Semester 2 contract notes II

Sales of good act :

● applies to all the transaction RElating to sale of goods which happens in india ,
● it does not prescribe any language
● can be oral or written
● The registration of the document relating to contract of sale is governed by registration
act 1908
● The unrepealed provision of ICA 19872 continue to apply to contract of sales
No illustration of the act , to keep it open to interpretation , and not limit the act and let it change
with the times
● Until 1st july 1930 the law of sales of goods was governed by chapter 7 of ICA which
was based on english common law
● English sales of goods act was enacted in 1893
● Chapter 7 was found inadequate to meet the need of the community
● The a of english sales of good act were not found in chap 7
● In 1926 draft bill was prepared
● In 1929 the draft was revised by select committe and in 1930 the separate act the indian
sales of good act was enacted
● 8th law commission report is relating to it
● Sec 65 repealed chap 7 of ICA 1872
All the essential element of sec 10 is applicable to sales of good act

Definition sec 2 subsection 1 talks about buyer

● Buyer : the one who buys or agree to buy
● He is contractually bound to purchase
● He is said to buy- when transaction of sale is complete or takes place in future
●
“delivery” means voluntary transfer of possession from one person to another
● Actual delivery or constructive delivery(If you pick up a parcel on your friend's behalf
and agree to hold on to it for him, that's a constructive delivery.)
● Involuntary transfer by threat force duress
● Symbolic delivery is sufficient (example - when the keys are delivered )
 ●

Symbolic : example - 50 oranges in sharma jis godown ,dubey ji asked me for 50 oranges to sell
and i gave the ownership of my oranges kept in godown to dubeyji so sahrma will cut my name
in his register and write dubeyji’s name . here no delivery is made but ownership has changed its
symbolic delivery .
Constructive delivery : i have given my keys of jupiter to someone to take the oranges or deliver
them to someone.
Sec 2(4) : “document of title to goods” includes a bill of lading, dockwarrant, warehouse
keeper’s certificate, wharfingers’ certificate, railway receipt, 5 [multimodal transport document,]
warrant or order for the delivery of goods and any other document used in the ordinary course of
business as proof of the possession or control of goods, or authorising or purporting to authorise,
either by endorsement or by delivery, the possessor of the document to transfer or receive goods
thereby represented
Which represents the goods as well the transfer of such documents operates the transfer of
constructive possession of goods
● Goods 2(7): means every kind of moveable property(things which are not permanently
fastened) under the horizon, other than actionable claims and money; and
● includes stock and shares,
● growing crops, grass, and
● things attached to or forming part of the land but which are agreed to be severed before
sale or under the contract of sale
Immovable property wont be under sales of good act : machines under factory are build into it ,it
can be sold but if you agree to severe it.
1. What will not be considered good : actionable claim sec 3 of topa act ( amount due
under any policy or person upon which an action can be taken ,some money is due and if
i have to transfer it to someone these are not goods )
2. Money is also not included in goods
 land : definition of immovable property- general clause act it shall include land , benfits arising
out of land , things attached to earth or permanently fastened to anything which is attached to
earth except standing timber griwing crop or grass
Land: means determinate portion of earth's surface which may be covered by water , the
column of surface above the surface, the ground ,beneath the surface ,
benefits arising out of land :
1. Case law - anand behera v. state of orissa 1964 held that right to catch fish from lake is
included in benefits arising out of land . hence immovable property.
water oil gases generally are being capable of being bought or sold hence, movable.
minerals should be severed to be included in goods
2. Madras state v. Ganon dunkerly 1958sc whether the supply of material will amount to sale,
the contracter is bound to make goods acc construct a building acc to agreement. There is no
contract of sale per se of the material supplied. Doubt why its not a sale per se
3. D - gopala krishna pillai v. km mani air 1984 sc 216 : that domestic animals can be
treated as goods but do not include wild animals Topa band commercialization bcz
unethical nd public policy. as far as wigs and skeleton are concerned : they are movable.
4. electricity (movable good ) : provision of supply of services not sales of goods held in
"karnataka power transjission pvt ltd v. ashok iron works pvt ltd 2009 sc electricity is not
immovable property it's supply of service "
5. central Inland Water Transport Corporation Limited V Brojo Nath Ganguly AIR 1986 SC
1571 : against public policy.

formation of contract of sales :

6. cbb draper and sons v. advert turner & son ltd : talks about general property, in contract
of sale gen proprty is sold nd all transfer all its right [sec 4]
what kind of rights are attached to general property ?
Ans - to possess, sell or use these are transferred from one to another when a thing is sold . if
only 1 right is sold you cannot sell or take it
concept of agreement to sell diff from basic concept of sale:
1. contract of sale : sale and agreement to sell (takes place in future however its agreement
is made , already agreed to take keys from house )

2. sale is already executed transfer is completed immediately and in latter it takes place in
future its executery ,
3. the transfer of property takes place in future or upon some condition,
4. transfer of general property : in case of sale it should be buyer who will be responsible
for the damages caused and in agreement it will be seller who will be responsible,(
generally in sale for subsequent loss of goods buyer bears the loss and in contract of sale
the seller bears the loss)
 Sale Agreement to sell

Executed Executery

Transfer of property takes place immediately Transfer of property takes place in future or
upon somecondition

Transfer of general property :general rule of general rule of risk : transfer risk is on seller
risk : transfer risk is on buyer or transfer has as buyer is not yet in possession for
happened immediately ,for subsequent loss of subsequent loss / damage ,seller bears the
goods ,buyer bears the loss. loss

Two ppl
Payment in legal currency
Sib matter of sales is good
Essential condition of_ must be implied

Sale and hire purchase

Car installment, after last installment another person will become owner
Under heir purchases agreement the property is transferred into good when certain fix no of
installment is paid by hirer, till then the hirer remains bailee.
You can return the goods at any point of time, gen property is not transferred in hire purchase.
Only rights of usage is given in hire purchase
Ut is governed by the hire purchase act 1972.
8th commission report, to include hire purchase in SGA ACT.
If there is default in payment of hire, the owner has the right to resume possession without
refunding the amount received as hire(rent).
Hirer remains a bailee I'll the installment is paid, in sale thr buyer cannot terminate the contract
in hirer purchase he can terminate the contract by returning the goods.
Homework find a case related to hire purchase Lee v. Butler it has complications
Difference between sale nd bailment
B is defined sec 158 of ica under which thee isa delievrty of good/movable for some purpose.
Once purpose is accomplished goods will be returned.
15jan
hindustan shipyard ltd. v. state of AP [2000] SC
- work- something that involves mental or physical efforts
- a contract substance of which is that skill and labour must be exercised in carrying out the
contract in addition to the supplying of materials used in the work is contract of work and not
contract of sale.
- SC held that while deciding whether the transaction is a sale or contract of work predominant
object of the contract, circumstances of the case and custom of trade must be taken into
consideration. - imp revision
state of tamil nadu v. anandam viswanathan [1989] SC
- whether supply and printing of q papers to the universities was contract of work or sale. held
that having regard to nature of job and confidence reposed on the contractor for work to be
rendered supply of paper was merely incidental therefore it is not a contract of sale.

M/S Northern India Caterers v. state [1980] SC

- when the hoteliers prepare and serve food to residents as well as casual customers it is service
of food not amounting to sale.
It was not only supply of food but also ambience provided to customer ,service include service of
food and also ambience.
CONDITIONAL CONTRACTS
- contracts are conditional when the enforceability depends upon the performance or fulfillment
of some conditions. the conditions may be contingent or promissory
- promissory condition- within the control of the promissor [ precure the;license for liquor and
then only goods would be supplied to you] [
-contingent condition- not in control [ only buy when black puppies are born]
Section 5- no mention of property its in TOPA act.
In subsection 1 there is an offer of acceptance to buy or sell the goods for price which clearly
indicates consensual nature .
Sale can be complete even without immediate delivery or payment of price
Section 14-17 : of SGA deals with the terms implied by law
Future goods and existing goods: Existing and Future Goods

Existing goods (1) The goods which form the subject of a contract of sale may be either existing
goods, owned or possessed by the seller, or future goods.
future goods: (2) There may be a contract for the sale of goods the acquisition of which by the
seller depends upon a contingency which may or may not happen. (If its asked to make a
hundred toys but it has not been manufactured but will be done in future,contract is not about
raw material but about future goods) . Section 6 existing-owned by the seller
Future -will come existence in future or seller will own it in future
Present sale of future good is an agreement to sell
Acc to benjamin - future goods are the goods to be manufactured or produced by the seller after
making of contract of sale. Goods to be manufactured - in factory,goods which may become
property by purchase or gift etc
Goods expected to come into existence in ordinary course of nature
Things attached to earth forming part of land agreed to be severed,ex timber crops,minerals
Specific goods
In _Ram Narain Mahato v. State of Madhya Pradesh (1970) (S. C.) case Sc defined generic good
or unascertained goods are those which are not identified and agreed upon at the time of
making of contract.
Ascertained good- Ascertained Goods:
Goods which are identified and agreed upon after the contract is made.
Identified+ Agreed +After the Contract of Sale=ascertained goods.
17jan how sec 20 ica and 56 is diff and which is more suitable
1. Specific goods: all the things un my car are damage without the knowledge of seller at
the time of contract i didnt know that commoddity is damage.so its void and wont suffer
liability and cost. Knowledge of the seller is material but not the buyer. If is void it has
consequences : not enforceable no party is bound by it.
section 7:Goods perishing before making of contract. Where there is a contract for the sale of
specific goods, the contract is void if the goods without the knowledge of the seller have, at the
time when the contract was made, perished or become so damaged as no longer to description
contract. . The section is founded on the rule that where both the parties to a contract are under a
mistake as to a matter of fact essential to the contract, the contract is void; see Contract Act,
section 20.
1. essentials :sale of specific good,
2. without knowledge of seller,
3. perished(it includes stolen as well)
Barandrow lane and ballard v. Philip and co. : out of 700 bag 190 are lost -sold the
bag-compelled buyer to buy
Section 8 : Goods perishing before sale but after agreement to sell. Where there is an agreement
to sell specific goods, and subsequently the goods without any fault on the part of the seller or
buyer perish or become so damaged as no longer to answer to their description in the agreement
before the risk passes to the buyer, the agreement is thereby avoided. ( Both seller and buyer and
not about knowledge of the seller but fault of both the parties)
1. Essentials : Specific goods not generic
2. Before sale goods must perished verorr sale and after agreememt to sell
3. Risk must not have passed to the buyer

section 8-Goods Perishing before Sale but afterAgreement to Sell

- section applies to cases where goods are in existent at the time of making the contract
- but they perish without fault of either party before risk has passed to the buyer
- this applies on specific goods(pollock nd mullah - This section, as stated above, applies only to
specific goods. It does not apply to unascertained goods. A agrees to sell to B 50 bales of Bengal
cotton out of 3,000 bales in his godown. The godown had, at the time of the contract, been
destroyed by fire unknown to A. Here the sale is not of specific goods, but of a certain quantity
of unascertained goods. The contract is not void, and A must procure 50 bales of Bengal cotton
elsewhere or pay damages for the breach)
- goods must perish before sale and after agreement to sell
Tempest v. Fitzgerald- buyer agreed to buy a horse and specified the day of payment and
delivery. before that agreed date, buyer came and told seller he wants to ride the horse and asked
seller to keep it for further 1 week and said after end of 1 week he will pay and take delivery.
contract was avoided as no transfer of property. [hose had died], e. It turns out that the horse was
dead at the time of the bargain, though neither party was aware of the fact. The contract is void
word avoided is used becos perishing of goods if there was any obligation they have to abide by
them.

section 9-
- it is not necessary in the contract that exact amount should be specified.
- the parties may leave the price to be determined in any other manner
- if the contract is silent regarding price as to be determined the agreement to pay reasonable
price would be implied
- one of the party may be given the power to determine price and such agreement will be valid
subject to the condition that the determination must be bonafide.
- if in any manner price is not ascertainable then contract will be void for uncertainty
21jan (+ mam ki ppt)

Section 9(1):

The price could be either be fixed in the contract itself, or it could be left to be fixed in a manner
agreed upon. Eg. one of the parties will fix the price later after seeing the market price, provided,
it should be done in a Bonafede manner, or the other party can go to court. Or it could be
determined in the course of dealing. Eg. if there is a long standing relationship, whatever the
norm becomes, it is followed.

Section 9(2):

If the price was not determined in accordance with Section 9(1), the buyer has to pay a
reasonable price on the basis of the facts and circumstances of the case. Eg. reasonable price
can be determined on the basis of the market price, etc.

*Drafting the Clause for Section 9(1):

In accordance with Section 9(1) of the Sales of Goods Act, and on the basis of the agreement
between the parties, the seller shall determine the price and such will be paid by the buyer on
xyz date, which will be subjected to due consideration by the parties. After the setting of the
price, the contract can be further executed.

Section 10: Price and Third Party Valuer of Goods

Section 10(1):

Price is determined by a third party valuer, by the mutual agreement of the contracting parties.
The third party might be an expert, arbitrator, etc.

If the 3rd party cannot determine the price, the contract is avoided.

Proviso: And if there had been some transfer or appropriation of goods, the buyer will pay a
reasonable amount for that.

It would be a conditional contract because if the 3rd party fails to value the contract, there won’t
be a contract at all, thus avoided.

Section 10(2):

If one of the parties prevents evaluation of the goods, the other party may take action or
damages.

Note: if the third party is negligent or fraudulent, either of the parties may take action against
the 3rd person.

*Drafting Clause of Section 10(1):

In accordance with Section 10 of the Sale of Goods Act, the two parties to the contract, A and B,
have mutually consented for a third party, C, to determine the price of the stated goods. Such
shall be determined on xyz date. If the price of goods cannot be determined by C, the contract
will be avoided.

