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THE INDIAN CONTRACT ACT, 1872

CHAPTER-1 NATURE OF CONTRACT


1. DEFINITIONS
A. CONTRACT Sec.2(h) B. AGREEMENT Sec.2(e) C. ENFORCEABILIT B LA! D. PROMISE Sec.2(") E. CONSIDERATION An agreement enforceable by law. Every promise and every set of promises forming consideration for each other. An agreement which creates legal obligation on the part of parties. A proposal when accepted becomes a promise. Price paid by the one party for the promise of the other. Tech#$c%& '()* +e%#$#, -.UID PRO .UO/ $.e. 0(+e1h$#, $# )e12)#

2. ESSENTIAL ELEMENTS OF A 3ALID CONTRACT SECTION 14 All A,)ee+e#10 are contracts if they are made by the 5)ee c(#0e#1 of the 6%)1$e0 c(+6e1e#1 1( c(#1)%c1 for a &%'52& c(#0$*e)%1$(# and with a &%'52& ("7ec1 and are #(1 he)e"8 e96)e00&8 *ec&%)e* 1( "e :($*.

ESSENTIAL ELEMENTS OF A 3ALID CONTRACT 1. AGREE E!" #n order to constit$te a valid contract% there m$st be an agreement between the parties. "o form an agreement% there sho$ld be proper offer by one and its proper acceptance by the other. &. 'REE C(!)E!" C(#0e#1 means agreed $pon same thing in the same sense i.e. there sho$ld be c(#0e#020-%*-$*e+. A c(#0e#1 is said to be 5)ee when it is #(1 ca$sed by coercion% $nd$e infl$ence% fra$d% misrepresentation or mista*e. E9%+6&e; - -A+ threatened to shoot ,B+ if he -B. does not sell his ho$se to him Rs. &//// and ,B+ agreed to it. 0ere the agreement is entered into $nder coercion and hence voidable at the option of ,B+.

1. C( PE"E!C2 Parties m$st have the capacity to enter into a contract otherwise the (' "0E PAR"#E) contract is not valid. !h( $0 c(+6e1e#1 1( c(#1)%c1 a3or Person of )o$nd mind Person not dis5$alified by law from contracting !h( $0 $#c(+6e1e#1 1( c(#1)%c1 inor Person of 4nso$nd ind Person dis5$alified by contracting

law

from

6. 7A8'47 C(!)#DERA"#(!

Consideration m$st not be $nlawf$l% immoral or opposed to the p$blic policy. E9%+6&e0; U#&%'52&; -A agrees to sell narcotics to B for a s$m (5 Rs. 1/////. "his agreement is not valid beca$se the consideration is $nlawf$l. I++()%&; - An agreement for letting a ho$se to a prostit$te for carrying

on her vocation there. O66(0e* 1( 1he 62"&$c 6(&$c8; - "rading with enemy% Agreement in restraint of marriage% trade% legal proceedings etc. 7A8'47 (B9EC" (b3ect means the p$rpose or design. "he ob3ect of the agreement m$st be lawf$l. E9%+6&e;- ,A+ and ,B+ ma*e an agreement for sm$ggling o$t some goods from #ndia to another co$ntry. "his agreement cannot be enforced in the co$rt beca$se the ob3ect is $nlawf$l. An agreement sho$ld not be one which is e<pressly declared void by the law. E9%+6&e;- Agreement in restraint of trade% marriage or legal proceedings are e<pressly declared void by the law and hence not enforceable. Parties m$st have an intention of creating the legal relationship. An agreement of a p$rely domestic or social nat$re is not a contract. E9%+6&e 1=> ,A+ invites his friend ,B+ to his birthday party. ,B+ accepts the offer. B$t he fails to t$rn $p for the party. "his agreement creates social and personal relationship between ,A+ and ,B+. #t cannot be enforced in the co$rt. "h$s A has no legal remedy against B. E9%+6&e 2=> ,A+ borrows s$m of Rs. ?// from his friend ,B+ for three months. ,B+ gets legal right to s$e $pon ,A+ if he fails to ret$rn money. #t is beca$se this agreement creates legal relationship% which can be enforced in the co$rt. BALFOUR 30. BALFOUR (1<1<)

!(" E:PRE))72 DEC7ARED ;(#D

#!"E!"#(! "( CREA"E 7EGA7 RE7A"#(!)0#P

#n this case a h$sband 3$st ma*es a promise to pay his wife monthly allowance of @1/ for her maintenance. 7ater on they separated and h$sband failed to pay stip$lated amo$nt to his wife. )he filed s$it for that allowance. B$t it was held by the co$rt that s$ch arrangements are not contracts or do not res$lt in a contract beca$se parties did not intend to create legal relationship and finally the s$it was dismissed. Agreement made by the parties m$st be certain or capable of being CER"A#!"2 (' made certain. EA!#!G E9%+6&e; ,A+ is a dealer of *erosene oil and cocon$t oil. ,B+ ma*es an agreement with him for b$ying 1/ lts of oil. eaning of this agreement is $ncertain and therefore it cannot be enforced. P())#B#7#"2 (' PER'(R A!CE 7EGA7 '(R A7#"#E) An agreement to do an act impossible in itself is void. E9%+6&e; - An agreement to discover treas$re by magic is void. )$ch as in writing% registration etc m$st be completed otherwise the contract is not enforceable at law.

=.

T PES OF CONTRACTS

ENFORCEABILIT >3OID >3OIDABLE >UNENFORCEABLE >ILLIGAL

CREATION >IMPLIED >E- C(#1)%c1

E?ECUTION >E?ECUTOR >BILATERAL >UNILATERAL

ENGLISH LA! CLASSIFICATION

SIMPLE CONTRACTS

FORMAL CONTRACTS

CONTRACT OF RECORD

CONTRACT UNDER SEAL

EUDGEMENT OF COURT

RECOGNISANCE

A. ON THE BASIS OF ENFORCEABILIT 1. 3ALID CONTRACT A contract which contains all the essential elements. A contract which ceases to be enforceable by law becomes void 2. 3OID CONTRACT when it ceases to be enforceable. @SEC. 2(7)A An agreement which is not enforceable by law is said to be void. #t =.3OID AGREEMENT is an agreement which cannot be enforced from the date when they @SEC. 2(,)A were made. #t is :($* %" $#$1$(. An agreement% which is enforceable by law at the option of one B.3OIDABLE more of the parties% b$t not at the option of the other -s. is a voidable CONTRACT contract. @SEC. 2($)A F() e9%+6&e; - r. A% at *nife > point% as*s B to sell his scooter for Rs. ?/. r. B gives consent. "he agreement is voidable at the option of B% whose consent is not free. An $nenforceable contract is one which is good in s$bstance b$t C. UNENFORCEABLE cannot be enforced by law d$e to some technical defects% s$ch as CONTRACT $nder stamping% absence of writing% barred by limitation. A contract which is forbidden by law. D. ILLEGAL F() e9%+6&e; - Agreement to commit crime. CONTRACT B. CLASSIFICATION ON THE BASIS OF CREATION 1. E:PRE)) A contract which is created either by word spo*en or written. C(!"RAC" F() e9%+6&e; - #f ,A+ of Agra offers to sell his car for Rs. 1?//// to ,B+ of Delhi by a letter and ,B+ accepts the offer by writing a letter. "h$s the contract between ,A+ and ,B+ is said to be an e<press contract. &.# P7#ED "he contract which is created otherwise than by words spo*en or written. i.e. these C(!"RAC" contracts are=> A. "acit A contract which is inferred from the cond$ct of the parties is said Contract to be tacit contract. F() e9%+6&e; - -i. 8hen we enter into a b$s witho$t as*ing any 5$estion from b$s cond$ctor% we enter into implied contract. -ii. (btaining cash form A"

1. E>C(!"RAC"

"hese are the contracts% which are created neither by word spo*en% nor written% nor by the cond$cts of the parties% b$t these are created by the law. F() e9%+6&e; - #f ,A+ leaves his goods at ,B++s shop by mista*e% then it is ,B++s d$ty to ret$rn the goods or to compensate the price. I# 5%c1, 1he0e c(#1)%c10 *e6e#*0 26(# 1he 6)$#c$6&e 1h%1 #("(*8 '$&& "e %&&('e* 1( "ec(+e )$ch %1 1he e96e#0e (5 1he (1he)0. Th$0 6)$#c$6&e $0 F#('# %0 doctrine of unjust enrichment. An e>contract is one% which is entered into between two parties via internet.

B. A$asi Contracts

C. CLASSIFICATION ON THE BASIS OF BASIS OF E?ECUTION 1. E9ec21e* C(#1)%c1 An e<ec$ted contract is a contract in which both the parties have performed their obligation. "his is a contract which has been completed. F() e9%+6&e;- #f ,A+ agrees to sell his car to ,B+ for Rs. 1/////. "he contract is said to be e<ec$ted if ,A+ delivers car to ,B+ and B pays the price to ,A+. An E<ec$tory contract is the contract which is to be performed in f$t$re. 8here obligation is pending on the part of one of the parties. A Bilateral Contract is a contract in which obligation is pending on the part of both of the parties. D. ENGLISH LA! CLASSIFICATION 1. S$+6&e C(#1)%c10 2. F()+%& C(#1)%c10 %. C(#1)%c1 (5 Rec()* A simple contract is the contract that is not formal. "hese can be made orally or in writing and m$st be s$pported by consideration. A formal contract is one which is entered into the prescribed form. "hese contracts may be s$b>divided as follows= -i. E2*,+e#1 (5 C(2)1;- #t is an obligation imposed by the co$rt $pon one or more persons in favo$r of the otherBs. -ii. Rec(,#$G%#ce;>#t is a written ac*nowledgement of a debt d$e to state. #t is met in connection with criminal proceedings. #t is a contract which derives its binding force from its form alone. #t is also *nown as deed or specialty contract.

2. E9ec21()8 C(#1)%c1 =. U#$&%1e)%& C(#1)%c1 B. B$&%1e)%& C(#1)%c1

". C(#1)%c1 2#*e) Se%&

CHAPTER-2 OFFER H ACCEPTANCE


IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII 1.)PROPOSAL @Sec 2(%)A; 8hen one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that either to s$ch act or abstinence% he is said to ma*e a proposal.

E9%+6&e ;- A tells B % C# want to marryD. "his does not amo$nt to offer b$t it is a mere e<pression of willingness. E9%+6&e;- A said to B% C# want to marry% 8ill yo$ marry me.D "his wo$ld amo$nts to offer beca$se in this case% the intention of A is to obtaining the consent of B. E9%+6&e;- D said to E% C# want to sell my bi*e to yo$.D "his is an offer Cto do somethingD. E9%+6&e;- : said to 2% C# will not file a s$it against yo$ in the co$rt of law% if yo$ repay the overd$e amo$nt of Rs.1/////."his is an offer for Cnot to do somethingD. O55e)(); - Person who ma*es the offer. O55e)ee; - Person to whom offer is made.

LEGAL RULES REGARDING OFFER


1. (ffer m$st be A social invitation% even if it is accepted% does not create legal relations capable of creating beca$se it is not so intended. (B%&5(2) 30. B%&5(2)) the legal relation &. (ffer m$st be "he terms of the offer m$st be certain or capable of being made certain. certain% definite and not vag$e ,A+ has two ar$ti cars% one is red and other bl$e. 0e offers to sell his car E<ample 1 to ,B+. #n this case% 8hich car he is offering to sell is not clear. "herefore the offer is not valid one. -A+% a dealer of cocon$t oil% offers to sell 1/ lts of oil to ,B+ for a certain E<ample & price. "his offer is valid one beca$se it is capable of being made certain. E<ample 1 1. (ffer may be e<press or implied -A+ offered to ta*e a ho$se on lease provided the ho$se sho$ld be p$t into thoro$gh repairs and sho$ld be s$fficiently decorated. "his offer is too vag$e and hence not valid. a. E<press (ffer An offer which is made by words spo*en or written. E9%+6&e; - -:+ says to ,2+% C 8ill yo$ p$rchase my white horse for Rs. &////. E9%+6&e; - ,:+ writes to ,2+ a letter% C # want to sell my car for Rs. 6//// to yo$.D

An offer which is made otherwise than by words spo*en or written. E9%+6&e;- A transport company r$ns b$ses on a partic$lar ro$te. "his is an implied offer from the transport company to carry passengers on the ro$te who are prepared to pay the specified fare. "he acceptance of the offer is complete as soon as the passengers board the b$s. A passenger who enters the b$s also impliedly promises to pay the prescribed fare. 6. (ffer m$st be An offer sho$ld be disting$ished from an invitation to offer. An offer is disting$ished from definite and capable of converting an intention into a contract. 8hereas an an invitation to offer invitation to an offer is only a circ$lation of an offer% it is an attempt to ind$ce offers and precedes a definite offer. E9%+6&e0 (5 I#:$1%1$(# 1( O55e) 1. 8indow display of goods by a shop*eeper. &. A$otations% Catalog$e% Price list. 1. Advertisement in a newspaper for sale of an article.

b. #mplied (ffer

E9%+6&e;- Goods are sold in a shop $nder ,self service+ system. C$stomer select the goods in the shop and ta*e them to the cashier for payment of price. Cashier ref$ses to accept the payment. 0eld that c$stomer cannot bo$nd the shop*eeper for delivery of goods. (Ph%)+%ce21$c%& S(c$e18 (5 G)e%1 B)$1%$# :. B((10 C%0h Che+$010 L1*. ) ?. (ffer may be )pecific (ffer An offer made to a definite person is called )pecific specific or general offer. A specific offer can be accepted only by the person to whom it is made. General (ffer An offer which is made to the p$blic at large. Anyone having *nowledge of the offer can accept this offer by complying with the terms of the offer. E9%+6&e;- A company advertised in several newspapers that a reward of E 1// wo$ld be given to any person who contracted infl$enFa after $sing the smo*e balls of the company according to its printed directions. Carlill $sed the smo*e balls according to the directions of the company b$t contracted infl$enFa. 0eld that she co$ld recover the amo$nt as by $sing the smo*e balls she had accepted the offer.( C%)&$&& 3. C%)"(&$c S+(Fe B%&& C(.18<=) An offer% to be complete% m$st be comm$nicated to the person to whom it is made. 4nless an offer is comm$nicated to the offeree by the offeror or by his d$ly a$thoriFed agent% there can be no acceptance of it. An acceptance of an offer% in ignorance of the offer% is no acceptance and does not confer any right on the acceptor. E9%+6&e;- ) offered a reward to anyone who ret$rned his lost dog. ' bo$ght the dog to ) witho$t having heard of the offer. 0eld% ' was not entitled to the reward (F$1ch :. S#e*%Fe)). E9%+6&e;- ) sent his servant 7 to trace his missing nephew. 0e then anno$nced that anybody who traced his nephew wo$ld be entitled to a certain reward. 7 traced the boy in ignorance of this anno$ncement. )$bse5$ently when he came to *now of the reward% he claimed it. 0eld% he was not entitled to the reward (L%&+%# Sh2F&% :. G%2)$ D211) A mere declaration of intention does not amo$nt to offer.

