SECTION-C

16(A) Sources Of Indian Mercantile Law

The Indian Mercantile Law has developed from many sources. The following are the main
sources of Indian Mercantile Law:
 English Mercantile Law:
The Indian Mercantile Law owes its origin to the English Mercantile Law. For a very long time,
India was under the control of Britishers. Therefore, it has a direct influence on Indian law,
and Indian Mercantile Law is no exception to it. The dependence of Indian Law on English Law
is so high that, in the absence of any provision related to the issue in question, the direct
recourse is to refer to the English Mercantile Law. The sources of English Mercantile Law are
Common Law, Equity, Law Merchant, and Statute Law. The Common law of England or the
judge made law is the preliminary source of Indian Law. It is the unwritten law of England
that consists of judicial decisions and customs. With the passage of time, this law became
rigid. This rigidity led to the development of Equity in England.
The remedy under Common Law was available by obtaining writs, but the writs were very
specific and less than required. This led to dissatisfaction among people. And in many cases,
the remedy under Common Law was not adequate. So, the people would appeal to the King.
The King transferred the cases to the Chancellor, who would decide those cases by his
common sense, natural justice, and conscience. This led to the development of Equity
Courts. Law Merchant is the law that consists of the principles developed out of the principles
of customs and usages. This ultimately became a part of Common Law of England.
Statute law is the written law of England enacted by the Parliament of England. This written
law always overrides the unwritten law i.e. Common Law and Equity. It is one of the very
vital sources of Mercantile Law of England. For example English Partnership Act, 1890, Sale of
Goods Act, 2015, etc.
 Acts enacted by Indian Legislature:
The greater part of Indian Mercantile law is Legislature enacted. The Acts enacted by the
Indian Parliament are that source of law which makes it possible to bring uniformity in Indian
Law. Changes can be brought in Indian Law effectively by legislative enactments.
Judicial Decisions:
Judges interpret the law and put life into the black and white letters of law for its effective
implementation. The decision of judges is binding on all subsequent decisions unless
overruled by a higher court or a larger bench. For example, the decision of a High Court is
binding on all the lower courts under its jurisdiction, and the decision of a Supreme Court is
binding on all the courts of India except for the Supreme Court itself. The decision of the
Supreme Court has persuasive value for the same bench, but it has binding value in the case,
a larger bench gave the earlier ruling.
The doctrine of the binding value of earlier judicial decisions i.e. the precedent is followed to
maintain uniformity in delivering justice. Whenever the law is silent on a certain issue, then
the judges interpret the law in such a way that the yawning gaps in the law are filled to
ensure justice. The precedents have binding value to ensure that no two alike cases are
decided on two different principles as this will result in injustice to some. This principle
ensures justice for each and every individual along with a measure of certainty for the law
itself.
Before independence, the decisions of Privy Council were binding on all the lower courts as it
was the highest court of Appeal for Indians. At present, the Supreme Court of India is the
highest court of Appeal, and its decisions are binding on all the courts of India. But even
today, the decisions of Privy Council and House of Lords are referred to as precedents in
deciding certain cases and in interpreting certain statutes in India.

 Customs and Trade Usages:

Customs and Usages had played a very vital role in regulating the commercial transactions in
India when there was no codified law. In fact, the codified law of India has given superseding
powers to the customs and usages. For example, Section 1 of Indian Contract Act states,
“Nothing herein contained shall affect any usage or custom of trade not inconsistent with the

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Act.” A custom becomes binding when certain pre-requisites are fulfilled. For example,
antique, reasonable, consistent with law, not against public policy. Then, the custom is
recognized by courts, and it becomes a legal obligation. Hundi is the best example of this,
and it has been recognized by the Negotiable Instruments Act as well.
The need for mercantile law is felt when a dispute arises between the two parties to the
contract. Awareness about the law of the land is essential as ignorance of law is no excuse.
Therefore, each and every individual should have knowledge of the mercantile law of their
country. In the absence of knowledge, no rights can be enjoyed, and no obligations can be
met.

