1.

Differentiate between:
a) Condition and Warranty

SR Basis of Condition Warranty

No. Difference
1. Meaning It is a stipulation which is It is a stipulation which is
essential to the main collateral to the main
purpose of the contract of purpose of contract.
sale.
2. Significance Condition is so essential to It is of subsidiary or inferior
the contract that the character. The violation of
breaking of which cancels warranty will not revoke the
out the contract. contract.

3. Transfer of Ownership on goods Ownership on goods can be

Ownership cannot be transferred transferred on the buyer
without fulfilling the without fulfilling the
conditions. warranty.
4. Remedy In case of breach of In the case of breach of
contract, the affected warranty, the affected party
party can cancel the cannot cancel the contract
contract and claim but can claim damages only.
damages.
5. Treatment Breach of condition may Breach of warranty cannot
be treated as breach of be treated as breach of
warranty. condition.

b) Indemnity and Guarantee

SR Basis of Indemnity Guarantee

No. Difference
1. Number of There are only two There are three parties –
Parties parties namely the creditor, principal debtor and
indemnifier and the surety.
indemnified.
2. Nature of Liability The liability of the The liability of the surety is
indemnifier is primary secondary and conational as
and unconditional. the primary liability is that of
the principal debtor.

3. Time of Liability The liability of the The liability arises only on the
indemnifier arises only on non-performance of an
the happening of a existing promise or non-
contingency. payment of an existing debt.
 4. Time of Liability The indemnifier need not
act at the request of
indemnity-holder.
5. Right to sue third Indemnifier cannot sue a
party third party for loss his
own name as there is no
privity of contract. Such a
right would arise only if
there is an assignment in
his favor.
6. Purpose Reimbursement of loss.
7. Competency to All the parties must be
Contract competent to contract.
c) Bailment and Pledge
SR Basis of Bailment
No. Difference
1. Meaning Transfer of goods by one
person to another for
some specific purpose is
known as bailment.
2. Terms Applicable The person delivering the
goods under a contract of
bailment is called as
‘Bailor’. The person to
whom the goods are
delivered under a
contract of bailment is
called as ‘Bailee’.
3. Purpose Bailment may be made
for any purpose (as
specified in the contract if
bailment, eg: for safe
custody, for repairs)
The surety acts at the request
of principal debtor.
Surety can proceed against
principal debtor in his own
right because he gets all the
right of a creditor after
discharging the debts.
For the security of the
creditor.
In the case of a contract of
guarantee, where a minor is
a principal debtor, the
contract is still valid.
Pledge
Transfer of goods from one
person to another as security
for repayment of debt is
known as the pledge.
The person who delivers the
goods as security is called the
‘Pawnor’. The person to
whom the goods are
delivered as security is called
the ‘Pawnee’.
Pledge is made for the
purpose of delivering the
goods as security for
payment of debt, or
performance of a promise.
 4. Consideration The bailment may be Pledge is always made for a
made for consideration or consideration.
without consideration.

5. Right to sell the The bailee has no right to The pawnee has the right to
goods sell the goods even if the sell goods If the pawnor fails
charges of bailment are to redeem the goods.
not paid to him. The
bailee’s rights are limited
to suing the bailor for his
dues or to exercise lien
on the goods bailed.

6. Right to use of Bailee can use the goods Pledgee or pawnee cannot
goods only for a purpose use the goods pledged.
specified in the contract
of bailment and not
otherwise.

2. Short Notes on:

a) Lien (General and particular lien)

Lien is a right to keep possession of property belonging to another person until a debt owed
by that person is discharged.

Particular Lien

Particular lien implies a right of the bailee to retain specific goods bailed for non-payment of
an amount. A particular lien can be exercised by a craftsman or a person who has spent his
time, labor and money on the good retained. Goods are retained for a particular debt only.
It is exercised by Bailee, pledgee, finder of goods, agent, partner, unpaid seller etc.

