�Contract of Indemnity – According to Pakistani Law (Contract

Act, 1872)
�Definition (Section 124 of the Contract Act, 1872 – Pakistan)

―A contract by which one party promises to save the other from loss caused to him by the conduct of the
promisor himself, or by the conduct of any other person.‖

� Example:

If A agrees to pay B for any loss B suffers because of a lawsuit filed by a third party, this is a contract of
indemnity.

�Parties Involved:

1. Indemnifier – the person who gives the promise to protect against loss.
2. Indemnified – the person who is protected from loss.

�Essentials of a Valid Contract of Indemnity:

 It must be a valid contract under the Contract Act (offer, acceptance, consideration).
 The loss should be caused by a human act (not natural disaster, unless specified).
 The indemnity must be specific and clearly defined.

�Rights of the Indemnified (Implied under Section 125):

If the indemnified person (the one protected) has incurred a loss:

 They can recover all damages they are forced to pay in a lawsuit.
 They can claim legal costs incurred in defending a case (if done in good faith).
 They can also recover sums paid under a settlement.

�When the Indemnifier Becomes Liable:

 The indemnifier's liability starts as soon as the indemnified is in danger of loss, even before actual
payment is made, as per judicial interpretation in Pakistan and India.

�Usage in Pakistan:

Contracts of indemnity are commonly used in:

 Insurance contracts
 Business agreements
  Bank guarantees
 Employment contracts (in some cases)

�Relevant Case Law in Pakistan:

While not many detailed case laws are widely published, Pakistani courts generally follow precedents from:

 Indian case law before 1947

 English common law
 And apply the Contract Act, 1872 as it is still in force

If you need a sample indemnity clause or want it in Urdu, I can provide that too. Let me know!

�Contract of Guarantee – According to Pakistani Law (Contract

Act, 1872)
�Definition (Section 126 of the Contract Act, 1872)

―A contract of guarantee is a contract to perform the promise or discharge the liability of a third person in
case of his default.‖

� Simple Example:

If A borrows money from B, and C promises to pay if A does not — this is a contract of guarantee.

 A = Principal Debtor
 B = Creditor
 C = Surety

�Parties in a Contract of Guarantee:

1. Principal Debtor – the person who takes the loan or has the original obligation.
2. Creditor – the person to whom the debt is owed.
3. Surety – the person who guarantees to pay if the debtor fails.

�Types of Guarantee:

1. Specific Guarantee – for a single transaction or debt.

2. Continuing Guarantee (Sec 129) – for a series of transactions or ongoing liability.
�Key Sections (Contract Act, 1872 – Pakistan):

 Section 126 – Definition

 Section 127 – Consideration for guarantee (benefit to principal debtor is enough)
 Section 128 – Surety’s liability is the same as the principal debtor
 Section 129 – Continuing Guarantee
 Section 130-131 – Revocation of continuing guarantee
 Section 133–139 – Discharge of Surety due to various acts of the creditor

�Rights of the Surety (Guaranteeing Party):

1. Right of Subrogation (Section 140):

o Once the surety pays, they get all the rights the creditor had against the principal debtor.
2. Right to Indemnity from Principal Debtor (Section 145):
o Surety can recover the amount from the principal debtor after payment.
3. Right to Contribution:
o If there are multiple sureties, they share the burden equally unless agreed otherwise.

�When a Surety is Discharged:

The surety is no longer liable if:

 The terms of the contract change without the surety’s consent (Section 133)
 The creditor releases the principal debtor (Section 134)
 The creditor acts carelessly or loses security (Section 139)

�Legal Use in Pakistan:

 Bank guarantees
 Business loans
 Construction contracts
 Employment bonds

�Important Notes:

 This law is federal law and is uniformly applied in all provinces of Pakistan.
 The courts in Pakistan often refer to Indian pre-1947 case law and English common law while
interpreting this act.
�Contract of Bailment – According to Pakistani Law (Contract
Act, 1872)
�Definition (Section 148 of the Contract Act, 1872):

―A bailment is the delivery of goods by one person to another for some purpose, upon a contract that the
goods shall be returned or otherwise disposed of according to the instructions of the person delivering
them.‖

� Example (Simple):

You give your clothes to a dry cleaner to wash.

 You are the Bailor.

 The dry cleaner is the Bailee.
 The clothes are to be returned once cleaned. This is bailment.

�Parties Involved:

1. Bailor – the person who delivers the goods.

2. Bailee – the person who receives the goods for a purpose.

�Essentials of a Valid Bailment:

 Delivery of movable goods only (not land or buildings).