17(b) Performance of Contract

The term ‘Performance of contract‘ means that both, the promisor, and the promisee have fulfilled their respective
obligations, which the contract placed upon them. For instance, A visits a stationery shop to buy a calculator. The
shopkeeper delivers the calculator and A pays the price. The contract is said to have been discharged by mutual
performance.
Section 27 of Indian contract Act says that
The parties to a contract must either perform, or offer to perform, their respective promises, unless such
performance is dispensed with or excused under the provisions of this Act, or any other law.
Promises bind the representatives of the promisor in case of the death of the latter before performance, unless a
contrary intention appears in the contract.
Thus, it is the primary duty of each contracting party to either perform or offer to perform its promise. For
performance to be effective, the courts expect it to be exact and complete, i.e., the same must match the contractual
obligations. However, where under the provisions of the Contract Act or any other law, the performance can be
dispensed with or excused, a party is absolved from such a responsibility.
Example
A promises to deliver goods to B on a certain day on payment of Rs 1,000. A expires before the contracted date. A‘s
representatives are bound to deliver the goods to B, and B is bound to pay Rs 1,000 to A‘s representatives.
Types of Performance
Performance, as an action of the performing may be actual or attempted.
Actual Performance
When a promisor to a contract has fulfilled his obligation in accordance with the terms of the contract, the promise is
said to have been actually performed. Actual performance gives a discharge to the contract and the liability of the
promisor ceases to exist. For example, A agrees to deliver10 bags of cement at B’s factory and B promises to pay the
price on delivery. A delivers the cement on the due date and B makes the payment. This is actual performance.
Actual performance can further be subdivided into substantial performance, and partial Performance
Substantial Performance
This is where the work agreed upon is almost finished. The court then orders that the money must be paid, but deducts
the amount needed to correct minor existing defect. Substantial performance is applicable only if the contract is not an
entire contract and is severable. The rationale behind creating the doctrine of substantial performance is to avoid the
possibility of one party evading his liabilities by claiming that the contract has not been completely performed.
However, what is deemed to be substantial performance is a question of fact to be decided in both the case. It will
largely depend on what remains undone and its value in comparison to the contract as a whole.
Partial Performance
This is where one of the parties has performed the contract, but not completely, and the other side has shown
willingness to accept the part performed. Partial performance may occur where there is shortfall on delivery of goods
or where a service is not fully carried out.
There is a thin line of difference between substantial and partial performance. The two following points would help in
distinguishing the two types of performance.
Partial performance must be accepted by the other party. In other words, the party who is at the receiving end of
the partial performance has a genuine choice whether to accept or reject. Substantial performance, on the other hand,
is legally enforceable against the other party.
Payment is made on a different basis from that for substantial performance. It is made on quantum meruit, which
literally means as much as is deserved. So, for example, if half of the work has been completed, half of the negotiated
money would be payable. In case of substantial performance, the party that has performed can recover the amount
appropriate to what has been done under the contract, provided that the contract is not an entire contract. The price is
thus, often payable in such circumstances, and the sum deducted represents the cost of repairing defective
workmanship.

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Attempted Performance
When the performance has become due, it is sometimes sufficient if the promisor offers to perform his obligation
under the contract. This offer is known as attempted performance or more commonly as tender. Thus, tender is an
offer of performance, which of course, complies with the terms of the contract. If goods are tendered by the seller but
refused by the buyer, the seller is discharged from further liability, given that the goods are in accordance with the
contract as to quantity and quality, and he may sue the buyer for.breach of contract if he so desires. The rationale
being that when a person offers to perform, he is ready, willing and capable to perform. Accordingly, a tender of
performance may operate as a substitute for actual performance, and can effect a complete discharge.

18(b)
Termination of agency by operation of law
An agency may be terminated by operation of law, under the circumstances explained below.
1. Completion of business: An agency automatically comes to an end when its business is completed. For example, A
employs B to sell his goods. The authority of B to sell goods ceases to be exercisable as soon as the sale is complete.
2. Death or insanity of the Principal or Agent: An agency is terminated automatically in the event of the death of
the principal or the agent, or if either becomes insane. The principal’s insanity puts an end to the agency even though
the agent has no notice of it.
3. Insolvency of the Principal: The principal’s insolvency does terminate the agent’s authority. Besides, the
insolvency of the agent also terminates his authority if it makes him unfit to perform his duties.
4. Expiry of Time: Where the agent is appointed for a fixed term, the agency comes to an end when the term expires
(if the term of the agency was not extended), no matter the purpose of agency has been accomplished or not.
5. Destruction of the subject matter: Destruction of the subject matter of the agency automatically puts an end to it.
For example, A employs someone to let his house. The house collapses in an earthquake, the agency ceases to exist.
6. Dissolution of company: Where the principal or the agent is an incorporated body (i.e, company) the agency comes
to an end on dissolution of the company.
7. Upon Principal or Agent becoming an Alien Enemy: Where the principal and agent are the citizens of two
different countries, their agency relationship comes to an end in the event of an outbreak of war between the two
nations. The reason behind the same is simple. As a consequence of war, the principal and the agent become alien
enemies to each other and the existing contract of the agency becomes unlawful.

