LL.

B Part-I Notes

CONTRACT ACT AND SALE OF GOODS ACT

Q # 01: What are the essentials of a valid contract?

Preface Statement

Law of contract 1872 provides the rules for commercial transactions. It is very important branch of
mercantile law.A contract is a legal arrangement between two or more parties that is enforceable
at law. Contract law legally binds the parties to do or not to do some particular thing between the
tenure of agreement. The major elements of a contract are offer, acceptance, and its aim is to
create legal relations, and consideration. The contract act 1872 is prevail into the whole Pakistan
and it does not goes against any other law of the country.

1) Meaning of Contract

Following is the meaning of contract, according to the oxford dictionary is as under

 Oxford dictionary of law
“A legally binding agreement”
2) Definition of contract
A contract is written or spoken agreement between two or more persons to do something or not to
do something for a specified time and it legally binds them and it is enforceable by law.

3) Conditions for contract

There are two conditions for contract

I. An Agreement
II. An agreement should be enforceable by law. Contract = Agreement+ Enforceability
4) Classifications of Contract
Following are the classifications of contract are as under
1. According to its Validity
Validity of contract means, an agreement which fulfills all the legal
requirements and is enforceable at law is called valid contract
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2. According to its formation

LL.B Part-I Notes

Formation of contract means, is the existence of offer and acceptance

3. According to its performance
Performance of contract' means contract should be capable of being performed
Example
If there is an agreement between A and B that,Awill construct a house for B and B
will pay 5 lakhs to A, that agreement is a contract
5) Essentials for valid contract
Following are the essentials for valid contract, details are given below
1. Proposal
There must be lawful proposal from one party to another party
2. Acceptance
There must be lawful acceptance from other party
3. Agreement
There should be an agreement between the two parties such as proposer and acceptor
4. Written
It is necessary elements that agreement between the two parties should be in written
form
5. Lawful agreement
The agreement between the parties should be lawful, because unlawful agreement
cannot be enforceable at law
6. Legal relationship
The parties must create a legal relationship and both the parties must have
intention to go to the court it the other party does not meet his promise
7. Lawful object
The object of the contract should be lawful and does not violate the law, against the
public policy or unlawful such as someone hires a house for gambling so that it
will be unlawful object
8. Competency of Parties
Parties of the contract must be competent to enter into contract. According to the
contract act 1872, every person is competent to contract who
1) Attained the age of maturity
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2) Is of sound mind
3) Is not disqualified by law to enter into the contract
9. Consideration
Consideration contract plays a vital role in contract. Consideration is a benefit
and this benefit itself is the reason of contract. Without consideration the
contract would be considered as invalid

10. Free consent

For a valid contract, it is necessary that the consent of the parties must be free, and
should be free from any pressure or undue influence among the parties
11. Certain and definite
The agreement should be clarified in terms because if the terms of the
agreement will uncertain or confusing it will not be enforceable at law
12. Not declared void
Contract has not been declared void (Cancelled) according to any law of the
country because a void agreement is not enforceable by law and it has no
legal authority
13. Possibility of performance
The agreement must be capable of being performed. If the parties have agreed
upon a matter which is practically not possible to perform then the
agreement will not be considered as valid contract

14. Legal formalities

In contract the legal formalities should be performed according to law such as
writing of contract, attestation of contract or registration of contract is needed in
law, otherwise it should not be enforceable by law
7) Preclude Remarks
The agreement is a contract which is enforceable by law. An agreement
becomes enforceable by law when it fulfills some conditions given into the
contract act 1872 and these conditions may be called essentials of a valid
contract. If any of the essential element is missing from the contract in this case
such contract will be considered as illegal or unenforceable by law
LL.B Part-I Notes

Q # 02: What is the difference between voidable and void agreement. Give
your answer with example.

1) Preface Statement
Law of contract 1872 provides the rules for commercial transactions. It is very
important branch of mercantile law. A contract is a legal arrangement between
two or more parties that is enforceable at law. Contract law legally binds the
parties to do or not to do some particular thing between the tenure of
agreement. The major elements of a contract are offer, acceptance, and its aim
is to create legal relations, and consideration. The contract act 1872 is prevail into
the whole Pakistan and it does not goes against any other law of the country

2) Definition of Void contract

An agreement which is not enforceable by law is called void contract.
Explanation
The word void means “not binding in law” A contract which cannot be enforced
by law even no party can take legal action against one another.

3) Reasons of void contract

Following are the main reasons when contract becomes void.
1) When contract is illegal from the moment it is made
2) Contract was legal but declared unacceptable by the courts because it
violates fundamental principles
3) It becomes void due to the changes in law
4) Even it has been fully performed

4) Feature of void contract

Following are the feature of void contract

1. Enforceability by law
A void contract is not enforceable by law because it not fulfill the
requirements of a valid contract

2. Compensation
In void contract no compensation can be paid by any party because it
not fulfill the requirements of a valid contract

3. Nature of contract
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According to its nature because it is against the public policy that’s why it is a
void contract because

4. No legal rights
A void contract does not create any legal rights because it not fulfill the
requirements of a valid contract

5. No obligation on any party

A void contract does not create any obligation on any party because it
not fulfill the requirements of a valid contract

5) Example of void contract

An agreement which is based upon illegal act is an example of a void agreement.
For example, a contract between drug dealers and buyers is a void contract because
the terms of the contract are illegal. In such a case, no party can go to court to
enforce
the contract

6) Definition of Voidable contract

An agreement which is enforceable only with the option of one party who
can cancel or repeal the contract
I. Reasons of voidable contract
Following are the main reasons when contract becomes voidable
1) Mistake in facts makes the contract voidable
2) Getting consent by undue influence makes the contract voidable
3) Making contract by minor makes the contract voidable
4) Misrepresentation and fraud, makes the contract voidable
5) Failure of performance within specified time makes the contract voidable

7) Features of voidable contract

1. Enforceability by law
It is only enforceable by law on the option of one or more parties

2. Compensation
In voidable contract compensation will be paid by one party to another party if
any party cancels the contract

3. Nature of contract
A voidable contract is a valid contract until it is avoided by the party. Once it is avoided
it
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becomes void

4. Legal Right
It provides legal rights in hands of both parties who can claim that their
consent has been obtained by undue influence etc.

