Business Law 2023

BUSINESS LAW
Prof. Benny John M.A., LL.M., MCILT (Lon)

WHAT IS LAW ?
• Rules Prohibiting / Compelling ( Behaviour)
• Punishment
• Compensation for Injury
• Procedures ( Contracts, Wills, Transfer of
Property etc..)
• Administrative Rules ( Running Government)
• Regulating Legislature – Law Making Body
INTRODUCTION
• What is Law?
• Source of Law
• Division of Law
• Law of Tort
• Law of Contracts incl. Agency, Bailment
• Sale of Goods
• Law of Carriage of Goods
• International Conventions
WHAT IS LAW ?
• Rules Prohibiting / Compelling ( Behaviour)
• Punishment
• Compensation for Injury
• Procedures ( Contracts, Wills, Transfer of
Property etc..)
• Administrative Rules ( Running Government)
• Regulating Legislature – Law Making Body
ENGLISH & INDIAN LAW
• ENGLISH LAW
• Common Law >> Word of the King
• INDIAN LAW
• Oldest of any system
• “Dharma” >>> “Dharmashastra”
– Legal & Moral Values
• Upanishads
• Tirukural ( Thiruvalluvar)
Background to Indian Law
• The “Govt. of India Act, 1858
– Transferred all powers from East India Company to
the “British Crown”
• First Supreme Court In Calcutta

Source of Law
• Customs
– Local Customs, Conventional Customs (De Facto)
• Precedent
– A previous case/ instance as rule
• Legislation
– Statute Law (by Assembly / Parliament)
• Equity
– Law of Fairness / Fair play
• Common Law
– Word of the King
Division of Law
STATE LAW INTERNATIONAL
(National Law) LAW
• Public Law • Public
International Law
• Private law (Conduct of
States)
• Private
International Law
– Rules for Private
citizens
STATE LAW ( NATIONAL LAW)
• PUBLIC LAW
• Constitutional Law
• Administrative Law
• Criminal Law
• PRIVATE LAW ( CIVIL LAW)
• Law of Person
• Law of Property
• Law of Obligation ( Law of Contracts / Law
of Torts)
LAW OF TORTS
TORT = Civil Wrong
• Tortum ( Latin) = twisted, crooked
• not straight or lawful
• A breach of duty fixed by law
• An act or omission which is unauthorised by
law
• An infringement (interference) of the right of a

private individual
LAW OF TORTS
Types of Torts
• Trespass
• Nuisance
• Conversion
• Defamation
• Deceit
• Negligence
TRESPASS
• = Interference with Person / Property
• Property: Trespassing on another’s land
actionable
• Person: Assault, Attack on another person
infringes one’s right to his body
• ( when an act endangers society, a tort
becomes Crime )
NUISANCE
• Prevention from enjoyment of one’s property
• Disturbance = Public Nuisance
Private Nuisance
• To do Hurt, Annoy, Inconvenience, damage
– ( To a Person or to the Public in general )
CONVERSION
• Inconsistent treatment of someone else’s
property
• Willful interference
• Wrongful dealing with goods / property
– Wrongfully taking, detaining;
– By parting / disposing of goods;
– By Sale;
DEFAMATION
• Saying or publishing (writing) anything Untrue
• Statements against a person affecting his
reputation
• TWO TYPES:
• Slander ( Word of mouth )
• Libel ( Permanent form)
DECEIT
• Fraud / Misrepresentation/ Cheating

– Intention to deceive another ( mens rea)
– Selling somebody’s Goods and Property as your
own
“No man can have any right to present his goods as
goods of somebody else”
NEGLIGENCE
• Common & most important in Shipping

• Negligence= Carelessness; Failure ( Breach) of
Duty of Care
• Take reasonable care to avoid Acts / Omissions
likely to injure others
• Donogue vs. Stevenson, 1932 ( decomposed snail in
ginger beer)
NEGLIGENCE ( Contd..)
• Carriers owe a duty of Care for cargo /
passengers
• ( Highways, Professionals, Doctors, Bailee of
Goods etc.. )- Torts founded on Contract
• “Res Ipsa Loquitor” ( the thing speaks for itself) –
Swimming pool owned, controlled and managed by 5-star
hotel – foreigner died ) Defence of contributory negligence
rejected
VICARIOUS LIABILITY
• Liability on behalf of another
• Employer liable for torts of employees
• “ADLER vs. DICKSON, 1955 ( The Himalaya Case)
• ( Lady –Mrs. Adler injured while disembarking from ship –
gangway(ladder) collapsed- could not sue ship owner due to
exclusion clause in ticket- held Bosun & Captain responsible;
Captain held vicariously liable for Bosun’s negligence)
• The Himalaya Clause in Bill of Lading ( Exclusion Clause)
Malfeasance, Misfeasance,
Non-feasance
• MALFEASANCE:
– Commissioning of an Unlawful Act
• Trespass, Defamation et..
• MISFEASANCE:
– Improper performance of a Lawful Act
– Negligent performance (Janitor)
• NON-FEASANCE:
– Failure or Ommission to perform
– Especially when there is a relationship (Swimming Pool Guard)
• “mens rea” ( guilty
mind) – state of mind
REMEDIES IN TORT
• DAMAGES ( PECUNIARY – MONEY)
– Nominal Damages ( Not as compensation)
– Real Damages ( Real and Substantial)
Compensation actually suffered
• INJUNCTION
– Prohibitory
• SPECIFIC RESTITUTION OF PROPERTY
– To recover wrongfully dispossessed property
• EXTRA-JUDICIAL
– a) Self defence ; b) Expulsion/ re-entry
DAMAGES
• Compensation so far as money can
compensate
• Ex. Personal injuries: 1. Loss of earnings/
earning capacity; 2. medical and other
expenses; 3. Pain, suffering and mental
distress; 4. Loss of life expectation etc..
• Different from ‘Exemplary Damages’: Not
just as compensation; but as punishment also
• Remote Damages not allowed
UNIT- 2
LAW OF CONTRACTS
LAW OF CONTRACTS
• Basis: Indian Contracts Act, 1872
• Contracts: A legally enforceable
Agreement
• 4 Basic requirements:
• OFFER <> ACCEPTANCE <>
• CONSIDERATION<>LEGALITY
• ( Offeror) ( offeree ) ( Price)
• ( Duration) (Acceptance to be communicated)
• CONTRACT= An Agreement enforceable by law
• A contract has to be expressed in Words-
Spoken or Written
OFFER (PROPOSAL)
• Person making the Proposal: PROMISOR
• Person accepting the Proposal: PROMISEE
• Promisee promises to do / abstain from doing
something: CONSIDERATION
• ‘Consensus ad idem’ = Meeting of minds

OFFER (PROPOSAL)
• An Offer is accepted when ACCEPTANCE IS
COMMUNICATED
• Exposure of Goods: Not an OFFER to Sell

• On PICKING THE Goods, it is an OFFER by the
Customer to buy
• Sale NOT effected until the Buyer’s Offer Price
is Accepted by the Shopkeeper
REVOCATION OF PROPOSAL
• A Proposal may be revoked at any Time before
Communication of Acceptance is complete;
But Not Afterwards
• ( A proposes by letter / mail to sell his house

to B. B accepts the proposal by letter / mail. A
may revoke his proposal any time when B
send letter or mail of acceptance; but NOT
afterwards.)
COMMUNICATION
• COMMUNICATION of OFFER
• OFFER TO THE WHOLE WORLD
– ( Carlill vs. Carbolic Smoke Ball Co., 1893
– Flue Remedy-Smoke Ball- Advt- Accepted- Reward UK
Pds.100
– ( Communication of acceptance implied by conduct
of parties)
• COMMUNICATION of ACCEPTANCE
ACCEPTANCE
• An ACCEPTANCE should be ABSOLUTE,
UNCONDITIONAL & UNQUALIFIED
• Be expressed in some USUAL and
REASONABLE manner
CONSIDERATION
• Something in Return
• Price for the Promise of the Other
• ‘Quid pro quo’
• Consideration may be Past, Present & Future

• Abstinence is valid consideration
CONSIDERATION
• ADEQUACY OF CONSIDERATION
• Consideration need Not be adequate to the
Promise: It must be Real and have value in the
eyes of Law
• Forbearance to Sue
• Compromise of Disputed Claim
CONSIDERATION
• Agreements NOT supported by Consideration
• 1. Natural Love and Affection
– The Agreement is in writing
– Agreement is Registered under law relating to
Registration of Documents
– The Agreement is made on account of natural love
and affection
– The parties to the agreement stand in near
relation to each other
CONSIDERATION
• 2. Compensation for Past Voluntary Services
– The act must be voluntary act
– For an act which the Promisor was legally compellable
to do e.g., supporting the minor child of the promisor
• A finds B’s dog and returns to him. B subsequently promises
to give A Rs.1000/- This promise is enforceable
• A supports B’s minor child C. B promises to reimburse A. The
Agreement is valid
CONSIDERATION
• 3. Time-barred Debt
– There must be an express promise to pay the
time-barred debt
– The promise must be in writing
– It must be signed by the person to be charged
therewith
• E.g., A owes B Rs.10,000/- but the debt is time-barred
by the Limitation Act. A signs a written promise to pay B
Rs.5,000/- B can enforce the agreement
CLASSIFICATION OF CONTRACTS
• BASED ON:
• 1. Validity
• 2. Formation
• 3. Performance
VALIDITY
• 1. Classification according to validity:
• All Essential Elements of Contract are present
• Void and Voidable
• Unenforceable because of some technical
defect.
– Technical defect
– Absence of writing
– Time-barred etc..
FORMATION
• 2. Validity as to Formation:
• Express Contract
• Implied Contract
• Quasi-Contract ( based on Equity)
• E-Commerce ( via Internet)
– Different Companies create networks linked to
numerous other networks
PERFORMANCE
• 3. Validity as to Performance:
• Executed Contract
– Contract which is already done
• Executory Contract
– Still to be performed
• Unilateral ( One sided Contract)
– Contracts with executed consideration
– Coolie placing a luggage in the compartment; the
owner of the luggage to perform his side = to pay for
the service
OFFER & INVITATION TO OFFER
• OFFER ( Proposal) • INVITATION TO OFFER
• Examples: • Examples:
• Bid in an Auction Sale • Tender Notice ( Advt.)
• A tender to supply • Advt. For sale / auction
goods at a certain date • Catalogue of goods for
sale
• Offer: ‘Carlill vs. • Quotation of lowest
Carbolic Smoke Ball price in an answer to an
Co.,1893 enquiry
OFFER (PROPOSAL)
• An Offer is accepted when ACCEPTANCE IS
COMMUNICATED
• Exposure of Goods: Not an OFFER to Sell

