Professional Documents
Culture Documents
Kinds of Contract
The contract can be divided according to enforceability, formation, and performance.
• Enforceability
1. Valid Contract
2. Void Contract{sec(j)}
3. Void Agreement{sec(g)}
4. Voidable Contract {sec(i)}
5. Unenforceable Contract
6. Illegal Agreement (section 23)
• Formation
1. Express contract (section 9)
2. Implied contract (section 9)
3. Quasi contract
• Performance
1. Executed contract
2. Executory contract
• Unilateral contract
• Bilateral contract
Revocation of Offer :
1. Notice of Revocation
2. Lapse of time
3. Failure to fulfill Condition
4. Death or insanity of Offeror
5. Revocation of Offer by Offeree
6. Death or insanity of Offeree
7. Counter offer by Offeree
8. Subsequent Illegality
9. Destruction of subject matter
10. Failure to Accept according to Mode
CONSIDERATION
“When at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstains from doing, or promises to do or abstain from doing something,
such act or abstinence or promise is called a consideration for promise.”
Exception to Consideration :
1. If it is Forbidden by Law
2. If it Defeat the Provision of any Law
3. If it is Fraudulent
4. It it involves Injury to Person or property of another
5. If the court regard it as Immoral
6. If the court regards it as opposed to Public Policy
• DISQUALIFIED PERSONS
The following are the persons who are disqualified from contracting due to political, Professional
or legal status, etc.(sec.11)
1. Joint Stock Company
2. Diplomatic Agent
3. Alien Enemies
4. Insolvent
5. Convict
FREE CONSENT
Consent :
Section 13 of the Contract Act, define the term Consent as,
“Two or more than two person said to consent when they agree upon the same thing in the same
sense.”
Free Consent :
Section 14 lays down that Consent is said to be free when it is not caused by coercion, undue
influence, fraud, misrepresentation, or mistake.
Coercion :
Section 15 defines coercion as follow:
“Coercion is the committing or threatening to commit, any act, forbidden by the Pakistan Penal
Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any
person whatever, with the intention of causing any person to enter into an agreement.”
Undue Influence :
Section 16(1) define:
“A contract is said to be induced by undue influence where the relations subsisting between the
parties are such that one of the parties is in a position to dominate the will of the other, and uses
that position to obtain an unfair advantage over the other.”
Fraud :
Section 17 define:
“Fraud means and includes any of the following acts committed by a party to a contract, or with
his connivance, or by his agent with intent to deceive another party thereto or his agent or to
induce him to enter into the contract”:
1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be
true;
2. the active concealment of a fact by one having knowledge or belief of the fact;
3. A promise made without any intention of performing it;
4. Any other act fitted to deceive; and
5. Any such act or omission as the law specially declares to be fraudulent.
1. The positive assertion in a manner not warranted by the information of the person making
it, of that which is not true, though he believes it to be true;
2. Any breach of duty which without an intent to deceive, gains an advantage to the
person committing it, or any one claiming under him, by misleading another to his
prejudice or to the prejudice of anyone claiming under him;
3. Causing, however, innocently a party to an agreement to make a mistake as to the
substance of the thing which is the subject of the agreement.
Contingent Contract:
“A contingent contract is a contract is a contract to do or not to do
something, if some event, collateral to such contract does or does not happen.”
Collateral Event:
The collateral event means connected event. The collateral event is not the part
the consideration but in fact, a part the contract.
Quasi Contract :
Quasi contracts are based on the principle of equity and justice. It is simply states that no
body shall be allowed to become rich at the cost of another. In such contracts there is no face to
face agreement. However, the law imposes the obligations of a contract. Such obligations are
generally described as quasi contracts. These are also called constructive contracts.
PERFORMANCE OF CONTRACTS
“The fulfillment of legal obligations created under the contract by both the promisor and the
promisee is said to be performance of contract”.
Assignment of Contracts:
“An assignment means a transfer by a party to a contract of some or all of his rights under the
contract, to a person who is not a party to the contract. The party making the assignment is the
assignor, and the person whom the assignment is made is the assignee.