5. Voidable at the option of one party

The contract is voidable at the option of one party whose consent become
cause of void of the contract

8) Examples of voidable contract

Following are the examples of voidable contract
1) Agreement with a person of unsound minded
2) Agreement under undue influence
3) Agreement based upon fraud or misrepresentation
4) Agreement with the minor , are the examples of voidable contract

9) Difference between void and voidable contract

1. As to enforceability
A void contract is not enforceable
A voidable contract is enforceable at the option of one party

2. As to compensation
In void contract compensation cannot be paid
Compensation may be paid in voidable contract

3. Legal effect
A void contract has no legal effect
A voidable contract has legal effect until it is avoided

4. As to objection
In void contract no party can claim his objection against other party
In voidable contract each party can claim his objection against other party

5. Time factor
A void contract is invalid from the moment it is created
A voidable contract is valid till the time it is avoided

10) Preclude Remarks

Contract is legally binding agreement between two or more parties by which rights can
be
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acquired by parties. A void contract is not enforceable by the law due to

failure of fulfillments required by law, makes the such contract void. A
voidable contract is enforceable by the law but only the option of the
one or more parties
LL.B Part-I Notes

Q # 03: What is consideration? Explain its exceptions.

1) Preface Statement

The meaning of consideration in legal sense is “ something in return”. Simply it

can be said that exchange of something against another thing. Contract without
consideration is not enforceable by the law as well as consideration can be ,in
form of money, in form of other thing or to do something or not to do something ,
consideration has multiple natures. An agreement without consideration is void
and consideration should be good and valuable. Consideration is the backbone of
the contract it means without it contract cannot create it is vital element in the law
of contract

2) Definition of consideration

Consideration is a such benefit which becomes the reason of creation of

contract between the parties
Consideration is an object which can be in form of money, in form
of to do something or not to do something or even other than
these

Example

A agrees to sell his car to B for Rs. 3 lakh. Now B promises to pay such
amount to A, this amount is consideration in this contract or agreement
3) Types of consideration
Following are the three types of consideration

1. Past consideration
When consideration is given even before the creation of contract. It is
consideration that is already given is called past consideration

2. Present consideration
If the consideration is given at the time of creation of contract, it is
called present consideration

3. Future consideration
It the consideration is given after the creation of contract, it is called future
consideration
4) Essentials of consideration
Following are the essentials of consideration
1) Consideration should be given by the promisee
2) Consideration should be given by the desire of promisor
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3) Consideration should be lawful

4) Consideration should be real
5) Consideration may be, past, present, or future
6) It may be consisted of an act or money or other than these

5) Exceptions
It is a fact that without consideration an agreement cannot be created but it has
following exceptions

1. Love and affection

If an agreement has been created between the parties for natural love and
affection, in such case consideration is not necessary

2. Contract of agency
In the contract act of 1872, it has been mentioned that there is no consideration
is required for contract of agency

3. Voluntary services
A contract made without consideration is also valid if there is a promise to
compensate, in such case there is no consideration is required

4. Time barred debt

Money a person borrowed and didn't repay but is not legally collectable because
too many years have passed. In such case there is no consideration is required

5. Contract under seal

Under the English law, a contract which is made in form of a deed under seal is
valid even it is made without consideration

6. Extension in time limit

If agreement is made for extension in time limit for enforcement of the
contract, in such case, there is no need of any consideration

6) Unlawful consideration
If in a contract any object which violates the law or based upon a fraud or
creates an injury to others it will be considered unlawful consideration

7) Cases of unlawful consideration

Following are the cases of unlawful consideration which are being given below

1. Prohibited by law
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If the object of an agreement is prohibited by the law, in this case the

consideration will be unlawful

2. Element of fraud
If the object of an agreement has element of fraud, in this case the
consideration will be unlawful

3. Immoral
If the object of an agreement is immoral in nature, in this case the
consideration will be unlawful

4. Against public policy

If the object of an agreement is against the public policy, in this case the
consideration will be unlawful

5. Injury to other person or property

If the object of an agreement which become cause of an injury to other
person or property, in this case the consideration will be unlawful

6. Unlawful object
If the object of an agreement is itself unlawful, in this case the
consideration will be unlawful

8) Preclude Remarks
It said that the consideration is the one of the most important essential of
the valid contract. Without consideration there is not contract but there are
certain exception according to them a contract can be valid without the
consideration. Consideration removes the fear from the mind of other
persons those think that there is a chance of lose in deal. Consideration an
object which can be in form of money, in form of to do something or not to do
something or even other than these. Consideration play vital role in the a
valid contract and it is like a backbone in the human body which may help the
being to stand without any support
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Q # 04: What is void contract? What contract are specifically

declared void contracts under the contract act 1872.

1) Preface Statement
The word void means “not binding in law”. A contract which cannot be
enforced by any party is void contract. It cannot create legal relationship between
the party because it is not recognized by the law. A lot of reasons which makes
such kind of contracts void and no one can take legal action against other on the
behalf of void contract

2) Definition of Void contract

An agreement which is not enforceable by law is called void contract.
Explanation
The word void means “not binding in law” A contract which cannot be enforced
by law even no party can take legal action against one another.

3) Reasons of void contract

Following are the main reasons when contract becomes void
1) When contract is illegal from the moment it is made
2) Contract was legal but declared unacceptable by the courts because it
violates fundamental principles
3) It becomes void due to the changes in law
4) Even it has been fully performed

4) Feature of void contract

Following are the feature of void contract

1. Enforceability by law
A void contract is not enforceable by law because it not fulfill the
requirements of a valid contract

2. Compensation
In void contract no compensation can be paid by any party because it
not fulfill the requirements of a valid contract

3. Nature of contract
According to its nature because it is against the public policy that’s why it is a void
contract
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4. No legal rights
A void contract does not create any legal rights because it not fulfill the
requirements of a valid contract

5. No obligation on any party

A void contract does not create any obligation on any party because it
not fulfill the requirements of a valid contract

5) Contracts which are specifically declared void

Following are the contract which declared to be void

1. Agreement in restraint of marriage

Any contract which restraints to any adult person from marriage for
whole life or for specified time is void contract.
Illustration
If A agrees with B that she will not marry C.it is a void marriage

2. Agreement in restraint of trade

Any agreement which restraint to any businessman from establishing lawful
business is void contract

3. Agreement in restraint of legal proceeding

Each and every body is allowed to obtain his legal rights through the legal
proceeding. So following agreements is void
Any agreement which restrains from taking legal proceedings, while law
enable the same person to take action against any one

4. Agreement when both parties are at mistake

Any agreement in which both the parties are under mistake as to a matter of
fact, such agreement is void contract

5. Agreement by way of wager

Literally the word ‘wager’ means ‘a bet’ something stated to be lost or won on
the result of a doubtful issue, and, therefore, wagering agreements are nothing
but ordinary
betting agreements and it is void contract

6. Uncertainty
Any agreement, whose meaning are not clear and certain is called void contract
Example
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A agreement to sell his car to B for R.s 1 lakh or 50 thousand. It is

not clear which amount will be given. In such case contract is
void

7. Immoral
Any agreement which is against the moral values of the society, in this
case it is void contract

8. Element of fraud
Any agreement which has element of fraud, in such case it a void contract

9. Against public policy

Any agreement which is against the public policies, is a void contract

10. Injury to others

Any agreement which become cause of an injury to other person or property, in
this case the contract will be void

11. Unlawful object

Any agreement which is in itself unlawful, it will make the contract unlawful

12. Impossible act

Any agreement in which such act is mentioned which is impossible to
perform, it will make to contract void

13. Contract forbidden by law

If the object of an agreement is forbidden by the law, it will be void contract

6) Preclude Remarks
Void contracts are not enforceable by law, because these are not recognized
by the law. It does not create any rights on any party and party is not
responsible to perform such contracts. So void contract is not contract in the
eye of law
LL.B Part-I Notes

Q # 05: What do you understand by capacity of contract?