• On PICKING THE Goods, it is an OFFER by the
Customer to buy
• Sale NOT effected until the Buyer’s Offer Price
is Accepted by the Shopkeeper
REVOCATION OF PROPOSAL
• A Proposal may be revoked at any Time before
Communication of Acceptance is complete;
But Not Afterwards
• ( A proposes by letter / mail to sell his house

to B. B accepts the proposal by letter / mail. A
may revoke his proposal any time when B
send letter or mail of acceptance; but NOT
afterwards.)
COMMUNICATION
• COMMUNICATION of OFFER
• OFFER TO THE WHOLE WORLD
– ( Carlill vs. Carbolic Smoke Ball Co., 1893
– Flue Remedy-Smoke Ball- Advt- Accepted- Reward
Pds.100
– ( Communication of acceptance implied by conduct
of parties)
• COMMUNICATION of ACCEPTANCE
ACCEPTANCE
• An ACCEPTANCE should be ABSOLUTE,
UNCONDITIONAL & UNQUALIFIED
• Be expressed in some USUAL and
REASONABLE manner
CONSIDERATION
• Something in Return
• Price for the Promise of the Other
• Quid pro quo
• Consideration may be Past, Present & Future

• Abstinence is valid consideration
CONSIDERATION
• ADEQUACY OF CONSIDERATION
• Consideration need Not be adequate to the
Promise: It must be Real and have value in the
eyes of Law
• Forbearance to Sue
• Compromise of Disputed Claim
CONSIDERATION
• 1. Natural Love and Affection
– The Agreement is in writing
– Agreement is Registered under law relating to
Registration of Documents
– The Agreement is made on account of natural love
and affection
– The parties to the agreement stand in near
relation to each other
CONSIDERATION
• 2. Compensation for Past Voluntary Services
– The act must be voluntary act
– For an act which the Promisor was legally
compellable to do e.g., supporting the minor child
of the promisor
• A finds B’s dog and returns to him. B subsequently
promises to give A Rs. 1000/- This promise is
enforceable
• A supports B’s minor child. B promises to reimburse A.
The Agreement is valid
CONSIDERATION
• 3. Time-barred Debt (As per Limitation Act,1963)
– There must be an express promise to pay the
time-barred debt
– The promise must be in writing
– It must be signed by the person to be charged
therewith
• E.g., A owes B Rs.10,000/- but the debt is time-barred
by the Limitation Act. A signs a written promise to pay B
Rs.5,000/- B can enforce the agreement
OFFER & INVITATION TO OFFER
• OFFER ( Proposal) • INVITATION TO OFFER
• Examples: • Examples:
• Bid in an Auction Sale • Tender Notice ( Advt.)
• A tender to supply • Advt. For sale / auction
goods at a certain date • Catalogue of goods for
sale
• Offer: ‘Carlill vs. • Quotation of lowest
Carbolic Smoke Ball price in an answer to an
Co.,1893 enquiry
Types of Contracts ( Agreements)
• 1. Valid Agreements
• 2. Void Agreements
• 3. Voidable Agreements
• 4. Unenforceable Agreements
• 5. Illegal Agreements
1. Valid Agreements
• Parties are Competent

• Consent is Free
• Object and Consideration are Lawful
• Agreement Not declared Void by Law
Ingredients of Valid Contract
• 1. An enforceable agreement
• 2. Parties must be competent to contract
– Not a minor
– Not of unsound mind
– Not disqualified
Ingredients of Valid Contract
• 3. Free Consent
• Not under:
– Duress
– Coercion
– Undue influence (one Party in dominant Position)
– Fraud
– Misrepresentation
– Mistake of fact
Ingredients of valid contract (contd.)
• 4. Lawful consideration and object

–Not forbidden by law
• 5. Must fulfill the law of the land (India)
Competent Parties
• 1. Is of the age of Majority
– Above the age of 18. ( Indian Majority Act, 1875
Sec.3)
– No Estoppel against a minor ( E.g.: A minor who
misrepresents his age and get a loan from a
money lender cannot recover the amount)
• Estoppel: A principle of Law under which a
person is bound by the representation he
makes; and he is not allowed to subsequently
go back on his representation
Competent Parties
• Benefit of a Contract may be given to a Minor
– A mortgage executed in favour of a Minor, where he
had advanced mortgage amount, is enforceable
• Minor Cannot be Partner in firm
– Although Minor cannot be a Partner in a Firm, he may
be admitted to the benefits of Partnership; but not
liable for the losses of the firm
• No subsequent Ratification by a Minor
– A Minor, on attaining majority, cannot ratify or adopt
an agreement entered by him during minority
Competent Parties
• Minor as an agent
– Minor as an agent incurs no personal liability to
his Principal
If a Minor is supplied with necessaries,
such person can claim re-imbursement
from his properties, but not personally
liable
Competent Parties
• 2. Of Sound Mind
– A person in a Lunatic Asylum, who at intervals of
sound mind, may contract during those intervals
– A sane man who is so drunk that he cannot
understand the terms of a contract or form a
rational judgement cannot contract as long as the
drunken-ness last
• 3. Not disqualified
– Not bankrupt (Pauper)
– Not a Prisoner etc..
Competent Parties
• Not Alien Enemies
2. Void Contracts
• An Agreement NOT enforceable by Law is a
VOID contract
• Neither Legal Rights NOR Legal Obligations
• No party to such Agreement can claim any
right under it
VOID CONTRACTS
• VOID (Invalid): Agreements:
• (void ‘ab initio’)
– Void from the very Beginning
• a) If Consideration and Objects are Unlawful
• b) Agreement without Consideration
• c) in Restraint of marriage
• d) in Restraint of trade (Profession)
VOID CONTRACTS
• e) in Restraint of Judicial proceedings
– ( Except Arbitration proceeding)
• f) the meaning of which is not clear/certain
• g) by way of wager (betting)
• h) to do an impossible act
3. VOIDABLE CONTRACTS
• An Agreement one which is enforceable by
law at the option of one or more Parties
• But NOT at the option of the other
• A voidable agreement can be avoided or Set
Aside at the Option of One of the Parties to
the Agreement
DOCTRINE OF FRUSTRATION
(VOIDABLE CONTRACTS)
• A VALID CONTRACT but Impossibility comes
In-Between
• DOCTRINE OF SUPERVENING IMPOSSIBILITY
• IMPOSSIBILITY BY:
– FORCE MAJEURE ( natural calamities, war, strike,
lock-out, etc..
– FRUSTRATING EVENT ( not at the fault of either
party)
– CHANGE OF LAW OF LAND
– DESTRUCTION OF SUBJECT MATTER
– INCAPACITY OF THE PROMISOR
VOIDABLE CONTRACTS
• A CONTRACT WHICH CAN BE LEGALLY
REJECTED AT THE OPTION OF ONE OF THE
PARTIES
• Example:
– Mistake of fact,
– Lack of free will
– May be ratified by the party with power to avoid
contract, once the reasons no longer exists
4. UNENFORCEABLE CONTRACTS
• An Agreement one which cannot be enforced
in a Court of Law because of some technical
defect
– For want of Registration
– For want of Proper Stamp
– By Law of Limitation
– Valid but cannot be proved and enforced in a
Court of Law
• Illegal Contracts are Void and are also
Unlawful
5. ILLEGAL CONTRACTS
• All contracts that are Unlawful / Forbidden by
Law
– To Murder / Contract Killing / Quotation Killing /
Kidnapping
– To commit Dacoity
– To Smuggle Goods
– Agreements with Minors are Void; but not Illegal
or Unlawful
– An agreement with a Minor or a Person of
Unsound Mind; the Court shall NOT enforce such
an agreement
ILLEGAL CONTRACTS
– Agreements which are void as the legislature
prohibits or penalises it as they are Unlawful
– A void agreement may not be illegal
– Both Illegal and Void Agreements are VOID and
are unenforceable
– In case of Void agreement, the agreement
collateral to it can be valid
• E.g.: Wager is the main transaction which is void, but a
loan given to one of the parties to pay a wagering debt
is valid
EXCLUSION CLAUSES
• Clauses which excludes liability of a party to
contract
• Must be properly incorporated in to the
contract, at the beginning of the contract
• Not possible to exclude liability for fraudulent
misrepresentation
• The clause must be in clear language
• “Thornton vs. Shoe Lane Parking Ltd, 1971”
• “ Adler vs. Dickson, 1954”
QUASI CONTRACTS
• RELATIONS RESEMBLING THOSE CREATED BY
CONTRACT ( Sec. 68-72 of Indian Contracts Act)
• Not Resulting from:
• Any Express Agreement/ Any Implied Agreement/
No Offer / Acceptance
• 1. A minor’s / lunatic’s liability to pay for
‘necessaries’
• 2. Finder of Goods
• 3. Doing a non- gratuitous act for another
• 4. Payment of money due to another
QUASI CONTRACTS
• 1. A minor’s / lunatic’s liability to pay for
‘necessaries’
– A supplies B, a lunatic with necessaries suitable to
his conditions in life. A is entitled to be
reimbursed from B’s property
– The expenses can only be reimbursed from the
property of the incapable person. Not Personally
liable.
QUASI CONTRACTS
• 2. Finder of Goods
– A finder of Goods has right to retain goods until
he receives compensation for the trouble and
expense voluntarily incurred by him to preserve
goods; but no right to sue the owner for such
amount
– Where the Owner offered a specific reward for the
return of goods, the finder may sue for such
reward and may retain goods until he receives the
amount of the reward.
• The Responsibilities of the Finder of Goods are
similar to that of a Bailee of Goods
QUASI CONTRACTS
• 3. Liability to pay for Non-Gratuitous Act
– A, a trader leaves his goods at B’s godown/
warehouse by mistake and B uses ( sells) as his
own. B is bound to pay for A’s goods.
– A saves B’s property from fire. A is not entitled to
compensation from B, if the circumstances show
that he intended to act gratuitously.
QUASI CONTRACTS
• 4. Payment under Mistake or Coercion
– A person whom money has been paid or anything
delivered by mistake or coercion must repay or
return ( sec. 72)
• A and B jointly owes Rs.10,000/- to C. A pays the
amount to C and B without knowing this fact, pays
Rs.10,000/- to C. C is bound to repay the amount to B
• A Railway company refuses to deliver goods to the
consignee except upon payment of illegal charges. The
consignee pays the sum to obtain goods. He is entitled
to recover the excess sum paid.
DISCHARGE OF CONTRACT
• 1. By Agreement or Consent
– Mutual agreement between Parties
• 2. By Performance
– Contract already performed to mutual satisfaction
• 3. By impossibility of Performance
– Force Majeure / Frustration
• 4. By Breach
DISCHARGE BY AGREEMENT
• 1. Novation:
– Parties to the Contract agree to substitute a New
Contract for it or Alter it, the Original need not be
performed.( Sec 62 of the Contracts Act)
– A owes B Rs.50,000/- . A enters into an agreement with B and
gives B a mortgage of his (A’s) property for Rs. 25,000/- This is
a new contract and extinguishes (cancels) the old one
– The Original Contract should be subsisting, not
expired
– The New Contract must substitute the Original
contract
• 1. Novation (contd..)
– Novation may involve either discharge of parties,
the contract remaining the same or change in
terms of contract, the parties remaining the same
– A owes Rs.50,000/- to B under contract. It is agreed between
A, B and C that henceforth C will be debtor instead of A. the
old debt of A to B comes to an end and a new debt from C to B
has been contracted
– Novation must be with mutual consent of all the
parties concerned
• 2. Remission of Performance (remission=reduction)
– Remit wholly or in part the performance
– Extend the time for Performance
• A owes B Rs.25,000/-. A pays B Rs.10,000/- in satisfaction of the
whole debt of Rs.25,000/- The whole debt is discharged
• A owes B Rs.10,000/-. C Pays B Rs.5,000/- an B accepts this in
satisfaction of his claim on A. This payment is a discharge of the
whole claim of Rs.10,000/-
• ..
• 3. Waiver
– A release or surrender of a contractual right
– Giving up all claims
• 4. Accord and Satisfaction
– Instead of giving complete release, accepts
something else giving up his right. Then the
contract is said to have been discharged
• A build a house for B for a consideration of
Rs.500,000/- After construction of the house, B offers A
a plot of land to A instead of Rs.500,000/- If A accepts
B’s offer, it is a case of discharge by Accord and
Satisfaction.
DISCHARGE OF CONTRACTS
• 5. Discharge by Impossibility of Performance
• 6. Discharge by Supervening Impossibility
(Doctrine of Frustration)
• 7. Non-Existence of or Non-Occurrence of a
Particular thing
• 8. Death or Incapacity
• 9. Change of Law
• 10. War
BREACH OF CONTRACT -REMEDIES
• DAMAGES = Compensation ( Money
Award)
• Principle: “Injured (Affected) Party to be put in
the same position as if the contract is performed”
• “ Hadley vs. Baxendale,1854’
– Millers- Common Carrier- deliver crankshaft for
repairs –redelivery by certain date – delayed/ failed –
Jury: UK Pds. 25/- as damages (the wages of workers
and depreciation charges, not profit loss which might
have been earned)
DAMAGES
• Measure of Damages:
• 1. The PARTY in breach must make
compensation in respect of the direct
consequences of the Breach
• 2. The Aggrieved Party is not entitled to
remote or indirect loss or damages
• 3. The means that existed for mitigating the
Loss shall be taken into account
DAMAGES FOR DIRECT LOSS
• Loss of Profit as Damages only when you
declare that if the defendant is made known
of the loss of profit.
• E.g.: Union of India & Anr vs. Hari Mohan Ghosh AIR
(1990) Gau14..
• Consignment of artificial silk lost. Entitled to
compensation for loss due to non-delivery but not loss
of profit
• Duty to mitigate the loss ( sec.73):
– Car on fire.. The owner did not take any steps to
douse the fire immediately..
DAMAGES ( sec 73)
• Measure of Damages = Difference between