Reciprocal Promises:
“Promises which form the consideration for each other are called reciprocal promises.”
Rules of Performance:
1. Mutual and Concurrent (simultaneously performance of promises)
2. Conditional and dependent
3. Mutual and Independent (one party perform his promise independently)
4. Where a party prevents performance
Appropriation of Payments:
When a debtor owes several distinct debts to a creditor and makes all the payment, which is
insufficient to discharge the debts the question arises to which debt the payment is to be applied.
The rules are:
1. Appropriation by debtor
2. Appropriation by creditor
3. Appropriation by law
4. Principal and interest due
DISCHARGE OF CONTRACT
“When the rights and obligations arising out of a contract come to an end, the contract is said to
be discharged or terminated.” A contract may be discharged in any of the following ways:
1. Discharge by Performance
• Actual performance
• Tender
2. Discharge by Agreement
• Novation
• Alteration
• Rescission
• Remission
• Waiver
• Insolvency
• Merger (inferior right and superior right)
• Unauthorized material Alteration
• Actual breach
• Anticipatory Breach:
1. Express Breach
2. Implied Breach
Contract of Indemnity:
“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.”
Rights of Indemnifier
Contract of Guarantee:
“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 give the guarantee is called the surety or guarantor. The person to whom the
guarantee is given is called the creditor. The person in respect of whose default the guarantee is
given is called the principal debtor.
Essentials Features:
1. Secondary contract
2. Consideration
3. No Misrepresentation
4. writing not necessary
Kinds of Guarantee:
1. Specific guarantee
2. Continuing guarantee
Rights of surety:
1. Rights against the creditor
• Right to securities
• Right to claim set-off
2. Rights against the principal debtor
• Right of subrogation
• Right to indemnify
3. Rights against co-sureties
• Similar amount
• Different amount
Termination of Bailment:
1. Expiry of time 2. Accomplishment of purpose
3. Unauthorized used 4. On death
4. Termination by bailor 5. Destruction of subject matter
Finder of lost goods:
“ A person who finds goods belonging to another and take them into his custody is subject to the
same responsibility as a bailee”.
Duties of Finder:
1. Duty to find out the owner
2. Duty to take reasonable care
3. Duty not to use the goods
4. Duty not to mix the goods
Rights of Finder:
1. Right to retain
2. Right of lien
3. Right to sue third person
4. Right to sue for reward
5. Right of sale
PLEDGE OR PAWN
“The bailment of goods as security for payment of a debt or performance of a promise is called
pledge”.
Essentials of Pledge:
1. Movable property
2. Limited interest
3. Transfer of Possession
4. No transfer of ownership
5. Not mere custody
Rights of Pledgee:
1. Right to retain
2. Right to retain for other debts
3. Right to Extraordinary expenses
4. Right to sue and sell
Duties of Pledgee:
1. Take reasonable care
2. Not make an authorized use
3. Not mix the goods
4. Returned the goods
5. deliver and profit
Rights of Pledgor:
1. Right to redeem
2. Right to claim damages
3. Right to claim increase
4. Right to redeem the debt
Duties of Pledgor:
1. Duty to compensate
2. Duty to complete
CONTRACT OF AGENCY
“A contract which creates the relationship of principal and agent is called an agency.”
Essentials of Agency:
1. Agreement
2. who can be principal
3. who can be agent
4. Consideration not necessary
5. Intention
Kinds of Agent:
1. General Agent
2. Special Agent
3. Universal Agents
4. Mercantile Agent
5. Factor
6. Commission Agent
7. Del Credere Agent
8. Broker
9. Auctioneer
10. Indenter
11. Banker
12. Advocate
Creation of Agency:
1. Agency by express agreement
2. Agency by Implied agreement
• Agency by Estoppels
• Agency by Holding out
• Agency by necessity
3. Agency by ratification
4. Agency by operation of law
Ratification:196
Where acts are done by one person on behalf of another, but without his knowledge or
authority, he may elect to ratify or to disown such act, if he ratifies theme , the same effect will
be follow as if they had been performed by his authority.
