Unit 9: Legal Aspects of Business ° ian Contract Act, 1872: Elements of a valid contract; Capacity of parties; Free consent; Discharge of a contract; Breach of contract and remedies against breach; Quasi contracts; Special contracts: Contracts of indemnity and guarantee; contracts of bailment and pledge; Contracts of agency ut Sale of Goods Act, 1930: Sale and agreement to sell; Doctrine of Caveat Emptor; Rights of unpaid seller and rights of buyer Negotiable Instruments Act, 1881: Types of negotiable instruments; Negotiation and assignment; Dishonour and discharge of negotiable instruments By Navdeep KaurThe Companies Act, 2013: Nature and kinds of companies; Company formation; Management, meetings and winding up of ajoint stock company Limited Liability Partnership: Structure and procedure of formation of LLP in India The Competition Act, 2002: Objectives and main provisions The Information Technology Act, 2000: Objectives and main provisions; Cyber crimes and penalties The RTI Act, 2005: Objectives and main provisions Intellectual Property Rights (IPRs) : Patents, trademarks and copyrights; Emerging issues in intellectual property Goods and Services Tax (GST): Objectives and main provisions; Benefits of GST; Implementation mechanism; Working of dual GSTIndian Act. 1872) The Indian Contract Act, 1872 is the law relating to Contracts in India. It came into force on September 1, 1872 and is extended to the whole of India except to the state of Jammu and Kashmir. tne The Act has 238 sections altogether. Sections 1 to 75 came into force on September 1, 1872.CConracs ‘Contract’ has beet defined defined in Section 2(h) of the Indian Contract Act, 1872. It defines the Contract as an agreement enforceable by farEssential Elements of a Contract as defined in Section 10 of the Indian ontract Act 1872 — wv @ Agreement? Offer and Acceptanci . Legal p 3. Lawful Cor 4-Capacity to contract 5. Consent to contract 6. Lawful object 7 8. Possibility of Performance 9. Not expressly deciared void) 10. Legal formalities like Writing, Registratio’ ‘eesAll contracts are agreements, but not all agreements are contracts. contract is valid agreeme_ Sffer! proposal ‘Section_2(a) of the Indian Contract Act, 1872 defines the term “Proposal” as when one person signifies to another his willingness to do or to abstain from doing something with a view to obtaining the assent of the other to such an act or abstinence, he is said to make a proposal. The person making the ‘proposal or ‘offer’ is called the '‘promisor' or ‘offeror’, the person to whom the offer is made is called the ‘offeree’. Acceptance means the expression of assent to whom the proposal is made a Contract. Acceptance may be expressed either by conduct or by plied circumstances. However, silence cannot be prescribed as a mode of acceptance. Promise A proposal when accepted becomes.Valid acceptance must be 1. PaIPoD absolute and unqualified. 7 (a) (unqualifiedmeans having the right knowledge.) manner in which acceptance is to be given communication by whom to whom time limit can be prescribed or reasonable time before lapse of offer5. Revocation of proposals and acceptances >A proposal may be revoked at any time before the communication > of its acceptance is complete as against the proposer, but not afterward A ‘acceptancd may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.iorf40 oF the Indian Contract Act states Con sideration as one : of the essential elements to constitute aContract.) ——= sideration means ‘something in return',According to section of the Indian Contract Act, Cc “When at the desire of the promisor, the promisee or any other person has done or abstained fromdolne, or does or abstains- from doing, or promises to do or abstain from doing something, such act or abstinence is called a consideration for the promisee." SSfateninent without need of consideration natural love and affection 25(1) compensation for past voluntary service 25(2 ) promise to pay time bared debt 25(3) Agency Completed gift gePensy“bagadity to Contract Section 11 of the Indian Contract Act provides the requirements for competence of the parties to the contract. “Every person is competent to contract, who is of the age of = ~ according to law, which he is subject to also who is of and > whois not disqualified from contracting by any law to which he is the subjectPerson(aat bompetent to contract / Disqualifications 4. minor re 2. unsound mind (Sec 12) ~~ 3. disqualified by law 4. an alien enemy 5. an insolvent 6. a Convict undergoing imprisonment ((2)conson defined ‘wo or more persons are said to consent when they agree upon the same thing in the same sensesaid to be free when it iGcoptaused by- (1) coercion, as defined in section 15, or (2) undue influence, as defined in section 16, or the parti dominate the will of the other and uses that position to o! \vantage over the