DELHI INSTITUTE OF ADVANCED STUDIES

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I-INTERNAL EXAMINATION
BCom(H) - II

Subject: Business Laws Date: 28th February 2019

Max. Marks: 60 Time: 2 hours

Note: Attempt all questions.

Q1.Answer the following:

(a) Justify the following: (2x4 = 8 marks)

st
i. X, a minor was studying in Class XII in a school. On 1 July, 2018, he took a loan of Rs.
10,000 from B for payment of his school fees and to purchase books and agreed to repay
the loan by 31st December 2019. X possesses assets worth Rs 2 lakhs. On due date, X
fails to repay the loan to B. B now wants to recover the loan from X out of his (X’s)
assets. Referring to the provisions of Indian Contract Act, 1872, decide whether B would
succeed.

ii. A set of napkins and table clothes, described as of 17th Century was sold at an auction
sale to an antique dealer who had seen the set. Later on, it was found by the dealer that
the set was of 18th Century and therefore, he wanted to reject the set. Can he do so in the
provisions of Sale of Goods Act, 1930?

(b) Explain the meaning of the following: (3 marks)

i. VOID ABINITIO
ii. CONSENSUS ADIDEM
iii. CAVEAT EMPTOR

(c) Write whether the statement is TRUE or FALSE (2 Marks)

i. A horse race betting is a valid agreement
ii. A written and registered promise made on account of love and affection doesn’t
require consideration
iii. Conditional acceptance is no acceptance
iv. The buyer has to bear the risk of loss of goods, in case of agreement to sell.

(d) Fill in the blanks (2 Marks)

i. Order of the court instructing a person to refrain from doing some act which has been the
subject matter of contract is called___________
ii. ______________ is discharging a contract by substituting a new contract in place of old
contract
 iii. The right of _______________ is the right of the seller to retain the possession of goods.
iv. Sale takes place for some consideration called___________
Q2.
(a) “A contract cannot be discharged mere by performance”. Do you agree? In the light of
this statement, discuss the provisions of Indian Contract Act, 1872 in relation to Modes
of Discharge of a Contract.
OR
(b) “An agreement enforceable by law is a contract”. Discuss and explain the essentials of a
valid contract as per the provisions of Indian Contract Act, 1872.
(15 Marks)

Q3.
(a) Discuss the rule of Caveat Emptor. What are the exceptions to this rule available under Sale
of Goods Act, 1930? Explain
OR
(b) Explain the term ‘Unpaid Seller’. Discuss the rights of an unpaid seller, under Sale of Goods
Act, 1930.
(15 Marks)

Q4. Write short notes on (any 5) (3x5 = 15 marks)

i. Minority is a Blessing
ii. All Contracts are Agreements but all Agreements are not Contracts
iii. Goods and Types of Goods
iv. Breach of Condition taken as Breach of Warranty
v. Bailment and Pledge
vi. Condition and Warranty
vii. VOID Agreements and VOID Contracts

ALL THE BEST!!!

Q1.Answer the following:

(a) Justify the following: (2x4 = 8 marks)

st
i. X, a minor was studying in Class XII in a school. On 1 July, 2018, he took a loan of Rs.
10,000 from B for payment of his school fees and to purchase books and agreed to repay
the loan by 31st December 2019. X possesses assets worth Rs 2 lakhs. On due date, X
fails to repay the loan to B. B now wants to recover the loan from X out of his (X’s)
assets. Referring to the provisions of Indian Contract Act, 1872, decide whether B would
succeed.

Ans. The agreement between X and B is valid because as per the provisions of Indian Contract
Act, 1872, the contract made during minority for the necessities (in this case, school fees
and books) of minor is valid. B can claim Rs. 2 lakhs from A. Although A is not
personally liable but the amount can be recovered from his assets

ii. A set of napkins and table clothes, described as of 17th Century was sold at an auction sale
to an antique dealer who had seen the set. Later on, it was found by the dealer that the set
was of 18th Century and therefore, he wanted to reject the set. Can he do so in the
provisions of Sale of Goods Act, 1930?
Ans. As per the provisions of Sale of Goods Act, the goods sold by the seller should meet the
description given by the seller. If the goods don’t meet the description the buyer is
allowed to reject the goods.
In this case, since, the goods (of 18th century) don’t meet the description given by the seller
about the goods (of 17th century) therefore; the antique dealer is allowed to reject the set as
the goods.

