Business Laws

Unit 1: Business Organization

Types of Business Organization

1. 2.

3.

Proprietorship Partnership ± Make a partnership deed - Optional to register with the Registrar of Firms¶ Office which exist in each state Company ± To register with the Registrar of Companies which exist in each state (ROC) governed by the Companies Act, 1956

Various Registrations under different acts
a.

b.

c.

If sell goods which are subject to VAT, get registered with the state VAT governed by the state VAT Act If sell Services, get registered with the Central Service Tax governed by the Service Tax Act If manufacturer of Goods, apply for registration under The Central Excise Act, 1960

Registration under Income Tax Act. 75. .If make payment of fees for professional & technical services exceeding Rs. 1961 . if employees earn more than the exemption limit of income liable for tax .) .000 in a F.000 in a financial year (F. 1961 d. if liable to deduct tax at source (TDS) under sections 192 to 206 of Income Tax Act.In case of partnership once the firm starts earning income .proprietor.to register with Income Tax apply for PAN No..If make payment to contractors exceeding Rs.80. Apply for TAN No.TDS applicable. Income Tax Act. 1. 30. starts earning income .Y. etc.000 in a F.Y.000 / aggregate of payments Rs.30.Y.In case of Company once the Co. . the income of the proprietor exceeds the exemption limit of income liable for tax . 1961 applicable if in case of .If make payment of rent exceeding Rs. e.

Registrations under various other acts  The Industries (Development and Regulations) Act. 1951. Factories Act. 1999. 1992. 1999. 1949. The Minimum Wages Act.1952. The Foreign Exchange Management Act. The Banking Regulation Act. 1948. The Securities & Exchange Board of India Act. . The Export-Import Bank of India Act. 1948. The Shops & Establishments Act. 1981. The Insurance Regulatory & Development Authority Act. The Employees¶ Provident Funds & Miscellaneous Provisions Act.

1872 Essentials of a Valid Contract u/s 2(h). and are not hereby expressly declared to be void.The Indian Contract Act. Offer and Acceptance .Lawful offer & lawful acceptance resulting into an agreement . 29 and 56  u/s 2(h): An agreement enforceable by law is a contract  u/s 10: All agreements are contracts if they are made by the free consent of parties competent to contract. for a lawful consideration and with a lawful object.Lawful means the offer & acceptance must satisfy the requirements of the Contract Act . 3 to 18. 1.

Intention to create legal relations .Intention among the parties that the agreement must be attached by legal consequences & create legal obligations .Case of Balfour vs.In commercial agreements an intention to create legal relations is presumed unless parties to the agreement expressly resolve that the intention is not to create legal obligations .2. Balfour .Agreements of social nature do not create legal relations .

is not immoral f.3. it is not forbidden by law b. does not defeat the provisions of any law c. does not involve/imply injury to the person/property of another e. is not fraudulent d. Lawful Consideration - - - Presence of consideration Consideration is the price paid by one party for the promise of the other Each of the parties to it gives something and gets something Consideration may be an act (doing something) or forbearance (not doing something) u/s 23 Consideration is lawful if a. is not opposed to public policy .

Capacity of Parties - - The parties to an agreement must be competent to contract otherwise it cannot be enforced by a court of law u/s 11 Every person is competent to contract who is: a. not disqualified from contracting by any law to which he is subject. . of the age of majority b. of sound mind c.4.

A says that land is fertile believing it to be true but without verifying it. Free Consent i) ii) iii) iv) i) U/S 13 Consent means that the parties must have agreed upon the same thing in the same sense u/s 14 There is absence of µfree consent¶ if the agreement is induced by Coercion (u/s 15) Undue Influence (u/s 16) Fraud (u/s 17) Misrepresentation (u/s 18) a statement of fact made innocently/ believing it to be true to induce the other party to enter into contract For e. B purchases the land and the land turns out to be non-fertile Mistake .5.g. A wants to sell land to B.

is not opposed to public policy . does not involve/imply injury to the person/property of another e. Lawful Object - u/s 23 Object is lawful if a. does not defeat the provisions of any law c.If a landlord knowingly lets a house to carry out illegal activities. is not immoral f. it is not forbidden by law b. the object is unlawful .6. is not fraudulent d.

must be in writing and registered . Writing & Registration - - A contract may be oral/in writing But. where under any other act. it must be in writing or/and registered it must be done so u/s 25 Agreement without consideration/ promise to compensate for something done or promise to pay a debt barred by limitation law. it is laid down that for the agreement to be valid.7.