other. (@ieaus as defined in section 17, or )_misrepresentation, as defined in section 18, or (5) mistake, subject to the provisions of sections 20, 21, ai Consent is said to be so caused when it would not have been gi jut for the existence of such coercion, undue influence, fraud, misrepresentation,17. "Fraud defined "Fraud" means and includes any of the following acts commit contract, or with his connivance, or by his agents , with intent party thereto or his agent, or to induce him to enter into the contract: (1) the suggestion as a fact, of that wi nt tue, By one who does not believe it to be true; (2) the esi concealment a fact by one having knowledge or belief of the fact; (3) a promise itho! intention of performing it; @) any other act fitted Gdecetat (5) any such act or omission as the law “specially declares to bi Asells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse's unsoundness. This is not fraud in A.COMPARISON VOID CONTRACT VOIDABLE CONTRACT Meaning The type of contract which cannot be The contract in which one of the two parties enforceable is known as void contract. _| has the option to enforce or rescind it, is known as voidable contract. Defined in ‘Section 2 (j) of the Indian Contract Act, Section 2 (i) of the Indian Contract Act, 1872. 1872. Reasons ‘Subsequent illegality or impossibility of —_| If the consent of the parties is not any act which is to be performed inthe _| independent. future. Rights to party No Yes, but only to the aggrieved party. Suit for damages Not given by any party to another pasty for the non-performance, but any ber received by any party must be whose option tls voldable Repudetes ra are Ph Foret Te PET IT aE eT aT, Aa aH ag Yea ae ETEJRF Dinesh Verma: mam marriage k contract valid nhi hote jitna mne pdha h bez ap kisi ko kisi ‘se marrige k liye bound nhi kr skte ?30. Agreements by way of wager, void Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to a person to abide the result of any game or other uncertain event on which any wager is made. or ee An agreement in which one person agrees to pay certain amount of 0-0 e in happening or non ha, ing of specifi oeA"contingent contract" is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. Example: Acontracts to pay to B Rs. 10,000 if B's house is burnt. This is a contingent contract. > contract to do do or not to do on some event Collateral to search contri Ss or does not happen example: A will sell his car to be if he buy a new car in future(ax puigaions of parties to contracts (performance of contract) ie parties to a contract must either perform, or offer to perform, their respecti unless such performance Is dispensed with or excused under the provisions of this Act, or of any other law. > Promises bind the representatives of the promisor in case of the death of such promisors before performance, unless a contrary intention appears from the contract. 2 2Caarerson by whom promise is to be performed co) . the promisor, 7 6 2. representative 3. agent 4. third person in case of representative, aoe third-person it must be specified in the contract explicitly or implied (a) A promises to dolivet goods tO B on a certain day of payment of Rs. 1,000. Adies before that day. A's representatives are bound to deliver the goods to B, and B is bound to pay the Rs. 1,000 to A's representatives. (b) A promises to paint picture for B by a certain day, at a certain price. A dies before the day. eres enforced either by A’s representatives or by B.Discharge of a contract 62. Effect of novation, rescission, and alteration of contract > Effect of novation: If the parties to a contract agree to substitute a new contract for it > rescission: revocation, cancellation, or repeal of agreement. 64 > alteration of contract: alter it, > remit: Every promisee may dispense with or remit, wholly or in part, the erformance of the promise made to him, or may extend the time for such performance, for may accept instead of it any satisfaction which he thinks fit. 63 Example: A agrees to make 10 boxes for rupees 40 if latter A says | can make 2 boxes and other agrees for that the original contract need not be performed. —Waiver: A waiver is the voluntary relinquishment or surrender of some known right or privilege. Regulatory agencies or governments may issue waivers to exempt companies from certain regulations. ccord and satisfaction: js a contract law concept about the purchase of the release from a scomouligasion, It is one of the methods by which parties toa contract miay ferminate their agreement. discharge by operation of law: party becomes Gees) mound mind or that act is not permissible as per new law _change in subject matter: destruction of subject matter terms and_ condition discharge b)of contract occurs when the agreement is not kept, because fetes) the contract does not fulfill their obligation according to eon a tent Abreach can occur perform within the time frame specified in the contract; jot perform in accordance with the terms of the agreement, or fails to perform whatsoever. If one party fails to perform while the other party fulfills her dutio under the contract, the performing party is entitled to leg. for breach of contract.