1) Preface Statement
Under contract act 1872 parties must be competent to contract. Every is not
competent to enter into the contract unless he fulfills the conditions laid down
in the contract act. A contract made by un-competent person is invalid or void
contract. There are several things that make a person legally able to do contract,
including age and state of mind. Minors, the mentally insane, and persons who
are under the influence do not have legal capacity to enter into a contract.

2) Contractual capacity
According to section 11 of the contract act” Every person is competent to
contract who is of the age of majority according to the law, & who is of sound
mind , and has not been disqualified by any law from contracting

3) Persons competent to contract

Following are the persons who are competent to enter into the contract

1. Adult
A person who has attain 18 years of age in adult under contract act 1872. And
an adult can enter into the contract

2. Persons of sound mind

The person who want to perform a legal contract should be sound mind, he must
has ability to judge the matter and must be able to perform civil duties is a sound
mind person.
The unsoundness of mind has been categorized into following types
Person usually unsound minded
Person who is usually unsound mind. But occasionally of sound mind. He
can make a contract when he is of sound mind
Person usually sound minded
Person who is usually sound mind. But occasionally of unsound mind. He
cannot make a contract when he is unsound mink
Example
A patient in an insane, who is at intervals of sound mind, can make
contract during intervals

3. Persons not disqualified by law

Persons who have not been disqualified by law. If a person who has not disqualified by
law,
LL.B Part-I Notes

is capable to enter into contract

4) Persons not competent to contract

Following are the persons who are not competent to enter into the contract

1. Minor
A minor is a person who has not attained the age of 18 years. And people below
this age are sometimes called minors in the context of contract law. Such person
who are minor cannot enter into the contract
a. Rules relating to minor’s agreement
A minor is not competent to contract
A minor’s agreement has no validity in the eye of law
A minor cannot be compelled to pay back the money received by him
under an agreement
A minor cannot be held responsible for breach of contract
The parent can be held liable if the minor act as agent of the parent
Where a minor and an adult jointly enter into the contract with another
person, the minor will not be held responsible but only adult would be held
responsible
A minor cannot be declared bankrupt
A minor can only be receiver

2. Persons of unsound mind

Mentally disturbed person cannot make a valid contract because he is unable to
understand the terms and conditions of the contract that’s why he is
incompetent to enter into the contract
a. Causes of unsoundness of mind
Following are the causes of unsoundness of mind
1) Insanity
2) Drunkenness
3) Old age
b. Effect on agreement
A contract made by a person of unsound mind is void
c. Burden of proof
The burden of proof is in hands of the party who wants to cancel the contract

3. Persons disqualified by law

Persons who have been disqualified by law. If a person who is disqualified by law he is
LL.B Part-I Notes

incompetent to enter into contract

a. Joint stock company
Joint stock Company whose stock is owned jointly by the shareholders,
has been declared in-competent by the court of law to enter into the
contract
b. Foreigner
Foreigners have been declared in-competent by the court of law to
enter into the contract
c. Convict
A person who is under imprisonment has been declared in-competent by
the court of law to enter into the contract
d. Bankrupt
A person bankrupt has been declared in-competent by the court of
law to enter into the contract
e. Diplomat
Diplomat and ambassadors have been declared in-competent by the
court of law to enter into the contract

4. Intoxicated Persons
It has been declared by the court that contract made by a person who drunk
because he does not know the consequences of his act is that’s why such a
contract is not void but merely voidable, but if the drunken party, upon coming to his
senses, approves the contract, he is bound by it

5) Preclude Remarks

Every person is not competent to enter into the valid contract. A contract made
by impotent person is invalid or void in the eye to the law. Mentally disturbed
person have been
declared incompetent by the court of law for entering into the contract. As well as
minors also are not capable to enter into the contract. All those person can enter
into the contract who are declared competent by the court of law such as an adult
who has attained age of 18 years and has sound mind and legally authorized
person can make the contract
LL.B Part-I Notes

Q # 06: What is consent and free consent? When consent said to

be free?

1) Preface Statement
Consent is very important essential of the contract because without the consent
of parties there is no valid contract. When consent could be taken by coercion,
undue influence, misrepresentation or mistake the agreement is voidable which
can be cancelled on the option of that party whose consent was taken by
unfair means. Free consent is the foundation of valid contract. Without free
consent any agreement cannot bear the status of valid contract. Without free
consent any agreement does not amount the valid contract and such contract
cannot be enforced by the court of law

2) Definition of consent
When all the parties of a contract may agree upon the same thing in the
same sense is called consent

3) Definition of Free consent

Consent will be considered free when it has been taken without coercion, undue
influence, fraud, misrepresentation or mistake

4) Age of consent
Consent only can be given by an adult. A consent which is given by minor in
contract will be considered invalid. The age of consent is the age at which a
person is considered to
be legally competent to consent to sexual acts. The ages of consent are currently set
between 14 and 18

5) Consent of unsound person

A consent which has been taken by unsound person has no legal value. If a
contract has been made upon such consent in this case such contract shall be
void. Because unsound person is unable to judge the consequences of his
consent against any agreement that’s why such contract has no value in the eye
of the law and it is not enforceable by the law

6) Essentials of consent
Following are the essential of consent

1. Free consent
It is also necessary that the consent should be free from any pressure. Free consent is
LL.B Part-I Notes

one of
LL.B Part-I Notes

the essential elements of valid contract. Parties to a contract may agree upon the
same thing in the same sense.