Where a principal affirms or adopts the unauthorized act of his agent he is said to have ratified
that act there comes into existence an agency by ratification retrospectively.
Rights of Agent:
1. Right to retain
2. Right to receive remuneration
3. Right of lien
4. Right to be indemnified
5. Right to be indemnified for act done in good faith
6. Right to compensation for injury
7. Right of stoppage of goods in transit
Rights of Principal:
1. Right to recover damages
2. Right to obtain secrete profit
3. Right to refuse to indemnify Agent
Duties of Principal:
1. Duty to indemnify for lawful acts
2. Duty to indemnify for acts done in good faith
3. Duty to Indemnify for Injury caused by Principals Neglect
Termination of Agency:
1. Agreement
2. Revocation by Agent
3. Revocation by Agent
4. Completion of Business
5. Expiry of Time
6. Death of Principal or Agent
7. Insanity of the Principal or Agent
8. Insolvency of Principal
9. Destruction of subject matter
10. Principal or Agent become Alien Enemy
11. Change of law
Essentials:
1. Contract
2. Two parties
3. Transfer of property
4. Goods
5. Price
6. Sale and agreement to sell
7. Other formalities
Kinds of Goods:
1. Existing goods
• Specific goods
• Ascertained goods
• Unascertained goods
2. Future goods
3. Contingent goods
Destruction of goods:
1. Physical destruction
2. Lost their commercial value
3. Loss of goods by theft
4. Lawfully requisitioned by the govt.
Fixation of Price:
The money consideration for a sale of goods is known as price.
Implied Conditions:
1. Condition as to title
2. Sale by description
3. Sale by sample
4. Sale by sample as well as by Description
5. Condition as to fitness or quality (buyer should inform the seller, seller’s skill, must be of description)
6. Condition as to Merchantability
7. Condition by custom
8. Condition as to Wholesomeness
Implied Warranties:
1. Quiet Possession
2. Freedom from Encumbrances
3. Usage of trade (fading of color within week... pay damages)
4. Disclosure of Dangerous Goods
TRANSFER OF PROPERTY
Means transfer of ownership of goods.
Sale by non-owner:
Only true owner of the goods can sell the goods.
The maxim ‘memo dat quod non habit’ means that no one can transfer a better title that he
himself possesses.
Modes of Delivery:
1. Actual delivery
2. Symbolic delivery (means of obtaining possession of goods is delivered)
3. Constructive delivery (change in possession of goods without any cahnge in the custody)
Rights of Buyer:
1. Right to take delivery 7. Right to sue for price
2. Right to reject 8. Right to sue for performance
3. Right to cancel 9. Right to sue for breach of warranty
4. Right to notice of insurance 10. Right to cancel the contract
5. Right to examine 11. Right to sue for interest
6. Right to sue for damages
Duties of buyer:
1. Duty to accept the goods
2. Duty to apply for delivery
3. Duty to demand delivery
4. Duty to take risk of deterioration
5. Duty to inform the seller
6. Duty to take delivery
7. Duty to pay price
8. Duty to pay damages
Characteristics:
1. Easy Transferability
2. Right of the holder
3. Better Title to transferee
4. Unconditional promise or order
5. Certain Amount
6. Presumptions (consideration, date, time of acceptance, stamp, holder in due
course.)
Promissory Note:
“A promissory note is an instrument in writing containing an unconditional undertaking,
signed by the maker, to pay on demand or at a fixed or determinable future time a certain sum of
money only to, or to the order of, a certain person, or to the bearer of the instruments.”
Essentials.
1. In writing
2. Promise to pay
3. Unconditional promise
4. Signed by Maker
5. Certain Maker
6. Certain Payee
7. Certain Sum
8. Pakistani Currency
9. Other formalities( date, stamped, lawful consideration, place)
Bill Of Exchange:
“A bill of exchange is an instrument in writing containing an unconditional order, signed
by the maker, directing a certain person to pay on demand or at a fixed or determinable future
time a certain sum of money only to, or to the order of, a certain person or to the bearer of the
instrument.”