Not expressly declared Void u/s 24-30 - . physically/legally A agrees with B to discover treasure by magic 10.8. this is uncertain since the type of oil is not specified 9. Possibility of performance Agreement must be capable of performance The act must not be impossible in itself. Certainty The terms of the agreement must not be vague/uncertain It must be possible to ascertain the meaning of the agreement A agrees to sell B a hundred tons of oil.

* u/s 19 & 19A Such contract is voidable at the option of the aggrieved party if The option is exercised within a reasonable time and Before the rights of third parties intervene . 56  - i) Voidable Contract u/s 2(i) An agreement which is enforceable by law at the option of one or more of the parties thereto. 19 to 30.Void and Voidable Contracts and Void Agreements u/s 2(i). is a voidable contract A contract becomes voidable * When the consent of one of the parties to the contract is obtained by coercion. undue influence. misrepresentation or fraud a. but not at the option of the other or others. 36. 32. b.

but fails to do it. A is ready & willing to execute the work but B prevents iii) u/s 55 When a party to the contract promises to do a certain thing within a specified time. and the intention of the parties was that. time should be of the essence of the contract .) ii) u/s 53 When a contract contains reciprocal promises and one party to the contract prevents the other from performing his promise * A contracts with B to whitewash B¶s house.Voidable Contract (Contd.

Consequences of rescission of Voidable Contract i) ii) u/s 64 When a person at whose option a contract is voidable rescinds it. he must restore such benefit to the person from whom it was received . the other party need not perform any promise therein contained in which he is a promisor If the party rescinding a voidable contract has received any benefit from another party to such contract.

but after its formation it becomes invalid because of: Supervening impossibility (u/s 56) * Performance is impossible after the formation of the contract * A & B contract to marry. 1. but before marriage.650 per bag. A goes mad Subsequent illegality (u/s 56) A agrees to sell B 100 bags of wheat at Rs.Void Contract - - a) b) Void means not binding in law u/s 2(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable A void contract is valid and binding on the parties. when originally entered. Govt. Before delivery. bans private trading in wheat .

1.Reasons of Valid Contract becoming Void (Contd.000 as loan to B. if B marries C. C dies without being married to B . the contract becomes void u/s 32 In the case of a contract contingent on the happening of an uncertain future event.) c) d) Repudiation of a voidable contract If the party at whose option the contract is voidable exercises the option. if that event becomes impossible A contracts to give Rs.

Void Agreement - - - - i) u/s 2(g) An agreement not enforceable by law is said to be void It is void ab-initio i. such an agreement is no agreement from the beginning There is absence of one or more essential elements of a valid contract except that of free consent Distinction between Void Agreement & Void Contract Void agreement is void ab-initio while a void contract is valid when entered into .e.

3. 5.Void Agreements 1. u/s 11 Agreements by a minor or a person of unsound mind u/s 20 Agreements made under a bilateral mistake of fact material to the agreement u/s 23 Agreements of which the consideration/ object is unlawful u/s 24 Agreements of which the consideration/ object is unlawful in part and the illegal part cannot be separated from the legal part u/s 25 agreements made without consideration . 2. 4.

