Civil Law Nominated

Contract

Prepared By: Atiqur Rahman

Chapter 1

Introduction to Law of Contract

What Is a Mortgage?
• The term mortgage refers to a loan used to purchase or maintain a home, land, or other
types of real estate.
• The borrower agrees to pay the lender over time, typically in a series of regular payments
that are divided into principal and interest.
• The property serves as collateral to secure the loan. A borrower must apply for a
mortgage through their preferred lender and ensure they meet several requirements,
including minimum credit scores and down payments. Mortgage applications go through
a rigorous underwriting process before they reach the closing phase. Mortgage types vary
based on the needs of the borrower, such as conventional and fixed-rate loans.
A mortgage is an agreement between borrower and a lender that gives the lender the right
to take your property if you fail to repay the money you've borrowed plus interest.

A mortgage is a loan – provided by a mortgage lender or a bank – that enables an individual

to purchase a home or property. While it’s possible to take out loans to cover the entire cost
of a home, it’s more common to secure a loan for about 80% of the home’s value.
Seven things to look for in a mortgage
•The size of the loan
•The interest rate and any associated points
•The closing costs of the loan, including the lender's fees
•The Annual Percentage Rate (APR)
•The type of interest rate and whether it can change (is it fixed or adjustable?)
•The loan term, or how long you have to repay the loan
•Whether the loan has other risky features, such as a pre-payment penalty, a balloon clause,
an interest-only feature, or negative amortization
KEY POINTS
• Mortgages are loans that are used to buy homes and other types of real estate.
• The property itself serves as collateral for the loan Mortgages are available in a variety of
types, including fixed-rate and adjustable-rate.
• The cost of a mortgage will depend on the type of loan, the term (such as 30 years), and
the interest rate the lender charges.
• Mortgage rates can vary widely depending on the type of product and the qualifications
of the applicant.
How Mortgages Work ?
• Individuals and businesses use mortgages to buy real estate without paying the entire
purchase price upfront.
• The borrower repays the loan plus interest over a specified number of years until they own
the property free and clear.
• Mortgages are also known as liens against property or claims on property. If the borrower
stops paying the mortgage, the lender can foreclose on the property.
• For example, a residential homebuyer pledges their house to their lender, which then has
a claim on the property. This ensures the lender's interest in the property should the buyer
default on their financial obligation. In the case of a foreclosure, the lender may evict the
residents, sell the property, and use the money from the sale to pay off the mortgage debt.
The Mortgage Process
• Would-be borrowers begin the process by applying to one or more mortgage lenders.
• The lender will ask for evidence that the borrower is capable of repaying the loan.
• This may include bank and investment statements, recent tax returns, and proof of
current employment.
• The lender will generally run a credit check, as well.
• If the application is approved, the lender will offer the borrower a loan of up to a certain
amount and at a particular interest rate.
• Homebuyers can apply for a mortgage after they have chosen a property to buy or while
they are still shopping for one, a process known as pre-approval. Being pre-approved for
a mortgage can give buyers an edge in a tight housing market because sellers will know
that they have the money to back up their offer.
• Once a buyer and seller agree on the terms of their deal, they or their representatives
will meet at what's called a closing.
• This is the time the borrower makes their down payment to the lender.
• The seller will transfer ownership of the property to the buyer and receive the agreed-
upon sum of money, and the buyer will sign any remaining mortgage documents.
Types of Mortgages
Mortgages come in a variety of forms. The most common types are 30-year and 15-year
fixed-rate mortgages. Some mortgage terms are as short as five years while others can run
40 years or longer. Stretching payments over more years may reduce the monthly payment,
but it also increases the total amount of interest the borrower pays over the life of the loan.
Fixed-Rate Mortgages
With a fixed-rate mortgage, the interest rate stays the same for the entire term of the loan,
as do the borrower's monthly payments toward the mortgage. A fixed-rate mortgage is also
called a traditional mortgage.

Adjustable-Rate Mortgage (ARM)

With an adjustable-rate mortgage (ARM), the interest rate is fixed for an initial term, after
which it can change periodically based on prevailing interest rates. The initial interest rate
is often a below-market rate, which can make the mortgage more affordable in the short
term but possibly less affordable long-term if the rate rises substantially.
Average Mortgage Rates
How much you'll have to pay for a mortgage depends on the type of mortgage (such as
fixed or adjustable, its term (such as 20 or 30 years), any discount points paid, and interest
rates at the time. Interest rates can vary from week to week and from lender to lender, so it
pays to shop around.
Why Do People Need Mortgages?
The price of a home is often far greater than the amount of money most households save.
As a result, mortgages allow individuals and families to purchase a home by putting down
only a relatively small down payment, such as 20% of the purchase price, and obtaining a
loan for the balance. The loan is then secured by the value of the property in case the
borrower defaults.
Can Anybody Get a Mortgage?
Mortgage lenders will need to approve prospective borrowers through an application and
underwriting process. Home loans are only provided to those who have sufficient assets
and income relative to their debts to practically carry the value of a home over time. A
person's credit score is also evaluated when making the decision to extend a mortgage.
The interest rate on the mortgage also varies, with riskier borrowers receiving higher
interest rates.
What Does Fixed vs. Variable Mean on a Mortgage?
Many mortgages carry a fixed interest rate. This means the rate will not change for the
entire term of the mortgage—typically 15 or 30 years—even if interest rates rise or fall in
the future. A variable or adjustable-rate mortgage (ARM) has an interest rate that
fluctuates over the loan's life based on what interest rates are doing.
How Many Mortgages Can I Have on My Home?
Lenders generally issue a first or primary mortgage before they allow for a second
mortgage. This additional mortgage is commonly known as a home equity loan. Most
lenders don't provide for a subsequent mortgage backed by the same property. There's
technically no limit to how many junior loans you can have on your home as long as you
have the equity, debt-to-income ratio, and credit score to get approved for them.
Where Can I Get a Mortgage?
Mortgages are offered by a variety of sources. Banks and credit unions often provide
home loans. There are also specialized mortgage companies that only deal specifically
with home loans. You may also employ an unaffiliated mortgage broker to help you shop
around for the best rate among different lenders.
Mortgage Payments
Mortgage payments usually occur on a monthly basis and consist of four main parts:

1. Principal
The principal is the total amount of the loan given. For example, if an individual takes out
a $250,000 mortgage to purchase a home, then the principal loan amount is $250,000.
Lenders typically like to see a 20% down payment on the purchase of a home. So, if the
$250,000 mortgage represents 80% of the home’s appraised value, then the homebuyers
would be making a down payment of $62,500, and the total purchase price of the home
would be $312,500.
2. Interest
The interest is the monthly percentage added to each mortgage payment. Lenders and banks
don’t simply loan individuals money without expecting to get something in return. Interest is
the money a lender or bank earns or charges on the money they loaned to homebuyers.

