INDIAN CONTRACT ACT,1872

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INDIAN CONTRACT ACT 1872 sanjeev mishra invertis-bareilly mba-c:

INDIAN CONTRACT ACT 1872 sanjeev mishra invertis-bareilly mba -c 3/8/2011 THE INDIAN CONTRACT ACT,1872 1

DEFINITIONS:

DEFINITIONS U/S-2(a) PROPOSAL or OFFER :- When one person signifies his willingness to do or to abstain from doing anything, with a view to obtain the assent of that other to such act or abstinence, he is said to make a proposal. U/S-2(b) –PROMISE: -When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal ,when accepted becomes a promise. 3/8/2011 2 THE INDIAN CONTRACT ACT,1872

KINDS OF OFFER:

KINDS OF OFFER 1.According to mode of communication Express offer: when an offer is put in words. Implied offer: inferred from the conduct . 2.On the basis of offerees : Specific offer-to a particular person. General offer-to the public at large generally. 3/8/2011 THE INDIAN CONTRACT ACT,1872 3

Cont..:

Cont.. 3. on the basis of nature Cross offer: when two persons without having the knowledge of other’s offter made to each other identical offers. Counter offer: when an offer is accepted on the terms or on conditions, it is not an acceptance but a counter offer. Standing offer: a standing offer is an offer which is open for aceptance over a period of time. This offer is also called continuing offer or open offer 3/8/2011 THE INDIAN CONTRACT ACT,1872 4

DEFINITIONS:

DEFINITIONS U/S-2(C ) PROMISOR AND PROMISEE :-The person making the proposal is called the promisor . And the person accepting the proposal is called the promisee or ( offeror and oferee ) U/S-2 (e):AGREEMENT: - Every promise and every set of promises ,forming the consideration for each other,is an agreement . 3/8/2011 5 THE INDIAN CONTRACT ACT,1872

Cont…………..:

Cont………….. U/S-2 (h)-CONTRACT: -A contract is an agreement enforceable by law. Thus for the formation of a contract: 1.There must be an agreement. 2.Agreement must be enforceable by law. So we can summarise as: “A CONTRACT IS AN AGREEMETN,AN AGREEMENT IS A PROMISE AND A PROMISE IS AN ACCEPTED PROPOSAL.” 3/8/2011 6 THE INDIAN CONTRACT ACT,1872

agreement:

agreement According to sir William Anson “A legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearances on the part of the others” According to Salmond “ A contract is an agreement creating and defining obligations between the parties.” 3/8/2011 THE INDIAN CONTRACT ACT,1872 7

Cont……:

Cont…… u/s-(d) Consideration :- 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 to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise. Essential rules of consideration: a. Consideration must be at the desire of the promisor b. Its not necessary to benefit oneself only c. It may be given by the promisee or any other person 3/8/2011 8 THE INDIAN CONTRACT ACT,1872

Cont..:

Cont.. but when it is given by third party he will entitled to get the benefit only when he is a party because “ stranger to consideration can sue but a stranger to the contract cannot sue” d. It may be act or abstinence or promise. e. It may be: i . Past. ii. Present or executed iii. Future or executory 3/8/2011 THE INDIAN CONTRACT ACT,1872 9

Cont.:

Cont. f. Consideration need not to be adequate g. It must be real, not fanciful or illusory h. It must not be unlawful i . It must be certain j. It should not be impossible 3/8/2011 THE INDIAN CONTRACT ACT,1872 10

Without consideration. :

Without consideration. Agreements without considerations are void but under the following circumstances an agreement may be without consideration. NATURAL LOVE AND AFFECTION 1. If an agreement is made a.In writing and registered b.Made on account of natural love and affection between parties standing in near relations. 3/8/2011 THE INDIAN CONTRACT ACT,1872 11

FOR PAST ACT.:

FOR PAST ACT. 2.A promise for the act done in past a. The act must have been already done b. The act should have been done voluntarily. c. The act should be done to the promisor . d. Promisor so promises to compensate in whole or in part. 3/8/2011 THE INDIAN CONTRACT ACT,1872 12

TIME BARRED DEBT:

TIME BARRED DEBT 3. Past debt; a.Promise was made in writing and registered b.Promise to pay whole or in part a debt of which the creditor might have taken but unable to do so due to the limitations of suits. 3/8/2011 THE INDIAN CONTRACT ACT,1872 13

Cont……….:

Cont………. u/s-2 (f) Reciprocal promises: - Promises which form the consideration for each other are called reciprocal promises. u/s-2(g)-Void Agreement: - An agreement not enforceable by law is said to be void. u/s-2( i ) voidable contract: -An agreement which is enforceable by law at the option of one or more of the parties thereto,but not at the option of the other is voidable contract. u/s-2(j)void contract: - A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. 3/8/2011 14 THE INDIAN CONTRACT ACT,1872

COMPLETION OF COMMUNICATION:

COMPLETION OF COMMUNICATION The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. Example: A proposes to sell a house to B at Rs.5 lac by letter.The communication of the proposal is complete when B receives the letter. 3/8/2011 15 THE INDIAN CONTRACT ACT,1872

Communication of acceptance:

Communication of acceptance The comm.of an acceptance is comlete As against the proposer,when it is put in a course of transmission to him so as the become out of the power of the acceptor. As against the acceptor,when it comes to the knowledge of the proposer. Example: B accepts the proposal sent by A by post.The comm.of acceptance is complete As against A when the letter is posted. As against B when A receives the letter. 3/8/2011 16 THE INDIAN CONTRACT ACT,1872

CON…:

CON… Revocation of proposals 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. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. 3/8/2011 17 THE INDIAN CONTRACT ACT,1872

Example:

Example A proposes to sell his house to B by a letter. B receives the proposal letter and accepts it by sending a letter of acceptance by post. A may revoke his proposal 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. 3/8/2011 18 THE INDIAN CONTRACT ACT,1872

How revocation to be made:

How revocation to be made By the notice to the other party. By the lapse of the prescribed time. By the failure of fulfilling conditions. By the death or insanity of the proposer,if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. 3/8/2011 19 THE INDIAN CONTRACT ACT,1872

WHAT AGGREMENTS ARE CONTRACTS.:

WHAT AGGREMENTS ARE CONTRACTS. ALL AGREEMENTS ARE CONTRACTS OF THEY ARE MADE 1.By free consent of the parties. 2.Parties are competent to contract. 3.For lawful Consideration. 4.Object is lawful. 5.Not declared to be void. 3/8/2011 20 THE INDIAN CONTRACT ACT,1872

Essential elements of a valid contract:

Essential elements of a valid contract Two or more parties. Offer and acceptance Lawful consideration Intention to create legal relationship Capacity of parties Free consent Lawful object Agreement not declared to be void. Certain and possibility of performance. 3/8/2011 THE INDIAN CONTRACT ACT,1872 21

Consent u/s-13:

Consent u/s-13 Two or more person are said to consent when they agreed upon the same thing in the same sense. CONSENSUS AD IDEM 3/8/2011 22 THE INDIAN CONTRACT ACT,1872

Free consent-u/s-14:

Free consent-u/s-14 A consent is said to be free when it is not caused by COERCION as defined in sec-15 UNDUE INFLUENCE as defined in sec-16 FRAUD as defined in sec-17 MISREPRESENTATION as defined in sec-18 MISTAKE as given in sec-20,21,22. 3/8/2011 23 THE INDIAN CONTRACT ACT,1872

Competency or capacity to contract:

Competency or capacity to contract u/s-11 Every person is competent to contract who is 1. of the age of majority according to law in existence. 2. of sound mind 3. and not disqualified by law for the time being in forece . 3/8/2011 THE INDIAN CONTRACT ACT,1872 24

Persons of unsound mind:

Persons of unsound mind u/s-12 A person is said to be of sound mind for the purpose of making a contract if at the time when he makes it, he is capable of contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interest. A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. A person who is usually of unsound mind, but occasionally of sound mind, may not make a contract when he is of unsound mind. 3/8/2011 THE INDIAN CONTRACT ACT,1872 25

Coercion u/s-15:

Coercion u/s-15 Coercion is the committing or threatening to commit any act forbidden by the IPC.or the unlawful detaining or threatening to detain, any propertyto the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. e.g. A,a wife said to her husband to execute the property of house to her brother’s name if he does not do so she will commit suicide. Husband execute.This agreement of execution is not freely consented due to coercion. 3/8/2011 26 THE INDIAN CONTRACT ACT,1872

UNDUE INFLUENCE-u/s-16:

UNDUE INFLUENCE-u/s-16 A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. One person is deemed to be in a position of dominating the will of other --where one has real or apparent authority over the other or where one is in fiduciary relationship with other. --where one makes a contract with another whose mental condition is affected by age,illness,distress.etc . 3/8/2011 THE INDIAN CONTRACT ACT,1872 27

examples:

examples A being in debt to B, the money lender of his village, contracts a fresh loan on terms which appear to be inconscionable . It lies on B to prove that the contract was not induced by undue influence. A goes to B to to have some money. But at that time there is stringency in the market ,so B declines to give money to him except on high rate of interest.A accepts this.This transaction is in the ordinary course of business and the contract is not induced by undue influence. 3/8/2011 THE INDIAN CONTRACT ACT,1872 28

FRAUD:

FRAUD Fraud means and includes any of the following acts Committed by a party to contract or with his connivance or by his agent, with intent to deceive another party thereto or his agent, or to induce, him to enter into the contract. 1.The suggestion, as a fact,of that which is not true , by one who does not believe it to be true. 2.The active concealment of a fact by one having knowledge or belief of the fact 3/8/2011 THE INDIAN CONTRACT ACT,1872 29

Cont…:

Cont… 3.A promise made without any intention of performing it 4.Any other act fitted to deceive. 5. Any other act which law specially so declares. Explanation:- Mere keeping silence to the fact is not a concealment amounted to fraud untill there is not a duty to speak or to reply. Examples:-- A sells by auction a horse which A knows to be of unsound of mind. A says nothing to B about the horse. This is not a fraud. 3/8/2011 THE INDIAN CONTRACT ACT,1872 30

Examples:

Examples B is a daughter of A and has just come of age. Here,the relation between the parties would make it A’s duty to tell B if the horse is unsound. B says to A ‘if you do not deny. I shall assume that the horse is sound” A said nothing. Here,A’s silence is equivalent to speech. A and B being trader,enter upon a contract. A has private information of a change in price which would affect B’swillingness to proceed with the contract. A is not bound to inform. 3/8/2011 THE INDIAN CONTRACT ACT,1872 31

MISREPRESENTATION:

MISREPRESENTATION Misrepresentation means and includes 1.The positive assertion, in a manner not warranted but the information of the person making it, of that which is not true, though he believes it to be true. 2.Any breach of duty which without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of anyone claiming under him 3.Causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement. 3/8/2011 THE INDIAN CONTRACT ACT,1872 32

MISTAKES:

MISTAKES WHEN BOTH PARTIES ARE UNDER MISTAKE AS TO MATTTER OF FACT Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. But merely an erroneous opinion as to the value of the thing which forms the subject matter of the agreement is not to be deemed a mistake as to a matter of fact. 3/8/2011 THE INDIAN CONTRACT ACT,1872 33

Examples:

Examples A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void. A agrees to sell to B specific good supposed to be on its way from Delhi to Bareilly, But before the time of bargaining the goods were fired 3/8/2011 THE INDIAN CONTRACT ACT,1872 34

Cont…:

Cont… EFFECT OF MISTAKES AS TO LAW : A contract is not voidable because it was caused by a mistake as to any law in force in India; but a mistake as to a law not in force in India has the same effect as a mistake of fact. EFFECT OF MISTAKES AS TO MATTER OF FACT OF ONE PARTY: A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact. 3/8/2011 THE INDIAN CONTRACT ACT,1872 35

3.LAWFUL OBJECT & LAWFUL CONSIDERATION:

3.LAWFUL OBJECT & LAWFUL CONSIDERATION If It is not forbidden by law. It is permitted it does not defeat the provision of law. It is not fraudulent. It does not involves injury to the person or property of another person. It is not immoral. It is not against the public policy. 3/8/2011 THE INDIAN CONTRACT ACT,1872 36

illustration:

illustration 1.A agrees to sell his house to B for 10,000 rupees. Here B's promise to pay the sum of 10,000 rupees is the consideration for A's promise to sell the house, and A's promise to sell the house is the consideration for B's promise to pay the 10,000 rupees. These are lawful considerations. 2. A promises to pay B 1,000 rupees at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here the promise-of each party is the consideration for the promise of the other party and they are lawful considerations. 3/8/2011 THE INDIAN CONTRACT ACT,1872 37

Cont..:

Cont.. 3.A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain voyage. Here A's promise is the consideration for B's payment and B's payment is the consideration for A's promise and these are lawful considerations. 4. A promises to maintain B's child and B promises to pay A 1,000 rupees yearly for the purpose. Here the promise of each party is the consideration for the promise of the 'other party. They are lawful considerations. 5. A, B and C enter into an agreement for the division among them of gains acquired, or- to be acquired, by them by fraud. The agreement is void, as its object is unlawful. 3/8/2011 THE INDIAN CONTRACT ACT,1872 38

Cont..:

Cont.. 6.A promises to obtain for B an employment in the public service, and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful. 7. A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void. as it implies a fraud by concealment, by A, on his principal 3/8/2011 THE INDIAN CONTRACT ACT,1872 39

Cont..:

Cont.. 8.A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful. 9.A, who is B's mukhtar , promises to exercise his influence, as such, with B in favour of C, and C promises to pay 1,000 rupees to A. The agreement is void, because it is immoral. 10. A agrees to let her daughter to hire to B for concubinage . The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code 3/8/2011 THE INDIAN CONTRACT ACT,1872 40

DECLARED TO BE VOID BY LAW:

DECLARED TO BE VOID BY LAW Agreements void, if considerations and objects unlawful in part: If any part of a single consideration for one or more objects or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void. Example: A,promises to superintend on behalf of B,a legal manufacture of indigo, and an illegal traffic in other articles, B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the object of A’s promise, and the consideration for B’s promise being in part unlawful. 3/8/2011 THE INDIAN CONTRACT ACT,1872 41

Agreement in restraint of marriage voidu/s-26:

Agreement in restraint of marriage voidu /s-26 Every agreement in restraint of the marriage of any person, other than a minor, is void. 3/8/2011 THE INDIAN CONTRACT ACT,1872 42

Agreement in restraint of trade void.u/s-27:

Agreement in restraint of trade void.u /s-27 Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void . 3/8/2011 THE INDIAN CONTRACT ACT,1872 43

Exception 1.-:

Exception 1.- One who sells the good-will of a business mayagree with the buyer to refrain from carrying on a similar business,within specified local limits, so long as the buyer, or any person deriving title to the good-will from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business . 3/8/2011 THE INDIAN CONTRACT ACT,1872 44

Agreements in restraint of legal proceedings void u/s-28:

Agreements in restraint of legal proceedings void u/s-28 Every agreement,- (a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or 3/8/2011 THE INDIAN CONTRACT ACT,1872 45

Cont..:

Cont.. (b) which extinguishes the rights of any party thereto, or discharges any party thereto from aby liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights Is void to that extent. Saving of contract of refer to arbitration dispute that mayarise .- 3/8/2011 THE INDIAN CONTRACT ACT,1872 46

Agreements void for uncertainty u/s-29:

Agreements void for uncertainty u/s-29 .-Agreements, the meaning of which is not certain, or capable of being made certain, are void. Illustrations: (a) A agrees to sell to B " a hundred tons of oil ". There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty. b) A agrees to sell to B one hundred tons of oil of a specified' description, known as an article of commerce. There is no uncertainty here to make the agreement void. 3/8/2011 THE INDIAN CONTRACT ACT,1872 47

Cont..:

Cont.. (c) A, who is a dealer in cocoanut-oil only, agrees to sell to B "one hundred. tons of oil". The nature of A's trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of cocoanut-oil. (d) A agrees to sell to B " all the grain in my granary at Ramnagar ". There is no uncertainty here to make the agreement void. 3/8/2011 THE INDIAN CONTRACT ACT,1872 48

Cont..:

Cont.. (e) A agrees to sell B " one thousand maunds of rice at a price to be fixed by C ". As the price is capable of being made certain, there is no uncertainty here to make the agreement void. (f) A agrees to sell to B " my white horse for rupees five hundred or rupees one thousand". 'There I is nothing to show which of the two prices was to be given. The agreement is void, 3/8/2011 THE INDIAN CONTRACT ACT,1872 49

Agreements by way of wager void. u/s--30:

Agreements by way of wager void. u/s--30 Agreements by way of wager are void ; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. 3/8/2011 THE INDIAN CONTRACT ACT,1872 50

Exception.:

Exception. This section shall not be deemed to render unlawful a subscription or contribution,or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be awarded to the winner or winners of any horse-race 3/8/2011 THE INDIAN CONTRACT ACT,1872 51

"Contingent contract" u/s-31:

"Contingent contract" u/s-31 A " contingent contract " is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. Illustration A contracts to pay B Rs. 10,000 if B's house is burnt. This is a contingent contract. 3/8/2011 THE INDIAN CONTRACT ACT,1872 52

contingent on an event happening u/s-32:

contingent on an event happening u/s-32 Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void. 3/8/2011 THE INDIAN CONTRACT ACT,1872 53

illustrations:

illustrations A makes a contract with B to buy B's horse if A survives C.This contract cannot be enforced by law unless and until C dies in A's lifetime. A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law unless and until C refuses to buy the horse. A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void. 3/8/2011 THE INDIAN CONTRACT ACT,1872 54

Enforcement of contracts contingent on an event not happening.-u/s-33 :

Enforcement of contracts contingent on an event not happening.-u/s-33 Contingent contracts to do or not to do anything if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible, and not before. Illustration A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks. 3/8/2011 THE INDIAN CONTRACT ACT,1872 55

When event on which contract is contingent to be deemed-u/s-34 :

When event on which contract is contingent to be deemed-u/s-34 When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person.-If the future event on which a contract is contingent is the way in which a person will act at an unspecified time ,the event shall 3/8/2011 THE INDIAN CONTRACT ACT,1872 56

Illustration::