Contract Price & Market Price
• ‘A’ contracts to charter his ship to ‘B’ from 1st

Jan for a year- freight rises – ‘A’ breaks his
promise – Must pay ‘B’ by way of compensation
difference between charter rate and price for
which ‘B’ could get a similar ship.
LIQUIDATED DAMAGES
• Damages (Penalty) amount

specified in contract
• ( Amount previously agreed upon by both
parties, and mentioned in the Contract )
• ( Example: Demurrage, Service Contracts /

Volume Contracts, Performance Contracts)
QUANTUM MERUIT
• Payment for the Value of “So much as is
merited” or “Earned”
• Can be awarded only if the Contract does not
provide for a fixed price or consideration for
the work done or services rendered
SPECIFIC PERFORMANCE
• (Specific Relief Act, 1963)

• Specific Relief = Specific Remedy = Specific
Fulfillment
• An Equitable Relief
• Specific Performance by way of Damages for
Breach, where Remedy of Damages is
inadequate.
• MODES of Specific Relief:
• Restoration of Possession
• Specific Performance of Contract
• Injunction to prevent breach
• ( When pecuniary – Money- Compensation NOT
adequate)
• Ex.: Shares in a company not ordinarily available
in market
• Property transaction
• Specific Performance when:

• Affected Party wants the ‘thing’ in Specie
and cannot have in any other way
• Courts will NOT decree Specific
Performance to Build, Repair or Maintain
works
ANTICIPATORY BREACH
• A party to contract has refused to

perform or disabled himself from
performing his promise in its entirety, the
Promisee may put an end to contract (
and claim damages) and acquiese its
continuance.
• Frost vs. Knight, 1872 ( promise to marry upon his (K)
father’s death)
PRIVITY OF CONTRACT
• Doctrine based on Rights in Personam
• Only Persons who are Parties to a
contract can Sue and be Sued
• EXCEPTIONS:
• 1. Beneficiary to a contract
– Oberoi Hotel case ( German pilot of Lufthansa), 1997
• 2. Trust or Charge
– A gave his entire estate to B, his son who agreed to
pay certain sum of money and property to C, A’s
illegitimate son. Although C is a stranger to the
agreement between A and B, C can enforce it
PRIVITY OF CONTRACT
• 3. Family arrangements, Partitions, Marriage
settlements
– Provision made for the benefit of a third person
• 4. Agency
– The Principal can enforce claim on a third party on
contract made by the agent
• 5. Assignee of a debt
• 6. Holder of a Bill of Lading/Holder of a
Negotiable Instrument
• 7. Third Party Insurance
• 8. Acknowledgement or Estoppel
– Partner of a firm liable for loan taken by the firm
CONTINGENT CONTRACTS
• Contingent Contract: (Sec. 31 of Indian Contracts
Act)
• A Contract to do or not to do something if
some event does or does not happen
• Contingent Contract is Conditional – Different
from Absolute Contracts
• Absolute Contract binds the Promisor – binds
himself in any Event
• Ex.: 1. ‘A’ contracts to pay ‘B’ Rs.10,000/- if ‘B’s
house is burnt.
• 2. Contracts for Sale or Contracts for
Exports is made subject to obtaining an
‘Export Licence’ – Obligation usually on
Sellers.
• Contracts of Indemnity or Insurance are
common examples of Contingent Contracts.
• Sale of a Ship subject to ‘Satisfactory Survey’.
• Sale / Buying of Land subject to the grant of
planning permission/ municipal permission to
use the land as a warehouse or depot.
• Enforcement of Contracts contingent upon an
event Happening.
• Ex. ‘A’ contracts to pay ‘B’ 2.0 Lakhs Rupees if
‘B’ marries ‘C’. ‘C’ dies without being married.
The contract is void.
• Agreements contingent on Impossible
Events: Void
– Whether the impossibility of the event is known
or not known to parties at the time of agreement
– A agrees to pay B Rs.50,000/- if B marries D’s
daughter C. C is dead at the time of agreement.
CONTINGENT CONTRACTS vs. WAGER
CONTRACTS
• In a WAGER agreement, the Uncertain event is
beyond the power of both parties.
• In CONTINGENT agreement, the event may be
within the power of one of the parties
• Wagering agreements are Void; But
Contingent agreements are Valid ( except
when they are dependant on an impossible
event)
Agreements Opposed to Public Policy
• Agreements Trading with Enemy
• Agreement to commit a Crime
• Agreements which interfere with

Administration of Justice
• Trafficking in Public Office and Titles
• Agreements in Restraint of Legal Proceedings
Agreements Opposed to Public Policy
• Agreements tending to create interest

Opposed to Duty
• Agreement to defraud Creditors or Revenue

Authorities
Reciprocal Promises
• Mutual and Independent
• Conditional and Dependant
• Simultaneous Performance
• Effect of One Party Preventing Another from
performing the promise
• Effect of Default as to Promise tto be
performed First
Time as the Essence of Contract
• When Time is the Essence if the Contract
• When Time is not the Essence
Assignment of Contract
• Assign= Transfer
• Transfer of Contractual Rights and Obligations
Unit - IV
• CONTRACTS OF INDEMNITY (Sec 124-125)

GUARANTEE (Sec 126-147), BAILMENT ( 148 –
171) & AGENCY (Sec 182-238)
CONTRACT OF INDEMNITY
• A Contract by which One Party promises to

save the other from any loss caused to him
by the conduct of the Promisor himself or by
the conduct of any other Person.
• The Person who promises to make good the
loss is called the Indemnifier and the person
to whom the loss is to be made is called the
Indemnity- Holder ( The Indemnified)
INDEMNTITY CONTRACT -
Characteristics
• An Agreement with All ingredients of a
Contract
• Free consent, competent, consideration, and object
must be lawful, not declared void by law.
• Ex.: A promises to pay B for publishing a libellous article
against C. B publishes the defamatory article against C
and is compelled to pay the damages to C. B cannot
recover the amount from A. The agreement is void and
the object is unlawful.
• A contingent agreement to make Good the
Loss ( compensate for any Loss)
Characteristics
• Loss must be caused by Human Conduct only
• Do not cover Insurance Contract in India unlike British Law
• Under British (English) Law, Contract of Indemnity cover not
only Loss based on Human Conduct, but also natural events
and accidents
• Indemnity-holder must have actually suffered
loss before he can be entitled to recover the
amount
• However, certain High Courts orders held that Indemnity-
holder is entitled to recover his indemnity even before he
actually discharges his liability
• ..
Characteristics
• RIGHTS OF INDEMNITY HOLDER ( Sec 125)
• All Damages / Costs/ Sums which he may have