> of cont a) 7 (4) nor Broach: a minor breach occurs when one party “substantially performs,” or meets the essential obligations of the contract, but does not meet a condition that is minor and does not affect the contract terms. This is also known as a partial breach. Material Breach: A material breach is a substantial breach in contract terms usually excusing the non-breaching party from performing and giving her the right to sue for damages. For example, in ome purse contract, a seller refusing to give the buyer to the home after the buyer has completed all contract terms is a material breach:‘putin Breach: This occurs when one at. the contract terms so egregiously that the other party may terminate the contract (as well as seek damages). Anticipatory Breach: Contracts generally have set dates on which “performance,” or fulfillment of the contract’s obligations, are required. If one of the parties commits a breach prior to that time, then they have committed an anticipatory repudiation, or anticipatory breach. If this occurs, the non-breaching party may immediately consider the contract breached, and take legal action.Remedie$ against breach 68.-Claim for a to persor( incapablo/of contracting, or on his account If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. —_S—C—~S~S (a) Asupplies B, Gunatio ith necessaries suitable to his condition in life. Ais entitled to be reimbursed from B's property. Selene hor Pee (b) A supplies, the wife and children of B, a lunatic, with necessaries suitable to their condition in life. Ais entitled to be reimbursed from B's property.2 Sue for Damages Section 73 clearly states that the party who has suffered, since the other party has broken promises, can claim compensation for loss or damages caused to them in the normal course of business. Such damages will not be payable if the loss is abnormal in nature, i. in the ordinary course of business. not Liquidated Damages: Sometimes the parties to a contra the amount payable in case of a breach. This is kno damages. > Unliquidated Damages: Het amount payable due to the breach of om contract is assessed by tl pone any appropriate — et are two types of damages according to the Act, afor Breach of Contract promise or agreement is broken by any of the parties we call it a breach of contract. 1 Recession of Contract When one of the parties to a contract does not fulfill his obligations, then the other party can rescind the contract and refuse the performance of his obligations. f the Indian Contract Act, the party that rescinds the contract must restore any benefits he got under the said agreement. And section 75 states that the party that rescinds the contract is entitled to receive damages and/or compensation for such a recession.75. Party rightfully rescinding contract, entitled to compensation A person who rightfully rescinds a contract is entitled to consideration for any damage which he has sustained through the non-fuifillment of the contract. Example A, a singer, contracts with B, a manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her 100 rupees for each night's performance. On the sixth night, A willfully absents herself from the theatre, and B, in consequence, rescinds the contracts. B is entitled to claim compensation for the damage which he has sustained through the nonfulfilment of the contract.Genre This means the party in breach will actually ry out his duties according to the contract. In certain cases, t! fe courts 3 ay insist that the party carry out the agreement. eee? > Soif any of the parties fails to perform the contract, the court may order them to do so. This is a decree of specific performance and is granted instead of damages. > For example, A decided to buy a parcel of land from B. B then refuses to sell. The courts can order B to perform his duties under the contract and sell the land to A. ——Sy 4 oncom” > An injunction is basically like a decree for specific performance but for a negative contract. An injunction is a court order restraining a person from doing a particular act. > Example: Ram and Shya that Ram will sell goods to Shyam but Shyam entered vand Ram can issue injection that he cannot buy goods from Raghu because he is already in the contract5 Quantum Meruit Quantum meruit literally translates to “as much is earned”. At times when one party of the contract is prevented from finishing his performance of the contract by the other party, he can claim quantum meruit. So he must be paid a reasonable remuneration for the part of the contract he has already