Conditions and Warranties:

When contracting, the parties represent their goods.

Representations so important as to form the essence of the contract.

If reps are flexible - claim for damage.

If very important reps – the contract is considered a breach.

Section 11:
Unless stated otherwise, time of payment does not become the essence of the contract, thus a
breach of time cannot be enough to terminate the contract.
Note: time should be reasonable.

But if it is stated that time is of importance, a delay or breach in paying in time, can terminate the
contract.

The seller can withhold delivery, or maintain a suit for price if the delivery is already made.
(Section 55 of SGA)

Other stipulations as to time like. time of delivery of goods/date of shipment/time of getting a

license from the government, etc. would be of essence only if it is mentioned in the contract.

In some cases, timely delivery is implied depending upon the facts. Eg. delivery of cow milk,
which is a perishable item.

· Martindale v Smith [1841] QB 389

Buyer asked for extension of time, but seller did not comply, and sold the goods to someone else.

The buyer was allowed damages as time of payment was not an essence in contract.

Section 12:
(1) A stipulation in a contract of sale with reference to goods which are the subject thereof may
be a condition or a warranty. (2) A condition is a stipulation essential to the main purpose of the
contract, the breach of which gives rise to a right to treat the contract as repudiated.
Explanation - Condition - is a stipulation(requiurement) essential to the main purpose of contract
Effect of breach- ki agar ye condition breach hui to buyer has right to repudiate (refuse) the
contract , reject goods or refund
(3) A warranty is such a stipulation(requiremenet) collateral to the main purpose of the contract,
the breach of which gives rise to a claim for damages but not to a right to reject the goods and
treat the contract as repudiated.
Explanation- you cant reject the goods as it is collateral to the main purpose if the contract

If there are specific conditions given in the contract as to the goods, their breach matters. Eg.
contract for a mobile phone; condition is that the camera should work. Implied condition: phone
should switch on.

Warranty = condition in the eyes of the court.

Representation: They are general statements made by the party to contract. They can be merely
opinions or conditions or warranties.

In breach of condition, the non-defaulting party may reject the goods, and also sue for damages
for breach.
In cases where the term broken is flexible, the court may not allow rejection of goods, but may
allow claim for damages.

A condition normally includes warranty. The buyer may waive it, and may still have remedy in
damages without rejecting the goods.

When the conditions are annexed by law to the contract, they are called implied conditions or
warranty (Section 14 to 17).

Section 13: When a Condition is to be treated as Warranty:

S. 13. When condition to be treated as warranty.- (1) Where a contract of sale is subject to any
condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the
breach of the condition as a breach of warranty and not as a ground for treating the contract as
repudiated [ went to buy a phone it caused problem you asked seller ki just mend it , so he in
turn waived the condition and elected to treat it as breach of warranty]
Effect- buyer will loose the right to repudiate the contract
(2) Where a contract of sale is not severable and the buyer has accepted the goods or part
thereof 95[***] the breach of any condition to be fulfilled by the seller can only be treated as a
breach of warranty and not as a ground for rejecting the goods and treating the contract as
repudiated, unless there is a term of the contract, express or implied, to that effect.
[ WHEN you buy a mixture of concrete to build a building it consists of sand ,grit(gitti) , cement ,
and you want the amount of sand more in the mixture but he has delivered you the mixture with
equal amount of all three things in it, so the contents are non severable even if there is breach
of you required condition : you cant ask him to mend the mistake and separate ret gitti ND
CEMENT , even if its is your breach of condition you cant ask or sue him the condition of
breach ,it will be breach of warranty you can ask that ] [ iphone ki guarantee 1 saal ki hoti hai
and uaki accessories 6month , your charger got damaged and you asked him for the breach of
condition , it is not breach of condition but warranty
[3] Nothing in this section shall affect the case of any condition or warranty fulfilment of which is
excused by law by reason of impossibility [ darjeeling se chai ka contract tha , and flood aagya ]
or otherwise[ curfew or ban of the product]

In non-severable contracts, it is only a breach of warranty, but goods cannot be returned.

Non-severability: If I buy 5kg of flour and 5kg of cocaine for 10 lakh, the cocaine part is
unlawful. But as it cannot be determined how much the flour would cost out of that 10 lakh, the
clause or the part cannot be severed. The entire contarct will be declared void.

The party to a contract may dispense with the performance, therefore the buyer may waive the
conditions and treat it as warranty.
The waiver may be expressed or implied. In an implied waiver, we see the conduct of buyer. Eg.
if the buyer deals with the goods, uses them, resell them. Then also, we consider it a waiver by
conduct.

Sub-section 3 saves the rights of the seller and in apt cases, the seller can rely upon impossibility
of performance.

Section 14:
Clause a:

Unless stated otherwise, the seller has a complete right to sell a good to the buyer in case of Sale;
in Agreement to Sell, the seller has a right to sell the goods when property is to transferred. That
right should not be restricted in any way.

There will be no breach where seller acquires rights before the property is to pass.

Eg. if A agrees to sell to B a jewel he will inherit in future—after inheriting A has an absolute
right to dispose the property.

Clause b:

There is an implied warranty that the buyer has a right to enjoy the good undisturbed by a 3rd
party/quiet possession of goods.

· Niblett Ltd. v Confectioners Material Co. Ltd. [1921] 3 KB 387

S sold 1000 cans of condensed milk trademarked as Nestle. Infringed of trademark. By using the
word ‘ nissley’

· Rawland v Divall [1923] KB 500 CCA

[9:22 pm, 26/01/2022] Imran Nliu: Quite Possession matlab ki - The good is under no
encumbrance, Freehold hona chahiye, Loan ya mortgage pe nhi ...Iss case me usey pehle
bataya hi nhi ki Woh registered brand hai pehle se(buyer ko), Toh usey Kam price pe bechna
pada Ye sab....
[9:26 pm, 26/01/2022] Imran Nliu: Ulta kaam nhi kiya, Pehle Nhi bataya ki Infringement hoga

🤷🏽‍♂️
ye...mai jaise mother dairy naam se apni dairy khol lun or Tumko bech dun, Or fir baad me
tumhe pata chale ki ye toh Asli mother dairy nhi hai, Registered wali doosri hai, toh Galti Meri
hui na-toh compensation mai dunga tumhe
Clause c:

Buyer’s possession is to be free of encumbrance.

And if the buyer is compelled to discharge it, he can recover it from the seller.

Eg. the property is a pledge for a loan, that cannot be sold.

Section 15: Sale by description and Sample:

The goods must correspond by description, as well as the sample.

Sale by Description:

Description means kind of goods/their identification. It may include type, packaging, etc.
Defect in quantity is not covered in this section, and thus not included in Description. It is dealt
in Section 37.

Suitability of goods for a specific purpose is also not included here. It is dealt in Section 16.

General purpose can be a part of Description. Eg. dog food.

Sometimes, sample is only description of the goods. Then the bulk must correspond with the
sample.

Even if goods are selected by the buyer himself, this section applies. Eg. A selects a pack of dal,
what description is written on the packet should correspond to the actual goods.

Stipulation of quality are dealt with in Section 16(2) and 17.

Warranty implies that the buyer can claim damages.

· Wallis v Pratt [1911] AC 394

Sale of seeds, Common English Sanfoin Seeds. No warranty given of the goods clause
(exemption clause).

When delivered and were Giant English Sanfoin Seeds which are inferior in nature.

Buyer got to know when sown and crops were grown.

Court: You can rely upon exemption clauses when the contract id fulfilled. But here, no
performance only, so buyer can recover damages.

With Description and sample:

If sample is sent first, the bulk must correspond with the sample and description.

Eg. sharbati gehu – sample sent – bulk should correspond.

Eg- ganja should be both original/pure (sample) and of neemach[a town famous for ganja]
(description) , it is pure but not of neemach so its a breach of implied condition hence
repudiated contract

Section 16: Quality and Fitness:

Implied condition ki raincoat suitable hai ya nhi OR sweater garam krrha hai ki nhi isme implied
condition generally quality ya fitness ke liye koi compensation nhi hai bcz let the buyer be
aware[caveat emptor]
 The first class of cases is where— (i) the buyer makes known to the seller the particular purpose
for which the goods are required;

(ii) the buyer relies on the seller’s skill or judgment; and

(iii) the goods are of a description dealt in by the seller, whether he bbe the manufacturer or not.

If you go to dentist you tell him you want the specific teeth set fulfills condition one you rely on
a dentist’s skill

Note; implied condition of generality and fitness if goods are bought under trademark or patent

If shopkeeper said ki ye wali sweater lo dusri wali me sundr dikhoge brand name hai but thand ni
chupegi , then you did not reply on his skill /judgment and went by patent

2)- Where goods are bought by description from a seller who deals in goods of that description
(whether he is the manufacturer or producer or not), there is an implied condition that the goods
shall be of merchantable quality - you want horn and described him that you want pressure horn
and bought from a person deals in horns so there is implied condition that goods[horn] should be
of quality suitable or fit for sale [merchantable quality]

(3) An implied warranty or condition as to quality or fitness for a particular purpose may be
annexed by the usage of trade.

- Conditions as to wholesomeness [ it means healthy] if youre buying a good it must be

healthy to eat that is a implied condition attached to it

Implied warranties

1. Warranty as to undisturbed possession (quite possession)

2. Warranty as to non existence of encumbrances{ it means that property is on pledge}jo
warranty ap seller se lerhe ho usme kisi bhi prakar ka udhar ya bhaar [pledge] nhi hoga

[s. 16.6] Sale of dangerous goods.— Where a person sells goods which he knows to be
dangerous, without warning the buyer of the fact, he may be liable in damages for the
consequences. This is so apart from any implied condition. [

[s. 16.7] Sub-section (3): Usage of trade as annexing implied condition as to quality or
fitness.— An implied warranty or condition as to quality or fitness for a particular purpose may
be annexed by the usage of trade. [usage means custom or ritual - kapdo ki shop ka custom if not
deemed fit or na pasand aaye to you will return the back to them ] It may similarly be excluded
by the usage of trade.161

[s. 16.8] Sub-section (4): Implied warranty or condition may co-exist with express warranty or
condition.—
27 JAN
Baldry v. Marshall; relies on skill of seller
Section 16 [2] : This provision provides that an implied warranty or condition as to quality or
fitness for a particular purpose may be annexed, by usage of trade
Usage of trade means a practice or method of dealing which is regularly observed in trade and it
is justifiably expected to be follower by a party to a commercial transaction
There was a sale of a acar by defendants who were dealer of car, to supply a car for touring
purposes ,the defendants want buggati ______ - specific purpose which was made known to the
seller,buyer was allowed to reject the car.
16.2- in case of goods sold by description by a seller who deals in such goods is responsible for
the latent deffect which render them unmerchantable
Implied comdition under subsection 2 applies to all goods
Merchantable quality - not defined anywhere in sga but it generally mean that thr goods are of
such quality nd in such a condition that a reasonable person would accept it in performance of
rhe contract - commercialy saleable
Jones v. Just-
Thornett v. Beers nd sons-
16.3 - this provision provides that an implied warranty or condition as to quality or fitness for a
particular purpose maybe be annexed by usage of trade
Usage of trade means a practice or method of dealing which is regularly observed in trade and
justifiably expected to be followed by a party to a commercial transaction
Jones v. Bowden- it sS held that any such usage must be proved that it has been relied upon, it
must be certain uniform and reasonable.
16.4- if an express term in consistent with the term implied by law then it will prevail.
Section 17
lorymal V. Smith there was sale by sample of two parcels of wheat, buyer was allowed to see
only one parcel, the buyer was held and allowed to rescind the contract.
Section 18 : transfer of property in goods.
Badri prasad v. state of mp : find
State of karnataka v. West coast paper mills -under contract of sales the company was
permitted to remove bamboos at rupees 10 per/tonne ,govt by a subsequent order enhanced the
price to rupees 20/tonne
It was held that the enhanced rate was not applicable to the bamboos which were already cut
although not removed prior to the date of order of the govt. Because when the bamboos were cut
they became ascertained and the property passed to the company.
The risk usually passes with the property but it may pass independently also (sec26)
Ascertainment of goods depends upon they being separate from bulk or by severance or by
measuring them,unless this is done the property can not pass.
Section 19
1. The parties are free to agree upon the time of passing of property
While ascertaining the intention, the terms of the contract,conduct of the party and
circumstances of the case ,must be taken into consideration.
20-24 are general rules to be followed for the ascertainment Of intention
16.3-If customer ask you to disclose defects / to give warranty or conditions in a particular type
of transaction then it will be deemed that a warranty and a condition is attached to such contract.
Section 20: specific good in a deliverable state that state where buyer is allowed to take delivery,
when goods are in physical condition in which you can take delivery of it,
Specific goods deliverable state me hone ke bad do conditions fulfill honi chaiye
[a] property passes when contract is made
Eg; a local uncle tells you abou his car and upon finding god condition of it you agree to accept
his offer , ab ekdm se bijli gire or car fatt jaye to nuksan tumhra hai
n Hoe Kim Seing v Maung Ba ChitA^ it was held taht intention of party matters
[b]it is immaterial whether the time of payment of the price or the time of delivery of the goods,
or both, is postponed.