been compelled to pay in any Suit,
Compromise agreement etc.
• CONTRACT OF GUARANTEE
CONTRACT OF GUARANTEE
• A Contract to Perform the Promise or
Discharge the Liability of a THIRD PERSON in
case of his default.
• The Person who gives Guarantee is called:
SURETY (GUARANTOR)
• ( Anything done or any promise made for the
Principal Debtor is sufficient CONSIDERATION
to the Surety for giving the Guarantee)
• A promise to answer for DEBT, DEFAULT etc.,
• Ordinary Guarantee
– Liable for Single Transaction
• Continuing Guarantee
– Liable for Successive and Series of Transactions
Revocation of Continuing Guarantee: May be revoked
any time by Surety by giving notice to the Creditor or
By the death of Surety
• ESSENTIALS:
• Tripartite Privity
– Requires the consent and concurrence of THREE
parties
–Principal Debtor
–Creditor
–Surety (Guarantor)
• Tripartite Privity:
• Consent and agreement of THREE parties
• A Promise by the Surety to be answerable for
the default of the Principal Debtor
• Liability of the Principal Debtor must be
legally enforceable.
• A Guarantee may be Either Oral or Written
• Although Consideration is essential, it is not
necessary that the Benefit should accrue to
the Surety
• It is sufficient that there is some benefit to the
Principal Debtor
– A sells goods to B. C afterwards request A not to
file a suit against B, and C will pay for the goods in
default of payment by B. This is sufficient
Consideration
• ESSENTIALS:
• A Promise by the Surety to be answerable for
the Default of the Principal Debtor
– There must be a clear and distinct promise by the
Surety to answer for the debt
– Even if the Principal Debtor is a Minor, the Surety
is liable to pay even though the Minor is NOT
• The Liability of the Principal Debtor must be
legally enforceable
BANK GUARANTEE
• A Mechanism used
• To ensure performance between
geographically distant parties
– Where the Performance of the Contract is
guaranteed by Bank, and a demand made, the
bank must pay the amount without any objection
• To facilitate transfer of Goods or
• Performance of the Contract
CONSIDERATION FOR GUARANTEE
• CONSIDERATION may be anything done
or any promise made for the benefit of
the Principal Debtor
• Ex.: ‘B’ wants goods from ‘A’ on credit. ‘A’ agrees
provided ‘C’ will guarantee payment, in
consideration of ‘A’s promise to deliver goods. This is
sufficient consideration for ‘C’s promise
BANK GUARANTEE
• MAIN PRINCIPLES:
• All the Obligations of the Bank are irrevocable
• A Bank is not concerned with the relations
between a Supplier and the Customer
(Creditor and the Principal Debtor); the Bank
must pay, ON DEMAND, according to its
Guarantee
• (the above principle applies also to
‘irrevocable letter of credit’)
BANK GUARANTEE
• MAIN PRINCIPLES: ( Contd..)
• Obligations assumed by the Bank are Irrevocable
• The Bank and the Beneficiary / Creditor are the
only Parties in a Bank Guarantee
• The Bank is:
– Not concerned with the relations between the
supplier and the customer
– Not whether supplier is in default or not
– Not whether the supplier has performed his
contractual obligations or not
BANK GUARANTEE
• MAIN PRINCIPLES: ( Contd..)
• Exceptional Cases where a Bank may refuse
payment
– Where there is Fraud
– Concealment of material facts
• Courts should be slow in granting injunctions
• It is immaterial whether the Injunction is
sought against Bank or the Party invoking the
Guarantee
CONTRACT OF INDEMNITY &
GUARANTEE
• CONTRACT OF INDEMNITY • CONTRACT OF GUARANTEE
• 2 Parties • 3 Parties
– Indemnified – Principal Debtor
– Indemnifier – Creditor
For re-imbursement of Loss – Surety
Person giving Indemnity Guarantor is totally
has some interest in unconnected with the
transaction contract
An Original & Direct There is a Primary &
engagement Secondary liability
Person giving the Indemnity If Surety discharges debt, he
is primarily liable can proceed against
Eg.: Letter of Indemnity to get principal debtor making
release of cargo without default
Original Bill of Lading. ( Eg.: Guarantee for Loan;
Bank Guarantee)
GUARANTEE
• CONTRACT OF • CONTRACT OF
INDEMNITY GUARANTEE
• Number of Contracts:1 • Number of Contracts:3
• Between Indemnifier & • One Express Contract
Indemnified between Creditor &
Principal Debtor
• One Express between
the Creditor and the
Surety
• A third Implied contract
between the Principal
Debtor & Surety
GUARANTEE
• CONTRACT OF • CONTRACT OF
INDEMNITY GUARANTEE
• Nature of Liability: • Nature of Liability:
• The Indemnifier is liable • The Principal Debtor is
to make good the loss : Primarily liable; The
Surety is only
• No secondary Liability secondarily liable
• The Surety can sue the
Principal debtor after
paying the Creditor
RIGHTS OF SURETY (GUARANTOR)
• RIGHTS AGAINST PRINCIPAL DEBTOR:
• Right of Subrogation: Upon payment of Debt,
he has all rights as the Creditor
• He steps into shoes of the Creditor
• Right of Subrogation available to Surety only when
he has discharged his entire obligations to Creditor
• Right of Indemnity: There is an implied
promise by the Principal Debtor to indemnify the
Surety
RIGHTS OF SURETY (GUARANTOR)
• Surety’s Right against the Creditor:
• The Surety is entitled to every Security which
the Creditor has against the Principal Debtor
• Surety’s Right against Co-Sureties:
• If there are Two or more Sureties for the same
debt, they are liable to contribute equally
towards the debt
• DISCHARGE OF SURETY (Conditions):
• Alteration in terms of Contract
• Discharge by Creditor
• Discharge by Operation of Law
• Compromise
• Release of Security
• Death of Surety
• Automatic Discharge ( Co-sureties do not join)
• Invalidity of Guarantee
– Guarantee obtained by misrepresentation
– Guarantee obtained by concealment of facts
LIABILITY OF SURETY
• Liability of Surety is same as that of the

Principal Debtor
• Liability co-extensive as that of the Principal
Debtor
CONTINUING GUARANTEE
• A guarantee which extends to a Series of
Transactions ( Ordinary Guarantee- only for a
single transaction)
– Guarantees performance of successive
transactions
– A guarantees to B for C’s employment with B for
collecting Chit fund cash daily. A guarantees for an
amount upto Rs.50,000/-
• .
CONTINUING GUARANTEE
• REVOCATION of Continuing guarantee:
• 1. By Notice
– May be revoked any time by giving notice
• 2. On Death of Surety
– The Estate of Surety is liable for all transactions
prior to the death of the Surety
• ..
INVALID GUARANTEE
• Guarantee obtained by means of:
– 1. Misrepresentation
• Misrepresentation concerning some material fact
• Misrepresentation made by Creditor or with his knowledge
– 2. Concealment
– Hiding certain facts by the creditor
• B is working with A and fails to account for certain money. A
wants B to furnish security and C gives his guarantee without
knowing B’s previous default.
– 3. Where the Co-surety does not join
• A guarantee given on condition that the creditor will not act
upon until another person or persons join him as co-surety
or sureties
LAW OF BAILMENT
( Sec 148 – 181 of Indian Contracts Act, 1872)
BAILMENT
• “ BAILMENT” derived from the French

word “bailler” means ‘to deliver’, ‘to
hand over’ or ‘to lease’
BAILMENT
• “Delivery of Goods by one person to another
for some purpose, upon a contract, when
Purpose accomplished, be returned or
otherwise disposed of according to direction
of person delivering them”.
• Bailor = Person Delivering Goods
• Bailee = Person receiving Goods
• Delivery of Goods > Delivery of Possession
BAILMENT
• Sale and Exchange are NOT bailment
• Ex.: Giving goods ( Gold / Ornaments) to a
Goldsmith for making jewelry / ornaments is
bailment ( delivery for some purpose).
• Delivering cloth to a tailor for stitching
• A Banker who accepts articles for Safe Custody is
a Bailee
• Car park owner
• Port Warehouse
• CFS (Container Freight Station)
ESSENTIALS OF BAILMENT
• Delivery of Possession ( Not just ‘custody’)
• Goods must be handed over to the “Bailee”
– A servant or guest using his host’s material is not a
bailee
• Delivery may be ‘Actual’ or ‘Constructive’
• Actual Delivery: When goods physically handed
over
• Constructive Delivery: No physical possession,
but has the effect of handing over
– Delivery of Railway Receipt amounts to goods being
handed over
BAILMENT
( Types of Bailment)
• Non-Gratuitous Bailment
• Bailment for Consideration
• Gratuitous Bailment
• No consideration
Non – Gratuitous Bailment
( Bailment for Consideration)
• Bailment for Mutual Benefit

– Example: Giving Vehicle for Repair
– Giving Goods to a Warehouse / Port Authorities
– Giving Goods to a Carrier
• ( Damages for Negligence)
Gratuitous Bailment
• Bailment for Exclusive Benefit of Bailee

• Taking jewellery for attending a function / marriage
• Student taking book from a friend or library
• Bailment for Exclusive Benefit of Bailor

• Giving a vehicle or jewellery to friend while going on a
Tour
• Damages only for ‘Gross Negligence’
BAILMENT
• DUTIES OF BAILOR:
• 1. Duty to disclose defects ( which Bailor is
aware)
– Bailment for consideration ( Bailor responsible for
loss suffered by Bailee) - vicious horse / defective
car from ‘Rent-a-car company..
– Gratuitous Bailment ( Ornaments given to another for
marriage) – Finder of goods- a gratuitous Bailee.
BAILMENT
• DUTIES OF BAILOR (contd..):
• 2. Liability to repay Expenses ( Ex.: Repair/
work done)
• 3. Liability to Compensate ( for loss suffered
by Bailee by reason of Imperfect title)
DUTIES OF BAILEE
• 1. Duty to take Care ( Ordinary prudence as

his own goods. ( No extra-ordinary care)
– Ex.: Carrier , Railways, Warehouses, Paid Parking space
• 2. Not to deviate from Terms of Contract
– ‘A’ lets ‘B’ for hire a car for his own driving.. ‘’B’ gives car to
‘C’’. Termination at the option of ‘A’
• 3. Not to use bailed goods unauthorisedly
– Goods bailed must be strictly used for the purpose
for which they are bailed
DUTIES OF BAILEE:
• 4. NOT to mix goods with his own goods / other
goods
– Bailed goods to have separate identity
• 5. Return goods after expiration of time /
purpose accomplished
• 6. To return the increase or profit from goods
bailed
– A leaves a cow in B’s custody. The cow delivers a calf. B
is bound to hand over the calf also to A
• 7. NOT to set up an adverse title.
– Hire purchase agreement:
– Pawn / pledge: Things bailed as security for payment
RIGHTS OF BAILEE
• 1. Possessory Lien (Particular Lien or General
Lien)
– Right to retain goods until a claim demanded by
him is satisfied
1.a).Particular Lien enjoyed by an Agent, Pawnee,
Unpaid Seller of Goods, Finder of Goods etc.
– If Bailee must have lawful possession of goods
– If He must have rendered some service
– If He has not received Remuneration
RIGHTS OF BAILEE
• Particular Lien
• E.g.: A delivers rough diamond to B for cutting. B cuts
the diamond and returns to A, who does not pay for
the services. Next day, A delivers rings for polishing.
A pays for polishing but B refuses to give the ring
saying A’s previous dues. B cannot do this since he
has a particular Lien which is applicable for those
specific goods only
LIENS
• = To Bind ( Latin – ‘Ligae’)
• RIGHT TO OBTAIN POSSESSION OF ANOTHER’S
PROPERTY PENDING DISCHARGE OF DEBT.
• Types of Liens:
• Possessory Lien
• Equitable Lien
• Contractual Lien
• Statutory Lien
• Maritime Lien
Possessory Lien
• Rightful and Continuous Possession
– “Hatton Vs. Car Maintenance Co. Ltd., 1915”
– Hatton (H), Owner of Car, agreed with Car
Maintenance Co Ltd., that they would maintain
and garage her car for 3 years on being paid
annual sum. H was entitled to take her car as and
when she liked. Annual payment in arrears, CMC
detained car and claimed lien. Held: Entitled to
take car as and when she pleased. Possession was
not continuous.
Possessory Lien
• Enforcement of Possessory lien: By Right of
Detention
• No General Right of Sale of Property
– Except: 1) Repair of Goods
– 2) Unpaid Seller of Goods
• Lien Extinguished ( lost) by:
– 1) Loss of Possession of Goods
– 2) Payment of Amount claimed
– 3) Taking Security in substitution of Payment
Equitable Lien
• In Respect of ‘Beneficial Ownership’
• Equitable Lien Lost if ‘Property sold to a

“Bonafide Purchaser’ ( Equity’s Darling )
• Equitable Lienor: Does NOT have Right

of Sale except by Order of Court
Statutory Lien
• Based on Statutes:
• Enforcement by selling Property
– Eg: Major Port Trust Act
– Port is a Bailee of Cargo
– Holds Lien for Unpaid Storage / Wharfage /
Charges
– May Sell Cargo to recover
CONTRACTUAL LIEN
• Dependant upon requirements as set out in