2. Coercion
Consent should be free from coercion. Such consent is the most important
element of the valid contract.

3. Undue influence
Consent should be free from undue influence which can be mental or physical threat.

4. Misrepresentation
False statement in the agreement can cause the contract void. So there
should be no Misrepresentation between the parties

5. Fraud
Consent should be free from fraudulent element

7) Types of consent
Following are the three types of consent

1. Explicit Consent
Explicit consent also known as direct consent which means that an individual has
been given options to agree or disagree with the treaty even after disclosure of
personal information

2. Implied consent
Implied consent also known as indirect consent which means that an individual
who has not been given options to agree or disagree with the treaty even nothing to
disclose upon him about personal information

3. Written consent
Written consent also known as informed consent which means an individual
who gives consent even after knowing the all written risk involved which may
occur in the future and promise may disclose sufficient information upon him

8) Reasons which makes consent unfree

Case law
It was held that If a contract has been made by obtaining consent by coercion
of a party, it does not remain a free consent, and the contract becomes voidable
Following are the reasons which make the contract unfree
LL.B Part-I Notes

1. Coercion
When consent for an agreement is taken by coercion, the contract becomes
voidable at the option of the party whose consent was taken by coercion. But If
such party want to continue this agreement then contract shall be valid in the eye
of law

2. Undue influence
Undue influence is a mental or moral threat. When consent for an agreement
is taken by undue influence, the contract becomes voidable at the option of the
party whose consent has been taken by undue influence.

3. Fraud
The element of fraud in a contract makes the contract voidable in the eye of law
and there is no legal obligation on the parties. The contract becomes voidable at
the option of the party whose consent has been taken by fraud

4. Misrepresentation
When a false statement is made with the knowledge that it is false in order to get
consent of the party in this case, contract become voidable at the option of the
party whose consent
has been taken by Misrepresentation

5. Mistake
Sometimes, one or both parties are working under some misunderstanding
about fact relating to the subject matter of contract and enter into a contract.
Because such contract is based on a mistake so in this case it is not free consent
and contract is voidable

9) Preclude Remarks
Free consent is the consent which obtained by the free will of the parties. Free
consent is an essential element of the valid contract. A contract is voidable if
there is no free will and consent of the parties have been taken by undue
influence, mistake, fraud or Misrepresentation in such cases contract is void and
there is no obligation on the parties
and they cannot take legal actions against one another. It is not free consent
which is necessary for the validity of a contract there are a lot of other factors
which makes contract valid
LL.B Part-I Notes

Q # 07: Explain the rules which govern the appropriation of payment made by
the debtor to the creditor.

1) Preface Statement
When a debtor takes several loans from creditor and return the payment which
is less than to whole amount then the question arises which is known as
appropriation of payment. When once made, the appropriation cannot be
changed. Section 59,60 & 61 of the contract act 1872 provides the rules for the
appropriation of the payment in case when debtor takes loan and when return the
payment to his creditor. When a debtor gives the payment to his creditor, he has
right to indicate this payment to any particular debt which he has taken,
and it a duty of creditor to discharge the payment accordingly.

2) Definition of Appropriation of payment

When a debtor returns the money to his creditor and instructs to his creditor
that from in which debt, the payment to be discharged, it is called appropriation
of payment. And according to law, creditor is bound to discharge the payment
accordingly

3) Meaning of Creditor
A creditor is a person or enterprise that gives money to another person or party

4) Meaning of debtor
A debtor is a person or enterprise that have a loan from any other person or party

5) Rules of appropriation of payment

Following are the rules of appropriation of payment. Details are as under

1. Appropriation by debtor
First rule of appropriation of the payment is laid down in sec 59 of contract act
1872 and it gives the right to debtor about the appropriation of the payment
According to the section 59.
Each debtor who takes several debts from a single creditor, he has right to
instruct his creditor that payment to be discharged from particular debt, and it a
duty of creditor to discharge the payment accordingly. The creditor has to follow
the debtor’s instruction.
Application of rule
This rule of appropriation of payment applies upon where are several
debts and it not applies upon a single debt which is payable by the
LL.B Part-I Notes

installments
LL.B Part-I Notes

Example
A gives to B three different debts of 20,000, 30,000 and 50,000. And B returns
50,000 to A and instructs that the payment should be discharged against
the first two debts (20,000 & 30,000). A is bound to discharge the payment
from first two debts
A. Indirect appropriation by debtor
Each debtor who takes several debts from a single creditor and debtor makes a
payment to his creditor without any expressed instructions that from which
debt, payment to be discharged. In such case it is duty of creditor to discharge
the payment from the debt which is intended by the debtor
Example
When debtor gives an amount of 800 to creditor and there no similar amount
pending from debtor. It is the duty of creditor to clear the payment of a
particular debt because his intention is to clear particular debt. Such
appropriation should be done by the creditor

2. Appropriation by creditor

Second rule of appropriation of the payment is laid down in sec 60 of contract

act 1872 and it gives the right to creditor about the appropriation of the payment
According to the sec 60.
If the debtor does not give any direct or indirect instruction about the
appropriation of the payment to creditor. The creditor has right to discharge the
payment on his own discretion from any debt. He can discharge the received
amount from any lawful debts but he cannot discharge the payment from
unlawful debts
Example
A have several loans from B. One of them R.s 2 Lac is time barred. A send R.s 4
Lac to B without instruction that from which debt, payment to be discharged. B
may discharge the amount R.s 2 Lac against the time barred debt.

3. Appropriation by law

Third rule of appropriation of the payment is laid down in sec 61 of contract

act 1872. Details are as under.

According to the sec 61

When the debtor does not instruct expressly or impliedly to his creditor, and
LL.B Part-I Notes

creditor does not discharge the payment on his own discretion then sec 61 would apply. In
such
LL.B Part-I Notes

cases, the payment by the debtor will be discharged towards the debts in order to
the time. In sec 61 this method of appropriation of the payment applies as per rule
of law

Application
This rule of appropriation of the payment applies when no party makes
any appropriation. In this situation the law gets the right to appropriate
the payment
Example
A have a two loans of R.s 4 lac each which are time barred and another loan of
R.s 8 Lac. A sends R.s 4 Lac and no party makes any appropriation of R.s 4 Lac.
In this case it would automatically be discharged from the payment of time
barred

I. When principal and interest both are due?

If a payment has been made without expressly stating that it is towards interest
or principal, payment must be discharged from interest first, and then from the
principal
It is emphasized by law that if the creditor accepts the payment, he must follow
the above rules of appropriation; otherwise he must refuse to accept the
payment.

6) Preclude Remarks
Under the contract act 1872 in which sec 59,60 & 61 deals with the rules of
appropriation of the payment . There are certain conditions for debtor and creditor
which legally bound
them to follow these rules. Section 59 give authority to debtor meanwhile sec 60
give authority to creditor according to these rules both of debtor and creditor can
exercise their rights according to the law. Section 61 which empowers the law to
use his own discretion when there is no express or implied instructions from both
the parties in such case law has right the appropriation of the payment . All rules
apply then a number of debts have been taken from creditor and in case of single
debt taken by creditor , these rules not apply in such conditions
LL.B Part-I Notes

Q # 08: Describe the various modes in which a contract may be

discharged

1) Preface Statement
The discharge of a contract means that when the rights & obligations of the
contract come to an end. When discharge occurs, all duties attached with contract
are detached. Discharge of the contract actually is the termination of the
contractual relationship between the parties. And there are certain reasons which
may discharge the contract. Contract act 1872 provides various modes of
discharge of contract

2) Meaning of Discharge
Discharge of a contract means termination of the contractual relations between
the parties of the contract. A contract is said to be discharged when the rights and
obligations upon contract come to an end.

