CHAPTER 1

LAW AND ITS SOURCES

Introduction
 Man is by nature a social being. He comes into contact with other individuals in different capacities. These
contacts or associations are the inevitable consequence of modern civilization. In all these associations, he is
expected to observe a Code of Conduct or a set of rules.
 The object of these set of rules is to
 make human associations possible; and
 ensure that members of the society may live ; and
 work together in an orderly and peaceful manner.
WHAT IS LAW
 The word `law` is a general term and over a period of time attained different connotations to signify varied
purposes.
DEFINITON OF `LAW` - ARTICLE 13 (3) OF CONSITTUTION OF INDIA
 Clause 3 of Article 13 of the Constitution of India defines `law` as under
(a) `law` includes any
 Ordinance,
 order,
 bye-law,
 rule,
 regulation,
 notification,
 custom or usage having the force of law;
 An amendment to an existing law is also law.
 `Law` in the context of the provisions of the Constitution of India may also be defined as – “It is an Act passed
by the legislature and assented to by the President of India or Governor of a State.” [Arts 111 and 200 of the
Constitution of India].
NEED FOR KNOWLEDGE OF `LAW`
 `Ignorntia juris non excusat` is a familiar maxim. This means `ignorance of law is no excuse`. Although it is
not possible for a layman to be aware of every branch lf law, yet he must acquaint himself with the general
principals of the law of the country.

EXTENT OF LAWS MADE BY LEGISLATIVE BODIES

 Article 245 of the Constitution of India empowers the Parliament and the Legislature of a State to make laws for
the country and the State respectively.
 Article 245, inter alia, stipulates as under: -
Article 245 Extent of laws made by Parliament and by the Legislatures of States
 The Parliament may make laws for the whole or any part of the territory of India, and
 The Legislature of a State may make laws for the whole or any part of the State.
 The law made by Parliament may have extra-territorial operation.
 The Constitution of India has put certain limitations on the legislative powers of the Parliament as well
the State Assembly.
SUBJECT MATTER OF LAWS MADE BY LEGISLATIVE BODIES
 Article 246 of the Constitution, inter alia, provides for the subject matter of laws to be made by Parliament and
by the Legislatures of States. The subject matters have been specified in the Seventh Schedule to the
Constitution.
 Parliament - Exclusive power relating to any of the matters enumerated in List I. ("Union List"-
contains 97 Entries).
 The State Legislature - Exclusive power relating any of the matters enumerated in List II. ('State List'-
contains 66 Entries).
 Parliament besides the State Legislature – Empowered to make laws relating to matters enumerated in
List III ("Concurrent List" – contains 47 Entries).
 Parliament has power to make laws with respect to any matter for any part of the territory of India not included
in a State notwithstanding that such matter is a matter enumerated in the State List.
List I – Union List. It has 97 entries.
IMT INTELLECTUAL PROP. RIGHTS