Expressly declared Void Agreements 1.g. i) Agreement in restraint of Marriage u/s 26 Eg. Restraint is unreasonable and so the agreement is void . A sells the goodwill of his business to B & promises not to carry on similar business anywhere in the world. A agrees with B that she will not marry C Agreement in restraint of Trade u/s 27 Eg. A agrees to close his business Exceptions: Sale of Goodwill The seller of goodwill of a business can be restrained from carrying on a similar business within specified local limits provided the restraint is reasonable in point of time and space e. 2.

if the restrictions imposed are reasonable Among the partners upon/in anticipation of the dissolution of the firm that some/ all of them will not carry on a business similar to that of the firm within a specified period/within specified local limits. b. if the restrictions imposed are reasonable Between any partner and the buyer of the firm¶s goodwill that such partner will not carry on any business similar to that of the firm within a specified period/within specified local limits. d. Partner¶s agreements Partners can be restrained if there is an agreement: Among the partners that a partner shall not carry on any business while he is a partner By a partner with his other partners that on retiring from the partnership he will not carry on any business similar to that of the firm within a specified period/within specified local limits.Exceptions to agreements in Restraint of Trade (Contd.) ii) a. c. if the restrictions imposed are reasonable .

if an agreement attempts to create a monopoly.) * But.g. Vs Bombay Ice Co. not to sell their goods below a certain price (Fraser & Co.Exceptions to agreements in Restraint of Trade (Contd. it is void .) iii) Trade Combinations * An agreement. to regulate the business is valid * Agreements in the nature of a business combination between traders/manufacturers e.

an agreement of service which restricts occupation for some period. is void (Brahamputra Tea Co. Vs Scarth) . after the termination of service.) iv) Negative stipulations in service agreements * An agreement of service by which a person binds himself during the term of the agreement. not to take service with anyone else. is valid * But.Exceptions to agreements in Restraint of Trade (Contd.

) Agreements in restraint of Legal Proceedings u/s 28 Following agreements are void i) An agreement by which a party is restricted from taking legal proceedings.Expressly declared Void Agreements (Contd. . in respect of any rights arising from a contract Exceptions (a) Does not affect the law relating to arbitration (b) Does not affect an agreement whereby parties agree not to file an appeal in a higher court (c) Does not prevent the parties to a contract from selecting one of the two courts which are equally competent to try the suit 3.

Insurance companies cannot insist that suits for claims be brought within a period of time shorter than the period provided under the Limitation Act.Agreements in restraint of Legal Proceedings (Contd. A & B contract that either party can sue for breach within a year of breach.g. The clause is void because the time allowed by the Limitation Act is three years iii) An agreement which provides for forfeiture of any rights arising from a contract. E. otherwise all benefits under the policy shall be forfeited .g.) ii) An agreement which limits the time within which one may enforce his contract rights. without regard to the time allowed by the Limitation Act E. without regard to the time allowed by the Limitation Act. if suit is not brought within a specified period.

Wagering Agreements u/s 30 Wager means a bet.) 4.Expressly declared Void Agreements (Contd. Uncertain Agreements u/s 29 An agreement to enter into an agreement in future is void for uncertainty unless all the terms of the proposed agreement are agreed clearly 5.500 to be awarded to the winner of any horse race . something stated to be lost/won on the result of a doubtful issue Exception Prize amounting to >= Rs.

Commercial transactions * Agreements for sale & purchase of any commodity/share market transactions. then the effect is that persons running the lottery are not guilty of criminal offence but such agreements are void because they are wager . e.Special cases whether wager/not a. the transaction is a wager Lotteries * It is a wager * Sometimes lottery is authorised by Govt. b. with a genuine intention to give & take delivery of goods/shares are not wagering agreements * If parties only want to gamble on the rise/fall of the market by paying/receiving the difference in prices only.g Maharashtra & Gujarat.

000 they are wagers as per the provisions of the Prize Competition Act. but. 1.Special cases whether wager/not (Contd. Crossword Puzzles * When prizes depend upon a chance. if such prizes exceed Rs. it is not a wager. Insurance Contracts Valid contracts because: i) They are entered to protect the interest of the holder of the policy but in wagering there is no interest to protect but only a means to make some easy money ii) Insurance contracts are based on scientific calculation of risks whereas wagering agreements are a gamble without any scientific calculation of risks iii) Insurance contracts are beneficial to the public whereas wagering agreements do not serve any useful purpose . 1955 d.) c. it is a lottery and so a wager * if prizes depend upon skill & intelligence.

