the law of contract act, cap. 345 r.e 2002.pdf

8/10/2019 The Law of Contract Act, Cap. 345 R.E 2002.pdf

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_____CHAPTER 345

______

THE LAW OF CONTRACT ACT

[PRINCIPAL LEGISLATION]

ARRANGEMENT OF SECTIONS

Section TitlePART I

PRELIMINARY PROVISIONS1. Short title.2. Construction.

PART IICOMMUNICATION, ACCEPTANCE ANDREVOCATION OF PROPOSALS

3. Communication, acceptance and revocation of proposals.4. Communication, when complete.5. Revocation of proposals and acceptances.6. Revocation, how made.7. Acceptance must be absolute.8. Acceptance by performing conditions, or receiving consideration.9. Promises, express and implied.

PART IIIVOIDABLE CONTRACTS AND VOID AGREEMENTS

10. What agreements are contracts.11. Persons competent to contract.12. What is a sound mind for the purposes of contracting.13. "Consent" defined.14. "Free consent" defined.15. "Coercion" defined.16. "Undue influence" defined.17. "Fraud" defined.18. "Misrepresentation" defined.19. Effect of agreements induced by coercion, fraud, misrepresentation or

undue influence.20. Agreement void where both parties are under a mistake as to matter of

fact.21. Effect of mistakes as to law.22. Unilateral mistake.23. What considerations and objects are lawful and what are not.


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24. Agreements void if considerations and objects are unlawful in part.25. Agreement without consideration, is void, unless it is in writing and

registered; or is a promise to compensate for something done; or is apromise to pay a debt barred by limitation of law.

26. Agreement in restraint of marriage void.

27. Agreement in restraint of trade void.28. Agreement in restraint of legal proceedings void.29. Agreement void for uncertainty.30. Agreement by way of wager void.

PART IVCONTINGENT CONTRACTS

31. "Contingent contract" defined.32. Enforcement of contract contingent on an event happening.33. Enforcement of contract contingent on an event not happening.

34. When event on which contract is contingent to be deemed impossible, if itis the future conduct of a living person.35. A contingent contract.36. Agreement contingent on impossible events void.

PART VPERFORMANCE OF CONTRACTS

Contracts which must be Performed

37. Obligations of parties to contracts.38. Effect of refusal to accept offer of performance.39. Effect of refusal of party to perform promise wholly.40. Persons by whom promise is to be performed.41. Effect of accepting performance from third person.

Joint Liabilities and Rights

42. Devolution of joint liabilities.43. Obligations and liabilities of joint promisors.44. Effect of release of one joint promisors.45. Devolution of joint rights.

Time and Place for Performance

46. Time for performance of promise where no application is to be made andno time is specified.

47. Time and place for performance of promise where time is specified and noapplication is to be made.

48. Application for performance on certain day to be at proper time and place.


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49. Place for performance of promise where no application to be made and noplace fixed for performance.

50. Performance in manner or at time prescribed or sanctioned by promisee.

Performance of Reciprocal Promises

51. Promisor not bound to perform unless reciprocal promisee ready andwilling to perform.

52. Order of performance of reciprocal promises.53. Liability of party preventing event on which contract is to take effect.54. Effect of default as to that promise which should be first performed, in

contract consisting of reciprocal promises.55. Effect of failure to perform at fixed time in contract.56. Agreement to do impossible act, subsequent impossibility or unlawfulness

and related compensation.57. Reciprocal promise to do things legal, and also other things illegal.

58. Alternative promise, one branch being illegal. Appropriation of Payment

59. Application of payment where debt to be discharged is indicated.60. Application of payment where debt to be discharged is not indicated.61. Application of payment where neither party appropriates.

Contracts Which Need Not Be Performed

62. Effect of novation, rescission and alteration of contract.63. Promisee may dispense with or remit performance of promise.64. Consequences of rescission of voidable contract.65. Obligation of person who has received advantage under void agreement or

contract that becomes void.66. Mode of communicating or revoking rescission of voidable contract.67. Effect of neglect of promisee.

PART VICERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT

68. Claim for necessaries supplied to person incapable of contracting, or onhis account.

69. Reimbursement of person paying money due by another, in payment ofwhich he is interested.

70. Obligation of person enjoying benefit of non-gratuitous act.71. Responsibility of finder of goods.72. Liability of person to whom money is paid or thing delivered by mistake

or under coercion.


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PART VIICONSEQUENCES OF BREACH OF CONTRACT

73. Compensation for loss or damage caused by breach of contract, etc.74. Compensation for breach of contract where penalty stipulated.