INTELLECTUAL PROPERTY LAWS

WHAT IS `INTELLECTUAL PROPERTY`
 Companies use their assets as part of the operations of their business and, as such, they contribute to the
development of the organisation as a whole. Managing and protecting assets is, therefore, a key operational and
strategic function.
 Assets may be classified as: -
1. Tangible (or physical) assets - land and building, plant and machinery and tools and equipment.
2. Intangible assets - goodwill, patents, designs, trademarks and copyrights -Intellectual property rights (IPRs)
 Intellectual property, often known as IP, allows people to own their creativity and innovation in the same way
that they can own physical property. The owner of IP can control and be rewarded for its use, and this
encourages further innovation and creativity to the benefit of us all.
Types of Intellectual Property
 There are four main types of IPRs:-
1. Patents: registered rights protecting industrial invention, which last for upto 20 years.
2. Trademarks registered rights for brand identity, which can continue as long as the registration fees are paid.
3. Designs registered designs (which lasts upto 25 years) and unregistered design right protect the aesthetic
appearance of articles.
4. Copyright unregistered protection for authors, artists and composers against the unauthorised copyin of their
works, which lasts for the life of the author plus 70 years.
 The first three categories are known as registered or monopoly rights as the process of registration effectively
prevents others from exploiting an invention, brand or design without the owner’s consent.
TRADEMARKS ACT, 1999
What is `Trade Mark`
 A `Trade Mark` is a distinguishing mark used in the course of trade of goods of one manufacturer or trader and,
therefore, it seeks to protect the interest of the consumer as well as the trader. A trademark may consist of a device
depicting the picture of animals, human beings, etc., words, letters numerals, signatures or any combination thereof.
Trademark Owner or Proprietor
 The person in whose name the Trade mark is registered and his name is so entered in the Register maintained
by the Registrar Trademarks.
Registered users (Section 48)
 A person other than the registered proprietor of a trademark may be registered in respect of any or all of the goods or
services in respect of which the trademark is registered. (Ex – HLL products manufactured by some other
manufacturer)
Trademarks as a series
 Where the proprietor of a trademark claims to be entitled to the exclusive use of any part thereof separately, he may
apply to register the whole and the part as separate trademarks. Each such separate trademark shall satisfy all the
conditions applying to and have all the incidents of, an independent trademark. (Ex – `Liberty` and `Ballerina` used
for Ladies Sandals)
Limitation as to Colour
 A trademark may be limited wholly or in part to any combination of colours. When a trademark is registered without
limitation of colour, it shall be deemed to be registered for all colours. (Ex- Airtel – in Red and White colours)
TYPES OF TRADEMARKS
Classification Description
(A) Registered Trade Mark A trademark registered with the Registrar of Trade Marks in the name of a person.
(B) Certification mark The owner of that mark is called Registered Owner or Proprietor.
A mark used in commerce with the owner’s permission by someone other than its
owner,
 to certify regional or other geographic origin, material, mode of manufacture,
quality, accuracy, or
 that the work or labor on the goods or services was performed by members of
a union. (Ex – Woolmark; AGMARK)
(C) Collective mark A trademark or service mark used in commerce, by all the members of a
cooperative, an association etc. (Ex- Lijjat papad, FICCI)
(D) Well-known trademark A mark, which has become so well known to the substantial segment of the public,
that the use of same trademark is used in relation to other goods or services, in the

LECTURES BY PROF. (DR.) S N GHOSH

IMT INTELLECTUAL PROP. RIGHTS

Agents may present the applicant before Registrar (Section 145)

 The Registrar may authroise the legal practioners or registered agents may be authorised to represent their
principals.
PATENTS ACT, 1970
What is `Patent`
 Patent is a monopoly granted to the original inventor of a product or process that is capable of commercial
exploitation.
The benefits of patent protection
 The patent gives the patent holder the right to stop others from using the invention concerned or to choose to
let others use it under agreed terms. It also brings the right to take legal action against others who might be
infringing the invention to claim damages. Patent right is assignable.
Patent Requirements
 Be novel.
 Involve an inventive step
 Capable of Commercial Exploitation
 Be described.
TRIP AGREEMENT
Compliance of the TRIP Agreements
 India is a signatory to the agreement establishing the World Trade Organization (WTO). The WTO Agreement,
inter-alia, contains an agreement on intellectual property rights, namely, the Agreement on Trade Related
Aspects of Intellectual Property Rights (TRIPs). The TRIPs Agreement requires member countries to align their
legislations on intellectual property in conformity with their obligations under the TRIPs Agreement.
 The Patent Act 1970 has been amended in 1999, 2002 and 2005 so as to make Indian Patent Act fully
compliant of the TRIP Agreement.
INVENTIONS NOT PATENTABLE (SECTION 3 AND 4)
 Frivolous or claims made are obvious or contrary to well established natural laws.
 Contrary to law or morality or injurious to public heath. (Ex.-Method for gambling)
 Mere discovery of a scientific principle or the formulation of an abstract theory. (Ex -Scientific theory is a
statement about the natural world.)
 The mere discovery of any new property or its use or of the mere use of a known process, machine or
apparatus. (Ex - Use of Aspirin for cardio-vascular disease)
 A substance obtained by a mere admixture resulting only in the aggregation of the properties of the
components thereof (Ex – Alloy)
 The mere arrangement or re-arrangement or duplication of known devices (Ex - Umbrella with fan)
 A method or a process for enhancing machine efficiency. (Ex - Process for testing of chlorine level in the water)
 A method of agriculture or horticulture (Ex - A method for cultivation of an algae)
 Any process for the medicinal, surgical, curative, prophylactic or other treatment of living animals to make them
disease free. (Ex - treatment of malignant tumour cells)
 Inventions relating to Atomic energy [Section 4]
Who may apply for Patent
 An application for a patent may be made by the first inventor, his assignee or legal representative or foreign
national of a convention country on reciprocal basis.
Types of Patent Applications
a. Patent applications under Patents Act 1970.
b. International applications under PCT.
Secrecy direction of certain inventions
 The Registrar while sealing a Patent may issue security directions for products or process for defence
purposes.
Term of a patent
 The term of every patent shall be 20 years from the date of filing application for patent. A patent may be
revoked by the High Court on any of the specified grounds.
Compulsory licences
 At any time after 3 years from the date of the sealing of a patent, any person including Central Government in
the public interest may make an application to the Controller for grant of compulsory licence on patent on
specified grounds. The Controller on being satisfied with the expediency and urgency and public interest, my
grant compulsory licence.
LECTURES BY PROF. (DR.) S N GHOSH
IMT INTELLECTUAL PROP. RIGHTS