In accordance with the purpose of bailment if the bailee by his skill or labor improves the
goods bailed, he is entitled for remuneration for such services. Towards such remuneration,
the bailee can retain the goods bailed if the bailor refuses to pay the remuneration. Such a
right to retain the goods bailed is the right of particular lien. He however does not have the
right to sue.

Where the bailee delivers the goods without receiving his remuneration, he has a right to
sue the bailor. In such a case the particular lien may be waived. The particular lien is also
lost if the bailee does not complete the work within the time agreed.

General Lien
 General lien alludes to the right to keep possession of goods belonging to other against a
general balance of an account. A general lien is applicable in respect of all amounts due
from the debtor to the creditor. Goods are retained for all the debts due from the debtor to
the creditor. It is exercised by Bankers, Wharfingers, factors, policy brokers, attorneys etc.

A general lien is the right to retain the property of another for a general balance of account.
In contract the particular lien is the right to retain the particular goods bailed for non-
payment of charges/remuneration.
Bankers, factors, wharfingers, policy brokers and attorneys of law have a general lien in
respect of goods which come into their possession during the course of their profession. For
instance, a banker enjoys the right of a general lien on cash, cheques, bills of exchange and
securities deposited with him for any amounts due to him. For instance, ‘A’ borrows ` 500/-
from the bank without security and subsequently again borrows another ` 1000/- but with
security of say certain jewelry. In this illustration, even where ‘A’ has returned ` 1000/- being
the second loan, the banker can retain the jewelry given as security to the second loan
towards the first loan which is yet to be repaid.

Under the right of general lien the goods cannot be sold but can only be retained for dues.
The right of lien can be waived through a contract. Interestingly, Chartered Accountants
have a general lien against the books of their clients which come into their possession
against professional fees not paid to them by those clients.

b) Unpaid Seller

An unpaid seller is one who is to get the price or consideration for the goods.
S.45 Unpaid Seller –

“One who has not been paid or tendered the whole of the price or one who receives a bill of
exchange or other negotiable instrument as conditional payment and the condition on
which it was received has not been fulfilled by reason of the dishonor of the instrument or
otherwise.”

It must be noted that where a part payment remains due, then also he is an unpaid seller.
However, where the seller has wrongfully refused to accept the price or where the price is
fully paid but some other expenses like say transportation charges are to be paid then the
seller cannot be an unpaid seller.

c) Goods

Goods are defined to mean every kind of movable property other than actionable claims
and money. The term includes stock and shares, growing crops, grass and things attached
to, or forming part of the land which are agreed to be severed before sale or under the
contract of sale [Section2(7)]

Every kind of movable property, i.e., things which can be carried form one place to another.
However, all such things which form part of the land itself but are agreed to be served from
 the land under the contract of sale, are considered as goods. Thus, grass, growing crops,
trees to be cut and their logwood to be delivered are goods as per the above definition,
similarly things like goodwill, copyright, trade mark, patents, water, gas, electricity are all
good and may be subject matter of a contract of sale.

Types of Goods

Goods

Existing Future Contingent

Goods Goods Goods

Specific Ascertained Unascertained

Existing Goods

As per Section 6 of the Act, existing goods are those goods which are owned or possessed
by the seller at the time of contract of sale. The seller is either the owner of good or he is in
possession of goods. For example, A, a manufacturer of fans, sells a fan to B. It is a contract of
sale of existing goods because A owns the fan. Similarly, when a person sells goods possessed
by not owned by him such as sale by an agent, it is a sale of existing goods. For instance, in
the above example, if the manufacturer sends the fans to his agent in Delhi and sells them
through the agent it is a sale of existing goods because the dealer possesses the goods,
although he is not the owner of them, at the time of the contract of sale.