3. Taxes
In most cases, mortgage payments will include the property tax the individual must pay as a
homeowner. The municipal taxes are calculated based on the value of the home.
4. Insurance
Mortgages also include homeowner’s insurance, which is required by lenders to cover
damage to the home (which acts as collateral), as well as the property inside of it. It also
covers specific mortgage insurance, which is generally required if an individual makes a
down payment that is less than 20% of the home’s cost. That insurance is designed to
protect the lender or bank if the borrower defaults on his or her loan.
Chapter 3
Lease
Definition of Lease
• A lease is a contractual arrangement calling for the user (referred to as the lessee) to pay
the owner (the lessor) for use of an asset. Property, buildings and vehicles are common
assets that are leased.
• Industrial or business equipment is also leased.
• Broadly put, a lease agreement is a contract between two parties: the lessor and the lessee.
The lessor is the legal owner of the asset, while the lessee obtains the right to use the
asset in return for regular rental payments.
• The lessee also agrees to abide by various conditions regarding their use of the property
or equipment. For example, a person leasing a car may agree to the condition that the car
will only be used for personal use.
A lease of immoveable property is a transfer of a right to enjoy such property, made for a
certain time, express or implied, or in perpetuity, in consideration of a price paid or
promised, or of money, a share of crops, service or any other thing of value, to be rendered
periodically or on specified occasions to the transferor by the transferee, who accepts the
transfer on such terms.
 "Lessor", "lessee", "premium" and "rent" defined

The transferor is called the lessor, the transferee is called the lessee, the price is called the
premium, and the money, share, service or other thing to be so rendered is called the rent.

All kinds of personal property (e.g. cars and furniture) or real property (e.g. raw land,
apartments, single family homes, and business property, which includes wholesale and retail)
may be leased. As a result of the lease, the owner (lessor) grants the use of the stated property
to the lessee.
Common elements of a lease agreement

•Names of the parties of the agreement.

•The starting date and duration of the agreement.
•Identifies the specific object (by street address, VIN, or make/model, serial number)
being leased.
•Provides conditions for renewal or non-renewal.
•Has a specific consideration (a lump sum, or periodic payments) for granting the use
of this object.
•Has provisions for a security deposit and terms for its return.
•May have a specific list of conditions which are therein described as Default Conditions and
specific Remedies.
•May have other specific conditions placed upon the parties such as:
• Need to provide insurance for loss.
• Restrictive use.
• Which party is responsible for maintenance.
•Termination clause (describing what will happen if the contract is ended early or cancelled
by either of the parties, stating the rights of parties to terminate the lease, and their
obligations)
Tenancy
a legal arrangement in which someone has the right to live in or use a building or land
owned by someone else in exchange for paying rent to its owner.
Tenant
A person who occupies land or property rented from a landlord

landlord
A landlord is the owner of a house, apartment, condominium, land, or real estate which is
rented or leased to an individual or business, who is called a tenant (also a lessee or
renter).
 Types of tenancies
1. Fixed-term tenancy or tenancy for years
A fixed-term tenancy or tenancy for years lasts for some fixed period of time. It has a definite
beginning date and a definite ending date. Despite the name "tenancy for years", such a
tenancy can last for any period of time—even a tenancy for one week may be called a
tenancy for years.
A fixed term tenancy comes to an end automatically when the fixed term runs out or, in the
case of a tenancy that ends on the happening of an event, when the event occurs.
2. Tenancy at will
A tenancy at will is a tenancy which either the landlord or the tenant may terminate at any
time by giving reasonable notice. Unlike a periodic tenancy, it isn't associated with a time
period. It may last for many years, but it could be ended at any time by either the lessor or
the lessee for any reason, or for no reason at all. Proper notice, as always with
landlord/tenant law, must be given, as set forth in the state's statutes.

A tenancy at will is broken, again by operation of law, if the: Tenant commits waste against
the property; Tenant attempts to assign the tenancy; Tenant uses the property to operate a
criminal enterprise; Landlord transfers his/her interest in the property; Landlord leases the
property to another person; Tenant or landlord dies.
Leases of land

A land lease permits a tenant to use a piece of property in exchange for the payment of rent.
Land leases are commonly used for mobile homes, billboards and farmland.