STATUTORY EXCEPTIONS TO INFRINGEMENT (SECTION 52)

 Some of the exceptions provided under the Act are as follows: -
(i) a fair dealing with a literary, dramatic musical or artistic work;
(ii) the making of copies or adaptation of a computer programme by the lawful possessor;
(iii) the doing of any act necessary to obtain information essential for operating inter-operability of an
independently created computer programme.
(iv) the reproduction of a literary dramatic, musical or artistic work for the purpose of a judicial proceeding;
(v) the reading or recitation in public of any reasonable extract from a published literary or dramatic work;.
(vi) the publication in a collection, mainly composed of non-copyright matter, bona fide intended for the use of
educational institutions;
(vii) the reproduction of a literary, dramatic musical or artistic work by a teacher or a pupil in the course of
instruction; or as part of the question to be answered in an examination; or in answers to such questions;
(viii) the making of sound recordings in respect of any literary, dramatic or musical work, if sound recordings of
that work have been made by or with the licence or consent of the owner of the right in the work; the person
making the sound recordings has given a notice of his intention to make the sound recordings, has provided
copies of all covers or labels with which the sound recordings are to be sold, and has paid in the prescribed
manner to the owner of rights in the work royalties in respect of all such sound recordings to be made by
him, at the rate fixed by the Copyright Board in this behalf.
(x) the causing of a recording to be heard in public by utilising it in an enclosed room or hall.
(xi) the making of not more than three copies of a book;
(xv) the reproduction, for the purpose of research or private study;
PENALTIES FOR INFRINGEMENT OF COPYRIGHT (SECTIONS 54 –62)
 Imprisonment for a minimum period of 3 years and with fine upto Rs. 2 lakhs. For any second and subsequent
convictions imprisonment up to three years and the fine upto Rs.2 lakhs.
COMPARITIVE ANALYSIS OF PATENT, COPYRIGHT AND TRADEMARK
PATENT COPYRIGHT TRADEMARK

Right Protected A new invention to Original, literary, dramatic, To use a particular mark,
manufacture the product musical and artistic works, which may be a symbol,
patented or use the cinematograph film and records. word, device applied to
process patented. articles of commerce to
indicate the distinctiveness of
goods.
Time Period 20 years Lifetime plus 60 years for literary, 7 years and may be renewed
and in case of food and dramatic, musical and artistic from time to time.
drugs 5 or 7 years. works. 50 years from year of
publication for records.

Who Can Register Actual inventor or an The author or publisher of, or Proprietor of the trademark
assignee of the right to owner of or other person and application may be made
make an application or interested in the copyright in any in the name of an individual,
legal representative of work. partners of a Firm,
either. Corporation, Government
department or Trust.
Commercial Use Assigning rights or By assigning or licensing the Licensing the right by
licensing them to right to others on a royalty or registration of the licensee as
industrialists for a lump lump sum basis. a registered user.
sum payment or royalty
basis.
Remedy For Injunction, Damages, Civil, Criminal, Administrative. Injunction, Damages,
Infringement Accounts of profits. Accounts of profits