G. (ffer m$st be comm$nicated to the person to whom it is made

H. (ffer m$st be made with a view to E9%+6&e;- An a$ctioneer advertised in a newspaper that a sale of office obtaining consent of f$rnit$re wo$ld be held. A bro*er came from a distant place to attend that the offeree a$ction% b$t all the f$rnit$re was withdrawn. "he bro*er there$pon s$ed the a$ctioneer for his loss of time and e<penses. 0eld% a declaration of intention to do a thing did not create a binding contract with those who acted $pon it% so that the bro*er co$ld not recover (H%))$0 :.N$cFe)0(#). I. An offer may be 8hile ma*ing an offer the offeror may impose conditions for the conditional acceptance of the offer. A conditional offer is a valid offer. J. An offer sho$ld not contain a term the non compliance of which amo$nts to acceptance (fferor cannot impose any s$ch condition the non>f$lfillment of which wo$ld lead to acceptance of that offer. E9%+6&e;- A offers to sell o$t his bi*e to B stating that if B does not reply with in a wee*% he will ass$me that he has accepted the offer. "his is not a valid offer% beca$se fail$re on the part of B to reply wo$ld res$lt in an acceptance.

1/. Comm$nication E9%+6&e;- P deposited his bags in the cloa*room at the railway station. of )pecial terms (n the face of receipt% the words JSee "%cFK were printed. (ne of the conditions printed on the bac* was C the liability of the railway company shall be limited to E 1/ for any pac*ageD. P+s bag was lost. 0e claimed the act$al val$e of bag amo$nting to E &6. 0eld that P cannot recover the amo$nt more than E 1/ since the railway company had ta*en all the reasonable steps to ens$re that conditions printed on bac* printed were bro$ght to the *nowledge of P. ( P%)Fe) :. S.E. R%$& C(.)

2. T PES OF OFFER
A. General offer B. )pecific offer C. Cross offers An offer made to the p$blic at large. Anyone can accept this offer by doing the desired act . An offer made to a definite person or a gro$p of persons. )$ch offer can be accepted only by the specified person to whom it is made.

8hen two parties e<change identical offers in ignorance at the time of each other+s offer% the offers are called cross offers. "wo cross offers cannot become a binding contract in the absence of acceptance. E9%+6&e;- A ma*es an offer for selling o$t his bi*e to B for Rs &////. B% in ignorance of this offer ma*es a similar offer for b$ying A+s bi*e for Rs.&////."hese two offers are called cross offers and none of these wo$ld constit$te an acceptance. A 5$alified acceptance to the offer s$b3ect to modifications and variations D. Co$nter offer in the terms of original offer. Co$nter offer amo$nts to re3ection of the original offer. E9%+6&e;- A offers B% C 8ill yo$ p$rchase my car for Rs 1/////.B replies% C# will p$rchase b$t # can pay only Rs H?/// for yo$r car.D "his acceptance given by B is a co$nter offer. E. )tanding% open An offer is allowed to remain open for acceptance over a period of time. E9%+6&e;- "ender for s$pply of goods. or contin$ing offer =.) LAPSE (Re:(c%1$(#) OF AN OFFER (n e<piry of stip$lated or reasonable time. By not accepting in mode prescribed. By re3ection by the offeree. By death or insanity of the offerer or offeree before acceptance. By revocation by the offeror at any time before acceptance. Revocation of standing offer at any time by giving notice to the offeree. Revocation by non f$lfillment of condition precedent to acceptance. By s$bse5$ent illegality or destr$ction of s$b3ect matter.

B.) ACCEPTANCE;- Sec.2(") 8hen the person to whom proposal is made signifies his assent thereto% the proposal is said to be accepted. A proposal when accepted becomes a promise.

LEGAL RULES AS TO 3ALID ACCEPTANCE Acce61%#ce +201 "e %"0(&21e %#* 2#L2%&$5$e* (fferee sho$ld be assented to all terms K conditions of the offer. A 5$alified acceptance amo$nts to co$nter offer.

Acce61%#ce +201 "e ere mental acceptance is not acceptance. Acceptance cannot be made c(++2#$c%1e* in ignorance of the offer. ere silence is not acceptance. Acce61%#ce 1( !h(+ M(*e (5 Acce61%#ce Acceptance m$st be comm$nicated to the offeror i.e. the person who made the offer. Acceptance m$st be in the mode prescribed in the proposal. #f no mode prescribed in the proposal% the acceptance m$st be according to some $s$al and reasonable mode. Acceptance m$st be given within specified time limits given in the offer. #n case no time is specified in the offer% offer m$st be accepted within reasonable time and before the offer lapses. E9%+6&e;> A person applied for shares in a company in 3$ne. 0e cannot be bo$nd by the allotment made late in !ovember since delay of G months in acceptance of application for shares was $nreasonable. (R%+0,%1e 3$c1()$% H(1e&0 :. M(#1e5$()e ) Acce61%#ce "8 c(#*2c1 !h( c%# %cce61 S6ec$5$c (55e) Ge#e)%& (55e) By performance of an act intended by the proposer.

T$+e 5() Acce61%#ce

A )pecific offer can be accepted only by the person to whom it is made. A general offer can be accepted by anyone having *nowledge of the offer by complying with the terms of the offer.

C.) AN ACCEPTANCE TO OFFER IS !HAT A LIGHTED MATCH TO A TRAIN OF GUNPO!DER According to S$) !$&&$%+ A#0(#% CAn acceptance to offer is what a lighted match to a train of g$npowderD. (ffer is compared to a train of g$npowder. Acceptance is compared to a lighted match. 8hen a lighted match is applied to a train of g$npowder% an e<plosion ta*es place. #n the same way% an acceptance is given to the offer% it wo$ld res$lt into a contract and offer cannot be revo*ed thereafter. A train may be removed before match is applied to g$n powder. #n the same way% an offer may be revo*ed before it is accepted by offeree. D. COMMUNICATION OF OFFER H ACCEPTANCE ( Sec1$(# B ) (A) C(++2#$c%1$(# (5 "he comm$nication of offer is complete when it comes to the O55e) *nowledge of the person to whom it is made. (B) C(++2#$c%1$(# (5 "he comm$nication of acceptance is complete> Acce61%#ce -a. As against the 8hen it is p$t into the co$rse of transmission Proposer to him so as to be o$t of power of the acceptor to withdraw the same .

-b. As against the 8hen it comes to the *nowledge of the Acceptor proposer.
7. RE3OCATION OF OFFER H ACCEPTANCE ( Sec1$(# B ) The c(++2#$c%1$(# (5 )e:(c%1$(# $0 c(+6&e1e-a. As against the person 8hen it is p$t into the co$rse of transmission to the person to who ma*es it whom it is made so as to be o$t of power of the person who ma*es it.

-b. As against the person to whom it is made

8hen it comes to his *nowledge.

TIME FOR RE3OCATION ( Sec1$(# C ) An offer can be revo*ed at any time before the comm$nication Revocation of (ffer of acceptance is complete as against the proposer. An acceptance can be revo*ed at any time before the Revocation of Acceptance comm$nication of acceptance is complete as against the offeree.

CHAPTER-= CONSIDERATION IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII


1.) CONSIDERATION; - J.UID PRO .UOK M i.e. something in ret$rn. Consideration is the price agreed to be paid by the promisee for the obligation of the promisor. 8hen% at the desire of the promisor% the promisee or any other person has done or abstained from doing or does or abstains from doing or promise to do or to abstain from doing something% s$ch act or abstinence or promise is called consideration for the promise.@Sec1$(# 2(*)A

2. LEGAL RE.UIREMENTS REGARDING CONSIDERATI(! A. Consideration m$st Consideration m$st move at the desire or re5$est of the promisor. Any act move at the desire of done at the desire of a third party is not consideration. the promisor E9%+6&e;- D constr$cted a mar*et at the desire of the collector of the district. B% a shop*eeper of the mar*et promised to pay commission to D on the sales effected by him. 7ater on B denies to pay the promised amo$nt. D filed a s$it in the co$rt for the recovery of the amo$nt. "he co$rt held that D cannot recover the amo$nt from B beca$se D has constr$cted the mar*et at the desire of the collector % not at the desire of the promisor i.e. B. ( D2),% P)%0%* 3. B%&*e( ) B. Consideration may move from the promisee or any other person Consideration may move from the promisee or any other person who is not a party to the contract. "h$s% 1he)e c%# "e % 01)%#,e) 1( % c(#0$*e)%1$(#. E9%+6&e;- A% by a deed of gift transferred certain property to her da$ghter with the direction that da$ghter sho$ld pay an ann$ity to her sister . "he da$ghter e<ec$ted a writing in favo$r of her sister agreeing to pay the ann$ity. 7ater on% she ref$sed to pay the amo$nt to her sister ta*ing a plea that no consideration is given to her in ret$rn from her sister. "he co$rt held that consideration need not necessarily move from the promisee. 0ence% she is bo$nd to pay the promised amo$nt to her sister. ( Ch$##%88% 3. R%++%88% )

C. E<ec$ted and E<ec$tory consideration D. Consideration may be past% present or f$t$re

#f consideration $nder the contract has been given% it is said to be e<ec$ted. #f consideration $nder the contract is to be moved in f$t$re% it is called e<ec$tory consideration. Past "he words Jh%0 *(#e () %"01%$#e* 5)(+ *($#,K consideration indicates past consideration. P%01 c(#0$*e)%1$(# $0 #( c(#0$*e)%1$(# $# E#,&%#*. Present "he words J*(e0 () %"01%$#0 5)(+ *($#,K indicates consideration present consideration. Consideration which moves sim$ltaneo$sly with the promise. E9%+6&e;- Cash )ales. '$t$re "he words J6)(+$0e 1( *( () 1( %"01%$# 5)(+ *($#,K consideration indicates f$t$re consideration. Consideration which is to be performed in f$t$re. E9%+6&e;- A get boo*ed an air tic*et from Delhi to $mbai. "he flight is to be ta*e off on the ne<t day. #n this case the consideration from A is a Past consideration and consideration is pending on the part of Airlines which is to be performed in f$t$re. E. Consideration sho$ld be real% not #f consideration is an ill$sory one% then it is not valid. ill$sory '. Consideration need not be ade5$ate "ho$gh consideration is an essence of contract% ade5$acy of consideration is not regarded as an essence of contract. Co$rts do not regard the ade5$acy of consideration% it is at the part of promisor to consider that whether he is receiving ade5$ate consideration or not. G. "he performance of an act what one is legally bo$nd to perform is not consideration for the contract

E9%+6&e;- Promise to pay money to a witness. 0. Consideration m$st not be $nlawf$l% immoral or opposed to the p$blic policy 2.) A THIRD PART OR A STRANGER TO A CONTRACT CANNOT SUE A stranger to a contract means a person who is not a party to the contract. "here is a privity of contract between the parties. "herefore only a party to the contract can enforce its rights $nder the contract. E?CEPTIONS;$. T)201 I# c%0e (5 1)201, % "e#e5$c$%)8 c%# 02e 26(# 1he c(#1)%c1. E9%+6&e;- 0 s$ed her father in law L to recover Rs 1?/// being the arrears of allowance payable to her by L. L $nder an agreement made between L and 0+s father% in consideration of 0+s marriage to L+s son D. 0eld that she can recover the amo$nt beca$se she is a beneficiary $nder the contract. (Nh'%7% M2h%++%* 3. H200%$#$ Be,2+) $$. F%+$&8 #n case of family settlement% if the terms of settlement are red$ced into Se11&e+e#1 writing% members who were not originally party to the contract can also s$e $pon it. $$$. M%))$%,e A female member can enforce a provision for marriage e<penses made C(#1)%c10 on partition of 04' between male members. $:. AcF#('&e*,e+e#1 8here a person admits his liability% thereafter% if he ref$sed% he will be estopped from denying his liability. (5 L$%"$&$18 E9%+6&e;- 8here A receives money from B for paying it to C and A admits C the receipt of that amo$nt. 7ater on if he ref$ses% he will be stopped from denying his liability to pay the amo$nt. #n case of assignment of a contract% 8here the benefit $nder the :. A00$,#+e#1 contract has been assigned% the assignee -the person to whom benefits of contract are assigned. can enforce $pon the contract. :$. C(:e#%#1 )2##$#, "he person who p$rchases land with notice that the owner of land is '$1h &%#* bo$nd by certain d$ties affecting land% the covenant affecting the land may be enforced against the s$ccessor of the seller. =. NO CONSIDERATION, NO CONTRACT "he general r$le of law is that an agreement witho$t consideration is void. E?CEPTIONS ($) A,)ee+e#1 (# %cc(2#1 (5 N%12)%& &(:e %#* A55ec1$(#

E9%+6&e;- A h$sband by a registered doc$ment after referring to 5$arrels and disagreements between himself and his wife% promised to pay his wife a s$m of money for her maintenance and separate residence% it was held that the promise was $nenforceable. ( R%7&2Fh8 De:$ 3. Bh((1#%1h ) ($$) C(+6e#0%1$(# 5() 6%01 :(&2#1%)8 0e):$ce0 OSec1$(# 2C (2)P )ervices rendered vol$ntarily. )ervices rendered for the promisor. Promisor m$st be in e<istence at the time of rendering services. Promisor m$st have intended to compensate the promisee.