(b) Explain the meaning of the following: (3 marks)

i. VOID ABINITIO
ii. CONSENSUS ADIDEM
iii. CAVEAT EMPTOR

Ans. i. VOID ABINITIO: As per provisions of Indian Contract Act, 1872, it refers to the void
agreement that means the agreement is void from the beginning, doesn’t have any legal
effect and cannot be enforced by law.

ii. CONSENSUS ADIDEM: As per provisions of Indian Contract Act, 1872, it refers to the
meeting of mind. When both the parties understand the contract in the same sense.

iii. CAVEAT EMPTOR: As per provisions of Sale of Goods Act, 1930, it refers to “Let the
buyer beware” in case of a contract of sale
 (c )Write whether the statement is TRUE or FALSE (2 Marks)
i. A horse race betting is a valid agreement : True
ii. A written and registered promise made on account of love and affection doesn’t
require consideration: True
iii. Conditional acceptance is no acceptance: True
iv. The buyer has to bear the risk of loss of goods, in case of agreement to sell: False.

iv. Fill in the blanks (2 Marks)

i. Order of the court instructing a person to refrain from doing some act which has been the
subject matter of contract is called _Injunction_
ii. _Novation_ is discharging a contract by substituting a new contract in place of old
contract
iii. The right of _Lien_ is the right of the seller to retain the possession of goods.
iv. Sale takes place for some consideration called _Price_
Q2.
(a) “A contract cannot be discharged mere by performance”. Do you agree? In the light of
this statement, discuss the provisions of Indian Contract Act, 1872 in relation to Modes of
Discharge of a Contract.

ANS - When parties fulfil their obligations and promises under a contract the contract is said to have
been performed and discharged. Performance should be complete and according to the real
intentions of the agreement. Offer of performance shall have the same effect as performance. A party
to a contract shall become free from all obligations if it had offered to perform his part of the
promise but it was not accepted by the other party. But a contract cannot be discharged mere by
performance.

Apart from the performance there are other ways to discharge the contract which are as follows:

1. By agreement.
2. By lapse of time.
3. By operation of law.
4. By material alteration.
5. By subsequent impossibility of the performance.
6. By breach.
1. By Agreement Sec. (62-64)
The parties may agree to terminate the existence of the contract by any of the following ways:-
(a) By Novation : Substitution of a new contract in place of the old existing one is
 known as ‘novation of contract’. New contract may be either between the same parties or
between different parties, the consideration being mutually the discharge of the old
contract.
(i) Substitution of a contract with new terms for an old contract between the same parties.
(ii) Substitution of a new party for an old one, the contract remaining the same. Promisee
will now look to the third party for the performance of the contract. Original promisor
is released of the obligations under the old contract.
Examples: A owes money to B under a contract. It is agreed between A, B and C that B shall
henceforth accept C as his debtor, instead of A. The old debt of A to B is at an end and a new
debt from C to B has been contracted.
As a result of novation, old contract is completely discharged and law will not entertain any
action based upon the terms of the old contract.
(b) By rescission: Rescission means cancellation of the contract. A contract can be rescinded by
any of the following ways:-
(i) By mutual consent :- Parties may enter into a simple agreement to rescind the contract
before it’s breach.
(ii) By the aggrieved party :- Where a party has committed a breach of the contract, the
aggrieved party can rescind the contract without in any way effecting his right of
getting compensation for the breach of contract.
(iii) By the party whose consent is not free:- In case of a voidable contract, the party whose
consent is not free can, if so decides, rescind the contract.
A contract may also be taken to be impliedly rescinded wherenone of the parties has
performed his part till a long and no party has any complaint against the other.
(c) By alteration: Alteration means change in one or more of the conditions of the contract.
Alteration made by the mutual consent of the parties will be perfectly valid. But any material
alteration in terms of a written contract by the one party without the consent of other party will
discharge such party from its obligations under the contract.
In case of novation a new contract replaces an old contract. The parties may also change.
While in case of alteration only some of the terms of the contract are changed. Parties also
continue to be the same.
(d) By remission (Sec. 63) : Remission means acceptance of a lesser performance than what was
actually due under the contract. According to Sec. 63 a party may dispense with or remit,
wholly or in part, the performance of the promise made to him. He can also extend the time of
such performance or accept instead of any satisfaction which he deems fit. A promise to do so
will be binding even though there is no consideration for it.
Example: A owes B Rs. 5,000. A pays to B and B accepts in satisfaction of whole debt Rs.
2,000 paid at the time and place where Rs. 5,000 were payable. The whole debt is discharged.
2. By Lapse of time
 Every contract must be performed either within the period fixed or within a reasonable time of
the contract. Lapse of time may discharge the contract by barring the right to bring an action to
enforce the contract under the Limitation Act.
3. By operation of Law
A contract is discharged or terminated by operation of other laws in the following cases:
(a) Merger. Merger implies coinciding and meeting of an inferior and superior right on one and
the same person. In such a case inferior right available to a party under an agreement will
automatically vanish.
Examples: A is holding a property under lease. He subsequently buys that property. A’s right
as a tenant is inferior to his right as an owner of the property. The right as a tenant and right as
owner have coicided and met in one person i.e. A. Therefore, A’s rights as a lessee will
terminate.
(b) Death: In case a contract is of a personal nature, the death of the promisor will discharge the
contract. In other case, the rights and liabilities of the deceased person shall pass to his legal
representatives.
(c) By complete loss of evidence of the existence of the contract.
(d) By insolvency. An insolvent is released from performing his part of the contract by law. Order
of discharge, however gives a new lease of life to the insolvent and he is discharged from all
obligations arising from all his earlier contracts.