A land lease, also called a ground lease, is a lease agreement that permits the tenant to use a
piece of land owned by the landlord in exchange for rent. Land leases work very similarly to
the way traditional property leases operate, and tenants can enter into both residential and
commercial agreements.
Types of Land Lease
1. Residential Land Leases
Residential leases are uncommon but not unheard of for permanent real property, especially
when a homeowner owns the house on the land in question. Instead, residential land leases are
used almost exclusively for mobile or trailer homes. When a consumer purchases a mobile
home, the buyer must find her own land to park on at her own cost. Mobile home
communities, colloquially referred to as trailer parks, offer mobile home buyers open land on
which they can move their home under a residential land lease agreement. Mobile home land
leases generally include hook-ups to water, electricity and sewage as well.
2.Commercial Land Lease
Commercial land leases are more common than residential and are available for various types
of commercial ventures. Land leases for parking spaces, such as an open field or parking lot,
are common in cities where parking is not always readily available. Short-term commercials
leases for temporary or pop-up retail shops are also popular in land leasing arrangements.
3. Agricultural Farmland Leases
A farmland lease is an arrangement where a farmer who does not own enough suitable land
to raise crops leases farmable land from someone else. Farmland leases are the most
common types of land leases in areas where farmable land is a hot commodity.
Landlords that own large plots of farmable land often lease their plots to tenants when they
have no interest in farming the land themselves. Farmland leases may allow tenants to raise
livestock or keep animals such as horses in areas where sufficient space is not readily
available or affordable.
4. Governmental Land Leases
Government owns a significant amount of property throughout the country and surrounding
territories, and each state also retains ownership over some plots of land. This land can then
be rented to the military, the state or to individual counties for public uses.
For example, if a state-owned a large plot of undeveloped land, the state could lease the land
to the county where the plot is located and allow the county to develop a community park.
Governmental land leases allow the government to retain control and interest in the land
while simultaneously permitting the general public to enjoy its use.
5. Ground Lease
A land lease or ground lease is a long-term lease of land, typically 50 to 99 years in length.
The tenant normally makes improvements to the property, such as building a restaurant,
supermarket or other structures. The terms of the lease dictate what happens to the
improvements at the end of the lease term, which might give the landowner rights to the
buildings, allow the tenant to remove the improvements or give the landowner the option
to purchase the improvements.
• Considerations
• In a ground lease, the tenant is typically required to pay expenses on the property, such as
taxes, insurance, maintenance and repairs, during the term of the lease, referred to as a net
lease. The actual conditions of the lease can vary, depending on the agreement between the
property owner and lessee.
• Benefits
• A property owner has the benefit of retaining ownership of the land while earning revenue
on the property, without the expense of developing the land. Since it is typically a long-term
lease, the property owner has a tenant locked into a commitment for a long period. At the
end of the lease, the property owner may reap the benefits of whatever improvements the
tenant made to the land.
• Function
• Ground leases are often commercial leases, giving lessees a way to build a business
without the expense of purchasing land. Governments sometimes enter into ground leases
when constructing public buildings. This allows them to construct buildings, such as
libraries, when public land is not available and purchasing real estate is unaffordable
 Leasing vs. renting
The main difference between a lease and rent agreement is the period of time they cover.
A rental agreement tends to cover a short term—usually 30 days—while a lease contract
is applied to long periods—usually 12 months, although 6 and 18-month contracts are
also common.
Similarities between leasing and renting
Lease and rental agreements have the following things in common:
•They are specific to a period of time.
•They include a security deposit, which the renter pays the landlord to cover damages, but
which the landlord returns at the end of the term.
•They specify what utility costs and maintenance the owner is responsible for and what
maintenance the renter is responsible for.
•They give rules for usage, including allowances for pets and a landlord’s right to entry.
Advantages of leasing
•Greater stability. Stability is the key advantage of a lease. You’re entitled to stay in your
home through the duration of the contract. It’s an ideal arrangement for someone who
knows they want to stay in a place long-term.
•No rent increases. The landlord can’t raise the rent for the duration of the contract. Once
you’ve signed a lease, you’re locked into the monthly rent set forth in that document.
•Rent-controlled renewal. In rent-controlled areas, you may be entitled to renew your lease
at the same rate (or with a slight percentage increase) at the end of a lease term, making
expensive cities more affordable for some.
Disadvantages of leasing
•Less flexible. You have less flexibility when signing a lease. You’ve agreed to stay in a place
for the amount of time set forth in that contract. That means if the price of rents suddenly
decreases in your area, you may find yourself paying higher rent than you would be if you
had moved recently.
•Harder to move suddenly. The same goes for sudden life changes. If you get a job in
another part of the country or need to move back home to help out during a family
emergency, a long-term lease can turn into an obstacle. Some landlords
allow subletting which can help make leasing more flexible.
•Consequences to breaking a lease. There are consequences for breaking a lease. that
include the loss of deposit, or even being on the hook for the remaining rent. Check the terms
of the lease to find out what the consequences are for early termination.
Advantages of renting
•Short-term flexibility. A monthly rental agreement can be ideal if you know you’re only
going to be in town for a set amount of time—for an internship, for instance—or if you’ve
just arrived in town and want a place to land while you look around for other housing
options.
•Easier to make life changes. Unlike a lease agreement, it accommodates big, unexpected
life changes that may require you to leave the area.
•Opportunities to renegotiate. Many rentals convert to a month-to-month contract at the end
of the first 30 days, and while you aren’t going to be signing a new rental agreement every
month, it does give you a chance to renegotiate some terms of the contract if you want, such
as asking for the landlord to allow you to have a pet.
Disadvantages of renting
What you gain flexibility you lose in stability, so figure out what your priorities are before you
decide to lease or rent.
•Less stability. Both you and the landlord have the right to walk away from a rental contract at
the end of the 30 days. That can be freeing unless you want to stay—which may not be up to
you. In your tenant screening, make sure to go over your contract and take note of if the
landlord has to notify you within a certain time period that you have to leave the home at the
end of your contract.
•Rent increases. In many places, the landlord can raise the rent every time the contract renews.
That means if property values go up in your neighborhood, your landlord may well want to see
that reflected in your rent. A sudden rent increase can mean the difference between staying and
going. The specifics of when and how much your landlord can raise the rent should be in your
Chapter 4

Agency
Agency:

Agency is the relationship which exists where one person (the principal) authorizes another
(the agent) to act on its behalf and the agent agrees to do so. Although agency can be
relevant in various areas of the law, this chapter is solely concerned with the agent acting on
behalf of its principal in making contracts with others.

Agency law is concerned with any "principal"-"agent" relationship; a relationship in which

one person has legal authority to act for another. Such relationships arise from explicit
appointment, or by implication.
➢ The relationships generally associated with agency law include guardian-ward, executor
or administrator-decedent, and employer-employee.
➢ The law of agency is based on the Latin maxim "Qui facit per alium, facit per se," which
means "he who acts through another is deemed in law to do it himself."
➢ Agency, in its legal sense, nearly always relates to commercial or contractual dealings.
Who is a Principal?
Any person who employs another person to perform an act and who is
being represented by another person in dealing with the third party is the
Principal.
Who is an Agent?
A person employed by the Principal, to act on his behalf, represent him in
the dealings with the third party and also to bring him into a contractual
relationship with the third party, is called an Agent.
 Creation of Agency

Agency may be created in any one of four ways:

(1) by an actual authority

(2) by the principal’s ratification of a contract

(3) by an ostensible authority

(4) by authority implied by law in cases of necessity.

(1) By an actual authority

➢ Actual authority to contract may be express or implied.

➢ Normally the authority given by a principal to its agent is an express authority enabling the
latter to bind the former by acts done within the scope of that authority. Such authority may,
in general, be given orally. But in some cases, it is necessary that the authority should be
given in a special form.

➢ First, in order that an agent may make a binding contract by deed, it is necessary that
authority should normally be given in a deed.

➢ The authority of an agent may also be implied. But such implied authority can be negatived
by an express limitation. In most cases implied authority is said to be incidental to an express
authority or required due to the circumstances of the case.
(2) By the principal’s ratification of a contract

➢ Even if the agent enters into a contract without the authority of the principal, the principal
may subsequently ratify, that is to say, adopt the benefit and liabilities of a contract made
on the principal’s behalf. This may occur in one of two ways.