aeons be the remuneration of the services he has provided or the vale of the work he has alrea done. a73. Compensation of loss or damage caused by breach of contract When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him 2 kinds of compensatory damages party may be entitled to recover: A. General Damages. General damages cover the loss directly and necessarily incurred by the breach of contract. General damages are the most common type of damages awarded for breaches of contract. Example: Company A delivered the wrong kind of furniture to Company B. After discovering the mistake later in the day, Company B insisted that Company A pick up the wrong furniture and deliver the right furniture. Company A refused to pick up the furniture and said that it could not ‘supply the right furniture because it was not in stock. Company B successfi reach of contract. The general damages for this breach could include: + refund of any amount Company B had prepaid for the furniture; plus + reimbursement-of any expense Company B incurred in sending the furnitu fo Company A; plus —_ + payment for any increase in the cost Company B incurred in buying the right furniture, or its nearest equivalent, from another seller.Greciat Damas . Special damages (also called “consequential damages”) cover any loss breach of contract because of special circumstances or conditions that are not ordinarily predictable. To obtain damages for this type of loss, the nonbreaching party must prove that the breaching party knew of the special circumstances or requirements at the time the contract was made. — Example: In the scenario above, if Company A knew that Company B needed the new furniture on a particular day because its old furniture was going to be carted away the night before, the damages for breach of contract could include all of the damages awarded in the scenario above, plus: > + payment for Company B's expense in renting furniture until the right furniture arrived.74.Compensation for breach of conti penalty stipulated for (oF liquidated) > Punitive damages (also called @xemplary damages”) are awarded to punish or v make an example of a wrongdoer who has acted willful fraudulently. maliciously or are intended to punish t! to deter others from acting in a similar mani Punitive damages are awarded in addition to compensatory damages. r egregious behavior and Punitive damages are rarely awarded for breach of contract.eatin Cpa These damages are awarded against the party who has committed a breach of the contract with the object of punishing the erring as defaulting party and to compensate the aggrieved party. Generally, these damages are awarded in case of action on lost or breach of promise. E.g., breach of contract to marry, dishonor of cheque by the bank without any proper reason. _Such-damages are awarded due to ian measuring the amount of the mental Gxteinper the extent of the injury to feelings of the aggrieved party. The main aim of awarding such damages is to deter a person from committing a breach of such contract. arepotre ar wien afer SERS ele Ferre fear ares 8 Facer eee er eae ee eT Sau wr Seca Pea ee ape fear TO GATER. Saver We HEAT a STOTT AACE HTS A hee emer Fore Hepa aT Teeter, Fae Pare Sheet HALT & Sas CART WH HT HAT was ‘at arate Sgr A ATA aah Tes Ht foes AT Ha Tar Ar Ses HY Ae WFAA FARO one tert ‘STAT BA Totter Br cet Sr AA TeRNA AN Salsa HI FH ANG H HAE Hi Soca Het S“cacy onmsn or uae Damages tia e in the ordinary course of events from the breach of contract are called ordinary damages. Damages arising out of natural and probable consequences of breach of contract are also considered an ordinary damage. General damages are such damages, which the law presumes from the breach of the contract. The quantum of damages which the court can award will be just that amount which would place the innocent party in the same position, which he would have occupied, had the contract been performed, and not broken.Special Damages Special damages are those damages that are payable for the loss arising on account of some special or unusual circumstances. That is, they are not due to the natural and probable consequences of the breach of the contract. Indirect loss experienced by the affected party out of breach of contract is treated as special damage. Special damages can be recovered only when the other party, while signing the contract, is informed of the special circumstances which are responsible for the special losses. Nominal Damages Nominal damages are awarded to the aggrieved party when there is only technical violation of the legal rights. Here no substantial loss is caused. These danagesare very small in amount. They are awarded simply to ad recognize the right of the party to claim damages for the breach of the contract.AUR aifel At AeA HAT eee ago eae ae te eri eae pre ae ee ote Ee H Seca H orple si Talat GLUT