Section 21 : specific goods not in deliverable state

Eg: the car is not ready to be delivered if oneof its tyre is not fitted , as soon as the tyre is fitted
and sellers calls buyer that tyre is fitted and car is ready to use . the possession is then and there
at the moment transferred [ buyer has notice thereof]
Rug v. minute : find

Section 22 [s 22.1] Contract of sale of specific goods in a deliverable state when the seller has to
do anything thereto in order to ascertain the price.— Where anything remains to be done to the
goods by the seller for the purpose of ascertaining the amount of the price, e.g., weighing them
or measuring them, the property does not pass until this has been done and the buyer has notice
thereof
Section २३: Fill in this
Rohde v. Thwaite : 20kg of sugar,out of larger quantity ,the seller before that it were taken away
by the buyer subsequently filled 16 bags and informed that buyer to come and take them away ,
the buyer promised to do so
Property passed.
Note: unconditional appropriation is one way of ascertainment of goods for the purpose of
passing of property. It is not found yet.
Section 24: its owners risk is product has been damaged or perished, the burden of proof that the
loss of damage to the goods occurred without his fault ,will on such person who holds goods.
Goods delivered on sale of return,pledged by the person to whom the goods were delivered. The
property passed to him and the original owner couldn't recover goods from the pledgee.
i) when he signifies his approva or acceptance
ii) when the buyer does any act adopting the transaction (when 1st person gives the product to
2nd and then therefore the 2nd person passes it to third person mortgage it to third person due to
any circumstance - for example in case of lack money , the 1st person deems it to be accepted by
2nd because he had the intention to purchase and then thereafter transfer it to 3rd person )
iii) ) if he does not signify his approval or acceptance to the seller but retains the gods without
giving notice of rejection, then, if a time has been fixed for the return of the goods, on the
expiration of such time, and, if not time has been fixed, on the expiration of a reasonable time.

Section 25: restoration of right of disposal

The seller may by terms of contract reserve right of disposal until certain conditions are fulfilled.
In such cases not withstanding the delivery to the buyer or to carrier or other bailee for the
purpose of transmission, the property in goods does not pass untill conditions imposed by the
seller are fulfilled.
The conditions which are usually imposed is payment or tender of price but seller is free to
impose any other condition which he may wish
Romalpa clause :
It is a provision in contract of sale under which a seller can retain ownership of goods untill they
are paid or any other condition is fulfilled in other words we can say romalpa clauses are those in
which the title of goods remains with the seller _ they are also called as retention of title क्लॉस
or reservation of title clause
Section 26 : party may agree that the risk shall pass at some time or on some condition which is
not necessarily simultaneous with passing of property
● The risk may be separated from ownership
aCcession (addition increase profit) to the goods when risk nd property are with diff persons
normally be regarded as belonging to owner

Complete sale- Property is transferred.

Denby hamilton v. borden : seller sells juice to buyer and it gets stale , buyer does not accept it
and he is liable to compensate [buyer ne deri krdi lene me wo juice kharab hogya ] seller
sufferred loss and then buyer will compensate the losses of juice.

Section 28: Sale by one of the joint owners: A, B and C are joint-owners of a bulk of goods.
Then A gets the sole ownership of the entire bulk, by the permission of B and C. If A makes a
sale without the permission of B and C (if A is not authorized to sell), the sale is valid but only
until the buyer is innocent.

Example: `Gauri mera or divyanshi ka laptop hai and gauri jaake kisi 4th person ko sell krdeti
hai laptop without letting the buyer knoe that gauri is not sole owner of this laptop but a joint
owner tab bhi property will pass to the buyer until buyer has notice thereof.

Section 29: Voidable contract (consent is acquired under undue influence, etc.) Section 19 of
ICA Not rescinded Buyer is acting in good faith Eg. A gets hold of a car by undue influence
from B, if A sells it to C before B has rescinded the contract (contract being voidable). C will
have title of the car if he did not know about the undue influence part. The seller may transfer the
better title to innocent buyer even if he is not in possession of goods with free consent of the
owner. The possession must be obtained under a contract, which is voidable at the option of the
wronged party. The seller in possession of the goods may do so before the rescission of the
contract by the other party. *Good title: Absolute dominion over the goods. *Better title: Eg. a
thief can only sell the goods in his own capacity, not in the capacity of the owner.

Section 30: Section 30(1): Seller in Possession of Goods after Sale: Even after selling the goods,
the seller holds title to goods. If he sells it again to a second buyer., the second buyer gets the
good title of the goods (the second buyer being innocent). Eg. B purchased a book from A, but
forgot to take it with himself. A sold it again to C, C, being an innocent buyer, gets the good title.
B will claim the compensation from the seller, A. Formal Comments: There is a complete sale
and the seller is in possession. The delivery or transfer by the seller, when he has possession of
goods or document of title, the person receiving the goods in good faith will acquire good title.
Section 30(2): A buyer bought or agreed to buy something—he obtains title of good/possession
of goods with the consent of seller--then sells it to an innocent buyer, the sale is valid. Right of
Lean: a possessory right; if not paid, the seller may not delivery the goods, or take back the
goods. Formal Comment: 21 The Section talks about the buyer being in possession after sale
where both the conditions are included, he has bought the goods or agreed to buy the goods. The
buyer must obtain possession with the consent of the seller. • Staff Motor Guarantee Ltd. v.
British Wagon Company [1934]: X here was a dealer in motor vehicles. He sold the vehicle to
the defendant. The defendant lent it back to X on hire purchase. Later on, X sold the sold vehicle
to the plaintiff who was not aware of the previous transaction. Therefore, it was held that X was
not a person who, having sold the goods, continued his possession but he was a bailee under the
hire purchase agreement. Therefore the delivery or transfer by him of the said vehicle under the
sale to the plaintiff was not valid. Subsection 1 will be applied only when the capacity of the
seller has not changed. • Lee v Butler (for reference)
Section 30 [2] : Staff Motors Guarantee limited v. British Wagon Company (1934)

X here was a dealer in motor vehicles. He sold the vehicle to the defendant. The defendant lent it
back to X on hire purchase. Later on, X sold the sold vehicle to the plaintiff who was not aware
of the previous transaction. Therefore, it was held that X was not a person who, having sold the
goods, continued his possession but he was a bailee under the hire purchase agreement.
Therefore the delivery or transfer by him of the said vehicle under the sale to the plaintiff was
not valid.
Subsection 1 will be applied only when the capacity of the seller has not changed.

· Lee v Butler-

CHAPTER IV
PERFORMANCE OF THE CONTRACT
Section 31
31. Duties, of seller and buyer.— It is the duty of the seller to deliver the goods and of the
buyer to accept and pay for them, in accordance with the terms of the contract of sale.
Comments-

· The seller should deliver the good and give possession.

· The buyer must accept and pay the price.

· If the buyer wrongfully or unjustifiably refuses to take delivery or rejects the goods,
there will be a breach of duty on his part. Similarly, if the seller wrongfully refuses to
deliver the goods, there will be breach of duty.

· Acceptance may be expressed or implied.

Section 32
32. Payment and delivery are concurrent conditions.—Unless otherwise agreed, delivery of
the goods and payment of the price are concurrent conditions, that is to say, the seller shall be
ready and willing to give possession of the goods to the buyer in exchange for the price, and the
buyer shall be ready and willing to pay the price in exchange for possession of the goods.
Ready and willing also means inability to deliver goods or inability to buy goods. It will be
deemed that you don't want to sell or buy it.
Comments-

· The seller is not bound to deliver if the buyer is not ready and willing to pay on
delivery and the buyer is not bound to pay if the seller is not ready and willing to give
the goods.
· Readiness and willingness includes capacity. If the buyer is insolvent.

· The rule applies only when there is no contract to the contrary. Example- Sale on
credit.

Section 33

33. Delivery.—Delivery of goods sold may be made by doing anything which the parties agree
shall be treated as delivery or which has the effect of putting the goods in the possession of the
buyer or of any person authorized to hold them on his behalf.

Comments-

· Parties are free to agree upon the mode and the act which would constitute as
delivery.
· Any act which has the effect of putting the goods in possession of the buyer or any
person authorized by him shall constitute delivery.

Example- If the buyer names an agent to hold the goods on his behalf, delivery to the agent shall
constitute as delivery to the buyer.

· It can be symbolic.

Example- Delivery of keys of a godown where the goods are kept by the seller.

Marvin v Wallis (1856)

Sale of horses. The seller asked the buyer to lend him the sold horse for sometime. The buyer
agreed and left the horse in the custody of the seller. There was a valid delivery under the sale.

Examples

· There is a sale of goods to be done by the seller at the buyer's premises. The goods are
delivered by the seller’s agent to a person who was present at the premises and he was
reasonably appearing to be authorized to receive the goods but in reality, he was not
 authorized. Whether delivery to that person will constitute a valid delivery?

· If I have given the keys of my house to my best friend and I am not home but amazon
guys come and deliver the goods. Friend didn’t tell me that goods came. Can I sue
Amazon?

In practice, it constituted a delivery. Both opinions that it does/doesn’t constitute delivery are
valid. Depends on the circumstances.

Edan v Dudfield (1841)

If the buyer is already holding the goods as bailee of the seller, and the seller agrees with him
that he shall hold the goods as owner, the character of possession is changed. The buyer here
ceases to hold as a bailee and begins to hold as an owner.

Section 34

34. Effect of part delivery.—

A delivery of part of goods, in progress of the delivery of the whole, has the same effect, for the
purpose of passing the property in such goods, as a delivery of the whole; but a delivery of part
of the goods, with an intention of severing it from the whole, does not operate as a delivery of
the remainder.

Comments-

· Delivery of part may operate as delivery of whole if it is so intended but delivery of

part with intention of severing it from whole does not operate as delivery of the
remaining part.

· Example- There was a sale of goods lined up in a godown. The seller instructed the
caretaker of godown to deliver the goods to the buyer who has paid the price already.
The buyer weighed the gods and took away part of it. This will amount as delivery of
the whole. (The buyer gave authority to take the entire but he took a part, so it is
whole delivery)

Mitchell Red v. Baldeo (1887)

Section 35

Comment

Buyer here has no cause of action against the seller if he has not applied for delivery.

When the buyer applies for delivery and the seller fails to deliver he shall be guilty of breach.
Section 36

Comment Subsection 1

This provision fixes place of delivery and the rule applies subject to express or implied
agreement (section 9 of Indian Contract Act)

Comment Subsection 2

Generally in contract of sale of good condition relating to delivery are the essence of contract
and breach of such conditions may give the right to the buyer to repudiate the contract and reject
the goods.

Philipp v. Blaire and Martin

There was a sale of 12 containers of liquor. 4 were delivered. Buyer asked for delivery of the
remaining container. Seller delayed the delivery. Meanwhile the government passed an act
prohibiting distillation. This annulled all contracts for the sale of such spirit. Seller was liable
because he failed to deliver within reasonable time. This case is an example of subsection 2 of
section 36.

Comment Subsection 3

Subsection 3 talks about delivery of atonement which has the effect of transferring the
possession to the buyer to constitute it on the parties should agree.

Comment Subsection 4

Demand of delivery by the buyer and tender of delivery by the seller has to be made within a
reasonable hour which depends upon facts. Example - working hour of business etc.,

Comment Subsection 5

Expenses to make the good deliverable are borne by the seller but if the buyer has paid for that
then he may recover.

Section 37

Subject to this rule if the seller does not fulfill his obligations under the contract, sending less
quantity cannot compel the buyer to accept it. Equally the buyer cannot call for delivery of
anything which is short of agreed quantity

Under subsection 2 of the goods are in excess quantity the buyer is not bound to accept excess
nor he is bound to put himself into trouble to separate the excess from the bulk delivery.
When the goods are mixed with goods of other description, the buyer is not bound to accept even
if it is very easy to separate the goods. Where the buyer exercises his right to reject the good the
property revest in the seller.

If the goods are delivered which are not of merchantable quality the buyer may reject the whole.

Dudhiya Forest Corp. Labourers and Artisans society Ltd. v. Mohammad Saiyed

The quantity of charcoal which was delivered in this case was 30 to 35 percent less than the
assured amount at the time of auction and therefore it was held that principle of de minimis
cannot be applied.

Section 38 Installment deliveries

Comment

Neither buyer nor seller can demand or tender delivery less than the full quantity and neither of
them can compel the other that the delivery should be by installment.

Such an agreement may be made expressly or may be inferred by circumstances of each case.

Benjamin - a contract is severable or divisible if liability under it acruse from time to time as
performance of a part or parts of contract.

The contract may provide delivery by installment and payment for each installment and be of
such a nature that each delivery is like a delivery under a separate contract to be paid separately.

Section 39

Subsection 1 provides that where under a contract the seller is authorised or required to send the
goods to a carrier whether named by buyer or not for the purpose of transmission to the buyer. In
such a case delivery to the carrier or wharfinger prima facie is deemed to be delivery of goods to
the buyer.

Under subsection 2 the seller is duty bound to make such a contract with the carrier or
wharfinger as may be reasonable considering the nature of goods and other circumstances. If the
seller omits to do so and the goods are lost or damaged during transit the buyer may decline to
treat delivery to himself and may hold the seller responsible for damages.

The purpose of imposition of duty under this section is to secure for the buyer such a contract of
carriage as well enable the buyer to recover loss or damage from the carrier.

Clark v. Hutchins

In this case goods were delivered to the carrier and there was a requirement of notice that the
goods were over a certain value otherwise the carrier will not be liable for any loss. The seller
gave no such notice. It was held that he failed in his duty of making a reasonable contract
therefore liable for the loss.

Thomas Young & Sons Ltd. v. Hobson & Partners

In this case machines were sold. It was agreed that they should be sent to the buyer through
railways. The seller dispatches the machine at the owner's risk and not at the company's risk.
There was no difference in charges. The only difference was that before accepting the company's
risk, the company would have inspected their packaging and required machines to be properly
secured at owner risk. They did not bother about these things. The machines were damaged
during transit. It was held that the seller has not secured a contract which nature of good
reasonably required and the buyer could reject the good and he was not liable for payment.