4. By material alternation
Any material alteration made intentionally in a written contract by the promisee or his agent
without the consent of the promisor entitles the later to regard the contract as rescinded.
An alternation will be taken to be material if it directly or indirectly affects the nature or
operation of the contract or the identity, validity or effect of the document.
5. By supervening impossibility of performance (Sec. 56)
Supervening impossibility arises due to the happening of certain events which were neither in
the contemplation of the parties when they entered into the agreement nor either of the parties
are responsible for causing the performance of the contract impossible. In such a case the
contract will be void as soon as such events make the performance of the contract impossible.
The impossibility must be either legal or physical but not commercial. This is called “Doctrine
or Supervening Impossibility”. Section 56 of the Indian Contract Act lays down:
“An agreement to do an impossible act is void”.
A contract to do an act, which after the contract is made, becomes impossible, or by reason of
some event which the promisor could not prevent, becomes void when the act becomes
impossible or unlawful. This is called “Supervening Impossibility”, i.e. impossibility arising
subsequent to the formation of the contract. The supervening impossibility may be due to any of
the following causes:
 (a) By the destruction of the subject matter. If the subject matter of the contract is destroyed
subsequent to the formation of the contract, without any fault of either of the parties, the
contract shall become void.
Example: A music hall was let for a series of concerts on certain days. The hall was burnt
down before the date of the first concert. The contract was held to be void.
(b) By the non-existence of a state of things necessary for the performance. If a contract is
made on the basis of continued existence of certain state of circumstances, the contract stands
discharged if the state of things ceases to exist.
Example: H hired a room from K for two days to witness the coronation procession of King
Edward VII. K knew the object of the contract though the contract contained no reference to
the coronation. Owing to King’s illness the procession was cancelled. It was held that H was
excused from paying rent for the room, as the existence of the procession as the basis of the
contract and its abandonment discharged the contract.
(c) Death or personal incapacity of the promisor. Contracts involving personal skill of the
promisor will stand discharged in the case of his death or personal incapacity.
Example: A contracts to act at a theatre for six months in consideration of a sum paid in
advance by B. On several occasions A is too ill to act. The contract to act on the occasions
becomes void.
(d) Change of law. On account of subsequent change in law, the performance of the contract may
become impossible. The object of the contract may be declared to be unlawful.
Example: A, who is governed by Muslim law and who already had a wife promises to marry B.
Subsequent to this promise and before it is carried out, Special Marriage Act prohibiting
polygamy is passed. The contract to marry becomes void.
6. Outbreak of War. A contract entered into with an alien enemy during the war is unlawful and,
therefore, void ab initio contracts made before the outbreak of war either suspended or declared
void by the Government. If they are suspended, they may be performed after the termination of
the war.
Example: A contracts to take in cargo for B at a foreign port. A’s Government afterwards
declared war against the country in which port is situated. The contract becomes void when war
is declared.