 Purpose must be clearly defined (e.g., safekeeping, repair, transport).
 Return of goods is expected after the purpose is fulfilled.
 It must be based on a contract, express or implied.

�Duties of Bailee (Sections 151–153):

1. Take reasonable care of the goods.

2. Not use the goods for personal use unless allowed.
3. Return the goods after the purpose is over.
4. Not mix bailor’s goods with other goods without permission.

�Rights of Bailee:

 Right to compensation if bailor's goods cause loss.

 Right to retain goods (called bailee’s lien) until payment is made for services rendered (Section
170).
�Duties of Bailor:

1. Disclose faults in the goods that could harm the bailee.

2. Pay expenses if the bailment is for the bailor’s benefit.
3. Indemnify the bailee if bailee suffers a loss due to the bailor's instructions.

�Termination of Bailment:

Bailment can end:

 When the purpose is completed.

 On expiry of time (if time was fixed).
 If the goods are destroyed or lost.
 If either party ends the contract (with notice, if required).

�Types of Bailment:

1. Gratuitous Bailment – done without reward (e.g., lending a book to a friend).

2. Bailment for Hire – with payment (e.g., giving car to mechanic).

�Legal Use in Pakistan:

 In logistics, warehousing, transport, repair services, dry cleaning, bank lockers, and many daily
activities.
 Courts apply this law based on principles of justice, equity, and good faith.

Let me know if you want:

 A sample bailment agreement

 Case law references from Pakistan
 This explanation in Urdu

�Pledge (Bailment of Pledge) – According to Pakistani Law

�Definition (Section 172 of the Contract Act, 1872):

―The bailment of goods as security for payment of a debt or performance of a promise is called a pledge.‖

� Simple Example:

You borrow money from a bank and give your gold jewelry as security.
  You = Pawnor (bailor)
 Bank = Pawnee (bailee)
 Gold = Pledged goods

This is a pledge, a special kind of bailment made for securing a loan or obligation.

�Parties in a Pledge:

1. Pawnor – the person who pledges the goods (giver of goods).

2. Pawnee – the person to whom goods are pledged (receiver/lender).

�Essentials of a Valid Pledge:

 Only movable goods can be pledged (not land or buildings).

 There must be delivery of goods (actual or symbolic).
 The goods are given as security for a loan or promise.
 The contract must clearly show intention to pledge.

�Rights of Pawnee (Section 173–176):

1. Right to retain goods until full repayment or performance.

2. Right to recover expenses incurred to preserve the goods.
3. Right to sell the goods if the pawnor defaults (after giving reasonable notice).

�Duties of Pawnee:

 Take reasonable care of the pledged goods.

 Not use the goods unless agreed.
 Return goods after debt is paid or obligation is fulfilled.

�Rights of Pawnor:

 Right to redeem the goods anytime before they are sold.

 Right to get notice before sale by pawnee.
 Right to claim back goods if loan is repaid.

�Pledge by Non-Owners (Section 178 & 179):

In some cases, even non-owners can make a valid pledge:

 Mercantile agent in possession of goods with the owner’s consent.

 A person with possession under a voidable contract (unless contract is rescinded).
  Co-owner with consent of other co-owners.

�Use of Pledge in Pakistan:

 Common in banking (loans against gold, shares, goods).

 Used in trade and commerce (warehouses, export finance).
 Law applied by civil courts under the Contract Act, 1872.

�Difference Between Bailment & Pledge:

Feature Bailment Pledge

Purpose For safekeeping, repair, etc. As security for loan or promise
Rights to Sell Not allowed Allowed (with notice)
Consideration May or may not involve payment Always involves a loan/promise

�Contract of Agency – According to Pakistani Law (Contract Act,

1872)
�Definition (Section 182):

Agent: A person employed to do any act for another or to represent another in dealings with third persons.
Principal: The person for whom such act is done.

In short, a contract of agency is a legal relationship where one person (agent) acts on behalf of another
(principal) to create legal obligations with a third party.

� Simple Example:

If Mr. A hires Mr. B to sell his car, Mr. B is the agent and Mr. A is the principal. Mr. B can deal with
buyers on A’s behalf.

�Essentials of a Contract of Agency:

1. Mutual consent between agent and principal.

2. The agent must act on behalf of the principal.
3. The agent must have the authority to act (express or implied).
4. The agent’s acts must affect legal rights and obligations of the principal.
5. No need for consideration (unlike other contracts).
�� Types of Agents (Under Contract Act, 1872)
1. General Agent

 Has authority to do all acts relating to a particular business or profession of the principal.
 Example: Manager of a shop.