i.) Specific Goods: These are the goods which are identified and agreed upon by the
parties at the time a contract of sale is made [Section 2(14)], for example, a specified
watch, ring or a car.
ii.) Ascertained Goods: Though normally used as synonym for specific goods,
ascertained goods are intended to include goods which have become ascertained
subsequently to the formation of the contract. When the “unascertained goods” are
identified and agreed upon by the parties, the goods are called ‘ascertained’. You
should not e that ascertainment involves unconditional appropriation of the goods as
the subject-matter of a particular contract. Thus, when out of a mass of
unascertained goods, the quantity contracted for is identified and set aside for a
given contract, the goods are said to be ascertained.
iii.) Unascertained Goods: These are the goods which are not identified and agreed upon
at the time when the contract is made. They are identified only by description. For
example, A who owns an ambassador car show room, has 50 cars and agrees to sell
anu one of them to B. The contract is for unascertained goods, because which
 particular car shall be sold to B has not been identified at the time of the contract of
sale.

Future Goods

As per [Section 2(6)] of the Act ‘future goods’ means to be manufactured or produced or
acquired by the seller after making the contract of sale. Thus, future goods are goods which
either are not in existence at the time of contract or they may in existence when the
agreement of the sale is entered upon but have not yet been acquired by the seller by that
time. For example, S agrees to but the entire crop of wheat that would yield in B’s farm, at
the rate of rupees 200 rupees per quintal. This is an agreement of sale of future goods. As
future goods are not in the possession of the seller at the time of contract, they can become
the subject-matter of an agreement to sell only, and not the contract of sale.

Contingent Goods

Contingent Goods are the goods the acquisition of which by the seller depends upon a
contingency which may or may not happen [Section 6(2)]. For example, A agrees to sell B a
certain painting only if C, its present owner, sells it to him. Here the contract is for the sale of
contingent goods as the availability of the painting depends on its sale by C.

d.) Caveat Emptor

Caveat emptor is a Latin phrase that is translated as “let the buyer beware.” The phrase
describes the concept in contract law that places the burden of due diligence on the buyer of
a good or service. Caveat emptor is a fundamental principle in commerce and contractual
relationships between a buyer and a seller. According to the caveat emptor principle, a buyer
is responsible for performing the necessary due diligence before the purchase to ensure that
a good is not defective and that it suits his/her needs. If the buyer fails to perform the
necessary actions, he or she will not be entitled to any remedies for damages in case the
purchased product shows significant defects.

Example of Caveat Emptor (Buyer Beware)

John purchases a house from Adam. Before the purchase, John asked the seller about the
defects in the house. Adam told him that there was a leak in the bathroom upstairs, but it
was fixed already. However, Adam also warned him that despite the repairs, a small leak
could occur from time to time. John failed to inspect the bathroom properly but still decided
to buy the house.

After three months, there was a big leak that damaged the floor in the bathroom and the
ceiling in the dining room downstairs. John decided to go to court to recover damages from
Adam. However, the judge stated that John is not entitled to any remedy because the caveat
emptor principle is applied. John did not perform thorough due diligence to ensure that the
defect in the bathroom could not cause any damage in the future.
 e.) Kinds of Guarantee

Contract of guarantee means a contract to perform the promises made or discharge the
liabilities of the third person in case of his failure to discharge such liabilities.

There are two types of guarantees: -

a.) Specific Guarantee – A guarantee which extends to a single debt/specific transaction is

called a specific guarantee. The surety’s liability comes to an end when the guarantee
debt is duly discharge or the promise is duly performed.

For Example: A guarantees payment to B of the price of the five bags of rice to be
delivered by B to C and to be paid in a month. B delivers the bags to C. C pays for them.
This is a contract for specific guarantee because A intended to guarantee only for the
payment of price of the first five bags of rice to be paid one time. [Kay v Groves]

b.) Continuing Guarantee [Section 129] – A guarantee which extends to a series of

transaction is called a continuing guarantee. A surety’s liability continues until the
revocation of the guarantee. The essence of continuing guarantee is that it applies not to
a specific number of transactions but to any number of transactions and makes the
surety’s liable for the unpaid balance at the end of the guarantee.