75. Party rightfully rescinding contract entitled to compensation.

PART VIIIINDEMNITY AND GUARANTEE

76. "Contract of indemnity" defined.77. Rights of indemnity-holder when sued, etc.78. "Contract of guarantee", "surety", "principal debtor", and "creditor"

defined.79. Consideration for guarantee.80. Surety's liability.

81. "Continuing guarantee" defined.82. Revocation of continuing guarantee.83. Revocation of continuing guarantee by surety's death.84. Liability of two persons, primarily liable, not affected by arrangements

between them that one shall be surety on another's default.85. Discharge of surety by variance in terms of contract.86. Discharge of surety by release or discharge of principal debtor.87. Discharge of surety when creditor compounds with, gives time to, or

agrees not to sue, principal debtor.88. Surety not discharged when agreement made with third person to give

time to principal debtor.89. Creditor's forbearance to sue does not discharge surety.90. Release of one co-surety does not discharge others.91. Discharge of surety by creditor's act or omission impairing surety's

eventual remedy.92. Rights of surety on payment or performance.93. Surety's right to benefit of creditor's securities.94. Guarantee obtained by misrepresentation invalid.95. Guarantee obtained by concealment invalid.96. Guarantee on contract that creditor shall not act on it until co-surety joins.97. Implied promise to indemnify surety.98. Co-sureties liable to contribute equally.99. Liability of co-sureties bound in different sums.

PART IXBAILMENT

100. "Bailment", "bailor" and "bailee" defined.101. Delivery to bailee, how made.102. Bailor's duty to disclose faults in goods bailed.


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103. Care to be taken by bailee.104. When bailee not liable for loss, etc., of thing bailed.105. Termination of bailment by bailee's act inconsistent with conditions.106. Liability of bailee making unauthorised use of goods bailed.107. Effect of mixture, with bailor's consent, of his goods with bailee's.

108. Effect of mixture, without bailor's consent, when the goods can beseparated.109. Effect of mixture, without bailor's consent, when the goods cannot be

separated.110. Repayment by bailor of necessary expenses.111. Restoration of goods lent gratuitously.112. Return of goods bailed, on expiration of time or accomplishment of

purpose.113. Bailee's responsibility when goods are not duly returned.114. Termination of gratuitous bailment by death.115. Bailor entitled to increase or profit from goods bailed.

116. Bailor's responsibility to bailee.117. Bailment by several joint owners.118. Bailee not responsible on redelivery to bailor without title.119. Right of third person claiming goods bailed.120. Right of finder of goods.121. When finder of thing commonly on sale may sell it.122. Bailee's particular lien.123. General lien of bankers, factors, wharfingers, advocates, and policy-

brokers.

Bailments of Pledges

124. "Pledge", "pawnor", and "pawnee" defined.125. Pawnee's right of retainer.126. Pawnee not to retain for debt or promise other than that for which goods

pledged.

Presumption in Case of Subsequent Advances

127. Pawnee's right as to extraordinary expenses incurred.128. Pawnor's right where pawnor makes default.129. Defaulting pawnor's right to redeem.130. Pledges by mercantile agents and persons in possession under voidable

contracts.131. Pledge where pawnor has only a limited interest.

Suits by Bailees or Bailors against Wrongdoers

132. Suit by bailor or bailee against wrongdoer.133. Apportionment of relief or compensation obtained by such suits.


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PART XAGENCY

Appointment and Authority of Agents

134. "Agent" and "principal" defined.135. Who may employ agent.136. Who may be an agent.137. Consideration not necessary.138. Agent's authority may be express or implied.139. Definitions of express and implied authority.140. Extent of agent's authority.141. Agent's authority in an emergency.

Sub-Agents

142. When agent cannot delegate.143. "Sub-agent" defined.144. Representation of principal by sub-agent properly appointed.145. Agent's responsibility for sub-agent appointed without authority.146. Relation between principal and person duly appointed by agent to act in

business of agency.147. Agent's duty in naming such person.

Ratification

148. Right of person as to acts done for him without his authority and effect ofratification.

149. Ratification may be express or implied.150. Knowledge requisite for valid ratification.151. Effect of ratifying unauthorised act forming part of a transaction.152. Ratification of unauthorised act cannot injure third person.