OR
(b)“An agreement enforceable by law is a contract”. Discuss and explain the essentials of
a valid contract as per the provisions of Indian Contract Act, 1872.
(15 Marks)
Ans.
An agreement to be enforceable at law must satisfy the essentials of a valid contract, According to
Section 10 of the Act. “All agreements are contracts, if they are made by the free consent of parties,
competent to contract, for a lawful consideration and with a lawful object, and not hereby expressly
declared to be void.”
Thus, the following are the essential elements of a valid contract:
1. Agreement, i.e., Proposal and Acceptance.
2. Intention to Create Legal Relationship.
3. Free Consent
4. Competent Parties
5. Lawful Consideration
6. Legal Object
7. Not Expressly Declared Void by Law
8. Possibility of Performance
9. Compliance with Legal Formalities
1. Agreement: An offer or proposal by one party and an acceptance of that offer by another
party is called an agreement. An agreement has been defined by the Act as “every promise or
every set of promises forming consideration for each other.” The acceptance of the offer
must be according to the mode prescribed and must be communicated to the proposer.
Further, the intention of the agreement must be to create legal relationship between the
parties. Agreement must be capable of performance with term which are clear and certain. It
should not be suffering from either a fundamental mistake or impossibility of performance.
2. Intention to create legal relationship when an agreement is made between the parties, their
intention should be to create legal relationship. Absence of such an intention creates no
contract between the parties. Social or domestic agreements do not involve creation of legal
relationship so, they are not contracts.
Example : A husband made a promise to pay his wife £ 30 every month as domestic expense.
Sometime later, husband and wife separated and the husband stopped paying monthly
expense. Subsequently, wife filed a suit for the allowance for expenses. It was held that it
was a domestic agreement and this was outside the contract. This was decided in the case
ofBalfour V. Balfour.
3. Free consent : Two or more persons are said to have consented when they agree upon the
same thing in the same sense. Thus, if two persons enter into apparent contract concerning a
particular person or thing and it turns out that each of them was misled by a similarity of
name and actually each had a different person or thing in mind, no contract would exist
between them.
Example: A has two cars, one blue and the other red. He wants to sell his blue car, B, who
knows of only A’s red car, offers to purchase A’s car for Rs. 20,000. A accepts the offer
thinking that it is for his blue car. There is no consent because both the parties are not
understanding the same thing in the same sense. Besides, to make a contract valid not only
consent is necessary but the consent must also be free. According to Sec. 14, consent is said
to be free when it is not caused by
a. coercion
b. undue influence
c. fraud
d. misrepresentation or
 e. mistake.
A clear distinction must be made between ‘no consent’ and ‘no free consent’. In the case of
‘no consent’ there is no identity of mind and therefore, in the absence of consent the
agreement is void abinitio--from the very beginning. In the later case of ‘no free consent’
consent is there but it not free, the agreement is voidable at the option of the party whose
consent is not free.
4. Competent Parties: At least two parties are essential for every valid contract. A person
cannot enter into a contract with oneself except in a different capacity, e.g., a partner may
purchase goods from his own firm. In order that an agreement may be a binding contract, the
parties must have the legal capacity of enetering into the contract. According to Sec. 11 of
the Act “Every person is competent to contract who is of the age of majority according to the
law to which he is subject and who is of sound mind and is not disqualified from contracting
by any law to which he is subject”. Thus, a contract entered into by a minor or by a lunatic is
void, In India, a person who has not completed his 18th year of age is considered to be a
minor. However, a lunatic can enter into binding contracts during his lucid intervals. The
legal presumption is that every party to a contract has the capacity to contract unless contrary
is proved and the presumption is rebutted.
5. Lawful Consideration : Consideration is an essential element of valid contract. An
agreement without consideration is a bare promise and is not binding on the parties.
Contracts result only when a promise is made for something in return. This something in
return is termed as consideration. “Consideration is the price paid by the promisee for the
obligation of the promisor. Consideration need not be a benefit to the promisor. If the
promisee has suffered some loss of detriment, it will be taken as sufficient consideration for
the promisor to fulfil his promise.
Example : A agrees to sell his car to B for a sum of Rs. 10,000. For A’s promise, the
consideration is a sum of Rs. 10,000 while for B’s promise’ consideration is the car.
Consideration is also the necessary evidence required by law about the intention of the
parties to establish legal relationship.
Consideration must be real, and not illusory or illegal. Consideration may be past, present or
future. It may move from the promise or any other person but it should always be furnished
at the desire of the promisor. Consideration must be valid in the eyes of law, i.e., it must
result in some gain to one party and detriment to the other.
6. Legal object: The agreement must not relate to a thing which is contrary to the provisions of
any law or has expressly been forbidden by any law or which is opposed to policy or is
immoral. All agreements which are not lawful cannot be enforced by law. This is because
courts will not allow polluted hands to touch the pure fountains of justice. No agreement can
be allowed to defeat the provisions of any law or to cause injury to the person or property of
any person or to achieve fraudulent objects.
Example: A agrees to sell certain goods to B. A knows that the goods are to be smuggled out
of the country. The contract is unlawful and not enforceable.
A person who knowing lets out his home for prostitution, cannot recover the rent thereof
because the purpose of the agreement has been immoral.
 7. Not expressly declared void : The agreement must have not been expressly declared void by
any law in force in the country. In India agreements in restraint of trade, in restraint of
marriage, or to do things which are impossible or are in the nature of marriage agreements,
etc., are expressly declared void by the Indian Contract Act.
Example : A and B are competitions in a business. B agreed to pay A a sum of money if he
would close his business. A did so but B refused to pay him the money. Here, the agreement
was void because it was in the nature of restraint of trade and therefore, money could not be
recovered.
8. Certainty and possibility of performance. The agreement entered into by the parties must be
certain and not indefinite. If the agreement is vogue or indefinite and the ascertainment of the
meaning of the agreement is not possible, such an agreement cannot be enforced.
Example: A agrees to sell to B one thousand meters of cloth. This does not indicate what
kind of cloth is intended to be sold. This agreement is void and unenforceable because of
uncertainty.
9. Compliance with Legal Formalities : If any legal formalities of writings, registration, etc.,
are necessary by law, these must be satisfied. In the absence of these legal formalities,
agreements will not be enforceable in courts of law.