For Example: On A’s recommendation B, wealthy landlord employs C as his estate

manager. It was the duty of C to collect rent on 1 st of every month from the tenant of B
and remit the same to B before 5 th of every month. A, guarantee this arrangement and
promises to make good any defaulter made by C. This is a contract of continuing
guarantee.

3. What are the different types of disabilities? How do you calculate compensation for each?

As per this act following are the types of Disablement:

Permanent Total Disablement: Permanent total disablement is that condition where an

employee becomes unfit for every type of work and is not able to get job anywhere because
of that of that disablement. This disablement is for life time of an employee.

Permanent Partial Disablement: Permanent partial disablement is one which reduces the
earning capacity of an employee in every employment which was capable undertaking at the
time of injury. This disablement is for life time of an employee.

Temporary Total Disablement: Temporary total disablement is that condition where an

employee becomes unfit for every type of work and is not able to get job anywhere for
particular time period because of that disablement. This disablement is for temporary period.

Temporary Partial Disablement: Temporary partial disablement means any disablement as

reduces the earning capacity of an employee in any employment in which he was engaged at
the time of accident which resulted un such disablement. This disablement is for temporary
period.
Compensation

Amount of Compensation (Sec. 4)

The amount of compensation to an employee depends on
(i) The nature of the injury caused by accident,
(ii) The monthly wages of the employee concerned, and
(iii) The relevant factor for working out lump-sum equivalent of compensation amount as
specified in schedule IV.

Note: If monthly wages of the deceased or injured employee exceeds 8,000/- than his or her
monthly wages for the purpose of calculating the compensation shall be deemed to be
8,000/- only. (As per the Amendment Act of 2009 is in force from 2010).

Sec. 4 provides for compensation for –

1. Death,
2. Permanent total disablement,
3. Permanent partial disablement, and
4. Temporary disablement, whether total or partial.

1. Compensation for Death

Where death results from an injury, the amount of compensation shall be equal to 50%
of the monthly wages of the deceased employees multiplied by the relevant factor.

The formula for calculating the amount of compensation in case of death resulting from
an injury will be as follows:

50% of monthly wages x relevant factor or

Rupees 1,20,000/-, whichever is more.
Example:
(a) An employee drawing a monthly wage of 10,00/- meets with an accident while
working on a machine and he dies. His age is 40 years. The amount of compensation
payable to him will be determined as follows:

Completed years of age is 40 years so relevant factor for age as per the schedule IV is
184.17.

Amount of compensation = 50% of 8,000 (if monthly wages are exceeding 8,00/-
then the monthly wages are to be taken 8,000/- only) x 184.17.%

= 50% of 8,000 x 184.17

= 7,36,680/- or 1,20,000/- whichever is more.

Hence, the employee will get 7,36,680/-.

2. Compensation for permanent total disablement [ Sec. 4(1)(b)]:

 Where permanent total disablement result from an injury, the amount of compensation
payable shall be equal to 60 per cent of the monthly wages of the injured employee
multiplied by the relevant factor as per the schedule IV or Rupees 1,40,000, whichever is
more.

The formula for calculating the amount of compensation in case of permanent total
disablement resulting from an injury will be as follows:

60% of monthly wages x relevant factor

or 1,40,000 whichever is more.

The relevant factor shall be ascertained from schedule IV and will depend on the age of
the employee on his immediately preceding birthday.

Example: In the above examples if the injury results in permanent total disablement, the
amount of compensation payable would be as follows:

Ex. (a) Amount of compensation = 60 % of 8,000(if monthly wages are exceeding 8,000/-
then the monthly wages are to be taken 8,000/- only) x 184.17

= 60% of 8,000 x 184.17

= 8,84,016/- or 1,40,000/- whichever is more.
Hence, the employee will get 8,84,016/-.