Illustration: A agrees to pay B a sum of money if B marries C. C marries D. The marriage of B to C must now be considered impossible, although it is possible that D may die and that C may afterwards marry B. 3/8/2011 THE INDIAN CONTRACT ACT,1872 57

contingent on happening of specified event within fixed time u/s-35:

contingent on happening of specified event within fixed time u/s-35 Contingent contracts to do or not to do anything if a specified uncertain event happens within a fixed time become void if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible. 3/8/2011 THE INDIAN CONTRACT ACT,1872 58

Cont…:

Cont… Contingent contracts to do or not to do anything if a specified uncertain event does not happen within a fixed time may be enforced by law when the time fixed has expired and such event has not happened or, before the time fixed has expired, if it becomes certain that such event will not happen 3/8/2011 THE INDIAN CONTRACT ACT,1872 59

Illustration::

Illustration: (a) A promises to pay B a sum of money if a certain ship returns within a year. The contract may be enforced if the ship returns within the year, 'and becomes void if the ship is burnt within the year. (b) A promises to pay B a sum of money if a certain ship does not return within a year. The contract may be enforced if the ship does not return within the year, or is burnt within the year. 3/8/2011 THE INDIAN CONTRACT ACT,1872 60

Agreement contingent on impossible events void u/s--36:

Agreement contingent on impossible events void u/s--36 Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made . 3/8/2011 THE INDIAN CONTRACT ACT,1872 61

Illustrations::

Illustrations: (a) A agrees to pay B 1,000 rupees if two straight lines should enclose a space. The agreement is void. (b) A agrees to pay B 1,000 rupees if B will marry A's daughter C. C was dead at the time of the agreement. The agreement is void. 3/8/2011 THE INDIAN CONTRACT ACT,1872 62

Illustrations:

Illustrations (a) A promises to deliver goods to B on a certain day on payment of Rs. 1,000. A dies before that day. A's representatives are bound to deliver the goods to B, and B is bound to pay the Rs. 1,000 to A's representatives. (b) A promises to paint a picture for B by a certain day, at certain price. A dies before the day. The contract cannot be enforced either by A's representatives or by B. 3/8/2011 THE INDIAN CONTRACT ACT,1872 63

Effect of refusal to accept offer of performance u/s-38:

Effect of refusal to accept offer of performance u/s-38 .-Where a promisor has made an offer of performance to the promisee , and the offer has not been accepted, the promisor is not responsible for nonperformance, nor does he thereby lose his rights under the contract. Every such offer must fulfil the following conditions:- (1) it must be unconditional; 3/8/2011 THE INDIAN CONTRACT ACT,1872 64

Cont….:

Cont…. (2) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by his promise to do (3) if the offer is an offer to deliver anything to the promisee , the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver. An offer to one of several joint promisees has the same legal consequences as an offer to all of them, 3/8/2011 THE INDIAN CONTRACT ACT,1872 65

Illustration:

Illustration contracts to deliver to B at his warehouse, on the 1st March, 1873, 100 bales of cotton of a particular quality. In order to make an offer of a performance with the effect stated in this section, A must bring the cotton to B's warehouse, on the appointed day, under such circumstances that B may have a reasonable opportunity of satisfying himself that the thing offered is cotton of the quality contracted for, and that there are 100 bales. 3/8/2011 THE INDIAN CONTRACT ACT,1872 66

Effect of refusal of party to perform promise wholly-u/s-39:

Effect of refusal of party to perform promise wholly-u/s-39 Party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance. (a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her 100 rupees for each night's performance. On the sixth night A wilfully absents herself from the theatre. B is at liberty to put an end to the contract. 3/8/2011 THE INDIAN CONTRACT ACT,1872 67

Illustrations:

Illustrations (b) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every. week during the next two months, and B engages to pay her at the rate of 100 rupees for each night. On the sixth night A wilfully absents herself. With the assent of B, A sings on the seventh night. B has signified his acquiescence in the continuance of the contract, and cannot now put an end to it, but is entitled to compensation for the damage sustained by him through A's failure to sing on the sixth night 3/8/2011 THE INDIAN CONTRACT ACT,1872 68

Person by whom promise is to be performed-u/s-40:

Person by whom promise is to be performed-u/s-40 If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor . In other cases, the promisor or his representatives may employ a competent person to perform it 3/8/2011 THE INDIAN CONTRACT ACT,1872 69

Illustrations:

Illustrations (a) A promises to pay B a sum of money. A may perform this promise, either by personally paying the money to B or by causing it to be paid to B by another ; and, if A dies before the time appointed for payment, his representatives must perform the promise, or employ some proper person to do so. (b) A promises to paint a picture for B. A must perform this promise personally 3/8/2011 THE INDIAN CONTRACT ACT,1872 70

Effect of accepting performance from third person u/s-41:

Effect of accepting performance from third person u/s-41 When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor . 3/8/2011 THE INDIAN CONTRACT ACT,1872 71

Devolution of joint liabilities.u/s-42:

Devolution of joint liabilities.u /s-42 .-When two or more persons have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives, and, after the death of any of them, his representative jointly with the survivor or survivors, and, after the death of the last survivor, the representatives of all jointly, must fulfil the promise 3/8/2011 THE INDIAN CONTRACT ACT,1872 72

Any one of joint promisors may be compelled to perform u/s-43:

Any one of joint promisors may be compelled to perform u/s-43 When two or; more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any 1*[one or more] of such joint promisors,to perform the whole of the promise. ----Each promisor may compel contribution. Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract 3/8/2011 THE INDIAN CONTRACT ACT,1872 73

Cont…:

Cont… Sharing of loss by default in contribution.-If any one of two or more joint promisors makes default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares. Explanation.-Nothing in this section shall prevent a surety from recovering from his principal, payments made by the surety on behalf of the principal, or entitle the principal to recover anything from the surety on account of payments made by the principal 3/8/2011 THE INDIAN CONTRACT ACT,1872 74

Illustrations:

Illustrations (a) A, B and C jointly promise to pay D 3,000 rupees. D may compel either A or B or C to pay him 3,000 rupees. (b) A, B and C jointly promise to pay D the sum of 3,000 rupees. C is compelled to pay the whole. A is insolvent, but his assets are sufficient to pay one-half of his debts. C is entitled to receive 500 rupees from A's estate, and 1,250 rupees from B. 3/8/2011 THE INDIAN CONTRACT ACT,1872 75