E9%+6&e;- : finds 2+s p$rse and gives it to him. 2 promises to give : Rs 1///. "his is a valid contract. ($$$) P)(+$0e 1( 6%8 1$+e "%))e* *e"1 OSec1$(# 2C (=)P A promise to pay% wholly or in part a debt which is barred by law of limitation can be enforced if it is => #n writing and )igned by the person ma*ing it or his a$thoriFed agent. ($:) A,e#c8 According to Sec1$(# 18C of the #ndian Contract Act% no consideration is necessary to create an agency. (:) C(+6&e1e* G$510 Gifts do not re5$ire any consideration. ( E96&%#%1$(# 1 1( Sec1$(# 2C) (:$) Ch%)$18 A promise to contrib$te to charity% tho$gh grat$ito$s% wo$ld be enforceable% if on the faith of the promised s$bscription% the promisee ta*es definite steps in f$rtherance of the ob3ect and $nderta*es a liability% to the e<tent of liability inc$rred% not e<ceeding the promised amo$nt of s$bscription.(Ne*%)#%1h 3. G()$e M(h%++%*) ($) B%$&+e#1 Consideration is not necessary to effect bailment.(Sec1$(# 1B8)

CHAPTER-B CAPACIT TO CONTRACT


1. !HO IS COMPETENT TO MANE A CONTRACT SECTION 11; M Every person is competent to contract who is of %,e (5 +%7()$18 according to the law to which he is s$b3ect% who is of 0(2#* +$#* and is #(1 *$0L2%&$5$e* 5)(+ c(#1)%c1$#, "8 %#8 &%' to which he is s$b3ect. A. AGE OF MAEORIT According to Sec1$(# = (5 I#*$%# M%7()$18 Ac1, 187C A minor is a person who has not completed 18 8e%)0 of age. Every person domiciled in #ndia attains ma3ority on the completion of 1I years of age. E9ce61$(#0 ; - #n the following cases% a person attains ma3ority on completion of &1 years of age=> 1. 8here the g$ardian of a minor is being &. 8here the s$perintendence of minor+s appointed $nder G$ardians and 8ards Act% property is ass$med by Co$rt of 8ards. 1IJ/. B. SOUND MIND PERSON (Sec1$(# 12 ) A person is said to be of so$nd mind for the p$rpose of ma*ing a contract if at the time when he ma*es it he is capable of $nderstanding it and of forming a rational 3$dgment so as to its effect $pon his interests. A person who is $s$ally of $nso$nd mind% b$t occasionally of so$nd mind% may ma*e a contract when he is of so$nd mind. A person who is $s$ally of so$nd mind b$t occasionally of $nso$nd mind% may not ma*e a contract when he is of $nso$nd mind.

UNSOUND MIND PERSONS

C. PERSONS DIS.UALIFIED B LA! Alien enemy An Alien enemy is a person who is a citiFen of a foreign co$ntry which is at war with #ndia. Contracts d$ring An alien enemy cannot enter into contract d$ring the period of war the war e<cept a license from the central government. Contracts entered Contracts entered before war are either dissolved or merely before war s$spended for the period of war and revived after the war is over. )tat$tory Corporation $nicipal Bodies )overeign )tates% Ambassadors K Diplomatic Co$riers Convict #nsolvent A stat$tory corporation cannot enter into contracts which are $ltra vir$s its memorand$m. $nicipal bodies cannot enter into acts which are beyond their stat$tory powers. "hese persons en3oy certain special privileges. "hey cannot be s$ed in the #ndian co$rts. 0owever% they can enter into contracts and enforce those contracts in #ndian Co$rts. A convict cannot enter into contract d$ring the period of imprisonment. 8hen the person is ad3$dged insolvent% his property stands vested in the official receiver or official assignee appointed by the co$rt. 0e cannot enter into contracts in relation to property which is vested to the official assignee or receiver. A c(#1)%c1 '$1h % 6%)18 $#c(+6e1e#1 1( c(#1)%c1 $0 :($* %" $#$1$(. 2. POSITION OF MINOR/S AGREEMENT A minor is not competent to contract. A minor+s contract being void% any money advanced to a minor cannot be recovered. O M(h$)$ B$"$ 3. Dh%)+(*%0 Gh(0e (1<4=) P

i. An agreement entered into by or with a minor is void ab initio ii. inor beneficiary can

be Even if a minor is incapable of contracting% still no law prevents him from ta*ing the benefit $nder a contract. A promissory note e<ec$ted in favo$r of a minor is valid and can be enforced by the minor. A minor can be payee of a che5$e or other negotiable instr$ment. A inor cannot become a partner in a firm b$t he can be admitted to the benefits of the partnership with the consent of all partners .( Sec1$(# =4 (5 I#*$%# P%)1#e)0h$6 Ac1, 1<=2)

inor as a partner

inor can always #f a minor by fra$d$lently representing his age enters into contract% still pleads minority minor can ta*e the shelter of minority. E9%+6&e;- A% a minor by fra$d$lently representing himself to be a ma3or% ind$ce B to lend him Rs.&///. 0e ref$sed to repay it and B s$ed him for the money. 0eld that the contract was void and A was not liable to repay the amo$nt d$e. NHAN GUL 3. LANHA SINGH 7ahore 0igh Co$rt held that where the contract is set aside the status quo ante sho$ld be restored and the co$rt may direct the minor% on e5$itable gro$nds% to restore the money or property to the other party. "h$s% in s$ch cases% if money co$ld be traced% the co$rt wo$ld% on e5$itable gro$nds% as* the minor for restit$tion. Sec1$(#0 =4 %#* == (5 1he S6ec$5$c Re&$e5 Ac1, 1<D= provide that in case of a fra$d$lent misrepresentation of his age by the minor% ind$cing the other party to enter into a contract% the Co$rt may award compensation to the other party. Ratification an A minor cannot ratify the agreement on attaining the age of ma3ority as attaining ma3ority is the original agreement is void>ab>initio and therefore% validity cannot be given to it later on. not allowed E9%+6&e; ,A+% a minor ma*es a promissory note in favo$r of ,B+. (n attaining ma3ority% he ma*es o$t a fresh promissory note in lie$ of old one. !either the original% nor the fresh promissory note is valid. Contract by minor+s A contract may be entered into on behalf of a minor by his g$ardian or manager of his estate. #n s$ch a case the contract can be enforced by or g$ardian against the minor provided that the contract -a. is within the scope of the a$thority of the g$ardian or manager% and -b. is for the benefit of the minor. 7iability for necessaries !o personal liability of minor b$t minor+s property is liable. #n order to entitled a s$pplier to be reimb$rsed from the minor+s estate% following conditions m$st be satisfied=> A. Goods m$st be necessaries for that partic$lar minor having regard to his condition in life. B. "he minor m$st be in need of those goods both at the time of sale and delivery.O N%0h :. I#+%#(1<48) P C. "he minor+s estate is not liable only for necessary goods b$t also for necessary services rendered to him. inor can be an agent b$t cannot be held personally liable for negligence or breach of d$ty. A minor cannot be ad3$dicated as insolvent beca$se he is incapable of contracting.

inor as an Agent inor as an #nsolvent

CHAPTER-C FREE CONSENT


MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1. CONSENT (Sec1$(# 1=) "wo or more persons are said to have consented when they agree $pon something in the same sense (c(#0e#020-%*-$*e+). E9%+6&e;- A offers B that he want sell his ar$ti I// to him for Rs. ?////. B replies that # can pay only Rs6//// for yo$r car. )ince there is no consent between the parties% no contract will can be formed.

2.) FREE CONSENT (Sec1$(# 1B) A c(#0e#1 $0 0%$* 1( "e 5)ee 'he# $1 $0 not c%20e* "8 coercion, $nd$e infl$ence% fra$d% misrepresentation () mista*e. -a. Coercion -)ection 1?. =.) ELEMENTS 3ITIATING FREE CONSENT Coercion is committing or threatening to commit any act forbidden by #ndian Penal Code% or the $nlawf$l detaining or threatening to detain any property% to the pre3$dice of any person whatever% with the intention of ca$sing any person to enter into an agreement. "hreat to commit s$icide amo$nts to coercion. "he agreement ind$ced by coercion is voidable. A person to whom money has been paid or anything delivered $nder coercion% m$st repay or ret$rn it. A contract is said to be ind$ced by $nd$e infl$ence when the relations s$bsisting between the parties are s$ch that one of the parties is in a position to dominate the will of the other and $ses that position to obtain an $nfair advantage of the other. A person is deemed to be in a position to dominate the will of the other% when he holds a$thority real or apparent over the other% or when he stands in a fid$ciary relation to the other. E9%+6&e= > -a. 'ather and son -b. )olicitor and Client -c. "r$stee and Beneficiary -d. Doctor and Patient% etc. A contract which is ind$ced by $nd$e infl$ence is :($*%"&e. 'ra$d means and incl$des any of the following acts committed by a party to a contract or with his c(##$:%#ce or by his agent with intent to deceive another party thereto or his agent% or to ind$ce him to enter into the contract= the s$ggestion as to fact of that which is not tr$e by one who does not believe it to be tr$e. the active concealment of a fact by one having *nowledge or belief of the fact. a promise made witho$t any intention of performing it. any other act fitted to deceive. any s$ch act or omission as to law specially declared to be fra$d$lent. A contract ind$ced by fra$d is :($*%"&e.

(") 4nd$e #nfl$ence -)ection 1G.=

(c) 'ra$d -)ection 1H.

A> #s mere silence amo$nts to fra$d N Ans= > !o% ere silence as to facts li*ely to affect the willingness of a person to enter into a contract is no fra$d. E<ceptions=>1.. 8here it is d$ty of the person to spea*. &.. 8here silence itself e5$ivalent to speech. (*) isrepresentation where a person asserts something which is not tr$e tho$gh he believes it to be tr$e% his assertion amo$nts to misrepresentation. -e.

CHAPTER-D LA!FUL CONSIDERATION H OBEECT


IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII 1. LA!FUL CONSIDERATION OR OBEECT @Sec1$(# 2=A Consideration or ob3ect is 2#&%'52& if it is= > A. 'orbidden by law Acts forbidden by law are those which are p$nishable $nder any stat$te as well as those prohibited by reg$lation or orders made in e<ercise of the a$thority conferred by the legislat$re. E9%+6&e;- A promises to drop prosec$tion which he has instit$ted against B for robbery and B promises to restore the val$e of the things ta*en. "he agreement is void% as its ob3ect is $nlawf$l. E9%+6&e;- A loan granted to the g$ardian of a minor to enable him to celebrate the minor+s marriage in contravention of the Child arriage Restraint Act is illegal and cannot be recovered bac*. E9%+6&e;- A license to c$t the grass is given to : by forest department $nder 'orest Act. "he license provides for imposition of penalty in the event of : choosing to assign his right. 0owever if : assigns his right% the agreement wo$ld still be valid since there is no prohibition for s$ch assignment as the consideration stip$lating penalty is only to reg$late the matter of administrative meas$re. B. Defeat provisions of law C. 'ra$d$lent the "he term -L%'/ incl$des any legislative enactment or r$le of the 0ind$ any and $slim 7aws or any other r$le for the time being in force in #ndia. E9%+6&e;- Agreement in restraint of parental rights is in violation of 0ind$ 7aw.

8here ob3ect or consideration is $nlawf$l on gro$nd of fra$d. E9%+6&e;-A% B and C enter into agreement for the division among them of gains ac5$ired or to be ac5$ired% by them for fra$d. "he agreement is void as its ob3ect is $nlwf$l. D. #n3$ry to the "he general term J$#72)8K means criminal or wrongf$l harm. 8here the person or property of ob3ect of an agreement is to ca$se in3$ry to the person or property of

another

another. E9%+6&e;- An agreement to print a boo* in violation of another+s copyright is void. E9%+6&e;>A borrowed Rs. 1/// from B. A e<ec$ted a bond promising to wor* for B witho$t pay for & years and in case of defa$lt agreed to pay interest at a very e<orbitant rate and the principal amo$nt at once. 0eld% the contract was void (R%+ S'%)((6 :. B%#0$)

E. #mmoral or E9%+6&e; - 7etting ho$se to a prostit$te *nowingly. opposed to the p$blic policy P%)1$%& I&&e,%&$18 ;-( Sec1$(# 2B ) #f any part of a single consideration for one or more ob3ects% or any one or any part of any one of several considerations for a single ob3ect% is $nlawf$l% the agreement is void. E9%+6&e;-A promises to s$rvive the b$siness on behalf of B% a licensed man$fact$rer of some permissible chemicals and some contraband items. B promises to pay A a salary of Rs. 1///// per month. "he agreement is void% the ob3ect of A+s promise and the consideration for B+s promise being in part $nlawf$l. CHAPTERM7 3OID AGREEMENTS 1. AGREEMENTS E?PRESSL DECLARED 3OID Agreements by incompetent parties -)ec. 11. Agreements with $nlawf$l ob3ect or consideration -)ec. &1. Agreement made $nder m$t$al mista*e of fact -)ec. &/. Agreements witho$t consideration -)ec. &?. Agreements in restraint of marriage% trade or legal proceedings etc. Agreements to do impossible Acts -)ec. ?G. E<ample=> An agreement to discover treas$re by magic is void.

U#ce)1%$# +e%#$#, O An agreement the meaning of which is not certain is void b$t where the meaning thereof is capable of being made certain% the agreement is valid.(Sec. 2<) E9%+6&e;- A agrees to sell 1// tons of oil P Rs. &/// per ton to B. "he agreement is void on gro$nd of $ncertainty beca$se in which type of oil they are dealing is not clear. !%,e)$#, %,)ee+e#1 O #t is an agreement involving payment of a s$m of money $pon the determination of an $ncertain event. An agreement by way of wager is void. !o party have control over the event. Collateral transactions are valid.