Under subsection 3 where the goods have to be sent by a sea transit and where the insurance is
usual the seller shall give a notice to the buyer to enable him to ensure the goods. If he fails the
goods shall be at his risk and this principle can be excluded by a contract to the contrary.

Under section 3 of commerce act it is provided that the carrier is not responsible for any loss of
certain goods valuing more than 100 rupees unless the value is expressly declared

Section 40:

The seller agrees to take risk and delivers the goods at some other place; risk of damage is upon
the seller. The buyer does nit take any risk during transit, unless specified. Eg. Amazon, etc.

*Sometimes, the seller and buyer can agree that parts of risk would be upon both, equally.

The seller shall take risk till delivery if the goods are supposed to be delivered at a place other
than where they are sold.

Section 41:

• Shah Mohanlal Manilal v. Firm Running in the Nmae and Style (1961)

Section 41(1):

Buyer has a right to examine the goods before purchase. The buyer may not accept the goods if
he didn’t have reasonable opportunity to examine the goods.

Section 41(2):

The seller has an obligation to let the buyer sufficiently examine the oods. Even if the seller does
not allow such, it will still be the seller’s fault.

If there is a request placed by the buyer to examine the goods, and it was refused, this Section
comes into play.
In case of Myntra, etc., you can reject or replace or return the goods if one is not happy with
them.

In Amazon, they tell you which products are returnable or not in their contract.

This Section applies only when there is arefusal by the delivery boy in letting the buyer examine
the goods.

Formal Comments:

If the goods are not previously examined, the buyer is not bound to accept them until he is given
reasonable opportunity to examine them, and the seller is bound to give such opportunity.

If the buyer requests and the seller rejects to do so, there will be a breach.

Section 42:

The buyer is deemed to have accepted the goods if he intimates the seller.

When the goods are delivered and the buyer does not inspect, and delivers the goods to
sub-purchaser, the buyer is deemed to have accepted the bad goods.

If the buyer keeps the goods for an unreasonable amount of time, but has intimated the seller that
he rejects it, it is still not acceptance.

The buyer is deemed to have accepted the goods in the following situations:

1. Intimates the seller that he has accepted them.

2. Does any act inconsistent with his ownership.

3. Keeps the goods beyond reasonable time.

Section 43:

The buyer is not bound to return the rejected goods to the seller, unless otherwise specified, he
could just let the seller know that he does not accept the goods.

Of course, there must be a reasonable cause for rejecting the goods.

Section 44:

If the buyer is not taking delivery in reasonable time, despite the seller’s willingness and request
to do so, the buyer shall be responsible for any loss occasioned on his neglect and refusal, and for
a reasonable charge to keep the goods in said custody

The seller may either repudiate the contract, or just ask the buyer to pay the compensation and
continue with the contract.
Section 45:

Section 45(1):

Clause a: Unpaid seller: it is a person who has not been paid price, partially or wholly.

Clause b: Bill of exchange: it is a written order to pay a person a particular sum to a particular
person, on a particular date. Eg. check. If a bill of exchange is given but it is dishonored, the
seller is unpaid.

Section 45(2):

If the surety has paid amount for principle debtor to the seller, the surety will have all the rights
that a seller has. Seller includes anyone who is in the capacity or position of a seller. Same goes
for an agent of the seller to whom the bill of lading has been endorsed.

Bill of lading: it acts as a document of title, authorizing the buyer or a person whose name is
endorsed on it to receive the goods. It is issued by a carrier, which is in nature of
acknowledgement or the receipt of cargo for shipment. It implies legally that the carrier has
received the cargo, and is under obligation to deliver the goods to the person who was authorized
to receive them.

If agent has paid price initially to the seller, and goes to the buyer to receive that price from the
buyer, agent will be the seller.

This term includes a person who is in position of the seller. Eg. in case of surety for the buyer
who has paid price to the seller, he will stand in the position of the seller. (Section 140 of ICA)

Section 46:

Section 46(1):

Clause a: Right of Lien: if the seller has goods in your possession and is unpaid, the seller may
say that he will not deliver until not paid. It is a possessory right.

Clause b: Stoppage in Transit: If the buyer has parted with the goods, and they are in transit
(given to carrier), and the seller knows that the buyer will not pay, he can stop the goods. Here,
the buyer must be insolvent.

Clause c: Right to resale: the seller cannot resell the goods.

Section 46(2):

Right of Withholding Delivery: when the property has not passed, the seller can withhold the
delivery.

Section 46:
The definition of lien under blacks law dictionary is its a legal right or interest that a creditor has
in another's property , last thing until debt or duty that is secured , is satisfied.

This term also implies that a property in the goods has vested in the buyer because generally no
man can have lien on his own property or goods .

This right of lien is exercisable when the payment has become due and the seller remains unpaid
, it doesnt matter whether the buyer has become insolvent or not.

The right of stoppage in transit arises only when the buyer has become insolvent and the seller
has parted withe the possession

Under subsection 2 of section 46 : this is a situation where the property has not passed to the
buyer , here the seller being still the owner cannot exercise right of lien per se but he can
withhold delivery until the price is paid , this right is analogues to the right of lien and sometimes
called as quasi lien.

Section 47 : 1: provides that lien can be exercised in :

1. Goods have been sold without any stipulations as to credit (payment need not to be
immediately)
2. Sold on credit but term has extend
3. Buyer becomes insolvent

Right of lien can be exercised even if the seller has possession of goods as bailee or agent etc.

The sellers lien is a particular lien. Its not general one for all his debt for a buyer.

A sale is on a credit where seller agrees to accept payment at future date

The granting of payment implies that the seller needs to accept the payment at a later date , but it
doesn't mean that he is prepared to deliver the goods without payment ,

There is no right of lien of currency during credit but it evives once the credit period expires

If the buyer becomes insolvent before price is paid and the seller is in possession he can exercise
his right of lien

Tender of price extinguishes lien even if seller declines to receive money.

section 48 : 1. the seller may exercise right of lien on remainder unless there is a waiver

2. Even where the contract is for delivery and payment by distinct installments and the buyer
becomes insolvent in the course of contract , the seller is entitled to refuse the delivery till he has
paid for those already delivered as well the price of those still to be delivered.
Section 49 termination of lien

1. Whenever the property has passed and the goods have reached the actual possession of
buyer the sellers sold remedy in personal claim he stands in ina position like that of any
other creditor , all the special remedies in his favour are gone.
2. If the buyer taken possession by wrongful act the seller may take them back he may even
sue the buyer for recovery of possession.
3. When the sale is on the credit the seller is deemed to have waived the lien.
4. The seller may reserve the right of disposal by making the good deliverable on his
direction.
5. There can be expressed waiver or implied waiver. An implied waiver can occur simply by
some action, where such action indicates one's intention to waive the rights.

Valpy v. Gibson: the good were delivered to buyer by seller and were to be returned and buyer
becomes insolvent , seller refuses to sell

Facts : goods were sold, sent by the seller to the shippers subsequently they were re landed and
sent back for repacking while they were still in possesion of the seller, the buyer became
insolvent. The seller lost their lien by delivering to the shipping agents their refusal to deliver the
goods to the trustee was wrongful.

Eduljee v. John bros

Facts refrigerator was sold, delivered to the buyer, two parts were taken away by the seller for
repair ,the seller had no lien over the separate parts on the groud that original part was not paid

Section 50 : right of stoppage in transit

When the buyer is (must be) insolvent, the buyer can stop the goods in transit and retain the
possession of goods again.

1. The exercise of right of stoppage in transit does not mean that the seller cancels the sale
or property revests in him. He gets the rights to reposses the goods
2. after repossessing he is bound to deliver the goods to the buyer if the price i paid or
tendered after delivery seller loses his lien but he may exercise right of stoppage in
transit.
3. we may say that when the right of lien ends the right to stop in transit begins.

Section 51:

subsection one

Subsection two-

1. DISTINCTION BETWEEN RIGHT OF LIEN AND STOPPAGE IN TRANSIT

2. (1) The essence of lien is to retain possession while the essence of the stoppage in transit
is to regain possession.
 3. (2) The right of lien is applicable to goods, which are in the possession of the seller. The
right of stoppage in transit is applicable to the goods, which are in possession of the
carrier.
4. (3) The right of stoppage in transit is applicable to the insolvent buyer. But the right of
lien is applicable to all persons, solvent or insolvent.
5. (4) The right of stoppage in transit is applied to the buyer through the earner. Therefore
stoppage means the seller's right to 'regain' the goods. But he means the right to 'retain'
the goods. Of course both the rights are applicable to goods only.
6. When the right of lien ends the right to stop in transit begins.
7. Class - the essence is retaining the possession, in stoppage its regaining
8. In lien seller must have possession of the goods in stoppage he must have parted with the
possession.
9. Right of lien can be exercised even if the buyer is not insolvent stoppage in transit can be
exercised only when buyer is insolvent.
1. section 51: the moment the goods are delivered to the carrier ,to be transmitted to the
buyer, the transit begins. And once the goods arrived the destination and deliver to the
buyer, the transit ends.
2. If the buyer takes delivery before destination transit ends
3. It can end even by attornment (acknowledgement)

Section 52: there are two modes of exercisation of right under section 52 first by taking actual
possession, second by giving notice to carrier/bailee/agent to not to deliver the goods

This section does not provide any form of notice. It may be oral or written

The notice must be given in advance to enable the principle to stop the goods. Once the notice is
recieved the carriee has to comply with it if he fails he may be sued by the seller.

Section 53: this section deals with the situation where the buyer without paying the price sells
the goods or pledges them right of stoppage in transit and right of lien is not affected by subsale
or pledge unless the seller assented

It also contemplates a situation where the seller has lawfully transferred the document of title to
the buyer and the buyer tranfers that document by way of sale or pledge to a person who takes
the document in good faith and for consideration in such a case where there is a the rights of
seller is defeated but in case of pledge the seller can only exercise his right subject to right of
pledge

The pledgee may in advance an amount as consideration or may secure an antecedent or previous
debt

Consideration here means the debt.

S

Where the goods are pledged to y it means there is a tramsfer of document of title to him

Section 54:
Subsection 2-when you give notice, seller can recover loss but the buyer cannot recover from
you

When you don't give the notice Nd there occurs a loss, then even seller cant recover loss but
buyer can recover profit.

Subsection 3-

subsection 4- if a seller asks a buyer with a reasonable time that if he will not pay seller may
resell to someone else

🌾
Question - x is a grain merchant who carries on his business in delhi , y order 10 bag of wheat
from x, x sends 10bags to y, who lives in bhopal by handing over the bags to z, who was a
cartier appointed by y , goods arrived at bhopal and placed by z , at y's request in z's warehouse,
while the goods were in possession of z , y becomes insolvent, x called z and directed him not to
deliver the goods to y as the price was not paid, even after this instruction z handed over the
goods to y.

1. Whether x can retake the possession , ( no because the transit has already ended and he
has already delivered the good and kept in godown and hence acknowledged)
2. Whether x can sue z for the loss sustained by him due to the delivery of goods. (No
because the notice has been given after the transit)

section 54 the word rescinded subsection 1 means treated as discharge by the seller or terminated
by the seller

The buyer may put an end to sellers lien and entitle himself for delivery

Right of resale is very important because the seller cannot keep goods with him indefinitely after
exercise of right of lien or stoppage

Resale is provided in section 54 it says that if buyer fails to pay the price, the unpaid seller can
resale the goods in a following circumstances

1. Where the goods are of perishable nature

2. Where the unpaid seller has exercised right of lien or stoppage in transit and gives notice
to the buyer of his intention to resell the goods.
3. Where the unpaid seller has expressly reserved his right of resale
4. Where the goods are perishable the seller may resale the goods to another within a
reasonable time.

What is reasonable is a question of fact here.

5. Where the seller expressly reserve his right of resale, the seller is not required to give
notice and
6. Where the unpaid seller has exercised his right to lien or stoppage in transit and gives
notice to the buyer and buyer doesnt pay even after receiving that notice within
 reasonable time, the seller may resale thr goods and in such cases the seller is also
entitled to
1. Recover the difference between contract price and sells price
2. Retain the profits if the resale price is higher than the sale
3. However, if the goods are resold by the seller without giving notice to the buyer
○ The seller cannot recover the loss suffered
○ If there is any profit he cannot keep surplus with him

Case law : US Steel products and company v. G. W. R. 1963

Facts : a railway company was in possession of goods as carrier the seller gave notice of
stoppage in transit, the buyers were owing some of money to the railway company (iska matlb)
here the railway company was not allowed to setup in priority to the sellers right of stoppage in
transit, a lien exercisable by the company against the buyers

Knight v. Wiffen (sec 53 , 48(2) ) : Here x sold to Y 80maunds out of granary , y sold 60 maunds
out of that to Z, Z received delivery order from Y and forwarded it to X, X informed Z that he
will send the grain in due course Y became insolvent, the question was whether X can refuse to
deliver the 60maunds to them and whether he may retain the remaining 20 maunds.

X's right against the 60maunds is lost because X recognised the title of Z

He can retain the possession and cannot refuse to deliver it to Z.