The following rules govern ratification:

(i) The agent must purport to act as an agent for a disclosed principal
(ii) The principal must be in existence
(iii) Capacity of the principal to contract
(iv) Manner of ratification
(v) Time and retrospectivity of ratification
(3) By an ostensible authority
The principal may, by words or conduct, create an inference that an agent has authority to act
on behalf of the principal even though no authority exists in fact. In such a case, if the agent
contracts within the limits of the apparent authority, although without any actual authority,
the principal will be bound to third parties by the agent’s acts.
(4) By authority implied by law in cases of necessity.
There are a number of cases which appear to establish that, in certain circumstances, a
principal may be liable for the unauthorized acts of an agent, even though the third party did
not rely upon any representation by the principal of the agent’s authority to act as agent.
In these cases, the existence of the principal was unknown to the third party, so that it could
not be said that the principal held out the agent to have authority to act as agent and was
estopped.
The apparent rule to be extracted from them is as follows: an undisclosed principal who
employs an agent to conduct business is liable for any act of the agent which is incidental to or
usual in that business, although such act may have been forbidden by the principal.
 Types of Agents
There are five types of agents
1. Special Agent
The special agent is one who has authority to act only in a specifically designated instance or
in a specifically designated set of transactions. For example, a real estate broker is usually a
special agent hired to find a buyer for the principal’s land.
Suppose Sam, the seller, appoints an agent Alberta to find a buyer for his property. Alberta’s
commission depends on the selling price, which, Sam states in a letter to her, “in any event
may be no less than $150,000.” If Alberta locates a buyer, Bob, who agrees to purchase the
property for $160,000, her signature on the contract of sale will not bind Sam. As a special
agent, Alberta had authority only to find a buyer; she had no authority to sign the contract.
2. Agency Coupled with an Interest
An agent whose reimbursement depends on his continuing to have the authority to act as an
agent is said to have an agency coupled with an interest if he has a property interest in the
business.
K literary or author’s agent, for example, customarily agrees to sell a literary work to a
publisher in return for a percentage of all monies the author earns from the sale of the work.
The literary agent also acts as a collection agent to ensure that his commission will be paid.
By agreeing with the principal that the agency is coupled with an interest, the agent can
prevent his own rights in a particular literary work from being terminated to his detriment.
3. Subagent
To carry out her duties, an agent will often need to appoint her own agents. These appointments
may or may not be authorized by the principal.
An insurance company, for example, might name a general agent to open offices in cities
throughout a certain state.
The agent will necessarily conduct her business through agents of her own choosing. These
agents are subagents of the principal if the general agent had the express or implied authority of
the principal to hire them.
For legal purposes, they are agents of both the principal and the principal’s general agent, and
both are liable for the subagent’s conduct although normally the general agent agrees to be
primarily liable.
4. Servant
The final category of agent is the servant. Until the early nineteenth century, any employee
whose work duties were subject to an employer’s control was called a servant; we would not
use that term so broadly in modern English.
A servant as “an agent employed by a master [employer] to perform service in his affairs
whose physical conduct in the performance of the service is controlled or is subject to the
right to control by the master.”
 EFFECT OF AGENCY

The effects of agency, may be arranged as follows:

(1) the relations between the principal and agent.
(2) the relations between the principal and third parties
(3) the relations between the agent and third parties.
 Duties of the agent

(i) To account
The agent is bound to account for such property of the principal as comes into its hands in
the course of the employment. The agent must keep accurate accounts of the transactions
which are entered into on the principal’s behalf, and produce them on demand to the
principal.
(ii) To use care and skill
The agent must also use ordinary diligence in the discharge of its duties, displaying any
special skill or capacity which it may profess in relation to the work in hand. Where the
agency is gratuitous, the agent is only liable in tort; the standard of care is that which might
reasonably be expected in the circumstances. If the agent fails in its duty, the normal
remedy of the principal is to bring an action for damages or equitable compensation; but
where the breach consists of a failure to pay across money received on behalf of the
principal, an action for money had and received or an action for an account may also be
brought by the principal.
(iii) Not to make secret profit
The fiduciary’s obligation of loyalty entails that the agent must not, except with the
knowledge and assent of the principal, make any profit out of its position as agent. It is
immaterial that the principal has suffered no loss, or that the agent has acted throughout in
good faith. Any such profit is held on constructive trust and must be accounted for (ie paid
over) to the principal.
(iv) Not to put itself in a position where interest and duty conflict
More generally, the fiduciary’s duty of loyalty means that the agent must not put itself in a
position where its duty and interest conflict unless full disclosure of the agent’s interest
(specifying its exact nature) has been made to the principal, and the principal has given its
informed consent to the conflict.

v) Not to delegate to another

The agent may not, as a general rule, delegate to another person the task undertaken by the
contract of agency.
 Rights of the agent

(i) To be paid agreed remuneration

Th e principal must pay the agent such remuneration or commission as may be agreed upon
between them. In the absence of any express agreement, an agent is normally to be paid a
reasonable remuneration. Th is may be based on an implied term or may be a non-contractual
quantum meruit—granting restitution of an unjust enrichment—
for the value of services rendered. Before becoming entitled to remuneration
(ii) Opportunity to earn commission
Where the employment of an agent is on a commission basis, the commission being
payable on results, there is no general rule which prevents the principal from taking a
step which deprives the agent of the opportunity to earn commission. So, for example, a
person who employs an estate agent is not necessarily bound to complete the sale,
and can sell the property elsewhere, or simply refuse to sell at all. But there may be
an express term of the agreement to the contrary, and in some cases the Courts have
been prepared to imply a term in order to give business efficacy to the contract. It is
difficult to imply such a term, however, if it means that the principal’s business must be kept in
existence simply for the agent’s benefit.
(iii) Reimbursement and indemnity
Unless otherwise agreed, the agent must also be reimbursed by the principal for all
expenses, and indemnified against all liabilities, which the agent has reasonably incurred in
the execution of its duties. These rights of reimbursement and indemnity extend to cases
where the agent has occasioned liability by an honest mistake, but not where they have
arisen from breach of duty or default by the agent
Termination of Agency
(i) Act of the Parties
The relation of principal and agent is generally founded on mutual consent, and may be
brought to a close by the same process which originated it, by agreement.
(ii) Operation of law

(i) Insolvency:

The insolvency of either the principal or the agent will determine an agency for
most purposes. But the appointment of a receiver or the cessation of business
by the agent will not.
 (ii) Frustration:

An agency which is created to deal with certain subject-matter will normally be

frustrated by the destruction of that subject-matter.
(iii) Death

❑ If a person died , there is no alternative (general)

❑ If agent died, then Principal is directly liable to 3rd party but not incase of where agent
has individual liability
❑ If a principal died, some cases lability goes to his successor.
❑ In case of 3rd Parties death, Principal and agent has lability to his family(Conditional)
• Chapter 5
• Partnership
Definition of partnership
a partnership “as the relation which exists between persons carrying on a business in
common with a view to profit”.

Consequently, whether a partnership exists is a matter of fact. Merely labelling a business

relationship a “partnership” does not create a partnership in law if there is no business being
carried on “in common with a view to profit”.
A partnership comes into existence through a continuing relationship. The courts will
consider the substance of the arrangements and not just the stated intentions of the parties
when considering whether a partnership is in existence.
• It is important to note that a partnership has no separate legal identity, it is the collection of
its partners. Partnership contracts are made with the partners who have joint and several
personal responsibility for the partnership’s liabilities. The acts of one partner, in the name
of the partnership, will be binding on all of the partners.