S6ec2&%1$:e 1)%#0%c1$(#0 %)e ,e#e)%&&8 :%&$* E&e+e#10=> $t$al intention of contracting parties to ac5$ire or deliver the commodities. "he $nderta*ing or ris* arising from movement in prices. AGREEMENTS OPPOSED TO THE PUBLIC POLIC "hese are the agreements which are against the moral laws of the society and contravenes any established interest of society. 'ollowing agreements are opposed to the p$blic policy=> -a. "rading with enemy Any trade with person owing allegiance to a Government at war with #ndia witho$t the license of the Government of #ndia is void% as the ob3ect is opposed to p$blic policy. An agreement to stifle prosec$tion tends to be a preservation or an ab$se of 3$sticeQ therefore% s$ch an agreement is void. "he principle is that one sho$ld not ma*e a trade of felony -crime..(ne sho$ld not convert a crime into into a so$rce of profit. Compromise of p$blic offence is illegal. "o drop $ncompo$ndable offence witho$t permission of co$rt. E9%+6&e;- A Lnew that B has committed a crime. 0e obtains a promise from B to pay him Rs. &//// in consideration of not e<posing B. "his is a case of stifling prosec$tion K therefore illegal K void. M%$#1e#%#ce #t is the promotion of litigation in which one had no interest. E9%+6&e;- A promises to pay B a s$m of Rs. 1//// if B filed a s$it against C in the co$rt. "his agreement is in the nat$re of maintainence and hence void. Ch%+6e)18 #t is bargain whereby one party agrees to assist the other in recovering property% with a view to sharing the profits of litigation. E9%+6&e;- An agreement to give assistance-monetary or otherwise. to another person to recover the property by legal action and to share the proceeds of litigation is a champerto$s agreement. An agreement whose ob3ect is to ind$ce any 3$dicial officer of the state to act partially or corr$ptly is void. An agreement to negotiate marriage for reward% which is *nown as a marriage bro*erage contract% is void% as it is opposed to p$blic policy. F() E9%+6&e;- An agreement to pay money to a person hired to proc$re a wife is opposed to p$blic policy and therefore void. "a*ing a benefit against the obligation. E9%+6&e;- A% who is the manager of a firm% agrees to pass a contract to : if : pays to A Rs. &//// privatelyQ the

-b. )tifling prosec$tion

-c. Champerty K maintenance

-d. #nterference with the co$rse of 3$stice -e. arriage contracts bro*erage

-f. #nterest -benefit. against obligation

agreement is void.

-g. )ale of p$blic office

-h. Agreements for creation of monopolies void

Bribe for appointment in a p$blic office as it interfere with the appointment of a person best 5$alified for the service of p$blic. An agreement to pay money to a p$blic servant in order to ind$ce him to retire from his office so that another person may sec$re the appointment is void. An agreement to proc$re a p$blic recognition li*e Padma ;ibh$shan for reward is void.

Agreements having their ob3ect the establishment of monopolies are opposed to the p$blic policy and hence void. #t is also hit by R"P Act. E9%+6&e;- A local body granted a monopoly to A to sell vegetables in a partic$lar locality. 0eld that the agreement was void.

restraint of Every agreement in restraint of marriage of any person% (1he) 1h%# % +$#(), is void (Sec. 2D). E9%+6&e;-A promised to marry no one else e<cept iss B and in defa$lt pay her a s$m of Rs.1/////. A married some one else and B s$ed A for recovery of the s$m. 0eld% the contract was in restraint of marriage% and as s$ch void. -3. Agreement in restraint of trade An agreement by which any person is restraint from e<ercising a lawf$l profession% trade or b$siness of any *ind% is to that e<tent void. -i. Agreement marriage in E9ce61$(#0 -i. )ale of goodwill
8ithin specified local limits Reasonable

-ii. An agreement among the sellers of a partic$lar commodity not to sell the commodity for less than a fi<ed price is not an agreement in restraint of trade. -iii. An agreement between partners not to carry on competing b$siness d$ring the contin$ance of partnership is valid. ( Sec1$(# 11 (5 I#*$%# P%)1#e)0h$6 Ac1, 1<=2) -iv. Agreement with o$tgoing partner not to carry on competing b$siness for a reasonable time will be valid . ( Sec1$(# =D (5 I#*$%# P%)1#e)0h$6 Ac1, 1<=2) -v. An agreement of service by which an employee binds himself% d$ring the term of his agreement% not to complete with his employer is not in restraint of trade. E9%+6&e;- B% a physician and s$rgeon% employs A as an assistant for a term of three years and A agrees not to practice as a s$rgeon and physician d$ring these three years. "he agreement is valid and A can be restrained by an in3$nction if he starts independent practice d$ring this

period.

-vi. An agreement by a man$fact$rer to sell d$ring a certain period his entire prod$ction to a wholesale merchant is not in restraint of trade. -*. Agreement in restraint of legal #t is one by which any party thereto is restricted absol$tely proceedings from enforcing his rights $nder a contract thro$gh a co$rt or which abridges the $s$al period for starting legal proceedings. #t is void. E9ce61$(#0 O )ettlement of disp$te thro$gh arbitration. A$estion already arisen or which may arise in f$t$re refer to arbitration s$ch a contract m$st be in writing.

CHAPTER-8 PERFORMANCE OF CONTRACT


MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1. PERFORMANCE OF CONTRACTS @Sec1$(# =7A "he parties to a contract m$st either perform% or offer to perform their respective promises $nless s$ch performance is dispensed with or e<c$sed $nder the provisions of the contract act or any other law. Promises bind the representatives of the promisor in case of death of s$ch promisor before performance% $nless a contrary intention appears from the contract. 2. B !HOM CONTRACT MA BE PERFORMED #f there is something in the contract to show that it was intention of the parties that the promise sho$ld be performed by the promisor himself% s$ch promise m$st be performed by the promisor. "his means contracts which involves the e<ercise of personal s*ill K diligence or which are fo$nded on personal confidence between the parties m$st be performed by the promisor himself. 8here personal consideration is not the fo$ndation of the contract% the promisor or his representative may employ a competent person to perform it. A contract which involves the $se of personal s*ill or is fo$nded on personal consideration comes to an end on the death of the promisor. As regards any other contract% the legal representatives of the deceased promisor are bo$nd to perform it $nless a contrary intention appears from the contract. B$t their liability $nder a contract is limited to the val$e of the property they inherited from the deceased. 8here the promisee accepts performance of the promise from a third person% he cannot afterwards enforce it against the promisor. 8hen two or more persons have made a 3oint promise% then $nless a contrary intention appears from the contract% all s$ch persons m$st 3ointly f$lfill the promise.

Promisor himself

Agent Representatives

"hird persons 9oint promisors

#f any of them dies% his legal representatives m$st% 3ointly with the s$rviving promisors% f$lfill the promise. #f all of them dies% the legal representatives of all of them m$st f$lfill the promise 3ointly (Sec.B2). =. SUCCESSION H ASSIGNMENT -a. )$ccession -b. Assignment 8hen the benefits of a contract are s$cceeded to by Benefits of a contract can only be process of law% then both b$rden and benefits assigned b$t not the liabilities there attaching to the contract% may sometimes devolve on $nder. legal heir. B. EFFECT OF REFUSAL TO ACCEPT OFFER OF PERFORMANCE @ Sec1$(# =8A 8hen the promisor has made an offer of performance to the promisee% and the offer has not been accepted then the promisor is not responsible for non>performance% nor does he thereby lose his rights $nder the contract. C(#*$1$(#0; #t m$st be 2#c(#*$1$(#%&. #t m$st be made at 6)(6e) 1$+e %#* 6&%ce. #f the offer is to deliver %#81h$#, to the promisee% promisee m$st have )e%0(#%"&e (66()12#$18 1( checF 1he ,((*0. A# (55e) 1( (#e (5 1he 0e:e)%& 6)(+$0ee0 '$&& h%:e 0%+e &e,%& c(#0eL2e#ce0 %0 %# (55e) 1( %&& (5 1he+. 6. EFFECT OF REFUSAL OF PART TO PERFORM PROMISE @Sec1$(# =<A 8hen a party to a contract has )e520e* 1( 6e)5()+ () has *$0%"&e* h$+0e&5 5)(+ 6e)5()+$#, h$0 6)(+$0e in entirely% the promisor may p$t an end to the contract% $nless he has signified by words or cond$ct% his ac5$iescence in its contin$ance. R$,h10 1( 1he %,,)$e:e* 6%)18 "o terminate the contract. "o indicate% by words or by cond$ct% that he is interested in his contin$ance. Right to claim damages. D. LIABILIT OF EOINT PROMISORS Promisee may compel any one or more of s$ch 3oint promisors to perform the whole of the promise. #f one of the 3oint promisors is made to perform the whole contract% he can call for a contrib$tion from others. #f any of the 3oint promisors ma*e a defa$lt in ma*ing his contrib$tion the remaining 3oint promisors m$st bear the loss arising from s$ch defa$lt in e5$al shares. 7. RIGHTS OF EOINT PROMISEES All of them 3ointly have right to claim performance. #f any one of 3oint promisees dies% )$rvival promisee R Representatives of deceased promisee. #f all of them dies. Representatives of deceased promises. 8.TIME H PLACE FOR PERFORMANCE OF THE PROMISE

!o time specified for performance of promise% promise m$st be performed within reasonable time. #f promise is to be performed on a specified date b$t ho$r is not mentioned% the promisor may perform it any time d$ring the $s$al ho$rs of b$siness% on s$ch day . Delivery m$st be made at the $s$al place of b$siness. 8hen no place is fi<ed for performance of promise% it is the d$ty of the promisor to as* promisee to fi< a reasonable place for the performance of promise. 8hen the promisor has not $nderta*en to perform the promise witho$t an application by the promisee and the promise is to be performed on a certain day% it is the d$ty of the promisee to apply for performance at a proper place and within the $s$al ho$rs of b$siness. <. PERFORMANCE OF RECIPROCAL PROMISES

Rec$6)(c%& P)(+$0e0

8hen a contract consists of two promises% one being consideration for the other% s$ch promises are called Reciprocal promises. E<ample O A promises to deliver ?// 5$intals of rice and B promises to pay the price on delivery% the contract wo$ld consists of reciprocal promises.

S$+2&1%#e(20 Reciprocal promises may have to be performed sim$ltaneo$sly or 6e)5()+%#ce (5 one after another. Rec$6)(c%& 6)(+$0e0 E9%+6&e 8here A promises to deliver ?// 5$intals of rice and B promises to pay the price on delivery% both the promises are to be performed sim$ltaneo$sly. Pe)5()+%#ce (5 Rec$6)(c%& 6)(+$0e0 'he)e ()*e) (5 6e)5()+%#ce $0 e96)e00&8 5$9e* Pe)5()+%#ce (5 Rec$6)(c%& 6)(+$0e0 'he# 1he ()*e) (5 6e)5()+%#ce $0 5$9e* "8 $+6&$c%1$(# 8hen the order of performance of the reciprocal promises is e<pressly fi<ed by the contract% they m$st be performed in that order. E9%+6&e MA and B contract that A shall b$ild a ho$se for B at a fi<ed price. A+s promise to b$ild the ho$se m$st be performed before B can be called $pon to perform the promise to pay for it. "he order of performance may sometimes be indicated not e<pressly% b$t by the nat$re of the transaction. E< O A promises to ma*e over stoc* for B and B promises to give sec$rity for the payment of price. A+s promise to ma*e over stoc* need not to be performed $ntil the sec$rity is given by B.

E55ec1 (5 (#e 6%)18 o Contract become voidable 6)e:e#1$#, (1he) 5)(+ o Another party is entitled to claim compensation on ABc of by 6e)5()+$#, 6)(+$0e s$ffered d$e to non>performance.

Rec$6)(c%& 6)(+$0e 1( *( ce)1%$# 1h$#,0 1h%1 %)e &e,%& contract% and also some other things that are illigal ;oid Agreement EFFECT OF FAILURE TO PERFORM AT A TIME FI?ED IN A CONTRACT IN !HICH TIME IS ESSENTIAL 8here time is essential and the party fails to perform promise at or before specified time% the contract becomes voidable at the option of the promisee. 8here time is not essential% the contract cannot be avoided on the gro$nd that time for performance has e<pired. "he promise is only entitled to compensation from the promisor

14.

for any loss ca$sed by delay. B$t it m$st be remembered that even where the time is not essential it m$st be performed within a reasonable time otherwise it becomes voidable at the option of the promisee. 8here time is essential% promisor fails to perform within time K promisee accept the performance% he cannot claim compensation for non>performance at time agreed $nless notice of intention to claim compensation is given.

11.

Appropriation by Debtor Appropriation by Creditor Appropriation by "ime

11. APPROPRIATION OF PA MENTS Appropriation of payment where debt to be discharged is indicated by debtor% payment% if accepted% m$st be applied accordingly. L%1$# +%9$+ A$ic*5$id soivit$r% sovit$r sec$nd$m mod$m solventis. Appropriation of payment where debt to be discharged is not indicated by debtor% creditor is entitled to appropriate it to the debt first in time. 8here neither party appropriates %Payment shall be applied in discharge of the debts in order of time% where they are time barred or not. #f debts are e5$al standing% the payment shall be applied in discharge of each proportionately.

1&. CONTRACTS !HICH NEED NOT BE PERFORMED 8hen parties to a contract s$bstit$te a #e' c(#1)%c1 5() (&*. (n 1. N(:%1$(# novation% old contract is discharged and conse5$ently it need not to be performed. "here may be change in parties. 8hen parties to a contract agree to rescind it% the contract need not 2. Re0c$00$(# be performed. #n this case% only (&* c(#1)%c1 $0 c%#ce&&e* #( #e' c(#1)%c1 $0 5()+e*. 8here parties to a contract agrees 1( %&1e) it% the original contract is =. A&1e)%1$(# rescinded% with the remit that it need not be performed. !o change in parties to the contract.

B. !%$:e) () Re+$1 (5 6e)5()+%#ce "8 6)(+$0e

Change in terms K conditions of original agreement. Promisee can dispense with performance witho$t consideration and witho$t a new contract or may e<tend the time of performance.

