MODULE I

MERCANTILE LAW OR BUSINESS LAW

I LAW & SOCIETY OR WHY DO WE NEED LAWS? 1. WITHOUT LAW^^^^^^ WILL BE CHAOS THERE AND CONFUSION IN SOCIETY 2. TODAY LAW PERVADES ALMOST EVERY FACET OF HUMAN LIFE 3. IT IS ALSO SAID- IGNORANCE OF LAW IS NOT AN EXCUSE1

II. 1.

2. 3.

4.

WHAT IS MEANT BY LAW OR DEFINITIONS OF LAW OXFORD DICTIONARY DEFINES THE TERM LAW AS THE RULE MADE BY AUTHORITIES FOR THE PROPER REGULATION OF A COMMUNITY OR SOCIETY OR FOR CORRECT CONDUCT OF LIFE ACCORDING TO JURIST- AUSTIN A LAW IS A RULE OF CONDUCT IMPOSED AND ENFORCED BY THE SOVEREIGN ACCORDING TO JURIST SALMOND LAW IS THE BODY OF PRINCIPLES RECOGNISED AND APPLIED BY THE STATE IN THE ADMINSTRATION OF JUSTICE LAW ACCORDING TO HOLLAND LAW IS RULE OF EXTERNAL HUMAN ACTIONS ENFORCED BY SOVEREIGN POLITICAL 2 AUTHORITY

III. WHAT ARE THE BRANCHES OF LAW? OR WHAT ARE THE CLASSIFICATION OF LAWS? 1. PUBLIC LAW & PRIVATE LAW 2. CRIMINAL LAW & CIVIL LAW 3. SUBSTANTIVE LAW & PROCEDURAL LAW 4. INTERNATIONAL LAWS & NATIONAL LAWS 5. PUBLIC INTERNATIONAL LAW & PRIVATE INTERNATIONAL LAW [MS = 12, SG=16 18, PG= 4 ]3

IV. WHAT IS BUSINESS OR MERCANTILE LAW 1. THE TERM MERCANTILE OR BUSINESS LAW DEALS WITH THAT BRANCH OF LAW REGULATING TRADE, INDUSTRY AND COMMERCE 2. IT PRESCRIBES RULES FOR THE GOVERNANCE OF RELATIONS BETWEEN: (a) BUSINESS PERSONS TO BUSINESS PERSONS (b) BUSINESS PERSONS AND THEIR CUSTOMERS, DEALERS, SUPPLIERS ETC., (c) BUSINESS PERSONS AND THE STATE CONT4

3.

IN PARTICULAR IT IS CONCERNED WITH THE FOLLOWING LEGISLATIONS: a) INDIAN CONTRACT ACT 1872 b) SALE OF GOODS ACT 1930 c) INDIAN PARTNERSHIP ACT 1932 d) NEGOTIABLE INSTRUMENTS ACT 1881 e) INDIAN COMPANIES ACT 1956 f) THE DEPOSITORIES ACT 1996 g) THE CONSUMER PROTECTION ACT 1986 h) THE FOREIGN EXCHANGE MGT- ACT 1999 i) INFORMATION TECHNOLOGY ACT 2000 j) THE PATENTS ACT 1957 k) THE COPY RIGHT ACT 1957 l) THE COMPETITION ACT 2000 m) TRADE MARKS ACT 1999 5

V.

WHAT ARE THE SOURCES OF BUSINESS LAW IN INDIA SOURCES OF INDIAN LAWS ARE JUDICAL DECISIONS OR CASE LAWS TRADE CUSTOMS & USAGE INDIAN STATUTES

ENGLISH LAW

ENGLISH COMMON LAW [MS = 14

EQUITY

15, PG=5

LAW MERCHANT STATUTE OR LAW MARITIME USAGE 6, MK=2- 3 AP=1- 2 6 SG=24 25]

MODULE II

LAW OF CONTRACT

I WHAT IS THE MEANING OF THE TERM CONTRACT 1. THE WORD CONTRACT IS DERIVED FROM LATIN WORD CONTRACTUM MEANING TOGETHER 2. A CONTRACT IS AN AGREEMENT ENFORCEMENT AT LAW MADE BETWEEN TWO OR MORE PERSONS BY WHICH RIGHTS ARE ACQUIRED BY ONE OR MORE TO ACT OR FOREBEARANCE ON THE PART OF OTHER OR OTHERS [SIR WILLIAM ANSON] 7 CONT .

3. EVERY AGREEMENT AND PROMISE ENFORCEABLE AT LAW IS A CONTRACT [SIR FEDRICK POLLOCK] 4. ACCORDING TO SECTION 2 (h) OF THE INDIAN CONTRACT ACT 1872 AN AGREEMENT ENFORCEABLE BY LAW IS A CONTRACT 5. AN ANALYSIS OF THESE DEFINITIONS SHOW THAT A CONTRACT MUST HAVE THE FOLLOWING TWO ELEMENTS: (a) AN AGREEMENT AND (b) IT MUST BE LEGALLY ENFORCEABLE CONTRACT=AN AGREEMENT +ITS 8 ENFORCEABILITY

II. 1.

2. 3.

WHAT IS MEANT BY THE TERM AGREEMENT? AS PER SECTION 2 (e): EVERY PROMISE AND EVERY SET OF PROMISES, FORMING CONSIDERATION FOR EACH OTHER IS AN AGREEMENT WHAT IS PROMISE -ACCORDING TO SECTION 2 (b) A PROPOSAL WHEN ACCEPTED BECOMES A PROMISE RAM OFFERS TO SELL HIS CAR TO SHYAM FOR RS. 2 LAKHS. SHYAM ACCEPTS THIS OFFER. THIS OFFER WHEN ACCEPTED BECOMES A PROMISE AND THIS PROMISE IS TREATED AS AN AGREEMENT BETWEEN THE TWO CONT . 9

4. AS PER SECTION 2 (c) THE PERSON MAKING THE PROPOSAL IS CALLED PROMISOR AND THE PERSON ACCEPTING THE PROPOSAL IS CALLED PROMISEE

10

III. WHEN DOES AN AGREEMENT BECOME A CONTRACT? 1. ACCORDING TO SECTION 2 (h) ONLY THOSE AGREEMENTS WHICH ARE ENFORCEABLE BY LAW IS A CONTRACT 2. AGREEMENTS INTENDED ONLY TO CREATE MORAL, RELIGIOUS OR SOCIAL OBLIGATION AND NOT INTENDED TO CREATE LEGAL OBLIGATIONS ARE NOT TREATED AS CONTRACTS 11 CONT .

[EX(i) A PROMISE TO HOST A LUNCH FOR A FRIEND ON HIS BIRTHDAY IS NOT LEGALLY ENFORCEABLE (AS IT IS ONLY A SOCIAL OBLIGATION) (ii) ANTONY PROMISES A PRIEST THAT HE WOULD DONATE RS. 10,000/- IF HE GETS A FIRST CLASS [ONLY A MORAL OBLIGATION] (iii) A HUSBAND PROMISED HIS WIFE TO PAY RS. 500 PM AS POCKET MONEY. HE LATER STOPPED PAYING IT. BOTH THESE AGREEMENTS ARE SOCIAL / RELIGIOUS / FAMILY OBLIGATIONS AND ARE NOT ENFORCEABLE IN LAW 3. THEREFORE IT IS SAID THAT ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE NOT CONTRACTS [BECAUSE SOME OF THEM ARE NOT LEGALLY 12 ENFORCEABLE]

IV. WHAT ARE THE INGREDIENTS OR ESSENTIAL REQUIREMENTS FOR AN AGREEMENT TO BECOME A CONTRACT 1. SECTION 10 PRESCRIBES TEN REQUIREMENTS FOR AN AGREEMENT TO BECOME A CONTRACT 2. IF ANY ONE OF THE REQUIREMENTS ARE NOT MET, THE AGREEMENT WOULD NOT BE ENFORCEABLE IN LAW AND HENCE WOULD NOT BECOME A CONTRACT 3. THE TEN REQUIREMENTS ARE: (i) THERE SHOULD BE A PROPER PROPOSAL (OFFER) AND ITS PROPER ACCEPTANCE (ii) THERE MUST BE AN INTENTION TO CREATE LEGAL RELATIONS (iii) THERE MUST BE A LAWFULL 13 CONSIDERATION CONT

(iv) THE PARTIES SHOULD HAVE LEGAL CAPACITY OR COMPETENCY TO ENTER INTO A CONTRACT (v) THEIR CONSENT MUST BE FREE ([WITHOUT COERCION] (vi) THE OBJECT OF THE AGREEMENT SHOULD BE LAWFULL (vii) IF THE LAW REQUIRES IT TO BE IN WRITING OR REGISTERED IT SHOULD BE COMPLIED WITH (vii) THERE SHOULD BE CERTAINITY OF MEANING (ix) THERE SHOULD BE POSSIBILITY IF 14 PERFORMANCE CONT

(x) IT SHOULD NOT FALL UNDER CERTAIN CATEFORIES OF AGREEMENTS WHICH HAVE BEEN EXPRESSLY PROHIBITED OR DELCARED AS ILLEGAL [MS=2.4 PG = 30-33 SG = 38-42 CB=4-5 MK=8-13

15

V.

WHAT ARE THE CLASSIFICATION OF CONTRACTS? (1) ON THE BASIS OF ENFORCEABILITY: (a) VALID CONTRACTS [MA=2.4, MK-13 (b) VOID CONTRACTS [MS=2.9 MK-14 (c) VOIDABLE CONTRACTS [MS=2.9, MK=13 (d) ILLEGAL CONTRACTS [MS=2.9, MK=17 CONT ..

16

(2) ON THE BASIS OF MODE OF CREATION/ FORMATION: (a) EXPRESS CONTRACT [MS=2.10, MK=18 (b) IMPLIED CONTRACT [MS=2.11, MK=18 (c) QUASI CONTRACT [NOT STRICTLY A CONTRACT] (3) ON THE BASIS OF EXTENT OF PERFORMANCE: (a) EXECUTED CONTRACT [MS=2.11 MK=19 (b) EXECUTORY CONTRACT [MS=2.11 MK=19 (4) ON THE BASIS OF OBLIGATIONS: (a) UNILATERAL (2) BILATERAL (3) MULTILATERAL [MS=2.9 to 2.12 PK=34, SG=42-43, CB=6-8 17 MK =13-20]

VI. WHAT IS MEANT BY VOID AGREEMENTS, VOID CONTRACTS, VOIDABLE CONTRACTS 1) VOID AGREEMENT ACCORDING TO SECTION 2(g) AN AGREEMENT NOT ENFORCEABLE BY LAW IS VOID [ VOID MEANS EMPTY] AN AGREEMENT NOT SUPPORTED BY : (a) CONSIDERATION (b) FREE CONSENT (c) COMPETENT PARTIES (d) WHEN THE OBJECT IS UNLAWFULL [A VOID AGREEMENT IS AB-INIT10 VOID [MS=2.9 MK=15 SG=46]18

VOID CONTRACT ACCORDING TO SECTION 2 (j) A CONTRACT WHICH WAS INITIALLY VALID, BUT BECAME SUBSEQUENTLY INVALID IS A VOID CONTRACT FROM THE DATE IT BECOME INVALID. [MS=2.9, MK=14 S=46, ] [AN AGREEMENT WITH A FOREIGN NATIONAL BECOMES VOID WHEN WAR IS DECCARED BETWEEN THE TWO COUNTRIES] 3) VOIDABLE CONTRACT ACCORDING TO SECTION 2(i) 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 OR 19 OTHERS CONT

2)

[EX

A PARTY WHO HAS GIVEN HIS CONSENT TO AN AGREEMENT BY MISTAKE, MISREPRESENTATION, FRAUD, COERCION OR UNDER UNDUE INFLUENCE HAS THE OPTION TO RESCIND OR CANCEL OR AVOID THE CONTRACT. ONLY HE HAS THE OPTION TO AVOID AND NOT THE OTHER PARTY IF THE WISHES, HE CAN PROCEED WITH THE CONTRACT] [MS=29 MK=14 ]20

VII.WHAT IS MEANT BY ILLEGAL AGREEMENTS, UNLAWFULL AGREEMENTS, UN-ENFORCEABLE CONTRACTS? (1) ILLEGALAGREEMENT AN AGREEMENT IS SAID TO BE ILLEGAL WHEN THE PURPOSE OR OBJECT FOR WHICH IT HAS BEEN FORMED IS BASED ON COMMITTING A CRIME [MS=2.10 MK=17]21

(2) UNLAWFULL AGREEMENT AN AGREEMENT IS SAID TO BE UNLAWFULL, WHEN IT HAS BEEN ENTERED INTO AMONG PARTIES CONTRARY TO THE PROVISIONS OF LAW. SUCH AN AGREEMENT IS ONLY UNLAWFULL AMONG THE PARTIES TO THE AGREEMENT AND NOT AGAINST A STRANGER [MS=2.10 MK=17]22

(3) WHAT IS MEANT BY UNENFORCEABLE CONTRACT AN AGREEMENT WHICH IS OTHERWISE VALID BUT CANNOT BE ENFORCED FOR WANT OF PROCEDURAL FORMALITIES OR TECHNICAL FAULTS LIKE WRITTEN ON INSUFFICIENT STAMP PAPER. [MS=2.10 MK=17]

23

VIII.WHAT IS MEANT BY EXPRESS CONTRACT OR IMPLIED CONTRACT? (1) CONTRACTS WHICH ARE EXPRESSED ORALLY OR IN WRITING ARE CALLED EXPRESS CONTRACTS (2) WHERE THE OFFER AND ACCEPTANCE ARE MADE OTHERWISE THAN IN WORDS IT IS CALLED IMPLIED CONTRACTS IT IS IMPLIED FROM THE BEHAVIOUR OR BODY LANGUAGE OF THE PARTIES [MS 2.10 & 2.11 , MK = 18-19 ] 24

IX. WHAT IS MEANT BY QUASI CONTRACT OR CONSTRUCTIVE CONTRACTS (1) SUCH CONTRACTS DO NOT EMENATE OUT OF ANY AGREEMENTS AND HENCE ARE NOT CONTRACTS IN THE STRICT SENSE OF THE TERM CONTRACT (2) THE REALITY IS, IN CERTAIN SPECIAL CIRCUMSTANCES COURTS INTERPRET IT AS IF THERE WAS AN AGREEMENT (3) IT IS BASED ON THE PRINCIPAL OF EQUITY25

(4) SECTION 68-72 OF THE ICA DESCRIBES THE CASES WHICH WILL BE DEEMED AS QUASI- CONTRACTS (5) EX. (i) LIABILITY OF A FINDER OF LOST GOODS TO RETURN IT TO THE OWNER (ii) IF MONEY IS PAID BY MISTAKE TO THE WRONG PERSON HE IS OBLIGATED TO RETURN IT [MK-19 ]26

X. 1.

2.

3.

WHAT IS MEANT BY EXECUTED, EXECUTORY CONTRACTS EXECUTED CONTRACT WHEN THE OBLIGATIONS UNDER THE CONTRACT HAVE BEEN DISCHARGED IT BECOMES AN EXECUTED CONTRACT EXECUTORY CONTRACT A CONTRACT IN WHICH THE OBLIGATIONS BY EITHER PARTY ARE TO BE PERPORMED AT A FUTURE DATE EX. A AGREES TO SELL HIS CAR TO B FOR RS 1LAKH AND RECIEVES AN ADVANCE OF RS.1,000/- AND GIVE DELIVERY WHEN THE BALANCE IS PAID27

XI. WHAT IS MEANT BY THE TERMS OFFER (OR PROPOSAL) AND ACCEPTANCE UNDER ICA 1872 ? 1. SECTION 2(a) DEFINES OFFER OR PROPOSAL AS FOLLOWS: (i) WHEN A PERSON SIGNIFIES HIS WILLINGNESS TO ANOTHER PERSON (ii) IN RESPECT OF DOING OR ABSTAINNG FROM DOING SOMETHING (iii) WITH A VIEW TO OBTAINING THE ASSENT OF THE OTHER HE IS SAID TO BE MAKING A PROPOSAL28

[EX- RAM CONVEYS HIS INTENTION TO SELL HIS HOUSE NO 27 ON HOSUR ROAD FOR RS. 10 LAKHS TO SITA, MADE WITH AN INTENTION TO OBTAIN HER ASSENT IDEA CONVEYED IS KNOWN AS A PROPOSAL OR OFFER 2. THERE ARE CERTAIN RULES FOR MAKING A VALID OFFER LIKE: i. A STATEMENT OF INTENTION IS NOT AN OFFER AS IT IS NOT INTENDED TO CREATE LEGAL OBLIGATIONS [I AM MULLYING THE IDEA OF SELLING MY LAPTOP TO PROF. RAM] IT MUST BE INTENDED TO CREATE LEGAL OBLIGATIONS CONT . 29

ii.

IT CAN BE BY WORDS OR BY CONDUCT [EXPRESS OR IMPLIED] EXPRESS RAM SAYS TO SHYAM I WILL SELL MY CAR TO YOU FOR RS. 3 LAKHS IMPLIED BMTC RUNS BUSES ON ROADS, IT IS IMPLIED THAT PASSANGERS USING IT MUST PAY iii. THE TERMS OF OFFER MUST BE CERTAIN OR CAPABLE OF BEING MADE CERTAIN [IT SHOULD NOT BE AMBIGOUS] EX- RAM SAYS TO SHAYM I WILL SELL YOU A CAR, RAM HAS THREE CARS. THE PROPOSAL IS NOT CERTAIN AS TO WHICH CAR. CONT .30

iv.

v.