Cont…:

Cont… (c) A, B and C are under a joint promise to pay D 3,000 rupees. C is unable to pay anything, and A is compelled to pay the whole. A is entitled to receive 1,500 rupees from B. (d) A, B and C are under a joint promise to pay D 3,000 rupees, A and B being only sureties for C. C fails to pay. A and B are compelled to pay the whole sum. They are entitled to recover it from C. 3/8/2011 THE INDIAN CONTRACT ACT,1872 76

Effect of release of one joint promisor u/s-44:

Effect of release of one joint promisor u/s-44 Where two or more persons have made a joint promise, a release of one of such joint promisors by the promisee does not discharge the other joint promisor or joint promisors ; neither does it free the joint promisors so released from responsibility to the other joint promisor or joint promisors . 3/8/2011 THE INDIAN CONTRACT ACT,1872 77

u/s-45.Devolution of joint rights:

u/s-45.Devolution of joint rights When a person has made a promise to two or more persons jointly, then, unless a contrary intention appears from the contract, the right to claim performance rests, as between him and them, with them during their joint lives, and, after the death of any of them, with the representative of such deceased person. Jointly with the survivor or survivors, and, after the death of the last survivor, with the representatives of all jointly 3/8/2011 THE INDIAN CONTRACT ACT,1872 78

Illustration:

Illustration A, in consideration of 5,000 rupees, lent to him by B and C, promises B and C jointly to repay them that sum with interest on a day specified. B dies. The right to claim performance rests with B's representative jointly with C during C's life, and after the death of C with the representatives of B and C jointly 3/8/2011 THE INDIAN CONTRACT ACT,1872 79

Time for performance of promise,when no application is to be made and no time is specified u/s-46:

Time for performance of promise,when no application is to be made and no time is specified u/s-46 Where, by the contract, a promisor is to perform his promise without application by the promisee , and no time for performance is specified, the engagement must be performed within a reasonable time. Explanation.-The question " what is a reasonable time " is, in each particular case, a question of fact. 3/8/2011 THE INDIAN CONTRACT ACT,1872 80

Time and place for performance of promise, where time is specified and no application to be made-47:

Time and place for performance of promise, where time is specified and no application to be made-47 When promise is to be performed on a certain day, and the promisor has undertaken to perform it without application by the promisee , the promisor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed. 3/8/2011 THE INDIAN CONTRACT ACT,1872 81

Illustration :

Illustration A promises to deliver goods at B's warehouse on the first January. On that day A brings the goods to B's warehouse, but after the usual hour for closing it, and they are not received. A has not performed his promise. 3/8/2011 THE INDIAN CONTRACT ACT,1872 82

. Application for performance on certain day to be at proper u/s-48:

. Application for performance on certain day to be at proper u/s-48 When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee , it is the duty of the, promisee to apply for performance at a proper place and within the usual hours of business 3/8/2011 THE INDIAN CONTRACT ACT,1872 83

Place for performance of promise, where no application to be made and no place fixed for performance u/s-49:

Place for performance of promise, where no application to be made and no place fixed for performance u/s-49 When a promise is to be performed without application by the promisee , and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at such place. 3/8/2011 THE INDIAN CONTRACT ACT,1872 84

Illustration :

Illustration A undertakes to deliver a thousand maunds of jute to B on a fixed day. A must apply to B to appoint a reasonable place for the purpose of receiving it, and must deliver it to him at such place. 3/8/2011 THE INDIAN CONTRACT ACT,1872 85

Performance in manner or at time prescribed or sanctioned by promisee u/s-50:

Performance in manner or at time prescribed or sanctioned by promisee u/s-50 The performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions 3/8/2011 THE INDIAN CONTRACT ACT,1872 86

Illustrations;:

Illustrations; B owes A 2,000 rupees. A desires B to pay the amount to A's account with C, a banker. B, who also banks with C, orders the amount to be transferred from his account to A's credit, and this is done by C. Afterwards, and before A knows of the transfer, C fails. There has been a good payment by B. (b) A and B are mutually indebted. A and B settle an account by setting off one item against another, and B pays A the balance found to be due from him upon such settlement. This amounts to a payment by A and B,respectively , of the sums which they owed to each other. 3/8/2011 THE INDIAN CONTRACT ACT,1872 87

illustrations:

illustrations (c) A owes B 2,000 rupees. B accepts some of A's goods in reduction of the debt. The delivery of goods operates as a part payment. (d) A desires B, who owes him Rs. 100, to send him a note for Rs. 100 by post. The debt is discharged as soon as B puts into thepost a letter containing the note duly addressed to A. 3/8/2011 THE INDIAN CONTRACT ACT,1872 88

Performance of reciprocal promises u/s-51-55:

Performance of reciprocal promises u/s-51-55 u/s-51 .Promisor not bound to perform, unless reciprocal promisee ready and willing to perform. When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise. 3/8/2011 THE INDIAN CONTRACT ACT,1872 89

illustration:

illustration (a) A and B contract that A shall deliver goods to B to be paid for by B on delivery. ---A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery. ---B need not pay for the goods, unless A is ready and willing to deliver them on payment. (b) A and B contract that A shall deliver goods to B at a price to be paid by instalments , the first instalment to be paid on delivery. ---A need not deliver, unless B is ready and willing to pay the first instalment on delivery. ---B need not pay the first instalment , unless A is ready and willing to deliver the goods on payment of the first instalment 3/8/2011 THE INDIAN CONTRACT ACT,1872 90

Order of performance of reciprocal promises u/s-52:

Order of performance of reciprocal promises u/s-52 Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and, where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires . 3/8/2011 THE INDIAN CONTRACT ACT,1872 91

Illustration;:

Illustration; (a) A and B contract that A shall build a house for B at a fixed price. A's promise to build the house Must be performed before B's promise to pay for it. (b) A and B contract that A shall make over his stock-in-trade to B at a fixed price, and B promises to give security for the payment of the money. A's promise need not be performed until the security is given, for the nature of the transaction requires that A should have security before he delivers up his stock. 3/8/2011 THE INDIAN CONTRACT ACT,1872 92