LECTURES BY PROF. (DR.) S N GHOSH

 ARBITRATION & CONCL. ACT

dispute is decided in accordance with substantive law in India or any other country, depending on the contract
in this regard and the rules of conflict of laws.
(iii) Institutional arbitration
 Institutional arbitration means an arbitration conducted by an arbitral institution in accordance with prescribed
rules of the institution. Many a times, business contracts contain a similar provision that should any dispute
arise the same will be referred to arbitration and decided in accordance with rules of arbitration of particular
arbitral institution. Such arbitration is called ‘institutional arbitration.’
MATTERS THAT CAN BE REFERRED TO ARBITRATION
 Sec 9 of CPC, 1908, inter alia, provides that all matters in dispute between parties relating to private rights
or obligations, which civil courts may take, cognizance of may be referred to arbitration.
Exception – Any matter, which is forbidden by any law or is against public policy, shall not be referred to
arbitration.
MATTER THAT CANNOT BE REFERRED TO ARBITRATION
1. Matrimonial matters e.g. divorce or restitution of conjugal rights
2. Testamentary matters like the validity of a will
3. Insolvency matters
4. The guardianship of a minor
5. Public charities and charitable trusts
6. Lunacy proceedings
7. Matters of criminal nature
8. Execution proceedings.
ARBITRATION MECHANISM
Appointment of Arbitrators (Arbitral Tribunal)
 Arbitration agreement is a contract. It is a document in writing, signed by both the parties. This will make
them bound by the arbitration agreement. An arbitration clause, which forms part of a contract, shall be
treated as an agreement independent of the other terms of the contract. The person of any nationality may
be appointed as arbitrator. The parties are free to determine the number of arbitrators (Arbitral Tribunal).
The number of arbitrators cannot be in even number. Party cannot approach the Court for removal of
arbitrator or stay of proceeding except on specified grounds.
When Arbitrator may be appointed by Chief Justice
(i) the parties disagree on the arbitration procedure
(ii) the two appointed arbitrators disagree as to the procedure
(iii) any person including the institution fails to perform any function entrusted to him .
[NOTE: Chief Justice means the Chief Justice of the concerned High Court where the jurisdiction of the civil court
lies.]
Procedure to be followed by the Arbitral Tribunal
 The parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its
proceedings. The Arbitral Tribunal shall not be bound by the Code of Civil Procedure or the Indian Evidence
Act. The parties are free to agree on the place of arbitration.
 An arbitrator may be challenged only if
(i) Circumstances exist that give rise to justifiable doubts as to his independence or impartiality or
(ii) He does not possess the qualifications agreed to by the parties
 The arbitral tribunal may require a party to provide appropriate security.
Features of an Arbitral Award
(a) The award should be in writing, dated, and signed by majority of the arbitrators. (Arbitral Tribunal). The reasons
for omission of the signature of other members should be specified.
(b) The awards need to quantify the award. It should be made on a stamp paper of appropriate value which value
is dependent of the quantum and the State where the award has been made.
(c) The award should contain reason, justification, evidence or the set of documents, which have been relied upon
while formulating the award and the conclusions for arriving at the pronounced award.
(d) The place of the arbitration is very crucial. It is required to be mentioned for it determines the jurisdiction of the
High Court for appeal, if opted by either party.
(e) Cost of arbitration may also be provided in the award
(f) After the award is made, a copy of the said award is required to be each party in dispute for implementation
accordingly.

2
IMT 1 CONTRACT ACT

Sessions 05 - 08

INDIAN CONTRACT ACT 1872

INTRODUCTION
 The Law of Contract deals with the law relating to the general principles of contract. It is the most important part
of Mercantile Law. It affects every person in one way or the other, as all of us enter into some kind of contract
everyday.
 Since this law was not happily worded, two subsequent legislations namely Indian Sale of Goods Act –
Sections 76 to 123 of the Indian Contract Act 1872 were repealed; and Partnership Act was also enacted and
Sections 239 to 266 of the Contract Act were also repealed.
What is `Contract`
 The term `Contract` is defined in Section 2(h) of the Indian Contract Act, which reads as under
“An agreement enforceable by law is a contracts.”
 The analysis of this definition shows that a contract must have the following two elements:
1. An agreement, and
2. The agreement must be enforceable by law.
 In other words:
Contract = An Agreement + Enforceability (by law)
Agreement (Section 2(e)
Every promise and every set of promises forming the consideration for each other is an agreement.
Promise (Section 2(b))
A proposal when accepted becomes a promise.
 Every agreement is not a contract. When an agreement creates some legal obligations and is enforceable by
law, it is regarded as a contract.
1.1 ESSENTIAL ELEMENTS OF CONTRACT
1. Agreement
2. Intention to create legal relationship
3. Free and genuine consent.
4. Parties competent to contract.
5. Lawful consideration.
6. Lawful object.
7. Agreement not declared void or illegal.
8. Certainty of meaning.
9. Possibility of performance.
Ex –
Where 'A' who owns 2 cars x and y wishes to sell car 'x' for Rs. 30,000. 'B', an acquaintance of 'A' does not know
that' A' owns car 'x' also. He thinks that' A' owns only car 'y' and is offering to sell the same for the stated price. He
gives his acceptance to buy the same. There is no contract because the contracting parties have not agreed on the
same thing at the same time, 'A' offering to sell his car 'x' and 'B' agreeing to buy car or'. There is no consensus-ad-
idem.
CLASSIFICATION OF CONTRACTS
1. Classification according to validity or enforceability.
a) Valid
b) Voidable
c) Void contracts or agreements
d) Illegal.
e) Unenforceable