AN OFFER MUST BE DISTINGUISHED FROM AN INVITATION TO OFFER OR A QUOTATION [AN AUCTIONER OFFERING A GOOD ON AUCTION, OR BARGAIN ADVERTISEMENTS/ PRICE CATALOGUES ARE NOT OFFERS, BUT THE PERSON RESPONDING IS SAID TO BE MAKING AN OFFER AND NOT THE AUCTIONER. IF THERE ARE SOME SPECIAL CONDITIONS ATTACHED TO THE OFFER IT SHOULD BE NOTIFIED. [QUOTATION INVITED WITHIN 3 DAYS OF ADVERTISEMENT APPLY THROUGH E-MAIL ETC]

[MS=3.2-3.3 PG=34-35 SG=47-48 CB=13-14 ] 3.8 MK=22-3031

XII.WHAT IS MEANT BY ACCEPTANCE AND WHAT ARE THE ESSENTIALS OF A VALID ACCEPTANCE SECTION 8 & 9 LAY DOWN THE RULES TO CONVERT A PROPOSAL INTO A PROMISE i. ACCEPTANCE MUST BE ABSOLUTE AND UNQUALIFIED [SUBJECT TO OR CONDITIONAL ACCEPTACE NOT ALLOWED] ii. MODE OF ACCEPTANCE MUST BE IN SOME USUAL OR REASONABLE MODE OR IN THE PRESCRIBED MODE iii. MERE MENTAL ACCEPTACE IS NOT 32 ENOUGH IN LAW

iv. ACCEPTANCE MUST BE COMMUNICATED TO THE PROPOSER v. ACCEPTANCE MUST BE GIVEN WITHIN REASONABLE TIME AND BEFORE THE PROPOSAL LAPSES OF IS REVOKED vi. ACCEPTANCE OF THE PROPOSAL MUST BE TOTAL (OF ALL THE TERMS) vii. ACCEPTANCE MUST BE BY A CERTAIN PERSON [NOT BY AN ANONYMOUS PERSON] viii. ACCEPTANCE NEED NOT NECESSARILY BE IN WORDS [INSURANCE COMPANY ENCASHING A CHEQUE IS ENOUGH PROOF OF ACCEPTANCE] 33 CONT

ix. AN ACCEPTANCE GIVEN IN IGNORANCE OF OFFER WILL NOT BE VALID [SERVANT TRACED MASTORS SON WITHOUT KNOWING THE REWARD OFFER] [MS=4.1-4.9 PG=38-39, SG=52-55 CB=15-18 MK=28-34]

34

XIII.WHAT ARE REQUIREMENTS OF COMMUNICATING A: A PROPOSAL AN ACCEPTANCE OR A REVOCATION? 1. COMMUNICATION OF A PROPOSAL IS COMPLETE WHEN IT COMES TO THE KNOWLEDGE OF THE PERSON TO WHOM IT IS MADE [WHEN THE LETTER CONTAINING THE PROPOSAL REACHES THE PROPOSEE] 2. THE COMMUNICATION OF ACCEPTANCE IS COMPLETE: a) AS AGAINST THE PROPOSER WHEN IT IS PUT IN COURSE OF TRANSMISSION AND IS GONE OUT OF THE REACH OF THE PROPOSER [WHEN THE PROPOSAL LETTER IS PUT IN THE POST BOX] CONT35

b) 3. a)

b)

AS AGAINST THE ACCEPTOR WHEN IT COMES TO HIS KNOWLEDGE [WHEN THE LETTER REACHES HIM] COMMUNICATION OF REVOCATION (WITHDRAWAL OF OFFER) IS COMPLETE: AS AGAINST THE PERSON WHO MAKES IT, WHEN IT IS PUT INTO A COURSE OF TRANSMISSION TO THE PERSON TO WHOM IT IS MADE SO AS TO GO OUT OF THE REACH OF THE PERSON REVOKING. [WHEN REVOCATION LETTER IS POSTED] AS AGAINST THE PERSON TO WHOM IT IS MADE, WHEN IT COMES TO HIS KNOWLEDGE [WHEN LETTER IS RECEIVED BY HIM] CONT36

4.

TIME DURING WHICH AN OFFER OR ACCEPTANCE CAN BE REVOKED a) A PROPOSAL CAN BE REVOKED AT ANY TIME BEOFRE THE COMMUNICATION OF ITS ACCEPTANCE b) ACCEPTANCE MAY BE REVOKED AT ANY TIME BEFORE THE COMMUNICATION OF ACCEPTANCE IS COMPLETE AS AGAINST THE ACCEPTOR BUT NOT AFTERWARDS [MS=4.7 PG=40 SG=54-55 CB=18-21 37 MK=34-35]

XIV.WHAT IS CONSIDERATION AND WHAT ARE THE ESSENTIALS OF VALID CONSIDERATION 1. SECTION 2 (d) OF ICA DEFINES CONSIDERATION AS WHEN AT THE DESIRE OF THE PROMISOR, THE PROMISEE OR ANY OTHER PERSON HAS DONE OR ABSTRAINED 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 MAKING THE PROMISE CONT .38

2.

CONSIDERATION IS ALSO KNOWN AS QUID PRO QUO THAT IS SOMETHING IN RETURN FOR SOMETHING DONE OR FOR ABSTAINING FROM DOING SOMETHING [RAM AGREES TO PAY SHYAM RS. 10,000/- IF HE DOES NOT PRESS THE SUIT FILED AGAINST RAM OR WITHDRAWS THE POLICE COMPLAINT] 3. THAT SOMETHING IN RETURN IS CALLED CONSIDERATION 4. CONSIDERATION IS THE PRICE FOR WHICH THE OTHER PERSON S PROMISE IS BOUGHT. 5. AS PER SECTION 10 & 25 A CONTRACT WITHOUT CONSIDERATION IS HELD TO BE VOID AND NOT ENFORCEABLE [HOWEVER THERE ARE A FEW EXCEPTIONS TO THIS RULE] 39 [MS=51 MK=40 CB=23 PG=41 SG=67]

XV. WHAT ARE ESSENTIALS OF A VALID CONSIDERATION ? 1. CONSIDERATION SHOULD HAVE BEEN PROVIDED AT THE DESIRE OF THE PROMISOR ONLY a) ACT OR ABSTINENCE BY MR. B SHOULD HAVE BEEN AT THE REQUEST OF MR. A b) VOLUNTARY OR GRATUITOUS ACTS BY B NOT REQUESTED BY A WOULD NOT AMOUNT TO CONSIDERATION c) DESIRE OF THE PROMISOR COULD BE EXPRESS OR IMPLIED CONT .40

d)

ACT OR ABSTYNENCE BY B COULD BE FOR THE BENEFIT OF A OR ANY THIRD PERSON [EX. MR. D CONSTRUCTED A MARKET AT THE REQUEST OF THE COLLECTOR MR A THE SHOP KEEPERS USING THE MARKET PROMISED D TO PAY A COMMISSION TO D ON THE BASIS OF THEIR GOODS SOLD. IF HE LATER BACK-TRACKED, MR D CANNOT ENFORCE PAYMENT BECAUSE THE MARKET WAS NOT CONSTRUCTED AT THE REQUEST OF THE SHOP KEEPERSSHOE SHINE BOYS IN THE TRAIN POLISHED SHOES WITHOUT BEING ASKED COCONUT PLUCKER PLUCKED NUTS WITHOUT BEING ASKED] 41 CONT .

2. a) b)

CONSIDERATION MAY MOVE FROM THE PROMISEE OR ANY OTHER THIRD PERSON: THE RETURN PROMISE (CONSIDERATION) MAY BE PERFORMED BY THE PROMISEE HIMSELF OR BY ANY THIRD PARTY HOWEVER THE THIRD PARTY (MR C ) CANNOT SUE MR A FOR NON PERFORMANCE AS HE IS NOT A PARTY TO THE CONTRACT [FLOWER BOQUET DELIVERY] A BEQUEATED RS. 10 LAKHS TO HIS DAUGHTER ON CONDITION THAT SHE WILL GIVE AN ANNUITY OF RS 1 LAKH TO HIS SISTER (GIRL S AUNT. SHE SIGNED AN AGREEMENT WITH HER ANUTY TO THIS EFFECT. CONT . 42

3. a)

AND AFTER HER FATHER S DEATH SHE REFUSED TO PAY THE ANNUITY TO THE AUNTY ON THE GROUND THAT AUNTY HAD NOT OFFERED HER ANY CONSIDERATION AND HENCE THERE IS NO VALID CONTRACT BETWEEN HER AND HER AUNTY. COURTS HLED THOUGH THE AUNTY HAD NOT GIVEN ANY CONSIDERATION TO THE NEICE, THE CONSIDERATION [PAYMENT OF 10 LAKHS WAS MADE BY A THIRD PERSON-HER BROTHER AND HENCE THE CONTRACT BETWEEN AUNT AND NIECE IS VALID AND ENFORCEABLE] CONSIDERATION NEED NOT BE IN CASH OR KIND EVEN ACTS OF ABSTAINING OR FOREBEARING LIKE PROMISE OF NOT TO SUE OR WITHDRAWAL OF SUIT IS HELD TO BE VALID CONSIDERATION CONT .43

4.

CONSIDERATION COULD BE PAST, PRESENT OR FUTURE a) CONSIDERATION RECEIVED BEFORE EXECUTION OF CONTRACT (PAST) [REWARD FOR SAVING FROM DROWNING] b) WHEN CONSIDERATION IS FOR A CURRENT FAVOUR (PRESENT) c) CONSIDERATION MAY BE TO DO A FUTURE ACT OR NOT TO DO A FUTURE ACT [A PROMISES NOT TO COMPETE AGAINST B IN NEXT YEARS SPORTS] CONT .44

5. a)

b) 6.

CONSIDERATION NEED NOT BE FULL OR ADEQUATE IT NEED NOT BE ADEQUATE OR EQUIVALENT TO THE VALUE OF THE PROMISE [MR A AGREES TO SELL HIS BIKE COSTING RS 1 LAKH TO HIS NEPHEW B FOR RS 10,000/- AND A S CONSENT WAS GIVEN FREELY. THE AGREEMENT IS VALID AND ENFOCEABLE THOUGH THE CONSIDERATION IS INADEQUATE HOWEVER INADEQUATE CONSIDERATION COULD GIVE RISE TO LITIGATION WHETHER THE CONSENT WAS FREE OR NOT CONSIDERATION MUST BE REAL AND NOT ILLUSORY CONT .45

a)

b)

CONSIDERATIONS WHICH CANNOT BE PHYSICALLY OR LEGALLY ACHIEVED WOULD NOT BE PROPER CONSIDERATION [(1) A PROMISES TO REVIVE B S DEAD WIFE FOR RS 10,000 AND RECEIVES AN ADVANCE (2) A JUDGE S SON AGREED TO GET A FAVOURABLE JUDGEMENT FROM HIS FATHER IN FAVOUR OF B FOR CONSIDERATION OF RS 10,000. B REFUED TO PAY] CONSIDERATION SHOULD NOT BE UNCERTAIN OR ILLUSORY [A AGREES TO PAY A REASONABLE COMMISSION TO B] CONT .46

7. CONSIDERATION MUST NOT BE FOR SOMETHING WHICH THE OTHER IS LEGALLY BOUND TO DO [A AGREED TO PAY B THE RTO THE FEE FOR THE DRIVING LICENCE + RS 1000/-] [MS=5.1& 5.2, CB=24-25, SG=68 MK=41-46 PK=41- 42]

47

XVI. AN AGREEMENT WITHOUT CONSIDERATION IS VOID [ACCORIDNG TO SECTION 25] WHAT ARE THE EXCEPTIONS TO THIS RULE? 1. CONSIDERATION BEING ONE OF THE ESSENTIAL INGREDIENTS OF A VALID CONTRACT, AS A GENERAL RULE AN AGREEMENT MADE WITHOUT CONSIDERATION IS VOID AND NOT ENFORCEABLE 2. THERE ARE 7 EXCEPTIONS TO THIS RULE AND THE EXEPTIONS ARE: a) AS PER SECTION 25 (1) AN AGREEMENT MADE OUT OF LOVE AND AFFECTION WITHOUT ANY CONSIDERATION IS VALID IF IT MEETS ALL THE FOLLOWING CONDITIONS: i. IT MUST BE EXPRESSED IN WRITING 48 CONT

ii. iii. iv.

IT MUST BE REGISTERED UNDER THE LAW OF REGISTRATION MADE ON ACCOUNT OF NATURAL LOVE AND AFFECTION IT MUST BE BETWEEN PARTIES WHO ARE NEAR RELATIONS TO EACH OTHER [(1) A AGREES TO PAY HIS SON S DEBT TO THE SON S DEBTORS (2) A AGREES TO PAY HIS QUARRELLING WIFE TO STAY AWAY FROM HIM HELD NOT VALID AS THE AGREEMENT WAS NOT FOR LOVE AND AFFECTION (3) NON WRITTEN OR NON REGISTERED WOULD ALSO NOT BE VALID IF REGISTRATION IS MANDATORY] CONT49

3.

4. 5.

AS PER SECTION 25 (2) AN AGREEMENT TO COMPENSATE FOR PAST VOLUNTARY SERVICE IS VALID EVEN IF THERE IS NO CONSIDERATION A RESCUED B FROM DROWING. ON RETURNING HOME, B PROMISES TO PAY A RS 1000/- THIS IS A VALID CONTRACT THOUGH A HAD DONE IT WITHOUT ANY EXPECTATION. [ PAST CONSIDERATION] AS PER 25 (3) AGREEMENTS TO PAY TIME BARRED DEBT IS VALID EVEN WITHOUT ANY FRESH CONSIDERATION EXPLANATION TO SECTION 25 (1) SAYS A GIFT IF ALREADY MADE BY DONOR TO DONEE SHALL BE VALID EVEN WITHOUT CONSIDERATION CONT50

[IN THIS CASE DONEE NEED NOT BE A RELATIVE] [I GAVE ALL MY STAMP / COIN COLLECTIONS TO A STUDENT IN THE COLLEGE] 6. ACCORDING TO SECTION 63 FOR REMISSION OR COMPROMISING A DEBT NO CONSIDERATION IS NECESSARY [AGREEING TO EXTEND TIME FOR REPAYMENT AGREEING TO CLOSE DEBT FOR A LOWER AMOUNT] 7. ACCORDING TO SECTION 185 NO CONSIDERATION IS REQUIRED FOR EXECUTING AN AGREEMENT OF AGENCY 8. NO CONSIDERATION REQUIRED FOR MAKING CONTRIBUTIONS TO CHARITY [MS 5.6 5.7, MK= 47 50, CB= 29 30, PG=42 SG= 67 68]51

XVII.WHAT IS MEANT BY PRIVITY TO CONTRACT? [ ONLY PARTIES TO A CONTRACT CAN SUE OR BE SUED- ARE THERE ANY EXCEPTIONS TO THIS RULE] OR A STRANGER TO A CONTRACT CANNOT SUE 1. IT IS A FUNDAMENTAL PRINCIPLE OF LAW OF CONTRACT THAT A STRANGER TO A CONTRACT CANNOT SUE, ONLY A PERSON WHO IS A PARTY TO A CONTRACT CAN SUE OR BE SUED. EX. A MORTGAGES HIS PROPERTY TO B IN CONSIDERATION OF B S PROMISE TO A TO PAY A S DEBTS TO C . B DID NOT KEEP HIS PROMISE. C CANNOT SUE B AS C IS NOT A PARTY TO THE AGREEMENT BETWEEN A & B CONT52

2. a)

b)

THE RULE THAT STRANGER TO A CONTRACT CANNOT SUE HAS THE FOLLOWING EXCEPTIONS: IN CASE OF CREATION OF A TRUST A BENEFICIARY CAN SUE THE TRUSTEES FOR DEMANDING HIS BENEFITS THOUGH HE IS NOT A PARTY TO THE TRUST AGREEMENT] IN CASE OF FAMILY ARRANGEMENTS OR SETTLEMENTS [WHEN A FAMILY PARTITION AGREEMENT PROVIDED FOR THE MARRIAGE EXPENSES OF FEMALE MEMBER EVEN WHEN SHE IS NOT A PARTY TO THE AGREEMENT] CONT53

c)

WHEN THE DEPENDANT ADMITS HIMSELF TO BE AGENT OF THE THIRD PARTY [ A RECEIVES SOME MONEY FROM B TO BE PAID TO C AND HE ADMITS THIS TO C. C CAN THEN SUE A TO RECOVER THIS AMOUNT FROM A] d) IN CASE OF AGREEMENTS SIGNED BY AGENTS THE PRINCIPAL CAN SUE THE THIRD PARTY ON AN AGREEMENT SIGNED BY HIS AGENT AND THE THIRD PARTY [PROVIDED AGREEMENT IS WITHIN THE SCOPE OF AGENCY] e) IN CASE OF ASSIGNMENT OF RIGHTS UNDER A CONTRACT [AN ASSIGNEE/ NOMINEE CAN SUE FOR BENEFIT, THOUGH HE IS NOT A PARTY TO THE CONTRACT] [MS=5.4 5.5, MK=43 44, CB= 27 28, SG=40] 54

XVIII.WHAT IS MEANT BY COMPETENCY OR CAPACITY TO CONTRACT? 1. AN ESSENTIAL INGREDIENT OF A VALID CONTRACT IS THAT IT SHOULD HAVE BEEN EXECUTED BY COMPETENT PERSONS OR PERSONS WHO HAVE THE LEGAL CAPACITY TO ENTER INTO LEGAL OBLIGATIONS [SN 10] 2. SECTION 11 SPELLS OUT THE CRITERIA FOR DETERMINING THE COMPETENCY OR THE CAPACITY FOR ENTERING INTO CONTRACTS 3. SECTION 11 DECLARES THE FOLLOWING PERSONS AS INCOMPETENT TO ENTER INTO CONTRACTS: i. A MINOR ACCORDING TO THE LAW TO WHICH HE IS SUBJECT TO, ii. IF HE IS OF UNSOUND MIND, AND iii. IF HE IS SPECIFICALLY DISQUALIFIED FROM ENTERING INTO A CONTRACT BY LAW 55

XIX.WHO IS A MINOR? 1. ACCORDING TO SECTION 3 OF THE INDIAN MAJORITY ACT 1875, AN INDIAN NATIONAL IS A MINOR TILL HE COMPLETES 18 YEARS 2. IF HE IS A WARD COMING UNDER THE GUARDIAN AND WARDS ACT, HIS MINORITY56

XX. WHAT IS THE LEGAL IMPLICATIONS OF AGREEMENTS INVOLVING MINORS 1. AN AGREEMENT WHICH PUTS OBLIGATION ON A MINOR IS VOID AND NOT ENFORCEABLE [A MINOR AGREED TO MORTGAGE HIS HOUSE TO MR B FOR RS 20,000AND RECEIVED AN ADVANCE OF RS 8000/- MR B CAN NEITHER ENFORCE THE MORTGAGE OR DEMAND REFUND OF THE ADVANCE] 2. AN AGREEMENT CONFERING BENEFITS ON THE MINOR IS A VALID AGREEMENT AND IS ENFORCEABLE BY THE MINOR [A MINOR PAID AN ADVANCE FOR THE 57 PURCHASE OF AN IMMOVABLE PROPERTY

3. a)

b)

4.