3) Modes of Discharge of Contract

Following are the five modes of discharge of the contract
1) By Performance
2) By Agreement
3) By Impossibility
4) by laps of time
5) By Breach of contract

1) By Performance
Performance is a common mode of discharge of the contract. It is a legal mode of
discharge when the parties of a contract perform their duties according to the
agreement then contract automatically gets discharge
Following are the two types of performance
I. Actual performance
When each party of the contract performs his legal duties according to the
terms and conditions of the contract. It is called actual performance
II. Offer of performance
Offer is also equivalent to performance, when one party offers to another
party for performance of legal duties according to the terms and conditions of
the contract and it depends upon the discretion of the other party who can
refuse to perform or perfor
LL.B Part-I Notes

Essential of valid offer of performance

Following are the essential of valid offer of performance
a) Offer of performance should be unconditional
b) Offer of performance should be at proper time
c) Offer of performance should be at a proper place
d) Offer of performance must be presented to contractor or his agent
e) Offer of performance presented to stranger is invalid offer

2) BY Agreement
A contract can also discharge by the new agreement on the place of old
agreement between the parties
Following are the ways of discharge of a contract by agreement
I. Novation
When the parties of the contract creates a new contract on the place of old
contract. It is called novation
Kinds of novation
Following are the kinds of novation
1) Sometime novation changes the party
2) Sometime novation creates a new contract

II. Rescission
When all or some of the terms of the contract are cancelled. It is called rescission
Modes of rescission
Following are the modes of rescission
1) It may be by mutual consent of the party
2) When a party fails to perform his contractual obligation, the other party may
rescind the contract
III. Alteration
When one or more of the terms of the contract are altered by mutual
consent of the parties. It is called alteration
IV. Remission
When a party discharges the contract without making new agreement.
It is called remission
V. Merger
When parties of the contract merges multiple lesser rights into superior rights. It is
LL.B Part-I Notes

called merger
3) By Impossibility
A contract also can discharge by Impossibility of performance. If the act becomes
impossible to perform after the formation of contract, in this case contract
becomes void
Following are the impossibilities
I. Initial impossibility
When one or both the parties do not have the knowledge that a promise is
impossible to perform even they enter into an agreement
II. Subsequent impossibility
Sometimes a contract is capable of being performed when entered into.
But later on under some circumstances it becomes impossible to perform
Factors of impossibility
Following are the factors causing impossible to performance of the contract
a) Destruction of the subject matter
b) Death of the person
c) Personal incapacity
d) Change of the law
e) Declaration of the war
4) By laps of time
A contract can also discharge by the laps of time because the contract should be
performed within the specified time if it is not performed within the time then it will
be discharged
5) By operation of law
A contract can also discharge by the operation of law
Following are the ways of discharge the contract under operation of law
I. Bankruptcy
When court declares a person as insolvent (Bankrupt) the contract
automatically will be discharged and all rights and obligation will be removed
and contract will come to an end
II. By unauthorized alteration
When one party alters the written terms of the contract without the
consent of other party. In this case contract is discharged
6) By Breach of contract
LL.B Part-I Notes

Contract can also discharge by breach. When one of the parties fails to perform
any term of the contract and does not fulfill his contractual responsibilities, in
this case contract is discharged
I. Actual breach
When a party fails to perform a contract, at that time when performance is needed
II. Anticipatory breach
An action that shows a party's intention to fail to perform its contractual
obligations to another party
III. Express breach
When one of the parties of the contract clearly refuses to perform a
contract, in this case contract gets discharge
IV. Implied breach
When one of the parties of the contract not clearly refuses to perform a
contract, in this case contract gets discharge
4) Preclude Remarks
When the rights and obligation of the contract removed even by failure of
performance , operation of law, breach of contract, by agreement or whatever the
reason in above cases the contract gets discharge. Under contract act 1872
there are a lot of reason which may discharge the contract or terminate it by
failure of required procedures
LL.B Part-I Notes

Q # 09: What is contract of bailment? Explain fully the rights and

duties of the bailee and revocation of contract of bailment.

1) Preface Statement
Bailment is a process when owner of the certain goods delivers possession of his
personal property to another person under an agreement but with the obligation
to return it to his original possessor when the purpose has been achieved. For
example, a man visits a repair shop for getting his television set fixed. The
television set is left at the shop where the repair man examines it and fixes the
problem. Once fixed, the television set has to be returned to its owner. There is a
contract of bailment between the man and the repair-man

2) Meaning of Bailment
The word ‘bailment’ has been derived from the French word ‘bailer’ which
means ‘to deliver’.

3) Definition of bailment
A bailment is the delivery of goods by one person to another person for some
purpose upon an agreement that the goods shall be returned when the purpose
will be completed. In a contract of bailment such kind of delivery is for temporary
purpose.

4) Kinds of bailment
Following are the kinds of bailment

1. Bailment for benefit of bailer.

In this type of bailment, the bailer gives goods to bailee upon his own
responsibility. While bailee is not responsible for any loss in this condition

2. Bailment for benefit of the bailee.

In this case the bailee takes possession of the goods upon his own responsiblity.
The bailer gets nothing. But the bailee is rewarded by the possession of the
goods.

3. Bailment for mutual benefit.

In this type, both the bailer and bailee benefits. If a person gives his vehicle for
repairing. The bailer will get his vehicle repaired and the bailee will be lawfully
charged

5) Parties of the contract of bailment

Following are the two parties in the contract of bailment
LL.B Part-I Notes

1. Bailer
The person who delivers the goods is called bailer in the contract of bailment

2. Bailee
The person who receives the goods is called bailee in the contract of bailment

6) Essentials of contract of bailment

Following are the essential of contract of bailment
I. Contract
Contract is a basic essential for the bailment, without contract nothing can be
proceeded

1. Moveable property
In contract of bailment property should be moveable or any property which can
be moved from one location to another location

2. Delivery of goods
In the contract of bailment goods should be delivered for some purposes

3. Change of possession
In the contract of bailment possession should be changed from one person
to another person

4. Specific purpose
The goods should be delivered for some specific purpose to another person

5. Ownership is not changed

In contract of bailment the ownership should not be changed. It remains of bailer