11. RESTORATION OF BENEFIT UNDER A 3OIDABLE CONTRACT #f the person at whose option contract was voidable has rescind the contract% he shall )e01()e 1he "e#e5$1 -either ret$rn the goods the goods or pay for it. received there $nder from another party to s$ch contract% to the person from whom it was received. 16. OBLIGATION OF PERSON !HO HAS RECEI3ED AD3ANTAGE UNDER 3OID AGREEMENT OR ONE BECOMING 3OID 8hen an agreement is discovered to be void or when a contract becomes void% any person who received any advantage $nder s$ch agreement or contract m$st restore it% ma*e compensation for it to the person from whom he received it.( E$1he) )e01()e "%cF 1he %*:%#1%,e )ece$:e* () 6%8 c(+6e#0%1$(# 5() $1) 1?. DISCHARGE OF CONTRACT

Discharge by m$t$al agreement M !ovation% Alteration% Rescission% Remission Discharge by impossibility of performance. Discharge of lapse of time e.g. "ime barred debt $nder #ndian 7imitation Act% 1JG1 Discharge by operation of law s$ch as by death of promisor% by insolvency% merger% material alteration etc. D$0ch%),e "8 ")e%ch (5 c(#1)%c1 Act$al Breach of Contract Breach of contract at time of performance Anticipatory Breach of Contract Breach of contract before time of performance

8here promisee neglects or ref$ses to afford the promisor reasonable facilities for performance of promise.

CHAPTER-< BREACH OF CONTRACT


IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII 1. BREACH OF CONTRACT

$. N()+%& Compensation for any loss or damage which arises nat$rally in the normal co$rse D%+%,e0 of events. (rdinary damages are calc$lated by meas$ring the difference between the contract price and mar*et price on the date of breach. $$. S6ec$%& 8here party to a contract receives a #(1$ce (5 06ec$%& c$)c2+01%#ce0 affecting the D%+%,e0 contract% he will also liable for special damages.

=. HO! TO CALCULATE THE DAMAGE ($:)N(+$#%& "hese damages are awarded where the plaintiff has proved that there has been b$t Damage S Contract price > any ar*et price at the date of breach Breach breach by b$yer D%+%,e0 of contract he has not in fact s$ffered real damage. damages are establish decree for breach of contract. awarded Damage3$st S to ar*et price right at theto date of Breach > Contract price Breach "hese by seller "he amo$nt may be a r$pee or even 1/ paise. Amo$nt of damages depends $pon loss of credit K rep$tation s$ffered on that ABc -v. D%+%,e0 5() Damages can be recovered from the carrier even witho$t notice. *e1e)$()%1$(# 1( Deterioration not only implies physical damages b$t also loss of special ,((*0 c%20e* "8 opport$nity for sale. *e&%8 B. REMEDIES FOR BREACH OF CONTRACT ($) Re0c$00$(# (5 C(#1)%c1 Discharge from his own obligations Entitled to compensation for damages s$ffered

($$) S2$1 26(# .2%#12+ Me)2$1 CAs m$ch as is earnedD (r CAccording to the 5$antity of .2%#12+ Me)2$1 wor* doneD 8hen the person has beg$n the wor* and before he co$ld complete it% the other party terminates the contract or does something which ma*e it impossible for the other party to complete the contract% he can claim for the wor* done $nder contract. 0e may also recover the val$e of wor* done when f$rther performance of contract become impossible. S2$1 5() .2%#12+ Me)2$1 %)$0e $# 1h)ee c%0e0;M A. 8or* done and accepted $nder void contract. B. Act done or something delivered non>grat$ito$sly% the person who en3oys the benefit m$st pay for it. C. Divisible Contract= > (ne part performed K ref$ses to perform other part. Party in defa$lt may s$e other party who has en3oyed the benefit of past performance. ($$$) S2$1 5() 8here damages are not an ade5$ate remedy in case of breach of contract% the 06ec$5$c co$rt may in its discretion on a s$it for specific performance direct party in 6e)5()+%#ce breach% to carry o$t his promise according to the terms of contract. ($:) S2$1 5() 8here a party to a contract is negativating the terms of contract% the co$rt may I#72#c1$(# >be iss$ing an -$#72#c1$(# ()*e)/ restrain him from doing what he promised not to do.

CHAPTER-14 CONTINGENT H .UASI CONTRACT


MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1. CONTINGENT CONTRACT @Sec1$(# =1A Contingent contract is a contract to do or not to do something% if some event colletral to s$ch contract% does or does not happen. E.g. O Contract of #ns$rance 2. ESSENTIAL ELEMENTS OF A CONTINGENT CONTRACT "he performance of a contingent contract is made dependent $pon happening or non>happening of some event. Event on which performance is made to depend% is an event colletral to the contract i.e. it does not form part of reciprocal promises which constit$te the contract. "he contingent event sho$ld not be the mere will of the promisor. E.g. O A promise to pay Rs. 1/%///% if he so chose% is not a contingent contract.

=. RULES RELATING TO ENFORCEMENT Contract contingent $pon 8here a contingent contract is made to do or not to do anything if happening of an event $ncertain f$t$re event happens% it cannot be enforced by law $nless and $ntil that event has happened. #f event becomes impossible s$ch -)ection 1&. contracts become void. Contract contingent $pon 8here a contingent contract is made to do or not to do anything if non>happening of an event any $ncertain f$t$re event does not happen it can be enforced only the happening of that event becomes impossible and not before. #f -)ection 11. s$ch event becomes happened% s$ch contracts become void. Contract contingent $pon Event shall have considered to become impossible when s$ch person f$t$re cond$ct of a living does anything which renders it impossible that he sho$ld act within any definite time or other than $nder f$rther contingencies. person -)ection 16. Contract contingent $pon #t becomes void if at the e<piry of fi<ed time% s$ch event has not specified event happening happened% or if before the time fi<ed% s$ch event becomes within fi<ed time-)ection impossible. 1?. Contract contingent $pon #t may be enforced by law when the time fi<ed has e<pired and s$ch specified event not event has not happened or before the time e<pired% if it becomes happening within fi<ed certain that s$ch event will not happen. time-)ection 1?. Agreement contingent on A contingent agreement to do or not to do anything% if an impossible impossible event -)ection event happens is void "he impossibility of an event may or may not be *nown to the parties to the agreement at the time when they 1G. entered into it. B. .UASI CONTRACTS A$asi contracts are "%0e* (# 6)$#c$6&e (5 eL2$18, 7201$ce %#* ,((* c(#0c$e#ce. #n the case of A$asi contracts% the 6)(+$0() :(&2#1%)$&8 2#*e)1%Fe0 %# ("&$,%1$(# in favo$r of the promisee% or O"&$,%1$(# +%8 "e $+6(0e* "8 &%' $pon a person for the benefit of another even in the absence of contract. C. SALIENT FEATURES OF .UASI CONTRACTS #t *(e0 #(1 %)$0e 5)(+ %#8 %,)ee+e#1 of the parties concerned% b$t it is $+6(0e* "8 &%', and #t is a right which is available #(1 %,%$#01 1he e#1$)e '()&*, b$t %,%$#01 % 6%)1$c2&%) 6e)0(#Q0 (#&8. D. T PES OF .UASI CONTRACTS C&%$+ 5() #ece00%)$e0 s$pplied to a person incapable of contracting% the s$pplier is entitled to claim their price from the property of s$ch a person. E.g. inor% Person of $nso$nd mind.

R$,h1 1( )ec(:e) A person who has paid a s$m of money which another is obliged to pay% +(#e8 6%$* 5() is entitled to be reimb$rsed by that other person provided that payment has been made by him to protect his own interest. %#(1he) O"&$,%1$(# (5 % 6e)0(# -a. 8here a person &%'52&&8 *(e0 %#81h$#, for another person or

e#7(8$#, 1he "e#e5$1 (5 delivers anything to him. #(#-,)%12$1(20 %c1 -b. N(1 intending to do so ,)%12$1(20&8 and -c. S2ch (1he) 6e)0(# e#7(80 1he "e#e5$1 thereof% the latter is bo$nd to ma*e compensation to the former in respect of% or to restore% the things so done or delivered. Re06(#0$"$&$18 F$#*e) (5 ,((*0 (5 A person who finds goods belonging to another and ta*es them into his c$stody is s$b3ect to same responsibility as a "%$&ee. T "o ta*e proper care T !ot $se it for personal p$rposes T Restore it to tr$e owner% if owner is traced

L$%"$&$18 5() +(#e8 A person to whom money has been paid or anything delivered by 6%$* () 1h$#, *e&$:e)e* mista*e or $nder coercion m$st repay or ret$rn it. "8 +$01%Fe () 2#*e) c(e)c$(# 7. 1. !%,e)$#, A,)ee+e#1 C(#1$#,e#1 C(#1)%c1

#t is a promise to give money or #t is a contract to do or not to do something if money+s worth $pon the determination or some event collateral to s$ch contract does or ascertainment of an $ncertain event. does not happen.

&.

#n a wagering agreement the #n a contingent contract% the event is only $ncertain event is the sole determining colletral. factor. 1. #t is essentially of a contingent nat$re. #t may not be of wagering nat$re. 6. ?. ;oid ;alid Parties have no other interested in the #t is not so in this case both parties have interested s$b3ect matter of the agreement e<cept in the s$b3ect matter of the contract. the winning or losing of the amo$nt of wager. #t is a game of chance.

INDIAN PARTNERSHIP ACT , 1<=2

1. PARTNERSHIP @Sec1$(# BA Partnership is the relation between 6e)0(#0 who have %,)ee* to 0h%)e 1he 6)(5$10 of a "20$#e00 c%))$e* (# "8 %&& () %#8 (#e (5 1he+ %c1$#, 5() %&&. PARTNER, FIRM H FIRM NAME ;- Persons who have entered into partnership with one another are individ$ally called 6%)1#e)0 and collectively a 5$)+ and the name $nder which their b$siness is carried on is called 5$)+ #%+e. 2. ESSENTIAL ELEMENTS OF PARTNERSHIP 1.T'( () +()e 6e)0(#0 "here sho$ld be at least two or more persons to form a partnership.

=. B20$#e00

"here m$st be b$siness. "he term b$siness incl$des every trade% occ$pation K profession. "he b$siness m$st be lawf$l. e.g. 8hen two persons owned a b$ilding K 3ointly share the amo$nt of rent. "here is no partnership beca$se there is no b$siness. B. Sh%)$#, (5 6)(5$10 4nless otherwise agreed% )haring of profits implies sharing of losses as well. 0owever% a person may become a partner in profits only. C. M212%& %,e#c8 B$siness m$st be carried on by all partners or any one of the partners+ who is acting for all. Every partner is the principal as well as agent of each other . he can bind the other partners for all the acts done by him and is bo$nd by the acts of other partners as well. D.M%9$+2+ #2+"e) (5 "he Partnership Act does not mention any thing abo$t the ma<im$m 6%)1#e)0 n$mber of persons who can be partners in a partnership firm% b$t Sec1$(# 11 (5 1he C(+6%#$e0 Ac1, 1<CD lays down the ma<im$m limit of partners.

=. TRUE TEST OF PARTNERSHIP Sh%)$#, (5 6)(5$10 $0 #(1 1he 1)2e 1e01 (5 6%)1#e)0h$6. )haring of profits with the following persons does not ma*e them partner=O A money lender or A servant -manager of a firm. or agent as his rem$neration or 8idow or child of a deceased partner or

A previo$s owner of part of the b$siness as the consideration for the sale of goodwill or share thereof. E<istence of M212%& A,e#c8 which is c%)*$#%& 6)$#c$6&e (5 6%)1#e)0h$6 &%' % is the 1)2e 1e01 (5 6%)1#e)0h$6. B. PARTNERSHIP 3. EOINT STOCN COMPAN
COMPAN

A company is an %)1$5$c$%& 6e)0(#, which is a 0e6%)%1e &e,%& e#1$18 c)e%1e* "8 &%' having a 6e)6e12%& 02cce00$(# K % c(++(# 0e%&. P%)1#e)0h$6 :0. E($#1 S1(cF C(+6%#8 S. No. 1. &. 1. 6. Basis Pe)0(#%&$18 A,e#c8 D$01)$"21$(# (5 6)(5$10 E91e#1 (5 &$%"$&$18 P)(6e)18 Partnership !o legal personality. Joint Stock Company A company is a separate legal entity.

Every partner is an agent of A member is not an agent of other partners as well as firm. other members or company. Comp$lsory according partnership deed. 4nlimited. to !o comp$lsion. Company limited by shares limited to the amo$nt $npaid on shares held by member.

?.

"he property of the firm is the "he property of the company 3oint estate of all the partners. belongs to the company not to its members. A share in a partnership cannot )hares are transferable s$b3ect to be transferred witho$t the provision contained in articles. consent of all partners. All partners. )eparation of management from ownership% management by

G.

T)%#05e) (5 0h%)e0 M%#%,e+e#1

H.

Board of Directors. I. M%9$+2+ #(. (5 +e+"e)0h$6 'irm Ban*ing (rdinary 'irm 1/ &/ & Company Private 7td. P$blic 7td. ?/

J. 1/. 11. 1&.

M$#$+2+ #(. (5 Me+"e)0h$6 Re,2&%1$#, Ac1 Re,$01)%1$(# A2*$1

Private Co. > & P$blic Co. > H Companies Act% 1J?G Comp$lsory 7egal re5$irement Companies Act. $nder

#ndian Partnership Act% 1J1& ;ol$ntarily !o legal necessity

PARTNERSHIP 30. CLUB CLUB A c&2" is an association of persons formed with the ob3ect #(1 5() e%)#$#, 6)(5$10 b$t (5 6)(+(1$#, some "e#e5$c$%& 62)6(0e0 s$ch as improvement of health or providing recreation for the members etc. C. P%)1#e)0h$6 :0. C&2" B%0$0 P%)1#e)0h$6 C&2" 1. (b3ective "o earn profits. "o promote some beneficial p$rpose. &. Agency A partner is an agent of other A member of a cl$b is not an agent of other partners as well as firm. members or cl$b. 1. Property A partner is having an interest in A member of a cl$b has no interest in property of the firm. property of the cl$b. D. PARTNERSHIP 30. HINDU UNDI3IDED FAMIL S. N(. 1. &. 1. 6. B%0$0 Creation Death P%)1#e)0h$6 By agreement Death of a partner ordinary leads to dissol$tion of partnership. Partners 4nlimited HUF By stat$s means by birth in the 0ind$ family.

C.

G. H. I. J.

1/.