000 as a loan if B marries A¶s daughter C. 7.Expressly declared Void Agreements (Contd. But. A agrees to pay B Rs.g. C was dead at the time of agreement. if an impossible event happens are void e. 1.) 6. Agreements contingent on impossible events u/s 36 Contingent agreements to do/ not to do. Agreements to do Impossible Acts u/s 56 .

no such obligation arises if A pays Rs. if the agreement is known to be void when entered into. the money cannot be recovered * Nothing can be recovered in the case of expressly declared void agreements except for: u/s 20 In the case of an agreement caused by bilateral mistake of essential fact restoration is allowed since agreement is not known to be void but is discovered to be void In the case of an agreement with a minor who commits fraud by misrepresenting his age restoration is allowed i) ii) . to the person from whom he received it when An agreement is discovered to be void * But.Obligation of person receiving advantage under Void Agreement/Void Contract a) u/s 65 the person is bound to restore the advantage received/make compensation for it.000 to B to murder C. 10.

his legal representatives can enforce performance .Performance of Contracts It means fulfilling of their respective legal obligations created under the contract by both the promisor and the promisee  Who can demand Performance . 1. B can demand performance and not C  .E.000.In case of death of the promisee. A promises B to pay C a sum of Rs.Only the promisee can demand performance .g.A third party cannot demand performance of the contract even if it was made for his benefit .

By whom Contracts must be Performed 1. 3. e. the liability of performance falls on his legal representatives but their liability is limited to the estate of the deceased which has come to their hands By a third person u/s 41 If a promisee accepts performance of the promise from a third person. 4.g. the promisor must himself perform By the promisor/ his agent u/s 40(2) In the case of impersonal contract. the promisor/his agent may perform By the legal representatives u/s 37(2) In the case of death of the promisor before performance. promisee cannot then enforce it against the promisor . a contract to paint a picture. 2. By the promisor himself u/s 40 Contract involving personal skill. taste or credit.

3000.g. A. All promisors must jointly fulfill the promise 2.Any one or more of joint promisors may be compelled to perform u/s 43 because the liability of the joint promisors is joint and several.Performance of Joint Promises Who can demand Performance u/s 45 When a promise is made to several persons jointly. D may compel either A/B/C/All/Any two to pay  . B and C jointly promise to pay D Rs. the right to claim performance rests with all the promisees jointly & a single promisee cannot demand performance  By whom Joint Pomises must be performed u/s 42 to 44 Rules 1. but the liability in case of Co-heirs is joint and not several because they are not joint promisors E. .

his liability to the promisee ceases but does not discharge the other joint promisors from their liability.) 3.By whom Joint Pomises must be performed u/s 42 to 44 (Contd. Right of contribution inter-se between joint promisors If one of several joint promisors are made to perform. the remaining joint promisors must bear the loss arising from such default in equal shares Effect of release of one joint promisor u/s 44 If one of the joint promisors is released from his liability by the promisee. 5. 4. neither does it free the joint promisors so released from his liability to contribute to the other joint promisors . he may require equal contribution from the other joint promisors Sharing of loss by default in contribution If any joint promisor makes default in making contribution.

Assignment of contracts   1. taste or credit cannot be assigned The obligations under a contract cannot be assigned except with the consent of the promisee Assignment of a claim to any debt/ beneficial interest in movable property to be complete & effectual must be made by an instrument in writing Assignment by operation of law takes place in case of death upon his heirs and in case of insolvency upon the Official Assignee/Receiver . 3. Means transfer of contractual rights & liabilities to a third party Rule Contracts involving personal skill. 2. 4.

from 1st April till the date of payment. A promises to deliver goods to B on 10th April & B promises to pay the price in advance on 1st April and on default to pay interest @ 15% p.g.a. B need to perform first but even if B does not perform. A must perform & then claim for price & damages . they must be performed in the order of the nature of the transaction u/s 52 E.Order of performance of Reciprocal Promises (u/s 51 to 54)    1. So. - - Promises which form the consideration for each other are reciprocal promises There is an obligation on each party to perform his own promise & to accept performance of other¶s promise Three types of reciprocal promises & rules for order of performance: Mutual & Independent Where each party must perform his promise independently without waiting for the performance of the other Promises must be performed in the order expressly fixed by the contract & where it is not fixed.