Liability of party preventing event on which the contract is to take effect- U/S-53.:

Liability of party preventing event on which the contract is to take effect- U/S-53. When a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract. 3/8/2011 THE INDIAN CONTRACT ACT,1872 93

Illustration;:

Illustration; A and B contract that B shall execute certain work for A for a thousand rupees. B is ready and willing to execute the work accordingly, but A prevents him from doing so. The contract is voidable at the option of B ; and, if he elects to rescind it, he is entitled to recover from A compensation for any loss which he has incurred by its non-performance. 3/8/2011 THE INDIAN CONTRACT ACT,1872 94

Effect of default as to that promise which should be first performed,in contract consisting of reciprocal promises-u/s-54:

Effect of default as to that promise which should be first performed,in contract consisting of reciprocal promises-u/s-54 When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract 3/8/2011 THE INDIAN CONTRACT ACT,1872 95

illustations:

illustations (a)A hires B's ship to take in and convey, from Calcutta to the Mauritius, a cargo to be provided by A, B receiving a certain freight for its conveyance. A does not provide any cargo for the ship. A cannot claim the performance of B's promise, and must make compensation to B for the loss which B sustains by the non-performance of the contract. (b)A contracts with B to execute certain builder's work for a fixed price, B supplying the scaffolding and timber necessary for the work. B refuses to furnish any scaffolding or timber, and the work cannot be executed. A need not execute the work, and B is bound to make compensation to A for any loss caused to him by them non-performance of the contract. 3/8/2011 THE INDIAN CONTRACT ACT,1872 96

illustration:

illustration (c)A contracts with B to deliver to him, at a specified price, certain merchandise on board a ship which cannot arrive for a month, and B engages to pay for the merchandise within a week from the date of the contract. B does not pay within the week. A's promise to deliver need not be performed, and B must make compensation. (d)A promises B to sell him one hundred bales of merchandise, to be delivered next day, and B promises A to pay for them within a month. A does not deliver according to his promise. B's promise to pay need not be performed, and A must make compensation. 3/8/2011 THE INDIAN CONTRACT ACT,1872 97

Effect of such failure when time is not essential:

Effect of such failure when time is not essential If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time ; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure 3/8/2011 THE INDIAN CONTRACT ACT,1872 98

Effect of failute where time is essential u/s-55 :

Effect of failute where time is essential u/s-55 When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee , if the intention of the parties was that time should be of the essence of the contract. 3/8/2011 THE INDIAN CONTRACT ACT,1872 99

Effect of acceptance of performance at time other than that agreed upon. :

Effect of acceptance of performance at time other than that agreed upon. If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed,unless , at the time of such acceptance he gives notice to the promisor of his intention to do so. 3/8/2011 THE INDIAN CONTRACT ACT,1872 100

Contract to do impossible or unlawful afterwards-u/s--56:

Contract to do impossible or unlawful afterwards-u/s--56 A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the Promisor could not prevent, unlawful, becomes void when the act becomes impossible orunlawful 3/8/2011 THE INDIAN CONTRACT ACT,1872 101

Compensation for loss non performance:

Compensation for loss non performance Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise 3/8/2011 THE INDIAN CONTRACT ACT,1872 102

illustration:

illustration (a) A agrees with B to discover treasure by magic. The agreement is void, (b) A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void. (c) A contracts to marry B, being already married to C, and being forbidden by the law to Which he is subject to Practise polygamy, A must make compensation to B for the loss caused to her by the non-performance of his promise. 3/8/2011 THE INDIAN CONTRACT ACT,1872 103

Cont..:

Cont.. (d) A contracts to take in cargo for B at a foreign port. A's Government afterwards declares war against the country in which the port is situated. The contract becomes void when war is declared. (e) A contracts to act at a theatre for six months in consideration of a sum paid in advance by B. On several occasions A is too ill to act. The contract to act on those occasions becomes void. 3/8/2011 THE INDIAN CONTRACT ACT,1872 104

DOCTRINE OF UNJUST ENRICHMENT OR QUASI CONTRACT::

DOCTRINE OF UNJUST ENRICHMENT OR QUASI CONTRACT: U/S-68-Claim for necessaries supplied to person incapable of contracting, or on his account. If a person, incapable of entering into a contract, or any one whom he is legally bound to support, is supplied by another, person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. 3/8/2011 THE INDIAN CONTRACT ACT,1872 105

illustration:

illustration (a) A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B's property. (b) A supplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B's property. 3/8/2011 THE INDIAN CONTRACT ACT,1872 106

Implied and quasi contract:

Implied and quasi contract u/s-69.Reimbursement of person paying money due by another, in payment of which he is interested A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other. 3/8/2011 THE INDIAN CONTRACT ACT,1872 107

illustration.:

illustration. B holds land in Bengal, on a lease granted by A, the zamindar . The revenue payable by A to the Government being in arrear, his land is advertised for sale by the Government. Under the revenue law, the consequence of such sale will be the annulment of B's lease. B, to prevent the sale and the consequent annulment of his own lease, pays to the Government the sum due from A. A is bound to make good to B the amount so paid 3/8/2011 THE INDIAN CONTRACT ACT,1872 108

Obligation of person enjoying benefit of non-gratuitous act:

Obligation of person enjoying benefit of non-gratuitous act u/s-70- Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered 3/8/2011 THE INDIAN CONTRACT ACT,1872 109

illustrations:

illustrations (a) A, a tradesman, leaves goods at B's house by mistake. B treats the goods as his own. He is bound to pay A for them. (b) A saves B's property from fire. A is not entitled to compensation from B, if the circumstances show that he intended to act gratuitously 3/8/2011 THE INDIAN CONTRACT ACT,1872 110

Responsibility of finder of goods:

Responsibility of finder of goods u/s-71 .-A person who finds goods belonging to another, and takes them into his custody, is subject to the same responsibility as a bailee . Illustration A goes to a shop where on the floor he finds a note of rupee one thousand knowing that note is of one person who is at that time at the shop. He put it in his pocket showing that he has found nothing. Here he is liable to return the note by enquiring. He is a bailee for that note. 3/8/2011 THE INDIAN CONTRACT ACT,1872 111

Liability in case of goods delivered by mistake or coerscion:

Liability in case of goods delivered by mistake or coerscion u/s-72 .-A person to whom money has been paid ,or anything delivered, by mistake or under coercion, must repay or return it. 3/8/2011 THE INDIAN CONTRACT ACT,1872 112

Breach of contract:

Breach of contract After formation of contract this is the time to perform the duties underlying therein but before the time of performance or at the time of performance either of the party refuses to perform duties on his part or make it himself unable to perform the contract, it is called breach of contract. It may be: Anticipatory breach of contract. Actual or present breach of contract. 3/8/2011 THE INDIAN CONTRACT ACT,1872 113

Cont..:

Cont.. Anticipatory breach is that breach where a party to the contract declared his intention of not performing the contract before the performance is due. A contract to B that on 1 st july,2010, that on the 1 st july 2011 he will appoint B as senior HR in his company. But during the Dec.2010 A says that he will not give him appointment, so repudiates the contract.This repudiation before the actual time of performance is anticipatory breach of contract. 3/8/2011 THE INDIAN CONTRACT ACT,1872 114

Actual or present breach :

Actual or present breach Actual or present breach of contract may be either on the date of performance or during the performance. Illustration X a famous singer enter into contract with Y, theatre owner, give his performance for two days every week.If X does not sing for second week. This is breach of contract. Here Y has two options: Y may rescind contract and claim compensation Y may permit to sing further but can claim compensation for the loss because of his not singing. 3/8/2011 THE INDIAN CONTRACT ACT,1872 115

Remedies for breach of contract:

Remedies for breach of contract Rescision of contract u/s-39 Suit for damage- Suit for specific performance Suit for injuction Suit for quantum damage 3/8/2011 THE INDIAN CONTRACT ACT,1872 116

Damage caused by breach u/s-73:

Damage caused by breach u/s-73 If the contract is breached or not performed the party who is at loss can claim the following damages: Ordinary damages: those damages which naturally arise in usual course of things from such breach. These can be recovered if the damages are direct and aggrieved party suffered. Special damages: Such damages which the parties how, when they made contract to be likely to result from breach. 3/8/2011 THE INDIAN CONTRACT ACT,1872 117

illustrations:

illustrations A contracts to pay a sum of money to B on a day specified. A does not pay the money on that day; B, in consequence of not receiving the money on that day, is unable to pay his debts, and is totally ruined. A is not liable to make good to B anything except the principal sum he contracted to pay, together with interest up to 'the day of payment. 3/8/2011 THE INDIAN CONTRACT ACT,1872 118

Cont..:

Cont.. Acontracts to sell and deliver 500 bales of cotton to B on a fixed day. A knows nothing of B's mode of conducting his business. A breaks his promise, and B, having no cotton, is obliged to close his mill. A is not responsible to B for the loss caused to B by the closing of the mil 3/8/2011 THE INDIAN CONTRACT ACT,1872 119

Slide 120:

A, showroom owner of Dell computers, contracts with B to supply 10 sets of laptops at the rate of 50K per set at a specified date. A contracts with C, an agency owner of Dell to supply 10 set of dell laptops informing C that these sets are to be supplied to his customer at so and so date at Rs.40K per set. C fails to perform his contract so A purchase those set from another agency holder at Rs,45K per set to fulfill his promise to A. A can claim 50K rupees from C as compensation if he could not have perform then Rs 1 lack as compensation. 3/8/2011 THE INDIAN CONTRACT ACT,1872 120

illustrations:

illustrations (a)A and B jointly owe 100 rupees to C. A alone pays the amount to C, and B, not knowing this fact, pays 100 rupees over again to C. C is bound to repay the amount to B. (b)A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegally excessive. 3/8/2011 THE INDIAN CONTRACT ACT,1872 121

Contract of indemnity:

Contract of indemnity U/S-124 A contract by which one party promises to save the other from the loss caused to him by the conduct of the promisor himself or by the conduct of any other person, is called a contract of Indemnity. The person who gives the indemnity is called the indemnifier,and the person for whose protection it is given called the indemnity holder. A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of 200 rupees. This is a contract of indemnity. 3/8/2011 THE INDIAN CONTRACT ACT,1872 122

Rights of indemnity holder:

Rights of indemnity holder All damages within the scope contract. All costs and expenses. All sums which he has made under the term of any compromise of any such suit. 3/8/2011 THE INDIAN CONTRACT ACT,1872 123

Contract of guarantee:

Contract of guarantee u/s-126 A "contract of guarantee " is a contract to perform the promise, or discharge the liability, of a third person in case of his fault. The person who gives the guarantee is called the " surety“ The person in respect of whose default the guarantee is given is called the " principal debtor ", and the person to whom the guarantee is given is called the " creditor ". A guarantee may be either oral or written. 3/8/2011 THE INDIAN CONTRACT ACT,1872 124

illustrations:

illustrations B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A's promise to deliver the goods. This is a sufficient consideration for C's promise. (b) A sells and delivers goods to B. C afterwards requests A to forbear to sue B for the debt for a year, and promises that, if he does so, C will pay for them in default of payment by B. A agrees to forbear as requested. This is a sufficient consideration for C's promise. (c) A sells and delivers goods to B. C afterwards, without consideration, agrees to pay for them in default of B. The agreement is void. 3/8/2011 THE INDIAN CONTRACT ACT,1872 125

Difference between contract of guarantee and contract of indemnity:

Difference between contract of guarantee and contract of indemnity There are three parties in contract of guarantee i.e.creditor,principal debtor and surety. While in contract of indemnity there are only two parties i.e. indemnifier and indemnity holder. The primary liability is of the principal debtor in contract of guarantee and surety’s liability is secondary. But in indemnity liability of indemnifier is primary and secondary. 3/8/2011 THE INDIAN CONTRACT ACT,1872 126

Cont..:

Cont.. In contract of guarantee at the same time there are three contracts whereas in contract of indemnity there is only one contract. In contract of guarantee it is necessary that surety should guarantee at the request of debtor but in indemnity indemnifirer should give the indemnity on the request of indemnity holder. Liability in contract of guarantee is existing one but in contract of indemnity it is contingent upon some happenings. 3/8/2011 THE INDIAN CONTRACT ACT,1872 127

