WHAT IS A CONTRACT ?
• Agreement enforceable by law
• Lawful proposal by one party and the other party
must accept it (promisor & promisee)
• There must be a lawful cosideration
• An agreement may be oral or written
• An agreement may be without consideration if it is
made out of nature, love and affection between
close relatives
• Free consent & Capacity to contract (section 11)
CONTRACT OF INDEMNITY
• It is a contract by which one party promises
to save the other party from any loss caused
to him either by the conduct of promisor
himself or by that of any other person.
• Indemnifier & Indemnified
• Indemnified is entitled to receive all
damages and all costs made by him in suits
GUARANTEE
• It is a contract to perform the promise or discharge
the liability of a third person in case of his default.
It may be either written or oral.
• The person who gives the guarantee is called
‘Surety’ and in respect of whom the guarantee is
given is called ‘Principal Debtor’. The person to
whom the guarantee is given is called “Creditor”
• Anything done or any promise made for the
benefit of principal debtor is a consideration
CONTINUING GUARANTEE
• A guarantee which extends to a series of
transactions
• Death of surety ends the guarantee then and
there
• Any variance made in the terms of contract
between the Creditor and Principal Debtor
without the consent of the Guarantor
discharges the surety after such varience
Misrepresentation by creditor
discharges the surety
• Surety is discharged if the Principal Debtor
is released by the creditor
• Release of one surety does not discharge the
other co-sureties
• Surety can claim his debt from the principal
debtor
• Forbearance on the part of creditor does not
discharge the surety
CONTINUED
• Implied promise by the principal debtor to
indemnify the surety
• Co-sureties are liable to pay equal share of
the whole debt or the part which remains
unpaid by the principal debtor
• Indemnity & Guarantee are different
because the liability of indemnifier is
primary and that of the surety is seciondary
CONTRACT OF BAILMENT
• It is the delivery of goods by one person to another
for some purpose. The person delivering the goods
is called bailor or the person to whom they are
delivered is called the bailee.
• Bailor is bound to disclose the faults in the goods
to bailee of which he is aware. The fault which
may expose the bailee to extraordinary risk
should also be made known by the bailee.
RIGHTS AND DUTIES OF
BAILEE
• To take care of goods (as for his own goods)
• To return the goods at expiry of the time or
purpose, for which it was bailed
• To receive due remuneration for any service
rendered in respect of the goods bailed. He
has a right to retain the goods until he
receives such remuneration.
PLEDGE
• The bailment of goods as security for payment of
a debt or performance of a promise is called a
pledge.
• The bailor is called ‘pawnor’ and the bailee is
called ‘pawnee’.
• In case of default the pawnee can sell the things
after giving due notice of the sale to the pawnor. If
there is a shortfall or surplus, the pawnor is liable
for that or entitled to receive that.
CONTRACTS OF AGENCY
• If a person is authorised to act for a person
in such a manner as to bind that person,
then a contract of agency is created.
• The person for whom the act is done is
called the Principal and the person who
represents other person is called the Agent.
• No consideration is necessary although it is
a contract in itself.
ESSENTIALS OF AGENCY
• The principal and agent both should be
major and of sound mind
• The authority of an agent may be expressed
or implied.
• Agent is authorised to do every lawful thing
necessary to conduct the functions of agent.
In emergency agent is authorised to do all
acts to protect the interest of principal.
OTHER FEATURES
• Ratification by the principal for any act
done by the agent without knowledge or
authority from principal
• Termination of agency (either the principal
or agent becomes of unsound mind or dies
or the principal is adjudicated insolvent)
• The principal may repudiate any transaction
concealed or dishonestly done by agent
CONTINUED
• Agent guilty of misconduct is not entitled to
remuneration
• Agent is entitled to retain property/papers
received for principal if the amount due to
him is not paid to him
• Agent to be indemnified for consequences
of lawful acts or acts done in good faith
CONTRACT OF SALE
• A contract of sale of goods is a contract
under which the seller transfers or agrees to
transfer the property in goods to the buyer
for a price.
• Goods means every kind of moveable
property other than actionable claims and
money. i.e. stock, shares, growing crops etc.
• The contract may be written or oral
OTHER FEATURES OF SALE
• Bilateral contract
• Only movable property is covered
• May be immediate delivery or payment or
payment or delivery in instalments.
• A contract of sale may be absolute or
conditional. If delivery is at a future time ,it
is Agreement to sell.
DIFFERENCE BETWEEN SALE
AND AGREEMENT TO SALE
• Ownership passed to the
buyer (irrespective of
delivery of goods)
• Risk in goods with buyer
• Buyer can sue seller for
non-delivery or quality
• Seller can claim price or
stop delivery of goods in
transit or can resell it
• Promises are not
performed
• Ownership not passed to
the buyer and risk of
goods with the seller
• Buyer can claim damages,
if the seller does not
deliver the goods
• The seller can only sue
fore damages
INDIAN CONTRACT ACT
1872
• Sec11: Minors, lunatics are incompetent to
enter into any contract
• Sec25(3): An agreement without
consideration is void unless it is a promise
to pay a time barred debt
• Sec68: Advances to minors for necessities
of life(quasi contract) are valid contracts
• Sec124: Defines Indemnity
INDIAN CONTRACT ACT,1872
• Sec126: Defines guarantee
• Sec128: Surety’s liability is co-extensive
• Sec130: A continuing guarantee may be
revoked by the surety as to future
transactions by notice to the creditor
• Sec131: Death of surety revokes a
continuing guarantee for future transactions
INDIAN CONTRACT ACT,1872
• Sec134: Discharge of surety by release or
discharge of principal debtor by account of
omission of the creditor
• Sec140: Rights of surety on payment or
performance: he is invested with all the rights
which the creditor has against the principal debtor
• Sec133: Any variance made without the surety’s
consent in terms of contract discharges the surety
INDIAN CONTRACT ACT,1872
• Sec151: Bailee is bound to take reasonable care of
goods bailed to him
• Sec190: An agent cannot generally delegate his
authority
• Sec201 Termination of agency on the death or
insolvency or insanity of the principal
• Sec202: Agency is not terminated where agent
himself has an interest in the property which forms
the subject matter of agency