Death of a member does not affect family b$siness. anagement Larta 7iability Larta 4nlimited (ther (nly to the e<tent of their share in family family b$siness members A$thority to Every partner can by his act bind Larta has a$thority to contract for bind the firm the firm. family b$siness. Contin$ity 'irm is dissolved on death or 04' has contin$ity till it is divided. insolvency of a partner. Governing Partnership Act% 1J1& 0ind$ law law Calling for Partner can bring a s$it against (n separation of 04' a member is ABcs the firm for ABc+s provided he not entitled to as* for ABc of the also seals for dissol$tion of the family b$siness. firm. inor+s inor cannot become a partner inor becomes a member by capacity tho$gh he can be admitted to the incidence of birth.

benefits of the partnership with the consent of all partners. 7. PARTNERSHIP 30. CO-O!NERSHIP P%)1#e)0h$6 C(-('#e)0h$6
By contract 2es Partners are agents of each other A partner can transfer his share only with the consent of all other partners "here m$st be a b$siness. By agreement or (peration of law !o% not necessary A coowner is not an agent of other coowner. A co>owner may transfer his interest or rights in property witho$t the consent of other coowners. #t may e<ist witho$t any b$siness.

S.N(.H B%0$0
1. &. Creation )haring of profits K losses 1. Agency 6. ?. "ransfer of shares B$siness

8. T PES OF PARTNERS 1. Ac1$:e P%)1#e) 1. N(+$#%& P%)1#e) ?. S2" P%)1#e)0h$6

T"a*e active participation in cond$ct of partnership b$siness. TP$blic notice of the time of retirement. &. S&ee6$#, P%)1#e) (D()+%#1) T Do not ta*e part in cond$ct of partnership b$siness T !o p$blic notice at the time of retirement.

A person who lends his name to the Partnership between partner firm% witho$t having any real and stranger interest. P%)1#e) "8 h(&*$#, 6. G. P%)1#e) $# (21 or 6)(5$10 (#&8 P%)1#e) "8 e01(66e& Anyone who by words spo*en or written or by cond$ct represents himself or *nowingly permits himself to be represented% to be a partners in a firm% is liable as a partner in that firm to anyone who has on the faith of any s$ch representation given credit to the firm. A person may become a partner in profits only.

<. MINOR/S POSITION IN PARTNERSHIP A minor cannot become partner of a firm beca$se he is incompetent to contract b$t he can be admitted to the benefits of firm with the consent of all partners. inor has a right to agreed share of profits.

0e has a right to have access to% inspect K copy %cc(2#10 of the firm. Right to s$e partners for acco$nts or for payment of his share b$t only when severing his connection with the firm. A p$blic notice is re5$ired to be given within G months of% attaining ma3ority or having *nowledge of the fact that he is a partner in a firm% whichever is later% whether he elects to become a partner or not.

0is share is not liable after the date of p$blic notice. #f he elects to become a partner then no p$blic notice is re5$ired to be given. #f he elects not to become a partner then p$blic notice is re5$ired to be given. #f he fails to give p$blic notice within G months% he shall be deemed to be partner of the firm on e<piry of G months. #f he becomes a partner then he shall be liable towards the debts of the firm retrospectively. 0is share in property and profits of the firm shall remain same.

CHAPTER-2 RELATIONS OF PARTNERS


1. Right to be cons$lted Right to have access to% inspect K copy "((F0 of the firm. Right to share profits e5$ally if there is no agreement otherwise. I#1e)e01 (# c%6$1%& N(1 %&&('e*. B$t if otherwise partnership agreement provides for the payment of interest on capital% it shall be payable (#&8 (21 (5 6)(5$10. I#1e)e01 (# %*:%#ce0 given by partner to firm will be paid at the rate agreed% if there is no agreement to this effect% interest is allowed R DS 6e) %##2+. Right to be $#*e+#$5$e* by the firm in respect of all e<penses and liabilities inc$rred by him in the ordinary and proper cond$ct of b$siness. R$,h1 1( Re+2#e)%1$(# O !o rem$neration allowed e<cept there is an e<press agreement. R$,h1 1( 01(6 %*+$00$(# (5 % #e' 6%)1#e). R$,h1 1( )e1$)e with the consent of all other partners. 8here 6%)1#e)0h$6 $0 %1 '$&&, "8 ,$:$#, #(1$ce to that effect to all other partners. R$,h1 #(1 1( "e e96e&&e* from the firm by any ma3ority of the partners. R$,h1 (5 (21,($#, 6%)1#e) 1( c%))8 (# c(+6e1$#, "20$#e00. R$,h1 (5 (21,($#, 6%)1#e) 1( 0h%)e 02"0eL2e#1 6)(5$10 O the retiring partner or legal representatives of deceased partners has option to 0h%)e (5 6)(5$10 or to $#1e)e01 R DS 6.%. on the amo$nt of his share in property of the firm. R$,h1 1( *$00(&:e 1he 5$)+ M 8ith the consent of all partners. 8here partnership is at will% the firm may be dissolved by any partners giving notice in writing to all other partners of his intention to dissolve the firm. R$,h1 $# e+e),e#c8 M A partner has right to bind the firm for acts done in emergency as are reasonably necessary for protecting the firm from loss. Provided he has acted in the same manner as a man of ordinary pr$dence wo$ld have acted in the li*e circ$mstances. RIGHTS OF PARTNERS

Right to ta*e part in cond$ct of the b$siness.

2.

T86e0 (5 P%)1#e)0h$6

P%)1#e)0 h$6 %1 (%) PARTNERSHIP AT !ILL '$&& 8here no provision is made by contract between the partners for the d$ration of their partnership or for the determination of their partnership %Partnership is at will

(") P%)1$c2&%) P%)1#e)0h$6 (") PARTICULAR PARTNERSHIP A person may become a partner with another person in partic$lar advent$re or $nderta*ing. )$ch partnership is called Jparticular partnership

=. D4TIES OF PARTNERS D218 1( c%))8 (# 1he "20$#e00 of the firm to the greatest common advantage. D218 1( %cc(2#1 5() 6)(5$10 earned O A. 'rom any transaction of the firm or C. B$siness connection of the firm or A. B. D. 'rom the $se of firm+s property or 'irm+s name.

D218 #(1 1( c%))8 (# c(+6e1$#, "20$#e00 to that of partnership firm. #f carries on% m$st acco$nt for and B. 'irm will not be liable for any loss arising $nder competing b$siness. pay the firm all profits made.

D218 1( "e 7201 %#* 5%$1h52& 1( e%ch (1he). D218 1( )e#*e) 1)2e %cc(2#10 and f$ll information of all things affecting the firm to any partner or his legal representatives. D218 1( $#*e+#$58 1he 5$)+ for any damage ca$sed to it by reason of his 5)%2* in cond$ct of firm+s b$siness. D218 1( %11e#* *$&$,e#1&8 h$0 *21$e0 relating to cond$ct of firm+s b$siness. D218 #(1 1( c&%$+ )e+2#e)%1$(#;- Rem$neration may be allowed to wor*ing partners provided there is specific agreement to that effect. D218 1( c(#1)$"21e eL2%&&8 1( the &(00 s$stained by the firm% $nless otherwise agreed. D218 1( $#*e+#$58 the 5$)+ for any loss ca$sed to it by '$&&52& #e,&ec1 in the cond$ct of b$siness of the firm.

C. IMPLIED AUTHORIT OF A PARTNER A21h()$18 means capacity of the partner to bind the firm% this capacity may be= E<press a$thority

By e<press agreement between the

#mplied a$thority

A$thority pres$med

IMPLIED AUTHORIT An act of a partner done in a $s$al way for the b$siness of the firm binds the firm provided the act is done in the name or any manner e<pressing or implying an intention to bind the firm s$ch an a$thority of a partner to bind the firm is called implied a$thority.

ACTS BE OND IMPLIED AUTHORIT (Sec1$(# 1<)

-a. -b. -c. -d. -e. -f. -g. -h.

S2"+$00$(# (5 *$0621e relating to firm+s b$siness 5() %)"$1)%1$(# as it is not the ordinary b$siness of partnership firm to enter into s$bmission for arbitration. C(+6)(+$0e () )e&$#L2$0h %#8 c&%$+ or portion of a claim by the firm against an o$tsider. !$1h*)%' % 02$1 or proceedings filed on behalf of the firm. A*+$1 %#8 &$%"$&$18 $# % 02$1 or proceeding against the firm. AcL2$)e $++(:%"&e 6)(6e)18 on behalf of firm. T)%#05e) $++(:%"&e 6)(6e)18 belonging to the firm. O6e#$#, % "%#F %cc(2#1 on behalf of the firm in his own name. E#1e) $#1( 6%)1#e)0h$6 on behalf of the firm.

D. LIABILIT TO THIRD PARTIES Contract$al liability 7iability for tort or wrongf$l act

7iability for misapplication of money received by a partner from a third party #n all these cases% all the partners as well as firm are liable to third parties. 7. E?PULSION OF A PARTNER A partner may not be e<pelled from a firm by a ma3ority of partners. E9ce61$(# O A partner may be e<pelled when= 1. P('e) (5 e962&0$(# e9$01e* in a c(#1)%c1 between the partners. 2. Power has been e<ercised by +%7()$18 (5 1he 6%)1#e)0 and 1. Power has been e<ercised in O

#f a partner is otherwise e<pelled% s$ch e<p$lsion is n$ll and void.

CHAPTER- = REGISTRATION AND DISSOLUTION OF A FIRM

1. REGISTRATION OF A FIRM M(*e (5 e55ec1$#, Re,$01)%1$(# By post By hand delivery "o the registrar of the area in which any place of b$siness of a firm is sit$ated or proposed to be sit$ated. A statement in 6)e0c)$"e* 5()+ along with 6)e0c)$"e* 5ee stating O !ame of the firm Principal place of b$siness !ames of other places of b$siness Date of 3oining of each partner !ame in f$ll and permanent addresses of partners K D$ration of the firm )igned by all the partners or their agents specially a$thoriFed for this p$rpose. Re,$01)%1$(# 'he# c(+6&e1e 8hen registrar is satisfied that all the provisions related to registration have been d$ly complied with% he shall record an entry of the statement in a register called the register of firms and shall file the statement. "hen he shall iss$e a certificate of registration. 0owever% registration is deemed to be complete as soon as an application in prescribed form with prescribed fees and necessary details concerning the partic$lar of partnership is delivered to the registrar. IS REGISTRATION OF FIRMS/ COMPULSOR T !o% Registration of firms is not comp$lsory. B$t as a conse5$ence of non>registration% following disabilities are to be faced by partnership firms O DISABILITIES 1. N( 02$1 %,%$#01 "he firm or any other person on its behalf cannot bring an action 1h$)* 6%)18 against a third party for breach of contract entered into by him. 2. N( 0e1 (55 (5 #f an action is bro$ght against the firm by a third party% then neither +()e 1h%# R0.144 the firm nor partner can claim any set off for a val$e more than Rs. 1// in a s$it. =. N( %c1$(# %,%$#01 A partner of an $nregistered firm cannot bring legal action against the 5$)+ firm or any other partner. B21 02ch % 6e)0(# +%8 02e 5() M o Dissol$tion of firm or o 'or acco$nts and realiFation of his share in the firm+s property where the firm is dissolved. N(1e M N(#-)e,$01)%1$(# (5 % 5$)+ *(e0 #(1 %55ec1 1he )$,h1 (5 1h$)* 6%)1$e0 %,%$#01 1he 5$)+ () $10 6%)1#e)0. 2. DISSOLUTION OF FIRM Dissol$tion of firm means discontin$ation of the 9$ral relation e<isting between all the partners of the firm. C%0e0 'he)e *$00(&21$(# (5 5$)+ 1%Fe0 6&%ce By agreement between all the partners. .. A#0.

a. b. c. d.

e.

By insolvency of all the partners. 8hen b$siness of the firm becoming $nlawf$l. By notice (f dissol$tion by a partner where partnership is a will. )$b3ect to the agreement between the partners% on happening of following contingencies O Effl$< of time Completion of vent$re Death of a partner #nsolvency of a partner By intervention of co$rt O Partner becoming of $nso$nd mind Permanent incapacity of a partner iscond$ct of a partner affecting the b$siness 8illf$l or persistent breaches of agreement by a partner "ransfer or sale of whole interest by a partner #mprobability of b$siness being carried on save at a loss (n other e5$itable gro$nd for dissol$tion as co$rt may satisfies

=. CONSE.UENCES OF DISSOLUTION (%) C(#1$# #nspite of dissol$tion of the firm% partners contin$e to be liable for any 2$#, &$%"$&$18 2#1$& act done by any of them% which wo$ld have been an act of the firm if 62"&$c #(1$ce done before the dissol$tion% 2#1$& 62"&$c #(1$ce $0 ,$:e# of the dissol$tion. (") R$,h10 (n dissol$tion of partnership% any partner or his representative shall 1( e#5()ce '$#*$#, have right% against other partners O 26 "o have property of the firm applied in payment of the debts of the firm and "o have the s$rpl$s distrib$ted among the partners or their representatives according to their respective rights. (c) A21h() "he a$thority of a partner to bind the firm K other m$t$al rights and $18 (5 6%)1#e)0 obligations contin$e O %51e) *$00(&21$(# 8hich are necessary to wind $p the firm. "o complete the $nfinished transactions pending at the date of dissol$tion. 7osses incl$ding deficiencies of capital are to be paid O -i. ($t of profits% then -ii. ($t of capital% then -iii. By partners individ$ally in their profit sharing ratio Assets of the firm R Contrib$tions by partners on ABc of deficiencies of capital m$st be applied in following order=O -i. "o pay debts of o$tsiders then -ii. "o pay partner+s loan then -iii. "o pay partner+s capital then -iv. Balance will be shared in profit sharing ratio

(*)

Se11&e+ i. e#1 (5 P%)1#e)0h$6 AQc/0

ii.

B.