Section 55 suit for price : 1 deals with the situation where the property in goods is passed , this
involved two types of cases

1. Suit for price of goods sold and delivered

2. Suit for price of goods sold but not delivered

passing of property is sufficient irrespective of delivery for application of this subsection

The term wrongfully refuses must be determined from the terms of the contract,for example - if
the buyer right fuses to pay before the expiry of period of credit it cannot be considered as
wrongful refusal

Subsection 2 provides that where under a contract of sale the price is payable on a specific date
irrespective of delivery and the buyer wrongfully neglects or refuses to pay the stipulated amount
\ price the seller may sue him for the price although the property has not passed and the goods
have not been appropriated to the contract

Section 56:

Special and general damages : baxendale case (facts -Plaintiffs operated a mill, and a component
of their steam engine broke causing them to shut down the mill. Plaintiffs then contracted with
Defendants, common carriers, to take the component to W. Joyce & Co. to have a new part
created. When delivery was delayed due to Defendants’ neglect, causing Plaintiffs’ mill to
remain closed longer than expected, Plaintiffs sued to recover damages.
Held. No. A nonbreaching party is entitled damages arising naturally from the breach itself or
those that are in the reasonable contemplation of the parties at the time of contracting. Here,
while the breach by Defendants was the actual cause of the lost profits of Plaintiffs, it cannot be
said that under ordinary circumstances such loss arises naturally from this type of breach. There
is a multitude of reasons for a miller to send a crank shaft to a third party. Defendants had no
way of knowing that their breach would cause a longer shutdown of the mill, resulting in lost
profits. Further, Plaintiffs never communicated the special circumstances to Defendants, nor did
Defendants know of the special circumstances.) section 73 of ica , proximate damage will be
awarded generally.

1. Section 56 deals with a situation where the buyer wrongfully neglects or refuses to accept
and pay for the goods or services. The seller may sue him for damages for non
acceptance. This section is silent on measure of damages, section 73 of ica applies
2. It is a general intention of legislature while awarding damages for the breach of contract,
the non defaulting party be placed in the same situation , as he would have been , if the
contract had been performed , in all cases where the contract is broken the injured party is
entitled to receive from the party in default compensation for the loss caused to him.
Which naturally arises in usual course of things from such breach.

Section 56+57 both following are the rules

Where there is available market price for the goods , the measure of damages is ascertained
between the contract price and market price at the date of breach

Where no market price is available, the measure of damages would be estimated to the loss ,
directly or indirectly naturally resulting in ordinary course of events , from breach of contracts
where the time of performance is fixed by the contract but is extended and another date is
substituted for it by the agreement between the parties , the substituted date is can be taken into
consideration.

State of madras v. Ganon dunkerly ; construction does not include the passing of property

This case law explains :

● How contract of construction are diff from contract of sale

● Statutory transaction section 4 - to make commodity readily available and to impose
statutpry obligation which refers toany type of legal duty or liability.

New india sugar mills ltd. V. Commissioner of sales tax

Andhra sugar mills v. State of UP

Vishnu agency v. Commercial tax officer

Suresh kumar rajendra kumar v. Koya and sons. : facts the plaintiff sold goods to the defendant
who wrongfully rejected them, plaintiffs took all necessary measures to sell the goods urgently it
was held that the plaintiff was entitled to get damages / claim the difference between price at
which the goods were supposed to be sold and the price at which they were actually sold ( it also
involved mitigation of damages -reducing the level of severity / minimising the loss)

Section 57 damages for non delivery

1. Buyers remedies : a buyer may sue for damages of non delivery of the goods provided the
seller wrongfully neglects or refuses to deliver the goods
2. Wrongful refusal or meglect may arise in the following circumstances where the buyer
● Has paid the price wholly or partly and the goods are not delivered
● That the seller has unreasonably delayed the delivery of the goods
3. Other remedies of buyer are
● Suit for specific performance
● Defects in the goods delivered - breach of warranty etc.

Section 58 : specific performance of contract.

Ingredients :

1. Subject to chapter 2 of SRA

2. On application
3. Without giving the defendant an option of retaining goods upon payment of damage
4. Goods must be specific and ascertained
5. Decree may be unconditional or conditional

This section is the only section in the act which deals with equitable rights and it provides
limited remedy for the buyer.

It is only on the application of the buyer when suing as plaintiff , that the contract of sale can be
enforced specifically

this section applies when the goods are specific and ascertained .

in any suit for breach of contract to deliver specific or ascertained goods, the Court may by its
decree direct that the contract shall be performed specifically, without giving the defendant the
option of retaining the goods on payment of damages.

The decree may be unconditional,

This section applies only to specific and ascertained goods

The court of equity only exercise their jurisdiction when the chattel in question were article in
peculiar value and such reliefs were not given for the goods which were general articles of
commerce readily available which had sufficient remedy in an action for damages

Because chapter 2 applies here and therefore the cases in which the remedy can be provided eare
limited
_ Those conditions may be for payment of price damage etc. and the buyer have to comply with
those conditions to get the goods delivered

Section 59 : breach of warranty

Breach of condition or warranties are dealt from 14-17 , for example if there is a breach as to
fitness of goods under sec 16 the buyer is entitled to treAT the contract as repudiated and to
reject the goods but he may elect to treat the breach of condition as breach of warranty in which
he is entitled for remedy under the present section.

The buyer may claim a deduction from the price if the loss occasion is less than price. He may
refuse to pay the price altogether

if the loss equals the price or he may not only refuse to pay the price but also claim the access if
the loss exceeds the price and he may pay the price in all these cases and sue the seller for breach
of warranty

Section 72 OF ICA applies

In case of breach of warranty related to quality such loss can be -primarily the difference
between the value of goods at the time of delivery to the buyer and the value they would have
had if they answered to the warranty

Anticipation of breach : one of the party refuses to accept the goods in future / delivery before
due date

Homework

Frost v, knight :- in Frost v Knight (1872) 7Exch 111. The defendant promised to marry the
plaintiff on the event of the death of his father. The father was then still living and the defendant
proclaimed his intention that he would not fulfill his promise on the event of his father’s death off
the engagement. The plaintiff did not wait for the death of the father, but immediately brought an
action for the breach of contract. He asserted that the breach could arise only on the
contingency taking place. As soon as breach happen even in anticipation you can take action.

Opinion of justice blackburn : it was held that the promisee, if he pleases, may treat the notice of
intention as inoperative and await the time when the contract is to be executed and then hold the
other party responsible for all the consequences of non performance but in that case he keeps the
contract alive for the benefit of the other party as well as his own, he remains subject to his own
obligations and enables the other party to not only to complete the contract , not withstanding the
previous repudiation but also to take advantages of any supervening circumstances.

1. Take action immediately

2. He can wait till the actual date amd keep the contract subsisting
3. You may keep the contract alive
4. the contract alive For advantage of both
Repudiation : hwere one defaulting party shows that u am not going to perform and in response
to that another party refuses the contract.

Immutable rues : cannot be altered / changed

Opt in rules : example arbitration

Default rules :

Anticipatory breach of contract

Section 60: it provides that if the contract is repudiated before due date it shall be considered as
anticipatory breach, this covers the situation where the performance is to take place in future but
before the time arrives, the promisor say or shows by conduct that he will not perform his patt of
obligation under the contract

This section gives option to the promisse to wait till the date of actual performance amd treat the
contract as subsisting or to treat the contract as rescinded in anticipation

The recission is the result of repudiation together with the acceptance of the repudiation.

Measure of damages is fixed by the difference between contract price and market price on the
day when they ought to have been delivered or accepted

If the party accepts repudiation he must act reasonably to minimize the loss

Section 61- Interest by way of damages and special damage

It deals with the situation where the seller or buyer wants to recover interest, special damages or
money paid where consideration for the payment of it has paid, here the special damages must be
recoverable by law, there may be a contract mentioning the rate of interest or else the court may
apply the rate which it deems fit.

If under a contract of sale then seller tenders the goods to the buyer and the buyer wrongfully
refuses to accept and pay for them the court may award interest on the price from the date of
such tender. Or if the price is payable on the certain date irrespective of delivery, the interest will
run from that date and the goods are sold on credit the interest will run from expiry of the credit
period

Interest prior to the suit may be awarded

Section 73 ica- the words compensation for any loss or damage which naturally arose from the
usual course of things from such breach " Refers to general damage and the words " Or which
the party knew when the make the contract to be likely to result from such breach refers to
special damages, this is covered in the later part of sec 73
Failure of consideration - the buyer is entitled to recover the price if the seller has no title (sec
14) or if the goods were not matchinh the description or there has been breach of condition , as to
quality of fitness.

Section 62: this section provides that any right or liability by implication of law may be
negatived or varied by express agreement therefore conditions and warranties implied section
14-17 may be negatived or varied by an express agreement similarly the rules relating to passing
of property under section 20-24 may be varied or negatived in the similar manner.

Section 16(4) provides that an express warranty or condition would not negative or vary unless
inconsistent therewith , there fore the court under this section also must see as to whether the
express conditions are inconsistent or in concurrence with the implied terms.

This may be done by course of d ealings and usage of trade

Course of dealing : between the parties like giving discount to a particular customer from a
long time

Under section 63 reasonable time is question of fact and it depends upon particular
circumstances, nature of goods etc to determine this question of fact, in some cases usage of
trade has also been taken into consideration.

Section 64: sale by auction

This section deals with auction sale where the bidder gives proposal by declaring price and the
invitation to such proposal is given by the seller/ auctioneer

If the auctioneer put the goods subject to auction sale in separate lots , each lot should br subject
to separate contract of sale prima facie

So long as there is no acceptance of the proposal given by the bidders, the bidders may retract by
their bid, the last proposal which is accepted by fall of hammer or any other customary manner,
the sale is deemed to be complete

Such acceptance may be subjected to condition depending upon the contract

It also lays down that seller cannot make bid without reserving a right to do so, once such right is
reserved it must be notified to the other party, the seller cannot his agent or nominee also to make
bid on his behalf unless such right is reserved if this provision is violated then it may render the
sale as fraudulent or voidable

The auction sale may be subject to reserve price / days price/ upset price and in such a situation
unless the bid reaches the reserved price , the auctioneer can postpone or cancel the auction sale.

Knock out agreements- when the bidder collude within themselves to hamper competition in
the bidding process by agreeing to not to bid against each other are also unlawful ( competition
act 2002-concept of bid rigging) pretended rigging leads to voidable at the option of buyer.
This act is not retrospective in nature (section-65).

The auction sale may be of following types:

Sale with reserved price

Sale without reserved price

Sale with reservation of right to bid by the seller

Conditional sale

End of sales of goods act

Drafting

Parts of deal

Description of deal

Date

Parties (entire description should be given)

Recitals - the background of the deed it may or may not be part of the deed

Testatum : after the recitals the operative part of the deed starts, it commences with a witnessing
clause, eg: "now this deed witnesses as follows" (Operative part starts from here)

Parcels - full description of the property transferred , if its by name you should give name and
other description as to its situation where it is situated, plot no etc.

Testamonial- This is the concluding paragraph, it is written generally as follows, eg- it witness
whereof the party where to have signed this deed on _ , attestation and registration depends upon
the specific law dealing with that.

INDIAN CONTRACT ACT SEC 124 ONWARDS

Section 124 : “Contract of indemnity” defined.—A contract by which one party promises to save
the other from loss caused to him by the contract of the promisor himself, or by the conduct of
any other person, is called a “contract of indemnity”.

The indemnifier’s liability does Arises he must suffer loss before recovering ( when the default
takes place.)

Gajanand case? Adamson case?

*Indemnity and Guarantee.pdf by nehamam - read

Mam: the term indemnity mean to make good the loss or to compensate the loss , sec 124c
defines indemnity as a contract in which one party promises to save the other from the loss
caused to him by the conduct of the promisor himself or by the conduct of the third party.

This section is limited to human conduct

Indemnifier - person who promises to save - the one who gives indemnity

Indemnity holder- person who is saved - to whom the indemnity is given - the definition
excludes loss arising out of perils of sea or fire etc [sec31]

Commencement of liability of indemnifier - english rule - indemnity holder must suffer actual
lost. This english rule was made a little flexible in case of :

Gajanand moreshwar v. moreshwar madan 1942 bom HC : justice chawla: expressed his
opinion “it is true that under english law no action could be maintained until actual loss had
been incurred it was realized that indemnity might be of little worth. if the indemnifier is not
allowed to enforce the indemnity till he had actually paid the loss , in a suit filed against him ,he
will have to wait till the judgment so that he can sue the indemnifier , therefore , by application
of equitable principle the rigor of the rule was mitigated and it was held that one the liability
becomes absolute then the indemnity holder may ask the indemnifier to pay the amount as
claimed or to deposit the amount with a bond so that he can pay it whenever the claim is made.”

Praful kumar mohanty v. regional manager of oriental insurance company 1997 orissa HC -
notice : in this case motor vehic;e was ensured - it was stolen -acc to the policy - indemnified
was supposed to give immediate notice of the loss assured made police report immediately - a
notice after one month , the company denied the claim due to delay in giving the notice -
indemnity was allowed by the court fro the reason is that “ immediate police report showed
bonafide intention on the part of the assured , delay of one month was not unreasonable

Adamson v. jarvis : plaintiff [auctioneer] sold kettles on behalf of defendant turned out that
defendant was not owner - auctioneer sufferred loss - sued defendant.

Held : plaintiff acting upon the request of teh defendant is entitled to assume that if he suffers
any loss due to wrongful act of the defendant he will be indenified - claim allowed

Section 125. Rights of indemnity-holder when sued.—The promise in a contract of indemnity,

acting within the scope of his authority, is entitled to recover from the promisor— (1) all
damages which he may be compelled to pay in any suit in respect of any matter to which the
promise to indemnify applies;

(2) all costs which he may be compelled to pay in any such suit if, in bringing or defending it, he
did not contravene the orders of the promisor, and acted as it would have been prudent for him to
act in the absence of any contract of indemnity, or if the promisor authorized him to bring or
defend the suit;

(3) all sums which he may have paid under the terms of any compromise of any such suit, if the
compromise was not contrary to the orders of the promisor, and was one which it would have
been prudent for the promisee to make in the absence of any contract of indemnity, or if the
promisor authorized him to compromise the suit

Mam: is limited to the rights of indemnity holder when he is sued and he is entitled to recover
the following :

1. All damages which he pays to third party

2. Costs incurred during the proceedings
3. Any compromise which has happened

For application of subsection 2 and 3 indemnity holder must act in a prudent manner nd he must
not violate the directions of indemnifier.

https://youtu.be/JMUF2xBXcbk above video

Section 126. “Contract of guarantee”, “surety”, “principal debtor” and “creditor”.—A “contract
of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in
case of his default. The person who gives the guarantee is called the “surety”; the person in
respect of whose default the guarantee is given is called the “principal debtor”, and the person to
whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written.