Q3.
(a) Discuss the rule of Caveat Emptor. What are the exceptions to this rule available under
Sale of Goods Act, 1930? Explain

Ans: “Caveat Emptor” is a Latin phrase that translates to “let the buyer beware”

 This means it lays the responsibility of their choice on the buyer themselves. It is specifically defined
in Section 16 of the act “there is no implied warranty or condition as to the quality or the fitness for
any particular purpose of goods supplied under such a contract of sale”
 A seller makes his goods available in the open market. The buyer previews all his options and then
accordingly makes his choice.
 This doctrine says that the buyer himself is responsible for the choice he made.
 The doctrine attempts to make the buyer more conscious of his choices.
 It is the duty of the buyer to check the quality and the usefulness of the product he is purchasing.
 If the product turns out to be defective or does not live up to its potential the seller will not be
responsible for this.
Example: A bought a horse from B. A wanted to make the horse run in a race. The horse was not capable of running a
race on account of being lame. But A did not inform B of his intentions. So B will not be responsible for the defects of the
horse. The Doctrine of Caveat Emptor will apply.

 However, the buyer can shift the responsibility to the seller if the three following conditions are
fulfilled.
 if the buyer shares with the seller his purpose for the purchase
 the buyer relies on the knowledge and/or technical expertise of the seller
 the seller sells such goods
EXCEPTIONS TO THE DOCTRINE OF CAVEAT EMPTOR

 Fitness of Product for the Buyer’s Purpose:

o When the buyer informs the seller of his purpose of buying the goods, it is implied that he is
relying on the seller’s judgment.
o It is the duty of the seller then to ensure the goods match their desired usage.
Example: A goes to B to buy a bicycle. He informs B he wants to use the cycle for mountain trekking. If B sells him
an ordinary bicycle that is incapable of fulfilling A’s purpose the seller will be responsible.

 Goods Purchased under Brand Name:

o When the buyer buys a product under a trade name or a branded product the seller cannot be
held responsible for the usefulness or quality of the product.
o So there is no implied condition that the goods will be fit for the purpose the buyer intended.

 Goods sold by Description:

o When the buyer buys the goods based only on the description there will be an exception.
o If the goods do not match the description then in such a case the seller will be responsible for the
goods.