AGREEMENTS OF APPRENTICESHIP OR SERVICE BY MINORS AN AGREEMENT SIGNED ON BEHALF OF A MINOR (BY PARENT / GUARDIAN) TO UNDERGO APPRENTICESHIP (FOR THE DEVELOPMENT & EMPLOYABILITY OF THE MINOR) IS VALID AND ENFORCEABLE AGAINST THE MINOR AN AGREEMENT ON BEHALF OF MINOR SIGNED BY PARENTS / GUARDIANS TO RENDER SERVICE IN AN ORGANISATION IS NOT VALID AND NOT ENFORCEABLE RATIFICATION ON ATTAINING MAJORITY WILL NOT VALIDATE THE AGREEMENT 58 AN AGREEMENT ENTERED INTO WHILE A

5. a) b) c)

6. a)

THE RULE OF ESTOPPEL DOES NOT APPLY TO A MINOR RULE OF ESTOPPEL SAYS A PERSON CANNOT GO BACK ON HIS ADMISSIONS THIS RULE IS NOT APPLICABLE TO MINORS A MINOR ENTERED INTO AN AGREEMENT DECLARING THAT HE IS A MAJOR. WHEN HE LATER DECLARED THAT HE WAS A MINOR THE OPPOSITE PARTY TRIED TO APPLY THE RULE OF ESTOPPEL. COURTS REFUSED TO APPLY RULE OF ESTOPPEL ON THE MINOR MINOR S LIABILITIES FOR RECEIPT OF NECESSITIES 59 A MINOR RECEIVED NECESSITIES FROM A SHOP KEEPER [FOOD, CLOTHING, SHELTER]

b) COURTS HELD THE MINOR HAS NO PERSONAL OBLIGATION TO PAY, BUT IF THE MINOR HAS ANY PROPERTY, THE SHOP KEEPER CAN RECLAIM THE AMOUNT FROM ANY SUCH PROPERTY 7. AN AGREEMENT ENTERED ON BEHALF OF A MINOR BY HIS GUARDIAN OR MANAGER OF THE ESTATE IS BINDING ON THE MINOR a) IT CAN BE ENFORCED AGAINST THE MINOR AS WELL AS HIS PROPERTY PROVIDED THEY WERE SIGNING 60 AGREEMENTS WHICH THEY WERE

8. a) b)

c)

STATUS OF MINOR AS A PARTNER MINOR CAN NOT SIGN A PARTERSHIP AGREEMENT HOWEVER SECTION 30 OF THE ACTS SAYS A MINOR CAN RECEIVE BENEFITS UNDER A PARTNERSHIP AGREEMENT SIGNED ON HIS BEHALF BY HIS GUARDIAN HOWEVER THE GUARDIAN CANNOT ENTER INTO ANY AGREEMENT CASTING OBLIGATIONS ON THE MINOR [MINOR CAN RECEIVE PROFITS OF PARTNERSHIP FIRMS BUT MINOR CANNOT BE MADE RESPONSIBLE TO SHOULDER LOSSES INCURRED BY THE FIRM]CONT .61

9.

CAN A MINOR ACT AS AN AGENT AND SIGN CONTRACTS ON BEHALF OF ANOTHER a) ACCORDING TO SECTION 184 A MINOR CAN SIGN AN AGREEMENT AS AN AGENT CASTING OBLIGATIONS ON HIS MASTER OR PRINCIPAL 10. MINOR AND INSOLVENCY a) MINOR CAN NEVER BE DECLARED INSOLVENT b) IF ANY NECESSITIES ARE SUPPLIED TO HIM AND HE CANNOT PAY, HE CANNOT BE DECLARED AN INSOLVENT [AT BEST RECOVERY CAN BE ENFORCED AGAINST HIS PROPERTY FOR NECESSITIES SUPPLIED TO HIM] CONT . 62

11. A CONTRACT JOINTLY ENTERED INTO BY A MINOR AND MAJOR ON ONESIDE a) IN SUCH A CONTRACT THE MINOR WILL HAVE NO OBLIGATION, BUT THE MAJOR WILL BE HELD LIABLE [A MAJOR STOOD SURETY FOR A MINOR TO OBTAIN A STUDY LOAN FROM A BANK] 12. POSITION OF MINORS PARENTS a) PARENTS OF A MINOR ARE NOT LIABLE FOR AGREEMENTS SIGNED BY THE MINOR b) HOWEVER IF THE MINOR HAS SIGNED THE AGREEMENTS AS THE AGENT OF THE PARENTS, THE PARENTS ARE LIABLE CONT . 63

13. MINORS LIABILITY FOR TORT a) A TORT IS A CIVIL WRONG AND NOT A CONTRACTUAL WRONG b) MINOR IS NOT LIABLE FOR DAMAGE ARISING OUT OF CONTRACT BUT IS LIABLE FOR DAMAGE ARISING OUT OF TORT [A HORSE HIRER GAVE A HORSE TO A MINOR TO RIDE ON CONDITION THAT HE SHALL NOT MAKE THE HORSE JUMP. THE BOY GAVE THE HORSE TO HIS FRIEND WHO MADE THE HORSE JUMP AND INJURED THE HORSE. THE MINOR HAD DONE AN ACT NOT 64 VISUALISED IN THE CONTRACT AND THIS IS A TORT FAULT AND THE MINOR IS LIABLE TO

XXI.WHAT IS THE LEGAL STATUS OF AGREEMENTS EXECUTED BY PERSONS OF UNSOUND MIND ? 1. WHAT IS MEANT BY UNSOUND MIND SECTION 12 DEFINES UNSOUND MIND AS FOLLOWS: 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 UNDERSTANDING IT AND FORMING A65 RATIONAL JUDGEMENT AS TO ITS

2.

3.

4.

THIS SECTION FURTHER STATES THAT A PERSON WHO IS USUALLY OF UNSOUND MIND, BUT OCCASIONALLY OF SOUND MIND CAN SIGN A VALID CONTRACT DURING THE SPELL HE WAS OF SOUND MIND [A PATIENT IN A LUNATIC ASSYLUM CAN SIGN] A PERSON WHO IS USUALLY OF SOUND MIND, BUT OCCASSIONALLY OF UNSOUND MIND CAN NOT MAKE A CONTRACT DURING THE SPELLS HE IS OF UNSOUND MIND. [MR. A IS SOBER DURING DAY TIME AND DEAD DRUNK AFTER 8PM TILL 6 AM CANNOT BIND HIMSELF WHEN HE IS DRUNK OR A PERSON UNDER HYPNOTISM] UNSOUNDNESS OF MIND MAY BE DUE TO IDIOCY. SUCH PERSONS ARE HELD TO BE PERPETUALLY66 UNSOUND AND CANNOT SIGN ANY CONTRACTS [EX MENTALLY DEFORMED PERSONS]

XXII.WHAT ARE THE CATEGORIES OF PERSONS LEGALLY DECLARED TO BE INCOMPETENT TO SIGN CONTRACTS 1. AN ALIEN ENEMY CANNOT a) AN ALIEN IS A CITIZEN OF A FOREIGN COUNTRY b) AN ALIEN FRIEND CAN EXECUTE c) AN ALIEN ENEMY (A NATIONAL OF COUNTRY AGAINST WHOM INDIA HAS DECLARED A WAR) CANNOT ENTER INTO A CONTRACT DURING THE PERIOD OF SUCH DECLARATION d) VALID CONTRACT ENTERED BEFORE THE67 WAR WILL STAND SUSPENDED DURING THE WAR AND CAN BE RESUMED AFTER THE WAR

2. a) b) 3. a) b)

AGREEMENTS SIGNED BY SOVEREIGNS AND AMBASSADORS WHILE THEY CAN SUE OTHERS THEY CANNOT BE SUED FOR CONTRACTS ENTERED INTO BY THEM IF THEY ARE TO BE SUED, PRIOR PERMISSION HAS TO BE OBTAINED FROM THE CENTRAL GOVERNMENT A CONVICT A CONVICT CANNOT ENTER INTO CONTRACT DURING HIS PERIOD OF IMPRISONMENT OR 68 CANNOT SUE ON ANY CONTRACT SIGNED BEFORE IMPRISONMENT DURING THE

4.a) b) 5. a) b) 6. a)

A MARRIED WOMANSHE CAN ENTER INTO CONTRACT ONLY ON HER OWN PROPERTIES SHE CANNOT CONTRACT ON ANY PROPERTY BELONGING TO HER HUSBAND AN INSOLVENT AN INSOLVENT CAN INCUR DEBTS, BUT HE CANNOT SELL HIS PROPERTY IF HE OBTAINS A DISCHARGE THEN HIS RIGHTS ARE REVIVED JOINT STOCK COMPANIES & INCORPORATED COMPANIES THEY CAN ENTER INTO CONTRACTS ONLY IN AREAS OR SUBJECTS SPECIFICALLY APPROVED UNDER THEIR MEMORANDUM OF ASSOCIATION (UNDER 69 THE COMPANIES ACT 1956) ANY CONTRACTS SIGNED BY THE DIRECTORS ON

b)

XXIII.WHAT IS THE LEGAL STATUS OF AGREEMENTS WITHOUT FREE CONSENT ?1. a) WHAT IS CONSENT ? SECTION 13 OF THE ICA DEFINES THE TERM CONSENT AS TWO OR MORE PERSONS ARE SAID TO CONSENT WHEN THEY AGREE UPON THE SAME THING IN THE SAME SENSE (CONSENT INVOLVES IDENTITY OF MINDS OR CONSENSUS AD-IDEM ) CONSENT SIGNIFIES AN ACT DONE BY A PERSON KNOWINGLY + FEELINGLY + WILLINGLY BOTH PARTIES MUST AGREE UPON THE SAME THING IN THE SAME SENSE CONT .. 70

b) c)

2.

WHAT IS THE SIGNIFICANCE OF FREE CONSENT? a) AN AGREEMENT IS ENFORCEABLE AND BECOMES A CONTRACT ONLY WHEN THE CONSENT TO THE AGREEMENT IS FREE b) SECTION 14 DEFINES FREE CONSENT c) CONSENT IS SAID TO BE FREE WHEN IT IS NOT CAUSED BY: i. COERCION AS DEFINED IN SECTION 15, OR ii. UNDUE INFLUENCE AS DEFINED IN SECTION 16, OR iii. FRAUD AS DEFINED IN SECTION 17, OR iv. MISREPRESENTATION AS DEFINED IN SECTION 18, OR v. MISTAKE , SUBJECT TO SECTIONS 20,21&22 71 [MK= 64 65 MS= 7.1 & 8]

XXIV.WHAT IS THE IMPACT OF COERCION ON ENFORCEABILITY OF AN AGREEMENT 1. WHAT IS COERCION ? a) ACCORDING TO SECTION 15, COERCION IS THE COMMITTING OR THREATENING TO COMMIT ANY ACT FORBIDDEN BY THE INDIAN PENAL CODE (IPC), OR THE UNLAWFUL DETAINING OR THREATENING TO DETAIN, ANY PROPERTY, TO THE PREJUDICE OF ANY PERSON WHATEVER, WITH THE INTENTION OF CAUSING ANY PERSON TO ENTER INTO AN AGREEMENT .CONT72

b)

THE EXPLANATION TO SECTION 15 SAYS IT IS IMMATERIAL WHETHER THE IPC IS OR IS NOT IN FORCE IN THE PLACE WHERE THE COERCION IS EMPLOYED EX: (i) RELATIVES COMPEL A WIDOW TO ADOPT A CHILD OR ELSE WILL NOT ALLOW THE HUSBAND S BODY TO BE REMOVED FOR CREMATION. WIDOW LATER BACKED OUT. COURTS HELD HER CONSENT WAS UNDER COERCION (ii) A POINTS A PISTOL AND COMPELS A LAND LORD TO RENT HIS HOUSE [MS= 8.6 8.7 MK= 65 67 ] 2. WHAT IS THE EFFECT OF COERCION a) THE AGREEMENT / CONTRACT IS NOT TOTALLY VOID CONT73

b) IT IS VOIDABLE (OBLIGATIONS AVOIDABLE) BY THE PERSON WHOSE CONSENT WAS OBTAINED BY COERCION c) THE BURDEN OF PROOF OF THAT COERCION WAS USED WILL REST ON THE PARTY WHO WANTS TO ESCAPE THE OBLIGATIONS UNDER THE CONTRACT [MS= 8.6 8.7 MK= 66 67 ]74

XXV.WHAT IS THE IMPACT OF UNDUEINFLUENCE ON THE ENFORCEABILITY OF AN AGREEMENT? 1. WHAT IS MEANT BY UNDUEINFLUENCE? a) SECTION 16 (1) DEFINES THE TERM UNDUEINFLUENCE AS FOLLOWS: A CONTRACT IS SAID TO BE INDUCED BY UNDUEINFLUENCE WHERE: (i) 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 (ii) HE USES THE POSITION TO OBTAIN AN UNFAIR ADVANTAGE OVER THE 75 OTHER CONT .

b)

SECTION 16 (2) SAYS A PERSON IS DEEMED TO BE IN A POSITION TO DOMINATE THE WILL OF THE OTHER WHEN: (i) HE HOLDS A REAL OR APPARENT AUTHORITY OVER THE OTHER [RELATIONSHIP BETWEEN POLICE OFFICER & ACCUSED, MASTER & SERVENT] (ii) WHERE HE STANDS IN A FIDUCIARY RELATION WITH THE OTHER (FIDUCIARY MEANS RELATIONSHIP OF MUTUAL TRUST & CONFIDENCE) [FATHER & SON / DAUGHTER, GUARDIAN & WARD, SOLICITOR & CLIENT, DOCTOR & PATIENT, GURU & DISCIPLE, TRUSTEE & BENEFICIARY] OR 76 CONT ..

c)

d)

(iii) HE MAKES A CONTRACT WITH A PERSON WHOSE MENTAL CAPACITY IS TEMPORARILY OR PERMANENTLY AFFECTED BY REASON OF AGE, ILLNESS, MENTAL OR BODILY DISTRESS, OR ILLITERACY THE ONUS OF PROVING NO UNDUE INFLUENCE WAS USED WILL REST ON THE SHOULDERS OF THE PERSON WHO WAS IN A POSITION TO DOMINATE HOWEVER THERE IS NO PRESUMPTION OF UNDUE INFLUENCE IN THE CASE OF THE FOLLOWING RELATIONSHIPS: (a) HUSBAND & WIFE (b) PARENTS & CHILDREN (c) LANDLORD & TENET (d) CREDITOR & DEBTOR 77 CONT ..

2.

WHAT IS THE EFFECT OF UNDUEINFLUENCE a) THE CONTRACT IS NOT TOTALLY VOID b) IT IS VOIDABLE BY THE WEAKER PARTY IF THEY ESTABLISH THAT UNDUEINFLUENCE WAS USED [MS = 8.8 8.10 MK= 67 71 ]

78

XXVI.WHAT IS THE DISTINCTION BETWEEN COERCION & UNDUEINFLUENCEUNDUEINFLUENC E BY DOMINATING BY 1 METHOD THE WILL OF THE COMMITING OF OTHER THROUGH OBTAINING OR THREATENIN THE SPECIAL CONSENT G TO COMMIT RELATIONSHIP AN OFFENCE FORBIDDEN BY IPC79

BASIS

COERCION

2 NATUE OFFORCE

INVOLVES PHYSICAL FORCE

IT INVOLVES MORAL PRESSURE AND IS SUBTLE IN CHARACTER

3 PRESUMPT THERE IS NOION

THERE IS PRESUMPTIO PRESUMPTION OF UNDUEINFLUENCE N OF COERCION. IT IN CASE OF CERTAIN TYPE OF MUST BE RELATIONSHIPS PROVED BY THE PARTY ALLEGING COERCION 80 CONT .