Mam : it is a collateral undertaking to be liable for default of another. Tripartite agreement - 3

parties are stipulated - surety principle debtor and creditor [ defineed in section 126]

INDEPENDENT LIABILITY incurred by the surety is not covered under 126.

Section 127. Consideration for guarantee.—Anything done, or any promise made, for the benefit
of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee.

Any act done for the principle debtor would be considered as the consideration.

No direct consideration for the surety is needed but the contract - section 127 `

It is not a contract of utmost good faith

Creditor is not under the obligation to disclose all circumstances to affect the willingness of
surety but it should not be falling under section 142 misrepresenation and 143 the concealment

Difference between past and executory consideration : when thing is done and acknowledged
later upon that is past consideration and when there are promises exchanged to perform task at a
later time. , is executory consideration.

Section 128 : 128. Surety’s liability.—The liability of the surety is co- extensive (same as that of
principle debtor (100% liable ) Surety’s liability extends upto the liability of PD - like if there is
a son and he did a mischief in neighbourhood his father will not say that im liable only for 50%
of this loss so same is the case here of principal debtor and surety , but if it is stated by the surety
specifically in the contract that ill pay only 50% then he will not be liable wholly and the clause
of co extensivity will be removed ) then a with that of the principal debtor, unless it is otherwise
provided by the contract.

Illustration A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is
dishonoured by C[rejected] . A is liable, not only for the amount of the bill, but also for any
interest and charges which may have become due on it.

Guanrantee given for rents : pd was not asked to pay the debt under the contract itself

https://youtu.be/GUHeAQeUQ9I sec 128

COMMENCEMENT of surety's liability start as soon as the default by the principle debtor
starts

Section 142 says when the contract of guarantee made by misrepresentation of any facts which
may affect the decision of surety is invalid.

Section 143 : any guarantee which the creditor has obtained by keeping silence to material
circumstances is invalid

Principle debtor need not to competent to contract only surety and creditor should be competent :
major
 Section 144 : . Guarantee on contract that creditor shall not act on it until co-surety
joins.—Where a person gives a guarantee upon a contract that the creditor shall not act upon it
until another person has joined in it as co-surety, the guarantee is not valid if that other person
does not join.

Bank of bihar v. damodar prasad : you dont need to exhaust all the remedies against PD and can
directly sue the surety because there has already been a contract and otherwise it will jeopardize
the whole motive behind the contract of guarantee. No need to prolong the litigation

INCOMPLETE - Imran notes

In the case of an unconditional bank guarantee , the nature of obligation of bank is absolute and
it is not dependent upon any dispute or proceeding between the party at whose instance the bank
guarantee is given and the beneficiary

2. The commitment by the bank must be honored , free from interference by the court and it is
only in exceptional cases that is in case of drought or in case irretreatable injustice would be
done . if the bank guarantee is allowed to be encashed

Up cooperative limited v. singh consultants 1988 SC :

HELD- the operation of bank guarantee should be stayed in cases of serious dispute or fraud
acceptor

State bank of india v. sahkari shakkar karkhana 2007 SC : the court held that the court cannot
take recourse to the surrounding circumstances except in exceptional circumstances .

Centax [india ltd. ] v. binmar impex inc. : held commitments under bank guarNTEE MUST be
honored otherwise trust in international commerce would be irreparably damaged

UCM investments v. royal bank of canada 1982: what is economic function for bank guarantee :

Judge cited : LORD DIPLOCK : - the commercial purpose for which the system of confirm
irrevocable documentry credit has been developed inthe international trade is to give to the seller
and assured right to be paid before he parts with control of goods and that does not permit any
dispute with the buyer as to the performance of the sale be used as a ground for non payment or
reduction or deferment of the payment.

A guarntee has to be enforcced within th eperiod of limitation from the date on which it was
executed [ limitation act 1963]

Section 133 : Discharge of surety by variance in terms of contract.—Any variance, made

without the surety‟s consent, in the terms of the contract between the principal 1 [debtor] and the
creditor, discharges the surety as to transactions subsequent to the variance.

Raju shetty v. bank of bAroda 1992 karnataka hc : a variance even given in advance or at the
time of variance would maintain liability of the surety intact
Example - A becomes surety to C for B‟s conduct as a manager in C‟s bank. Afterwards, B and
C contract, without A‟s consent, that B‟s salary shall be raised, and that he shall become liable
for one-fourth of the losses on overdrafts. B allows a customer to overdraw, and the bank loses a
sum of money. A is discharged from his suretyship by the variance made without his consent,
and is not liable to make good this loss. A is surety , B IS PD nd c is creditor

Example :C agrees to appoint B as his clerk to sell goods at a yearly salary, upon A‟s becoming
surety to C for B‟s duly accounting for moneys received by him as such clerk. Afterwards,
without A‟s knowledge or consent, C and B agree that B should be paid by a commission on the
goods sold by him and not by a fixed salary. A is not liable for subsequent misconduct of B

Section 134 : this section providees two modes of discharge : when creditor makes any
contact with the prinicple debtor by which the principle debtor is discharged.

Example : 1. creditor releases the principle debtor

2. When creditor does any act or omission the legal consequences of which is discharge of
principle debtor

Example : the contract of construction- creditor was bound to supply creditor - omitted to
supply - PD id discharged - surety is discharged

_ holi vacay_

Rights against co sureties

1. This covers the situation where teh debt has been guaranteed byn more than one persons
2. The released co sureties remains liable to other for contributions sec 148
3. The co sureties are liable to make equal contributions to the extent of default [sec 146]
the princi[le of equal contribution is subject to the maximum limit if any fixed by assurity
to hisi liability a continuing guarantee is a type of guarantee which applies to a series of
transaction [129 sec]
4. A continuing guarantee may be revoked at any time by the surety by giving notice to the
creditor
5. Write diff between indemnity and guarantee - homework

Sec 148 - contract of bailment

Thais section defines bailor and bailee the bailment is delivery of good by one person to another
upon the some purpose and once the purpose is adcomplished the goods shall be returned to
bailor or any other person to whom it directs or dispose goods in pursuance of his direction.

The explanation clarifies that if a person is already in possession of goods and contracts to hold
them as a bailee he becomes bailee although the goods may not a=have been delivered in reality.
Bailor- who deliver the goods

Bailee - to whom they are delivered

Essentials :

1. Delivery and transfer of possession : for appliucation of this section possesion must be
transferred and not mere custody [women delivereed orbnnaments to jeweller for melting
and making new jewels

17 march to 2 april notes

[7:59 am, 09/04/2022] Shreeji Nliu: 126 contract of guarantee

1. It is a collatoral undertaking to be liable for default of another

2. Tripartite agreement - three parties are stipulated - surety, principle debitor and
creditor(defined in sec 126)

3. Independant liability incurred by the surety is not covered under section 126

4. No direct consideration for the surety but the contract is vallid - see section 127

Contract of guarantee is not of atmost good faith- creditor is not under obligation to tell all
circumstances effecting willingness of the sureity but it should not be falling under section 142
or 143( misrepresentation or concealment ) if it is hit by the above given section - contract
invalid

Bank of bihar v damodar prasad

Whether the creditor has to exhaust all the remedies, the very purpose of thr contract of
guarantee is to make suretor liable

Extent of suretor's liability is co extensive with that of principle debtor (section 128 - it shows
max extent of surety's liability )

Maharaja of banaras v har narayan singh 1909

Guarantor not liable for interest on rent as principle debtor was also not liable

Indian oversees bank v ramulu 1999

Surety - was liable for principle amount and interest - pd was also liable

Section 124- deals with joining of co surety, provides guarantee is not valid if the other person
does not join

Guarantee is generally unconditional

Bank of bihar v damodar prasad ( AIR 1967 SC 297)

In this case the defendant guarantted a bank loan then there was a default - defendant was sued -
trial court directed that the bank shall enforce the guarantee only after exhausting all remedies
against the principle debitor - hc confirmed the decree- sc overruled it - held the basic object of
guarantee is defeated if the creditor is asked to postpone his remedies against the surety -
solvency of the principle debitor was not sufficient ground for restraining execution of decree
against the surety, It is duty of surety to pay the amount decreed and upon such payment he'll be
subrogated in place of creditor,

Union of India v manku narayana 1997 Sc held that the creditor must proceed against the
morgage property at first place and then against the surety for balance.

SBI v index port (1992)

Sc cited following passage - holsbery la2 of england - it is not necessary for the creditor before
proceeding against the surety to request the principle debitor to pay or to sue him although
solvent, unless it is expressly before stipulated for.

Chitty on Contracts - ' prima facie the surety may be proceeded against without demand against
him and without first proceeding against the principle debitor".

The creditor can be proceeded against the principle debitor alone his suit shall not be rejected on
the grounds that he has not joined the surety as defendant, similarly surety alone can be sued,
surety can place limits on his liability or put conditions upon it, bank guarantee an agreement
made by a bank to pay a debt if the person who owes the money can not pay

Bank guarantee is an absoluted undertaking to pay the amount on demand

It has nothing to do with the state of relations between the gurantee holder and the person on
whoes behalf the gurantee was given

Maharashtra state electriciry board vs official liquidator 1982 Sc

Bank gave guarantee- Limited to rs 50k to be encashed within 48 hrs of demand,it was issued on
behalf of the supplier and sufficient securities were deposited within the bank for the sale, the
only condition was to pay on demand - payment demanded - liquidator tried to prevent the
encashment, no such relief was allowed , held - the guarantee holder had right to enforce
payment and the bank had right to reimburse itself from securities deposited with the bank

Banwarilal v punjab state cooperation limited 1983 delhi hc held - the scrutiny if it is
commensed in case of underlying contract , the autonomy and independence of an absolute
gurantee would be lost - enforcement would depend upon enquiry - would defeat the very
purpose

Hindustan steel works copr v Tara core and co. Ltd

Sc laid down following propositions

1. Bank gurantee is independant and distinct contract between the bank and the beneficiary and it
is not qualified by underlying transaction and primary contract between the person at whoes
instance the bank gurantee is given and tge beneficiary

The nature of obligation of bank is absolute and it is not dependent upon any dispute or
proceeding between the party at whoes instance bank guarantee is given and the beneficiary
The commitment must be honored free from interference by the court and it is only in
exceptional cases that is in case of fraud or in case irreputable injustice would be done till the
time gurantee is allowed to be encashed

Up cooperative federation ltd vs sing consultance 1998 SC held the operation of bank guarantee
should be stayed in cases of serious dispute or fraud etc

State bank of India v sehkari shakar karkhana 2007 Sc held the court can not take recource to the
surrounding circumstances except in exceptional cases,

Centax ( India ltd) v binnar Intex Inc 1986 SC

Held commitments under guarantee must be honored otherwise trust in international commerce
would be irreparably damaged.

What is the economic function is bank guarantee ans these cases?

UCM investments V royal bank of canada 1982

Judge cited lord bliptok " the commercial purpose for which the system of confirm irrevocably
documentary credit has been developed in the international trade is to give to the sellor and
assure right to repay before he parts with the control ofthe goods and that does not permit any
dispute with the buyer as to the performance of contract of sale being used as a ground for non
payment or reduction of deferment of payment

A guarantee has to be reenforced within the days it was executed ( the limitation act 1963 )

The discharge of surety from liability

Section 123 - surety is discharged when without his consent the creditor makes any change in
nature or the terms of the contract ( C and A illustration)
Raju shetty v bank of barodra 1992 karnataka HC ,

a variance in consent either given in advance or at the time of variance , would maintain the
liability of surety intact

Section 134 - this section provides two modes of discharge

1. Creditor makes any contract with the principal debtor by which the principle debitor is
discharged example - creditor releases the principle debitor

2. When creditor does any act or omission the legal consequence of which is the discharge of
principle debitor

Example the contract of construction - creditor bound to supply material- ommited to supply- PD
is discharged- surety discharged

Section 135 provides following modes of discharge

bY composition

Promise of giving time

Promise not to sue

Section 137 provides that mere forbearance to sue the principal debtor does not discharge the
surety ,promise not to sue discharges the surety

Section 138 provides that in the situation where there are co- sureties, release of one of them will
not discharge the other and neither does it free the surety so released, from its responsibilities
from others ( joint and several liability)

section 136 the surety is not discharged when there is an agreement with the third person to give
time to the principal debtor
Under section 139 if the creditor does any act which is inconsistent with the rights of surety or
omits to do which he is required to do which eventually impares the remedy of the surety, then
the surety will be discharged.