 Goods f Merchantable Quality:

o The seller who is selling goods by description has a duty of providing goods of merchantable
quality, i.e. capable of passing the market standards.
o So if the goods are not of marketable quality then the buyer will not be the one who is
responsible.
o It will be the seller’s responsibility.
o However if the buyer has had reasonable chance to examine the product, then this exception will
not apply.

 Sale by Sample:
o If the buyer buys his goods after examining a sample then the rule of Doctrine of Caveat Emptor
will not apply.
o If the rest of the goods do not resemble the sample, the buyer cannot be held responsible. In this
case, the seller will be the one responsible.
Example: A places an order for 50 toy cars with B. He checks one sample where the car is red. The rest of the
cars turn out orange. Here the doctrine will not apply and B will be responsible.

 Sale by Description and Sample:

o If the sale is done via sample as well as a description of the product, the buyer will not be
responsible if the goods do not resemble the sample and/or the description.
o Then the responsibility will fall squarely on the seller.

 Usage of Trade:
o There is an implied condition or warranty about the quality or the fitness of goods/products.
o But if a seller deviated from this then the rules of caveat emptor cease to apply.
Example: A bought goods from B in an auction of the contents of a ship. But B did not inform A the contents were
sea damaged, and so the rules of the doctrine will not apply here.
 Fraud or Misrepresentation by the Seller:
o If the seller obtains the consent of the buyer by fraud then caveat emptor will not apply.
o If the seller conceals any material defects of the goods which are later discovered on closer
examination then again the buyer will not be responsible.
o In both cases, the seller will be the guilty party.

OR
(b) Explain the term ‘Unpaid Seller’. Discuss the rights of an unpaid seller, under Sale of
Goods Act, 1930.
(15 Marks)

Ans.
 A seller is an unpaid seller-
 When the whole of the price has not been paid or tendered; or
 When a conditionalpayment was made by a bill of exchange or other negotiable
instrument, and the instrument has been dishonoured.

 In simple words, an unpaid seller is one

o Who has sold goods on cash terms and to whom the price of the goods is payable
immediately.
o It does not include a seller who has sold goods on credit and the period of credit
has not expired.
o An unpaid seller has two-fold rights

 An unpaid seller of goods, even though the property in the goods has passed to buyer,
has following rights against the goods :
o a lien on the goods for the price while he is in possession of them;
o a right of stoppage in transit in case of the buyer’s insolvency;
o right of resale under certain circumstances;If the property in the goods has not pass
ed the unpaid seller canwithhold delivery of the goods.

Right of Lien

 An unpaid seller of goods in possession of goods sold by him may exercise his lien on
the goods and refuse to deliverthem to the buyer until full payment or tender of the price i
n cases where:
o the goods have been sold without any stipulation as to credit;
o the goods have been sold on credit, but the term of credit has expired;
o the buyer has become insolvent

Right of Stoppage in Transit

 The right of stoppage in transit is an extension of the right of lien

 But it arises only on the the insolvency of the buyer.
  It’s a right to regain possession of goods not paid for, while in transit , in case the buyer
becomes insolvent.
 So the right of stoppage in transit begins where the right of lien ends.
 The goods are deemed to be in transit from the time theyare delivered to the carrier or
to the time they are delivered to the buyer or his agent.
 The goods are still in transit if they are rejected by the buyer.
 The right of stoppage in transit comes to an end:
o as soon as the buyer or his agent takes delivery of goods either at their destination
or before their arrival at the destination.
o If after the arrival of the goods at their destination; the carrier acknowledges to the
buyer that he holds the goods on his behalf.
o If the carrier wrongfully refuses to deliver the goods to the buyer or his agent
Right of Resale

 The unpaid seller who has retained possession of the goods in exercise of his right of lien
or who has regainedpossession from the carrier upon insolvency of the buyer can re-
sell the goods:
o if the goods are of a perishable nature without any notice to the buyer; and
o in other cases after giving notice to the buyer, calling upon him to pay or tender the
price withinreasonable timer and upon failure of the buyer to do so.
 If the money realised upon such re-sale is not sufficient to compensate the seller, he can
sue the buyer for thebalance.
 But if he receives more than what is due to him, he can retain the excess.