2. Classification according to Mode of formation

(i) Express contract
(ii) Implied contract
3. Classification according to Performance
(i) Executed contract

LECTURES BY PROF. (DR.) S N GHOSH

IMT 3 CONTRACT ACT

ACCEPTANCE
 Acceptance has been defined as "When the person to whom the proposal is made signifies his assent thereto,
the proposal is said to be accepted”.
Acceptance how made
 The offeree is deemed to have given his acceptance when he gives his assent to the proposal. The assent may
be express or implied. It is express when the acceptance has been signified either in writing, or by word of
mouth, or by performance of some required act.
Ex- A enters into a bus for going to his destination and takes a seat. From the very nature, of the circumstance,
the law will imply acceptance on the part of A.]
 In the case of a general offer, it can be accepted by anyone by complying with the terms of the offer.
ESSENTIALS OF A VALID ACCEPTANCE
1) Acceptance must be absolute and unqualified.
2) Acceptance must be communicated to the offeror.
3) Acceptance must be according to the mode prescribed.
Ex- A sends an offer to B through post in the usual course. B should make the acceptance in the "usual and
reasonable manner" as no mode of acceptance is prescribed. He may accept the offer by sending a letter,
through post, in the ordinary course, within a reasonable time.
COMMUNICATION OF OFFER, ACCEPTANCE AND REVOCATION
 As mentioned earlier that in order to be a valid offer and acceptance.
(i) the offer must be communicated to the offeree, and
(ii) the acceptance must be communicated to the offeror.
The communication of acceptance is complete:
(i) as against the proposer, when it is put into a course of transmission to him, so as to be out of the power of
the acceptor;
(ii) as against the acceptor, when it comes to the knowledge of the proposer.
Ex-
A proposes, by letter, to sell a house to B at a certain price. B accepts A's proposal by a letter sent by post. The
communication of acceptance is complete: (i) as against A, when the letter is posted by B; (ii) as against B,
when the letter is received by A.
The communication of a revocation (of an offer or an acceptance) is complete:
(1) as against the person who makes it, when it is put into a course of transmission to the person to whom it is
made, so as to be out of the power of the person who makes it.
(2) as against the person to whom it is made when it comes to his knowledge.
Ex-
A revokes his proposal by telegram. The revocation is complete as against A, when the telegram is dispatched.
It is complete as against B, when B receives it.
Revocation of proposal and acceptance:
 A proposal may be revoked at any time before the communication of its acceptance is complete as against the
proposer, but not afterwards.
Ex-
A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A
may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not
afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it
reaches A, but not afterwards.
CAPACITY TO CONTRACT
(Sections 10-12)
WHO ARE NOT COMPETENT TO CONTRACT
 The following are considered as incompetent to contract, in the eye of law: -
(A) LIVING PERSON
(1) Minor: -
(i) A contract with or by a minor is void and a minor, therefore, cannot, bind himself by a contract.
(ii) A minor's agreement cannot be ratified by the minor on his attaining majority.
(iii) If a minor has received any benefit under a void contract, he cannot be asked to refund the same.
(iv) A minor cannot be a partner in a partnership firm.
(v) A minor's estate is liable to a person who supplies necessaries of life to a minor.
CASE EXAMPLE