Contract of Bailment (u/s-148):

Contract of Bailment (u/s-148) The term bailor has been derived from the french word ‘ baillier ’ which means to deliver. As per Indian contract Act Bailment means “The delivery of goods by one person to another for some purpose, upon a contract that they shall,when the purpose is accomplished, be returned or otherwise disposed of according to the conditions of the persons delivering them” The person who delivers the goods is called Bailor and the person to whom goods are delivered is Bailee . 3/8/2011 THE INDIAN CONTRACT ACT,1872 128

Essential elements of Bailment:

Essential elements of Bailment There must be a contract. Contract must be to deliver some movable goods. There must be delivery of goods from one person to another. Goods must be delivered for some specific purpose. Goods delivered must be returned when the purpose is fulfilled. Examples bailment may be for deposit, for use, for pledge,for carriage,for repair etc. 3/8/2011 THE INDIAN CONTRACT ACT,1872 129

Rights of bailor:

Rights of bailor To claim damage.—151 To receive the delivered goods back. To claim compensation for unautthorised use of goods. To claim compensation for the loss caused due to mixup with other goods. To claim profit if any is there from the goods. 3/8/2011 THE INDIAN CONTRACT ACT,1872 130

Duties of bailor:

Duties of bailor Duty to deliver the goods. To disclose the fault if any in the goods. To pay the expenses. To indemnify the bailee for breach of warrants. To receive back the goods or to give diretion for its disposal. 3/8/2011 THE INDIAN CONTRACT ACT,1872 131

Duties of Bailee:

Duties of Bailee To take care of the goods as his own. Not to do anything with the goods against the conditions. Not to make unauthorised use of goods. Not to mix goods with others. Mixture of goods when separable or non-separable. To return the goods to bailor or as directed. To give back profit or increase in the goods. 3/8/2011 THE INDIAN CONTRACT ACT,1872 132

Rights of Bailee:

Rights of Bailee To claim damage. To claim necessary expenses. Right to be indemnified. To recover goods due to defects of the goods. To return goods. To exercise lien on goods. 3/8/2011 THE INDIAN CONTRACT ACT,1872 133

Contract of Pledge-u/s-172:

Contract of Pledge-u/s-172 The bailment of goods as security for payment of a debt or performance of a promise is called ‘pledge’. In this case the ‘ bailor ‘is called “ pledger ” and the ‘ bailee ’ is called “ pawnee ” A borrows Rs 300 from B and keeps his watch as security for payment of the debt, the bailment of watch is a pledge. 3/8/2011 THE INDIAN CONTRACT ACT,1872 134

Difference between pledge and bailment:

Difference between pledge and bailment Purpose: The bailment may be for any purpose but pledge is only for the security for payment of debt or performance of promise. Right to use: Bailee may according to the conditions of bailment, use the goods bailed but pledgee can not use the pledged goods. Right to sell: the bailee can not sell the goods but if pawner default then pawnee has right to sell the goods 3/8/2011 THE INDIAN CONTRACT ACT,1872 135

Cont…:

Cont… Discharge of contract: a contract of bailment is discharged when the purpose is accomplished or after specified time but a contract of pledge is discharged when the payment of debt is made or the promise is performed or the goods bailed as security are sold due to default. 3/8/2011 THE INDIAN CONTRACT ACT,1872 136

Rights & duties of pawner/pledger:

Rights & duties of pawner / pledger RIGHTS To get back the goods. To redeem the goods To take care and preserve the goods To receive increase or profit from the goods To exercise rights of a debtor. 3/8/2011 THE INDIAN CONTRACT ACT,1872 137

Duties of pawner:

Duties of pawner To disclose the defects in the goods pledged. To pay the debt interest and other expenses or perform the promise any time specified. To pay extraordinary expenses if no contrary is there with the pawnee To redeem the goods pledged before sale To pay additional expenses arise due to default. 3/8/2011 THE INDIAN CONTRACT ACT,1872 138

Rights and duties of Pawnee:

Rights and duties of Pawnee Rights---- To retain the goods untill payment is not made To retain goods for subsequent advances To receive extraordinary expenses. To sue against the pawner To sell the goods. 3/8/2011 THE INDIAN CONTRACT ACT,1872 139

duties:

duties To take care of the goods Not to use the goods Not to mix the gods with his own goods To return the goods after payment of debt or performance of the promise To give notice before sale of the goods To return the increase or profit from the goods pledged To pay surplus of the proceeds of the sale of the goods pledged To act in goods faith. 3/8/2011 THE INDIAN CONTRACT ACT,1872 140

Agency:

Agency Agency is a contract where one person called agent, is permitted to do any act for his principal or to represent his master in dealings with the third persons. So agency is a medium of executing things by one person to another. Agent:- u/s-182 “ An agent is a person employed to do any act for another ,or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented is called the ‘ prinicipal ’. 3/8/2011 THE INDIAN CONTRACT ACT,1872 141

Cont..:

Cont.. The essence of the matter is that the principal authorised the agent to represent ro act for him in bringing the principal into contractual relation with a third person. Two principles govern the law of agency are: 1.Whatever a person can do personally, he is authorised to do it through agency. 2.He who does his act throught other is considered as he has does it himself. 3/8/2011 THE INDIAN CONTRACT ACT,1872 142

Creation of agency:

Creation of agency By express agreement. By implied agreement Agency by ratification Agency by operation of law 3/8/2011 THE INDIAN CONTRACT ACT,1872 143

Termination of agency:

Termination of agency By the principal revoking agent’s authority By the agent renouncing the business of the agency By the business of the agency being completed By either the principal or agent dying or becoming of unsound mind. 3/8/2011 THE INDIAN CONTRACT ACT,1872 144

Rights of agent:

Rights of agent Rights of retainer Right to receive remuneration Right to lien Right of indemnification Right of compensation Right of stoppage in transit. 3/8/2011 THE INDIAN CONTRACT ACT,1872 145

Duties of agent:

Duties of agent To carry out the work undertaken according to the directions given by the principal To carry out the work with reasonable care skill and deligence . To communicate with the principal Not to deal on his own account To pay sums received for the principal Not to make secret profit from agency. 3/8/2011 THE INDIAN CONTRACT ACT,1872 146