4 PLACE

THREAT MAY OF USE BE COMMITTED IN INDIA OR OUTSIDE INDIA 5 CRIMINAL IT ENTAILS ELEMENT CRIMINAL LIABILITY 6 RELATIO THERE MAY NSHIP NOT BE ANY RELATIONSHIP BETWEEN THE PARTIES

IT MUST HAVE BEEN EXERCISED ONLY IN INDIA IT DOES NOT ENTAIL CRIMINAL LIABILITYTHERE MUST BE SOME SPECIAL RELATIONSHIP BETWEEN THE PARTIES SUCH THAT ONE OF THEM CAN DOMINATE THE WILL OF THE OTHER81

XXVII.WHAT IS THE LEGAL STATUS OF AGREEMENTS (OR CONSENT) OBTAINED BY FRAUD? 1. WHAT IS MEANT BY THE TERM FRAUD a) ACCORDING TO SECTION 17 FRAUD MEANS AND INCLUDES ANY OF THE FOLLOWING ACTS COMMITTED BY A PARTY TO THE CONTRACT OR WITH HIS CONNIVANCE OR BY HIS AGENT TO INDUCE ANOTHER TO ENTER INTO THE CONTRACT b) IT INCLUDES THE FOLLOWING ACTS: i. SUGGESTING SOMETHING AS TRUE WHEN IT IS NOT TRUE BY ONE WHO DOES NOT BELIEVE IT TO BE TRUE ii. ACTIVE CONCEALMENT OF FACT BY A PERSON WHO HAS KNOWLEDGE OR BELIEF OF THE FACT 82 CONT .

iii. iv. v. 2. a) b) c)

A PROMISE MADE WITHOUT ANY INTENTION OF PERFORMING IT ANY OTHER ACT FITTED TO DECEIVE ANY OTHER ACT OR OMISSIONS AS THE LAW SPECIFICALLY DECLARES TO BE FRAUD CAN MERE SILENCE AMOUNT TO FRAUD SECTION 17 OUT LINES WHEN SILENCE AMOUNTS TO FRAUD AS A GENERAL RULE SILENCE IS NOT FRAUD SILENCE IS FRAUDULENT IF THE CIRCUMSTANCES OF THE CASE ARE SUCH THAT IT IS THE DUTY OF THE PERSON KEEPING SILENCE TO SPEAK: [A BROKER SOLD HIS OWN SHARES TO A BUYER WITHOUT DISCLOSING THAT IT WAS HIS OWN SHARES BUYER CAN REFUSE TO TAKE IT] CONT . 83

d) i.

ii. iii. iv.

THERE IS A DUTY TO SPEAK ON THE PART OF THE PERSON KEEPING SILENCE IN THE FOLLOWING TYPES OF CONTRACTS: IN CONTRACTS OF GOOD FAITH LIKE: CONTRACTS OF INSURANCE / SALE OF IMMOVEABLE PROPERTY/CONTRACTS OF MARRIAGE / CONTRACTS FOR PURCHASE OF SHARES & FAMILY CONTRACTS CONTRACTS OF PARTNERSHIP (PARTNERS SHOULD BE JUST & FAITHFUL TO EACH OTHER) CONTRACTS OF GUARANTEE (THE CREDITOR MUST DISCLOSE ALL MATERIAL FACTS ABOUT THE DEBTOR TO THE SURETY WHERE THE PARTIES STAND IN FIDUCIARY (TRUST) RELATIONSHIP TO EACH OTHER CONT . 84

v. vi.

e)

3. a)

CONTRACTS TO MARRY CHANGE OF CIRCUMSTANCES (WHEN A STATEMENT MADE WAS TRUE AT TIME OF MAKING BUT CHANGE IN CIRCUMSTANCES MADE IT UNTRUE) IN CERTAIN CIRCUMSTANCES SILENCE IS EQUIVALENT TO SPEECH [IF YOU DO NOT DENY IT, I SHALL PRESUME THAT THE HORSE IS SOUND. A SAYS NOTHING. A S SILENCE IS EQUAL TO SPEECH WHAT IS THE EFFECT OF FRAUD THE PARTY DEFRAUDED HAS THE FOLLOWING REMEDIES: SUIT FOR RECISION PROVIDED THE SUIT IS FILED WITHIN REASONABLE TIME CONT .85

b)

c) 4. a) b) c) d)

SUIT FOR SPECIFIC PERFORMANCE AND TO REQUIRE OTHER PARTY TO PUT HIM IN A POSITION IN WHICH HE WOULD HAVE BEEN IF THE REPRESENTATION MADE HAD BEEN TRUE SUE THE OTHER PARTY FOR DAMAGES THE RIGHT OF RECISION (AVOIDING) IS LOST IN THE FOLLOWING CASES: WHEN THE DEFRAUDED PARTY PROCEEDS WITH THE CONTRACT EVEN AFTER BECOMING AWARE OF THE FRAUD THE PARTIES CANNOT BE RESTORED TO THEIR ORIGINAL POSITIONS THE THIRD PARTIES HAVE ACQUIRED RIGHTS IN GOOD FAITH AND AFTER PAYING GOOD CONSIDERATION (PRICE) THE AGRIEVED PARTY COULD HAVE DISCOVERED THE TRUTH BY ORDINARY DILIGENCE [ 86 [MS = 8.3 8.5, MK=75 78, CB=44- 46]

XXVIII.WHAT IS THE LEGAL STATUS OFAGREEMENTS OR CONTRACTS OBTAINED BY MISREPRESENTATION? WHAT AMOUNTS TO MISREPRESENTATION ACCORDING TO SECTION 18 MISREPRESENTATION MEANS AND INCLUDES THE FOLLOWING: A POSITIVE ASSERTION, IN A MANNER NOT WARRANTED BY THE INFORMATION OF THE PERSON MAKING IT, OF THAT WHICH IS NOT TRUE, THOUGH HE BELIEVES IT TO BE TRUE ANY BREACH OF DUTY WITHOUT AN INTENT TO DECIEVE BY WHICH THE PERSON GETS AN ADVANTAGE BY MISLEADING ANOTHER TO HIS DISADVANTAGE CONT 87

1.

a)

b)

c)

d) i.

CAUSING, HOWEVER INNOCENTLY, A PARTY TO AN AGREEMENT TO MAKE A MISTAKE AS TO THE SUBSTANCE OF THE THING WHICH IS THE SUBJECT MATTER OF THE AGREEMENT THE MISREPRESENTATION MAY BE CAUSED BY ANY ONE OF THE FOLLOWING WAYS: BY MAKING UNWARRANTED STATEMENTS [A TELLS B, WITHOUT CHECKING RECORDS THAT IN HIS FACTORY 1000TONS OF ICE IS PRODUCED EVERY MONTH. A BELIEVES THIS TO BE TRUE. THE ACTUAL PRODUCTION IS ONLY 800 TONS. A= IS GUILTY OF MISREPRESENTATION] 88CONT

ii.

iii.

e)

BREACH OF DUTY COMMITTING A BREACH OF DUTY WITHOUT INTENTION TO DECIEVE [ A TELLS THE INSURANCE AGENT THAT HE IS 25 YEARS OLD AND LIC ISSUES HIM A POLICY BASED ON WHICH PREMIUM COMPUTED ON 25. A IS ACTUALLY 27 (HE DID NOT KNOW HIS CORRECT AGE) INNOCENTLY INDUCING MISTAKE ABOUT THE SUBJECT MATTER. PRODUCER TELLS BUYER THERE IS MOTORABLE ROAD TO CARRY OUR MACHINERY TO YOUR PLANT. THERE WAS A WEAK BRIDGE ON THE WAY WHICH WAS NOT COMMUNICATED MISREPRESENTATION CAN ARISE NOT ONLY FROM MISSTATEMENT OF FACTS, BUT ALSO FROM SUPRESSION OF FACTS (THOUGH 89 MADE INNOCENTLY) CONT

2.

WHAT IS THE EFFECT OF MISREPRESENTATION ON THE ENFORCEABILITY OF THE AGREEMENT i. THE AGGRIEVED PARTY HAS 2 COURSES OF ACTION: a) HE CAN RESCIND (REFUSE TO PROCEED WITH THE CONTRACT), OR b) PROCEED WITH THE CONTRACT AND INSIST ON RESTITUTION THAT IS TO BE PUT IN A POSITION HE WOULD HAVE BEEN, IF THE REPRESENTATION MADE WOULD HAVE BEEN TRUE [SECTION 19 (2)] ii. THE CONTRACT WILL NOT BE VOIDABLE IF THE PARTY ALLEGING MISREPRESENTATION COULD HAVE DISCOVERED THE TRUTH WITH ORDINARY DILIGENCE [MS= 8.1 & 8.2, MK= 72 74 , CB= 46 90 ] 47

XXIX.WHAT IS THE DISTINCTION BETWEEN FRAUD AND MISREPRESENTATION?BASIS OF MISREPRESE DIFFERENCE NTATION FRAUD THE FALSE STATEMENT IS MADE BY A PERSON WHO KNOWS IT TO BE FALSE OR MAKES IT RECKLESSLYWHETHER IT IS TRUE OR FALSE

1 BELIEFOR HONESTY

PERSON MAKING THE FALSE STATEMENT HONESTLY BELIEVES IT TO BE TRUE

CONT .. 91

2 INTENTION TO DECEIVE 3 IMPLICATI ON

NO INTENTION TO DECEIVE IT MAKES THE CONTRACT VOIDABLE IN THE HANDS OF THE AFFECTED

THERE IS INTENSTION TO DECEIVE NOT ONLY IS THE CONTRACT VOIDABLE THE AFFECTED PARTY CAN SUE FOR DAMAGES

CONT .. 92

IN CERTAIN CASES LITY CRIMINAL IT CAN BECOME A OFFENCE CRIMINAL UNDER IPC OFFENCE PUNISHABLE UNDER IPC AGGRIEVED THE CONTRACT IS 5 ON DISCOVE CANNOT AVOID VOIDABLE RY OF THE CONTRACT THOUGH THE TRUTH IF HE COULD AGGRIEVED HAVE COULD HAVE DETECTED THE DISCOVERED THE MISTAKE WITH MISTAKE WITH ORDINARY ORDINARY DILIGENCE DILIGENCE 93

4 CRIMINA IT IS NOT A

XXX.WHAT IS THE LEGAL STATUS OF AGREEMENTS / CONTRACT BROUGHT ABOUT BY MISTAKE ? 1. WHAT IS MISTAKE ? MISTAKE MAY BE DEFINED AS ERRONEOUS BELIEF CONCERNING SOMETHING. IT MAY BE OF 2 KINDS: a) MISTAKE OF LAW b) MISTAKE OF FACT 2. WHAT IS MEANT BY MISTAKE OF LAW? a) THIS AGAIN CAN BE OF 2 TYPES: i. MISTAKE OF LAW OF ONES OWN COUNTRY ii. MISTAKE OF FOREIGN LAW b) MISTAKE OF OWN LAW IS NOT EXCUSABLE CONT ..94

c) 3. a) i. ii. b)

4.

MISTAKE OF FOREIGN LAW VITIATES THE CONTRACT AND RENDERS IT VOID (IT HAS THE SAME EFFECT AS MISTAKE OF FACT) WHAT IS MEANT BY MISTAKE OF FACT? THIS AGAIN CAN BE OF 2 TYPES: BILATERAL MISTAKE OR UNILATERAL MISTAKE WHEN BOTH PARTIES TO A CONTRACT MISUNDERSTOOD THE FACTS THERE IS A BILATERAL MISTAKE AND HENCE THERE IS NO PROPER OFFER OR ACCEPTANCE. WHAT ARE THE CONTINGENCIES OF BILATERAL MISTAKES [BOTH MAKING MISTAKES] THAT MAKE THE AGREEMENT VOID? CONT . 95

a)

b)

MISTAKE AS TO THE EXISTENCE OF THE SUBJECT MATTER [X AGREED TO BUY FROM Y 100 TONNES OF WHEAT ARRIVING BY SHIP HIMALAYA FOR RS 1 LAKH. UNKNOWN TO BOTH THE SHIP HAD SUNK-THE CONTRACT IS VOID] MISTAKE AS TO IDENTITY OF THE SUBJECT MATTER. X AGREED TO BUY FROM Y 100 TONNES OF WHEAT ARRIVING FROM CANADA BY SHIP-CANBARA. UNKNOWN TO BOTH THERE WERE TWO SHIPS BY THE SAME NAME ONE LEAVING IN SEPTEMBER AND OTHER IN DECEMBER DUE TO MISTAKE IN IDENTITY AGREEMENT NOT ENFORCEABLE CONT .96

c)

d)

MISTAKE REGARDING THE QUALITY OF THE SUBJECT MATTER (IF THE QUALITY OF SUBJECT MATTER HAS BEEN MUTUALLY MIS UNDERSTOOD) [X AGREED TO BUY AT AN AUCTION THE PAINTING OF PICASSO SUBSEQUENTLY IT CAME TO BE KNOWN THAT IT WAS NOT THE ORIGINAL PAINTING THE AGREEMENT IS VOID] MISTAKE REGARDING QUANTITY OF THE SUBJECT MATTER (WHERE THE QUANTITY PURCHASED WAS DIFFERENT FROM WHAT WAS INTENDED) [X INSPECTED 50 RIFLES PUT UP BY Y FOR SALE. X SEND A TELEGAM SUPPLY THREE RIFLES . THE TELEGRAM WAS RECEIVED Y AS SUPPLY THE RIFLES . 97 CONT .

e)

f)

Y SHIPPED ALL 50 RIFLES. HELD THERE WAS NO CONTRACT THOUGH THE MISTAKE WAS CAUSED BY A THIRD PARTY] MISTAKE RAGARDING PRICE OF THE SUBJECT MATTER [X OFFERED TO BUY Y S CAR FOR RS. 75000/- Y DECLINED THE OFFER ON THE GROUNDS THAT THE PRICE WAS TOO LESS. AFTER A MONTH X RECEIVED A TELEGRAM AGREEABLE TO SELL FOR RS. 7500/-. X IMMEDIATELY ACCEPTED THE OFFER. THE AGREEMENT WAS HELD NOT ENFORCEABLE AS X KNEW VERY WELL THAT THE PRICE QUOTED WAS A MISTAKE] MISTAKE REGARDING TITLE (OWNERSHIP) OF THE SUBJECT MATTER CONT . 98

[X AGREED TO PURCHASE A PROPERTY FROM Y FOR RS. 10 LAKHS UNKNOWING THAT PROPERTY HAD REALLY BELONGED TO HIM. HELD THE AGREEMENT WAS VOID] g) MISTAKE REGARDING PHYSICAL OR LEGAL POSSIBILITY OF PERFORMANCE [AN AGREEMENT,TO HIRE ROOMS TO WATCH THE KINGS CORONATION CEREMONY. UNKNOWN TO BOTH PARTIES THE ROAD PARADE OF THE CORONATION WAS CANCELLED FOR SECURITY REASONS. AGREEMENT WAS HELD TO BE VOID FOR PHYSICAL IMPOSSIBILITY OF PERFORMANCE 99 CONT .

5.

WHAT IS THE EFFECT WHEN THE MISTAKE IS ONLY UNILATERAL OR BY ONE OF THE PARTIES ONLY a) SECTION 22 LAYS DOWN THAT A CONTRACT WILL NOT BECOME VOID MERELY BECAUSE ONE OF THE PARTIES TO THE AGREEMENT IS UNDER A MISTAKE ON THE SUBJECT MATTER OF THE AGREEMENT. THUS UNILATERAL MISTAKES DO NOT EFFECT THE VALIDITY OF THE CONTRACT [X AGREED TO LEND HIS LAPTOP TO Y FOR 3 TRIMESTERS. Y ACCEPTED IT BY MISTAKE THINKING IT IS FOR 3 SEMESTERS. Y CANNOT REFUSE TO HAND OVER THE LAPTOP AFTER 3 TRIMESTERS OR REFUSE TO PAY THE AGREED RENT] [MS= 7.1 7.10, MK=80 86, CB=48 52]100

XXXI.WHAT IS MEANT BY UNLAWFUL AGREEMENTS? 1. AN AGREEMENT BECOMES VALID AND ENFORCEABLE ONLY IF BOTH THE CONSIDERATION AND THE OBJECT OF THE AGREEMENT ARE LAWFUL 2. SECTION 23 STIPULATES THAT THE OBJECT AND CONSIDERATION OF AN AGREEMENT SHALL BE UNLAWFUL IN THE FOLLOWING CASES IF: i. IT IS FORBIDDEN BY LAW [SELLING CONTROLLED ARTICLES ABOVE THE PRICE FIXED BY ESSENTIAL COMMODITIES ACT 1956] ii. IT IS OF SUCH A NATURE THAT IF PERMITTED IT WOULD DEFEAT THE PROVISIONS OF LAW [ AN AGREEMENT BY A DEBTOR NOT TO RAISE THE PLEA OF LIMITATION IN A SUIT FILED BY THE CREDITOR] CONT . 101

iii. IT IS FRAUDULENT (AN AGREEMENT TO DIVIDE THE GAINS ACQUIRED BY FRAUD) iv. IT INVOLVES OR IMPLIES INJURY TO THE PERSON OR PROPERTY OF ANOTHER [AN AGREEMENT TO INDEMNIFY A PERSON AGAINST THE CONSEQUENCES OF PUBLICATION OF SCANDALOUS OR LIBEL MATERIAL] v. THE COURTS REGARD IT AS IMMORAL OR OPPOSED TO PUBLIC POLICY [AN AGREEMENT TO HIRE A HOUSE FOR PROMOTING PROSTITUTION OR STORING SMUGGLED GOODS] [MS MK= 49 90]102

XXXII.WHAT ARE THE KINDS OF AGREEMENTS HELD TO BE OPPOSED TO PUBLIC POLICY? 1. THE FOLLOWING TYPES OF AGREEMENTS HAVE BEEN HELD TO BE OPPOSED TO PUBLIC POLICY AND THEREFORE ARE VOID: i. TRADING WITH ENEMY DURING WAR ii. STIFLING PROSECUTION [AGREEMENTS WHICH SEEK TO ABSOLVE AN OFFENDER OR TO WITHDRAW A CRIMINAL PROSECUTION] iii. MAINTENANCE & CHAMPERTY a) MAINTENANCE AGRGEEMENTS THAT SEEKS TO PROVIDE FINANCIAL ASSISTENCE TO BRING OR DEPEND A LAW SUIT OR TO FOMENT LITIGATION CONT ..103

b)

CHAMPERTY AN AGREEMENT TO SHARE THE BENEFIT TO BE DERIVED FROM A LAW SUIT c) COURTS WILL NOT ENCOURAGE AN AGREEMENT THAT IS EXTORTIONATE [AN AGREEMENT TO PAY THE LAWYER ACCORDING TO THE RESULT OF THE CASE] iv. FOR INTEREFERING WITH THE COURSE OF JUSTICE [AGREEMENTS FOR USING ANY KIND OF IMPROPER INFLUENCE ON JUDGES AND LAW ENFORCEMENT OFFICERS] v. FOR TRAFICKING IN PUBLIC OFFICES AND TITLES 104 CONT ..