) 2. 4.g. - 3. Mutual and Dependent Where the performance of the promise by one party depends on the prior performance of the promise by the other party u/s 54 if the promisor who is required to perform his promise first does not perform.Types of Reciprocal Promises (Contd. A & B contract that A shall deliver goods to B to be paid for by B on delivery Consequences where a party prevents performance (u/s 53) the contract becomes voidable at the option of the party so prevented . such promisor cannot claim the performance of the reciprocal promise Mutual & Concurrent Where the two promises are to be performed simultaneously u/s 51 the promisor need not perform unless the promisee is ready & willing to perform his reciprocal promise E.

at godown/shop & not at a public meeting/ fair  .Time & Place of Performance u/s 46 to 50 & 55 Where prescribed by the promisee at the specified time & place  Where not prescribed by the promisee then the contract must be performed a) Within a reasonable time on a working day & within the usual hours of business b) At proper place e.g.

and can claim compensation for loss caused by the delay But if the delay is beyond a reasonable time the contract will become voidable by promisee In case of a voidable contract if the promisee accepts the delayed performance. 3. Rules u/s 55 Where ³time is of the essence of the contract´ the contract becomes voidable at the option of the promisee The promisee may rescind the contract & sue for the breach Where ³time is not the essence of the contract´ the promisee has to accept the delayed performance. he cannot later claim compensation for loss due to delay .Efffect of failure to perform a contract within the stipulated time  1. 2.

When time. is the essence of the contract i) ii)  If the parties expressly agree If the nature of transaction and the intention of parties was such Normally in commercial contracts the time of delivery of goods is the essence of the contract but not the time of payment of price Mode of performance The promisor must perform as per the terms of the contract/ instructions from the promisee .

5. 2. payment shall be applied proportionately When principal & interest both due to be applied towards interest first . order of time need to be followed If debts are of equal standing.Appropriation of Payments  1. otherwise he must refuse to accept the payment: Debtor¶s express instructions must be followed Debtor¶s implied intention must be followed Appropriation by Creditor If there is no express/implied directions by the debtor. creditor may appropriate to any debt Appropriation by Law Where debtor/creditor has not appropriated. 4. When a debtor owes several debts to the same creditor & if the creditor accepts the payment. 3. he must follow the rules for appropriation as follows.

Contracts which need not be performed   If parties to a contract agree to Novation. change of terms u/s 64 When a person at whose option a contract is voidable rescinds it. the other party need not perform his promise . Rescission or Alteration * Original contract disappears & is substituted by a new contract * Novation . new parties * Rescission ± Cancellation of old contract * Alteration ± Same party.Same contract.

Breach of a Contract     Breach of contract is a method of discharge of a contract The contract stands terminated Breach brings an end to the obligations created by a contract on the part of each of the parties The aggrieved party can sue for damages for breach of contract as per law .

The promisor promises to sell a particular horse to promisee but before the due date of performance sells it to another person (1) .Kinds of breach of contract Anticipatory Breach Breach occurring before the time fixed for performance taking place in two ways: (i) Expressly by words spoken/written Promisor communicates intention not to perform before the due date of performance Such declaration must be absolute & unconditional & not a probability to perform/not (ii) Implied by the conduct of one of the parties .