19(a) The following are the major differences between sale and agreement to sell:
1. When the vendor sells goods to the customer for a price, and the transfer of goods from the vendor
to the customer takes place at the same time, then it is known as Sale. When the seller agrees to
sell the goods to the buyer at a future specified date or after the necessary conditions are fulfilled
then it is known as Agreement to sell.
2. The nature of sale is absolute while an agreement to sell is conditional.
3. A contract of sale is an example of Executed Contract whereas the Agreement to Sell is an example
of Executory Contract.
4. Risk and rewards are transferred with the transfer of goods to the buyer in Sale. On the other hand,
risk and rewards are not transferred as the goods are still in possession of the seller.
5. If the goods are lost or damaged subsequently, then in the case of sale it is the liability of the buyer,
but if we talk about an agreement to sell, it is the liability of the seller.
6. Tax is imposed at the time of sale, not at the time of agreement to sell.
7. In the case of a sale, the right to sell the goods is in the hands of the buyer. Conversely, in
agreement to sell, the seller has the right to sell the goods.
20) negotiable instrument act
Negotiable instruments, it is seen have a great significance over the modern business world. It has to be
noted that these instruments have gained significant prominence as the principle instruments for paying
and discharging business obligation.
So what essentially is a negotiable instrument? A negotiable instrument is any transferable document which
satisfies certain conditions. These instruments pass freely from hand to hand and thus form an integral form
part this modern businesses instruments.
It also has to be noted that in our country, the law relating to negotiable instruments, is governed by the
Negotiable Instruments Act 1881.

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This Negotiable Instruments Act, does not in specific define what a negotiable instrument is, it merely states
that a negotiable instrument means “a promissory note, bill of exchange or cheque payable either to the
bearer.” [1]
Section 13 of the Act [2], does not indicate the characteristics of a negotiable instrument but only states
that three instruments-cheque, bill of exchange and a promissory note, are negotiable instruments. [3]
Thus these three instruments are therefore negotiable instruments as per the statute. But it has to be noted
that S.13, does not prohibit any other instrument which satisfies the essential features of negotiability, to be
treated as a negotiable instrument.
Thomas [4] , defines the negotiable instrument as an instrument is negotiable which it is, by a legally
recognized custom of trade or law, transferable by delivery or by endorsement and delivery, without notice
to the party liable, in such a way that a. a holder of it may for the time being may sue upon it in his own
name .The property in it passes on to a bonafide transferee for value free from any defect in the title of the
person from whom he obtained it.
Very simply putting it, a negotiable instrument is a transferable document either by the application of the
law or by the custom of the trade concerned.
Thus it has to be noted that a negotiable instrument, firstly is easily transferable from person to person and
the ownership of the property may be passed on by mere delivery. Secondly, a negotiable instrument
confers absolute faith and good title on a transferee, provided that he takes it in good faith for value and
without notice of the fact that the transferor had defective title thereto [5] .
It is seen that negotiable instruments can be essentially classified in to two major types [6]
Negotiable instruments by statute: The three instruments, cheque, bill of exchange and promissory notes
are negotiable instruments by statute
Negotiable instruments by custom or usage: Some instruments, have acquired the character of negotiability
by custom or usage of trade. Section 137 of the Transfer of Property Act, 1882, also recognized that an
instrument may be negotiable by law or custom. Therefore we have case of promissory notes, delivery order
and hundis being held as negotiable instruments.

SECTION-B

11)A)
No consideration no Contract : A legally binding contract needs consideration as it is a vital element. So,
a valid contract does not exist without consideration. We know that by promise one party give or sacrifice
something and other party take something. This type of give and take or sacrifice is called consideration
by law. If someone promises without any consideration that is called gift. On the other hand give premise
exchange of any consideration that is called contract. So it is clearly seen that to become a valid agreement
we need to consider its materiality and the level of voidable.
An agreement made without consideration is void unless it is expressed in writing and registered under the
law for the time being in force for the registration of documents and is made on account if natural love and
affection between the parties standing in near relation to each other. Agreement must be in writing and
registered. If you have an oral arrangement or unregistered agreement although it is in writing, it will not be
valid even though it proceeds from natural love and affection and even if the parties to it are near relations
to each other. It must be both in writing and registered.
18(a) types of contract breaches
Figuring out if a party to a contract is in breach of contract can be difficult. Sometimes it’s a case of the
contract being poorly designed or drafted. However, there are a fair few common ways contracts can be
breached.
Below are four major breaches of contract, with examples, that most commonly happen.
1)Minor breach of contract
A minor breach, also sometimes called an immaterial breach or partial breach, is a situation where the
important aspects of a contract were received but some small part of the obligation was missed.
Sometimes there is recourse to legal action, however, in the case of a minor breach it’s hard to show
damages as a result of a minor breach.