 Right of re-sale is a limited right

o The seller must give the notice of sale to the buyer and he should be given the fi
rst
opportunity to pay for thegoods. A resale does not absolve the buyer from any liabi
lities to compensate the seller for damages he may have suffered.
o The person who buys the goods upon such re-
sale gets a good title even if the seller has failed to give notice to the first buyer.
o The only effect of failure to give notice before selling the goods is that the seller
cannot sue the first buyer for damages for breach of contract and must pay back to
the first buyer any profit he had realised from the resale.

RIGHTS AGAINST THE BUYER PERSONALLY

 An unpaid seller has the following rights against the buyer personally.

Sue for Price

o Where the property in the goods has passed to the buyer, the seller is entitled to s
ue for price, whether the possession is with the buyer or the seller.
 o Where the price is payable on a certain day irrespective of delivery, the seller may s
ue
for the price, if it is notpaid on that day, although the property in the goods has no
t passed.
Suit for Damages

o Where the buyer wrongfully neglects or refuses to accept the goods and pay for th
em, the seller has a right to sue for damages.

Suit for Interest

Q4. Write short notes on (any 5) (3x5 = 15 marks)

i. Minority is a Blessing
ii. All Contracts are Agreements but all Agreements are not Contracts
iii. Goods and Types of Goods
iv. Breach of Condition taken as Breach of Warranty
v. Bailment and Pledge
vi. Condition and Warranty
vii. VOID Agreements and VOID Contracts

a. Write short notes on: (2x5 = 10 marks)

i. Minority is a Blessing
According to Indian Majority Act, 1875, every person domiciled in India shall be deemed
to have attained his majority when he shall have completed his age of eighteen years and
not before.
A minor enjoys can take advantage of his acts
a. Doesn't incur any liability
b. Can't be held personally liable for any of his wrongs
c. No legal action against him- for his misbehavior or false promises
d. Parents of minor-not legally responsible till they agree to act as agents
Minor can be:
a. Promisee
b. An agent
a. Principal will be responsible to third parties for acts of minor agent
 b. Principal cannot hold minor responsible
Minor cannot be:
a. Partner
b. Can be admitted to benefits of partnership
c. No right to take part in management activities
d. No right to inspect books of accounts
e. Member of a company
f. Declared insolvent
g. Liable for any loan
As per Indian Contract Act, ‘The law protects their persons, preserve their rights and estates,
excuse their laches and assists them in their pleadings, the Judges are their Counsellors, the
Jury are servants, Law is their Guardian”.
Hence, it can be said that minority is a blessing

ii. All Contracts are Agreements but all Agreements are not Contracts
A contract is a legally binding agreement or relationship that exists between two or more
parties to do or abstain from performing certain acts. There must be offer and acceptance for
a contract to be formed. An offer must be backed by acceptance of which there must be
consideration. Both parties involved must intend to create legal relation on a lawful matter
which must be entered into freely and should be possible to perform.
Every promise and every set of promises, forming the consideration for each other, is an
agreement.
All contracts are agreements

For a Contract to be there an agreement is essential; without an agreement, there can be

no contract. Where there is contract, there is agreement without an agreement there can
be no contract.
All agreements are not contracts
As stated above, an agreement to become a contract must give rise to a legal obligation. If
an agreement is incapable of creating a duty enforceable by law, it is not a contract. Thus
an agreement is a wider term than a contract.
Thus it can be said that all contracts are agreements but all agreements are not contracts.

iii. Goods and Types of Goods

Goods’ is defined as per Section 2 (7) of the ‘Act’ as. “Every kind of movable property other
than actionable claims and money; and includes stock and shares, growing crops, grass, and
things attached to or forming part of the land which are agreed to be severed before sale or
under the contract of sale.”
 As per section 3(36) of the General Clauses Act 1897, “movable property” is defined as
“property of every description except immovable property.”

Immovable property shall include land, benefits to arise out of land, and things attached to the
earth, or permanently fastened to anything attached to the earth.

Anything that is attached to the land maybe termed as “movable property”, provided that there
is an element of severability involved.

 Example: Timber Trees fall under the ambit of “goods” because timber trees are severed from the land for
the purpose of sale and hence they become a commercial commodity.

Types of Goods
a. Existing Goods:
Goods which are already in existence and which are physically present in some
person’s possession and ownership.
Existing goods may be either
Specific goods are those goods which are identified and agreed upon at the
time of contract of sale.
Example: A particular painting by a painter, a horse pointed out and recognised
as separate from otherhorses in a stable.
The term Ascertained goods is used in the same sense as Specific Goods.