Surety is entitled for re- imbursement from the principal debtor if the creditor impairs the benefit
of this remedy the surety is discharged

example -creditor is supposed to preserve securities but he fails - surety discharged- the creditor
is supposed to preserve securities- he fails- surety is discharged ( read illustration B and C for
139)

RIGHTS OF SURETY

right of subrogation- section 140 - It provides that upon payment or performance of the promise
by surety on behalf of the principle debitor he is invested with all the rights which the creditor
has against the principal debtor - he steps into the shoes of the creditor

Amratlal govardhan vs state bank of travancore 1968 SC- HELD- THE SURETY will be entitled
to every remedy which the creditor has against the principal debtor to enforce every security and
all means of payment, to stand in the place of creditor and to have the securities transferred, even
though there was no stipulation to that effect , this right of surety stands not only upon the
contract but also upon natural justice , the word invested means all the rights that the creditor has
against the principal debtor - the law vests those rights in surety

Marata bhoj v united industrial bank 1987 calcutta HC held - if in any suit it is proved that the
principal debtor is about to remove or dispose off his property with the intention to defraud his
creditors the court may grant a temporary injunction. To restrain him

Principle for specific relief

Balance on convenience

Irreparable loss

Prima facie case

Right of indemnity of surety - section 145 - rightfully paid depends on circumstances and
obligation

Illustration A and C is continuing guarantee give 2000 ,sell later , specific guarantee pay at
default
In every contract of guarantee there is an implied promise by principal debtor to indemnify the
surety

This right enables the surety to recover from the principal debtor for the sum he has rightfully
paid under the guarantee

Right against creditor - section 141

This provides that the surety is entitled to get benefited from every security which the creditor
has against the principal debtor at the time when the contract of surety shift was entered,the
knowledge of the fact is immaterial and if the creditor looses or parts with such security without
the consent of the surety,the surety is ultimately discharged to the extent of value of security.

Illustration A is general explanation,C talks about subsequent acquisition

State of Mp vs kalu ram 1967 SC- court explain the meaning of security- it includes all rights
which the creditor has against the property of principal debitor

Sales timber to a person for a fixed price payable in 4 installments, the payment was guaranteed
by the defendant the contract provided that there is a default in payment of price the state could
prevent further removal of the timber and the state should prevent further removal of the timber
and shall sale the remaining timber for realization of the price and the state allows to take the
timber, the surety was held not liable when he was sued by the creditor

Right of set off , if the creditor sues the surety , the surety may have the benefit of setoff if any
that the principal debtor has against the creditor

For example - if the creditor has in his hand something belonging to principal debtor for which
the debtor could have counter claim, the surety could also put up that counter claim

He can claim such right,not only against the creditor but also against the person who derives title
from the creditor.

Indian finance v Cammanore mills ltd 2002 SC - Held that surety is entitled to every remedy
which the creditor has and therefore he can even ask for the enforcement of the security,

Burden of proof on the gratuitous bailor if there is damage to the bailee with the knowledge of
bailor
Non gratuitous with reward and if injury irrespective of tge knowledge compensated by the
bailor

Right against co surety

This covers the situation where the debt has been guaranteed by more than one person

The released co surety remains liable to the others for contribution ( sec 138)

The co sureties are liable to make equal contribution to the extent of default ( sec 146)

The principal of equal contribution is subject to the maximum limit if any , fixed by a surety to
his liability

Continuing guarantee is a type of guarantee, which applies to a series of transaction (sec 129 )

A continuing guaranty may be revoked at any time by the surety by giving notice to the creditor

Hw Difference btw indemnity and guarantee

Bailment - bailee and bailor

The bailment is delivery of goods by one person to another upon some purpose at upon a
condition that once the purpose is acomplished the goods shall be returned to the bailor or to any
person to whom he directs or dispose of the goods in pursuance of his direction

The explaination clarifies that if a person is already in the possession of the goods and contracts
to hold them as a bailee , he becomes bailee although the goods may not have been delivered in
reality

Bailor - who delivers the goods

Bailee to whom they are delivered

Essentials

Transfer of possession
For application of this section possession must be transfered and not mere custody ( women
delivered ornaments to the jeweller for melting and making new jewels during the day time he
used to work on the jewels in the evening she used to lock them and keep the keys, goods were
lost during evening , jeweler was not held liable

Delivery should be made upon a contract

Goods are delivered for some purpose and upon a contract that after the purpose is acomplished
the goods shall be returned of disposed off , the contract may be expressed or implied,

cheshire - this ingredient is usual but not essential, state of gujarat v memom mohmad 1967 SC

Facts - vehicles belonging to the person is seized by customs while in custody , the goods were
damaged - they remain totally uncared, it was contented that the state was not bailee - no
obligation to take care - held - state was bailee- held liable

Conditional delivery

Under contract of bailment the delivery is always conditional that the goods shall be returned
after the purpose is acomplished

If the person is not bound to return the goods it will not constitute as bailment

Deposit of money is not bailment - bank is not bound to return same coin, same currency

Union of India v KV venugopalan 1990 kerala hc

Bank was not allowed to exercise right of lean of the money deposited under fixed deposit
scheme .

Agency and bailment

Bailee does not represent bailor however in agency , agent represents the principle

Difference between sale and bailment and exchange

Duties of bailor ( section 150)

Bailor - 2 types- gratuitpus bailor - bailor for reward

Duty of gratuitous bailor isless than the bailor for reward

Conditions of liability of gratuitous bailor are

He should have knowledge of the defect

The defect must pose risk to the bailee or materially interfere with the use of goods
Duty of bailor for reward is much greater , it is no answer for him to say that he was not awRe of
the defect , he will be liable anyway

Reed v dean ,

Plaintiff hired motor launch , (boat) for holiday , the launch caught fire ,plaintiffs were not sble
to extinguish it ,they suffered injuries , it was held that ,there was an implied undertaking on the
part of defendants , that the launch will be fit for the purpose they were held liable

DUties of bailee

Reasonable care- section 151

This section prescribes the standard of care in cases of bailment which is a degree of care which
a man of ordinary prudence would pay of his own goods if the care is below this standard and if
there is a loss to the goods then he'll have to compensate the bailor

Whether a person can escape lianility in terms of negligence in general , exclusion and limitation
clause

Union of india vs new indian assurance ltd 1983 SC

Plaintiffs care was lost in a fire at garage of bailee and the bailee did not lead any evidence to
show as to how the incidence took place the SC held the bailee liable

This is no justification on the part of bailee that his own goods were also lost along with the
bailers goods

If the loss is due to any act of bailees servant or agent within the course of employment then he
shall be liable

Gopal singh vs punjab national bank 1976 Delhi hc - held

No caste iron standard can be led down for the measure of care due from a bailee and the nature
and amount of care must vary with the posture of each case

Burden of proof will be on bailee to show that he wasexcersing reasonable care and if he places
sufficient evidence before the court that he took all precaustions and care he will not be liable for
the loss

Not make unauthorized use of thr goods bailed , he will be absolutely liable for the loss or
damage , inevitable accident , act of god etc would be no deffects, (section 154)

Alias v E. N. Paul ( 2004 kerela hc )

Car was delivered for repair , bailee allowed unlicenced driver to use it , accident - one person
died- bailee held liable - to compensate family of deceased as well as the bailor

Exception if after 5 pm.. act of god will also not apply if initial mistake
Not to mix goods of bailor with his goods ,without consent of the bailor, if mixed without
consent bear expenses of the separation, if not possible to separate, must compensate bailor for
the loss of goods.

After the accomplishment of the purpose , bailee is bound to return the goods to the bailor,
without demand

Duty to return

Bailor for reward , after the purpose ,

Gratuitous bailor may at anytime require the return of goods , even though he delivered them for
some purpose , or for specific time but if the bailee acted on faith of the bailor and the goods are
demanded back before time and the situation is that the bailee would suffer loss which would be
greater than the benefits recieved , the bailor must indemnify him or the loss .

A bailee not entitled to setup against the bailor , whether goods belong to third person ( setup jus
tertii)

Even if the third person is the owner ,the bailee should return the goods to the bailor as agreed
however, the person claiming rights over the goods , may apply to the court to prevent delivery
of the goods to bailor

Duty in absence of any agreement contrary , the bailee is bound to return to the bailor , natural
increase of profits accruing to the goods , during the period of bailment

Increase in goods need to be returned -Section 163

Finder of goods duties

A finder of goods is the bailee ,he is bound to take reasonable care of the goods

168 and 169 - reasonable care

Interest of the finder of goods is protected in the folloeing ways

Retain goods against the owner for the trouble and expenses incurred

Where the owner has offered a specific reward for the return of the goods , the finder may sue for
such rewards and he may retaun the goods as well , untill he recieves the rewards

Can not make independent claim for expenses but can retain them

Right to sue for rewards subject to condition of returning

Right to sell if perishable or nature of goods led to lot of expenses ( more than ⅔ of value
Sell in certain circumstances as follows

When the goods are in the danger of perishing or of loosing greater part of its value

When the lawful chargers of the finder in respect of the goods found amounts to ⅔ of its value

Contract of indemnity draft

Voluntarily incurred expenses can not be sued

Lawful charges

Involuntary can not be independently sued but can be retained

Rights of bailee -

Right of compensation under 164 - which provides that if the bailee has incurred some loss due
to the fact that the bailor has no right to bail or to give direction with respect to the goods bailed
or not authorized to take them back then the bailor shall compensate the bailee for that loss

Right to necessary expenses etc ( section 158)

Bailee is entitled to lawful charges for providing the services

However section 158 deals with a situation where by the conditions of the contract of bailment
the bailee has not agreed for any remuneration for the services , still the bailor has the obligation
to repay to the bailee necessary expenses, incurred by him for the purpose of bailment,

The bailee is entitled to recover the agreed charges but there is no agreement to that effect then
section 158 comes into claim , we know that lien can be exercised only as long as the bailee has
possession but the bailee has right to receive the charges even when the possession is parted with

Surya investment vs State trading corporation of India 1987 Calcutta hc

tHe corporation hired plaintiff's storage tank for storing oil on account of a dispute , special
officer appointed - took charges of the tank and delivered its content to others - plaintiff lost
possession - lien lost - allowed to claim the charges for protection and storage of the oil - the
bailor enjoyed the services - must pay

Right of lien (170- 171)

If the bailee's lawful charges are not paid he may retain the goods

Bailee's right of lien

Particular lien
General lien

Bailee is entitled to particular lien generally he can retain those goods only in respect of which
the charges are due

171- It provides that where the bailee within the purpose of bailment rendered any service
involved in labor or skill in respect of the goods liened he has in absence of the contract to
contrary, a right to retain the goods until he receives due remuneration

6april

Right to sue (sec 180/181) :these section enables a bailee to sue any person who has wrongfully
deprived him to use or to keep the possession of the goods bailed, if some damage to the goods
happen due to third person

Pledge : it's a special kind of bailment where loan is secured or performance of promise is
assured (172sec)

Essentials:

1. Delivery of possesion
2. document of title constituted valid pledge -Mercantile bank Ltd v. Uo: railway receipts
3. Pledge must happen in pursuance to a contract but it's not necessary that the delivery and
loan should be contemporaneous

rights of pawnee :

1. Right of retainer (zec 173-174) - it's in nature of particular lien - can be exercised for the
amount advanced +plus the interest+ necessary expenses
2. Right to extraordinary expenses ( section 175) - can only sue to recover them
3. Lallan prasad v. Rehman ali 1967 sc, the loan advanced was 20k - securities given were
35k , plaintiff sue for repayment of the loan but was unable to produce securities ,-action
was not allowed.
4. Right to sale (sec) upon a default being made by made in payment or performance of
promise, the pledgee gets right to sell under the section
5. Reasonable notice is statutory requirement here

pawners right (section 177) - upon repayment of loan or performance of promise as stipulated
the pawner has right to get the possesion back, if stipulated time has passed for the repayment
and a subsequent time is given before sale by a notice, th pawnner may redeem the goods for the
extended period too.

Pledge by mercantile agent (178)- conditions for application

1. Person should be mercantile agent as defined under sga

2. Possession must be with the consent
 3. Agent should act in ordinary course of business (example of furniture and house)
4. Pawnee should act in good faith
5. Mercantile Agent is in possession of document of title that pledges them - would be
considered valid pledge
6. Person in possesion of goods under voidable contract (178A) - when goods are pledged
by a person who has obtained possession under voidable contract, the pledge is valid
provided that the contract has not been rescinded at the time of pledge and ,the pledgee
has acted in good faith and without notice of the pledgers defect of title
7. Philip v. Brook: a ring was obtained under a voidable agreement - pledged- valid.
8. When a pledgee furthur pledges good the pledge would be valid only to the extent of the
interest and his interest is to the extent of the amount for which the goods have been
given to him as the security
9. A pledge by a seller remaining in possession of goods after sale is valid
10. When one of the joint owner who is in possession of the goods with the consent of others
a pledge by him would be valid.

If the question is asked of competency ,it is expected from us to write the section
relevant to it - example: sec 10 to 12 then section of majority - then main answer.

Agency :
Section 182 :

Agent is a person employed to do

1. Act for another

2. Represent another in dealing with third person , principle agent are defined under section
182
3. Representative chRACTER AND DERIVATIVE AUTHORITY is distinguishing feature
of an agent
4. Domestic servant is not an agent , generally renders personal services

Essentials :

1. Principle should be competent under sec 183

2. An agency is a type of employment which brings the principle into equal relation with the
third party and therefore the primary requisite is he should be competent but the agent
need not be competent , so therefore acc to sec 184 : as between the principle and third
person any person may be an agent
3. Agent may be minor but not responsible to the principle
4. No consideration is necessary for the agency [ exception : to the doctrine of
consideration]
Laxmi narayan ram gopal and sons v. govt of hyderabad : 1. Agent has authority to act on
behalf of his principle and to create contractual relations between the principle and third party .
this power is general y not enjoyed by the servant

2. The principle has right to direct what agent has to do but the master generally not only directs
what has to be done but how that has to be done. Therefore the servant acxts in direct supervision
and control of the master however the agent is bound to exercises his authority in accordance
with the lawful instructions but he is not in direct control or supervision.