Essentials:
1. In Writing
2. Unconditional Order
3. Signed by Drawer
4. Certain Drawee
5. Certain Payee
6. Certain Sum
7. Pakistani Currency
8. Other Formalities( date, stamped, lawful consideration, place)
CHEQUE:
“A cheque is a bill of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand.”
Essentials:
1. In Writing
2. Unconditional Order
3. Signed by Drawer
4. Payable on Demand
5. Certain sum
6. Payable to bearer or order
Distinction b/w Cheque and Bill of Exchange
1. Drawee
2. Payable on demand
3. Payable to bearer on demand
4. Acceptance
5. Grace Days
6. Stamp
7. Crossing
8. Noting or Protest
9. Stopping the payment
10. Notice of Dishonour
Types of Crossing
1. General Crossing
2. Special Crossing
• Account payee crossing
• Not Negotiable crossing
Classification of Negotiable Instruments
1. Inland Instrument
2. Foreign Instrument
3. Bearer Instrument
4. Order Instrument
5. Ambiguous Instrument
6. Amount different in figures from words
7. Instrument payable on demand
8. Inchoate instrument
9. Time Instrument
10. Fictitious Bill
11. Accommodation Bill
12. Undated Bill
13. Bank Draft
14. Bill in Sets
15. Documentary Bill
16. Clean Bill
17. Trade Bill
18. Escrow
Join holders
Capacity of Parties:
1. Minor
2. Insolvent
3. Person of unsound mind
4. Joint stock company
5. Partner
6. Agent
7. Legal representative
Liabilities of Parties:
1. Drawer
2. Drawee of cheque
3. Maker of note and acceptor of bill
4. Indorser
5. Prior parties to a holder in due course
6. Maker, drawer and acceptor as principals
7. Prior parties to subsequent party
8. Accommodation party
9. Surety ship
Means presenting a negotiable instrument for acceptance, sight, or payment before acceptor,
maker, drawee or other party liable thereon by or on behalf of the holder.
• Presentment for Acceptance (in bill of exchange only)
• Presentment for Sight
• Presentment for Payment
Types of Acceptance:
1. General Acceptance
2. Qualified Acceptance
Time of presentment
Place of presentment
Presentment for Sight: showing of promissory to the maker for his knowledge.
Presentment for Payment: On default of such presentment the maker, acceptor or drawee, as
the case may be, is not liable to pay.
1. Transfer by Negotiation:
When a promissory note, bill of exchange, or cheque is transferred to any person,
so as to constitute that person the holder thereof, the instrument is said to be negotiated.
Modes of Negotiation:
• Negotiation by delivery
• Negotiation by Endorsement and Delivery
2. Transfer by Assignment:
The ownership may be transferred by “assignment” by written and
registered document in accordance with the transfer o Property
Act.
ENDORSEMENT:
“When the maker or the holder of negotiable instrument signs the same, otherwise
than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of
paper annexed thereto, or so signs or for the same purpose a stamped paper intended to be
completed as negotiable instrument, he is said to indorse the same, and is called endorser”.
Kinds of Endorsement:
1. Blank Endorsement
2. Full Endorsement
3. Partial Endorsement
4. Restrictive Endorsement
5. Conditional Endorsement
6. Sans Recourse Endorsement
7. Facultative Endorsement
• Dishonour by Non-Acceptance
• Dishonour by Non-Payment
• Notice of Dishonour
• Notice by whom(holder, agent, party liable on inst, to all parties by receiving party)
• Reasonable time
• Place of Notice
NOTING:
Noting is the authentic and official proof of presentment and dishonour of negotiable
instrument. When the bill or note has been dishonour by non-acceptance or by non-
payment , the holder may cause such dishonour to be noted by Notary Public upon the
instrument, or on paper attached thereto. Notary public makes a demand for acceptance
or payment upon the drawee or acceptor or maker formally and on his refusal to do so
notes the same on the bill or note.