Contract
• Eg.: Dead Freight
Demurrage in Charter Party
MARITIME LIEN
• A PRIVILEGED LIEN in respect of Maritime
Property
• NOT dependant upon possession of Property
• NOT defeated by Sale to 3rd Party even if to a
“Bonafide Buyer’
• A ‘Bonfide Buyer’ is ‘Equity’s Darling’ ( Why?)
• Because of Personification of Ship
• Ship is the Wrong-Doer
• So Lien justified even if with ‘Change in
Ownership’
MARITIME LIEN ( Contd..)
• Maritime Lien Basically arises out of:
• A) Unpaid Salvage Awards
• B) Harm caused by ship ie. Collision to Ship / Port
/ Terminals etc.
• C) Unpaid Contractual Wages Eg.: Crew Wages /
Disbursement etc..
• MARITIME LIEN IS A “PROVIDED CLAIM”
• Holder of Maritime Lien has ‘Higher priority‘ over
other Creditors
MARITIME LIEN ( Contd..)
• In 1993, The International Convention on
Maritime Liens and Mortgages, 1993, adopted.
• Following Priorities:
– Master, Crew wages including cost of repatriation,
Social Insurance, Loss of Life, Personal Injury in direct
connection with Vessel’s Operation;
– Salvage;
– Claims of Ports, Canals, Waterways, Piolotage;
– Arising out of physical loss / damage
– ( Effecting Maritime Lien: “Action in Rem” )
RIGHTS OF BAILEE
• 1.b). General Lien ( Sec.171)
• Entitles the Bailee to retain goods bailed for
any amount due to him
• Bankers, Factors, Wharfingers ( Owner of a
Wharf e.g.: Port Authorities, Attorneys and
Policy Brokers ( only if there is no contract to
the contrary)
• ( Factor: A type of Agent who is entrusted with
Possession of goods for the purpose of selling them on
behalf of the Principal. Has a General Lien on Goods)
RIGHTS OF BAILEE
• 2. Right to Sue for wrongful deprivation or
injury to goods
– If a third person wrongfully deprives the Bailee of
the use or possession of the goods bailed, the
Bailee is entitles to use such remedies as the
owner might have done.
– The rights of the Bailee and Owner of Goods are
same; and so are the remedies
CARRIER
• CARRIER: Anyone who undertakes carriage of

Goods by issuing his Document of Carriage
CARRIER
• COMMON CARRIER: • PRIVATE CARRIER
• 1. One who holds himself (CONTRACT
out as ready for hire to CARRIER:
transport from one place • 1. Reserves himself the
to another – land, sea, air right of accepting or
etc.. rejecting offers of goods-
• 2. Service to All and ( whether full or empty)
Sundry • 2. Bailee of Goods ( Liable
• 3. Strict Liability ( even for Negligence)
without Negligence)
• 4. Common Carrier bound
to carry Goods of All
COMMON CARRIER’S DUTIES
• COMMON CARRIER BOUND (OBLIGED) TO
CARRY GOODS OF ALL:
• EXCEPT ( UNLESS):
– 1. No Space in Carrier / Vehicle
– 2. Not the kind of cargo usually carried
(ex.: DG)
– 3. Not the destination
– 4. Unusual Time / hour
– 5. Not properly packed / marked
– 6. Payment of Freight Terms ( PP / CC)
Common Carrier
• Liable for Loss / Damage during Care –

even without Negligence ( Unless there
is express contract )
PLEDGE
PLEDGE (PAWN)
• Pledge or Pawn is the delivery of Goods by one
person (Pawnor (Pledger)-Bailor) to
another person (Pawnee (Pledgee)- Bailee)
as Security for payment
• Deposit of Goods as Security for a Debt
• Advancement of Money against keeping
Possession of Goods
• Only Possession remains with the Pawnee
(Bailee)
PLEDGE
• ESSENTIALS OF PLEDGE:
• Delivery of Goods is to provide security for a loan.
• Possession only with Pawnee. Ownership remains
with Pawnor
• Only movable property
• There must be Actual or Constructive delivery of
Goods
• Mere de-facto or physical possession is not
enough to make a valid pledge ( e.g. Servants
with custody of owner’s property)
RIGHTS OF PAWNEE
• 1. Rights of Retainer:
• Has a Particular Lien over the goods pawned
for:
– The Payment of the Debt;
– The Performance of the Promise;
– The Interest on the Debt;
– All necessary Expenses incurred by him in respect
of Possession and preservation of the Goods
pledged
RIGHTS OF PAWNEE
• 2. Right to extra-ordinary Expenses incurred
– But no right to retain the goods for the extra-
ordinary expenses as in case of necessary
expenses
• E.g. Car Loan: In this case Car / Vehicle remains with the
pledger but the same is hypothecated to the bank /
financer. In case the pledger defaults, banks take
possession of the vehicle after giving notice and then
sell the same and credit the proceeds to the loan
account
RIGHTS OF PAWNEE
• 3. Right where Pawnor makes default
– Pawnee may file a suit for recovery of debt and
retain the goods as collateral security
– Sell the thing pledged after giving the Pawnor
reasonable notice of sale
RIGHTS OF PAWNOR
• Pawnor’s ( Pledgor’s) Right to Redeem
– It allows the Pawnor to redeem his property even if he
has defaulted.
– Section 177 says that if a time is stipulated for the
payment of a debt or performance of the promise for
which the pledge is made, and the Pawnor make
default in payment of the debt or performance of the
promise at the stipulated time, he may redeem the
goods pledged at any subsequent time before the
actual sale of them; but he must, in that case, pay, in
addition, any expense which have arisen from his
default.
PLEDGE BY NON-OWNERS
• Normally, only an Owner of
Property ( having ‘de-jure possession’)
can make a valid Pledge.
• But in Certain cases, a Non-Owner may pledge
goods of another
• Pledge by Mercantile Agents (Sec.178)
– A Mercantile Agent is a Person, has the authority
to buy goods; or to sell goods or to consign goods
for sale or to raise money on the security of goods
• If:
– The Mercantile Agent acts in the Ordinary course
of Business
– The Mercantile Agent is in possession of Goods or
Documents of Title
• Pledge by Mercantile Agents (Sec.178)
– The Possession of Goods or Documents of Title to
Goods is with consent of Owner
– The Pawnee acts in Good Faith
– The Pawnee has no Notice, at the time of Pledge,
that the Agent has no authority
• Pledge by a Buyer in Possession of Goods
before Sale:
– If a Person agrees to buy goods and obtains with
the consent of the seller possession of goods or of
the document of title to the goods, a pledge made
by such person or his mercantile agent is valid.
– Provided:
• If the person receiving the goods has acted in good
faith
• If he has no notice of any Lien or other right of the
seller of goods.
LAW OF AGENCY
AGENT ( Basis: Indian Contracts Act, 1872)
• Definition: An AGENT is a person
employed to do any act for another or
to represent another in dealing with
THIRD PERSON
• AGENT <> PRINCIPAL

• ^
• THIRD PARTIES
AGENT
• Relationship:
• AGENT & PRINCIPAL

• AGENT & THIRD PARTIES
• PRINCIPAL & THIRD PARTIES
• PRINCIPAL answerable to THIRD PARTIES

TYPES OF AGENTS
• BROAD DIVISION:
• MERCANTILE AGENTS: Ship’s Agent, Ship
Broker, Auctioneers, Sales Agent etc..
• NON-MERCANTILE AGENTS: Advocate, Power

of Attorney (POA) etc.., Wife
TYPES OF AGENTS
• 1. General Agent:
• An Agent who has the Authority to do all acts
connected with the particular trade, business
or employment.
– A Manager of a firm has authority to do all acts
necessary for carrying on the business.
– General Power of Attorney (GPA)
– ( Shipping General Agency)
TYPES OF AGENTS
• 2. Special Agent: ( Particular Agency):
• A person who is appointed to perform a
particular or special act or to represent the
Principal in some particular transaction
– An agent Appointed to buy or sell a house
– Particular Power of Attorney (PPA)
TYPES OF AGENTS
• 3. Del-credere agent:
– One, who for extra remuneration ( del-credere
commission) undertakes liability to guarantee the
due performance by the other party. ( Ex.: in case
of insolvency)
• 4. Commission Agent:
– One who buys and sells goods on behalf of his
employer on best possible terms and receives
commission for his labour
TYPES OF AGENTS ( contd..)
• 5. Broker:
– A mercantile agent employed for the purpose of
Purchase and Sale of Goods. Establish privity
between two parties and gets commission. ( Ex.:
Shipbrokers)
• 6. Factor
– Entrusted with possession of goods for the
purpose of selling them. He can sell in his own
name.
TYPES OF AGENTS (contd.)
• 7. Auctioneer
– A Mercantile Agent appointed by the Seller to sell his
goods in Public Auction
• Initially he is the agent of the Seller; but when the hammer
goes down, he is the agent of the Buyer
• 8. Co- Agent :
– Agency given to several persons – have a joint
authority
• 9. Sub-Agent:
– A person employed by and acting under the original
agent
SUB-AGENT
• Normally, A person (Agent) to whom authority
has been given cannot delegate that authority to
another person (‘Delegatus non potest delegare’)
– While appointing an Agent, the Principal takes into
consideration the honesty, integrity, skill, working
capacity etc. The Principal may not have the same to
another person
– As a Rule, an Agent should not appoint a sub-agent.
– In case of necessity or custom of trade, then a sub-
agent may be appointed, but with the permission of
the Principal
SUBSTITUTED AGENT
• Substituted Agent ( Sec. 194) (also a Co-Agent)
• Where an Agent holding an Express or Implied
Authority to name another person to act in
the business of agency, such person is not a
sub-agent, but an agent of the Principal.
• A directs his Solicitor B to sell his estate by Auction, and
to employ an Auctioneer. B names C as auctioneer. C is
not a sub-agent, but an Agent for A
Substituted Agent ( Sec. 194)
• Substituted Agent:
• In selecting a substituted agent, for his Principal,
an Agent is bound to exercise the same discretion
of a man of ordinary prudence. If so, he would
not be responsible for the acts or negligence of
the agent so selected.
• A instructs B, a merchant to buy a ship for him. B employs a
ship surveyor of good reputation to choose a ship. The
Surveyor makes the choice negligently and the ship turns out
to be ‘unseaworthy’. B is not responsible for A’s loss.
CREATION OF AGENCY
• 1. BY EXPRESS AGREEMENT:
– Authority given by WORDS- Spoken or Written
– Given by the Principal to the Agent enabling the
Agent to bind the Principal
• However, Formal Documents needed in:

– A) Conveyance of Landed Property ( POA)
– B) Advocate to execute ‘Vakalatnama’
CREATION OF AGENCY ( contd..)
• 2. BY IMPLIED AGREEMENT:
– Conduct of a Principal may create an Inference
– By Estoppel and Holding Out
• When a Person permits or represents another
to act on his behalf, a reasonable man infers
that the relationship is of Principal and Agent.
• Ex.: ‘A’ living in Chennai owns a shop in Coimbatore managed
by ‘B’. ‘A’ visits shop occasionally. ‘B’ used to order goods from
‘C’ and paying out of ‘A’s funds with ‘A’s knowledge. ‘B’ has an
implied authority from ‘A’
• 2. IMPLIED AUTHORITY ( contd..)
• By Presumption
– A Partner who retire from partnership must give
Notice of Retirement
• ..
• 3. BY ESTOPPEL
• An admission or something which Law treats
as an admission --- A legal principle that bars a
party from denying or alleging a certain fact
owing to that party's previous conduct,
allegation, or denial.
• A bar that prevents one from asserting a claim
or right that contradicts what one has said or
done before.
• 3. By ESTOPPEL (contd..):
– An Agent without Authority, has done Acts or incurred
obligations to third persons on behalf of the Principal,
the Principal is bound by such Acts
• A consigns goods to B for sale and gives instructions not to
sell below a fixed price. C being ignorant of these
instructions, enters into a contract with B to buy goods at a
price lower than the reserved price. A is bound by the
Contract
• A entrusts B with Negotiable Instruments/ documents
endorsed in Blank. B transfers them to C in violation of
private orders from A. The transfer to C is good
• 4. AGENCY BY NECESSITY
– Some circumstances force a person to act on
behalf of another without express authority
• E.g.: The holder of a Power of Attorney, has the power
to file a suit on a Pro-Note drawn in favour of the donor
of power, as an agent of necessity
• A horse was sent by train. At destination there was
nobody to take care of its delivery. The Railway
company sent it to a stable for a night. Held, the act
was necessary for the preservation of the horse.
• The Master of a ship can pledge the ship and cargo by
Bottomry and Respondentia bonds
• 5. AGENCY BY RATIFICATION:
– ( Acceptance of an Act which was initially done
without Authority)
• A appoints B as the Agent of C. C has 2 options: a.
Disown the Contract; b. accepts the transaction by
ratifying the agreement between A and B. B becomes
C’s agent by ratification.
• A, without B’s authority lends B’s money to C. And later,
B accepts interest on that money from C. B’s conduct is
implied ratification
• ..
AUTHORITY OF AGENT
• The Authority of an Agent is Express or
Implied from circumstances:
• An Agent having Authority to carry on
business has Authority to do every lawful
thing necessary for carrying on that business
– A is employed by B, residing in London to recover
a debt due to B in Mumbai. A may adopt any legal
process necessary for the purpose of recovering
the debt.
AUTHORITY OF AGENT
• Agent’s Authority in an Emergency:
– In an Emergency, the Agent may exceed his Authority
– Such Act should be that of a prudent man with the
intention of protecting the Principal
• E.g.: Agent for Sale may have goods repaired if
necessary
• A consigns Provisions to B at Delhi for sending
to Shimla. B may sell these in Delhi itself if he
thinks, the Provision may not bear the journey
to Shimla without spoiling
RIGHTS AND DUTIES ( Warranties)
• AGENT (Duties) • PRINCIPAL
• Exercise ‘Due Diligence’ (Duties)
• Apply Special Skills • To Remunerate the
• Render Proper Accounts Agent
to the Principal • To indemnify the
• Not to Compete with the Agent from any
Principal Liability
• Avoid Conflict of Interest (Vicarious
Liability)
• To Communicate with the
Principal
RIGHTS OF AGENT
• Right to Retain
– An Agent has Right to retain ( withhold) Principal’s
Money for unpaid Remuneration
• Right to Remuneration
– Entitled to Remuneration agreed upon by the
Principal. If not agreed specifically, entitled to a
reasonable remuneration
– An Agent guilty of misconduct in the business of
agency is not entitled to any remuneration in
respect of that part of the business.
RIGHTS OF AGENT (Contd..)
• Right of Lien ( Sec 221)
– Right of Lien on Principal’s Property until all lawful
amounts due to him are paid
• Right to be Indemnified
– Against the consequences of all Lawful acts done in
good faith by an agent in exercise of his authority
– Agent has no right to be indemnified for any criminal
acts done by him on behalf of the Principal
• Right to Compensation
– For any loss or injury caused to him by the Principal’s
neglect
PERSONAL LIABILITY OF AGENT
• General Rule: An Agent is NOT personally
liable for contracts entered into on behalf of
his Principal.
• AGENT’S PERSONAL LIABILITY:
• 1. Contracts made for a Foreign Principal
– Rule based on convenience and general
mercantile usage
• 2. Contracts made for an Undisclosed
Principal
– Where an agent contracts in his own name
TERMINATION OF AGENCY
• 1. By Principal revoking the Agency
• 2. By the Agent renouncing the Agency
• 3. By the Business of Agency being
completed
• 4. By either the Principal or Agent Dying
or Insane
TERMINTION OF AGENCY (contd..)
• 5. By the Principal becoming Insolvent
• 6. By the destruction of Subject matter of
the Agency
• 7. Happening of any event rendering the
agency unlawful ( Alien Enemies)
• 8. Limited Period Agency – Period Ends
UNIT V
SALE OF GOODS
( The Sale of Goods Act, 1930)
SALE OF GOODS
• THE INDIAN SALE OF GOODS ACT, 1930 (Amdt. 1963)
• A Contract of Sale of Goods = a contract
whereby seller transfers the property or agrees
to transfer property or goods for a price
• When goods are transferred, it is Sale
• When transfer at a future date, it is an
Agreement to Sell
• A contract may be absolute or conditional
(Contingent)
GOODS
• Goods = Every kind of movable property and
includes stocks and shares, growing crops,
grass, and things attached to or forming part
of land which are agreed to be severed
(removed) before sale or under the contract
of sale.
– Goods include Goodwill, Trade-Marks, Copy-
Rights, Patent etc.. as well as Water, Gas,
Electricity, Ships etc. are all considered Goods
Essentials Elements of Sale
• 1. There must be TWO distinct parties – a
Buyer and a Seller
• 2. There must be Goods, the general property
in which is transferred from the Seller to the
Buyer
• 3. A Price in Money ( Consideration) must be
paid or promised to be paid as ‘Quid pro Quo’
on a transfer of goods
Essentials Elements of Sale
• 4. There must be contract of sale which is
consensual and bilateral
• 5. There must be a transfer of ownership from
Seller to buyer
• 6. All the essential elements of a Valid
Contract must be present
Subject matter of SALE CONTRACT
• AGREEMENT TO SELL
• 1. Existing Goods
• 2. Specified Goods ( Identified and agreed upon)
• 3. Unascertained Goods (Described; but NOT
identified)
• 4. Future Goods ( To be manufactured)
• 5. Contingent Goods ( may or may not happen)
VOID SALE CONTRACTS
• Goods perishing before making of Contract
• Goods perishing before Sale; but after
Agreement to Sell
• ( BOTH HAPPENING WITHOUT SELLER’S KNOWLEDGE)
PRICE:
• 1. May be fixed by the contract or
• 2. Fixed or agreed later
SALE AND AGREEMENT TO SELL
• SALE • AGREEMENT TO SELL
• 1. Transfer of Property • Transfer of Property
– Goods passes from Seller – Refers to future and
to Buyer immediately contingent goods
• 2. Risk of Loss • Risk of Loss
– If the goods are – If the goods are
destroyed, the loss falls destroyed, the loss falls
on the buyer on the Seller
• 3. Results of Breach • Results of Breach
– If buyer fails to pay Price, – If the buyer fails to pay
the Seller can sue for the price, the Seller can
Price sue for Damages
SALE AND AGREEMENT TO SELL
• SALE • AGREEMENT TO SELL
• 4. Right to Re-Sell • Right to Re-Sell
– Seller cannot re-sell except – Seller can sell and the
as an ‘Unpaid Seller’ buyer who unaware of
prior agreement gets a
good title
• 5. ‘Jus in Rem’ against the • ‘Jus in Personam’ ( right
whole world against the seller only)
• 6. Insolvency of Buyer • Insolvency of Buyer
– If before payment, the – Seller is not bound to part
Seller must return them to with goods
the official Receiver
• 7. Insolvency of Seller
– Buyer entitled to recover • Insolvency of Seller
goods from official receiver – A buyer who paid the
price, can claim only a
rateable dividend
CONDITIONS AND WARRANTIES
(Stipulation with reference to Goods)
• CONDITION • WARRANTY
• A stipulation essential • A stipulation collateral
to the main Contract to the main Contract
• Ex.: Undertaking as to
the title of Goods
• Goods corresponds to
description
• As to quality and fitness
• Terms of Payment
(essence)
(Stipulation with reference to Goods)
• CONDITION • WARRANTY
• If there is a Breach, the • If there is a breach, the
affected party can affected party can claim
repudiate (cancel) the damages only
contract • A breach of warranty
• A breach of condition may not be treated as a
may be treated as a breach of condition
breach of warranty
• IMPLIED CONDTION THAT:
• 1. Condition as to the Title
– He has a right to sell the goods
• 2. Sale by Description
– If contract to sell Peas, you cannot later sell Beans
• 3. The Bulk corresponds to Sample
– The Buyer has opportunity to compare Bulk with
Sample
• 4. As to Quality and Fitness
– Buyer has a chance to get satisfied of the fitness
before he buys them
– When the buyer expressly or by implication
stipulates the particular purpose, the seller has to
supply such goods
• 5. Goods shall be free from any defect
rendering them Un-merchantable
– Must be commercially saleable ( merchantable
quality) – Manila hemp case ( Jones v. Just (1868)
• 6. Condition Implied by Custom
– Quality and fitness for a particular Purpose
– Priest v. Last (1903); Hot Water Bottle case
• 7. Condition as to Wholesomeness
– In the case of eatables and provisions
– Milk containing typhoid germs ( Frost v. Aylesbury
Dairy Co. ltd., (1905)
– Bun containing stone; teeth broken
• IMPLIED WARRANTIES:
• 1. Warranty of quiet possession
– By way of defective Title
• 2. Freedom from Encumbrances
– Not subject to any charge or right in favour of a
third party
• 3. As to Quality and Fitness by Usage of Trade
• 4. As to disclose Dangerous nature of Goods
– Handle with care; keep away from children;
precautions to be taken while handling etc..
“CAVEAT EMPTOR”
• Principle of ‘Caveat Emptor’ ( Traditional /
Old principle)
– “ Let Buyer Beware” ( Risk passes with
property- Risk remain at Seller’s until
property is transferred)
Principle of “Caveat Venditor”
“ Let Seller Beware”
‘Priest vs. Last’, 1903 (Hot water bottle case)
TRANSFER OF PROPERTY, POSSESSION
AND RISK
• THREE Stages in the performance of a
Contract of Sale of goods:
• 1. Transfer of Property in the Goods;
• 2. Transfer of possession of the Goods (
Delivery)
• 3. Passing of the Risk
• PROPERTY IN GOODS = OWNERSHIP OF
GOODS
• POSSESSION OF GOODS = CUSTODY OR
CONTROL OF GOODS
RISK
• 1. Risk follows Ownership
– Risk of Loss, as a rule, is on the Owner of Goods
• 2. Action Against Third parties
– It is the owner of goods who can take action
• 3. Insolvency of Seller or Buyer
– Whether the official Receiver or Assignee can take
over the goods depends on whether the property of
goods has passed from Seller to buyer
• Suit for Price
– The Seller can sue for Price if the goods have become
the property of the buyer
PASSING OF PROPERTY
• Rules as to the Property of Goods passes to
the Buyer as follows:
• 1. Goods must be Ascertained
– In case of unascertained Goods, no property in
the goods is transferred to buyer unless Goods are
ascertained ( Teakwood of 12 inches girth)
• 2. Intention of Parties
– With regard to the terms of Contract and the
conduct of Parties
PASSING OF PROPERTY
• 1. SPECIFIED GOODS
• Passing of Property at the Time of Contract
• Passing of Property delayed beyond the date of
Contract
– E.g.: Sale of timber from oak trees ( seller did not remove
the unwanted and rejected portions, became bankrupt;
Buyer did it himself; Assignee of Bankrupt seller sues for
‘conversion’ since the passing of property did not take
place… ( Acraman v. Morrice (1849)
• When the Price of Goods is to be ascertained by
Weighing
– Property does not pass until the seller is bound to weigh,
measure, test or do similar act
PASSING OF PROPERTY
• 2. UNASCERTAINED GOODS:
– Property does not pass on to Buyer, unless goods
are ascertained by Buyer
• GOODS SENT ON APPROVAL
– The Property passes to Buyer:
– When he signifies his approval
– Or when he does any other Act adopting transaction
• ..
INCOTERMS 2020 ( INTERNATIONAL
COMMERCIAL TERMS)- ICC
• ICC= International Chamber of Commerce
• MAIN ASPECTS OF INCOTERMS;
• Physical
• Financial
• Liability
International Sale of Goods
• Seller= Exporter – Consignor – Shipper