6. Parties of contract
There should be two parties of the contract of bailment. One is bailer and
second one is bailee

7. Returnable
The good should be returned to the owner of the property after the
completion of the purpose

7) Duties of bailee
Following are the duties of bailee

1. Care of goods
LL.B Part-I Notes

Bailee is responsible to take care of the goods of the bailer as he takes care of his own
goods

2. Return the goods

Bailee is responsible to return the goods to bailer after the completion of the purpose

3. Return at proper time

Bailee is responsible to return the goods at proper time to bailer according to the
contract

4. Return of profit
Bailee is responsible to return the profit to bailer for example if a cow gives
birth to a calf and bailee is responsible to return the cow along with calf to the
bailer

5. Proper use of goods

Bailee should use the goods according to the contract of bailment

6. Duty not to mix

Bailee should not mix his goods with bailor's good without bailor's consent. If
he does so, and if the goods are separable, he is responsible for separating
them and if they are not separable, he will be liable to compensate

8) Rights of bailee
Following are the rights of bailee

1. Recovery of loss
Bailee has right to recover all the loss which has been occured during the
completion of the purpose

2. Recovery of compensation
Bailee has right to receive compensation from the bailer for any loss during the
completion of the purpose

3. Recovery of expenses
Bailee has right to recover all the expenses which has been expensed during the
completion of the purpose

4. Right to possession
Bailee has right to keep the possession of the property of the bailer until that
bailer pays lawful charges to the bailee

5. Right of security
Bailee has right to receive the amount of security from bailer for any loss likely to be
LL.B Part-I Notes

possible in future during the completion of purpose

6. Rights against third person

He has the right to bring an action against that party. If a third person
wrongfully deprives the bailee from the use of the goods bailed to him

7. Right of wage
Bailee has the right to give lawful charges to him for providing services against
the contract of bailment

9) Termination of bailment
Following are the reasons which can cause the termination of bailment

1. Expiry of time
Bailment comes to an end on the expiry of specified time according to the
contract of bailment

2. Completion of purpose
Bailment comes to an end on the completion of the purpose. Bailment
terminates as soon as bailment completes

3. Unauthorized use
Bailment comes to an end if the bailee makes unauthorized use of the goods
delivered to him

4. Death of either party

Bailment comes to an end by the death of the any party before the
completion of the purpose

5. Termination by bailer
Bailment comes to an end if it is terminated by bailer before completion of the purpose

6. Destruction of subject matter

Bailment comes to an end if the subject matter of the bailment gets destroyed

10) Preclude Remarks

A bailment is an intentional transfer of the possession of the goods by the owner
to another person under a contract. The contract of bailment can be terminated
under some circumstances as well as it enforces different rights and duties upon
bailer and bailee
LL.B Part-I Notes

Q # 10: Define Agency. Duties and rights of agent.

1) Preface Statement
Such source which creates relationship between principle and an agent is called
agency. And the principle grants authority to agent and agent acts on the behalf of
principle. Both the agent and principal can be an individual or an entity, such as a
corporation etc. Agent has no his own authority and he can be terminated by
principle at any stage. Agent is such person who creates a legal relationship
between the principle and the third party

2) Definition of Agency
Such source which creates relationship between principle and an agent is called
agency

3) Parties to agency
Following are the two parties in the contract of agency

1. Agent
A representative of an agency who acts on the behalf of another person
(Principle) in order to legally bind the third party in particular business

2. Principle
Principle is a such person who is being represented before the third party by the agent

4) Appointment of agent
Every person can be appointed as agent who has attained the age of majority
according to the law and is of sound mind.

5) Who can be agent

Between the principle and third person, any person can become an agent. But
no person who has not attained the age of majority according to law and is not of
sound mind, cannot become an agent.
Kinds of Agent

1. Sub-Agent
Sub agent is a person who is acting under the control of original agent and is
working on the behalf of original agent

2. Co-agent
Co-agents are persons who are working together with one another on behalf
of principle are called co-agent
LL.B Part-I Notes

3. Advocate
Advocate is a person who acts as an agent. He appears on the behalf of principle
before the court

4. Banker
Banker is a person who acts like an agent on the behalf of bank. The
relationship between banker and customer is a legal relation

5. Broker
Broker is a person who acts like an agent on the behalf of principle. He employed
for buying or selling the goods between the two parties

6. Auctioner
An autioner is a person who acts like an agent on the behalf of principle and he is
authorized to sell goods on the highest price during the public sale

7. Mercantile agent
A mercantile agent is a person who acts on the behalf of principle and is
authorized to sell or buy goods, and collect a loan by using the principle’s goods

8. Delcredere Agent
Deccredere agent is an agent who guarantees to his principle that the person to
whom he sells will pay, if he will not pay, I will be liable

9. Factor
A factor is an agent whom goods have been given for sale

10. Indenter
An indenter is an agent who sells or buys on the behalf of his principle

6) Kinds according to extent of authority

Following are the kinds of an agent according to extent of authority

1. General agent
A general agent is a person who is authorized to do all acts in connection with
particular business. To whom third party can assume that this is a person who
has all power to do all acts

2. Special agent
Special agent is a person who is authorized to do some particular acts in connection
with
LL.B Part-I Notes

particular business. He represents his principle in some particular business

3. Universal agent
Universal agent is a person who is authorized to do all act and he has
unlimited powers which have been given by his principle

7) Rights of Agent
1. Right of Wage
Agent has the right to give lawful charges to him for providing services against
the contract of agency

2. Right of possession
Agent has right to keep the possession of the property of the principle until
that principle pays lawful charges to the agent

3. Right of commission
Agent has right of commission upon the thing which is under his possession

4. Right of compensation
Agent has right to receive compensation from the principle for any loss
during the completion of the purpose

5. Right of security
Agent has right to receive the amount of security from principle for any loss
likely to be possible

6. Right of expenses
Agent has right to recover all the expenses which has been expensed during the
completion of the purpose

7. Right of stoppage
Agent has right to stop the process of delivery of goods

8) Duties of an agent
Following are the duties of an agent

1. Obey the instructions

It is the duty of an agent to obey the instructions of the principle otherwise he
will be held responsible for any loss

2. Use of skills and knowledge

LL.B Part-I Notes

It is the duty of an agent to use his skills and knowledge for furtherance of the
business of the principle

3. Should not make any secret profit

It is the duty of an agent that he should not make any secret profit from the
business of principle

4. Return of profit
It is the duty of an agent that if he earned the profit from the business he should
return it to principle

5. Payment of all sums

It is the duty of an agent to pay all amounts received on his amount from the
business of principle

6. Showing of accounts
It is the duty of an agent to show his account on the demand of the principle

7. Separate accounts
It is the duty of an agent to maintain his accounts and keep them separate
from principle accounts and not to mix them

