
6. Reciprocal Promises [Sec 2(f)- When a contract consists a two promises, one being consideration
for the other such promise are called reciprocal promises.

Time essential Late performance Contract becomes voidable

7. at the option of promisee

Contract cannot be avoided

8. Time is not Late performance
promisee is only entitled to
essential
compensation

But within
reasonable time
 Contract becomes voidable
Time is not Late performance
9. at the option of promisee
essential

Reasonable time
expired

Time is Late Promisee No compensation

10. essential performance Accepts without notice

Impossibility of
11.
Performance

Supervening Initial Impossibility

Impossibility

Contract becomes Known to Unknown to Known to

void parties parties promisor only

Void Valid Compensatory

12. If debt to be discharged is not indicated by the Debtor, then creditor may apply it in discharge of debt
in order of time, whether time barred or not.
13. Novation – Old contract is cancelled & new contract is formed.
14. Recession – Old contract is cancelled, no new contract is formed.
15. Alteration – Changing in the terms of original contract parties must remain same.
16. Remission – To remit or waive off the performance by promise.
17. In case of voidable contract, if aggrieved party rescind the contract, it must return the benefit
received there under.
18. Void Contract / Agreement - Either restore back the advantage received or pay compensation for it.
19. Discharge of contract by
• Actual or attempted performance
• Mutual agreement – Novation, Alternation, Remission, Recession.
• Impossibility of performance.
 • Lapse of time eg. Time barred debt.
• Operation of law such as death or insolvency.
• Actual or anticipatory Breach.
20. Where the performance of promise by one party depends upon the prior performance of promise by
the other party, such promises are mutual & dependent.

CHAPTER – 9 : BREACH OF CONTRACT

Actual Breach – Breach of contract on the due date of performance or during the performance.

Anticipatory Breach – Breach of contract before time of performance has arrived ie., before due date of
performance.

Damages in case of Breach:-

1. Ordinary Damages – Compensation for any loss or damage which arise naturally in the normal
course of event of Breach.
2. Special Damages – It cannot be recovered as a matter of right. These can be recovered only if the
notice of special circumstances is given.
3. Vindictive Damages – For Breach of promise to marry or Exemplary Damages for wrongful
Dishonour by banker of his customer cheque.
4. Nominal Damages – Where plaintiff proved that there is breach of contract but he has not suffered
any real damage.
• These may be a single rupee or even 10 paise. These are awarded to maintain the right to
decree in the court.

5. Remote Damage – Indirect loss from breach of contract. Remote Damages are not recoverable.
6. Damages for deterioration coursed due to delay Deterioration – Not only implies physical
damages to goods but also loss of special opportunity for sale damages can be recovered from carrier
even without notice.

7. Calculation of Damage
• Breach by buyer
Damage = Contract Price – Market price in date of Breach.
• Breach by seller
Damage = Market price on date of Breach – Contract price

8. Remedies for Breach of Contract

• Right to rescind the contract
• Right to claim damages
• Right to continue the contract
• Suit upon Quantum merit (as much as is earned or according to the quality of work done)
• Suit for specific performance
• Suit for injunction
• Injunction order is issued by the court when a party do what he promised not to do.

Other points :-
• A contract is not frustrated by commercial impossibility
• In case of anticipatory breach, the aggrieved party may treat the contract
(a) As discharged and bring an immediate action for damages
(b) As operative and wait till the time of performance arrives.
• A party entitled to rescind the contract, loses the remedy where
(a) He has ratified the contract
 (b) The third party acquired the right in good faith
(c) Contract is not separable and recession is sought of one part only.

CHAPTER – 10 : CONTINGENT & QUASI CONTRACT

• Contingent contract [Sec 31] – It is a contract to do or not to do something, if some event collateral
to such contract, does or does not happens.
• Contract of Insurance is a contingent contract.
• When the contingent event is the part of contract, the contract is conditional one, & where it is
collateral to the contract, it is a contingent contract.

•
Contract
Contingent

An Event
“Happening”

An Event happens Happening of an

event become
impossible

Valid Void

• Contract
Contingent

An event not
“Happening”

An event happens Happening of an

event become
impossible
• The basis of “quasi contractual relations” is the prevention of unjust enrichment at the expense of
others.