[AGREEMENT FOR PURCHASE OR SALE OF PUBLIC OFFICES, APPOINTMENTS, PROCUREMENT OF REWARD OR TITLES PADMASHREE , DRONACHARYA AWARDS ETC] vi. MARRIAGE BROKERAGE AGREEMENTS [AGREEMENTS TO PROCURE MARRIAGES FOR REWARD OR AGREEMENTS TO PAY MONEY TO PARENT OR GUARDIAN TO GIVE A MINOR DAUGHTER IN MARRIAGE] vii. AGREEMENTS RESTRICTING PERSONAL LIBERTY [X BORROWED MONEY FROM Y AND SIGNED AN AGREEMENT NOT TO CHANGE HIS ADDRESS TILL THE MONEY IS FULLY PAID] 105 CONT ..

viii. AGREEMENTS IN RESTRAINT OF PARENTAL RIGHTS [RIGHT OF PARENT / GUARDIANSHIP CANNOT BE SOLD THROUGH AN AGREEMENT] ix. AN AGREEMENT WITH A PUBLIC OFFICIAL TO DO SOMETHING OPPOSED TO HIS DUTY x. AGREEMENTS INTERFERING WITH MARITAL RIGHTS [LENDING MONEY TO A WOMAN TO OBTAIN DIVORCE AND THEREAFTER TO MARRY HIM] xi. AGREEMENTS TO INCREASE OF REDUCE THE PERIOD OF LIMITATION xii. AGREEMENTS TO DEFRAUD CREDITORS OR REVENUE AUTHORITIES CONT .. 106

2. i.

EFFECT OF UNLAWFUL AGREEMENTS: EVERY AGREEMENT WITH THE OBJECT OR CONSIDERATION WHICH IS UNLAWFUL IS AB-INITIO-VOID ii. ANY COLLATERAL TRANSACTION TO SUCH AGREEMENTS IS ALSO VOID iii. IN CASE THE PARTIES ARE EQUALLY GUILTY, THE DEPENDENT IS IN A BETTER POSITION iv. AN AGREEMENT IS VOID EVEN IF ONLY A PART OF THE OBJECT OR CONSIDERATION IS UNLAWFUL[MS= 9.1 9.19, MK=92 98, CB= 55 58]107

XXXIII.WHAT ARE TYPES OF AGREEMENTS THAT HAVE BEEN EXPRESSLY DECLARED AS VOID UNDER THE ICA? [ WHAT ARE VOID AGREEMENTS] 1. WE HAVE ALREADY SEEN THAT AGREEMENTS WITH MINOR OR UNSOUND PERSONS WITH BILATERAL MISTAKE, WITH UNLAWFUL CONSIDERATION OR WITH NO CONSIDERATION ARE NOT LEGALLY ENFORCEABLE. IN ADDITION TO THESE ICA EXPRESSLY DECLARES 7 TYPES OF AGREEMENTS AS AB INITIO VOID 2. THE FOLLOWING AGREEMENTS ARE EXPRESSLY DECLARED AS VOID UNDER THE ICA: 108 CONT ..

i. ii. iii. iv. v. vi. vii.

AGREEMENTS IN RESTRAINT OF MARRIAGE (SEC 26) AGREEMENTS IN RESTRAINT OF TRADE (SEC 27) AGREEMENTS IN RESTRAINT OF LEGAL PROCEEDINGS (SEC 28) AGREEMENTS THE MEANING OF WHICH IS UNCERTAIN (SEC 29) AGREEMENTS BY WAY OF WAGER (SEC 30) AGREEMENTS CONTINGENT ON IMPOSSIBLE EVENTS (SEC 36) AGREEMENTS TO DO IMPOSSIBLE ACTS (SEC 56) CONT .. 109

3. i. ii. 4. a) b)

WHAT IS THE DIFFERENCE BETWEEN ILLEGAL AGREEMENTS & VOID AGREEMENTS COLLATERAL AGREEMENTS TO AN ILLEGAL AGREEMENT ARE ALWAYS VOID COLLATERAL AGREEMENTS TO THE 7 CATEGORIES LISTED ABOVE NEED NOT NECESSARILY BE ILLEGAL WHAT IS MEANT BY AGREEMENT IN RESTRAINT OF MARRIAGE IS VOID? EVERY ADULT ENJOYS THE FREEDOM TO MARRY SECTION 26 DECLARES THAT THE FOLLOWING KINDS OF AGREEMENTS PUTTING IMPEDIMENTS ON THIS RIGHT IS VOID: 110 CONT ..

i.

AN AGREEMENT AGREEING NOT TO MARRY AT ALL OR A CERTAIN PERSON OR FROM A PARTICULAR SECT / CASTE / RELIGION ii. OR MARRIAGE ONLY FOR A FIXED PERIOD c) HOWEVER AGREEMENTS RESTRAINING CHILD MARRIAGE IS NOT VOID [MS= 9.11 MK=101 CB=63]

111

5.

WHAT IS MEANT BY AGREEMENT IN RESTRAINT OF TRADE IS VOID? a) THE CONSTITUTION OF INDIA GUARANTEES THE FREEDOM TO CONDUCT TRADE & BUSINESS TO EVERY CITIZEN b) SECTION 27 DECLARES THAT EVERY AGREEMENT RESTRAINING ANOTHER PERSON FROM EXERCISING A LAWFUL PROFESSION, TRADE OR BUSINESS TO THAT EXTENT IS VOID c) HOWEVER THIS SECTION PROVIDES THE FOLLOWING EXCEPTIONS: i. SALE OF GOODWILL 112 CONT

ii.

AGREEMENT RESTRAINING PARTNERS NOT TO CARRY ON INDEPENDENT BUSINESS IN COMPETITION WITH THE PARENT FIRM WHILE THEY REMAIN AS PARTERS IS NOT VOID iii. A TRADE ASSOCIATION AGREEMENT INTENDED TO REGULATE AND NOT RESTRAINT TRADE IS NOT VOID iv. NEGATIVE STIPULATIONS IN SERVICE AGREEMENTS NOT TO SERVE ANOTHER MASTER WHILE SERVING THE MAIN MASTER IS NOT VOID [MS = 9.12 MK=102 103 CB=63 ] CONT113

6. i. a) b) c) d)

WHAT IS MEANT BY AGREEMENTS IN RESTRAINT OF LEGAL PROCEEDINGS IS VOID SECTION 28 DECLARES THE FOLLOWING KINDS OF AGREEMENTS AS VOID: ABSOLUTE RESTRICTION ON LEGAL PROCEEDINGS AGREEMENTS CURTAILING THE LIMITATION PERIOD EXINGUISHMENT OF CONTRACTUAL RIGHTS AFTER EXPIRY OF SPECIFIED PERIOD AGREEMENTS DICHARGING A PARTY FROM LIABILITY AFTER EXPIRY OF SPECIFIED PERIOD 114 CONT

ii. a) b) 7. i. ii.

THERE ARE TWO EXCEPTIONS TO THIS RULE: AN AGREEMENT TO REFER THE PRESENT DISPUTE TO ARBITRATION AN AGREEMENT TO REFER A FUTURE DISPUTE TO ARBITRATION [MS MK=104 105 CB=66] AGREEMENTS THE MEANING WHICH IS UNCERTAIN IS VOID [SN 29] COURTS WILL NOT ENFORCE AGREEEMNTS WHICH ARE NOT CERTAIN (VAGUE) OR WHICH IS NOT CAPABLE OF BEING MADE CERTAIN X AGREES TO SELL TO Y 100 TONNES OF OIL [NO INDICATION OF WHAT KIND OF OIL. HOWEVER IF HE WAS A DEALER ONLY IN COCONUT OIL, IT WOULD NOT BE A VAGUE AGREEMENT] 115 CONT

8. i.

ii. a) b)

WAGERING AGREEMENTS ARE VOID (Sn 30) WHAT IS WAGER (GAMBLING) WAGER IS A PROMISE TO GIVE MONEY OR MONEY S WORTH UPON DETERMINATION OR ASCERTAINMENT OF AN UNCERTAIN EVENT [X & Y MAKE AN AGREEMENT THAT X SHALL PAY Y RS. 500 IF IT RAINS ON MONDAY Y SHALL PAY X RS. 500 IF IT DOES NOT RAIN ON MONDAY] WHAT ARE ESSENTIAL INGREDIENTS OF A WAGER THERE MUST BE PROMISE TO PAY MONEY OR MONEY S WORTH THE PROMISE MUST BE CONDITIONAL ON THE HAPPENING OR NOT HAPPENING OF AN 116 EVENT CONT

c) d)

e) f) iii. a)

THE AGREEMENT MUST BE CONDITIONAL UPON THE HAPPENING OF AN UNCERTAIN EVENT BOTH PARTIES MUST STAND AN EQUAL CHANCE TO WIN OR LOSE ON DETERMINATION OF THE CONTEMPLATED EVENT NEITHER PARTY SHOULD HAVE CONTROL OVER THE HAPPENING OR NOT HAPPENING OF THE EVENT NEITHER PARTY SHOULD HAVE ANY INTEREST OTHER THAN THE SUM OR STAKE THAT HE STANDS TO WIN OR LOSE THE FOLLOWING ARE EXCEPTIONS TO THE WAGERING AGREEMENTS: HORSE RACING 117 CONT

b) c) d) e) f) iv.

CROSSWORD COMPETITIONS GAMES OF SKILL SHARE MARKET TRANSACTIONS CONTRACTS OF INSURANCE CHIT FUNDS WHAT IS THE DIFFERENCE BETWEEN WAGERING AGREEMENTS & INSURANCE CONTRACTSINSURANCE CONTRACTS THE ASSURED HAS AN INSURABLE INTEREST HIGHER THAN THE STAKE MONEY CONT118

WAGERING AGREEMENTS 1 THERE IS NO INSURABLE INTEREST EXCEPT THE STAKE MONEY

2 THESE ARE VOID AS THESE ARE NOT CONTRACTS OF INDEMNITY

3 THESE ARE CONDITIONAL

THESE ARE VALID CONTRACTS, AS THE OBJECT IS TO MAKE GOOD THE ACTUAL LOSS OF THE INSURED THESE ARE CONTRACTS OF INDEMNITY, EXCEPT INSURANCE ON LIFE WHICH IS A CONTINGENT CONTRACT119

CONT

4 IT IS JUST A GAMBLE 5 THERE IS NO BENEFIT TO SOCIETY

THESE ARE BASED ON SCIENTIFIC AND ACTURIAL CALCULATION OR RISKS IT IS A FORM OF SOCIAL COOPERATION

[MK= 106 107 CB= 67 69 ] v. AGREEMENTS TO DO IMPOSSIBLE ACTS ARE VOID (Sn 56) a) X AGREES WITH B TO TURN SILVER INTO GOLD BY MAGIC b) X AGREES WITH B TO RUN 100 KM IN 1 HOUR [MS MK= 109 CB-69]120

XXXIV.WHAT IS THE LAW PERTAINING TO CONTINGENT CONTRACTS [ Sn 31] 1. CONTRACTS MAY BE ABSOLUTE OR CONTINGENT a) ABSOLUTE CONTRACT: A CONTRACT IN WHICH PARTIES PERFROM THEIR RECIPROCAL PROMISES IN ALL EVENTS b) CONTINGENT CONTRACT : A CONTRACT TO DO OR NOT TO DO SOMETHING IF SOME EVENT COLLATERAL TO SUCH CONTRACT DOES OR DOES NOT HAPPEN 2. AN ORDINARY CONTRACT CAN BE CHANGED INTO A CONTINGENT CONTRACT IF ITS PERFORMANCE IS MADE DEPENDENT UPON THE HAPPENING OR NON-HAPPENING OF AN UNCERTAIN EVENT CONT . 121

3.

4. a)

b)

CONTRACTS OF INSURANCE, CONTRACTS OF GUARANTEE ARE POPULAR INSTANCES OF CONTINGENT CONTRACTS [1) X PROMISES TO SELL TO Y 100 TONNES OF COTTON IF HIS SHIP REACHES BOMBAY SAFELY 2) X PROMISES TO GIVE Y A LOAN IF HE IS ELECTED PRESIDENT OF THE COOPERATIVE SOCIETY] THE FOLLOWING ARE THE ESSENTIAL REQUIREMENTS OF A CONTINGENT CONTRACT [ Sn 32 & 33] THE PERFORMANCE OF THE CONTRACT DEPENDS UPON THE HAPPENING OR NOT HAPPENING OF SOME FUTURE UNCERTAIN EVENT THE FUTURE UNCERTAIN EVENT SHOULD BE COLLATERAL OR INCIDENTAL TO THE MAIN 122 CONTRACT CONT .

5.

WHAT IS THE DIFFERENCE BETWEEN WAGERING AGREEMENTS (GAMBLING) AND CONTINGENT CONTRACTS WAGERING CONTINGEN AGREEMENT T CONTRACT MUTUAL PROMISE REQUIRED MUTUAL PROMISE NOT NECESSARYCONT .

BASIS OF DIFFERE NCE 1 MUTUAL PROMISE

123

2 INTEREST PARTIES DO NOTIN THE SUBJECT MATTER HAVE INSURABLE INTEREST IN THE HAPPENING OR NOT HAPPENING OF THE EVENT AS SUCH. THEIR MAIN INTEREST IS IN WINNING OR LOSING THE HAPPENING OF FUTURE UNCERTAIN EVENT IS THE SOLE DETERMING FACTOR OF THE AGREEMENT

PARTIES HAVE SUBSTANTIAL INSURABLE INTEREST IN THE HAPPENING OR NOT HAPPENING OR THE EVENT

3 FUTUREEVENT

THE FUTURE EVENT IS NOT THE SOLE FACTOR IT IS ONLY INCIDENTIAL OR COLLATORAL TO THE MAIN AGREEMENT124

4 NATURE

THESE ARE CONTINGENT GAMBLING IN CONTRACTS SUCH AS NATURE INSUREANCE, INDEMNITY OR GUARANTEE ARE NOT WAGERS OR GAMBLES THERE NEED NOT BE 5 RECIPRO IT CONSISTS RECIPROCAL CAL OF PROMISE RECIPROCAL PROMISE PROMISE 6 VALIDITY IT IS VOID IT IS A VALID CONTRACT

[MS = 10.3

10.7

MK=110

114 CB= 73

76]125

XXXV.WHAT IS MEANT BY QUASI CONTRACT AND WHAT IS THE EXTENT OF ITS ENFORCEABILITY? 1. WHAT IS MEANT BY QUASI- CONTRACT a) UNDER THE LAW OF CONTRACTS OBLIGATIONS ARE VOLUNTARILY CREATED UPON EACH OTHER BY PARTIES TO THE CONTRACT b) IN CERTAIN CIRCUMSTANCES OBLIGATIONS MAY BE CREATED OR IMPOSED BY LAW EVEN WITHOUT THE EXISTENCE OF A CONTRACT c) SUCH IMPOSED OBLIGATIONS ARE CALLED QUASI- CONTRACTUAL OBLIGATIONS CONT 126.

d) SUCH OBLIGATIONS ARE IMPOSED BY COURTS ON THE EQUITY PRONCIPLE THAT NO MAN SHOULD GROW RICH AT THE COST OF ANOTHER e) QUASI- CONTRACTS ARE NOT CONTRACTS, BUT THE RELATIONSHIP OR OBLIGATIONS RESEMBLE THE RELATIONS/ OBLIGATIONS ARISING OUT OF CONTRACTS f) THE 5 TYPES OF QUASI-CONTRACTUAL OBLIGATIONS ARE OUTLINED IN SECTIONS 68 72 OF THE ICA 1872 2. THE 5 TYPES OF QUASI- CONTRACT OBLIGCATIONS ARE DESCRIBED BELOW: 127CONT .

CLAIMS FOR REIMBURSEMENT OF COST OF NECESSITIES SUPPLIED (Sn 68) i. IF A PERSON INCAPABLE OF ENTERING INTO A CONTRACT OR SOMEONE WHO IS LEGALLY BOUND TO SUPPORT SUCH HELPLESS PERSON IS SUPPLIED LIFE SUPPORTING ESSENTIALS, THE SUPPLIER IS ENTITLED TO BE REIMBURSED THE COST FROM THE PROPERTY OF THE INCAPABLE PERSON [X SUPPLIES FOOD AND MEDICINES TO A LUNATIC OR HIS GUARDIAN. THE SUPPLIER CAN CLAIM REIMBURSEMENT] NOTE: HE CAN ONLY CLAIM REIMBURSEMENT OF NECESSITIES AND NOT LUXURY ITEMS SUPPLIED [COST OF SCENTS, LIQUOR ETC WILL BE LUXURIES] CONT . 128

a)

b)

1.

i.

ii.

REIMBURSEMENT TO A PERSON PAYING MONEY DUE BY ANOTHER, IN THE PAYMENT OF WHICH THE PAYER IS INTERESTED (Sn 69) THE OBLIGATIONS OR RIGHT TO REIMBURSEMENT UNDER SECTION 69 WILL ARISE ONLY IF THE FOLLOWING CONDITIONS ARE FULFILED: THE PLAINTIFF (PETITIONER CLAIMING REIMBURSEMENT MUST HAVE AN INTEREST IN PAYING THE DEBT OWED BY THE DEPENDENT TO ANOTHER PARTY THE DEFENDENT SHOULD HAVE A STATUTORY OR CONTRACTUAL LIABILITY TO PAY THE DEBT CONT . 129

iii. THE PLAINTIFF (CLAIMANT) SHOULD HAVE ACTUALLY MADE THE PAYMENT TO THE OTHER PARTY [X BOUGHT A HOUSE FROM Y AND PAID HIM THE FULL PRICE IN 2008. AFTER AN YEAR MUNICIPAL AUTHORITIES SENT A NOTICE FOR ARREARS HOUSE TAX FOR THE EARLIER YEARS IN THIS HOUSE ADDRESS WITH A THREAT THAT THE HOUSE WILL ATTACHED / AUCTIONED IF THE ARREARS IS NOT PAID WITHIN 1 MONTH. X PAID THE TAX WHICH Y SHOULD HAVE PAID TO SAVE HIS PROPERTY FROM ATTACHMENT. X CAN SUE Y FOR REIMBURSEMENT OF THE ARREAR TAX PAID BY HIM TO THE 130 MUNICIPAL AUTHORITIES] CONT .

c) i.