2. Special Agent

 Appointed for a specific task or for a limited time.

 Example: An agent appointed to sell a particular property.

3. Universal Agent

 Has broad authority to act on behalf of the principal in all matters.

 Rare in practice, often includes power of attorney.

4. Commission Agent

 Buys or sells goods for the principal and earns a commission.

 Often seen in import/export businesses.

5. Broker

 Arranges contracts between buyers and sellers but does not possess the goods.
 Common in real estate and stock trading.

6. Factor (Mercantile Agent)

 Has possession of goods and authority to sell or pledge them.

 Can bind the principal by acting in the course of business.

7. Del Credere Agent

 A special type of agent who guarantees that the third party will pay.
 Takes an extra commission (del credere commission).

� Modes of Creating Agency (Sections 184–191):

1. By Express Agreement – Oral or written contract.
2. By Implied Agreement – Based on conduct or situation.
3. By Ratification (Sec 196–200) – When a principal accepts an unauthorized act done on his behalf.
4. By Necessity – In emergency situations to protect principal’s interest.
5. By Operation of Law – E.g., partners are agents of each other.

� Duties of Agent (Section 211–221):

 Obey lawful instructions of the principal.
 Act with reasonable care and skill.
  Maintain proper accounts.
 Avoid conflict of interest.
 Return any secret profits or bribes.
 Return property or money after the work is done.

� Rights of Agent:
 Right to receive remuneration/commission.
 Right of lien on principal’s property (retain until dues are paid).
 Right to be indemnified for lawful acts done.

� Termination of Agency (Section 201–210):

 By mutual agreement.
 By completion of the task.
 By revocation by principal.
 By renunciation by agent.
 By death, insanity, or insolvency of principal or agent.

� Use of Agency in Pakistan:

 Common in business, real estate, banks, insurance, logistics, and legal representation.
 Legally enforceable under civil courts using the Contract Act, 1872

�Transfer of Property – According to Sale of Goods Act, 1930

(Pakistan)

�What is "Property" in Goods?

In the Sale of Goods Act, "property" means ownership, not just possession.

Transfer of property = transfer of ownership of goods from seller to buyer.

� Key Sections:
 Section 18 to 25 of the Sale of Goods Act, 1930 deal with the transfer of property.
� Why is Transfer of Property Important?
Because once the ownership is transferred:

 The buyer becomes responsible for the goods (risk passes).

 The seller loses control over the goods.
 Legal rights (like suing for price or damages) depend on who owns the goods.

� When Does Property Pass from Seller to Buyer?

�1. In case of Specific or Ascertained Goods (Section 19–22):

Goods that are identified and agreed upon at the time of the contract.

Property passes when the parties intend it to pass.

Factors to consider:

 Terms of the contract

 Behavior of parties
 Delivery of goods

Example: If you buy a particular car (with engine number), and the deal is finalized, the ownership transfers
once conditions are met (e.g., payment, registration).

�2. In case of Unascertained Goods (Section 23):

Goods not yet separated or identified (e.g., 100 kg sugar from a larger stock).

Property passes only when goods are ascertained and appropriated to the contract (i.e., set aside and
agreed upon by both parties).

�3. In case of Goods Sent on Approval or Sale or Return Basis (Section 24):

Ownership passes when:

 The buyer gives approval or

 Does any act adopting the transaction (like reselling) or
 Retains goods beyond a set time.

�4. Reservation of Right of Disposal (Section 25):

If the seller reserves the right to keep ownership until certain conditions (like full payment) are met, then
property does not pass even if goods are delivered.
�Rights of Unpaid Seller – According to Sale of Goods Act, 1930
(Pakistan)

�Who is an Unpaid Seller? (Section 45)

A person is called an unpaid seller when:

 The whole price has not been paid or tendered.

 Or a part of the price has been lawfully withheld.

�Rights of Unpaid Seller (Sections 46 to 54)

An unpaid seller has certain legal rights to protect themselves until payment is made.

1. Right of Lien (Section 47)

 The unpaid seller can retain possession of the goods until payment is made.
 This right exists only if the seller is in lawful possession of the goods.
 Applies only if the goods are sold without delivery or if the buyer becomes insolvent.

Example: If you sell goods but the buyer hasn’t paid, you can keep the goods until they pay.