(Sender of Goods)
• Buyer= Importer – Consignee ( Receiver of

Goods)
INCOTERMS (2020)
( ICC- International Chamber of Commerce)
• EXW EX WORKS
– Goods at Seller’s Premises at Buyer’s Disposal
– Minimum Responsibility by Seller; Loading by Buyer
• FCA FREE CARRIER

– Seller Delivers Goods Export Cleared to Carrier of
Buyer; Seller arranges pre-carrier; 1st Carrier
responsible for Unloading
• FAS FREE ALONGSIDE SHIP

– Risk Passes to Buyer. Only Export Clearance with
Shipper (Seller); Loading on to the Ship by buyer.
INCOTERMS (2020)
• FOB FREE ON BOARD
– FAS + Loading on Vessel at Shipper’s cost
• CFR COST AND FREIGHT
– FOB + Payment of Freight –named
port(destination)( Risk passes to Buyer On Board
vessel)
• CIF COST, INSURANCE AND
FREIGHT
– CFR + Insurance ( Risk same as CFR)
INCOTERMS (2020)
• CPT CARRIAGE PAID TO
– Seller Delivers Goods to agreed Place of Destination (
Seller Pays for Carriage); but no Insurance
• CIP CARRIAGE AND INSURANCE PAID TO

– Similar as CPT; but Insurance also paid by Seller
• DPU DELIVERED AT PLACE UNLOADED

– (Replaces DAT – Delivered At Terminal- of 2010 version)
– Seller delivers Goods Unloaded at Destination Place
including a Terminal. No Import Clearance by Seller,
but by Buyer
INCOTERMS (2020)
• DAP DELIVERED AT PLACE

– Seller delivers Goods at Destination, ready for
unloading. No Import Clearance (Replaces DES,
DAF & DDU)
• DDP DELIVERED DUTY PAID

– Seller Delivers Goods at Buyer’s Disposal including
Import Duty Paid by Seller. ( Just Opposite of EXW)
OBLIGATION CHART
SALE BY NON-OWNERS
• If the Seller has no title to the goods, the
Buyer also does not get any (Normal Principle).
• 1. SALE BY ESTOPPEL
– A tells B, within hearing range of C that he is the
owner of Goods which in fact belongs to C. C does
not contradict A. Afterwards, B buys good from A.
The title of B will be better than that of A. C is
precluded from disputing B’s title.
SALE BY NON-OWNERS
• 2. SALE BY A MERCANTILE AGENT
– Who has no Authority from Principal to sell gets a
good title if:
• If the Agent is in Possession of Goods or Documents of Title
with the consent of the Owner
• The agent sells goods in the ordinary course of business
• The Buyer acts in good faith
• The Buyer does not know the Agent has no authority
• 3. SALE BY ONE OF SEVERAL JOINT OWNERS
• A Buyer in Good faith gets title ( if one of the several joint
owners, who is in sole possession of the goods, sells the
goods)
SALE BY NON-OWNERS
• 4. SALE BY A PERSON IN POSSESSION UNDER A
VOIDABLE CONTRACT
– If the sale has not been rescinded (rejected) by
the buyer at the time of sale
• A purchases a Piano by fraud from B. A has a voidable
title to the goods. Before B rescinds the contract, A sells
the piano to C, who buys in good faith, and therefore, C
gets a good title.
SALE BY NON-OWNERS
• 5. SALE BY SELLER IN POSSESSION AFTER SALE
– Seller having sold goods, continues to be in possession
of goods or document of title, sells them to person
who buys in good faith
• A sells certain goods to B and promises to deliver the goods
the next day. Before delivery, A sells the goods to C who
buys it in good faith. ( B has remedy only against A)
• 6. SALE BY UNPAID SELLER
– An Unpaid Seller who has a right of Lien or ‘Stoppage
in Transit’
Order of “UNPAID SELLER”
• RIGHT OF STOPPAGE OF GOODS IN TRANSIT
– ( Redelivery at the Expense of Seller)
• “TRANSIT” =
– From the Time when: Goods Delivered to Carrier
– Until : goods released by Carrier
– Including - Goods in Warehouse
– CY / CY : Until Picked up by Consignee
SALE BY NON-OWNERS
• 7. SALE BY BUYER IN POSSESSION AFTER
HAVING BOUGHT GOODS OR AGREED TO BUY
GOODS
– A bought some furniture on Hire-Purchase and he
sold the furniture to B before the paying the last
instalment. B purchased the furniture ‘bona fide’
• 8. SALE AS PER OTHER LAWS
– a) Sale by finder of Goods ( Indian Contracts Act)
– b) Sale by a Pawnee or Pledgee
– c) Sale by an Official Receiver, Liquidator or
Assignee
Performance of Sale Contract
• 1. Duty of Seller to Deliver; and Buyer to Accept
• 2. Payment and Delivery are concurrent
conditions
• 3. Rules as to Delivery ( Ex.: Refer INCOTERMS)
• 4. Delivery of Wrong Quantity
– Buyer may Reject; But if he accepts, he must pay at
contracted rate
– ‘Barrow Lane Ballard Ltd vs. Phillip Phillips Co.
1929
( contract for 700 bags of Groundnut, 109 bags stolen,
delivered remaining, Buyer refused; Held: Contract
Indivisible)
Performance of Sale Contract (contd.)
• 5. Delivery to Carrier / Warehouse/Docks
– Deemed Delivery
• 6. Buyers Right of examining Goods
• 7. Acceptance of Goods
– As and when buyer intimates seller that he has
accepted
• 8. Buyer NOT bound to return rejected Goods;
– But just intimate the Seller
RIGHTS OF A BUYER
• 1. Right to have delivery as per Contract
• 2. Right to reject goods
– If seller send a larger or smaller quantity
• 3. Right to Repudiate ( Reject)
– Not to accept delivery in instalments
• 4. Right to notice of Insurance
– If sent by sea route
• 5. Right to Examine
• 6. Damages for Non-Delivery
– Claim by Buyer ( Buyer to sue)
RIGHTS OF A BUYER
• 7. Buyer’s rights against Seller for Breach of
Contract
– Suit for Damages
– Suit for Price
– Suit for Specific Performance
– Suit for Breach of Warranty
– Repudiation of Contract before due date (by
seller).. Suit for Damages
• ‘Rule of Anticipatory Breach’
– Suit for Interest
DUTIES OF THE BUYER
• 1. Duty to accept goods and pay for them
• 2. Duty to apply for delivery
• 3. Duty to demand delivery at a reasonable
hour (time)
• 4. Duty to take the risk of deterioration in the
course of transit
• 5. Duty to intimate the Seller of rejection
• 6. Duty to take delivery
• 7. Duty to pay the price
RIGHTS OF UNPAID SELLER
• Who is an Unpaid Seller? > When ‘Whole’ or
‘Part’ price NOT paid by Buyer
• UNPAID SELLER’S RIGHTS
• a. A Lien on Goods while Goods are in his
possession ( Lien = Right to obtain Possession of another’s
property pending discharge of Debt)
• b. In case of Insolvency of Buyer, “RIGHT OF
STOPPAGE IN TRANSIT”
-By taking possession of goods; by Notice to the
Carrier
• c. A Right of Re-Sale
Order of “UNPAID SELLER”
• RIGHT OF STOPPAGE OF GOODS IN TRANSIT
– ( Redelivery at the Expense of Seller)
• “TRANSIT” =
– From the Time when: Goods Delivered to
Carrier
– Until : goods released by
Carrier
– Including - Goods in Warehouse/ Carrier /CY
: Until Picked up by Consignee
RIGHTS OF SELLER
• 1. Suit for Price:
– a) After Sale
– b) Price payable on a day irrespective of Delivery
of Goods
• 2. Damages for Non-Acceptance
– Claim by Seller ( Seller to sue /file case)
SUITS FOR BREACH
• SELLER’S SUITS
– Suit for Price
– Suit for Damages for Non-Acceptance of Goods
– Suit for Damages for repudiations of Contract by
Buyer before due date
SUITS FOR BREACH
• BUYER’S SUITS
– Suit for Damages for Non-Delivery of Goods
– Suit for Specific performance
– Suit for breach of Warranty
– Suit for Damages for repudiation of Contract
before due date
AUCTION SALES ( SEC 64)
• PUBLIC SALE WHERE DIFFERENT BUYERS
TRYING TO OUTBID EACH OTHER.
• THE GOODS ARE NORMALLY SOLD TO THE
HIGHEST BIDDER
• THE AUCTIONEER IS AN AGENT OF THE SELLER
UNTIL THE FINAL HAMMER FALLS
• THEREAFTER, THE AUCTIONEER BECOMES THE
AGENT OF THE BUYER TO RECOVER THE
MONEY TO PAY THE SELLER
AUCTION SALES
• RULES OF AUCTION SALES:
• 1. Goods put up for Sale lots
– Each Lot is deemed to be subject of separate sale
• 2. Completion of Sale
– One, Two, Three: The final hammer ( Sale Contract
is complete; just before the final hammer, the
bidder can withdraw the offer )
• 3. Right of Seller to Bid
– To expressly reserve Seller’s right to participate
AUCTION SALES
• RULES OF AUCTION SALES:
• 4. Reserve Price
– Sale may be notified subject to a Reserve price / Upset
Price. If no reserve price, goods will be sold to the
highest bidder
• 5. Use of Pretending Bidding
– If the Seller makes use of pretended bidding to raise
the price, the sale is voidable at the option of the
buyer
• 6. Knock out or Agreement not to bid against
each other
– Group of persons to prevent competition …… to
defraud third party, it is illegal ( Collusive Bidding)
AUCTIONS SALES
• IMPLIED WARRANTIES:
• THE AUCTIONEER:
– Warrants that he has Authority to Sell
– Warrants that he does not know of any defect in
the title of his Principal
– Undertakes to give Possession of the goods
against the Price paid to him
– Guarantees the quiet possession of the goods by
the Purchaser
• CONSUMER PROTECTION ACT,
2019
CONSUMER
• Who is a 'Consumer' under the 2019 Act?
• As per Section 2(7) of the 2019 Act, consumer
is any person who buys goods or avails any
service for a consideration and includes any
user, except for the person who has availed
such services or goods for the purpose of
resale or commercial use.
CONSUMER
• The explanation to the definition specifically
states that the expression "buys any goods"
and "hires or avails any services" includes all
online transactions conducted through
electronic means or direct selling or
teleshopping or multi-level marketing. Online
transactions is an exclusive feature of this act
and added keeping in mind the growing e-
commerce business and advancement in
technology.
Consumer
• Definition of consumer:
• A consumer is defined as a person who buys any
good or avails a service for a consideration.
• It does not include a person who obtains a good
for resale or a good or service for commercial
purpose.
• It covers transactions through all modes
including offline, and online through electronic
means, teleshopping, multi-level marketing or
direct selling.
Six Consumer Rights
• Right to Safety.
• Right to be Informed.
• Right to Choose.
• Right to be heard.
• Right to seek Redressal.
• Right to Consumer Education.
UNFAIR TRADE PRACTICE
• 'Unfair Trade Practice' under the 2019 Act?
• Section 2(47) of the Consumer Protection Act,
2019 defines ‘Unfair Trade Practice'. The
definition of 'unfair trade practice' has been
broadened to include practices such as:
• Manufacturing or offering spurious goods for
sale or adopting deceptive practices for
providing service,
• Not issuing proper cash memo or bill for the
services rendered and the good sold,
• Refusing to withdraw, take back or discontinue
defective goods and services and refund the
consideration taken thereof within the time
period stipulated in the bill or within 30 days if
there is no such provision in the bill
Product Liability
• Product Liability: A manufacturer or product service
provider or product seller will be held responsible to
compensate for injury or damage caused by
defective product or deficiency in services.
• Three-tier Quasi-judicial Mechanism: The Act
promulgates a three-tier quasi-judicial mechanism
for redressal of consumer disputes namely district
commissions, state commissions and national
commission.
Misleading Advertisements
• Penalties for Misleading Advertisement:
• The CCPA may impose a penalty on a
manufacturer or an endorser, for a false or
misleading advertisement. The CCPA may also
sentence them to imprisonment.
Unfair Trade Practices
• Unfair Trade Practices:
• The new Act has armed the authorities to take
action against unfair trade practices too.
• The Act introduces a broad definition of Unfair
Trade Practices, which also includes the
sharing of personal information given by the
consumer in confidence unless such disclosure
is made in accordance with the provisions of
any other law.
CPA & E- Commerce
• Inclusion of the e-commerce sector:
• The earlier Act did not specifically include e-
commerce transactions, and this lacuna has been
addressed by the new Act.
– E-commerce has been witnessing tremendous growth
in recent times. The Indian e-commerce market is
expected to grow to US$ 200 billion by 2026.
•
E-Commerce
• Every e-commerce entity is required to
provide information relating to return, refund,
exchange, warranty and guarantee, delivery
and shipment, modes of payment, grievance
redressal mechanism, payment methods, the
security of payment methods, charge-back
options, etc. including country of origin which
are necessary for enabling the consumer to
make an informed decision at the pre-
purchase stage on its platform.
E-Commerce
• The E-Commerce platforms will have to
acknowledge the receipt of any consumer
complaint within forty-eight hours and redress
the complaint within one month from the
date of receipt under this Act. This will bring
e-commerce companies under the ambit of a
structured consumer redressal mechanism.
COMPLAINTS
– Filing Complaints Electronically: The Act also provides
consumers the option of filing complaints
electronically.
• To facilitate consumers in filing their complaint online, the
Central Government has set up the E-Daakhil Portal.
– Mediation Route: The Act also includes reference of
consumer disputes to Mediation, with the consent of
both parties.
• This will not only save time and money of the parties
involved in litigating the dispute, but will also aid in reducing
overall pendency of cases.
• CONSUMER PROTECTION ACT, 2019
• (
Consumer Protection Act, 2019
• The Consumer Protection Act, 1986 is
repealed after three decades and replaced by
the Consumer Protection Act, 2019. The
Consumer Protection Act, 2019 has been
enacted with a view to widen the scope of
consumer rights and cover the field of e-
commerce, direct selling, tele-shopping and
other multi levels of marketing in the age of
digitization.
COONSUMER
• As per Section 2(7) of the 2019 Act, consumer is
any person who buys goods or avails any service
for a consideration and includes any user except
for the person who has availed such services or
goods for the purpose of resale or commercial
use. The explanation to the definition specifically
states that the expression "buys any goods" and
"hires or avails any services" includes all online
transactions conducted through electronic means
or direct selling or teleshopping or multi-level
marketing.
• Manufacturing or offering spurious goods for sale