OBLIGATION OF A PERSON ENJOYING THE BENEFIT OF NON-GRATITOUS ACT (Sn 70) IF A PERSON LAWFULLY DOES SOMETHING FOR ANOTHER PERSON OR DELIVERS ANYTHING TO HIM, NOT INTENDING TO DO SO GRATUITOUSLY (NOT FREE), AND SUCH OTHER PERSON HAS ENJOYED THE BENEFIT, THE LATER (ENJOYER) IS BOUND TO MAKE COMPENSATION TO THE FORMER (SUPPLIER) OR TO RESTORE OR RETURN THE THING SUPPLIED [SHOP KEEPER X SENT A SUPPLY OF PIZA TO A MR. REDDY ON THE THIRD FLOOR OF A BUILDING. THE DELIVERY BOY SUPPLIED THE PIZA BY MISTAKE TO ANOTEHR MR REDDY ON THE SECOND FLOOR. THE SECOND FLOOR REDDY AND FAMILY CONSUMED THE PIZA. THEY ARE BOUND TO PAY, THOUGH THEY NEVER ORDERED THE PIZA] 131 CONT .

d) i.

ii.

RESPONSIBILITY OF FINDER OF GOODS (Sn71) ACCORDING TO SECTION 71 A PERSON WHO FINDS GOODS BELONGING TO ANOTHER AND TAKES THEM INTO HIS CUSTODY, IS SUBJECT TO THE RESPONSIBILITIES OF A BAILEE (CUSTODIAN) THE RESPONSIBILITIES ARE AS FOLLOWS: TO TAKE REASONABLE CARE OF THE GOODS, WHICH A MAN OF ORDINARY PRUDENCE WOULD TAKE TAKE REASONALBE STEPS TO TRACE THE OWNER NOT TO MAKE UNAUTHORISED USE OF THE GOODS TO RETURN THE GOODS TO THE TRUE 132 OWNER CONT .

iii.

THE FINDER HOWEVER WILL HAVE THE FOLLOWING RIGHTS IN RESPECT OF THE GOODS FOUND: TO RECEIVE COMPENSATION FOR THE EXPENSES INCURRED BY HIM IN PRESERVING THE GOODS OR EXPENSES ON FINDING THE TRUE OWNER TO RETAIN POSSESSION UNTIL THE OWNER PAYS THE RIGHTFUL EXPENSES TO SELL THE GOODS IF THE TRUE OWNER CANNOT BE FOUND AFTER A REASONABLE SEARCH OR THE OWNER REFUSES TO PAY THE LAWFUL CHARGES AND WHEN THE GOODS ARE IN DANGER OF PERISHING OR THE CHARGES PAYABLE TO THE FINDER EXCEEDS TWO-THIRDS OF THE VALUE OF THE GOODS, TO SELL THE GOOD133

CONT .

e) LIABILITY OF THE PERSON TO WHOM MONEY HAS BEEN PAID OR ANYTHING DELIVERED BY MISTAKE [Sn 72] [X & Y JOINTLY OWES RS 100 TO Z. X PAYS THE FULL AMOUNT TO Z. Y NOT KNOWING THIS FACT PAYS ANOTHER RS. 100 TO Z. Z IS BOUND TO REFUND THE RS 100 TO Y] [MS 13.1 13.7, MK=142 147, CB=109 112, PG = 56 -57] 3. WHAT IS THE DISTINCTION BETWEEN A CONTRACT AND A QUASI- CONTRACT CONT .134

POINTS OF CONTRACT DISTINCTION 1 PURPOSE OBLIGATIONS ARISE FROM THE FREE WILL OF THE PARTIES A CONTRACT IS AN AGREEMENT

QUASICONTRACT OBLIGATIONS ARE IMPOSED BY EXTERNAL AGENCIES ON GROUNDS OF EQUITY THERE IS NO AGREEMENT AT ALL135

2 AGREEMENT

3 ESSENTIAL THE AGREEMENT ESSENTIALS FORELEMENT FULFILLS THE REQUIREMENTS OF MAKING IT A CONTRACT IT IS A FULLFLEDGED CONTRACT AND IS BINDING ON THE PARTIES FORMATION OF A CONTRACT (OFFER, ACCEPTANCE ARE MISSING) IT IS NOT A FULLFLEDGED CONTRACT. IT CAN AT BEST BE CALLED AN IMPLIED MORAL CONTRACT136

4 NATURE

XXXVI.WHAT IS MEANT BY DISCHARGE OF CONTRACT AND WHAT ARE VARIOUS MODES OF DISCHARGE? 1. WHAT IS MEANT BY DISCHARGE? A CONTRACT IS SAID TO BE DISCHARGED WHEN: a) THE PARTIES TO THE CONTRACT HAVE PERFORMED THEIR OBLIGATIONS RESPECTIVELY WITH THE TERMS OF THE AGREEMENT, OR b) THEY HAVE BEEN RELIEVED FROM FULFILLING THEIR OBLIGATIONS UNDER LAWCONT .. 137

2.

WHAT ARE THE METHODS UNDER WHICH A CONTRACT WILL STAND DISCHARGED? a) DISCHARGE BY PERFORMANCE b) DISCHARGE BY AGREEMENT c) DISCHARGE BY LAPSE OF TIME d) DISCHARGE BY OPERATION OF LAW e) DISCHARGE BY IMPOSSIBILITY & f) DISCHARGE BY BREACH OF CONTRACT [MS=10 10.2 MK=129 CB=76-77]138

XXXVII.WHAT IS MEANT BY DISCHARGE BY PERFORMANCE? 1. PERFROMANCE IS THE USUAL MODE OF DISCHARGE OF A CONTRACT 2. SECTION 37 & 38 PROVIDE THAT THE PARTIES MUST EITHER PERFORM, ATTEMPT TO PERFORM OR ATLEAST OFFER TO PERFORM UNLESS SUCH PERFORMANCE IS DISPENSED WITH OR EXCUSED UNDER THE PROVISIONS OF ICA OR ANY OTHER LAW 3. IF THE PROMISOR DIES BEFORE PERFORMANCE, HIS LEGAL REPRESENTATIVES MUST PERFORM UNLESS THE CONTRARY INTENTION APPEARS FROM THE CONTRACT CONT 139

4. a) b) c)

d)

AN OFFER TO PERFORM OR TENDER MUST SATISFY THE FOLLOWING REQUIREMENTS: IT MUST BE UNCONDITIONAL [Sn 38 (1)] IT SHOULD BE MADE AT FIXED OR PROPER TIME AND PLACE [Sn 38 (2)] REASONABLE OPPORTUNITY MUST BE GIVEN TO THE OTHER PARTY TO INSPECT AND SATISFY THAT THE PERFORMANCE IS IN ACCORDANCE WITH THE TERMS OF CONTRACT WHERE THERE ARE SEVERAL JOINT PROMISEES THE TENDER MADE TO ANY ONE OF THE JOINT PROMISEES WILL HAVE THE SAME AFFECT AS AN OFFER TO ALL OF THEM CONT 140

e) f) g) h)

TENDER CAN BE MADE TO THE PROMISEE OR HIS DULY AUTHORISED AGENT IT SHOULD BE AN OFFER TO PERFORM IN FULL IT SHOULD BE FOR DELIVERY OF GOODS OF THE RIGHT QUALITY AND QUANTITY IN CASE OF PAYMENT OF MONEY, THE TENDER MUST BE OF THE PRECISE AMOUNT AND IN TERMS OF LEGAL CURRENCY [ AN OFFER TO GIVE IN CHEQUE INSTEAD OF CASH MAY NOT SATISFY THE REQUIREMENT IF TURNED DOWN BY THE OTHER PARTY] CONT141

5. a) b) 6.

THERE ARE TWO KINDS OF TENDER: TENDER OF MONEY OR TENDER OF GOODS IN CASE OF PAYMENT OF MONEY, WHO SHOULD PERFORM CAN SOMEBODY OTHER THAN PROMISOR OR PROMISEE PERFORM? a) IF THE PROMISE TO PERFORM IS OF PERSONAL NATURE [SING, DANCE, SPEAK ETC] OR IF THE CONTRACT SPECIFICALLY INSISTS SO, THE PROMISOR HIMSELF MUST PERFORM 142 CONT

b)

c)

d)

CONTRACTUAL OBLIGATIONS WHICH ARE NOT OF PERSONAL IN NATURE COULD BE PERFORMED BY AN AGENT OF THE PROMISOR ON THE DEATH OF A PROMISOR, OBLIGATIONS NOT OF PERSONAL NATURE COULD BE PERFORMED BY THE LEGAL REPRESENTATIVES OF THE PROMISOR THIRD PARTIES MAY PERFORM THE PROMISE WHEN THEY ARE MADE ASSIGNS/NOMINEES BY THE PARTIES OR BY OPERATION OF LAW [X OWS Y RS 5000. Z A FRIEND OF X OFFERS RS 4000 TO Y AND HE ACCEPTS IT IN FULL SATISFACTION. Z CANNOT SUBSEQUENTLY SUE X FOR THE BALANCE] CONT 143

7.

a) b)

c)

WHAT IS THE IMPORTANCE OF TIME & PLACE OF PERFORMANCE OR WHAT IS MEANT BY TIME IS THE ESSENCE OF A CONTRACT CONTRACTING PARTIES MUST PERFORM THEIR PROMISES WITHIN THE TIME SPECIFIED OR AGREED IN COMMERCIAL TRANSACTIONS TIME IS TREATED AS AN ESSENTIAL INGREDIENT, WHILE IN NON-COMMERCIAL CONTRACTS, THERE IS NO SUCH PRESUMPTION WHEN TIME IS AN ESSENTIAL INGREDIENT, NON PERFORMANCE ON TIME MAKES THE CONTRACT VOIDABLE IN THE HANDS OF THE AGGRIEVED (Sn 55) CONT 144

d) WHEN TIME IS NOT THE ESSENCE OF THE CONTRACT, THE AGGRIEVED CAN SUE FOR COMPENSATION e) IF THE PROMISEE ACCEPTS ALTERNATE TIME OR PLACE OF DELIVERY, HE CANNOT THEN CLAIM COMPENSATION [MS=10.3 10.11 MK=114 12 CB=76 84 PG=57 58]145

XXXVIII.WHAT IS MEANT BY DISCHARGE OF CONTRACT BY AGREEMENT [Sn 62] 1. SINCE A CONTRACT IS CREATED BY AGREEMENT, IT MAY BE TERMINATED BY THE SAME METHOD OR MUTUAL CONSENT 2. THE DISCHARGE OF A CONTRACT BY AGREEMENT CAN TAKE THE FOLLOWING SHAPES: a) NOVATION (i) WHEN ALL PARTIES TO A CONTRACT AGREE TO REPLACE THE OLD CONTRACT WITH NEW CONTRACT (ii) IT MUST BE DONE BEFORE THE BREACH OR EXPIRY OF THE OLD CONTRACT b) RECISSION (i) IT TAKES PLACE WHEN ALL OR SOME OF THE TERMS OF THE CONTRACT ARE 146 CANCELLED CONT .

c)

d)

REMISSION (i) IT MEANS THE ACCEPTANCE OF A LESSER SUM THAN WHAT WAS CONTRACTED OR A LESSER FULFILLMENT OF THE PROMISE MADE (ii) IT MAY CONSIST OF EXTENTION OF TIME FOR PERFORMANCE OR ACCEPTANCE OF ALTERNATIVE SATISFACTION INSTEAD OF THE ORIGINAL PERFORMANCE WAIVER IT MEANS DELIBERATE / INTENTIONAL ABANDONMENT OR RELINQUISHMENT OF THE RIGHTS BY THE PARTIES TO A CONTRACT CONT . 147

MERGER IT TAKES PLACE WHEN AN INFERIOR RIGHT ACCRUING TO A PARTY UNDER A CONTRACT MERGES INTO A SUPERIOR RIGHT ACCRUING TO THE SAME PARTY UNDER THE SAME OR SOME OTHER CONTRACT [A TENENT GIVING UP HIS TENENCY RIGHTS WHEN HE BUYS UP THE SAME HOUSE] f) ALTERATION WHEN ONE OR MORE OF THE TERMS OF THE CONTRACT IS / ARE ALTERED BY MUTUAL CONSENT OF THE PARTIES TO THE CONTRACT. THE OLD CONTRACT IS DISCHARGED AND THE PARTIES BECOME BOUND BY A NEW CONTRACT [MS=10.12 10.16 MK= PG=59 CB=88] 148

e)

XXXIX.WHAT IS MEANT BY DISCHARGE OF CONTRACT BY IMPOSSIBILITY OF PERFORMANCE? 1. ACCORDING TO SECTION 56 OF ICA, AN AGREEMENT TO DO AN ACT IMPOSSIBLE ON THE FACE OF IT IS VOID [X PROMISES Y AN INDIAN NATIONAL TO GET HIM ELECTED AS PRESIDENT OF PAKISTAN] 2. IMPOSSIBILITY MAY BE OF 3 KINDS: a) IMPOSSIBILITY KNOWN TO THE PARTIES AT THE TIME OF MAKING THE CONTRACT. IN SUCH CASES THE AGREEMENT IS AB- INITIO VOID AS BOTH KNOW OF THE IMPOSSIBILITY 149 CONT

b)

c)

IMPOSSIBILITY UNKNOWN TO BOTH PARTIES AT THE TIME OF MAKING THE CONTRACT. IN SUCH CASE ALSO THE CONTRACT IS VOID DUE TO MUTUALITY OF THE MISTAKE [A SUPPLIER AGREES TO SHIP MATERIAL TO US ON SHIP WHICH SANK THE FACT OF SINKING SHIP WAS NOT KNOWN TO BOTH] IMPOSSIBILITY OR ILLEGALITY WHICH AROSE SUBSEQUENT TO THE FORMATION OF THE CONTRACT. IN SUCH CASE ALSO THE CONTRACT BECOMES VOID DUE TO IMPOSSIBILITY OF PERFORMANCE 150 CONT

3. a) b)

c)

CASES COVERED UNDER SUPERVENING IMPOSSIBILITY ARE AS FOLLOWS: DESTRUCTION OF THE SUBJECT MATTER [DEATH, SINKING, FIRE ETC] NON OCCURRENCE OF CONTEMPLATED STATE OF THINGS [X HIRED A FLAT IN LONDON TO VIEW THE CORONATION OF THE KING FROM A VANTAGE POSITION. THE CORONATION AND STREET PROCESSION WAS CANCELLED] UNANTICIPATED CHANGE OF CIRCUMSTANCES [CRICKET TICKET SALES. TOUR OF AUSTRALIANS CALLED OFF DUE TO TERROR THREAT] OR FUNCTION CANCELLED DUE TO BANDH] CONT 151

d) e) f) 4. a)

DEATH OR INCAPACITY OF A PARTY [ARTIST WHO WAS TO SING DIED OR GOT PARALYSED] CHANGE OF LAW [SALE OF LIQUOR AND INTRODUCTION OF PROHIBITION IN A STATE] OUTBREAK OF WAR [DURING THE CONTINUANCE OF THE WAR THE CONTRACT REMAINS SUSPENDED] HOWEVER THERE ARE SOME EXCEPTIONS TO THE DOCTRINE OF SUPERVENING IMPOSSIBILITY LIKE: IF PERFORMANCE BECAME CUMBERSOME OR DIFFICULT IT IS NOT SUFFICIENT GROUNDS TO ESCAPE LIABILITY [WEDDING CATEROR AGREED AT RS X PER PLATE. INFLATION AND COST OF INGREDIENTS GOING UP. CATERER HAS TO BEAR IT] 152 CONT

b)

c) d) e) 5. a) b)

DUE TO REDUCTION IN ANTICIPATED PROFITS [GOVERNMENT RAISED THE MINIMUM WAGES CONTRACTOR MUST COMPLETE THE JOB] SELF INDUCED IMPOSSIBILITY STRIKES, LOCKOUTS AND CIVIL DISTURBANCE IS NOT GROUNDS FOR ESCAPING LIABILITY PARTIAL IMPOSSIBILITY WILL NOT TERMINATE THE WHOLE CONTRACT EFFECT OF SUPERVENING IMPOSSIBILITY THE CONTRACT BECOMES VOID AND PARTIES ARE RELEASED FROM FURTHER PERFORMANCE IF ANY PERSON HAS RECEIVED ANY BENEFIT HE MUST RESTORE IT TO THE OTHER PARTY OR MAKE COMPENSATION FOR IT 153 [SN 56 & 65]

XL. WHAT IS MEANT BY DISCHARGE BY LAPSE OF TIME? 1. IF A CONTRACT IS NOT PERFORMED WITHIN THE PERIOD PRESCRIBED UNDER THE INDIAN LIMITATION ACT 1963, IT LAPSES. XLI. WHAT IS MEANT BY DISCHARGE BY OPERATION OF LAW? 1. A CONTRACT IS DISCHARGED BY OPERATION OF LAW IN THE FOLLOWING WAYS: a) DEATH OF THE PROMISOR b) INVOLVENCY OR MERGER c) UNAUTHORISED ALTERATION IN THE TERMS OF CONTRACT OR MATERIAL WITHOUT THE CONSENT OF THE OTHER PARTY [SUPPLY OF 154 BASMATI WITH SOME OTHER RICE]

