Contract – II – 2nd Sem – 2nd Internals Batch 2021

Multiple Choice Questions

1. Contract of Sale is defined in (Section 4(1))
2. Goods means (Every kind of Movable Property)
3. Breach of a Condition is treated as breach of Warranty in which Section (Section 13)
4. Caveat Emptor means (Let the buyer beware)
5. Nemo-Dat-Quod-Non-Habet (Means no one can give what he does not have) deals with (Section 27[1] Of the
Sale of Goods Act, 1930)
6. Passing of Property in Goods means transfer of title from (Seller to Buyer)
7. The term CIF stands for (Cost, Insurance, and Freight)
8. Risk Prima Facie passes with (Property or Ownership) Section 26 of the Sale of Goods Act, 1930
9. Sale by pledge (Pawnee) when he makes a defaulter on (Payment) Section 176 in The Indian Contract Act, 1872
10. A agrees to buy 120 barrels of groundnut oil to supply to B. A dispatches 140 barrels B refuses to receive on the
ground that it is excess has (Right to Repudiate)

Fill in the Blanks

1. Sale of Goods Act, (1930)
2. Sale creates Right in (Rem) Agreement to Sell creates Right in (Personam)
3. In Wallis Son and Wells v Pratt and Haynes [1911] AC 394 it was held that buyer may treat breach of condition as
breach of (Warranty)
4. In Udai Chand Pannalal vs Thansing Karamchand on 12 December, 1934 it was held that two Hindu joint families
cannot unite to constitute a partnership, but their managing members may become partners each having (Rights
& Duties) with reference to their respective families
5. A minor can get (Benefit) of partnership only by express consent – Section 30 in The Indian Partnership Act, 1932
6. Insolvency of Partner relevant section is (Section 34 in The Indian Partnership Act, 1932)
7. Dormant partner is also called as (Sleeping Partner)
8. Section 54 of Indian Partnership Act refers to Agreements in (Restraint of Trade)
9. Indian Partnership Act, (1932) and came into force on (1st day of October, 1933)
10.Kinds of Partner (Five: Active/Managing, Dormant/Sleeping, Nominal, Partnership in Profits, Sub Partners,
Minor)

Short Answers
1. Conditions & Warranty
In the context of the Sale of Goods Act, 1930, a condition is a foundation of the entire contract and integral
part for performing the contract. The breach of the conditions gives the right to the aggrieved party to treat the
contract as repudiated. In other words, if the seller fails to fulfil a condition, the buyer has the option to repudiate the
contract or refuse to accept the goods. If the buyer has already paid, he can recover the prices and also claim the
damages for the breach of the contract.
Warranty is the additional stipulation and a written guarantee that is collateral to the main purpose of the
contract. The effect of a breach of a warranty is that the aggrieved party cannot repudiate the whole contract however,
can claim for the damages. Unlike in the case of breach of condition, in the breach of warranty, the buyer cannot treat
the goods as repudiated.
BASIS FOR
CONDITION WARRANTY
COMPARISON
It is a stipulation which forms the very basis of the It is additional stipulation complementary to
Meaning
contract. the main purpose of the contract.
Section 12(2) of the Sale of Goods Act, 1930 defines Section 12(3) of the Sale of Goods Act, 1930
Provision
Condition. defines Condition.
Purpose Condition is basic for the formulation of the contract. It is a written guarantee for assuring the party.
Result of Breach of Only damages can be claimed in case of a
The whole contract may be treated as repudiated.
Contract breach.
Remedies available
to the aggrieved Repudiation, as well as damages, can be claimed. Only damages can be claimed.
party

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 2. Remedies for Breach
The appropriate remedy depends on the terms of the contract, the nature of the breach, and the specific circumstances of the
case.
1. Compensatory Damages - An award of compensatory damages is the most common of the legal remedies for breach of contract.
The calculation of compensatory damages is based on the actual losses you have sustained as a result of the breach of
contract. They typically fall into two categories: expectation damages and consequential damages.
2. Specific Performance – Specific performance is a type of remedy for breach of contract in which a court orders the breaching
party to perform their end of the bargain.
Monetary damages are typically favoured over specific performance as a remedy for breach of contract. However, specific
performance may be available when monetary damages won’t adequately compensate you.
3. Injunction – Injunctions serve a similar purpose as specific performance. The difference is that with specific performance, the
court orders a party to do something. With an injunction, the court often orders a party not to do something.
An injunction may be permanent or temporary. Temporary injunctions are often ordered while litigation is pending to
prevent potential damage.
4. Rescission – Rescission allows a nonbreaching party to cancel the contract as a remedy for a breach. Rather than seeking
monetary damages, the nonbreaching party can simply refuse to complete their end of the bargain. Rescission puts the parties
back in the position they would have been in had they never entered into the contract.
However, to justify rescission, the breach must be material. That means that it has to go to the heart of the contractual
agreement.
5. Liquidated Damages – Liquidated damages are a specific amount the parties agree to in the contract as compensation for a
breach. Contracts often use liquidated damages provisions where it might be difficult to calculate the correct amount of
compensatory damages.
6. Nominal Damages – A court may award nominal damages as a legal remedy for breach of contract when the plaintiff cannot
support their claim for compensatory damages. With nominal damages, the court recognizes that a breach of contract occurred,
but no harm can be calculated.
3. Rights of Unpaid seller
In every contract of sale, a seller is under an obligation to deliver the goods sold and buyer is under an obligation to pay
the requisite amount set or quid pro quo i.e., something in return, under the contract of sale, by them. This is known as reciprocal
promise as per Section 2(f) of the Indian Contract Act. In other words, any set of promises made which forms the consideration or
part of the consideration for each other are called reciprocal promises and every contract of sale of goods consists of reciprocal
promises.
According to Section 45(1) of Sale of Goods Act, 1930, the seller is considered as an unpaid seller when:
a- When the whole price has not been paid and the seller has an immediate right of action for the price.
b- When Bills of Exchange or other negotiable instrument has been received as conditional payment, and the pre-requisite
condition has not been fulfilled by reason of the dishonour of the instrument or otherwise. For instance, X sold some goods to Y
for $50 and received a cheque. On presentment, the cheque was dishonoured by the bank. X is an unpaid seller.
Seller also includes a person who is in a position of a seller i.e agent, consignor who had himself paid or is responsible for
the price.
4. Minor as a partner
Section 30 in The Indian Partnership Act, 1932 – Minors admitted to the benefits of partnership. —
 A person who is a minor according to the law to which he is subject may not be a partner in a firm, but with the consent of all
the partners for the time being, he may be admitted to the benefits of partnership.
 Such minor has a right to such share of the property and of the profits of the firm as may be agreed upon, and he may have
access to and inspect and copy any of the accounts of the firm.
 Such minor’s share is liable for the acts of the firm, but the minor is not personally liable for any such act.
5. Limited Liability Partnership
Concept of "limited liability partnership"
• LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a
partnership. The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and
holding property in its own name.
• The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed
contribution in the LLP.
• Further, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners
are shielded from joint liability created by another partner’s wrongful business decisions or misconduct. Mutual rights and duties
of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case
may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.
Since LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between
a company and a partnership.

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