Contract Contingent Future conduct of Void due to impossibilities

• living person of an event due to conduct of
such person

An event happens Valid

• within time
Contract Contingent An event
“happening” An event does not Void
happens within time
Within Fixed Time
Happening of an
event becomes Void
impossible within
time

An event happens Void

within time
Contract Contingent An event “not
• happening” An event does not Void
happens within time
Within Fixed Time
Happening of an
event becomes Valid
impossible within
time

• Contract Contingent Happening of Void

Impossible an event

QUASI CONTRACT
• Right in rem – Right against the entire world.
• Right in personam – Right against a particular personam.
• Quasi contractual right is a right in personam.
• Quasi contracts are implied by law.

Types of quasi contracts

• Claim for necessaries supplied to an incompetent person, supplier can recover the price from the
property of such personam.
• Right to recover money paid for another.
• Obligation of a person enjoying the benefit of non gratuitous act.
• Responsibility of finder of goods
same as bailee.
• A person to whom money has been paid or anything delivered under coercion or by mistake must
repay or return it.

CHAPTER -1 :INDIAN PARTNERSHIP ACT, 1932

1. Partnership [Sec 4] - It is the relation between persons who have agreed to share the profits of a
business carried on by all or any one of them acting for all.
2. Essential elements of partnership
• Two or more persons
• Agreement
• Business
• Sharing of profits
• Mutual agency.
3. Maximum no. of partners has not been defined under partnership Act. It has been defined under
Companies Act. For Ordinary business
(20), for Banking Business
(10). If no. of partners
exceed this maximum limit, it becomes an illegal Association.
4. The persons who entered into partnership are individually called partners & collectively called firm
and the name under which they carry on from business is called firm name.
5. Written agreement between partners is called partnership deed.
6. Mutual Agency – Business must be carried on by all partners or any one of them acting for all.
Every partner is the principal as well as agent of each other as well as firm.
7. Sharing of profits is not the true test of partnership.
8. Mutual agency, which is the cardinal principal of partnership law, is the true test of partnership.
9. Sharing of profits is the prima facie evidence of partnership.
10. Mutual agency is the conclusive evidence of partnership.
11. A partnership firm cannot become a partner in another firm because it has no separate legal entity.
12. The member of a registered company can become a partner in a firm because company is having a
separate legal entity from its member.
13. Types of Partners
1) Active partners – Who actively participates in conduct of partnership business. Public notice
at the time of retirement.
2) Sleeping or Dormant partners – Do not take part in conduct of partnership business. No
public notice at the time of retirement.
3) Nominal partner – A person who lend his name to the firm without having any real interest.
4) Sub partner – Partnership between partner and stranger.
5) Partner in profits only – No sharing in losses
6) Partner by holding out or partner by estoppel – on whose representation as partner, third
party has given credit to the firm.

14. Partnership arises by agreement whereas Co-ownership may arise by agreement or operation of law
15. Minor’s position in partnership
• A minor cannot become a partner in a firm, but he can be admitted to the benefits of
partnership with the consent of all partners
• He can access, copy & inspect the accounts of the firm and not books of the firm.
 •
On attaining majority or obtaining
knowledge of the fact that he is a partner
in a firm

Within 6 months

Public notice

Elect to become partner or not

No public notice is Public notice not

regd. If he want to given
continue as partner

Public notice given Deemed to be partner

Not to become a Liability

partner Retrospectively

His share is not liable after

the date of public notice

16. Minor has right to sue partners for accounts for payment of his share but only when severing his
connection with the firm.

CHAPTER -2 : RELATION OF PARTNERS

1. Right of partners
• Right to take part in conduct of the business.
• Right to be consulted.
• Right to have access to inspect & copy books of the firm.
• Right to share profits equally but if no agreement other wise.
• Interest on capital – not allowed if there is agreement otherwise, it shall be paid only out of
profits.
• Interest of advances @ 6% p.a. if no agreement otherwise.
• Right to be indemnified for ordinary expenses and expenses incurred in emergency.
• No remuneration unless there is an agreement otherwise.
• Right to stop admission of a new partner.
• Right to retire with the consent of all partners, if partnership is at will, by notice of retirement
to other partners.
• Right not to be expelled by any majority of partners.
• Right of outgoing partners to carry on competing business.
• Right of retiring partner or legal representative of deceased partner to share of profits or
Interest @6% p.a. at his option.
 • Right to dissolve the firm with the consent of all partners.
• In case of Partnership at Will, by giving notice in writing to other partners of his
intention to do so.