Pe)0(#%& 6)(5$10 and till the firm is wo$nd $p% partners m$st ABc for% the profits from e%)#e* %51e) carrying on b$siness of the firm% to the other partners. *$00(&21$(#

C. Re12)# (5 #n case of dissol$tion of partnership earlier than the period fi<ed for it% 6)e+$2+ (# the partner paying premi$m is entitled to ret$rn of the premi$m as s$ch 6%)1#e)0h$6/0 part thereof as may be reasonable% regard being had to the terms of 6)e+%12)e agreement K to the length of time d$ring which he was a partner% e<cept *$00(&21$(# when partnership is dissolved=O (Sec1$(# C1) D$e to death of one of the partners or or P$rs$ant to an agreement containing no provisions for the ret$rn of the premi$m or any part thereof ainly d$e to miscond$ct of the partner paying the premi$m

MODE OF GI3ING PUBLIC NOTICE (SECTION 72) #n every case where p$blic notice of any manner in respect of partnership firm is re5$ired to be given $nder this act% it m$st be given By #(1$5$c%1$(# $# 1he (55$c$%& G%Ge11e% and #n at least (#e :e)#%c2&%) (&(c%& &%#,2%,e) #e'06%6e) circ$lating n the district where the firm to which it relates has its place or principal place of b$siness. #n case of )e,$01e)e* 5$)+0% $# %**$1$(# 1( above notification% a notice is also re5$ired to be 0e):e* (# 1he Re,$01)%) (5 5$)+0.

THE SALE OF GOODS ACT, 1<=4 CHAPTER-1 FORMATION OF CONTRACT OF SALE


1. DEFINITIONS B28e) @ Sec 2 (1) A ! B$yer means a person who "280 or %,)ee0 1( "28 goods. Se&&e) @Sec 2 (1=)A ! )eller means a person who 0e&&0 or %,)ee0 1( 0e&& goods. G((*0 @Sec 2 (7)A ! Goods means every *ind of +(:%"&e 6)(6e)18 other than actionable claims & money and $#c&2*e0 = )toc* and shares Growing crops Grass K "hings attached to or forming part of land% which are agreed to be severed before sale or $nder the contract of sale. UAc1$(#%"&e c&%$+0 are claims which can be enforced only by an action or s$it e.g. Debt.V T86e0 (5 G((*0

E9$01$#, F212)e F212)e E9$01$#, G((*0 G((*0 G((*0 G((*0 E<isting Goods

S6ec$5$c S6ec$5$c U#%0ce)1%$#e* A0ce)1%$#e* U#%0ce)1%$#e* A0ce)1%$#e* G((*0 G((*0 G((*0 G((*0 G((*0 G((*0 Goods which are in e<istence at the time of contract of sale i.e. 1h(0e ('#e* H

'$t$re goods )pecific Goods

6(00e00e* "8 1he 0e&&e). eans goods to be man$fact$red or prod$ced or ac5$ired by seller after ma*ing the contract of sale. #n case of f$t$re goods% there is an %,)ee+e#1 1( 0e&&. eans ,((*0 $*e#1$5$e* H %,)ee* 26(# at the time of a contract of sale has been made.

C4nascertainedD or CGenericD goods Ascertained goods

eans goods *e5$#e* (#&8 "8 *e0c)$61$(# and not identified and agreed $pon. eans goods $*e#1$5$e* in accordance with the agreement %51e) 1he c(#1)%c1 (5 0%&e h%0 "ee# +%*e

G((*0 $# De&$:e)%"&e S1%1e;- Goods are said to be in a deliverable state when they are in s$ch a condition that the b$yer is bo$nd to ta*e delivery of them $nder the contract. E.g. O A contracts to sell timber and ma*es b$ndles thereof% Goods will be in a deliverable state% after A has p$t the goods in s$ch a condition. De&$:e)8 @Sec. 2 (2)A; > Delivery means vol$ntary 1)%#05e) (5 6(00e00$(# by one person to another.

N$#*0 (5 De&$:e)8

Ac12%& De&$:e)8

C(#01)2c1$:e De&$:e)8

S8+"(&$c De&$:e)8

a. Act$al Delivery #t is act$al when the goods are physically delivered to the b$yer. b. Constr$ctive delivery 8hen it is effected '$1h(21 %#8 ch%#,e $# 1he c201(*8 or act$al procession of thing. E.g. Delivery by attornment -ac*nowledgement.. E.g. 8here a wareho$seman holding the goods of A% agrees to hold them on behalf of B% at A+s re5$est. c. )ymbolic Delivery 8hen there is a *e&$:e)8 of thing $# 1(Fe# of a transfer of something else E.g. Delivery of goods in transit by handling over the doc$ments to title -ownership . to goods% BB7% Doc* warrant% Delivery of *ey of a 8areho$se. D(c2+e#1 (5 1$1&e 1( ,((*0 => #ncl$des= Bill of lading Doc* warrant 8areho$se *eeper+s certificate 8harfingers+ certificate Railway receipt $ltimodel transport doc$ment 8arrant or order for delivery of goods or any other doc$ment $sed in the ordinary ca$se of b$siness as a proof of possession or control of goods.

Me)c%#1$&e A,e#1 @Sec 2 (<)A; - #t means an agent having in the c$stomary co$rse of b$siness as s$ch agent an a$thority either

"o sell goods or "o consign goods for the p$rpose of sale or "o b$y goods or "o raise money on the sec$rity of the goods.. P)(6e)18 @Sec 2 ($$)A #t means Ge#e)%& 6)(6e)18 -Right of ownership in goods. and #(1 merely 06ec$%& 6)(6e)18. I#0(&:e#1 @Sec 2 (8)A A person is said to be insolvent when he ce%0e* 1( 6%8 his debts in the ordinary co$rse of b$siness () c%##(1 6%8 his debts as they become d$e whether he has committed an act of insolvency or not. C(#1)%c1 (5 0%&e @ Sec.B (1)A A contract of sale is a c(#1)%c1 whereby the 0e&&e) 1)%#05e)0 -sale. () %,)ee0 1( 1)%#05e) -agreement to sell. 6)(6e)18 -ownership. in ,((*0 to the "28e) for a 6)$ce. E00e#1$%&0= 2. S. NO. 1. &. 1. 6. ?. BASIS Property in goods Ris* "ype )$e for Price At least two parties )$b3ect matter of contract m$st be Goods Price in money only -not in *ind. sho$ld be paid or promised. "ransfer of ownership in goods A contract of sale m$st be absol$te or conditional. (ther essentials of a valid contract. SALE 30. AGREEMENT TO SELL SALE "ransfer "ransfer E<ec$ted contract 2es AGREEMENT TO SALE !ot transfer !ot transfer E<ec$tory contract !o% only damages $nless price was payable at stated date. )eller B$yer+s right to claim damages only.

7oss of destr$ction B$yer Breach by )eller B$yer+s Right -i. "o recover the goods -ii. )$it for damages.

=. S. NO 1. &. 1. BASIS "ransfer of property Position Right of termination

SALE 30. HIRE PURCHASE SALE #mmediate B$yer (wner B$yer cannot terminate the contract and is bo$nd to pay the price. Ris* of loss )eller HIRE PURCHASE (n the payment of last instalment 0irer Bailee till he pays last instalment 0irer may terminate the contract by ret$rning the goods to its owner witho$t any liability to pay remaining instalment. )eller has no ris*% right to ta*e bac* goods

6. ?.

B$yer+s #nsolvency Passing of title by b$yer

B$yer can pass good title 0irer cannot pass any title even to a to bonafide p$rchaser bonafide p$rchaser

G.

"a<

"a< is levied at the time "a< is not leviable $nless it event$ally of contract. ripens into sale

B. S%&e :. B%$&+e#1 BAILMENT A bailment is the delivery of goods for some specific p$rpose $nder a contract on the condition that the same goods to be ret$rned to the bailer or are to be disposed off according to directions of the bailer. SALE 30. BAILMENT SALE
2es Ret$rn of goods in contract of sale not possible. Consideration price money only

S.NO
1. &.

BASIS
"ransfer of ownership Ret$rn of goods

BAILMENT
!o (nly transfer of possession

Bailee m$st ret$rn the goods to the bailor on accomplishment of the p$rpose for which the bailment was made. Consideration may be grat$ito$s or non grat$ito$s.

1.

Consideration

C. SALE 30. CONTRACT FOR !ORN AND LABOUR S. NO


1."ransfer of ownership

SALE
2es

CONTRACT FOR !ORN H LABOUR


!o (nly doing some wor* of labo$r. E.g. Gold s$pplied to goldsmith for preparing an ornament An artist as* to paint a pict$re.

D. M(*e0 (5 5()+$#, c(#1)%c1 (5 0%&e M The)e +%8 "e; #mmediate delivery of goods or #mmediate payment of price b$t delivery at the some f$t$re date or #mmediate delivery of goods and immediate payment of price or Delivery or payment or both are to be made in instalments or Delivery or payment or both are to be made at some f$t$re date. 7. De01)2c1$(# (5 02"7ec1 +%11e) (5 c(#1)%c1 ( Sec. 7 H 8 ) => -a. Goods not e<isting at the time of contract. Goods destroyed witho$t *nowledge of the seller% c(#1)%c1 $0 :($*-%"-$#$1$(. -b. #f there was agreement to sell K Goods perishing after contract is made. 8itho$t any fa$lt of b$yer or seller% agreement becomes void. 8. A0ce)1%$#+e#1 (5 6)$ce ( Sec. < %#* 14 ) Price is the monetary consideration for sale of goods @Sec 2 (14)A Price may be= 'i<ed by the contract or Agreed to be fi<ed in a manner provided by the contract. E.g. by a val$er or Determined by the co$rse of dealings between the parties. 8here price cannot be fi<ed in any of above ways% b$yer is bo$nd to pay a reasonable price to the seller. <. S1$62&%1$(# %0 1( 1$+e (Sec1$(# 11)

As regard time for payment of price% $nless a different intention appears from the contract% stip$lation as regard this is not deemed to be essence of the contract of sale. B$t delivery of goods m$st be made witho$t delay. )tip$lations as to time of delivery are $s$ally the essence of contract.

CHAPTER-2 CONDITIONS H !ARRANTIES


MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1. C(#*$1$(# M A condition is a stip$lation e00e#1$%& 1( 1he +%$# 62)6(0e (5 c(#1)%c1 % the breach of which gives the )$,h1 1( )e62*$%1e 1he c(#1)%c1 K 1( c&%$+ *%+%,e0. 2. !%))%#18 M A warranty is a stip$lation c(&&%1e)%& 1( 1he +%$# 62)6(0e (5 c(#1)%c1 the breach of which gives rise to a c&%$+ 5() *%+%,e0 b$t #(1 to a )$,h1 1( )e7ec1 1he ,((*0 and treat the contract as rep$diated. =.
1. of contract. &. Aggrieved party can rep$diate the contract or claim damages or both in case of breach of condition. A breach of condition may be treated as breach of warranty. &. Aggrieved party can claim only damages in case of breach of warranty. A breach of warranty cannot be treated as breach of condition.

DISTINCTION BET!EEN CONDITION AND !ARRANT CONDITION


Essential to the main p$rpose 1.

!ARRANT
Collateral to the main p$rpose of contract.

1.

1.

B. !HEN A CONDITION MA BE TREATED AS !ARRANT


-i. -ii. 8hen b$yer altogether waives the performance of the condition. 8here b$yer elects to treat the breach of condition as one of warranty. 0e may only claim damages instead of rep$diating the contract. -iii. Contract is non>severable% the b$yer has accepted either the whole goods or any part thereof. -iv. 8here f$lfillment of any condition or warranty is e<c$sed by law by reason of impossibility or otherwise.

C. E?PRESS H IMPLIED CONDITIONS H !ARRANTIES


E96)e00 C(#*$1$(#0 are those which are agreed between the parties at the time of contract and are e<pressly provided in the contract. I+6&$e* C(#*$1$(#0 are those which are pres$med by law to be present in the contract. An implied condition may be negated or waived by an e<press agreement.

I+6&$e* C(#*$1$(#0 ;C(#*$1$(# %0 1( 1$1&e #n case of sale% seller has right to sell the goods K #n case of agreement to sell% he will have right to sell the goods at the time when property is to pass. #f the sellers title t$rno$t to be defective% b$yer m$st ret$rn the goods to the tr$e owner and recover the price from the seller. S%&e "8 *e0c)$61$(# S%&e "8 0%+6&e #n this case% there is implied condition that goods correspond with the description. B$l* shall correspond with the sample in 5$ality. "he b$yer shall have a reasonable opport$nity of comparing the b$l* with the sample and "he goods sho$ld b free from any defect rendering them $nmerchantable% which wo$ld not be apparent on reasonable e<animation of the sample.

C(#*$1$(# "8 0%+6&e %0 B$l* m$st correspond with sample K description 'e&& %0 *e0c)$61$(# !o implied condition as to 5$ality or fitness of the goods sold C(#*$1$(# %0 1( L2%&$18 () for any partic$lar p$rpose. 5$1#e00 Condition as to reasonable fitness of goods for a partic$lar p$rpose is implied if the b$yer had made *nown to the seller the p$rpose of his p$rchase and relied $pon the s*ill K 3$dgment of the seller to select the best goods and seller has ordinarily dealing in those goods. #n case of eatables K provisions% in addition to merchantable 5$ality% C(#*$1$(# %0 1( goods shall be wholesome. 'h(&e0(+e#e00

IMPLIED !ARRANTIES
1. nty as to possession &. 8arra B$yer shall have K en3oy 5$ite possession of goods. $ndist$rbed Goods shall be free from any charge in favo$r of a third party not declared or *nown to the b$yer before or at the time contract is entered into. Goods are dangero$s K b$yer is ignorant of danger% seller m$st warn the b$yer of the probable danger. An implied warranty as to 5$ality or fitness for a partic$lar p$rpose may be anne<ed by the $sage of trade.

arrant y as to non>e<istence of enc$mbrances 1. Disclo s$re of dangero$s nat$re of goods 6. 8arra nty as to 5$ality or fitness by $sage of trade

D. CA3EAT EMPTOR Me%#0 Le1 1he "28e) "e'%)e #t is the responsibility of the b$yer to ma*e proper selection of goods. #f the goods t$rn o$t to be defective he cannot hold the seller liable. "he seller is in no way responsible for bad selection of the b$yer. "he seller is not bo$nd to disclose the defects in the goods which he is selling. E?CEPTIONS 1. 8here b$yer ma*e *nown to the seller the partic$lar p$rpose 5() 'h$ch 1he ,((*0 %)e )eL2$)e*, 0( %0 1( 0h(' 1h%1 he )e&$e0 (# 0e&&e)/0 0F$&& H 72*,e+e#1. &. Goods p$rchased $nder patent !o implied condition that the goods shall fit for any name or brand name partic$lar p$rpose. 1. )ale by description Goods shall correspond with the description. Goods shall be of merchantable 5$ality% if p$rchased from dealer. the r$le shall not apply. B$t if b$yer has e<amined the goods K the defects were s$ch which o$ght to have been revealed by ordinary e<amination% the r$le shall apply. 6. )ale by sample if b$l* does not correspond with sample. ?. Goods by sample as well as Goods shall correspond with both discription as well as description sample. G. 8hen 5$ality or fitness for a partic$lar p$rpose K seller deviates from that. ass$med by $sage of trade H. 'ra$d or misrepresentation by the seller.