XLII.WHAT IS MEANT BY DISCHARGE BY BREACH? 1. WHEN A PARTY FAILS TO PERFORM HIS OBLIGATION UNDER A CONTRACT, HE IS SAID TO HAVE COMMITTED A BREACH OF CONTRACT 2. BREACH CAN BE OF 2 TYPES: (a) ANTICIPATED BREACH & (b) ACTUAL BREACH 3. REMEDIES AGAINST ANTICIPATORY BREACH [Sn 39] AGGRIEVED PARTY CAN TREAT IT AS ACTUAL BREACH AND SUE FOR DAMAGES OR WAIT FOR THE DUE DATE AND SUE FOR DAMAGES THEREAFTER [MS= 11.2 12.6 MK= 128 140 PK=59 155 CB=94]

XLIII.WHAT IS THE DIFFERENCE BETWEEN SUPERVENING IMPOSSIBILITY AND DOCTRINE OF FRUSTRATION? SUPERVENING IMPOSSIBILITY 1 SUPERVENING IMPOSSIBILITY IS CONTEMPLATED IN SECTION 56 OF THE ICA DOCTRINE OF FRUSTRATION DOCTRINE OF FRUSTRATION (SIMILAR TO IMPOSSIBILITY) IS APPLICABLE UNDER ENGLISH LAWCONT .156

2 IMPOSSIBILITY OF PERFORMANCE HAS TO BE DECIDED BY COURTS AND NOT FOR THE PARTIES TO RAISE IT AS A DEFENCE 3 IN INDIAN LAW WHEN THE CONTRACT BECOMES IMPOSSIBLE TO PERFORM, ANY AMOUNT PAID AS ADVANCE OR BENEFIT ALREADY GIVEN MUST BE RETURNED TO THE PARTY CONCERNED UNDER THE PRINCIPLE OF QUASICONTRACT [Sn 64 & 65]

PARTIES CAN RAISE THE DOCTRINE OF FRUSTRATION AS A DEFENCE UNDER THE DOCTRINE OF FRUSTRATION, ANY MONEY THAT WAS ALREADY ADVANCED BY THE PROMISOR TO THE PROMISEE NEED NOT BE REFUNDED. THE STATUS-QUO WOULD BE MAINTAINED157

[MS = 11.7 ]

XLIV. WHAT ARE THE REMEDIES AVAILABLE1. a) b) c) d) e) 2.

TO THE AGGRIEVED FOR BREACH OF CONTRACT BY THE OTHER PARTY? THE ICA PROVIDES FOR THE FOLLOWING REMEDIES: SUIT FOR RECISION OF THE CONTRACT SUIT FOR CLAIMING DAMAGES SUIT OF CLAIMING QUANTUM MERUIT SUIT FOR SPECIFIC PERFORMANCE SUIT FOR INJUNCTION WHAT IS MEANT BY SUIT FOR RECISION THE COURT MAY GRANT RECISION (PERMISSION NOT TO PERFORM ANY MORE OBLIGATIONS) IN THE FOLLOWING CASES: 158CONT

a) b) i. ii. iii. iv.

WHERE THE CONTRACT IS VOIDABLE AT THE OPTION OF THE PLAINTIFF THE COURT MAY HOWEVER REFUSE RECISION IN THE FOLLOWING CASES: WHERE THE PLAINTIFF HAS EXPRESSLY OR IMPLIEDLY RATIFIED THE CONTRACT DUE TO CHANGE IN CIRCUMSTANCES, THE PARTIES CANNOT BE RESTORED TO THEIR ORIGINAL POSITION WHERE THIRD PARTIES HAVE OBTAINED RIGHTS UNDER THE CONTRACT IN GOOD FAITH WHERE ONLY A PART OF THE CONTRACT IS SOUGHT TO BE RESCINDED AND SUCH PART IS NOT SEVERABLE FROM THE REST OF THE CONTRACT [Sn 27 OF THE SPECIFIC RELIEF ACT 1963] 159CONT

3. i. a)

b)

c)

WHAT IS MEANT BY SUIT FOR DAMAGES AND WHAT ARE THE VARIOUS TYPES OF DAMAGES: WHAT IS DAMAGES DAMAGES ARE THE MONETARY COMPENSATION ALLOWED TO THE INJURED PARTY FOR THE LOSS OR INJURY SUFFERED BY HIM AS A RESULT OF THE BREACH OF CONTRACT DAMAGE IS NOT PUNISHMENT OR PENALTY IT IS AIMED AT PUTTING THE INJURED PARTY INTO A SITUATION THE AGGRIEVED WOULD HAVE BEEN HAD THE CONTRACT BEEN FULFILLED DAMAGES AWARDED BY COURT COULD BE ANY ONE OF THE FOLLOWING: CONT 160

iv. d)

ORDINARY OR GENERAL OR COMPENSATORY DAMAGE FOR THE ACTUALLY QUANTIFIED DAMAGE SPECIAL DAMAGES (DAMAGES AS CONTEMPLATED BY THE PARTIES AT THE TIME OF EXECUTING THE CONTRACT) EXEMPLARY, PUNITIVE OR VINDICTIVE DAMAGES (WHERE AGGRAVATED SITUATION EXISTS) NOMINAL DAMAGES (ONLY TOKEN DAMAGE FOR MERE TECHNICAL VIOLATIONS) SECTION 73 OF THE ICA PRESCRIVE THE RULES REGARDING QUANTIFICATION OF THE DAMAGES TO BE AWARDED AS FOLLOWS: CONT 161

e)

f) i.

ONLY DAMAGE DIRECTLY OR NATURALLY ARISING OUT OF THE BREACH IS TO BE COMPENSATED REMOTE OR INDIRECT DAMAGES ARE NORMALLY NOT GRANTED UNLESS THE PARTIES HAD INDICATED THE SAME IN THE CONTRACT WHAT IS MEANT BY LIQUIDATED DAMAGES IF THE PARTIES HAD INDICATED IN THE CONTRACT ITSELF THE QUANTUM OF DAMAGES PAYABLE IT IS CALLED LIQUIDATED DAMAGES WHAT IS MEANT BY QUANTUM MERUIT ? ANOTHER REMEDY AVAILABE IS TO FILE A SUIT FOR GRANT OF QUANTUM METUIT CONT 162

ii.

THE PHARSE QUANTUM MERUIT MEANS AS MUCH AS EARNED iii. IN CASE A CONSTRUCTION CONTRACT IS UNDERTAKEN AND LATER THE WORK HAD TO BE STOPPED FOR SOME LEGAL REASON AND THE CONTRACT HAS BECOME VOID, THE PARTY WHO HAS DONE PART WORK CAN SUE FOR RECOVERING CHARGES FOR THE PROPORTION OF WORK ALREADY COMPLETED iv. THE CLAIM FOR QUANTUM MERUIT CAN BE OVER AND ABOVE THE CLAIM FOR DAMAGES g) WHAT IS MEANT BY EARNEST MONEY AND SECURITY DEPOSIT 163 CONT

SOMETIMES A PARTY MAY BE REQUIRED TO DEPOSIT SOME MONEY WITH THE OTHER PARTY TO THE CONTRACT AND IT MAY BE IN THE NATURE OF EARNEST MONEY OR SECURITY DEPOSIT EARNEST MONEY CAN BE ADJUSTED AGAINST PURCHASE PRICE AND IS FOREFEITED IF THE CONTRACT FALLS THROUGH OR IS NOT ENTERED INTO SECURITY DEPOSIT ON THE CONTRARY IS FOR ENSURING PERFORMANCE. IT IS NOT PART OF THE PURCHASE PRICE AND IS ALSO NOT ADJUSTED AGAINST PAYMENTS TO BE MADE. IT CANNOT BE FOREFEITED AS ITS FOREFEITURE WILL AMOUNT TO PENALTY WHICH ONLY COURS CAN AWARD CONT 164

4. a)

b) i. ii.

WHAT IS MEANT BY SUIT FOR SPECIFIC PERFORMANCE? IF THE COURTS FEEL MONETARY COMPENSATION IS NOT THE ADEQUATE REMEDY IT MAY COMPEL THE PARTY COMMITTING THE BREACH TO DO WHAT HE HAD PROMISED TO DO CIRCUMSTANCES WHEN COURT WOULD ORDER SPECIFIC PERFORMANCE COULD BE AS FOLLOWS: WHERE THE CONTRACT IS SUCH THAT MONEY WOULD NOT BE THE ADEQUATE RELIEF WHERE THERE ARE NO STANDARDS FOR ASCERTAINING THE ACTUAL DAMAGE CAUSED BY THE NON-PERFORMANCE OF THE AGREED ACT 165 CONT

iii. WHEN IT IS PROBABLE THAT COMPENSATION IN MONEY CANNOT BE GOT FOR THE NON - PERFORMANCE OF THE CONTRACT. c) HOWEVER SPECIFIC PERFORMANCE IS NOT ORDERED IN THE FOLLOWING CASES: i. MONEY IS AN ADEQUATE REMEDY ii. IT WILL BE INEQUITABLE (UNFAIR) TO EITHER PARTY iii. THE CONTRACT IS OF PERSONAL NATURE (EX CONTRACT TO MARRY) iv. THE COURT CANNOT SUPERVISE ITS EXECUTION 166 CONT

5.

WHAT IS MEANT BY SUIT FOR INJUNCTION? a) INJUNCTION IS AN ORDER FROM A COURT TO RESTRAIN A PERSON FROM DOING A PARTICULAR ACT b) WHERE A PARTY TO A CONTRACT IS ATTEMPTING TO DO SOMETHING THAT WILL DEFEAT THE EXECUTION OF THE CONTRACT, THE COURT MAY ORDER THE RESTRAINT OF THE OPPOSING ACTION WHEN PETITIONED BY THE OTHER PARTY TO THE CONTRACT [MS 14.1 14.11 MK = 149 160 CB= 99 106]167

MODULE III A SPECIAL CONTRACTS [CONTRACT OF INDEMNITY & GUARANTEE, CONTRACT OF BAILMENT & PLEDGE, CONTRACT OF AGENCY]I. 1. WHAT IS MEANT BY CONTRACT OF INDEMNITY & WARRANTY AND WHAT ARE THE PROVISIONS REGULATING THEM WHAT IS MEANT BY CONTRACT OF: INDEMNITY: ACCORDING TO SECTION 124 A CONTRACT OF INDEMNITY MEANS A CONTRACT BY WHICH ONE PARTY PROMISES TO SAVE THE 168 CONT .

OTHER FROM LOSS CAUSED TO HIM BY THE CONDUCT OF THE PROMISER HIMSELF OR BY THE CONDUCT OF ANY OTHER PERSON [X TAKES HIS FRIEND Y TO A HOTEL AND TELLS THE OWNER GIVE Y WHAT EVER FOOD HE WANTS, I WILL SEE THAT YOU ARE PAID] GUARANTEE: ACCORDING TO SECTION 126 A CONTRACT OF GUARANTEE MEANS A CONTRACT TO PERFORM THE PROMISE OR DICHARGE THE LIABILITY OF A THIRD PERSON IN CASE OF HIS DEFAULT [X TAKES Y TO A HOTEL AND TELLS THE OWNER GIVE Y WHAT EVER FOOD HE WANTS, IF HE DOES NOT PAY YOU, I WILL PAY]CONT169

2. WHO ARE THE PARTIES TO: CONTRACT OF INDEMNITY: a) THE PERSON WHO PROMISES TO MAKE GOOD THE LOSS IS CALLED THE INDMNIFIER (PROMISOR) [Mr X] b) AND THE PERSON WHOSE LOSS IS TO BE MADE GOOD IS CALLED THE INDEMNIFIED OR INDEMNITY HOLDER (PROMISEE) [HOTEL OWNER] c) TOTALLY 2 PARTIES CONTRACT OF GUARANTEE: a) THE PERSON IN RESPECT OF WHOSE DEFAULT THE GUARANTEE IS GIVEN IS CALLED THE PRINCIPAL DEBTOR [Mr Y] CONT 170

b) c) d) 3.

a)

THE PERSON TO WHOM THE GUARANTEE IS GIVEN IS CALLED THE CREDITOR [HOTEL OWNER] THE PERSON WHO GIVES THE GUARANTEE IS CALLED THE SURETY [Mr X] TOTALLY 3 PARTIES WHAT ARE THE RIGHTS OF THE INDEMNITY HOLDER SECTION 125 ENTITLES THE INDEMNITY HOLDER TO RECOVER THE FOLLOWING FROM THE PROMISOR: ALL DAMAGES WHICH HE MAY BE COMPELLED TO PAY IN A SUIT IN RESPECT OF ANY MATTER TO WHICH THE PROMISE TO INDEMNIFY APPLIES 171 CONT

b)

c) 4. a) b) c)

ALL COSTS WHICH HE MAY BE COMPELLED TO PAY IN BRINGING OR DEPENDING SUCH SUITS PROVIDED HE ACTS AS A PRUDENT MAN ALL SUMS WHICH HE MAY HAVE PAID UNDER THE TERMS OF ANY COMPROMISE OF ANY SUCH SUIT WHAT ARE THE KINDS OF GUARANTEES RETROSPECTIVE GUARANTEE IT IS A GUARANTEE FOR AN EXISTING DEBT PROSPECTIVE GUARANTEE IT IS A GUARANTEE FOR A FUTURE DEBT SPECIFIC GUARANTEE A GUARANTEE WHICH EXTENDS TO A SINGLE DEBT OR SPECIFIC TRANSACTION CONT 172

d) 5. a)

b)

CONTINUING GUARANTEE A GUARANTEE THAT EXTENDS TO A SERIES OF TRANSACTIONS CAN A GUARANTEE BE REVOKED OR WHEN CAN A SURETY STAND DISCHARGED? BY NOTICE (SECTION 130): A SURETY CAN AVOID THE LIABILITY IN RESPECT OF FUTURE TRANSACTIONS BY NOTICE OF REVOCATION. BUT THE GUARANTOR REMAINS LIABLE FOR ALL TRANSACTION PRIOR TO SUCH NOTICE BY DEATH OF SURETY (SECTION 131). DEATH OF THE SURETY OPERATES AS TERMINATION OF CONTINUING GUARANTEE WITH REGARD TO FUTURE TRANSACTIONS. MK CB= 115 120 PG= 61 -62]173

[MS =

II. 1. a)

2. a)

WHAT IS THE NATURE AND EXTENT OF A SURETY S LIABILITY COEXTENSIVE WITH THE PRINCIPLE DEBTOR SURETY S LIABILITY ARISES ONLY WHEN THE PRINCIPAL DEBTOR FAILS TO HONOUR HIS OBLIGATION. ONCE THE LIABILITY ARISES IT IS JOINT OR COEXTENSIVE WITH THAT OF THE PRINCIPAL DEBTOR. A SURETY S LIABILITY IS NEITHER MORE NOR LESS THAN THAT OF THE PRINCIPAL DEBTOR SECONDARY LIABILITY SURETY S LIABILITY IS SECONDARY AND ARISES ONLY IF THE PRINCIPLE DEBTOR FAILS TO PERFORM [PRIMARY RESPONSIBILITY REMAINS WITH THE PRINCIPAL DEBTOR] CONT . 174

SURETY IS A FAVOURED DEBTOR NO NEW LIABILITY CAN BE THRUST ON THE SURETY WHICH IS NOT COVERED IN THE ORIGINAL CONTRACT. ON ANY ALTERATION OF THE CONTRACT WITHOUT SURETY S CONSENT, THE SURETY CEASES TO BE LIABLE 4. NO PRIVITY OF CONTRACT THOUGH THE OBLIGATIONS OF THE SURETY & PRINCIPAL DEBTOR AR COEXTENSIVE, THEY DO NOT CONSTITUTE A SINGLE LEGAL PERSON. ACCORDINGLY THE SURETY IS NOT BOUND BY THE ADMISSIONS MADE BY THE PRINCIPAL DEBTOR 175 [MS MK= CB=120 121]

3.

III. WHAT ARE RIGHTS OF A SURETY? 1. RIGHTS AGAINST THE PRINCIPAL DEBTOR (Sn 145) a) IN A CONTRACT OF GUARANTEE THERE IS AN IMPLIED PROMISE OF THE PRINCIPAL DEBTOR TO INDEMNIFY THE SURETY b) ON DEFAULT, AFTER PAYING OF THE DEBTS OF THE PRINCIPAL DEBTOR, SURETY CAN CLAIM ALL THOSE RIGHTS THE CREDITOR HAD AGAINST THE PRINCIPAL DEBTOR. THAT IS THE SURETY STEPS INTO THE SHOES OF THE CREDITOR. THERE IS NO NEED OF ASSIGNMENT OR TRANSFER OF RIGHTS FROM THE CREDITOR TO THE SURETY. THE SUBROGATION IS AUTOMATIC 176 CONT

2. RIGHTS AGAINST THE CREDITOR a) BEFORE MAKING PAYMENT OF THE GUARANTEED DEBT THE SURETY CAN ASK THE CREDITOR TO FILE A SUIT AGAINST THE DEBTOR b) RIGHT TO SECURITIES. THE SURETY ENTITLED TO THE BENEFIT OF EVERY SECURITY HELD BY THE CREDITOR AT THE TIME OF MAKING THE CONTRACT. IF ANY SUCH SECURITY IS LOST WITHOUT THE CONSENT OF THE SURETY, THE LIABILITY OF THE SURETY WILL STAND REDUCED TO THAT EXTENT. 177 CONT

c)

RIGHT OF SUBROGATION ON PAYING OF THE DEBT, THE SURETY WOULD BE AUTOMATICALLY INVESTED WITH ALL THOSE RIGHTS WHICH THE CREDITOR HAD AGAINST THE PRINCIPAL DEBTOR 3. RIGHT OF THE SURETY AGAINST COSURETIES a) CO-SURETIES ARE LIABLE TO PAY THEIR SHARE TO THE SURETY WHO PAID THE DEBT [MS MK= CB=124 125]178

IV. BRING OUT THE DISTINCTION BETWEEN A CONTRACT OF INDEMNITY & CONTRACT OF GUARANTEEPOINTS CONTRACT OF CONTRACT OF OF INDEMNITY GUARANTEE DISTINC TION THREE 1 NO. OF TWO PARTIES [INDEMNIFIER+ [CREDITOR+PRINCIPL DEBTOR+SURETY] INDEMNITY HOLDER]

CONT....