• A partnership is a for-profit business organization comprised of two or more persons. State

laws govern partnerships. Under various state laws, "persons" can include individuals,
groups of individuals, companies, and corporations. As such, partnerships vary in
complexity.
Partnership agreements
The law surrounding partnerships can be complex and can become problematic if you do not
have an appropriately drafted and up to date partnership agreement. Without a partnership
agreement, your partnership will be governed by the Partnership Act of Country which is
unlikely to reflect the terms you want to apply to your partnership. For example, the Partnership
Act.
• assumes equality of capital contributions and sharing of profits and losses.
• assumes that all of the partnership’s assets have been contributed by and belong to the
partners equally. This is often not the case in practice but you need a partnership agreement to
avoid these terms being implied.
• contains a number of provisions concerning the running of the partnership that will be
implied in the absence of express provision to the contrary.
• is limited in scope and treats all partners equally.
• is outdated and therefore does not meet the needs of modern business practices regularly
used in partnerships today. For example, it allows a partner to dissolve the partnership at
any time, triggering significant and unwanted liabilities and tax consequences for the
partners and the business.
• In addition, in the absence of a partnership agreement, disputes may arise over ownership
division, the roles and responsibilities of the partners and the division of assets upon
termination of the partnership.
Kinds of Partnership
These are the four types of partnerships
1. General partnership
• A general partnership is the most basic form of partnership. It does not require forming a
business entity with the state.
• In most cases, partners form their business by signing a partnership agreement. Ownership
and profits are usually split evenly among the partners, although they may establish
different terms in the partnership agreement.
• In a general partnership, all partners have independent power to bind the business to
contracts and loans. Each partner also has total liability, meaning they are personally
responsible for all of the business's debts and legal obligations.
• That's a lot of power and a lot of mutual responsibility.
• For example, say a general partnership has three partners. One of the partners takes out a
loan that the business cannot repay. All partners may now be personally liable for the debt.
General partnerships are easy to form and dissolve.
• In most cases, the partnership dissolves automatically if any partner dies or goes bankrupt.
2. Limited partnership
• Limited partnerships (LPs) are formal business entities.
• They have at least one general partner who is fully responsible for the business and one or
more limited partners who provide money but do not actively manage the business.
• Limited partners invest in the business for financial returns and are not responsible for its
debts and liabilities.
• This silent partner limited liability means limited partners can share in the profits, but they
cannot lose more than they've invested.
• In some states, limited partners may not qualify for pass-through taxation.
• If they begin actively managing the business, they may lose their status as a limited
partner, along with its protections.
• Some LPs appoint a limited liability company (LLC) as the general partner so no one
has to bear unlimited personal liability for the business.
• That option may not be available in all states, and it's much more complicated than an
LP.
3. Limited liability partnership
A limited liability partnership (LLP) operates like a general partnership, with all partners
actively managing the business, but it limits their liability for one another's actions. The
partners still bear full responsibility for the debts and legal liabilities of the business, but
they're not responsible for errors and omissions of their fellow partners. LLPs are not
permitted in all states and are often limited to certain professions such as doctors, lawyers,
and accountants.
4. Limited liability limited partnership
A limited liability limited partnership (LLLP) is a newer type of partnership available in some
states. It operates like an LP, with at least one general partner who manages the business, but
the LLLP limits the general partner's liability so all partners have liability protection.
Formation of Partnership
Step 1: Choose a structure
The first step is to find the best partnership for your situation through these steps:
• Research permitted partnerships: Check your secretary of state’s website to determine the
types of partnerships available in your state and which ones are permitted for your business type.
• Discuss your vision and goals: What do you expect to contribute to the business, and what do
you want to get out of it? Are you looking for steady income, a tax shelter, or the chance to
pursue a dream? Do you have spouses or family members who might play a role in the business?
How will you handle structuring money and partnership accounting?
• Choose a structure: Based on all of those factors, choose the structure that best fits your
business. This is a good time to consult your attorney and a tax advisor.
Step 2: Draft a partnership agreement
While partnerships have been founded on a handshake, most are created with a formal
partnership agreement. A partnership agreement is like a corporation's articles of
incorporation. It establishes how your business will be run, how profits and losses will be
shared, and how you'll manage changes such as the departure or death of a partner. Your
partnership agreement should be signed by all parties and kept on file permanently. Your
agreement should cover the following items:
• Who are the partners and what is their contact information?
• How will ownership be divided among the partners?
• Who will manage the business? Will more than one partner share the responsibility?
• Do you have limited partners? If so, what will they contribute?
• How will disputes be resolved? Will one manager have a final say? What happens if you
have an irreconcilable difference?
• What process will you follow if a partner decides to leave? How will that person's financial
stake in the business be valued and resolved?
• How will profits and losses be distributed? On a set schedule? At the partners' discretion?
• Will family members participate in the partnership? Will they have any special powers,
privileges, or limitations?
Step 3: Name your business
Before filling out any state paperwork, you need to find an available, permissible name through
these steps:
• Consult partner name regulations: Each state has its own rules for including partner names in
your business name, and they can be very particular.
• Check corporate designator rules: States have unique requirements for including corporate
designators -- words or suffixes such as "LP" that reflect your business type -- in your
business name. This is to ensure that people dealing with you can readily understand the
nature of your businessCheck availability: Once you have a street-legal name, you need to
make sure it's not already taken. Most secretary of state websites include an online search
feature that will give you an answer immediately.
Chapter 6 Doctrine of Privity
Introduction
A contract can be defined as an agreement that subsists between two or more parties that is
enforceable in the courts of law. When one party fails to perform their obligations provided in
the contract, the other party can sue them for the breach and obtain adequate remedy.
Consideration is one of the major requisites for the validity of a contract.

It refers to any act or abstinence performed by the promisee or any other person at the request
of the promisor. Law permits consideration to be moved by persons who are not parties to the
contract as long as it is at the request of the promisor.
What Is Privity?
The doctrine of privity of contract is one of the major principles that govern the law of
contracts. The word ‘privity’ means ‘with knowledge and consent’. According to this
doctrine, only parties to a contract have the right to enforce the rights and obligations
provided by the contract and strangers to the contract are barred from enforcing any
obligation on any party. This doctrine protects parties to a contract from obligations that
they never agreed to incur. Only those parties that have an interest in the contract can sue
for its enforcement.
Privity is a doctrine of contract law that says contracts are only binding on the parties to a
contract and that no third party can enforce the contract or be sued under it. Lack of privity
exists when parties have no contractual obligation to one another, thereby eliminating
obligations, liabilities, and access to certain rights.
❑ The Doctrine of Privity states that only those who are parties to a contract can have rights
or liabilities under it
❑ A major exception to the doctrine it allows the parties to a contract to create benefits that
are legally enforceable by a third party
For example, A and B entered into a contract where A gave Rs.100 in return for which B
agreed to deliver a watch to C. Here since C is a stranger to the contract he cannot sue B if he
fails to deliver the watch.