CHAPTER-= TRANSFER OF O!NERSHIP AND DELI3ER OF GOODS

1. PASSING OF PROPERT (PASSING OF O!NERSHIP) R2&e0; ($) ($$) !o transfer of property to the b$yer% $nless K $ntil goods are ascertained. 8here there is a contract of sale of specific or ascertained goods% property passes to the b$yer at the time when parties intend to pass it. ($$$) 8here there is an $nconditional contract for the sale of specific goods in a deliverable state% property in goods passes to the b$yer when the contract is made. -)ec. &/.. "he property shall not pass when the goods are made in deliverable state b$t shall pass only when the b$yer has notice of it. -)ec. &1. ($:) 8here the goods are in deliverable state% b$t the seller is bo$nd to weigh% meas$re% test or to do same act or thing for the p$rpose of ascertaining price% the property does not pass $ntil s$ch act or thing is done. 8hen the seller has done its part the property passes even if the b$yer has to do something for his own satisfaction. -)ec. &&. (:) U#%0ce)1%$#e* ,((*0 Property passes when "here is ascertainment of goods K "here $nconditional appropriation to the contract. #t involves selection of goods with the intention of $sing them in performance of contract and with the m$t$al consent of seller K the b$yer. (:$) G((*0 0e#1 (# %66)(:%& () -0%&e/ () -6%11e)#/ Property passes O 8hen b$yer signifies his approval or acceptances to the seller. 8hen he does any act adopting the transaction K #f he does not signifies his approval or acceptance to the seller b$t retained the goods beyond a reasonable time. -)ec. &6. Property pass only when the cash is paid for. 8hen the seller reserves the right of disposal $ntil certain conditions aref$lfilled% the property therein will not pass to the b$yer till the condition imposed% if any% by the seller has been f$lfilled. A66)(6)$%1$(# (5 ,((*0

(:$$) S%&e 5() c%0h (#&8 () )e12)# (:$$$) C(#*$1$(#%& %66)(6)$%1$(#

2. PASSING OF RISN @Sec. 2DA JR$0F 5(&&('0 ('#e)0h$6K. "he general r$le is JRisk passes with propertyK. E9ce61$(#0 M #f there is delay of delivery d$e to fa$lt of seller or b$yer% the goods shall at the ris* of the party in defa$lt%as regards loss which might not have arises b$t for the defa$lt. "he d$ties and liabilities of the seller and b$yer as bailee of goods for the other party remain $naffected even when the ris* has passed generally. =. TRANSFER OF TITLE @Sec. 27 1( =4A "he general r$le regarding transfer of title is that the seller cannot transfer to the b$yer of goods a better title than he himself has. #f the seller is not the owner of the goods% then the b$yer also will not become the owner i.e.% the title of b$yer shall be the same as that of the

seller. 7atin ma<im JNe+( *%1 L2(* #(# h%"e1K. which means no one can give what he has not got. E9ce61$(#0 O )ale by non>owner valid S%&e "8 Me)c%#1$&e A,e#1 'or doc$ments of title to goods Agent in pocession of goods with consent of owner )ale made acting in ordinary co$rse of b$siness as mercantile agent K B$yer acted in good faith K at the time of contract of sale% no notice of fact that seller has no a$thority to sell.

S%&e "8 (#e (5 1he 7($#1 6)(+$0()0 B$yer > Good title -P$rchase in good faith R !o *nowledge of fact that seller has no a$thority to sale.. )ale by person in possession $nder voidable contract provided contract has not been rescinded $ntil the time of sale. )ale by one who already sold the goods b$t contin$es to be in possession thereof.-Person obtain delivery in good faith R !o notice of previo$s sale. )ale by b$yer obtaining possession before property in goods has vested in him. E55ec1 (5 e01(66e& 8here the owner is estopped by the cond$ct from denying the seller+s a$thority to sell% the transferee will get a good title on against the tr$e owner. )ale by an $npaid seller )ale by official receiver or li5$idator of a company. )ale by finder of goods $nder certain circ$mstances.

B. RULES REGARDING DELI3ER OF GOODS


($) ($$) B$yer to apply "he seller is not bo$nd to deliver the goods $ntil the b$yer has for delivery applied for delivery% $nless otherwise agreed P&%ce De&$:e)8 M (5 #f there is no contract to the contrary% goods m$st be delivered at the place where they were at the time of sale. #n case of agreement to sell% goods agreed to be sold are re5$ired to be delivered at the spot where they were at the time when agreement was entered into. #f goods were not in e<istence when agreement to sell was entered into% then delivery will be made at the place where they wo$ld be man$fact$red or prod$ced.

-iii. -iv.

-iii.

#f not fi<ed by the parties% the seller m$st send them within reasonable time. Goods with third party #n this case% there will be no delivery $nless and $ntil s$ch third person ac*nowledges to the b$yer that he hold goods on his behalf. #n case% there is a transfer of doc$ment of title to goods% it will be treated as symbolic delivery. Even if the goods are in c$stody of a third person% no ac*nowledgement is re5$ired. "ime for tender of Demand or tender of delivery sho$ld be made at a reasonable ho$r Delivery otherwise s$ch demand is ineffect$al. 8hat is reasonable ho$r is a 5$estion of fact. E<penses for Delivery Delivery 5$antity of E<penses related to p$tting the goods into a deliverable state m$st be borne by the seller% $nless there is a contact to the contrary. wrong #n case of delivery of &e00() L2%#1$18 of goods% the b$yer may either accept the same and pay for it or re3ect it. #n case of e9ce00 *e&$:e)8% the b$yer may accept or re3ect

"ime of Delivery

-iv. -v.

the delivery% if he accepts the whole of goods% he shall pay for them at the contract rate. #n case goods mi<ed with goods of a different description and delivery in made% the b$yer may accept the relevant goods and re3ect the rest or re3ect the whole. N(1e; i<ing of goods with inferior goods does not amo$nt to a mi<ing of goods of different description. -vi. Part Delivery Part Delivery wo$ld have the same effect for the p$rpose of passing of property in s$ch goods as delivery of the whole. B$t delivery of part of goods will not be treated as delivery of the whole. -vii. #nstallment deliveries 4nless otherwise agreed% the b$yer is not bo$nd to accept delivery in installments. "he parties to the contract thereon may determine the rights and liabilities in case of delivery by installments and payments. (9) Delivery of carrier )$b3ect to the terms of contract% the delivery of the goods to the carrier for transmission to the b$yer% is prima facie deemed to be delivery to the b$yer. (9$) Goods deteriorate d$ring 8here goods are delivered at a distant place% the liability for transit deterioration necessarily incidental to the co$rse of transit will fall on the b$yer% tho$gh the seller agrees to deliver at his own ris*. (9$$) B$yer+s right to e<amine #f goods are not previo$sly e<amined by the b$yer% the seller is the good bo$nd% on re5$est% to afford the b$yer a reasonable opport$nity of e<amining the goods.

C. Acce61%#ce (5 *e&$:e)8 (5 G((*0 Acceptance is deemed to ta*e place when the b$yer= #ntimates to the seller that he had accepted the goodsQ or Does any act to the goods which is inconsistent with ownership of the sellerQ or Retain the goods after the lapse of a reasonable time% witho$t intimating to the seller that he has re3ected them.

CHAPTER-B UNPAID SELLER


MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1. U#6%$* Se&&e) M "he seller of goods is deemed to be an $npaid seller when O "he whole of the price has not been paid or tendered and the seller has an immediate right of action for the price. A bill of e<change or other negotiable instr$ment was given as payment% b$t the same has been dishono$red% $nless this payment was an absol$te% and not a conditional payment. 2.

($)

(A) RIGHTS OF UNPAID SELLER AGAINST THE GOODS R$,h1 (5 L$e# (Sec1$(# B7) Goods are in possession of seller 7ien $ntil the payment or tender of the price of s$ch goods. C%0e0 'he)e )$,h1 (5 &$e# c%# "e e9e)c$0e*; -a. Goods sold witho$t any stip$lation of credit or -b. Goods sold on credit b$t term of credit has e<pired or -c. B$yer becomes insolvent

C%0e0 2#*e) 'h$ch 0e&&e) &(0e0 h$0 )$,h1 (5 &$e# 8here he delivers the goods to % c%))$e) or other "%$&ee for the p$rpose of 1)%#0+$00$(# to the "28e) witho$t reserving the right of disposal of goods. 8here the "28e) or his agent lawf$lly ("1%$#0 6(00e00$(# of the goods. 8here seller the '%$:e* the right of lien.

B8 E01(66e& i.e., where the seller so cond$cts himself that he leads third parties to believe that the lien does not e<ist. ($$) R$,h1 (5 01(66%,e $# 1)%#0$1 "his right can be e<ercised only if all the following conditions are f$lfilled= Se&&e) m$st be 2#6%$*. )eller m$st have 6%)1e* '$1h the 6(00e00$(# of the goods. G((*0 are $# 1)%#0$1. B28e) has become $#0(&:e#1. ($$$) R$,h1 (5 )e-0%&e "he right to re>sell the goods can be e<ercised by the $npaid seller $nder the following conditions= Goods are of perishable nat$re% no need to inform to the b$yer of intention of resale. #n case of other goods %when notice of intention of resale is given by $npaid seller to the b$yer K b$yer does not within reasonable time pay or tender the price. (B) RIGHT OF UNPAID SELLER AGAINST THE BU ER S2$1 5() 6)$ce (Sec1$(# CC) -a. Property has passed to the b$yer -ownership.. B$yer wrongf$lly neglects or ref$ses to pay price of goods.

($)

($$)

($$$)

($:) =. S.N(. 1. &.

-b. Property has not passed to the b$yer. Price is payable on a partic$lar date irrespective of delivery. B$yer wrongf$lly neglects or ref$ses to pay price of goods. S2$1 5() *%+%,e0 5() #(#-%cce61%#ce (Sec1$(# CD) 8hen b$yer wrongf$lly neglects or ref$ses to accept and pay for the goods% the seller may s$e him fordamages for non>acceptance. S2$1 5() *%+%,e0 5() B)e%ch (Sec1$(# D4) 8here the contract is rep$diated by the b$yer before the date of delivery% the seller may treat the contract as rescinded and s$e for damages for the breach. S2$1 5() $#1e)e01 8here there is O )pecific agreement between seller and b$yer as to interest on price of goods from the date. (n which payment becomes d$e% the seller may recover the interest from the b$yer. RIGHT OF LIEN 30. RIGHT OF STOPPAGE IN TRANSIT

RIGHT OF LIEN RIGHT OF STOPPAGE IN TRANSIT #t is a right to retain possession. #t is a right to regain possession )eller sho$ld be in possession of )eller sho$ld have parted with the the goods. possession. Possession sho$ld be with a carrier K B$yer has not ac5$ired the possession.

1.

"he right of lien can be e<ercised #t can be e<ercised only if b$yer is insolvent. even when the b$yer is not insolvent. "he right of stoppage in transit #ts starting point is the end of right of lien. starts where right of lien ends. B. EFFECT OF SUB-SALE OR PLEDGE B THE BU ER ON UNPAID SELLER/S RIGHT "he $npaid seller+s right of lien or stoppage in transit is not effected by any f$rther sale or other disposition of goods by the b$yer. "#ceptions 8hen seller has given his assent to s$ch sale% mortgage or other disposition of goods made by the b$yer. 8hen a doc$ment of title of goods has been transferred to the b$yer and the b$yer transfers the doc$ments to a person who has bo$ght the goods in good faith K for val$e.

6.

C. RIGHT OF BU ER AGAINST THE SELLER IN CASE OF BREACH OF CONTRACT (Sec1$(# C7 1( C<)


-i. )$it for 8here the seller wrongf$lly neglects or ref$ses to deliver the goods to the non>delivery b$yer% the b$yer may s$e the seller for damages for non>delivery. U)ection ?HV )$it for specific 8here property has passed to the b$yer% the b$yer can also e<ercise the right performance to s$e for specific performance. U)ection ?IV

-ii.

-iii. )$it for damages for B$yer is entitled to claim damages from the seller. Breach of warranty

U)ection ?JV -iv. )$it for recovery of "he b$yer has right to recover the money paid to the seller where the price U)ection G1V consideration for payment of it has failed.

D. AUCTION SALE #t is a mode of selling property by inviting bids p$blicly and the property is sold to the highest bidder. An a$ctioneer is an agent governed by law of agency. PRO3ISIONS RELATED TO AUCTION SALE 8here goods are p$t for sale in lot% each lot is prima facie deemed to be s$b3ect matter of a separate contract of sale. "he sale is complete when a$ctioneer anno$nces its completion= By fall of hammer or Any other c$stomary manner. Any bidder may retract from his bid $ntil anno$ncement is made. R$,h1 1( "$* may be )e0e):e* e96)e00&8 by or behalf of the seller and where s$ch a right is e<pressly reserved% b$t not otherwise% the 0e&&er or any one person on his behalf +%8 "$* at the a$ction. #f seller+s right to bid has not been e<pressly reserved% it shall not be lawf$l for the seller to bid himself or to employ any person to bid at s$ch sale Re0e):e P)$ce M "he sale may be notified to be s$b3ect to a reserve or $pset price. P)e1e#*e* "$*$#, M #f the seller ma*es $se of pretended bidding to raise the price% the 0%&e $0 :($*%"&e at the option of the b$yer.