LECTURES BY PROF. (DR.) S N GHOSH

IMT 5 CONTRACT ACT

Lords held that the directors were not liable in fraud because they honestly believed what they said in the
prospectus to be true. [Derry v. Peek (1889) 14 A.C. 337].
CONSIDERATION
[Sections 2(d), 10,23-25, 148, 185]
Definition
 Consideration is what a promisor demands as the price for his promise. In simple words, it means 'something in
return.'
 Consideration has been defined as
"When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or
does or abstains from doing, or promises to do or promises to abstain from doing something, such act or
abstinence or promise is called a consideration for the promise."
IMPORTANCE OF CONSIDERATION
 A promise without consideration is purely gratuitous and, however sacred and binding in honour it may be,
cannot create a legal obligation.
 A person who makes a promise to do or abstain from doing something usually does so as a return or equivalent
of some loss, damage, or inconvenience that may have been occasioned to the other party in respect of the
promise. The benefit so received and the loss, damage or inconvenience so caused is regarded in law as the
consideration for the promise.
KINDS OF CONSIDERATION
 A consideration may be:
1. Executed or Present
2. Executory or Future
LEGALITY OF OBJECT
(Sections 23, 24)
 An agreement will not be enforceable if its object or the consideration is unlawful. According to Section 23 of
the Act, the consideration and the object of an agreement are unlawful in the following cases:
What consideration and objects are unlawful – agreement VOID
1. If it is forbidden by law
2. If it is of such a nature that if permitted, it would defeat the provisions of any law.
1. If it is fraudulent. An agreement with a view to defraud other is void.
4. If it involves or implies injury to the person or property of another. If the object of an agreement is to injure
the person or property of another it is void.
5. If the Court regards it as immoral or opposed to public policy. An agreement, whose object or consideration
is immoral or is opposed to the public policy, is void.
Ex-
A partnership entered into for the purpose of doing business in arrack (local alcoholic drink) on a licence
granted only to one of the partners, is void ab-initio whether the partnership was entered into before the licence
was granted or afterwards as it involved a transfer of licence, which is forbidden and penalised by the Akbari
Act and the rules thereunder [Velu Payaychi v. Siva Sooriam, AIR (1950) Mad. 987].

VOID and VOIDABLE Agreements

(Sections 26-30)
Void agreement
1. The following are the additional grounds declaring agreements as void: -
(i) Agreements by person who are not competent to contract.
(ii) Agreements under a mutual mistake of fact material to the agreement.
(iii) Agreement with unlawful consideration.
(iv) Agreement without consideration. (Exception – if such an agreement is in writing and registered or for a past
consideration)
(v) Agreement in restraint of marriage.
(vi) Agreement in (absolute) restraint of trade
(vii) Agreements in restrain of legal proceedings,
(viii) Agreements void for uncertainty (Agreements, the meaning of which is not certain, or capable of being made
certain)
(ix) Agreements by way of wager (a promise to give money or money's worth upon the determination or
ascertainment of an uncertain event)

LECTURES BY PROF. (DR.) S N GHOSH

IMT 7 CONTRACT ACT

DISCHARGE OF CONTRACTS
[Sections 73-75]
 The cases in which a contract is discharged may be classified as follows:
A. By performance or tender
B. By mutual consent
 A contract may terminate by mutual consent in any of the following ways: -
a. Novation (substitution)
b. Recession (cancellation)
c. Alteration
C. By subsequent impossibility
D. By operation of law
E. By breach
REMEDIES FOR BREACH OF CONTRACT
(SECTIONS 73-75)
 As soon as either party commits a breach of the contract, the other party becomes entitled to any of the
following reliefs: -
a) Recession of the contract
b) Damages (monetary compensation)
c) Specific performance
d) Injunction
e) Quantum meruit
Ex –
A, a singer contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during
the next two months, and B engages to pay her Rs. 100 for each night’s performance. On the sixth night, A
wilfully absents herself from the theatre and B in consequence, rescinds the contract. B is entitled to claim
compensation for the damages for which he has sustained through the non-fulfilment of the contract.
CONTRACT OF AGENCY
[SECTION 182 – 238]
Who is an `Agent`
 An agent is defined as a "person employed to do any act for another or to represent another in dealings with
third person". In other words, an agent is a person who acts in place of another. The person for whom or on
whose behalf he acts is called the Principal.
 Agency is therefore, a relation based upon an express or implied agreement whereby one person, the agent, is
authorised to act for another, his principal, in transactions with third person.
 The function of an agent is to bring about contractual relations between the principal and third parties.
WHO CAN EMPLOY AN AGENT
 Any person, who is capable to contract may appoint as agent. Thus, a minor or lunatic cannot contract through
an agent since they cannot contract themselves personally either.
WHO MAY BE AN AGENT
 In considering the contract of agency itself (i.e., the relation between principal and agent), the contractual
capacity of the agent becomes important.
HOW AGENCY IS CREATED
 A contract of agency may be created by in any of the following three ways: -
(1) Express Agency
(2) Implied Agency
(3) Agency by Estoppel
(4) Agency by Holding Out
(5) Agency of Necessity
(6) Agency By Ratification
DUTIES OF AGENT
1. To conduct the business of agency according to the principal's directions
2. The agent should conduct the business with the skill and diligence that is generally possessed by persons
engaged in similar business, except where the principal knows that the agent is wanting in skill.
3. To render proper accounts.