Though consideration can be provided by third parties, they can never enforce the
performance of the contract as they are strangers to the contract. It is important to note that
there is a difference between a stranger to contract and stranger to consideration. As a stranger
to consideration remains a party to the contract in spite of not providing consideration, he can
still file a suit challenging the contract.
Understanding Privity
Privity is an important concept in contract law. Under the doctrine of privity, for example, the
tenant of a homeowner cannot sue the former owner of the property for failure to make
repairs guaranteed by the land sales contract between seller and buyer as the tenant was not
"in privity" with the seller. Privity is intended to protect third parties to a contract from
lawsuits arising from that contract.
However, privity has proven to be problematic; as a result, numerous exceptions are now
accepted.
▪ In contract law, privity is a doctrine that imposes rights and obligations to parties of a
contract and restricts non-contractual parties from enforcing the contract.
▪ Lack of privity states that there is no contract between parties, thereby not requiring them to
perform certain duties and not entitling them to certain rights.
▪ Under the doctrine of privity, for example, the tenant of a homeowner cannot sue the former
owner of the property for failure to make repairs guaranteed by the land sales contract
between seller and buyer as the tenant was not "in privity" with the seller.
▪ Privity is intended to protect third parties to a contract from lawsuits arising from that
contract.
▪ The strict liability and implied warranty doctrines allow third parties to sue manufacturers
for faulty goods, even though they are not parties to the original contract.
Exceptions to the rule that a Third Party to contract cannot sue
The doctrine of privity of contract is however not absolute. There are several exceptional
situations in which a third party to a contract can sue. The following are the exceptions to the
doctrine of privity.

1. Trust of contractual rights or beneficiary under a contract

A trust refers to something created by a contract for the benefit of a third party. In a contract
of trust, the trustor transfers the title of a property to the trustee, so that the trustee holds it for
the benefit of a third party who is also called the beneficiary. Even though beneficiaries are
third parties to a contract they have the right to enforce the provisions of trust.
2. Provision for marriage or maintenance under family arrangement
In a contract for a family settlement either for marriage or maintenance, where the contract is
intended to benefit a third party, he may sue on the contract to secure his rights.

For example, in the case of Lakshmi Ammal v. Sundararaja Iyengar (1914), there was an
agreement among the brothers of a Hindu joint family to pay for the expenses to be incurred
for the marriage of their sister. Despite being a third party to the agreement, the sister had the
right to enforce the provision that was made for her.
3. Acknowledgement or Estoppel
According to the law of estoppel, if a person by words or conduct suggests something, he is
not allowed to contradict it later. Thus, if a party to a contract acknowledges by words or
conduct that a third party has the right to sue him, he cannot deny that later by the rule of
estoppel. In such cases, a suit filed by that party, despite being a stranger to the contract, is
maintainable.
For example, A and B enter into a contract where A pays B a sum of money that has to be
given to C. B acknowledges to C that he is holding the sum for him. If B defaults in the
payment, C will have the right to recover the sum from him.
3. Contracts entered into through an agent
It is not uncommon for people involved in commerce and business to enter into contracts
through their agents. These agents can enter into contracts for them and represent them in the
relations that arise in such contracts. Thus, whatever contracts entered into by an agent while
acting within the scope of his authority can be enforced by the principal. It may seem that the
agent is the party to the contract, but in reality, he is more of a representative of the principal.

For example, A appoints B as his agent. He asks B to buy a bag of rice from C on his behalf.
Here, B enters into a contract with C when he buys the bag of rice, but it is A who has the right
to enforce the contract as B is a mere representative of A.
4. Charge created on a specific immovable property
In certain cases, charges or covenants are made on a specific immovable property, like land
for the benefit of a third party. In such cases, these third parties can enforce the contract,
though they are strangers to the contract.
5. Assignment of a contract
Assignment of contract refers to the transfer or assignment of the rights and liabilities arising
from contractual relations to a third party. In cases where the benefits of a contract are being
assigned, the assignee of the benefits can sue upon the contract though he is not a party to the
contract.
For example, a husband assigns his insurance policy in favour of his wife. As the benefit of
the contract is assigned to her, she has the right to enforce the contract though she is not a
party to it.
6. Collateral contracts
Collateral contracts refer to the contracts subsidiary to the original contract. It could be
entered into by the same parties or one of the original parties with another party. It can be
made before or after the main contract is formed. When a third party has entered into a
collateral contract, he can also file a suit to enforce the main contract in spite of not being a
party to it.

The best example of a collateral contract is a manufacturer’s guarantee regarding the goods
sold. The sale of the goods is the main contract and the guarantee is the contract collateral
to it.
Chapter 7
Financial
Contract
Related Crime
Crime
the intentional commission of an act usually deemed socially harmful or
dangerous and specifically defined, prohibited, and punishable under criminal
law.

Financial Crime
Financial crime is defined as crime that is specifically committed against property. These
crimes are almost always committed for the personal benefit of the criminal, and they
involve an illegal conversion of ownership of the property that is involved.
Who commits Financial Crime ?
There are essentially seven groups of people who commit the various types of
financial crime:
❑ Organized criminals, including terrorist groups, are increasingly perpetrating
large-scale frauds to fund their operations.
❑ Corrupt heads of state may use their position and powers to loot the coffers
of their (often impoverished) countries.
❑ Business leaders or senior executives manipulate or misreport financial data
in order to misrepresent a company’s true financial position.
❑Employees from the most senior to the most junior steal company funds
and other assets.
❑From outside the company, fraud can be perpetrated by a customer,
supplier, contractor or by a person with no connection to the organization.
❑Increasingly, the external fraudster is colluding with an employee to
achieve bigger and better results more easily.
❑Finally, the successful individual criminal, serial or opportunist fraudsters in
possession of their proceeds are a further group of people who have
committed financial crime.
 What are the main types of Financial Crime ?
Financial crime is commonly considered as covering the following
offences:
❑ fraud
❑ electronic crime
❑ money laundering
❑ terrorist financing
❑ bribery and corruption
❑ market abuse and insider dealing
❑ information security
What is Money Laundering?
Money laundering is the illegal process of making large amounts of
money generated by a criminal activity, such as drug trafficking or
terrorist funding, appear to have come from a legitimate source. The
money from the criminal activity is considered dirty, and the process
"launders" it to make it look clean.

