1. Distinguish between contract of sale and hire purchase agreement.

A Hire purchase agreement is an agreement for hire of goods where the person who hires the goods
has an option to purchase the goods at the end. The possession of the goods is delivered to such a
hirer and he has to pay via instalments. The property in the goods passes to the hirer on the
payment of the last instalments. The Hire purchase agreements are treated as bailment and the
parties have the same rights as a bailor and bailee. The hirer has a right to terminate the agreement
at any time before the property passes. The test whether an agreement is sale or hire purchase was
given in the case of Lee vs. Butler [1893 2 QB 318] – If a person taking the goods has no option to
terminate the agreement, is a contract of sale irrespective of where the price is paid in instalments.

Basis of Distinction Contract of Sale Hire Purchase agreement

Law A contract of Sale is Governed They are governed by Hire

Nature of Contract
Possession
Transfer of ownership
Buyer
Transfer to third parties
Right to repossess
Right to terminate
Sales Tax
by the Sale of Goods Act, 1930
– Sec 4(1)
It may be written, oral or
implied.
Possession may or may not
transfer immediately.
The ownership of goods is
transferred immediately.
The buyer becomes the full
owner of the goods.
The buyer can transfer a good
title to third parties because
ownership of goods has been
transferred.
The seller can sue for price but
he cannot repossess the
goods.
In a sale, there is no option to
the buyer to return the goods
bought.
In case of sale of taxable
goods, sales tax is levied.
Purchase Act,1972 – sec 2(c)
It is an agreement to hire and
an agreement to sell.it also has
to be in writing.
Possession passes immediately
It transferred only when the
option to purchase is exercised
and the last payment is made.
The hirer is a bailee, and not
the owner until he pays all the
instalments of the price in full
or exercises the option to
purchase.
The hirer cannot transfer a
good title to a third party as
ownership has not been
transferred
The hire vendor has a right to
repossess the goods if the
hirer defaults in the payments.
The hirer can terminate the
agreement before the
ownership is transferred.
Even if taxable goods are
hired, sales tax is not levied.
2. Modes of Dissolution (Section 40-41)
A firm may be dissolved in the following ways:

1) By Agreement

2) Compulsory dissolution

3) On happening of certain events

4) By Notice

5) By the court

1) Dissolution by mutual agreement [Section 40]: - A firm may be dissolved by mutual

agreement among all the partners. Even a firm for a fixed duration may be dissolved by
mutual agreement.

2) Compulsory dissolution [Section 41]: A firm is compulsorily dissolved in the following

two circumstances:

(i) If all the partners, or all but one partner of the firm are declared insolvent; [The reason is
that there must be at least two persons to continue a firm and such persons must be competent
to contract].

(ii) If some event takes place which makes it unlawful for the firm's business to be carried on

3) Dissolution on the happening of contingent event (S.42)

A firm may be dissolved on the happening of any of the following contingent event

(i) Expiry of Fixed Period

A firm constituted for a term is of course not exempt from dissolution by any of the other
possible cause before the expiration of the term. The contract may expressly provide that
the partnership will determine in certain circumstances but even if there is no such
express term, an implied term as to when the partnership will determine may be gathered
from the contract and the nature of the business. The provision of this section makes it
clear that unless some contract between the partners to the contrary is proved, the firm, if
constituted for a fixed term would be dissolved by the expiry of that term.

(ii) On achievement of specific task

 A partnership constituted to carry out contracts with specified persons during a particular
season would be taken to be dissolved once the contracts are closed. In the case of
Basantlal Jalan v. Chiranjilal, Where the firm was constituted for a specific undertaking
to supply certain quantity of grain and the contract was prematurely terminated after
supply of a part of the goods, it was held that the partnership did not come to an end and
was dissolved only on the final realization of the assets

(iii) Death of Partner

When the deed of partnership did not provide that the death of a partner would not
dissolve the partnership, the partnership stood dissolve on the death of a partner. Firm,
stands dissolved automatically on death of one partner. Continuance of business after
such death would not tantamount to continuance of earlier partnership.

(iv) Insolvency of Partner

In the absence of a contract to the contrary, the insolvency of any of the partner may
dissolve the firm. The rule shall apply even though the partnership has been constituted
for a fixed term and the term has not yet expired or has been constituted for particular
adventure and the same has yet not been completed.

(v) Resignation of Partner Resignation by any of the partners dissolves the

partnership

If all the partners or all but one partner of the firm are dead or becomes insolvent, the firm
shall be compulsorily dissolved even if the partnership agreement provided that the firm
shall not be dissolved on the death of a partner. The reason is that there must be at least
two partners to continue a firm.

4.Dissolution by notice (S.43)

In case of partnership at will, a partner can dissolve it by giving written notice of dissolution
to other partners duly signed by him. Notice must be very clear and certain. A notice once
given cannot be withdrawn without the consent of other partners was held in case of
Banarsidas v. Kanshi Ram. In those cases where a partner has given notice of dissolution at a
time when dissolution will give him some advantage over the other partners, he may be held
in the firm till the pending transactions are completed.