a Seteet tot aH afer HY aM Tay ATLMLOT Safer HT SAT | ATT rarer CA aaa &, foes Sree Hae H Sect S Arta I afer it ara, AN HeTolet HEH & Tach & ae ATT ae TA gal Sh Here car apr se Feet A ceaahy, Fora Te Baa Hes ay Fora ee, Hea fear ear, Se aet AST ara) fade qaeret BRN eur Aare ot Faery a saree ofeeaiaral a apreoT Ser are PRA & Few ea Tl ATS, F ea See canter vont earn seh €1 aeqaed seer waner cat ar se Fag Hace erfer Bade atfel & Ba A AT Sar al facta afe haat aah orca A or wach ee RG Fe er ee re aa ear tr Peer aaa & HATS FLAT ATT SHY FT ERATE FTE pen Sree after dr ema sector et RRS oat at aT & Here S TAfete PAT Sa el Ter | Sapa afer at | Soe separ Seater & Fae RAT ae Shoe Sante S aguas eine me arse fen oer LieQuasi-Contracts Sections 68 to 72 deal with Quasi-Contractual Obligations. A. 2. Pe Claim for Necessaries supplied to a person incapable of (\3) contracting or on his account <= Reimbursement of person paying money due by another, in payment of which he is interested Obligation of person enjoying benefit ot(on-gratuitous ae) Responsibility of finder of goods Liability of person to whom money is paid, or thing delivered by mistake or under coercion. ereNeha Mandhyani Salient features...... Quasi contractContract Of Indemnity —__— = The definition of a contract of indemnity as laid down in Sectio“ 124)- “A contract by which one party promises to save the other from loss Caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a contract of indemnity. Qa @Nature of Contract of Indemnity A contract of indemnity may be express or implied depending upon the circumstances of the case, though Section 124 of the Indian Contract Act does not seem to cover the case of implied indemnity. To make good the loss: to compensate for the lossThe Indian Contract Act also deals with special cases of implied indemnity 1. Ui ok a person who is interested in payment of money which another is bound by law to pay and therefore pays be indemnified. For instance — if a tenan' be paid by the owner, he is entitled to 2. Section 145 provides for right of a ure the principal debtor for all sums which he has rightfully paid towards the guarantee. 3. Section 222 provides for liability of the principal to indemnify the agent in respect of all amounts paid by him during the lawful exercise of his authority.Contract of indemnity when enforceable The question whether the liability of indemnifier commences only when the indemnified has actually suffered loss or when there is an apprehension that the indemnified by all chances is likely to suffer it.Right of the indemnity holder — (Sectior (426) ) An indemnity holder (i.e. indemnified) acting within the scope of his authority is entitled to the following rights — Right to recover damages ~ Right to recover costs Right to recover sums paid under compromise indemnifier. Right to sue for specific performance Note: the right to indemnity cannot be claimed Sidoticcmni tack of good faith and contravention of the promisor’s request. However, the right cannot be negatived in case of oversight. Poy > > The person who is promising to pay compensation is called Indemnifier and > the person whose loss is compensated is called Inde! fy holder»Rights of Indemnifier: It is a well known principle of law that where one person has agreed to indemnify another, he will on making good the loss, be entitled to all the ways and means by which the person indemnified might have protected himself against or reimbursed himself for the loss. Not responsible for illegal lossesContract of guarantee, surety, principal debtor and creditor A “contract of guarantee ” is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the ” surety”; The person in res; hose default the guarantee is given is called the ” pri or “, and the person to whom the guarantee is given is called the ” creditor “. A guarantee may be either oral or written. ——— : — & ¢ swity-A 2S x Pri ie wt 2 Oe Kags Qn 7) oeoo aoeGuarantee obtained by misrepresentat —_———ofa of Surety Rights of Surety can be classified into three groups, as follows; 1. Rights against Principal debtor. 2. hts against Creditor. 3. Rights against Co-Sureties.Rights agai rincipal Debto) e Right to give No 7 e Right of Indemnity. e Right to get Securities — A — ae ¢ Right to askfor Relief Principal B =— i \ ies Creditor _ Right of subrogation: stepping into t Ss yy of the creditor(s). When a surety has already paid thé guaranteed debt on its becoming due or has performed the guaranteed duty on the default of the principal debtor, he is invested with all the rights, which the creditor has against the debtor.Rights against Creditor eoee Right to get Securities Right to ask for Set-off Rights of Sub-rogation Right to advice to Sue Principal Debtor Right to insist on Termination of ServicesRights against Co-Sureties e Right to ask for Contribution e Right to claim Share in Securities A 