3. Compensation for permanent partial disablement [Sec. 4(1)C]:

In case of permanent partial disablement because of an injury specified in part II of
schedule I, then the amount of compensation shall be payable on the basis of percentage
loss of earning capacity, specified against each injury in part II of Sch. I.

The formula for calculating the amount of compensation in case of permanent partial
disablement resulting from an injury will be as follows:

60% of monthly wages x Relevant factor of age as per

the schedule EV x % loss of earning capacity,
specified against each injury in part II of Sch. I.

Example: An employee drawing monthly wage of Rupees 7000 loses his four fingers of
left-hand 1st Dec. 1997 as result of an injury caused to him. His date of birth is 13 th April
1950. The amount of compensation payable to him will be as follows:

Completed years of age on 1st Dec. 1997 = 47

Relevant factor for age 55 as per Schedule IV = 163.07
Loss of earning capacity as per part II of Schedule I = 50%
Amount of compensation = 60% of 7000 x 163.07 x 60%
= 6,84,894 x 50
= 3,42,447/-

4. Compensation for temporary-total or partial disablement:

 In case of temporary disablement whether total or partial, result from the injury, the
amount of compensation shall be a half-monthly payment of the sum equivalent to 25
percent of the monthly wages of the employee, i.e., 25 percent of monthly wages of the
employee shall be payable every half month.

For Example: An employee is temporarily disabled and his monthly wages are 7000/-
Amount of compensation = 7000 x 25/100 = 1750/-. This amount will be paid for every
half monthly till disablement last.

4. As per workmen’s Compensation Act which are the employers not liable to pay compensation?

As per workmen’s compensation act, followings are the times when employers are not liable
to pay compensation to their employees:

(a) An injury not exceeding in disablement for a period exceeding three days.
(b) Injury caused by an accident which is directly attributable to the workman having been
at the time under the influence of drink or drugs.
(c) The willful disobedience of the workman to on order expressly given, for the purpose of
securing the safety of workmen.
(d) The willful removal or disregard by the workman of any safety guard or device which he
knew to have been provided for the purpose of securing the safety of workmen.

5. Write a note on set off and set on of bonus as per Payment of Bonus Act.

Set-On and Set-Off of Allocable Surplus [Sec 15]

Set-On (In case of profits,)

Excess allocable surplus remains after paying the maximum bonus of 20% on the wage or
salary of the employee, should be carried forward to the next following year to be utilized
for the purpose of payment of bonus in case of the shortage of the allocable surplus or
losses occur. This is called as Set-On

Set-Off (in case of losses occur)

When there are no profits (available surplus or allocable surplus) or the amount falls short
or deficiency for payment of minimum bonus to employees 8.33%, such deficiency amount
should be adjusted to the current accounting year from the Set-On amount which was
carried forward in case of excess allocable surplus in the previous year. This is called as Set-
Off.

6. The years of all acts need to be remembered.

1.  Indemnity under Indian Contract Act, 1872

As per section 124 of the Indian contract Act 1872- a contract by which one party promises
to save the other from loss caused to him by the conduct of the promisor himself, or by the
conduct of any other person, is called a " contract of indemnity".

2. Guarantee under Indian Contract Act, 1872

Section 126 of the Indian contract act 1872 defines a contract of guarantee as a contract to
perform the promise or discharge the liability of the defaulting party in case he fails to
fulfill his promise.

3. Bailment under Indian Contract Act, 1872

Section 148 of Indian Contract Act 1872, A "bailment" is the delivery of goods by one
person to another for some purpose, upon a contract that they shall, when the purpose is
accomplished, be returned or otherwise disposed of according to the directions of the
person delivering them. The person delivering the goods is called the "bailor". The person
to whom they are delivered is called the "bailee".

4. Contract of Agency under Indian Contract Act, 1872

Contract of the agency is a legal relationship, where one person appoints another to
perform on the transactions on his behalf. The person who appoints the other to take care
of his transactions is the principal. Whereas, the person who looks after the transaction of
the principal is the agent. The Contract of the agency is a special contract under the Indian
Contract Act, 1872.