5. Dissolution by Court (S. 44)

The court may order for the dissolution of the firm on the following grounds: -

(i) Insanity of Partner

On the application of any of the partner, court may order for the dissolution of the firm if a
partner has become of an unsound mind. Lunacy of a partner does not itself dissolve the
partnership but it will be a ground for dissolution at the instance of other partners. It is not
necessary that the lunacy should be permanent. In the case of a dormant partner the court may
not order dissolution even on the ground of permanent insanity, except in special
circumstances.

(ii) Incapacity of Partner

If a partner has become permanent in capable of discharging his duties and obligations then
court may order for the dissolution of firm on the application of any of the partner. where a
partner is imprisoned for a long period of time the court may dissolve the partnership was
held in case of Whitwell v. Arthur.

(iii) Misconduct of Partner

If any partner other than partner suing is responsible for any loss to the firm, which amounts
to misconduct and prejudicially affects the carrying on of business then the court may order
for the dissolution of the firm. In Carmichael v. Evans a partner of the firm was convicted on
account of travelling without ticket in Rail, the court ordered the firm to be dissolved on
petition by other partners as such act of the partner was detrimental to the interest of the firm.
Similarly, in Abbot v. Grump the court ordered the firm to be dissolved on account of
adultery committed by one partner against the wife of the other partner. Dissolution was
ordered as such act of adultery would adversely affect the mutual trust and confidence among
partners.

(iv) Constant breach of agreement by partner

The court may order for the dissolution of the firm if the partner other than the suing partner
is found guilty for constant breach of agreement regarding the conduct of business or the
management of the affairs of the firm and it becomes impossible to continue the business
with such partner.

(v) Transfer of Interest

When any of the partner other than the suing partner transfers whole of its share to the third
party for permanently.

(vi) Continuous Losses

The court may order for dissolution if the firm is continuously suffering losses and there is no
more capital available for the future growth of the firm.

(vi)Just and Equitable

The court may order for dissolution on any other ground which court think is just, fair and
equitable. e.g., loss of total confidence between the partners was held in Abbot v. Crump
where adulterous act has been committed by one partner with another partners wife was held
to be valid ground for the dissolution of firm by the court.
3. Statutory modes of creating contract of agencies and modes through
which

the existence of an agency can be determined:

Chapter X of the Indian Contract Act (ICA), 1872 deals with laws relating to agency. The

two terms ‘Agent’ and ‘Principal’ is defined under section 182 of ICA. “An agent is person

who is appointed by principal to represent him or to act on behalf of him and the contract

which creates a relationship between them is called an Agency.”

There are in total five statutory modes of creating contract of agencies:

1. Express agreement

2. Implied authority

3. Ratification

4. By estoppel

5. By necessity

1. Express agreement - According to Section 187, an authority is said to be express when it is

given by words spoken or written. A contract of agency can be made orally or in writing.
Under section 183, any person who is the age of majority and is of sound mind can appoint
an agent.

In Syed Abdul Khader V. Rami Reddy, a case before Supreme Court, a person was appointed
as a caretaker of agricultural land by giving him power of attorney to act on behalf of
principal. The issue raised before court was how could three persons can appoint one single
agent and also by single power of attorney. The court regarded power to be valid and
applicable to their respective agricultural land.
2. Implied authority - The meaning implied is when proposal or acceptance is made otherwise
than in words, the promise is said to be implied. It made only through gestures or actions.
Section 187 of ICA, talks about implied authority and says “an authority is said to be implied:

a) When it is to be inferred from the circumstances of the case.

b) Things spoken or written

c) The ordinary course of dealing, may be accounted circumstances of the case.”

In Hely-Hutchinson and Freeman & Lockyer Case, the chairman of the company was
held to be impliedly responsible as an agent of the company to give the indemnity. It was due
to the company to give the indemnity. It was due to the conduct of the Board to appoint him
as the managing director.

3. Ratification - Agency of ratification is discussed under section 169-200 of ICA. An agency

by ratification arises, where a person not having any authority act as agent, or act beyond its
authority, then the principal is not bound by the contract with the agent. But the principal can
ratify the agent’s transaction and accept his liability. For example, X, without Y’s authority,
lends Y’s money to Z. Afterwards Y accepts interest on the money from Z. Y’s conduct
implies agency by ratification.

4. By estoppel - An agency can also be created by estoppel. In a situation where one person
behaves in such a manner in front of a third person, as to make someone believe he is an
authorized agent on behalf of someone, an agency by estoppel is created.

For example, A is the owner and he took his servant B along with him for shopping and the
shopkeeper will presume that B is acting on behalf of A. Here, a person simply by his
gestures or actions acts like another person, his agent and principal cannot deny or revert
himself from the fact which was represented as a fact earlier by him. Thus, the relationship
created between A and B is Implied agency by estoppel. In order to create such estoppel, the
duty to speak arises where “silence would create an erroneous impression which leads the
prospective represented to alter his position for the worse”.

5. By necessity -. Under section 189, agent is empowered to do acts that protects his principal
from any type loss and section 188, gives authority to agent do anything which is lawful and
beneficial for his principal.
In Great Northern Railways Co. v. Swaffield, A (principal) sent a horse by railways to his
agent B. B, went for some other work and could not receive him. Thus, there was no one to
receive horse on its arrival at destination. Railway station master received him and was bound
to take reasonable steps to keep the horse alive, he was an agent of the necessity on behalf of
A and A has the responsibility to pay amount spend by railway company to keep horse alive.