8B Principal Creditor lebtor — aSContract of Indemnity It refers to a Contract by which one party promises to save the other from loss cdused by conduct of the promisor or another person. In contract.of indemnity, the liability of the promisor js & promisor Jw Frimaty) Contract between the indemnifier and the indemnity holder is express and specific. In contract of indemnity there are two parties indemnifier and the indemnity holder. Contract of Guarantee to a Contract to perform the ‘harge the liability of a case of his default. In contract of guarantee,.the primary liability is of principal debtor and the liability of surety is secondary. Contract between surety and principal debtor i: implied and between creditor and principal debtor is express. In contract of guarantee there are three parties i.e. creditor, the principal debtor and surety.In Contract of indemnity there is only one agreement i.e. the agreement between indemnifier and indemnity holder. Contract of protects the promise fr i —— In Contract demnity, the promisor cannot file the suit against third person until and unless the promisee relinquishes his right in favour of the promisor. In contract of guarantee there are three agreements i.e. agreement between the creditor and principal debtor, the creditor and surety and surety and principal debtor. Contract of guarantee is for the surety of the creditor. In contract of guarantee, the surety does not require any relinquishment for filing of suit. The surety gets the right to file suit against the principal debtor as and when the surety pays the debt.Contracts of bailment and pledge — Bailment means a delivery of goods from one person to another for a special purpose. Cage sean delivery of goods as security for the payment of debt or performance of a promise.Bailment A bailment is a special contract defined under section 148 of the Indian Contract Act, 1872. It is derived from a French word i.e. “bailer” which means “to deliver” Pe eo The person who delivers the goods is known as The person to whom the goods are given is known a The property bailed is known as Bailed a iEssentials of Bailment 41. 2. 3. There shall be a contract between the parties for the delivery of goods, The goods shall be delivered for a special purpose only, Bailment can only be done for movable goods and not for immovable goods or money, There shall be a transfer of possession of goods, Ownership is not transferred to Bailee, therefore Bailor remains the owner, — Bailee is duty bound to deliver the any other goods. back and notException: € money deposited in the bank shall not account to bailment as the money returned by the bank would not be the same identical notes. It is one of the essentials of the bailment that same goods are to be delivered back. ———Duties of a Bailor Section 150 of the Indian Contract Act, 1872 Cratos Batmont: It is the duty of the bailor to disclose all the defects he goods that he is aware of to the Bailee that can interfere with the use of goods or can expose him to extraordinary risks. And failure to do the same will make bailor liable for damages. Gratuitous bailment is a type of bailment in which the bailee receives no compensation. For example, borrowing a friend's car. A gratuitous baile is liable for loss of the property only if th loss is caused by the bailee's gross negligence. Non Gratuitous Bailment (Bailment for Reward): This duty particularly deals with the goods given on hire. As per this provision, when the goods are bailed for hire, then in such a situation even if the bailor is aware of the defect in the goods or not will be held liable for the injury that has been caused due to the existence of such defect.Hyman v Nye & Sons, the plaintiff took a carriage on hire from the defendant but the carriage was not fit for the journey and subsequently, the plaintiff suffered injuries. TI | that even though the defendant was aware of such: not fe shall be lable:Duties of Bailee vu v Duty to take reasonable care (Section 151-152) Duty not to make unauthorized use of the goods (Section 153-154) Duty not tears goods with his own gooes (Section 155-157) —wikis not to mix bailor’s goods with his own goods (Section 155-157) TE » Ifthe bailor agrees for the mixing of the goods then the interest in the mixed goods shall be shared in proportion. > Incase, Bailee without the consent of bailor mixes the goods with his own then two situations arise: goods can be separated and goods can’t be separated. > Inthe former case ofa as to bear the cost of separation and in the (atter.case since there is the loss ofthe goods, therefore, bailorShall be entitled with damages of such loss. ———Duty to return the goods on the fulfilment of purpose:(Section 160-161) > Ifthe Bailee makes default in returning the goods on proper time then he will be responsible with the loss, destruction or deterioration of