PROTEST:
Protest is the formal certificate of dishonour issued by the notary public to the holder of
the bill or note, on his demand. Notary is merely a record of dishonour on the instrument itself. It
is a proof that a bill or note was presented for acceptance, payment, for better security but was
dishonour.
The law relating to carriage of goods by sea is contained in the Bill Of Lading Act.1856 and
Carriage of Goods by Sea Act, 1925.
Contract of Affreightment :
The contract to carry goods by sea is called a contract of affreightment. The consignor and the
ship owner are the two parties to the contract. The consideration paid for the carriage is called
freight. The contract of affreightment may be incorporated in a formal document containing the
terms of the agreement. Such document is called charter Party.
Charter Party:
A charter party is an agreement in writing for the purpose of hiring of the whole ship or a part
thereof for the purpose of carriage of foods. The person who hires the ship is called the charter.
Mate Receipt :
When the goods are delivered to the ship for carriage , a receipt called mate receipt is issued by
the mate of the ship. It is an acknowledgment that goods have been received on board the ship. It
is provisional receipt which is subsequently exchanged for a regular bill of lading.
Bill Of Lading:
“A bill of lading is a document issued by master of the ship or the ship-owner or other agent in
exchange of mate's receipt after the goods are placed on board the ship”.
4. Shall not be liable if nature and value has been misstated by the shipper in the bill of
lading
5. Danger goods loaded without the consent of carrier, they can be landed or destroyed at
any place and no compensation shall be paid to the shipper
6. Shall be discharged from all liability for loss unless suit is brought within one year after
delivery of the goods.
7. The carrier is not responsible for loss due to unavoidable circumstances.
Maritime lien:
A maritime lien is claim on a ship, cargo and freight in respect of services rendered to them. Law
on subject gives this right to all freight in respect of render some service to save the ship or cargo
in time of danger. They can recover their charges from the ship owner of cargo-owner. Until
such charges are cleared , the ship is not allowed to leave the harbour and court may order for
sale of the ship or cargo in favour of the holders of maritime lien.
Bottomry Bond:
When a ship needs urgent repair during voyage and it is not possivle for the captain of the ship to
negotiate with the ship owner to arrange for the funds for the repairs, it becomes unavoidable for
the Captain to borrow money on the security of the ship and cargo. When the master raises the
money on the security of the ship and cargo, the contract is called Bottomry Bond.
Respodentia Bond:
When master of the ship raises money on the security of cargo only, the contract is called
Respodentia Bond. The special quality of these bonds is that such loan would be payable only
when the ship reached destination safely.
LAW OF PARTNERSHIP
Law of Partnership is contained in the Partnership Act 1932, which came into force on 1st day of
October 1932. It extend to the whole of Pakistan. Sec 3
Definition :
According to section 4, “Partnership is the relation between persons who have agreed to share
the profits of a business carried on by all or any one of them acting for all”.
Characteristics :
1. Legal Entity
2. Agreement
3. Number of Partners
4. Existence of Business
5. Sharing of Profits
6. Mutual Agency
7. Unlimited Liability
8. Capital
9. Utmost Good faith
10. Management
11. Control
12. Transfer of Interest
13. Duration
Advantages :
1. Ease of formation
2. More capital
3. Better Management
4. High credit standing
5. More Interest
6. Useful Employees
7. Public relations
8. Flexibility
9. Protection to Minorities
10. Protection to minor
11. Quick decision
12. Sharing of risk
13. Possibility of Expansion
14. Business secrets
15. Spirit of cooperation
16. Personal supervision
17. Ease of dissolution
Disadvantages :
1. Unlimited liability
2. Risk of Dissolution
3. Possibility of disagreement
4. Limited Resources
5. No transfer of shares
6. Lack of Public confidence
7. Lack of Authority
8. Lack of Harmony
9. Lack of Secrecy
10. Authority of Partners
11. Loss of opportunities
12. Possibility of Fraud
Partner : sec 4)
“A person who have entered into partnership with one another are called individually partners.
Generally, the partner means a person who has agreed to share the profit of the business.
