the contract act,1872 ( a )

8/3/2019 The Contract Act,1872 ( a )

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By :

Dr. Vilas Kulkarni.



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INDEX

Contracts of Indemnity.

Contracts of Gaurantee.

Surety & Co Surety.Agency.



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Contracts of Indemnity.

A contract by which oneparty promises to save the other fromloss caused to him by theconduct of the promisor himself, or by

the conduct of any other person, iscalled a " contract of indemnity".

Eg - A contract to indemnify B against the

consequences of any proceedingswhich C may take against B in respectof a certain sum of 20000/-rupees. This is a contract of indemnity.



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Essentials of Contract of Indemnity.

• It must contain all the essentials of avalid contract.

• The promisee or the Indemnity holdermust have suffered loss.



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Rights of indemnity holder

1) All damages which he may be compelledto pay in any suit in respect of any matterto which the promise to indemnifyapplies.

2) All costs which he may be compelled topay in any such suit if, in bringing ordefending it, he did not contravene the

orders of the promisor, and acted as itwould have been prudent for him to act inthe absence of any contract ofindemnity, or if the promisor authorized

him to bring or defend the suit.



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Continued…

3) All sums which he may have paidunder the terms of any compromise ofany such suit, if the compromise was

not contrary to the orders of thepromisor, and was one which itwould have been prudent for thepromisee to make in the absence of

any contract of indemnity, or if thepromisor authorized him tocompromise the suit.



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Contracts of Guarantee

A "contract of guarantee" is a contractto perform the promise, or discharge

the liability, of a third person in caseof his default.

Eg – A lends money to B and Cpromises A that if B fails to repay hewill pay the money.



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Continued…

• The person who gives the guaranteeis called the "surety“.

• The person in respect of whose

default the guarantee is given iscalled the "principal debtor “.

• The person to whom the guarantee is

given is called the "creditor“. • A guarantee may be either oral or

written.



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Essentials of a Guarantee

1. There must be a debt existing,which should be recoverable.

2. Existence of 3 parties ie. Principaldebtor, creditor & surety.

3. There should be some consideration

4. The liability must be legallyenforceable.



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Continued…

5. The principal debtor must beprimarily liable. Surety’s liability is

secondary.

6. There must be a distinct promise,oral or written by the surety to paythe debt in case of default by

principal debtor.

7. All essentials of a contract.



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Rights of Surety

• Rights of Subrogation (Right of suretyagainst principal debtor).-

When the surety pays gauranted sum

to creditor on behalf of principal debtor,he owns all the rights of the Creditor.

• Rights to indemnity - Surety is entitled

to recover from the principal debtorwhatever sum he has rightfully paidunder the guarantee, but, no sumswhich he has paid wrongfully



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Continued…

• Rights to benefit of Creditors SecuritiesA surety is entitled to the benefit of

every security which the creditor hasagainst the principal debtor

• To be contributed equally in casewhere two or more persons areco-sureties.



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Agency

An "agent" is a person employed todo any act for another or to representanother in dealings with third

persons.

The person for whom such act isdone, or who is so represented, is

called the "principal".



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Creation of Agency.

Agency can be created as under:

1. Agency by agreement.

2. Agency by necessity.3. Agency by estoppel or by holding

out.

4. Agency by operation of Law.5. Agency by ratification.



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Ratification of Agency

Ratification is adopting or acceptingsubsequently a past act of an agentdone on behalf of another without

authority.

Rules governing ratification.

The act must be done by one personon behalf of another.



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Continued…

Ratification may be expressed or maybe implied in the conduct of theperson on whose behalf the acts are

done.

No valid ratification can be made bya person whose knowledge of the

facts of the case is materiallydefective.



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Continued…

Ratification must be communicated.

Ratification can be for whole contractand not part of it.

Ratification should not put a thirdparty to damages.

Ratification must be done withinreasonable time.



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Classification of Agents.

Specific or particular agent.

General agent.

Mercantile agent.Sub-Agent.

Co-Agent.

Substitute Agent.



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Agent's authority

The authority of an agent may be expressedor implied.

An agent having an authority to do an acthas authority to do every lawful thing which is

necessary in order to do such act.An agent has authority, in an emergency, todo all such acts for the purpose of protectinghis principal from loss as would be done by aperson of ordinary prudence, in his own case,under similar circumstances.



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Revocation of Agents Authority.

The principal mayrevoke the authority given to hisagent at any time before the

authority has been exercised so as tobind the principal.

Revocation of authority terminates the

agents authority.



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Continued...

The principal cannot revoke theauthority in following cases –

• When agent has partly exercised theauthority.

• Where agency is coupled withinterest.

• When agent is personally liable.



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Termination of agency

An agency is terminated by theprincipal revoking his authority; or bythe agent renouncing the

business of the agency; or by thebusiness of the agency beingcompleted; or by either the principal oragent dying or becoming of unsound

mind; or by the principal being adjudicatedan insolvent under the provisions of anyAct for the time being in force for the reliefof insolvent debtors.



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Agent's duty to principal

An agent is bound to conduct thebusiness of his principal according

to the directions given by the principal

An agent is bound to conduct thebusiness of the agency withas much skill as is generallypossessed by persons engaged insimilar business



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Continued…

To render proper accounts.

To pay sums to principal received forhim.

To communicate with principal.

Not to make secret profits fromagency.



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Rights of Agent.

To retain out of any sums received onaccount of the principal, all moneysdue to himself.

To lien.

To indemnity.

To receive compensation in respect ofinjury caused to him by the principal'sneglect or want of skill.

To appoint substitute agent.



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Principal’s Rights.

To repudiate Contract.

To demand accounts.

To refuse renumeration to agent whois guilty of misconduct.

To claim loss of profit sustained byhim.

To revoke agents authority.



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THANK YOU !!!

the contract act,1872 ( a )

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