2. Right of Stoppage in Transit (Section 50)

 If the buyer becomes insolvent (unable to pay) after dispatch but before delivery, the seller can stop
the goods while in transit and regain possession.
 Applies only if the seller has shipped the goods but delivery is not yet completed.

3. Right of Resale (Section 54)

 If the buyer does not pay within a reasonable time, the unpaid seller can resell the goods.
 The seller must give notice to the buyer before resale.
 The seller can recover damages for any loss caused by the buyer’s breach.

4. Right to Sue for Price (Section 55)

 The unpaid seller can sue the buyer to recover the price if:
o The buyer has accepted the goods, or
o The goods have been lost or destroyed after the risk passed to the buyer.
5. Right to Sue for Damages for Non-Acceptance (Section 56)

 If the buyer wrongfully refuses to accept the goods, the seller can sue for damages for the loss
caused.

Summary Table of Rights:

Right When it Applies Description

Lien Seller has possession and buyer has not paid Seller can keep goods until payment
Stoppage in Transit Buyer becomes insolvent after shipment Seller can stop delivery and reclaim goods
Resale Buyer fails to pay or accept goods Seller can resell goods after giving notice
Sue for Price Buyer accepted goods or risk passed Seller can recover price through the courts
Sue for Damages Buyer wrongfully refuses to accept goods Seller can claim damages for loss

Suits for Breach of Contract – According to Pakistani Law

�What is a Breach of Contract?

A breach of contract happens when one party fails to perform their promise or obligation under a contract
without lawful excuse.

�Types of Breach:

1. Actual Breach: When a party fails to perform on the due date.

2. Anticipatory Breach: When a party clearly indicates in advance that they will not perform their
obligations.

�Legal Rights of the Aggrieved Party:

The party affected by the breach has the right to:

 File a suit for damages to recover losses caused by the breach.

 File a suit for specific performance (court orders the party to perform their contractual duties).
 File a suit for injunction (stop the party from doing something against the contract).
 Rescind (cancel) the contract and seek restitution.
�Filing a Suit for Breach of Contract:

1. Jurisdiction:
Civil courts in Pakistan have jurisdiction to hear suits relating to breach of contract.
2. Cause of Action:
The cause of action arises when the breach occurs (i.e., when the party fails to perform or refuses to
perform).
3. Limitation Period:
Usually, suits for breach of contract must be filed within 3 years from the date of breach as per the
Limitation Act, 1908.

�Types of Suits Related to Breach:

Suit Type Description

Suit for Damages Monetary compensation for losses caused by breach.
Suit for Specific Performance Court orders the defaulting party to perform contractual duties.
Suit for Injunction Court restrains a party from doing something in breach.
Suit for Rescission Contract is canceled and parties restored to original position.

Auction Sale – Explained Simply

�What is an Auction Sale?

An auction sale is a way of selling goods where items are sold to the highest bidder.

 The seller offers goods.

 Buyers place bids, each trying to offer a higher price.
 The goods go to the person who offers the highest price.
 The sale is usually finalized by the auctioneer’s “knock down” or acceptance.

�How Does an Auction Work?

1. Announcement: The auctioneer announces the item for sale.

2. Bidding: Buyers bid openly by raising hands, calling out, or electronically.
3. Highest Bid: The auctioneer keeps calling for higher bids.
4. Sale Completion: When no higher bid is offered, the auctioneer declares the sale to the highest
bidder (sometimes by knocking the hammer).
5. Contract Formation: The sale contract is made between the seller and highest bidder.

�Types of Auction Sales:

 With Reserve: The seller sets a minimum price (reserve price). If bidding doesn’t reach it, the item
may not be sold.
  Without Reserve: No minimum price; item sold to highest bidder regardless of price.

�Legal Aspects (According to Sale of Goods Act, 1930):

 The auctioneer acts as an agent of the seller.

 The contract of sale happens when the auctioneer accepts the highest bid.
 If the sale is subject to a reserve price, the auctioneer can refuse bids below it.
 Buyers can withdraw their bid before acceptance.
 If goods are withdrawn by seller after bidding, it may be considered a breach.

�Rights & Duties:

 Seller’s Rights: To receive payment from the highest bidder.

 Buyer’s Rights: To get goods after payment.
 Auctioneer’s Role: Conduct fair bidding and act honestly.

�Example in Simple Words:

Imagine a car auction. The seller wants at least 1 million rupees (reserve price). Bidders start at 800,000 and
bid higher and higher. When the bid reaches 1.2 million and no one bids higher, the auctioneer declares the
car sold to that bidder.