Effect of an Anticipatory Breach When there is an anticipatory breach of contract the promisee need not perform  The promisee has the option: i) to treat the contract as cancelled & sue the other party for damages immediately without waiting till the due date of performance known as The Doctrine of Anticipatory Breach  Exception to the doctrine: Does not apply to contracts for the payment of debt Suppose the payment of debt is 2 months & the promisor conveys that he is not able to make the payment. the promisee cannot sue immediately but need to wait for the due period  .

There is an anticipatory breach.) ii) Not to treat the contract as cancelled & wait for the due date of performance and then sue . If B would have exercised the option to cancel the contract after 10th february but before the house is destroyed by fire.50. B could claim damages but after the house is destroyed by fire & the contract gets cancelled due to this supervening impossibility.In this case the contract shall be kept alive for the benefit of the promisor & the promisee The guilty party may reconsider & perform & take the advantage of any supervening imposibility which may discharge the contract A agrees to sell his house to B for Rs. 8. But on 10th February informs B that he will not sell his house. Later on the house is destroyed by fire.Option to promisee (Contd.000 on 1st of March. there can be no damages .

Actual Breach   When a party fails to perform his obligation upon the date fixed for performance by the contract Entitles the aggrieved party to cancel the contract & sue for damages for breach of contract .

Remedies for Breach of Contract 1. Suit for Damages Damages are monetary compensation allowed to the injured party for the injury suffered .The injured party may cancel the contract. not perform his part of obligation & may sit quiet/ sue the party for damages 2.

Assessment of damages  i) ii) iii) - Kinds of damages Ordinary damages are damages arising normally from the breach Special damages are decided at the time of contract by the parties Exemplary damages are awarded to punish the guilty party for the breach & not by way of compensation for the loss suffered by the aggrieved party Exemplary damages have no place in the law of contract & are not recoverable for a breach of contract .

greater the damage¶ according to the status of the party c) When any person gives any bond for the performance of any public duty iv) Nominal damages a) .Exemption : Exemplary Damages can be claimed Breach of a contract to marry b) Dishonour of a cheque by a banker when there are sufficient funds to the credit of the customer The rule of ascertaining damages is µsmaller the cheque.

3. Damages are awarded as compensation for the loss suffered by the aggrieved party & not for punishing the guilty party for the breach The aggrieved party can recover only the actual loss suffered arising naturally in the usual course known as ordinary damages Case of Hadley vs. 2. price at the date of breach Special damages are not allowed until they are in the knowledge of both the parties at the time of entering into the contract . Baxendale In the case of contract for µsale & purchase¶ damages would be assessed on the difference between the contract price & the mkt.Rules regarding the Measure of Damages 1. 4.

it should not exceed the amount mentioned in the contract It is the duty of the injured party to use all reasonable means of avoiding the damage The injured is entitled to get the costs of filing suit and order for damages from the defaulter Stipulation regarding payment of interest A stipulation of increased interest from the date of default may be a stipulation by way of penalty and so disallowed if the rate is very high . 7.Rules of measure of damage 5. the court will allow only reasonable compensation to cover the actual loss. 6. Even if the parties fix up in advance the sum payable as damages . 8.

the nature of the contract and other circumstances . 2. only reasonable interest is allowed Payment of compound interest on default is allowed only if it is reasonable Earnest Money Deposit (EMD) Money deposited as security for the due performance of a contract Cancellation of EMD is allowed if the amount is reasonable Reasonable means.  - Rules: Unless specifically mentioned for the payment of interest . proportion of the EMD which bears to the total sale price. 3. interest cannot be recovered as damages If mentioned.Payment of interest  1.

3. or the contract is discovered void or becomes void . Suit upon Quantum Meruit u/s 65 & 70   Quantum Meruit means ³as much as is earned´ / ³in proportion to the work done´ A right to sue upon quantum meruit arises where after part performance of the contract by one party. there is a breach of contract.