the goods if any. Duty to deliver to the bailor increase or profit if any on the goods bailed: (Section 163) For Example A leaves a cow in the custody of B and cow gives birth to the calf. Then B is duty bound to hand over the bailed goods along with accretion to the bailor.ights of a Bailor, As such Indian Contract Act, 1872 does not provide for Rights of a ime as Duties of the Bailee i.e. Bailor. But Rights of a Bailo) Rights of Bailoi = Duties o' Enforcement of Bailee’s Du' Right to claim damages: If the Bailee fails to take care of care of the goods, the bailor has the right to claim damages for such for such loss. (Section 151)Right to Termination the Contract: If the Bailee does not comply with the terms of the contract and acts in a negligent manner in such case the bailor has the right to rescind the contract. (Section 153) = Right to claim compensation: If the Bailee uses the goods for an unauthorized purpose or mixes the goods which cause loss of goods in such case bailor has the right to claim compensation. aC eae Right to demand the Itis the duty of the Bailes. to return the goods and the bailor has the right to demand the same.Right to recover expenses: In the contract of Bailment, the Bailee incurs expenses to ensure the safety of goods. The Bailee has the right to recover such expenses from the bailor. (Section 158) Right to remuneration: When the goods are bailed to the Bailee he is entitléd fo receive certain remuneration for services that he has rendered. But in case of gratuitous bailment, the Bailee is not awarded any remuneration.Right to ae At times a situation arises wherein bailor did not have the capacity to contract for bailment. Such a contract causing loss to the Bailee, therefore the Bailee has the right to recover such compensation from the bailor. (Section 168)ight to ilee has the right over Lien. (Section 170-171) If the bailo: r fails to make payment of remuneration or does not pay the amount due, the Bailee has the right to keep the goods b: in his possession till the time debtor dues are cleared. _7 Lien is of two types: particular lien and general lien. Right to suit against a wrongdoer: After the goods have been bailed and any third party deprives the Bailee of use of such goods, then the Bailee or bailor can bring ai in action against the third party. (Section 180) aGENERAL LIEN section 171 of the PARTICULAR LIEN section 170 of BASIS Indian Contract Act, 1872. the Indian Contract Act, 1872 Meaning General lien alludes to the right to__| Particular lien implies a right of the keep possession of goods belonging | bailee to retain specific goods bailed to other against general balance of |__| for non-payment of amount. accoun} Availability @oods, in respect of which the | Only against the goods, in which jount is due to another person. _| skill and lab ercised. eon Automatic No a Yes Right to sale goods _| No right to sale the goods. In general, there is‘no right to se goods, however, conferred to bail JL circumstances. Exercised by Bankers, Wharfingers, factors, policy | Bailee, pledge, finder of goods, brokers, attorneys etc. agent, partner, unpaid seller etc.is defined a kind of bailment. Pledge is also known Haine under section 172 of the Indian Contract Act, 1872. > > Pledge: bailment of goods as a security for the repayment of debt or loan advanced or performance of an obligation or promise. The person who pledges the goods as security is known as Pledger or Pawnor The person in whose favour the goods are pledged is known as Pledgee or Pawnee.eet of Pledge Pledge is a special kind of bailment, therefore all the essentials of bailment are also the essentials of the pledge. —— 1. There shall be a bailment for security against payment or performance of the promise, = The subject matter of pide goods Goods pledged for shall be fence, There shall be the delivery-ofgeods from pledger to pledgee, There is no transfer (emer case of the pledge. —— SeonPledge Hypothecation Type of Security ble Movable immovable Possession of the _ | Remains with lender Remains with Usually security (pledgee) Borrower Remains with Borrower Examples of Loan | Gold Loan, Advance against | Car/ Vehilce Loans, | Housing where used NSCs, Adv against goods —_| Adv against stock and | Loans {also given under hypothecation) debtors —_Exception: In exceptional circumstances pledgee has the right to sell the movable goods or property that are been pledged (as per section 176)Rights of Pawnor As per Section 177 of the Indian Contract Act, 1872 the Pawnor has the Right to Redeem. On the repayment of the debt or the performance of the promise, the Pawnor can redeem the goods or property pledged from the Pawnee before the Pawnee makes the actual sale. The right of redemption is extinguished once the actual sale is done by the Pawnee as per his right under section 176 of the Indian Contract Act, 1872