3. The mode of remuneration is different ,the servant gets salary/wages ,the agent receives
commission

4. A master is liable for the wrongs done by the servant during the course of employment
,however the principle is liable for his agent’s wrong when this done within the scope of
authority

5. Servant ususallly serves for one master , agent may work for many principle at the same
time

Difference between agent and bailee :

1. Relationship of bailer bailee exists as long as he holds goods annd also delivery is
essential elements for bailment this is not necessary for substistence of agency.
2. Sometimes bailee acts as agent when he recieves such direction from the bailor ,agent is a
representative he has a power to contract , bailee doesnt have that power
3. Transfer is necessaary in bailemnt
4. Ownership in bailement not agency

Types of agent:

Factor - entrusted with possession of the goods For the purpose of selling them , hes a mercantile
agent and possesssion of goods is must

Broker : he is primarily qappointed to negotiate and make contracts or to facilitate the execution
of contract between the principle and third parties , hes not generally given the possesion of the
goods or property .

delcredei agent : this agent to be lliable for the failure of the third party to perform thce contract
his responsibility is higher than other agents and therefore he recieves extra commission

Creation of agency

By express agreement

By implied agency [ conduct and situation]

Necessity

Ratification

Express - oral or written

Implied - arises from conduct situation or relation

April 11 notes here

When agent is justified in assuming : extraordinary power due to necessity thus any act for
principle - it is binding upon the principle

Example : carriage of goods by a sea - goods exposed to sea perils - threat of damage -master of
ship is justified in selling due to necessity - sales shall be binding upon the owner.

Sims and company v. midland railway: water was consigned to the railway company - delayed
delivery during transit - goods perishable - company sold-action was justified.

Urgent need of medical attendance - any person may act on behalf of the person who needs it
,shall be binding upon the person to whom attendance is provided

Conditions for application of principle of necessity :

1. Enability communicate to the principle :gwilliam v. twist - defendants servants were

driving vehicle belonging to him , policemen caught him , was not allowed to drive as he
was drunk , defendants yard was quarter mile away from _ driver authorized a biased
tender to drive it back to the yard- while returning - accident happened - defendants not
liable . there was no necessity ,the driver could have communicated to the principle
easily.
2. It should be reasonably necessary : the agent has to prove it . furskin was sold by the
agent there wawa no threat of deterioration of the goods , hence no necessity.
3. Agents must satisfy the court that he was acting bonafidely

Ratification section 196

Comes into play when a person has done an acct on behalf of another without his knowledge or
consent

Gives option to the person on whose behalf the act is done to adopt the act or to refuse or disown
it.

Conditions for ratification : act must be done of behalf of someones else

Ratification relates back to the date when the contract was originally made by the agent therefore
it is necessary that the person ratifying it must be in existence and competent at the time when
the contract by agent was made

Only lawful acts can be ratified : example - state of up v. murarilal 1971 sc

Ratification made in contravention with art 291 _ of the constitution of india not allowed.

A person cannot ratify part of transaction which is beneficial for and repudiate the rest , he must
ratify the whole transaction not only one part

Effect of ratification:

It creates relationship of principal and agent : between the person who has ratified the act and the
pearson who have done the act

It establishes relationship between principal and third party.

SUB agent can be appointed through

1. Expressed delegation
2. Implied delegation : principle is not having any problem with the subagent
3. Custom
4. Nature of of the agency section 190

Duties of agent - section 211

Agent is bound to conduct business of his principle acc to the direction given by him, in absence
of such direction he must follow customs, if he acts otherwise and principal suffer Loss the agent
shall compensate.

Example - principle instructed the agent to keep the goods in a named warehouse, the agent
placed at a different warehouse which was equally safe - goods destroyed due to fire - agent still
held liable. : lilly v. double day

Reasonable care and skills -sec 212 (pq)

-agent keeping goods which are kept at perils must ensure that if the goods are sold on credit, the
agent must ensure the solvency of the buyer.

Section of 215 duty to avoid conflict

It's a fiduciary relationship and therefore the agent is duty bound not to do anything which would
bring his personal interest and his duty to the principal in conflict with each other.

Example - a company appointed Y, to sell ships, Y attempted to sell but failed to find a customer
- without disclosing it to the principle he bought it for himself and later sold it on a very high
price, - company allowed to recover the profit.

Not to make secret profit - section 216

Secret profit - any advantage over his remuneration, which he would not had been able to make
but for his position as agent. Example - using confidential information in disclaimer, trade
secrets etc.
Duty to maintain section 213

Duty not to delegate authority - section 190

Agent cannot delegate his authority except in following circumstances.

1. Principle expressly permitted delegation

2. He impliedly allowed it by conduct
3. Custom made- those stock broker are generally allowed to appoint clerk Or brokers for
work in courts and brokers in rent
4. Nature of agency demands such appointments( auctioneer)

proper delegation section 192

Effects -

1. Principle is represented by subagent

2. Subagent is not directly liable to the principle except for wrong or willful wrong
3. Agent is responsible to the principle for the acts of subagent

Rights of agent section 219- remuneration- entitled to agreed remuneration and if no agreed
renumeration then reasonable remuneration.

Green v bartlett

Agent was apointed to sell house - auction took place- no buyer could be found - one person
attending the auction directly contacted principle and purchased the house - the agent was held
entitled for renumeration.

Effect of misconduct if the agent has done any misconduct on his part relating to agency the
pribciple may

1. Refuse to pay renumeration

2. He may repair compensation for the loss occured due to his misconduct.

Right of retainer - can be exercised on principle's money untill his claims are not satisfied.

Right of lien- 221- additionally the agent can retain goods papers any movable or immovable
property belonging to principle untill the amount due is not paid.
Conditions-

1. Agent must be lawfully entitled

2. Property must belong to the principle

3. Agent must get possession in a lawful manner

4. Agent has particularly (subject to the exceptions)

Loss of lien- possession given to the principle or to a carrier to be carried to the principle. He can
not stop the goods or property in transit

Lien is subject to the contract which may be contrary

By waiver- express or implied(means the agent himself shows or communicates to the principle
that he is not willing to exercise lien.

Right to indemnity 222- 223

Principle is bound to indemnify the agency for the consequences of all the lawful acts done by
such agent in exercise of the authority , example

Adamson v jarbis (previously discussed)

Right to compensation(225)

Principle must make compensation in respect of injury caused to the agent by principle's neglect
or want of skill.

Personal liability of agent

Section 230 - agent can not be personally bound by the contract which he has made on behalf of
the principle this rule issubject to a contract which may be contrary
Such contract is presumed in following situations

Agent is personally liable

1. Agent appointed by principle who is Foreign resident

2. When the Principle is unnamed / undisclosed.

3. Principle is incompetent or nonexistend- even disclosed can not be sued ,

4. When the Agent is pretentious, until the alleged principle ratifies the act

5. Breach of authority , or when the agent exceed his authority and the third party enters into a
contract with him upon false consideration

Determination of agency

It is the time when the relationship comes to an end

1. By revocation(either express or implied: for implied revocation see illustration of section 207 )
section 203 - principle may revoke the authority given the agent at any time before the authority
is exercised so as to bind the principal

2.hugh stevenson v. fur industries : an agency was deemed to be ended automatically by

operation of law , when the war broke out between the countries to which principal and agent
belonged.

● Revocation operation prospectively [sec 204] - principal may revoke the authority for
future and it is irrevocable for the acts which are already done
● Notice [sec 206] - reasonable notice is required before revocation or renunciation.
● If there isA loss party will have to compensate the other
● Renunciation sec206 agent may renounce the business of agency
● If without sufficient cause then must compensate the principal and reasonable notice is
required.

(Disha - Determination of agency

It is the time when the relationship comes to an end

By revocation(either express or implied) (Section 203) - Principal may revoke the authority
given to agent at any time before the authority is exercised so as to bind the principal.

Revocation may be expressed or implied. For implied revocation see illustration (section 207)

Hugh Stevenson v Fur industries

An agency was deemed to be ended automatically by operation of law, when the war broke out
between the countries to which principal and agent belonged.

Revocation (sub points:)

revocation operates prospectively (Section 204) - principal may revoke the authority for future
and it is irrevocable for the acts which are already done.

Notice (Section 206) - reasonable notice is required before revocation or renunciation

If there is a loss the party will have to compensate the other.

By renunciation (Section 206) - agent may renounce the business of agency

If without sufficient cause then must compensate the principal - reasonable notice is required.

By completion of business (Section 201) - automatic termination when the business is

completed.

Ex : agent appointed to sell goods sold them, agency comes to an end.

Death and insanity (Section 201)

agency automatically comes to an end on the death or insanity of the principal.

Principal's insolvency

On expiry of time for which the agency was created irrespective of the fact that whether the
purpose has been accomplished or not.

If even agency has been terminated by death of the principal or agent, the termination is effective
only when it comes to the knowledge. (section 208))

Section 201 - automatic termination when the business is completed example : agent appointed
to sell goods , sold them and then agency comes to end.

Death and insanity against section 201 : agency automatically comes to an end on the death or
insanity of the principal

Principle’s insolvency

On expiry of time ,_ irrespective of the fact that whether the purpose has been accomplished or
not
Actual authority [sec 186 187]

Implied authority : infer from the conduct or ordinary course of business

Dinge v. hare 1859 : agent was appointed to sell artificial manure , no authority was given to him
, to give warranty to third person but there was a custom to give such warranties , agent gave
some authority and principle was bound
Partnership act

Partnership Act:

Section 4: Definitions:

Partnership: A relationship between persons where they have agreed to share the profit of a
business, carried on by all or any of them, acting for all.

In practice, they share losses, too, although that is not mentioned in the Section itself.

Essentials:

1. An agreement—express/formal-implied, by conduct—partnership is created by contract,

not by succession or inheritance, etc.

• K. T. Abdul Badshah v. Sanctuary Goods:

Two bros-inherited property-did not divide it--sold it and invested in timbre business-earlier, they
had joint ownership of property-the intention obviously was to be partners in business although
there was no formal agreement.

2. Business: a regular activity which is being done to earn profits. (Read with Section 2.)

Section 2 clarifies that business includes every trade, business and occupation.

Business means any activity which, if successful, would result in profits.

Society for religious and charitable purposes is not partnership.

• Smith v. Anderson

3. Sharing of profit: without sharing of profits, there is no partnership.

• Cox v. Hickman:

No man is a partner unless he has right to share profit of a business.

4. Mutual Agency: X buys goods for the firm, all owners are equally bound.

Partners stand in a position of principle or agents tpwarsdeach other.

• Cox v. Hickman:

Iron Merchant-financial constraints-asked his creditors for money-become the trustee of his
business and when his debts are cleared, give my business back to me-they were empowered to
carry business and divide net income-one of the creditors, Cox, was not active-the other partners
purchased a quantity of coke from P-the bill remained unpaid-Hickman (P) brought an action
against trustees including Cox.
Held: Cox was not partner, not liable. The main intention was to satisfy the claim of the
creditors.

Section 6:

To determine if it is a firm or X is a partner, analyse the real relationship and relevant facts.

Even if two people are joint owners of a property and share the profits after selling it, it doesn’t
mean they are partners because it is a regular activity, not business.

Servant or agent, widow or child of deceased partner may be given profits, but will not by
default become partners. All essentials and especially the certain intention of the party should be
there.

A and B purchased a tea shop-incurred expenses to make it fancy-decided to lease it out. They
are not partners, only joint owners.

Real relation of the partner is supreme and is solely dependent upon the intention of the parties.

2nd explanation provide List of those who might be interested in the profit of the business but
they are not partners

Joint ownership is not business per se and therefore if the joint owners shares profit or gross
return arising out of joint ownership of a property ,do not become partner for this reason only.

Case - Govind nayar v. maga 1948 : they were joint owners of a tea shop purchased it and
incurred expenses to buy additional items - contributed half for it and then leased out - it was
held that parties did nothing than utilising common [property to obtain a return by leasing out.

A lender of money who receives profit from a firm engage in profit is not by this reason become
a partner . case - bradley v. consolidated : a lender advanced money to a contractor to carry
business with _ and in return he received 10 % profit he was not considered partner as there was
no intention to that effect.

Servant or agent allow to have portion from profit in addition to their remuneration does not
become partners

If on the death of the partner is surviving partners agree to give profit to the widow or child of
the deceased does not itself make them partners

The seller of goodwill who recieve share in business does not by itself becomes a partner

Rights and duties of the partner

Duty of good faith section 9

1. Partner to secure maximum benefit to the firm and should avoid secret topics
 2. Partners have fiduciary relationship with each other . bentley cravin : one of the partner
of the firm was allowed too buy sugar from the market , he supplied it from his personal
stock which he has bought earlier at a low price and charged prevailing market price and
therebby made considerable profit - its co partners brought an action to recover the profit
. he was allowed

Duty not to compete section 16

1. Partners are found not to carry similar business in competition with the business of the
firm : if partners does this he is bound to pay the profits made by this act
2. Example : one partner secretly sells frozen foods in market.
3. This duty is subject to the agreement between the partners .

Non compete clause in partnership Agreement is not restraint of trade [sec 27]

Duty to indemnify section 10:

The partner is bound to indemnify the firm for any loss occurred due to fraud in conduct of
business . example : if the customer is defrauded by one partner and the firm has been held liable
then the co partners can recover identity from the fraudulent one

Duty to make full disclosure and render accounts section 9 :

Example : partnership not conceal profits or variation in market price or any other information
related to business

Section 12 & 13 : duty of due diligence

Partner sould act diligently and if there is any neglect on his part he should indemnify the other

Willful neglect is different from mere error of judgment.