8. Duty in case of principle die or become insane

It is the duty of an agent in case of death or insanity of the principle that he
should protect the interests of his legal heirs

9. Delegation of authority
It is the duty of an agent that he should not delegate his authority to any
other person without the consent of the principle

10. Communicate with principle

It is the duty of an agent to communicate with principle and share all the
information with him related to matters of business

11. Performance with honesty

It is the duty of an agent that he should deal the business honestly. If he deals
the business dishonestly then he is not entitled to receive the wage of his
services

12. Conducting business

It is the duty of an agent to conduct the business of principle
LL.B Part-I Notes

9) Termination of authority of agent

Following are the ways by which authority of an agent gets terminated
1) In case of death of principle
2) In case of death of agent
3) In case of insanity of principle
4) In case of insanity of agent
5) If agent gives up of the business
6) In principle becomes bankrupt
7) In case of destruction of the subject matter of the business
8) In case of expiry of the time

10) Preclude Remarks

An agent is authorized to create a contract between the third party and

principle and he plays his role as middle person in the contract of agency. Agent
act on the behalf of principle and his authority can be terminated by principle at
any stage or any time without any reason because all powers are vested in
principle. Actually agent has no powers but there are a different kinds of agents
according to their authorities
LL.B Part-I Notes

Sales OfGoods

Q # 01: Define condition and warranty. What is the difference

between two.

1) Preface Statement
In contract, condition is an act which binds the contractual party to perform
certain act which has been obligated upon the party at the time contract signed.
For example, let's say that I promise my brother that I'll wash the car if he'll clean
my room. This agreement has a condition. I'm not bound to wash the car unless
my brother cleans my room. Contracts are common in the business world. A
contract is a type of legally binding written or spoken agreement. A valid contract
will create a mutual obligation. This means that each of the parties is obligated, or
required, to perform a duty under the contract. warranty has various meanings but
generally means a guarantee or promise which provides assurance by one party to
the other party that specific facts or conditions are true or will happen

2) Definition of warranty
warranty means a guarantee or a promise which provides assurance by seller to
buyer that specific facts or conditions are true or will happen

3) Definition of condition
In contract, condition is an act which binds the contractual party to perform
certain act which has been obligated upon the party at the time contract
signed

4) Types of Warranty
Following are the two types of conditions and warranties. Details are as under

1. Expressed warranty
Under the sale contract, written warranty or express warranty is an agreement
between the seller and the buyer according to which seller is liable to repair or
replace the thing which has been sold by seller.

2. Implied warranty
The warranties which are applicable automatically by operation of law are called
implied
LL.B Part-I Notes

warranties. And implied warranties ensure that purchased item is fit for the purpose
a. implied warranty of habitability
Implied warranty of habitability is a guarantee that a house is fit for live in
b. Implied warranty of fitness
This type of warranty provides a guarantee that the product
recommended by a salesperson is fit for a particular use for example if ali
purchases of blender to crush the ice under the recommendation of seller,
and blender does not crush the ice ,buyer will return the item under the
implied warranty of fitness
c. Implied warranty of title
This warranty is implied in which it is not required to be placed in writing,
ensuring the buyer that the property will not be stolen, or will not to belong to
someone else. This ensures to customer that they will not pay twice for an
item
d. implied warranty of merchantability
An implied warranty of merchantability applies to nearly all purchases as it
guarantees that the product will work for its intended purpose. For example,
Rob buys a new bulb, but it when he plugs it in at home, it does not work. Rob
has the right to return the
bulb and exchange it for a working one, or receive a refund.

5) Types of conditions
Following are the two types of conditions and warranties. Details are as under

1. Expressed condition
These are those conditions which has clearly been defined and agreed by
the parties while entering into the contract. And such conditions may be
written or spoken

2. Implied condition
These are those conditions which has not clearly been defined and agreed by
the parties while entering into the contract. The conditions which are applicable
automatically by operation of law are called implied condition

6) Difference between conditions & warranty

The following are the major differences between condition and warranty

1. As to nature
LL.B Part-I Notes

Condition is an obligation in his nature which requires to being

fulfilled for completion of contract
Warrant is a surety in nature given by the seller regarding the facts of the goods
LL.B Part-I Notes

2. Termination of contract
Breach of any condition may result in the termination of contract
Breach of warranty may not result the termination of the contract

3. Claim for damages

In case of breach of condition, the innocent party has the right to
cancel the contract and can claim for damages
In case of breach of warranty, the innocent party only can take legal action
against the other party

4. As to violation

Violation of a condition means violation of warranty too

But violation of warrant is not a violation of condition

5. As to importance
Condition is an important and integral part of the condition and it directly
affects the contract
Warranty is not so important part of the contract as condition and it
does not directly affect the contract

7) Preclude Remarks
At the time of contract of sale, both the buyer and seller define some conditions
regarding payment, delivery, quality, quantity, etc. These can be either condition
or warranty. Every contract of sale has some implied conditions and warranties.
Condition is such part of contract which needs to be fulfilled by other person so
that agreement between the parties may complete. And warrant is surety which
assures and protects the buyer rights and enables him to take legal action against
the seller if describes facts not prove true of happen
LL.B Part-I Notes

Q # 02: What is difference between agreement to sell and contract

of sale? Discuss the essential features which govern the formation of two.

1) Preface Statement
If ownership is transferred by seller to buyer under a contract for a price, is
called sale. If there is a promise that ownership will be transferred by seller to
buyer at a future time under a contract for a price, is called agreement to sell.
In contract of sale the buyer becomes full owner of the property and in
agreement to sell buyer does not become owner of the property because there
is only agreement to sell

2) Definition of Contract of sale

Such contract when seller transfer or agrees to transfer the property or the
goods to the buyer for a price is called contract of sale
And agreement to sell does not create any right in immovable property

3) Parties of the contract

Following are the two parties of a contract

1. Seller
Seller is a person who sells his property or goods to buyer for a price

2. buyer
buyer is a person who purchases the property or goods from a seller for a price

4) Types of contract of sale

Following are the three types of the contract of sale

1. Stamped contract
A contract is an enforceable legal document only if it was stamped by legal
authority. The stamp shows that the parties are agree to take legal action if
something happened unlawful.

2. Express contract
In an express contract, the parties state the terms and conditions either orally or
in writing, at the time of its formation. The expression shows that the parties are
agree to take legal action if something happened unlawful

3. Implied contract
LL.B Part-I Notes

In an implied contract, the parties do not state the terms and conditions of the
contract by words such kind of contract is called implied contract of sale

5) Essential elements of sale

Following are the essential feature of the contract of sale

1. Buyer and seller

One person cannot become buyer and also the seller; there should be two
persons to a contract of sale, buyer and seller.