2. Partnership at will – No duration and no particular venture is fixed.

3. Particular partnership – For particular adventure or particular time period ( Duration)
4. Duties of partners –
• Duty to carry on business to the greatest common advantage.
• Duty to accounts for profits earned from any transaction or business connection of the firm or
from use of firm’s property or firm’s name.
• Duty not to carry on competing business as to that of partnership firm. If carries on, must
account for and pay all the profits to the firm but firm will not be liable for any loss under
competing business.
• Duty to be just & faithful to each other.
• Duty to render true accounts.
• Duty to indemnify the firm for loss or damage due to his fraud or willful neglect.
• Duty to attend his duties diligently
• Duty not to claim remuneration.
• Duty to contribute equally to the loss of firm, unless otherwise agreed.

5. Acts beyond Implied authority of partner

• Submission of dispute for arbitration
• Compromise or relinquish of any claim
• Withdraw a suit filled on behalf of firm.
• Admit any liability in a suit against the firm.
• Acquire an immovable property on behalf of the firm.
• Transfer immovable property belonging to the firm.
• Opening a bank account on behalf of firm in his own name.
• Enter into partnership on behalf of the firm.

6. If any money received on behalf of the firm is misapplied by any partner, then all the partners as well
as firm are liable to third parties.
7. A partner can be expelled from the firm provided:-
a) Power of expulsion existed is a contract between part.
b) Power has been exercised by a big majority of partners &
c) Power has been exercised in good faith which means:-
i. Expulsion must be in the interest of partnership.
ii. Notice is served to the partner.
iii. Opportunity of being heard is given.

8. If the partner is otherwise expelled, the expelled is null & void.

CHAPTER – 3 : REGISTRATION & DISSOLUTION OF FIRM

• Registration of firm is not compulsory, it is optional.
• If a firm is not registered, it would attract following disabilities:-
(a) No suit against third party by firm
(b) No set off of more than Rs. 100 by firm or its partner
(c) No action against firm by partner
• Registration of partnership is complete when registrar of firms file the statement & records an entry
in the register of firm.
• Non registration of firm does not affect the right of third parties against the firm or its partners.
• Dissolution by Agreement
(a) Insolvency of all partners.
(b) Business becoming unlawful.
(c) Notice of Dissolution by partner where partnership is at will.

• Subject to agreement between partners, on happing of following :-

a) Efflux of time
b) Completion of venture
c) Death of a partner
d) Insolvency of a partner

Dissolution by court
• Partner becoming of unsound mind.
• Permanent incapacity of a partner
• Misconduct of a partner affecting business.
• Willful or persistent breaches of agreement by a partner
• Transfer or sale of whole interest by a partner
• Improbability of business being carried on save at loss
• On other equitable ground as court satisfies

Consequences of Dissolution
• Partners continue to liable until public notice is given.
• A partner can find the firm for acts done after dissolution of firm which are related to winding up or
to complete unfinished transactions.
• Partners are liable to repay to new partner reasonable amount of premium.

THE SALE OF GOODS ACT, 1930

1. Buyer means a person who buys or agrees to buy goods.
2. Seller means a person who sells or agrees to sell goods.
3. Goods means every kind of movable property other than actionable claim & money & includes stock
& shares , growing crops , grass or things attached to or forming part of land which are agreed to be
served before or under the contract of sale.
4. Existing goods – Goods existing at the time of contract of sale i.e. those owned and possessed by
seller.
5. Future goods – Goods to be manufactured or produced or acquired after making the contract of sale
( Agreement to sell ).
6. Specific goods - Goods identified and agreed upon at the time of contract of sale.
7. Unascertained / Generic Goods – Goods Defined only by description, & not identified and agreed
upon.
8. Ascertained goods – Goods identified as per agreement after contract of sale is made.
9. Goods in deliverable state – When they are in such a condition that buyer is bound to take delivery
of them under the contract.
10. Delivery – Voluntary transfer of possession by one person to another.
11. Actual Delivery – Physical delivery of goods from seller to buyer.
12. Symbolic Delivery – Delivery is taken e.g. Key of a warehouse.
13. Constructive Delivery – Without change in custody of thing.
14. Document of a title to goods – B/L, Dock warrant, warehouse keeper’s, Certificates, Wharfinger
certificate, Railway receipt, multimodal transport document.
15. Mercantile Agent – Who is having in customary course of business an authority
(a) To sell the goods or
(b) To consign the goods for purpose of sale or
(c) To buy goods or
(d) To raise money on security of the goods.