5. The Workmen Compensation Act, 1923

An Act to provide for the payment by certain classes of employers to their

workmen of compensation for injury by accident.

6. Payment of Bonus Act, 1956

The payment of Bonus Act, 1965 aims to regulate the amount of bonus to be paid to the
persons employed in establishments based on its profit and productivity. The act is
applicable to the whole of India for all establishments which had twenty or more persons
employed on any day during the year.

7. Payment of Gratuity Act, 1972

 An Act to provide for a scheme for the payment of gratuity to employees engaged in
factories, mines, oilfields, plantations, ports, railway companies, shops or other
establishments and for matters connected therewith or incidental thereto.

8. Sale of Goods Act, 1930

An Act to define and amend the law relating to the sale of goods.

7. Rights of an unpaid seller

An unpaid seller is one who is to get the price or consideration for the goods.

Rights of an unpaid seller

(I) Against goods:

(A) Where property in goods has passed to the buyer:
Under this category, the rights are being exercised against the goods where the
ownership has already been transferred to the buyer.
(1) Right of lien: The right of lien means the right to retain the possession of goods until the
full price is paid or tendered.
When can lien be exercised:
(i) Where the goods have been sold without any stipulation as to credit,
(ii) Where the goods have been sold on credit, but the term of credit has been
expired, and
(iii) Where the buyer has become insolvent.
The right can be exercised even if the seller holds the goods as an agent or
bailee.
 Where part delivery of goods has been made, it can be exercised on the
remaining goods, unless circumstances show he has waived his right.
The right can also be exercised although the seller has obtained a decree for the
price of goods.

Termination of lien:
The right gets terminated under the following circumstances:
(i) When the goods are delivered to a carrier or bailee but without reserving the
right of disposal.
(ii) When the buyer or his agent acquires the possession lawfully.
(iii) When the seller waives the right of lien.
(iv) When the buyer disposed of the goods by sale or in any other manner with the
consent of the seller.

(2) Right of stoppage of goods in transit: The right of stoppage in transit means the right of
stopping the goods while they are in transit, to regain possession and to retain them until
the price is paid.
The essential feature of stoppage in transit is that the goods should be in the possession
of someone intervening between the seller and the buyer.

When can the right be exercised?

The unpaid seller can exercise the right of stoppage in transit if:
(i) The seller has parted with the possession of goods.
(ii) The buyer has not taken possession of goods.
(iii) Buyer has become insolvent.

How is stoppage of transit exercised?

The unpaid seller may exercise the right of stoppage in transit in any one of the
following two ways:
(i) By taking actual possession of the goods, or
(ii) By giving notice of his claim to the carrier or other bailee in whose possession
the goods are.

When is right of stoppage in transit lost?

The right of stoppage is lost under the following circumstances:
(i) If the buyer or his agent obtains possession.
(ii) If after arrival of the goods at the appointed destination, the carrier or the
bailee acknowledges to the buyer that he holds the goods on his (buyer's)
behalf.
(iii) If the carrier or bailee wrongfully refuses to deliver the goods to the buyer or,
his agent.
(iv) Where the part delivery of the goods has been made to the buyer or his agent,
the remainder of goods may be stopped in transit. But if such part delivery has
been given in such circumstances as to show an agreement to give up
possession of the whole of goods the transit comes to an end at the time of par
delivery.

Example: 'A, in Mumbai sends goods to a buyer B' in Pune through a carrier. The
 goods are in transit, when it leaves "A's possession and 'B' or his agent has not taken
possession.

(3) Right to resale: Where the unpaid seller has exercised his right of lien or resumes
possession of the goods by exercising his right of stoppage in transit upon insolvency of
the buyer, he can re-sell the goods under the following circumstances.
(i) Where the goods are of perishable nature.
(ii) Where the seller has given notice of his intention to re-sell the goods and yet the
price remains unpaid.
(iii) Where the seller expressly reserves a right of resale if the buyer commits a
default in making the payment.