LECTURES BY PROF. (DR.) S N GHOSH

IMT 17 Session -09 SALE OF GOODS ACT

CHAPTER 02

SALE OF GOODS ACT 1930

 Originally, the law relating to sale of goods was contained in Chapter VII of the Indian Contract Act, 1872. The
same was repealed and re-enacted by the Sale of Goods Act, III of 1930.
FORMATION OF THE CONTRACT OF SALE
Definition
(Section 4)
A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to
the buyer for price".
ESSENTIALS OF CONTRACT OF SALE
From the above definition, the following essentials of a contract of sale may by noted:
1. There must be at least two parties
2. Transfer or Agreement to transfer the ownership of goods.
3. The subject matter of the contract must necessarily be 'goods'.
4. The consideration is Price.
3. A Contract of sale may be absolute or conditional
6. All other essentials of a valid contract must be present.
`SALE` AND 'AGREEMENT TO SELL' DISTINGUISHED
Sale:
 It is a contract where the ownership in the goods is transferred by seller to the buyer immediately at the
conclusion contract. Thus, strictly speaking, sale takes place when there is a transfer of property in goods from
the seller to the buyer. A sale is an executed contract.
 It must be noted here that the payment of price is immaterial to the transfer of property in goods.
Ex -
A sells his Yamaha Motor Bicycle to B for Rs. 10,000. It is a sale since the ownership of the motorcycle has
been transferred from A to B.
Agreement to sell:
 It is a contract of sale where the transfer of property in goods is to take place at a future date or subject to some
condition thereafter to be fulfilled.
Ex-
(i) A agreed to buy from B a certain quantity of nitrate of soda. The ship carrying the nitrate of soda was yet to
arrive. This is `an agreement to sale`. In this case, the ownership of nitrate of soda is to be to transferred
to A on the arrival of the ship containing the specified goods (i.e. nitrate of soda) [Johnson V Mcdonald
(1842) 9 M & W 600, 60 RR 838]
(ii) On 1st March 1998, A agreed to sell his car to B for Rs. 80,000. It was agreed between themselves that the
ownership of the car will transfer to B on 31st March 1998 when the car is got registered in B`s name. It is
an agreement to sell and it will become sale on 31st March when the car is registered in the name of B.
Other points of distinction between a sale and an agreement to sell are:
Sale Agreement to sell
1. A sale is an executed contract. 1. An Agreement to sell is an executory contract.
2. In a sale, since the property has passed to the buyer, 2. In an agreement to sell, in case of breach, the seller
the seller can sue the buyer for the price of the can only sue for damages, unless the price was
goods. payable at a stated date.
3. A sale creates a right in rem. 3. An agreement to sell creates a right in personam.
4. In case of loss of goods, the loss will fall on the 4. The loss in this case shall be borne by the seller,
buyer, even though the goods are in the possession even though the goods are in the possession of the
of the seller. It is because 'Risk' is associated with buyer.
ownership.
3. In case buyer pays the price and the seller thereafter 5. In these circumstances, the buyer cannot claim the
becomes an insolvent, the buyer can claim the goods goods but only a rateable dividend for the money
from the Official Receiver or Assignee. paid.
6. If the buyer becomes an insolvent without paying the 6. In these circumstances, the seller can refuse to
price, the ownership having passed to the buyer, the deliver the goods to the Official Assignee or Re-
seller shall have to deliver the goods to the Official ceiver.
Assignee or Receiver except where he has a lien
over the goods.