16. Property – Means general property, not special property.

17. Insolvent – Who ceased to pay his debts in the ordinary course of business or cannot pay his debts
when they become insolvent.
18. Contract of Sale is a contract whereby seller transfers or agrees to transfer property in goods to the
buyer for a price.
19. Price is the monetary consideration for sale of goods.
20. Border - when goods are exchanged for goods.
21. Sale – When goods are exchanged for goods & price.
22. (a) In case of sale, ownership & risk is transferred to the buyer.
(b) But in case of agreement to sell, it is not transferred.
23. Bailment is the deliver of goods from one person to another for some specific purpose, on a
condition that, when the purpose in accomplished the goods shall be retire or disposed of f according
to the direction of the person delivery them.
24. In case of Bailment, only possession is transferred not the ownership.
25. Unless otherwise agreed, stipulation as to payment of price is not essence of contract. But stipulation
as to delivery of goods is regarded as an essence of contract.
26. Condition essential to the main purpose of contract breach of which give right to repudiate the
contract & to claim damage.
27. Warranty – Collateral to the main purpose of contract. The breach of which give rise to right to
claim damages but not a right to reject the goods & treat the contract as repudiated.
• Breach of conditions may treated as breach of warranty but breach of warranty cannot be
treated as breach of condition.
28. Implied conditions
(a) Condition as to title
(b) Sale by sample as well as description
(c) No implied condition as to quality or fitness
(d) Condition as to wholesomeness.

29. Implied warranties

(a) Implied Warranties was to undisturbed possession.
(b) As to non existence of encumbrances
(c) Disclosure of dangerous nature of goods
(d) As to quality or fitness by usage of trade
30. Caveat emptor – Let the buyer beware
Exemption :-
(1) Buyer make known to the seller the purpose of purchase & relies upon seller’s skill &
judgement.
(2) Goods purchased under patent name or brand name
(3) Sale by description
(4) Sale by sample
(5) Sale by sample as well as description
(6) When quality or fitness is not defined by usage of trade
(7) Fraud or misrepresented by seller.
31. Appropriation of goods - Selection of goods for the purpose of using thus in the performance of
contract and with the mutual consent of seller and buyer.
32. In case of unascertained goods, property is passed to the buyer when the goods are ascertained and
they are unconditionally appropriated to the contract.
33. In case of cash sales, property passes only when the case is paid for.
34. “Nemo dat quod non label” – no one can give what he has not got”
35. Exception to sale by non owner
(1) Sale by Mercantile Agent
(2) Sale by one of joint promiser
(3) Sale by person in possession under voidable contract provided contract has not been
rescinded until sale
(4) Sale by unpaid seller
(5) Sale by official receiver as
(6) Sale by finder of goods
(7) Effect of estoppels
(8) Sale by one who already sold the goods but continuous in possession thereof.

36. Unpaid Seller

(1) When whole price has not been paid or tendered & seller has immediate right of action for
the price
(2) A bill of exchange or other negotiable instrument was given for payment but the same has
been dishonoured, unless this payment is absolute & not a conditional are.
37. Right of lieu is a right to retain possession while right of stoppage of in transit is a right to regain
possession.
38. Right of stoppage in transit can be exercised only. When buyer is insolvent.
39. Unpaid seller’s right
Against Goods Against Buyers
(1) Right of lieu (1) Suit for price
(2) Right of stoppage in transit (2) Suit for damages for non acceptance
(3) Right of Resale (3) Suit for damages for bread
(4) Suit for interest

• Right of stoppage in transit starts where right of lieu ends.

• Auction Sale – It is mode of selling property by inviting bids publicly & property is sold to
the highest bidder.
• An auctioneer is an agent governed by law of agency
• If seller makes use of pretended bidding to raise the price, the sale is voidable at the option of
buyer.
• Contract of sale and Bailment are species of general contract.
• Sale may be absolute conditional or contingent.
• Finder of goods can sell the goods if the owner of goods cannot be found with Reasonable
due diligence.
• Unless otherwise agreed, the expenses of delivery shall be from by seller.
• Unless otherwise provided, buyer shall apply for delivery.
• It time is not fixed for delivery, it must be delivered by the seller within reasonable time.
• Money does not include old coins & foreign currency.
• In an auction sale of bidders make an agreement, refraining from bidding against each other,
such an agreement in valid.
• Where goods are put for sale in lots in a sale of goods by auction, each lot prima facie
deemed to be separate contract of sale.
• Any seller of goods by auction may bid if he reserves his right to bid by notice to the public.
• Right to lieu can be exercised for price only.
• The sale of goods Act, 1930 deals with the movable goods only.
• A contract of sale may be a sale or agreement to sell.
• Document showing title to goods in different from document of title to goods.
• In a hire purchase agreement the hirer has an option to buy the goods.