Money laundering is a serious financial crime

❑ Money laundering is the illegal process of making "dirty" money appear
legitimate instead of ill-gotten.
❑ Criminals use a wide variety of money laundering techniques to make
illegally obtained funds appear clean.
❑ Online banking have made it easier for criminals to transfer and
withdraw money without detection.
❑ The prevention of money laundering has become an international effort
and now includes terrorist funding among its targets.
 How is financial crime linked to terrorist financing ?
❑ Terrorist organizations require financial support in order to achieve their aims
and a successful terrorist group, like any criminal organization, is therefore
one that is able to build and maintain an effective financial infrastructure.
❑ It is generally believed that terrorist organization raise funds by the following
means:
▪ legitimate sources, such as the abuse of charities or legitimate businesses
▪ self-financing (i.e. through their members or sympathizers)
▪ criminal activity
 Why is the financial sector vulnerable to fraud ?
❑ Due to the often-complex nature of financial services, detecting and
preventing fraud within the financial sector poses an almost
insurmountable challenge.
❑ The threats are both domestic and international.
❑ They may come from within the organisation or outside it.
❑ Increasingly, internal and external fraudsters combine to commit
significant fraudulent acts.
❑ The victims may be the financial sector firms themselves or the customers of those firms.
❑ The proceeds of fraud are rarely generated in cash.
❑ The funds that are the target of the fraud are generally already within the financial system but
will undoubtedly need to be moved in order to confuse the audit trail.
 White-collar crime

White-collar crime (or corporate crime, more accurately) refers to financially

motivated, nonviolent crime committed by businesses and government
professionals. It was first defined by the sociologist Edwin Sutherland in 1939 as "a
crime committed by a person of respectability and high social status in the course
of their occupation.
▪ Financially Motivated
▪ Nonviolent
▪ Business and Government Professionals
▪ Copyright infringement, Bribery, Insider Trading
 Characteristics of White Collar Crime:
❑ White-collar crimes differ primarily from other types of crime in that they are non-violent offenses.
❑ They use deception to obtain money, property or some other advantage or to cover up other criminal
activity.
❑ Both mens rea or actus rea in the crime are to obtain money, property or some other advantage or to
cover up other criminal activity.
❑ In most white-collar crimes multiple actors are involved who conspire together to commit fraud.
❑ White-Collar offences can be committed by individuals or corporations.
❑ White-Collar crime is not only committed by the people of high social status in their occupational capacity
but also is committed by the people of lower status.
❑ It is an illegal act or series of illegal acts committed by non-physical means and by concealment or guile.
 A financial liability

A financial liability is:

A contractual obligation
❑ to deliver cash or another financial asset to another entity; or
❑ to exchange financial assets or financial liabilities
 Performance of Financial Liability

Specific Performance Damages

❖Dishonor of Cheque
 Dishonor of a cheque

❖ On presenting a cheque if the bank refuses to pay the amount mentioned

on the cheque to the payee due to certain reasons then it is said to be a
dishonored cheque.

❖ In common terms, the non-payment of a cheque for any reason is called a

‘dishonor of cheque’ or ‘cheque bounce’.
➢ Presentation of Cheque

➢ Refuse to pay

➢ Dishonored cheque cannot be further be used

 Reasons for dishonor of a cheque :

* Insufficient Funds * Material Alterations

* Irregular Signature * Post- Dated Cheque
* Steal Cheque * Stop Payment’ Instruction
* Frozen Account * Closed Account
• Insufficient Funds :

In case the account of the payer doesn’t have sufficient funds in order for
the bank to pay the amount mentioned on the cheque to the payee, then
the cheque will be dishonored.

• Material Alterations :

A cheque will be dishonored if there are any alterations on it like

overwriting, corrections, missing of relevant details etc.
• Irregular Signature :

If the drawer’s signature on the cheque is different than that of the specimen signature
available with the bank, then the cheque will not be accepted and treated as dishonored
cheque.

• Post- Dated Cheque :

If the date mentioned on the cheque is yet to come then, it is known as a post-dated
cheque, and these are to be presented in the bank at a later date. For instance., If a
cheque written on 30th July 2019 bears the date 16th August 2019, is a post-dated
cheque and if this is presented to the bank before the mentioned date then this cheque
will be dishonored
• Stale Cheque :

If any cheque is presented to the bank for payment after three months from
the date mentioned on it, then it is known as a stale cheque. After expiry of
that period, the cheque will be dishonored.

• ‘Stop Payment’ Instruction :

If the drawer has asked the bank to stop payment and not to pay for the
cheque which is already issued, then in such cases the bank will dishonor
the cheque.
• Frozen Account :

In case, the court or the government has ordered that a person’s

account has to be frozen than in such a case all cheques bearing
that particular account number will be dishonored by the bank.

• Account Closed :