or adopting deceptive practices for providing
service,
• Not issuing proper cash memo or bill for the
services rendered and the good sold,
• Refusing to withdraw, take back or discontinue
defective goods and services and refund the
consideration taken thereof within the time
period stipulated in the bill or within 30 days if
there is no such provision in the bill,
JURISDICTION
• Jurisdiction of the District Commission, the
State Commission and the National
Commission Rules, 2021
• The Act stipulates the pecuniary jurisdiction of
each tier of consumer commission.
• The new rules revised pecuniary jurisdiction
for entertaining consumer complaints.
JURISDICTION
50 lakh (earlier less than 1 crore) for District
Commissions,
More than Rs. 50 lakh to Rs. 2 Crore (earlier 1 crore to
10 crore) for State Commissions
More than Rs. 2 Crore (earlier more than 10
crore) for the National Commission.
Three-tier Quasi-judicial Mechanism: The Act
promulgates a three-tier quasi-judicial mechanism
for redressal of consumer disputes namely district
commissions, state commissions and national
commission.
DISPUTE RESOLUTION
• Time Bound Disposal of Complaint: The Act stipulates
that every complaint shall be disposed of as
expeditiously as possible and endeavour shall be made to
decide the complaint within a period of 3 months from
the date of receipt of notice by the opposite party.
– Filing Complaints Electronically: The Act also provides
consumers the option of filing complaints
electronically.
• To facilitate consumers in filing their complaint online, the
Central Government has set up the E-Daakhil Portal.
DISPUTE RESOLUTION
– Mediation Route: The Act also includes reference
of consumer disputes to Mediation, with the
consent of both parties.
• This will not only save time and money of the
parties involved in litigating the dispute, but
will also aid in reducing overall pendency of
cases.
Central Consumer Protection
Authority (CCPA)
• Central Consumer Protection Authority:
• The Act proposes the establishment of the
Central Consumer Protection Authority (CCPA)
as a regulatory authority.
• The CCPA will protect, promote and enforce
the rights of consumers and regulate cases
related to unfair trade practices, misleading
advertisements, and violation of consumer
rights
CCPA
• CCPA would be given wide-ranging powers.
– The CCPA will have the right to take suo-moto
actions, recall products, order reimbursement of
the price of goods/services, cancel licenses,
impose penalties and file class-action suits.
• The CCPA will have an investigation wing to
conduct independent inquiry or investigation
into consumer law violations.
• Penalties for Misleading Advertisement:
• The CCPA may impose a penalty on a
manufacturer or an endorser, for a false or
misleading advertisement. The CCPA may also
sentence them to imprisonment.
Dispute Redressal Commision
• Consumer Disputes Redressal Commission:
• CDRCs will be set up at the district, state, and
national levels. A consumer can file a
complaint with CDRCs in relation to
JURISDICTION
• Revised Pecuniary Jurisdiction:
– 50 lakh (earlier less than 1 crore) for District
Commissions,
– More than Rs. 50 lakh to Rs. 2 Crore (earlier 1
crore to 10 crore) for State Commissions,
–Above 2 Crore, National Commission

Time limit
• Time Bound Disposal of Complaint:
• The Act stipulates that every complaint shall be

disposed of as expeditiously as possible and
endeavour shall be made to decide the complaint
within a period of 3 months from the date of receipt
of notice by the opposite party.
CENTRAL CONSUMER PROTECTION
COUNCIL
• Central Consumer Protection Council:
• The Consumer Protection Act empowers
the Central Government to establish a Central
Consumer Protection Council. It will act as an
advisory body on consumer issues.
– As per the notified Central Consumer Protection
Council Rules, the Central Consumer Protection
Council would be headed by the Union Minister of
Consumer Affairs, Food and Public Distribution with
the Minister of State as Vice Chairperson and 34 other
members from different fields.
CENTRAL CONSUMER PROTECTION
COUNCIL
• The Council, which has a three-year tenure,
will have a Minister-in-charge of consumer
affairs from two States from each region –
North, South, East, West, and NER. There is
also a provision for having working groups
from amongst the members for specific tasks.
THANK YOU

Business Law 2023

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Business Law 2023

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BUSINESS LAW

Prof. Benny John M.A., LL.M., MCILT (Lon)

• First Supreme Court In Calcutta

• An infringement (interference) of the right of a

• Fraud / Misrepresentation/ Cheating

• Common & most important in Shipping

• ‘Consensus ad idem’ = Meeting of minds

• Exposure of Goods: Not an OFFER to Sell

• ( A proposes by letter / mail to sell his house

• Consideration may be Past, Present & Future

• Exposure of Goods: Not an OFFER to Sell

• ( A proposes by letter / mail to sell his house

• Consideration may be Past, Present & Future

• Parties are Competent

• 4. Lawful consideration and object

• Measure of Damages = Difference between

• ‘A’ contracts to charter his ship to ‘B’ from 1st

• Damages (Penalty) amount

• ( Example: Demurrage, Service Contracts /

• (Specific Relief Act, 1963)

• Specific Performance when:

• A party to contract has refused to

• Agreements which interfere with

• Agreements tending to create interest

• Agreement to defraud Creditors or Revenue

• CONTRACTS OF INDEMNITY (Sec 124-125)

• A Contract by which One Party promises to

• RIGHTS OF INDEMNITY HOLDER ( Sec 125)

• All Damages / Costs/ Sums which he may have

• Liability of Surety is same as that of the

• “ BAILMENT” derived from the French

• Bailment for Mutual Benefit

• Bailment for Exclusive Benefit of Bailee

• Bailment for Exclusive Benefit of Bailor

• 1. Duty to take Care ( Ordinary prudence as

• Equitable Lien Lost if ‘Property sold to a

• Equitable Lienor: Does NOT have Right

• Dependant upon requirements as set out in

• CARRIER: Anyone who undertakes carriage of

• Liable for Loss / Damage during Care –

• AGENT <> PRINCIPAL

• AGENT & PRINCIPAL

• PRINCIPAL answerable to THIRD PARTIES

• NON-MERCANTILE AGENTS: Advocate, Power

• However, Formal Documents needed in:

• MAIN ASPECTS OF INCOTERMS;

• Seller= Exporter – Consignor – Shipper

• Buyer= Importer – Consignee ( Receiver of

• FCA FREE CARRIER

• FAS FREE ALONGSIDE SHIP

• CIP CARRIAGE AND INSURANCE PAID TO

• DPU DELIVERED AT PLACE UNLOADED

• DAP DELIVERED AT PLACE

• DDP DELIVERED DUTY PAID

• Manufacturing or offering spurious goods for sale

–Above 2 Crore, National Commission

• The Act stipulates that every complaint shall be

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