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Example (1): if a computer was delivered but the user manual was either missing or incomplete. If the part
who delivered the computer sends a new, complete, manual then there’s no harm done.
Example (2): if a shipment of goods is late, there may be no legal remedy unless you could show how the
delay caused a financial loss.
2) Material breach of contract
A material breach of contract is considered the most severe type of a breach. Typically, his type of breach
involves a key element of a contract not being either undertaken or provided as agreed.
In some cases, more complex contracts will actually define what does and does not constitute a material
breach of contract. But your everyday garden variety contract generally does not define what a material
breach of contract is.
Example (1): If you were to buy a computer online, and only received the monitor: that would be a material
breach of contract and you would be entitled to take legal action.
Example (2): If you enter into a contract with a marketing company to build a fully functional website by a
certain date, and they fail to deliver: that would be a material breach of contract.
3) Anticipatory breach of contract
An anticipatory breach is when one of the parties to the contract acknowledges that they won’t be able to
fulfill their side of the contract by the agreed upon time.
So, this usually happens when the breaching party notifies the other party of their inability to fulfill their
contract obligations.
And this is probably the least common of the four contract breaches, however, it still entitles the wronged
party to legal remedies.
Example (1): Architects make it impossible to meet a deadline. That is, they stop work on one project and
put all their resources into a new project with another developer. The first developer would have cause to
take legal action against the architects.
Example (2): If a service is delivered a monthly basis and the receiver says they won’t being paying for a
month but still expect the service, that would be an anticipatory breach of contract.

4) Actual breach
The fourth and final breach on our list is also the most common way a contract gets breached. An actual
breach of contract is it comes time for one party to deliver on their side of the contract and they either
improperly or incompletely perform their duties.
Example (1): A vendor is paid for a shipment of stock, and they either don’t deliver them, or deliver the
wrong stock.
Example (2): A service is paid for and either never received or it’s subpar and results in loss of business.
13)a) DUTIES OF AGENT
An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency
relationship. This duty supplements the duties created by an agency contract. A fiduciary duty exists because agency is
a relationship of trust and confidence. The principal’s many remedies for an agent’s breach of her fiduciary duty
include termination of the agency and recovery of damages from the agent.
1. Duties to execute mandate:
2.Duties to follow Instructions or Customs:
3. Duty of reasonable care and skill
4. DUTY TO AVOID CONFLICT OF INTEREST
5. Duty not to make secret profit:
6. Duty to remit sums
7. Duty to maintain Accounts:
8.Duty not to delegate

14(b) The differences between the warranties on goods and conditions on goods
1. A condition is an obligation which requires being fulfilled before another proposition takes place. A
warranty is a surety given by the seller regarding the state of the product.

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 2. The term condition is defined in section 12 (2) of the Indian Sale of Goods, Act 1930 whereas
warranty is defined in section 12 (3).
3. The condition is vital to the theme of the contract while Warranty is ancillary.
4. Breach of any condition may result in the termination of the contract while the breach of warranty
may not lead to the cancellation of the contract.
5. Violating a condition means violating a warranty too, but this is not the case with warranty.
6. In the case of breach of condition, the innocent party has the right to rescind the contract as well as
a claim for damages. On the other hand, in breach of warranty, the aggrieved party can only sue the
other party for damages.
15(a) The following are advantages of cheques:
1. IT helps to avoid carrying bulk cash which is very risky especially in modern days.
2. Crossed cheques are safe for remittance purposes. In case of fraud, the payee or endorsee can be found
out.
3. Payments/salaries received through cheques are safe. It creates evidence for having made the payments.
4. When payments/salaries are made through cheques, giving receipts are not necessary.
5. All cheque payments will be recorded in the books of the bank. No necessity to keep a separate record of
all payments made.
6. Cheques can be transferred from person to person. This will help one to make payments to sellers of
goods and services.
7. Printing of more currency notes can be avoided when cheques are used to make payments.
8. Handling of huge cash on a daily basis is avoided.