179

2 OBJECT ORPURPOSE

FOR FOR SECUTIRY OF REIMBURSEME A DEBT OR GOOD NT OF LOSS CONDUCT OF AN EMPLOYEE

3 NUMBER OF ONLY ONE

THREE CONTRACTS CONTRACT CONTRACTS: BETWEEN (i) PRINCIPAL INDEMNIFIER & DEBTOR WITH INDEMNIFIED CREDITOR (ii) CREDITOR & SURETY (iii) SURETY & PR. DEBTOR180

CONT....

4 NATURE OF THE LIABILITYLIABILITY OF THE INDEMNIFIER IS PRIMARY (MAIN) RESPONSIBILITY

5 ISREQUEST NECESSAR Y

INDEMNIFIER ACTS INDEPENDENT OF ANY REQUEST BY THE INDEMNITY HOLDER OR THIRD PARTY

LIABILITY OF THE SURETY IS SECONDARY (SURETY LIABLE ONLY IF PR. DEBTOR DEFAULTS) IT IS NECESSARY THAT THE SURETY GIVE THE GUARANTEE ONLY AT THE REQUEST OF THE DEBTOR181

CONT....

6 EXISTE IN MOST CASES THERE IS NCE OF NO EXISTING DUTY OR EXISTIN DEBT G DUTY OR DEBT 7 RIGHT TO SUE THE INDEMNIFIER CANNOT SUE THE THIRD PARTY FOR LOSS IN HIS OWN NAME, BECAUSE THERE IS NO PRIVITY OF CONTRACT. HE CAN DO SO ONLY IF THER IS AN ASSIGNMENT IN HIS FAVOURCB=118

THERE IS AN EXISTING DEBT OR DUTY THE PERFORMANCE OF WHICH IS GUARANTEED BY THE SURETY THE SURETY AFTER HE PAYS THE DEBT TO CREDITOR, CAN PROCEED AGAINST THE DEBTOR IN HIS OWN RIGHT182

119

PG=63

MODULE III BI. 1.

BAILMENT & PLEDGE

WHAT ARE THE LAWS GOVERNING THE CONTRACT OF BAILMENT & PLEDGE WHAT IS MEANT BY BAILMENT ACCORDING, TO SECTION 148 OF THE ICA BAILMENT IS DEFINED AS 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 BE DISPOSED OF ACCORDING TO THE DIRECTION OF THE PERSON DELIVERING THEM 183 CONT .

2. a) b) 3. a) b) c) d) e)

WHO ARE THE PARTIES TO THE CONTRACT? THE PERSON DELIVERING THE GOODS IS CALLED THE BAILOR THE PERSON TO WHOM THE GOODS ARE DELIVERED IS CALLED THE BAILEE EXAMPLES OF BAILMENT X LENDS HIS MOTOR CYCLE TO Y FOR HIS USE X GIVES HIS MOTOR CYCLE TO Y FOR REPAIRS X GIVES HIS MOTOR CYCLE TO Y ON HIRE X GIVES 2 METRES OF CLOTH TO A TAYLOR TO STITCH A PANT X GIVES HIS SHIRT TO Y FOR IRONING184 CONT

4. a)

b)

WHAT ARE THE ESSENTIAL INGREDIENTS OF A BAILMENT SEEN IN THE DEFINITION THERE MUST BE DELIVERY OF CHATTEL [MOVEABLE GOODS OTHER THAN MONEY] TO ANOTHER PERSON [WHO SHOULD NOT BE YOUR SERVANT] DELIVERY SHOULD BE BASED ON A CONTRACT [IN CERTAIN CIRCUMSTANCES IT COULD ALSO BE NON CONTRACTUAL WHEN CUSTOMS SIEZED A PASSENGERS GOODS IT WAS HELD THAT CUSTOMS DEPARTMENT BECOMES A BAILEE EVEN THOUGH THERE IS NO CONTRACT BETWEEN THE PERSON AND THE CUSTOMS AUTHORITIES] CONT185

c) d) e) f)

5. a)

DELIVERY MUST BE WITH SOME PURPOSE [IT COULD BE LENDING, CUSTODY, REPAIR, SECURITY DEPOSIT FOR DEBT ETC] THERE SHOULD BE RETURN OF GOODS OR DISPOSAL OR ALTERATION OF GOODS AS DESIRED BY THE BAILOR IT MUST BE ONLY MOVEABLE GOODS [CASH IS NOT TREATED AS MOVEABLE FOR PURPOSE OF BAILMENT] THERE SHOULD BE NO TRANSFER OF OWNERSHIP [THE BAILOR CONTINUES TO BE THE OWNER AND ONLY TEMPORARY POSSESSION IS TRANSFERRED TO THE BAILEE] WHAT ARE THE KINDS OF BAILMENT ON THE BASIS OF CHARGES BAILMENTS COULD BE OF 2 TYPES: (i) GRATUITOUS (ii) NON- GRATUITOUS 186 CONT

b)

ON THE BASIS OF BENEFITS IT COULD BE OF 3 TYPES (i) BAILMENT FOR EXCLUSIVE BENEFIT OF BAILOR ONLY [X WHILE GOING ABROAD GIVES HIS JEWELS TO Y FOR SAFE KEEPING] (ii) BAILMENT FOR EXCLUSIVE BENEFIT OF BAILEE ONLY [X GIVES HIS CAR TO Y FOR USE AT HIS DAUGHTER S WEDDING FREE OF CHARGE] (iii) BAILMENT FOR MUTUAL BENEFIT [BOTH] [X GAVE HIS CAR ON HIRE TO Y] [MS= 16.1 16.3 MK= 180 182 CB=129 130]187

II. 1. a)

b)

WHAT ARE THE DUTIES OF A BAILOR TO DISCLOSE FAULTS IN THE GOODS BAILED DUTY OF GRATUITOUS BAILOR IS BOUND TO DISCLOSE TO BAILEE THE FAULTS IN THE GOODS, HE IS AWARE WHICH COULD EXPOSE THE BAILEE TO RISKS. IF THE BAILEE FAILS TO MAKE SUCH DISCLOSURE HE WILL HAVE TO COMPENSATE THE BAILEE FOR ANY DAMAGE SUFFERED [X LENDS HIS CAR TO Y WITHOUT DISCLOSING THAT ITS BREAKS ARE NOT OK] DUTY OF NON- GRATUITIOUS BAILOR- SINCE THE BAILOR IS COLLECTING HIRE CHARGES, HE IS DUTY BOUND TO ENSURE THAT THE GOOD IS REASONABLY SAFE. BAILOR WOULD BE LIABLE FOR DAMAGES TO THE BAILEE WHETHER OR NOT HE WAS AWARE OF THE DEFECT [X LENT A BIKE TO Y ON HIRE. Y SUFFERED INJURY DUE TO POOR BREAKS. X MUST PAY FOR Y S MEDICAL EXPENSES] CONT . 188

2. i.

ii.

TO PAY NECESSARY EXPENSES TO THE BAILEE IN CASE OF NON GRAUITOUS BAILMENT MUST PAY REASONABLE MAINTENANCE EXPENSES TO THE BAILEE [X LEFT HIS PET DOG WITH Y WHEN HE WENT ABROAD FOR A MONTH THE DOG FELL ILL Y INCURRED MEDICAL EXPENSES ON THE DOG] IN CASE OF GRATUITOUS BAILMENT, HE SHOULD PAY THE BAILEE ANY EXTRA ORDINARY EXPENDITURE INCURRED [X GAVE HIS BIKE TO Y FOR FREE USE FOR 2 DAYS. Y HAD TO PAY A FINE OF RS 100/FOR THE VEHICLE NOT HAVING A SMOKE EMISSION CERTIFICATE TO THE COPS] CONT . 189

TO INDEMNIFY THE BAILEE FOR ANY BREACH OF WARRANTY AS TO TITLE [X STOLE A HORSE BELONGING TO Z AND GAVE IT TO Y ON HIRE. Y HAD TO PAY DAMAGE OF RS. 1000/ - X HAS TO PAY RS. 1000/ - TO Y] 4. TO INDEMNIFY BAILEE FOR PREMATURE TERMINATION OF GRAUITOUS BAILMENT [X LENT HIS OLD BIKE TO Y FOR USE FOR 3 MONTHS. Y SPEND RS 500/- TO MAKE IT USEABLE. AFTER ONE MONTH X ASKED FOR THE RETURN OF THE BIKE X MUST PAY THE COST OF REPAIR] 5. TO RECEIVE BACK THE GOODS AFTER THE BAILMENT PERIOD IS OVER OR ON THE ACCOMPLISHMENT OF THE PURPOSE [X GAVE HIS SARI FOR DRY CLEANING BUT WAS NOT COLLECTING IT BACK] [MS=16.3 16.5 MK=185 186 CB=132 133 ] 190

3.

III. WHAT ARE THE DUTIES OF A BAILEE 1. TO TAKE REASONABLE CARE OF THE GOODS [THE EXTENT OF CARE A MAN OF ORDINARY PRUDENCE WOULD TAKE IF THE GOODS WERE HIS OWN] [BAILEE MUST PROVE THAT HE HAD TAKEN REASONABLE CARE] 2. NOT TO MAKE ANY UN AUTHORISED USE OF THE GOODS BAILED IF HE MISUSES HE WILL HAVE TO PAY DAMAGES [ X LENT HIS HORSE TO Y FOR HIS OWN USE ONLY. Y ALLOWED HIS SON TO RIDE THE HORSE AND THE HORSE GOT INJURED. Y MUST COMPENSATE X] 3. BAILEE NOT TO MIX THE GOODS OF BAILOR WITH HIS OWN GOODS a) WHEN MIXING IS WITH BAILOR S CONSENT BOTH PARTIES SHALL HAVE PROPORTIONATE INTEREST IN THE MIXED GOODS 191 CONT

b)

c)

4.

WHEN MIXING IS WITHOUT BAILOR S CONSENT AND GOODS CAN BE SEPARATED BAILEE MUST PAY EXPENSES OF SEPARATION AND ANY LOSS SUFFERED IN THE PROCESS OF SEPARATION WHEN MIXING IS WITHOUT CONSENT AND GOODS CANNOT BE SEPARATED THE BAILEE HAS TO COMPENSATE THE BAILOR S FOR HIS LOSS TO RETURN THE GOODS TO RETURN THE GOODS TO THE BAILOR AT THE END OF THE BAILMENT PERIOD OR DISPOSE IT AS DIRECTED BY THE BAILOR HE CANNOT RETAIN POSSESSION 192 CONT

TO RETURN ANY INCREASE OR PROFIT THAT ACCRUED TO THE GOODS DURING THE BAILEE S CUSTODY [X GIVES HIS COW FOR SAFE KEEPING FOR SIX MONTHS. THE COW GAVE BIRTH TO A CALF. Y SHOULD RETURN THE COW & CALF] 6. NOT TO DO ANY ACT THAT WILL PREVENT THE GOODS GOING BACK TO THE BAILOR THIS RULE HAS AN EXCEPTION LIKE IF A LORRY OWNER TRANSPORT X S GOOD AND THE CENTRAL EXCISE AUTHORITIES CONFISCATES THE GOODS THE LORRY OWNER IS NOT LIABLE FOR THE LOSS OF GOODS [MS=16.5 16.6 MK= 185 - 186 193 CB=134 135]

5.

IV. WHAT ARE THE RIGHTS OF A BAILEE 1. TO CLAIM COMPENSATION IN CASE OF FAULTY GOODS [HIRING OF DEFECTIVE CAR] 2. TO CLAIM REIMBURSEMENT OF EXPENSES [BAILE HAD TO PAY EMISSION TEST FINE ON CAR GIVEN BY BAILOR] 3. TO CLAIM LOSS ARISING OUT OF PREMATURE DEMAND FOR RETURN OF GOODS BY THE BAILOR 4. TO SUE ANY THIRD PARTY WHO INTERFERES WITH THE BAILEE S RIGHT TO USE THE GOODSCONT....194

5.

BAILEES RIGHT TO LIEN [TO HOLD ON TO THE GOODS] IN CASE BAILOR HAS TO MAKE ANY PAYMENT TO THE BAILEE, BAILEE CAN RETAIN POSSESSION TILL SUCH PAYMENT OR LOSS IS MADE GOOD 6. RIGHT TO RETURN THE GOODS TO ANY ONE OF SEVERAL JOINT BAILORS 7. RIGHT TO BE INDEMNIFIED DUE TO ANY LOSS SUFFERED BY BAILEE WHEN BAILOR DID NOT HAVE THE AUTHORITY TO BAIL THE GOODS [MS= 16.7 16.8 MK=186 189 CB= 195 136]

V. 1.

2. 3. a)

WHAT IS MEANT BY LIEN AND WHAT ARE THE VARIOUS TYPES OF LIEN WHAT IS MEANT BY LIEN - IT IS THE RIGHT OF ANY PERSON TO RETAIN POSSESSION OF THE GOODS BELONGING TO ANOTHER, UNTIL THE PRESENT AND ACCRUED CLAIMS OF THE PERSON IN POSSESSION ARE SATISFIED BY THE OTHER PARTY SINCE THIS RIGHT ARISE BY POSSESSION IT IS CALLED POSSESSORY LIEN WHAT ARE THE DIFFERENT TYPES OF LIEN PARTICULAR LIEN IF BAILEE HAS SEVERAL GOODS AND PAYMENTS ARE DUE ONLY ON A PARTICULAR GOOD, HE CAN RETAIN ONLY THAT GOOD AND NOT ANY OTHER GOODS CONT .196

b)

GENERAL LIEN IT IS THE RIGHT OF THE BAILEE TO RETAIN ANY GOODS OF THE BAILOR FOR ANY MONIES DUE TO HIM [SEE WHAT IS MEANT BY FACTORS/ WHARFINGERS MK 189 ] 4. HOW ARE LIENS TERMINATED a) ON SURRENDER OF POSSESSION IF BAILEE LOSES POSSESSION. HE LOSES HIS LIEN b) ON PAYMENT OF OUTSTANDING DUES IF DUES ARE PAID BAILEE LOSES HIS RIGHT TO LIEN c) ON WAIVER BAILEE MAY WAVE HIS LIEN UPON AN EXPRESS OR IMPLIED AGREEMENT [MS= 16.8 16.9 MK= 187 189 CB= 137197 138]

VI. WHAT ARE THE RIGHTS OF A BAILOR 1. RIGHT TO TERMINATE THE BAILMENT IF BAILEE DOES NOT FULFILL THE CONDITIONS OF BAILMENT 2. RIGHT TO DEMAND RETURN OF GOODS IF BAILMENT WAS GRATUITOUS BAILOR CAN DEMAND PREMATURE RETURN [HOWEVER IF BAILEE SUFFERS ANY LOSS DUE TO PREMATURE RETURN IT HAS TO BE COMPENSATED BY THE BAILOR] 3. TO SUE THIRD PARTY IF HE CAUSES DAMAGE OR OBSTRUCTS THE BAILEE S USE OF THE GOODS 4. RIGHT TO DEMAND PROFITS ARISING OUT OF GOODS BAILED 5. RIGHT TO ENFORCE BAILEE S OBLIGATIONS 198 [MS=16.5 MK= 189 190 CB= 138 ]

VII. WHAT ARE THE RIGHTS AND LIABILITIES OF A FINDER OF GOODS 1. WHO IS A FINDER SECTION 71 OF ICA PROVIDES THAT A PERSON WHO FINDS THE GOODS BELONGING TO ANOTHER AND TAKES IT INTO HIS POSSESSION IS CALLED THE FINDER OF GOODS 2. WHAT ARE HIS DUTIES & LIABILITIES a) TO TAKE REASONABLE CARE OF THE GOODS b) TO USE REASONABLE DILIGENCE TO FIND THE TRUE OWNER c) TO RESTORE THE GOODS TO THE REAL OWNER d) NOT TO USE THE GOODS FOR HIS OWN PURPOSE 199 CONT ..

VIII.WHAT IS MEANT BY PLEDGE OR PAWN AND WHAT ARE THE LAWS GOVERNING THE CONTRACT OF PLEDGE 1. PLEDGE OR PAWN IS A SPECIAL KIND OF BAILMENT 2. ACCORDING TO SECTION 172 PLEDGE IS THE BAILMENT OF GOODS AS A SECURITY FOR PAYMENT OF DEBT OR PERFORMACE OF A PROMISE [PLEDGING JEWELS IN A BANK TO GET A LOAN] 3. THE BAILOR IN THIS CASE IS CALLED THE PAWNER AND THE BAILEE IS CALLED THE PAWNEE 4. PLEDGE CAN BE MADE ONLY OF MOVEABLE PROPERTIES 200 CONT ..

4. a) b)

WHAT ARE THE RIGHTS OF A PAWNEE RIGHT TO RETAINEER UNTIL DEBT IS PAID RIGHT TO RECEIVE EXTRA ORDINARY EXPENSES IF ANY INCURRED c) IN CASE OF FAILURE OR DEFAULT BY PAWNEE: i. TO SUE TO RETAIN THE GOODS AS COLLATERAL SECURITY ii. TO SELL THE GOODS AFTER GIVING REASONALBE NOTICE [BANKS CAN AUCTION THE GOLD ORNAMENTS IF PAWNER DOES NOT RECLAIM THE GOLD AFTER EXPIRY OF PERIOD WITH DUE NOTICE TO PAWNEE] [MS= 16.11 16.14 MK=193 CB= 139 140 ] CONT .. 201

5. a) b) c) d) e) f)

WHAT ARE THE DUTIES OF A PAWNEE TO TAKE REASONABLE CARE OF THE GOODS PLEDGED NOT TO MAKE UNAUTHORISED USE OF THE GOODS PLEDGED NOT TO MIX THE GOODS WITH HIS OWN NOT TO DO ANY ACT IN VIOLATION OF THE TERMS OF PLEDGE TO RETURN TH