After a part is constructed A prevents B from working b. But if the payment is lumpsum then no quantum meruit  .Quantum Meruit (Contd. the house is destroyed. Where work has been done in pursuance of a contract which is discovered void provided the contract is divisible A contracts with B to repair his house at a piece rate. After part of repairs.) Aggrieved party may file a suit upon quantum meruit: a. Where contract is discharged by the default of guilty A engages B to build a three storied house.

a trader leaves certain goods at B¶s house by mistake. When a person enjoys benefit of non-gratuitous act A. He is bound to pay A for them.) c.Quantum Meruit (Contd. d. B treats the goods as his own. A party who is guilty of breach of contract may sue on a quantum meruit if (a) The contract is divisible (b) The other party must have enjoyed the benefit of the part which has been performed .

Quantum Meruit (Contd.)
A carrier fails to take the complete consignment to the agreed destination, he may recover pro-rata freight Suit for Specific Performance means the actual carrying out of the contract granted only where just & equitable Usually granted in contracts connected with land, buildings, rare articles & unique goods having special value In such a case money is not an adequate relief because there is no substitute

4. -

-

Suit for Specific Performance (Contd.)
a.

b.

c.

not granted where Monetary compensation is an adequate relief Where the court cannot supervise the actual execution of the contract e.g. a building construction contract Where the contract is for personal service e.g. a contract to marry

5. 

Suit for an injunction 



Injunction is an order of a court restraining a person from doing a particular act Order not to do what he promised not to do A agreed to sing at B¶s theatre and sing for no one else. But A contracted to sing at somebody else¶s (Lumley vs, Wagner)

implies a promise imposing obligation on the one party & conferring a right in favour of the other Such obligation imposed by law are QuasiContracts Based on the doctrine of unjust enrichment . no consent & no intention of the parties to enter into a contract but from the conduct & relationship of the parties. no acceptance.Quasi-Contracts u/s 68 to 72    Contracts where there is no offer.

Doctrine of Unjust Enrichment   A person shall not be allowed to enrich unjustly at the expense of others Duty & not a promise or agreement is the basis of such contracts .

Quasi-contractual obligations: Claim for necessaries supplied to an incapable person or on his account u/s 68 . the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person 1. . is supplied by another person with necessaries suited to his condition.If a person incapable of entering into a contract/ anyone whom he is legally bound to support.

Claim for necessaries by incompetent person (Contd.) - - Only the estate is liable The things supplied must be necessaries Necessaries must be supplied only to incompetent person/ one whom he is legally bound to support Liable to pay a reasonable price .

Reimbursement of person paying money due by another in payment of which he is interested u/s 69  i) ii) iii) Conditions: The plaintiff should be interested in making the payment to protect his own interest & the payment should not be voluntary The payment must be such as the other party was bound by law to pay The payment must not be such as the plaintiff himself was bound to pay A sub-tenant pays the arrears of rent due by the tenant to the landlord to save the tenancy from forfeiture .2.

Obligation of person enjoying benefit of non-gratuitous act u/s 70   a. b. the latter is bound to make compensation to the former Conditions: The thing must have been done lawfully in good faith The thing must have been done by a person not intending to act gratuitously The person for whom the act is done must have enjoyed the benefit of it . not intending to do so gratuitously and such other person enjoys the benefit thereof. c.3. or delivers anything to him. Where a person lawfully does anything for another person.

c.4. Duties of finder of goods: Must try to find the real owner & hand over Must not appropriate the property to his own use Till the goods are in possession of the finder. Responsibility of finder of goods u/s 71  a. b. he must take due care as if they were his own .

b. c.Rights of finder of goods: a. i) ii) Till the true owner is found he can retain the goods Entitled to receive from the owner all expenses incurred for preserving the goods & finding the true owner Entitled to sell the goods if the owner is not found /if he refuses to pay the lawful charges of the finder when: The goods are perishing or When the lawful charges of the finder amount to at least 2/3rd of the value of goods found .

) The true owner is entitled to get the balance of sale proceeds if there is surplus after meeting the lawful charges 5. Liability of person to whom money is paid or thing delivered by mistake/ under coercion u/s 72 .person must repay/return it  .Responsibility of finder of goods (Contd.

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