2. Price
Price is the consideration in the contract of sale for which good is being sold. If
goods are being exchanged with goods it is not a contract of sale.

3. Goods
The subject matter of the sale is goods. All moveable property or goods and
immoveable property or goods are the most important essentials of the contract of
sale because without goods it is not possible of formation of contract of sale

4. Transfer of ownership
In contract of sale, ownership of the property or goods should be transfer to the
buyers

5. Transfer of possession
In contract of sale, possession of the property or goods should be transfer to the
buyers

6. Sale
When ownership is transferred by seller to buyer under a contract is called sale

7. Agreement to sell
When ownership will be transferred by seller to buyer at a future time under a
contract is called agreement to sell

8. Essentials of a valid contract

The contract of sale must have all the essentials of a valid contract

6) Difference between sale and agreement to sell

Following are the differences between the sale and agreement to the sale

1. Transfer of property
In contract of sale, property transfers from seller to buyer and buyer becomes the
owner
In agreement to sell, the seller only does the promise with buyer to transfer the
property in
LL.B Part-I Notes

future

2. Risk
In contract of sale, all risks transfers with the buyer
In agreement to sell, all risks remain with the seller

3. Tax
In contract of sale, tax imposed at the time of sale
In agreement to sell, there is no tax on agreement to sell

4. Availability of goods
In contract of sale, goods exists at the time of formation of the contract
In agreement to sell, goods may exist or may not exist at the time of
formation of the agreement to sell

5. Nature of contract
In contract of sale, the nature of contract is absolute
In agreement to sell, the nature of contract is conditional

6. Right of resale
In contract of sale, seller cannot resale the goods to another buyer
In agreement to sell, the seller can resale the goods to another buyer

7. Damages or lost
In contract of sale, if goods get destroyed or lost after handing over, in this case
buyer is liable
In agreement to sell, if goods get destroyed or lost in this case seller is liable

8. Bankruptcy of buyer
In contract of sale, if buyer becomes bankrupt. Seller can use his right of stoppage
In agreement to sell, seller can refuse to deliver the goods

9. Bankruptcy of seller
In contract of sale, if seller becomes bankrupt. Buyer has right to recover the
goods from seller
In agreement to sell, buyer only can claim

7) Preclude Remarks
A contract of sale and agreement of sell are two different terms. In
contract of sale ownership transfers from owner to buyer and buyers
becomes the new owner of the
LL.B Part-I Notes

property or goods but in agreement to sell ,seller makes promise with buyer to
sell the property or goods at the future time. In contract it is necessary the
existence of offer and acceptance without both of these ,contract cannot be
framed
LL.B Part-I Notes

Q # 03: Explain the classifications of Civil Law.

1) Preface Statement
Unpaid seller means a person who sells the goods for a price but price has not
been paid to him. Unpaid seller has rights against the goods and buyer. Because
payment is consideration and reason of the contract so that payment should be
paid timely even partly or wholly. The seller is not unpaid seller if buyer has offered
to pay the price and if seller refuses to accept it. In such case, the seller loses all
the rights against goods and buyer

2) Definition of unpaid seller

When whole or part of the price of goods has not been paid in such case seller
to be called unpaid seller Or when price of goods remain unpaid even after the
expiry of the decided period in this case seller is to be called unpaid seller

3) Features of unpaid seller

Following are the features of unpaid seller
1) Seller must sell the goods on cash basis and must be unpaid
2) Must be unpaid either wholly or partly
3) The decided period has expired and the price has not been paid to him.
4) If the price is paid through a bill of exchange
5) He must not refuse to accept the payment when he offered
4) Rights of unpaid seller
Following are the two types of rights of a seller
A. Rights of unpaid seller against goods
B. Rights of unpaid seller against buyer

A. Rights of unpaid seller against goods

Unpaid seller has following rights against the goods. Details are as under.

1. Right of possession
If a buyer fails to pay the price within the decided time, unpaid seller has
right to keep the goods in his possession and he can refuse to deliver the goods
to the buyer until due payment is paid
When right of possession can be exercised
Following are the conditions when right of possession can be exercised
1) When the goods have been sold without legal agreement
2) When the goods have been sold on cash basis, but payment is unpaid
LL.B Part-I Notes

3) When the goods have been sold on credit basis, the term of
credit has expired
4) When the buyer become bankrupt even within the decided period
Termination of right of possession
Following are the conditions when right of possession is terminated
1) When seller delivers the goods to buyer without having the
legal right on goods
2) When buyer has obtained possession lawfully
3) When buyer further sales the goods
4) When seller loses his possession on goods

2. Right of stoppage of goods in transit

If a buyer fails to pay the price within the decided time, unpaid Seller has
right to stop the goods in transit
Conditions for stoppage of goods
Following are the condition of stoppage of goods and seller can stop the
goods to deliver to the buyer
1) When the seller must be unpaid
2) When buyer become bankrupt
3) When the goods are not in possession of seller, but have not
reached buyer’s possession such as goods are in transit with
career
Methods of stoppage
Following are the methods for stoppage of goods by the seller. Details are
as under
1) By taking possession of the goods
2) By giving legal notice to the carriers under whose possession the goods are

3. Right of resale
If a buyer fails to pay the price within a decided time, the unpaid seller has
the right to resell the goods
Conditions
Following are the condition in which seller can resell the goods. Details are
as under
1) When buyer fails to pay the price of the goods
2) When buyer become bankrupt
LL.B Part-I Notes

3) When the goods are fresh in their nature

4) When unpaid seller has expressly reserved his right of resale
5) After receiving the notice from seller ,buyer does not pay the price
, seller can resale the goods

B. Rights of unpaid seller against buyer

If a buyer fails to pay the price of the goods and unpaid seller has rights against the
buyer

4. Suit for price

When the ownership of the goods have been transferred to buyer and buyer
refuses to pay the price of the goods according to the terms and condition of the
contract ,the seller has right to take legal action against buyer for the price of
the goods

5. Suit for breach of contract

When the buyer cancels the contract before the date of the delivery. The
unpaid seller can take legal action against the buyer in order to recover the
damages in the contract

6. Suit for damages for non-acceptance

When the buyer refuses to accept and pay for the goods, the seller can take
legal action against him for damages for non-acceptance. The seller can recover
damages only and not the full price

7. Suit for special damages and interest

The seller can take legal action against the buyer for special damages where
the parties are aware of such damages at the time of contract. The unpaid seller
can recover interest at a reasonable rate on the total unpaid price of goods,
from the time it was due until it is paid

5) Preclude Remarks

Unpaid seller under sales of goods act 1872, is a person who has not been
paid. He has rights to resale the goods, stoppage of goods or keep them in his
possession as well as he also can take legal action against buyer because he has
been awarded with these rights by the law
LL.B Part-I Notes