(B) Where the property in the goods has not passed to the buyer:
In cases where the property in the goods has not passed to the buyer the unpaid seller
can exercise the right to withholding delivery of goods. This right is similar to and co-
extensive with the rights of lien and stoppage in transit where the property has passed to
the buyer. Other remedies may include the right to claim damages for the loss suffered,
special damages, etc.

(II) Rights of an unpaid seller against the buyer personally:

In addition to the unpaid seller’s rights against the goods, he has rights even against the
buyer personally. They are as follows:

(1) Suit for price: Generally, the seller can sue for the price of the goods only when the
property in the goods has passed to the buyer and price is not paid as per the terms of
the contract.
In cases where the property in the goods has not passed to the buyer, suit for price
generally cannot be maintained, unless under the contract, price is payable on a certain
date irrespective of the delivery or passing of ownership of the goods.

(2) Suit for damages: The unpaid seller can bring action for damages when the buyer
wrongfully refuses to accept the goods or repudiates the contract.

(3) Suit for interest: In case of breach of contract on the part of the buyer, the unpaid seller
may claim for interest from the date of tender of the goods or from the date, the price
becomes payable along with a suit for price.

8. Classification of Goods

Goods are defined to mean every kind of movable property other than actionable claims
and money. The term includes stock and shares, growing crops, grass and things attached
to, or forming part of the land which are agreed to be severed before sale or under the
contract of sale [Section2(7)]

Every kind of movable property, i.e., things which can be carried form one place to another.
However, all such things which form part of the land itself but are agreed to be served from
the land under the contract of sale, are considered as goods. Thus, grass, growing crops,
 trees to be cut and their logwood to be delivered are goods as per the above definition,
similarly things like goodwill, copyright, trade mark, patents, water, gas, electricity are all
good and may be subject matter of a contract of sale.

Types of Goods

Goods

Existing Future Contingent

Goods Goods Goods

Specific Ascertained Unascertained

Existing Goods

As per Section 6 of the Act, existing goods are those goods which are owned or possessed
by the seller at the time of contract of sale. The seller is either the owner of good or he is in
possession of goods. For example, A, a manufacturer of fans, sells a fan to B. It is a contract of
sale of existing goods because A owns the fan. Similarly, when a person sells goods possessed
by not owned by him such as sale by an agent, it is a sale of existing goods. For instance, in
the above example, if the manufacturer sends the fans to his agent in Delhi and sells them
through the agent it is a sale of existing goods because the dealer possesses the goods,
although he is not the owner of them, at the time of the contract of sale.

i.) Specific Goods: These are the goods which are identified and agreed upon by the
parties at the time a contract of sale is made [Section 2(14)], for example, a specified
watch, ring or a car.
ii.) Ascertained Goods: Though normally used as synonym for specific goods,
ascertained goods are intended to include goods which have become ascertained
subsequently to the formation of the contract. When the “unascertained goods” are
identified and agreed upon by the parties, the goods are called ‘ascertained’. You
should note that ascertainment involves unconditional appropriation of the goods as
the subject-matter of a particular contract. Thus, when out of a mass of
 unascertained goods, the quantity contracted for is identified and set aside for a
given contract, the goods are said to be ascertained.
iii.) Unascertained Goods: These are the goods which are not identified and agreed upon
at the time when the contract is made. They are identified only by description. For
example, A who owns an ambassador car show room, has 50 cars and agrees to sell
anu one of them to B. The contract is for unascertained goods, because which
particular car shall be sold to B has not been identified at the time of the contract of
sale.