LECTURES BY PROF. (DR.) S N GHOSH

IMT 19 Session -09 SALE OF GOODS ACT

1. A condition is a stipulation (in a contract), which is 1. A warranty is a stipulation, which is only collateral or
essential to the main purpose of the contract. subsidiary to the main purpose of the contract.
2. A breach of condition gives the aggrieved party a 2. A breach of warranty gives only the right to sue for
right to sue for damages as well as the right to damages. The contract cannot be repudiated.
repudiate the contract. 
3. A breach of condition may be treated as a breach of 3. A breach of warranty cannot be treated as a breach
warranty in certain circumstances. of condition.
Ex-
A man buys a particular horse, which is warranted quiet to ride and drive. If the horse turns out to be vicious, the
buyer's only remedy is to claim damages. But if instead of buying a particular horse, a man asks a dealer to supply
him with a quiet horse and the horse turns out to be vicious, the stipulation is a condition and the buyer can reject
the horse, or keep the horse and claim damages.
WHEN CONDITION TO BE TREATED AS WARRANTY
[SECTION 13]
 Under the following circumstances a breach of condition is to be treated as a breach of warranty, i.e., the right
to repudiate the contract is deemed to have been lost:
1. Waiver of Condition
2. Compulsory treatment of breach of condition as breach of Warranty.
EXPRESS AND IMPLIED CONDITIONS AND WARRANTIES
 Conditions and Warranties may be either express or implied. They are said to be "express" when the terms of
the contract expressly provide for them. They are said to be 'implied' when the law deems their existence in
the contract even without their actually having been put in the contract.
(A) IMPLIED CONDITIONS
 The following are the implied conditions
(1) Condition as to Title
(2) Sale by Description
(3) Condition as to Quality or Fitness
(4) Merchantable Quality
Sale by sample - A contract of sale is a contract for sale by sample where there is a term in the contract, express or
implied, to that effect.
 In a sale by sample, the following are the implied conditions:
1. The bulk shall correspond with the sample in quality;
2. That the buyer shall have a reasonable opportunity of comparing the bulk with the sample; and
3. That the goods shall be free from any defects rendering them unmerchantable, which would not be
apparent on reasonable examination of the sample.
Ex-
(i) Certain shoes were sold by sample for the French Army. The shoes were found to contain paper not
discoverable by ordinary inspection. Held, the buyer was entitled to the refund of price plus damages.
(ii) In a contract for the sale of brandy by sample, the brandy that was supplied had been coloured with a dye.
Held, the buyer was not bound by the contract, though the bulk corresponded with sample, since the defect
could not have been located on reasonable examination of the sample [Mody v. Gregson (1868) L.R.4Ex. 49.].
(B) IMPLIED WARRANTIES
 There are two implied warranties. These are:
1. Warranty of Quiet Possession
2. Warranty of Freedom from Encumbrances
Ex –
A purchased a second hand typewriter from B. A used it for sometime and also spend some money on its
repairs. The typewriter turned out to be stolen one and as such A had to return it to the true owner. It was held
that A could recover damages from B amounting to the price paid and the cost of repair [Mason v.
Burmingham (1949) 2 KB 545]
3.5 DOCTRINE OF CAVEAT EMPTOR
 Caveat Emptor is a fundamental principle of the law of sale of goods. It means "Caution Buyer", i.e. "Let the
buyer beware".
 In other words, it is not the duty of the seller's duty to point out defects of his own goods. The buyer must
inspect the goods to find out if they will suit his purpose.
Ex-
Pigs were sold "subject to all faults", and these pigs, being infected, caused typhoid to other healthy pigs of the
buyer, it was held that the seller was not bound to disclose that the pigs were unhealthy. The rule of the law being

LECTURES BY PROF. (DR.) S N GHOSH

IMT 21 Session -09 SALE OF GOODS ACT

price has not been tendered. The term "seller" includes an agent of the seller.
 The seller of goods is deemed to be an "unpaid seller" if:
(a) the whole of the price, has not been paid or tendered;
(b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the
condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or
otherwise.
Rights of an unpaid seller
 Rights of an unpaid seller may broadly be classified under two heads namely:
1. Rights against goods
 An unpaid seller has the following rights against the goods:
(a) Lien on the goods
(b) A right of stoppage in transit
(c) A right of re-sale
2. Rights Against the Buyer Personally
 An unpaid seller, besides his rights against goods, has the following rights against the buyer personally:
(i) Right to sue for the price; and
(ii) the right to sue the buyer for damages for non-acceptance.

LECTURES BY PROF. (DR.) S N GHOSH