Unascertained Goods are those goods which are not specifically identified
but are indicated by description.
Example: If A agrees to supply one bag of wheat from his godown to
B, it is a contract relating to unascertained goods because it is not known which bag will be
delivered. As soon as a particular bag isseparated from the lot and making or identified for
delivery it becomes specific goods.

b. Future Goods are goods which the seller does not own or possess at the time of the
contract, butwhich he will manufacture or produce or acquire after the making of the contra
ct. Example: A agrees to sell B all the oranges which will be produced in his garden next
year. This is an agreement for the sale of future goods.

c. Contingent goods are those goods which the seller will acquire on the happening of
a contingency. An agreement to sell contingent goods can also be made.
Example: A’s father has a rare copy of bookwhich is out of print. A hopes to get it on his father’s death.
A agrees to sell it to B for Rs.10,000 evenbefore his father’s death. .

iv. Breach of Condition taken as Breach of Warranty

2 ways when a Condition can be treated as a “Warranty” are :
 Voluntary waiver of a condition:
 o The buyer may elect to treat a breach of condition as a breach of warranty, i.e.,
instead of repudiating the contract he may accept performance and sue for
damages, if he has suffered any.
o Where a contract of sale is subject to a condition to be fulfilled by the seller, the
buyer may waive the condition.

 Compulsory waiver of a condition:

o Where a contract of sale is not severable and the buyer has accepted the goods or
a part thereof, he cannot repudiate the contract but can only sue for damages. In
such a case, the breach of condition can only be treated as a breach of warranty,
unless there is a contract to the contrary.
o If a buyer prevents the fulfillment of a condition contained in the contract, the
condition becomes invalid.

Example: Certain goods were promised to be delivered on 1st June, time being made the essence of the
contract. The goods were delivered on the 2nd June. The buyer may accept the goods.

v. Bailment and Pledge

Basis Bailment Pledge

Meaning When the goods are temporarily handed When the goods are delivered to act as
over from one person to another person security against the debt owed by one
for a specific purpose, it is known as person to another person, it is known
bailment. as the pledge.

Defined in Section 148 of the Indian Contract Act, Section 172 of the Indian Contract Act,
1872. 1872.

Parties The person who delivers the goods is The person who delivers the goods is
known as the Bailor while the person to known as Pawnor while the person to
whom the goods are delivered is known whom the goods are delivered is
as Bailee. known as Pawnee.

Consideration May or may not be present. Always present.

Right to sell The party whom goods are being The party whom goods are being
delivered as security has the right to
 the goods delivered has no right to sell the goods. sell the goods if the party who delivers
the goods fails to pay the debt.

Use of Goods The party whom goods are being The party whom goods are being
delivered can use the goods only, for the delivered has no right to use the goods.
specified purpose.

Purpose Safe keeping or repairs, etc. As security against payment of debt.

vi. Condition and Warranty

Basis Condition Warranty

Meaning A requirement or event that should A warranty is an assurance given by the
be performed before the completion seller to the buyer about the state of the
of another action, is known as product, that the prescribed facts are
Condition. genuine.

Defined in Section 12 (2) of Indian Sale of Section 12 (3) of Indian Sale of Goods
Goods Act, 1930. Act, 1930.

What is it? It is directly associated with the It is a subsidiary provision related to

objective of the contract. the object of the contract.

Result of breach Termination of contract. Claim damages for the breach.

Violation Violation of condition can be Violation of warranty does not affect

regarded as a violation of the the condition.
warranty.

Remedy available Repudiate the contract as well as Claim damages only.

to the aggrieved claim damages.
party on breach
vii. VOID Agreements and VOID Contracts

VOID Agreements
 Those agreements which are not enforced by law courts
 Section 2(g) of the Indian Contract Act defines a void agreement as,
“an agreement not enforceable by law”
 Thus the parties to the contract do not get any legal redress in the case of void
agreements.
VOID Contracts
 Contracts which are valid at the time of formation but becomes unenforceable due to
certain reasons:
i. Supervening impossibility
ii. Voidable contract becomes void on the option of one party to repudiate the
contract
iii. A contingent contract to do or not to do something on the happening of an
event becomes void when the event becomes impossible.

VOID AGREEMENT VOID CONTRACT

Void from the very beginning Valid at the time of formation but
VOID ABINITIO becomes void later