If the drawer has closed the account before the cheque is

presented, then the bank will dishonor that particular cheque.
Chapter 8

Ownership
Meaning & Definition
▪ Ownership refers to the relation that a person has with an object that he owns. It is an
aggregate of all the rights that he has with regards to the said object.
▪ These rights are in rem, that is, they can be enforced against the whole world and not just
any specific person.
▪ The concept of ownership flows from that of possession. In the primitive societies, there was
no idea of ownership. The only concept that they identified with was that of possession. It
was only after they started settling down by building homes and cultivating land that they
developed the idea of ownership.
▪ According to Austin, ownership refers to “a right indefinite in point of user, unrestricted in
point of disposition and unlimited in point of duration.”
▪ Concurring with Austin’s view, Holland defines ownership as the right of absolute control
over an object. According to him, ownership is an aggregate of all rights pertaining to the
possession, enjoyment and disposition of an object.
▪ According to Salmond, “ownership, in its most comprehensive signification, denotes the
relation between a person and right that is vested in him.
Essentials of Ownership
Upon analyzing the various definitions of ownership, the following essentials of ownership
can be derived:
▪ Indefinite point of user- The owner of a property has the liberty to use it. Others have the
duty to not to use it or to not to interfere with the owner’s right to use it.
▪ Unrestricted point of disposition- The owner has the right to dispose of the property at his
own will. A person needs to have the ownership of a thing in order to transfer that
ownership to someone else. Mere possession does not give the power to dispose of the
ownership.
▪ Right to possess- The owner has the right to possess the thing which he owns.
▪ Right to exhaust- If the nature of the thing which is owned is such that it can be exhausted
then the owner has the right to exhaust it at his own will.
▪ Residuary character- The owner may part with several rights with regards to the thing he
owns. This does not take away the ownership from him.
▪ Right to destroy or alienate- An owner has the right to destroy or alienate the thing that he
owns.
Subject Matter of Ownership
One of the subject matters of ownership is material objects. Salmond is of the view that the
real subject matter of ownership is rights. This particular view of Salmond is supported by the
common law system. However, it has also received some amount of criticism. It has been
argued that law generally recognizes ownership of land and chattels and not of any right. A
person is said to have certain rights and not own rights.
The subject-matter of ownership is essentially determined by the legal system of a state.
There are certain objects which, by their very nature, are incapable of being owned such as
jungles, air, water, etc. However, the legal system of a country may recognize the ownership of
such objects thereby making them a subject matter of ownership
Kinds of Ownership
Ownership may be of the following kinds:
1. Corporeal and Incorporeal Ownership Corporeal ownership refers to the ownership of
material objects whereas incorporeal ownership refers to the ownership of a right. Incorporeal
ownership can also be said to be the ownership of intangible things. Examples of corporeal
ownership include ownership of a house, table, car, etc. whereas those of incorporeal
ownership includes ownership of trademarks, copyright, patents, etc.
2. Trust and Beneficial Ownership
The subject-matter of such ownership consists of property owned by two persons wherein one
person is obligated to use it to the benefit of the other. The person under such an obligation is
called the trustee and his ownership is known as trust ownership. The person to whose benefit
the property is to be used is called the beneficiary and his ownership is known as beneficial
ownership. Trust ownership is only a matter of form and not a matter of substance. This
means that a trustee’s ownership of the property is only nominal in nature. He is given
someone else’s property fictitiously by law and thereby obligating him to use it to the real
owner’s benefit.
3. Legal and Equitable Ownership
Legal ownership refers to the ownership as recognized by the rules of a legal system whereas
equitable ownership refers to the ownership as recognized by the rules of equity. There may
be cases wherein law does not recognize the ownership due to some effect but equity does. In
such situations, the ownership is said to be equitable ownership. Legal ownership is a right in
rem whereas equitable ownership is a right in personam since equity acts are in personam. A
person may be the legal owner of a thing and another may be the equitable owner of the same
thing at the same time.
4. Vested and Contingent Ownership
All kinds of ownership may either be vested or contingent. Ownership is vested ownership
when the title of the person is perfect. On the other hand, ownership can be said to be
contingent if it is imperfect and can be perfected subject to the fulfilment of certain conditions.
Thus, contingent ownership is conditional in nature.
5. Sole Ownership and Co-ownership
Under ordinary circumstances, a right can be owned by only one person at a time. Such
ownership is known as sole ownership. However, in certain cases, same right may be vested in
two individuals at the same time. This is known as co-ownership. For instance, partners of a
firm are co-owners of the partnership property.
6. Common ownership and Joint Ownership
Co-ownership is of two kinds. It may be owned in common or joint ownership. In case of
common ownership the owners’ share in the property can be inherited by their respective heirs
whereas in case of joint ownership, in case of death of any one of the owners, his or her share
is transferred to the other owner. This is the fundamental point of difference between the two.
7. Absolute and Limited Ownership
Absolute ownership is one wherein the owner is vested with all the rights with regards to the
property which he owns. Such rights are exclusively vested in the owner. It must be noted here
that absolute use of the property implies general use since the property can only be used by
lawful means and for lawful purposes. When there are limitations imposed upon the owner’s
rights with regards to his property, the ownership is known as limited ownership.
Grounds for termination of ownership rights
✓ the right of ownership shall terminate when the owner alienates his property to other
persons, the owner renounces the right of ownership, the death or destruction of
property
✓ Compulsory seizure of property from the owner is not allowed, except in cases when, on
the grounds provided for by law
✓ alienation of immovable property in connection with the seizure of a land plot due to its
improper use
✓ termination of the lease agreement for a land plot
✓ requisition
Chapter 9 Possession
Possession
Jurists have defined possession based on their personal beliefs. It is the most fundamental
interaction between man and things, according to Salmond. However, Henry Maine defined it
as “interaction with an object that includes the exclusion of other people from enjoying it.” A
man is considered to own a thing over which he has seeming control or over which he has
apparent authority to exclude others, according to Federick Pollock.
Elements of possession
Legal possession, according to Holland, comprises two fundamental elements:
1.Corpus
2.Animus
Corpus Possession
Corpus denotes two things:
1. the possessor’s physical relationship to the res or object; and
2. the possessor’s relationship to the rest of the world.
The first point highlights that a person must have some physical touch with whatever he owns
to have a reasonable expectation that others will not interfere with it, i.e. that others will not
interfere with the possessor’s right to use or enjoy that object. This guarantee of non-
interference can be obtained in a variety of ways:
The physical power of the possessor
The possessor’s physical power over the object in his possession works as an assurance that the
thing will be used. It’s also a guarantee that others won’t interfere with his rights. To prevent
others from interfering with his lawful ownership, the person in possession typically utilizes
walls, gates, doors, and locks.
Personal presence of the possessor
In many cases, the possessor’s sheer physical presence is enough to keep ownership, even if
he lacks the physical power to fight intervention. For example, a penny in a child’s hand
suffices to indicate his ownership of the currency, although that he lacks the physical
capability to do so.
Secrecy
It is an efficient method of avoiding external influence and keeping an object in one’s
possession secure if a person maintains it in a hidden area.
Wrongful ownership is rarely seen favourably in modern cultures, thus respect for a
legitimate claim prevents others from interfering with the possessor’s lawful possession.
Animus Possidendi
Possession does not imply mere juxtaposition. It must imply the possibility of bodily control,
as well as a desire to exert such power. Animism is the mental component of possession.
The Classical Roman jurists acknowledged two levels of authority over a possessed thing, the
lesser of which were referred to as detention and the highest as possession, properly so-
called.
In the context of the factor of animus in legal possession, the following points should be
taken into account:
✓ R v. Hudson (1943) The urge to acquire does not have to be righteous, and it might even
be deliberately wicked. The ownership of stolen goods by a criminal is no less genuine
than the possession of stolen goods by the rightful owner.
✓ The possessor must have sole ownership of the object in his possession. That is, he must
intend to keep others from using and enjoying the item. However, the exclusion does not
have to be complete.
✓ The animus does not have to be accompanied by a claim or an intention to utilize the
items as owner. In the event of a promise, the pledgee has ownership of the pledged
items, even if he simply wants to keep them in custody as a security to guarantee that his
obligation is paid.
✓ The possessor’s animus does not have to be his or her own. A servant, agent, trustee, or
bailee, for example, does not maintain goods in his possession for his personal use, but
rather for the benefit of another person.
✓ The animus could not be particular; instead, it could be broad. For example, a guy who
has caught fish in his net has ownership of all of them, even though he has no idea how
many there are. Similarly, a person is assumed to own all of the books in his library, even if
he is unaware of the existence of any of them.
✓ The animus may not be specific instead it may be merely general. For instance, a person
who has caught fish in his net has possession of all of them although he does not know
their exact numbers. Likewise, a person is deemed to have owned all the books in his
library although he may not even know about the existence of some of them.