Future Goods

As per [Section 2(6)] of the Act ‘future goods’ means to be manufactured or produced or
acquired by the seller after making the contract of sale. Thus, future goods are goods which
either are not in existence at the time of contract or they may in existence when the
agreement of the sale is entered upon but have not yet been acquired by the seller by that
time. For example, S agrees to but the entire crop of wheat that would yield in B’s farm, at
the rate of rupees 200 rupees per quintal. This is an agreement of sale of future goods. As
future goods are not in the possession of the seller at the time of contract, they can become
the subject-matter of an agreement to sell only, and not the contract of sale.

Contingent Goods

Contingent Goods are the goods the acquisition of which by the seller depends upon a
contingency which may or may not happen [Section 6(2)]. For example, A agrees to sell B a
certain painting only if C, its present owner, sells it to him. Here the contract is for the sale of
contingent goods as the availability of the painting depends on its sale by C.

9. What are the conditions in which my employer can deny gratuity to me?

The Act deals with this issue in two parts.

1. Section 4(6) (a) provides that the gratuity of an employee whose services have been
terminated for any act of willful omission or negligence causing any damage or loss to,
or destruction of, property belonging to the employer, shall be forfeited to the extent of
the damage or loss caused. The right of forfeiture is limited to the extent of damage. In
absence of proof of the extent of damage, the right of forfeiture is not available.

2. Section 4(6) (b) deals with a case where the services of an employee have been
terminated:

(a) For riotous and disorderly conduct or any other act of violence on his part, or
(b)For any act which constitutes an offence involving moral turpitude provided that such
offence is committed by him in the course of his employment.

In such cases the gratuity payable to the employee may be wholly or partially forfeited.
Where the service has not been terminated on any of the above grounds, the employer
cannot withhold gratuity due to the employee, Where the land of the employer is not
vacated by the employee, gratuity cannot be withheld. If assignment of gratuity is
prohibited, it cannot be withheld for non-vacation of service quarters by retiring employees.
10. How do you calculate gratuity?

1. Gratuity shall be payable for every completed year of service or if part of the year is in
excess of 6 months, then it will be taken as on year. For each completed year of service
Gratuity is payable at the rate of 15 days of wages.

2. Amount of Gratuity is computed on the basis of the rate of wages last drawn by the
employee.

Gratuity = Monthly Salary/ Wages last drawn * 15 days * no. of years of service

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3. In the case of a piece ratd employee, the rate of daily wages shall be computed on the
basis of average of the total wages earned by him for a period of 3 months immediately
preceding the termination of his employment. In this calculation overtime wages paid is
not considered.

Gratuity = Average of 3 months wages * 15 days *no. of years of service

No. of days worked

4. In the case of employees working with seasonal establishment, the rate gratuity shall
compute 7 days of wages for each season.

11. What is the maximum and minimum bonus payment?

According to the Bonus Payment Act, a minimum bonus of 8.33% of wage or salary earned
by the employee for an accounting year or Rs 100, whichever is higher shall be paid to the
employee. The employer shall also pay a higher bonus to employees if, in a year, the
allocable surplus exceeds the amount of minimum bonus payable to the employees.

Note: A ceiling limit of 20% of the wage or salary earned by the employee during an
accounting year is fixed.

12. Discuss the calculation of bonus as per the act

As per the amendment on the Payment of Bonus Bill passed in 2015, if the gross earning of
the employee is below Rs. 21,000, employers are liable to pay bonuses. The bonus will be
calculated as follows:

(i) If salary is equal to or less than Rs. 7,000, then the bonus will be calculated on the
actual amount by using the formula: Bonus= Salary x 8.33 / 100
(ii) If salary is more than Rs. 7,000, then the bonus will be calculated on Rs. 7,000 by
using the formula: Bonus= 7,000 x 8.33 /100

Note: Salary means: Basic Salary + Dearness Allowance

Examples:
1. If A’s Salary (Basic + DA) is Rs. 6,000, then bonus payable will be: 6,000 x 8.33 / 100= Rs.
500 per month (Rs. 6,000 per year)