Firm :
“The person who have entered into partnership with one another are called collectively a firm. A
firm is collective name of the individuals forming it. A firm cannot posses property. It cannot sue
or be sued. It is only for convenience, we use the terms like firm's property, suit against the firm
and so on.
Firm's Name :
“The name under which partners carry on their business is called the firm's name”. The partner
can choose any name according to the following rules:
1. The name must not identical or similar to the name of existing firm.
2. It must not contain the words GOVT, JINNAH, QUID-e-AZAM, or words showing the
approval or patronage of the federal govt or any provincial govt, without the consent of
the provincial govt.
3. It must not contain the name of United Nation or abbreviations of its subsidiary body
without the sanction of secretary General of the UNO.
4. It must not contain the name World Health Organization or its abbreviations without the
sanction of the Director-General of WHO.
5. - - - - - - - - - - - - - - - - - - - - - which may be declared by the provincial Govt, as
undesirable.
Ideal Partnership:
1. Mutual Understanding
2. Common purpose
3. Good faith
4. Sufficient capital
5. Long duration
6. Number of partners
7. Written Agreement
8. Registration
Kind of Partners :
1. Active Partner
2. Sleeping Partner
3. Nominal Partner
4. Senior Partner
5. Junior Partner
6. Partner in Profits Only
7. Secret Partner
8. Minor Partner ( a. Position during minority, b .Position after Majority, c. When he
decides to becomes a partner , d. when he decides not to become a partner
Co-ownership :
Co-ownership refers to joint ownership in a property. If some property owned jointly without
any intention to carry on a business, it is called co-ownership.
Distinction b/w Partnership & Co-ownership
1. Agreement 7. Business
2. Agency 8. Partition
3. Lien 9. Refund
4. Transfer of Interest 10. Sharing of Profits
5. Common Interest 11. Regulation
6. Number of members
Partnership Deed :
A partnership can be formed by oral or written agreement. It is better to have a written
agreement. The partnership agreement in writing is called partnership deed. It contains the rights
and duties of the members.
Types of Partnership :
The following of two main types of Partnership.
1. General Partnership :
a: Partnership-at-Will(section 7). No provision about duration.
b: Particular Partnership(section 8). For a particular business
2. Limited Partnership : (regulated and controlled by Limited Partnership Act 1907.)
One or more partners have limited liability and at least one of the partners has unlimited
liability.
REGISTRATION OF FIRM :
Optional Registration :
The registration of partnership is not compulsory. If the partners so desire they may get their firm
registered. The unregistered firm suffer from number of problems.
Meaning of Registration :
The registration of firm only a proof of the existence of the firm. It does not provide any legal
entity to the firm.
Procedure of Registration :
1. Submission of Application (name of the firm, principal place, other places where firm
carries on business, name and addresses of partners, partners date of joining, duration of
firm if any.)
2. Certification
3. Changes of particulars
4. Penalty for
5. false Particulars
Effect of Non-Registration :
1. Suit by Partner
2. suit by firm
3. Suit by firm against partner
4. Suit by third party
5. No claim for Adjustment
Exceptions:
1. Third party can sue
2. Partner can sue for dissolution
3. Partner can sue for accounts of a dissolved firm
4. Partner can sue for realization of property of dissolved firm
5. Dissolved firm can sue to recover damages for breach of contract
6. The firm and its partners can sue third party for adjustment of claim up to Rs. 100
7. The receiver of insolvent partner can sue for the realization of insolvent share
8. The partner can refer disputes to the arbitrator
Advantages of Registration :
1. Advantages to firm
2. Advantages to the partners
3. Advantages to the Creditors
Rights of Partners :
1. Right to take part in Business
2. Right to express opinion
3. Right of inspect to books
4. Right to share the profit
5. Right to interest on capital
6. Right to interest on Advances
7. Right to be indemnified
8. Right to Act in emergency
9. Right to give consent
10. Right to retire
11. Right to not be Expelled
12. Right to carry on competing business
13. Right to share in profits or interest
14. Right to bind other partners
15. Right to enforce
Duties of Partners :
1. Duty to carry on Business
2. Duty to just and faithful
3. Duty to render Accounts
4. Duty to Provide information
5. Duty to Indemnify
6. Attend Diligently
7. Share losses
8. Indemnify for willful Neglect
9. Use firm's property for the firm
10. Account for personal profits
11. Account for Profits
12. be liable individually & jointly
13. Not to transfer his rights
Liabilities of Partners :
1. Liability of a Partner for Acts of the firm
2. Liability of the firm for the Wrongful Act
3. Liability of the firm for Misapplication
Implied Authority :
It means the authority of the partner to bind the firm by his act under law.
Reconstitution of Firm :
1. Introduction of Partner (incoming partner) Liability of incoming partner
DISSOLUTION OF FIRM :
Dissolution of partnership is different from dissolution of a firm. When one partner dies, retires
or become insolvent but the remaining partners continue the business, it is called dissolution of
the partnership.
When the relationship between all the partners comes to an end and the business is closed, it is
called dissolution of firm. It means that the dissolution of the firm includes the dissolution of
partnership, but the dissolution of partnership may or may not include the dissolution of the firm.
LAW OF TRUST
TRUST ACT, 1882
A trust is an obligation annexed to the ownership of property and arising out of confidence
reposed in and accepted by the owner or declare and accepted by him, for the benefit of another
and the owner.
Trustee
Settler
Beneficiary
Trust property
Instrument of trust
Classification of trust:
1. Public or charitable
2. Private
3. Express
4. Implied
5. Constructive
6. Executed
7. Executory
Purpose of trust:
1. Fraudulent
2. Forbidden by law
3. If permitted ,...defeat the provision
4. Involves any injury to the person
5. As immoral
6. Opposed to public policy
Declaration of trust:
Immovable property.......declared by non-testamentary instrument
Movable property........declared as aforesaid or unless the ownership of property is transferred to
the trustee.
Creation of Trust:
When the author of the trust indicates with reasonable certainty by words or acts;
1. The intention on his part to create it
2. The purpose of property
3. The beneficiary
4. The trust property
Who may create a trust:
• Every person competent to contract
• With the permission of a principal civil court of original jurisdiction, by or on behalf of
minor.
Duties of Trustee:
1. Duty to fulfill the purpose
2. Duty to acquaint
3. Duty to protect the title
4. Duty not to set up title adverse to beneficiary
5. Duty to exercise reasonable care
6. Duty to convert perishable property
7. Duty to be impartial
8. Duty to prevent waste
9. Duty to maintain accounts
10. Duty to invest
Liabilities of Trustee:
1. Personally liable and his estate after his death
2. Liable for interest in addition to the damages
3. More trustees than one , liability is joint and several
4. Not liable for default of his predecessor and for default of his co-trustees
Rights of Trustee:
1. Right of possession (instrument of trust & all other documents)
2. Right of reimbursement
3. Right of lien (pays out of pocket)
4. Right of indemnify
5. Right to apply to court
6. Right to settlement of accounts
Power of trustee:
1. Power to sell
2. Power to convey
3. Power to vary investments
4. Power to apply property
5. Power to give receipts
6. Power to copound
Disability of trustee:
1. Renunciation of trust (perm of civil court, beneficiary, special power reserved in Instrument of trust)
2. Delegation of office (sec 47) (it can, instrument provides, absolutely necessary, ordinary
course of business, consent of beneficiary if he is competent to contract)
3. Execution of trust (sec 48) (all co-trustee)
4. Right of remuneration (50)
5. Use of trust property (sec 51)
Revocation of Trust:
1. Trust created by will may be revoked at the pleasure of the author of the trust
2. A trust may be revoke:
• When all the beneficiaries are competent to contract
• Trust declared by non-testamentary instrument or by words of mouth in
exercise of power of revocation expressly reserved to the auther of trust.
• Trust is for payment of debts of the author, and has not been
communicated to the creditors at the pleasure of the auther of trust.