Revocation of Agency

153. Termination of agency.154. Termination of agency, where agent has an interest in subject-matter.155. When principal may revoke agent's authority.156. Revocation where authority has been partly exercised.157. Compensation for revocation by principal or renunciation by agent.158. Notice of revocation or renunciation.159. Revocation and renunciation may be express or implied.160. When termination of agent's authority takes effect as to agent, and as to

third persons.161. Agent's duty on termination of agency by principal's death or insanity.


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162. Termination of sub-agent's authority.

Agent's Duty to Principal

163. Agent's duty in conducting principal's business.

164. Skill and diligence required from agent.165. Agent's accounts.166. Agent's duty to communicate with principal.167. Right of principal when agent deals, on his own account, in business of

agency without principal's consent.168. Principal's right to benefit gained by agent dealing on his own account in

business of agency.169. Agent's right of retainer out of sums received on principal's account.170. Agent's duty to pay sums received for principal.171. When agent's remuneration becomes due.172. Agent not entitled to remuneration for business misconducted.

173. Agent's lien on principal's property.Principal's Duty to Agent

174. Agent to be indemnified against consequences of lawful acts.175. Agent to be indemnified against consequences of acts done in good faith.176. Non-liability of employer of agent to do a criminal act.177. Compensation to agent for injury caused by principal's neglect.

Effect of Agency on Contracts with Third Persons

178. Enforcement and consequences of agent's contracts.179. Principal how far bound when agent exceeds authority.180. Principal not bound when excess of agent's authority is not separable.181. Consequences of notice given to agent.182. Agent cannot personally enforce, nor be bound by, contracts on behalf of

principal.183. Rights of parties to a contract made by agent not disclosed.184. Right of person dealing with agent personally liable.185. Consequence of inducing agent or principal.186. Liability of pretended agent.187. Person falsely contracting as agent not entitled to performance.188. Liability of principal inducing belief that agent's unauthorised acts were

authorised.189. Effect, on agreement, of misrepresentation or fraud by agent.


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PART XIPARTNERSHIP

Nature of Partnership

190. "Partnership" and "firm" defined.191. Rules for determining the existence of partnership.

Relationship of Partners to One Another

192. General duties of partners.193. Variation by consent of terms of partnership.194. Conduct of business and mutual rights and liabilities.195. Partnership property.196. Accountability of partners for private profits and competing businesses.197. When a term for partnership expires.

198. Introduction of new partners.199. Expulsion.200. Retirement.

Relationship of Partners to Persons dealing with them

201. Power of partner to bind the firm.202. Partners bound by acts on behalf of the firm.203. Liability of partners for debts.204. Liability for wrongs and misapplication.205. Improper employment of trust property for partnership purposes.206. Persons liable by holding out.207. Notice to partner to be notice to firm.208. Liabilities of incoming and outgoing partners.209. Revocation of continuing guarantee by change in firm.210. Rights of assignee of share in partnership.211. Minors not competent to be partners.

Dissolution of Partnership and its Consequences

212. Dissolution by expiration or notice.213. Dissolution by death, bankruptcy or charge.214. Dissolution by illegality of partnership.215. Dissolution by court.216. Rights of persons against apparent members of the firm.217. Partner's right to notice of dissolution.218. Continuance of rights and liabilities of partners after dissolution.219. Rights of partners as to application of partnership property.220. Apportionment of premium where partnership prematurely dissolved.221. Rights where partnership dissolved for fraud or misrepresentation.


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222. Right of outgoing partner in certain cases to share profits made afterdissolution.

223. Retiring or deceased partner's share to be a debt.224. Rule for distribution of assets on final settlement of accounts.225. Payment of firm debts and of separate debts.

226. Incorporated partnerships and joint-stock companies.

PART XIIREPEAL AND TRANSITIONAL PROVISIONS

227. [Disapplication of the Indian Contract Act and amendment of R.L. Cap.2.]

228. [Transitional provisions.]


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______CHAPTER 345

_______

THE LAW OF CONTRACT ACT

An Act to provide for the law relating to contracts.

[3rd March, 1961]Ord. No. 1 of 1961[R.L. Cap. 433]Act No. 55 of 1963

PART IPRELIMINARY PROVISIONS

Short title1.-(1) This Act may be cited as the Law of Contract Act.(2) Nothing contained in this Act shall effect the provisions of any

written law heretofore in force in Tanzania and not hereby expresslydisapplied or repealed, nor any usage or custom of trade, nor any incidentof any contract not inconsistent with the provisions of this Act.

2.-(1) In this Act, unless the context otherwise requiresConstruction Act No.55 of 1963 Sch. (a) when one person signifies to another his willingness to do or

to abstain from doing anything, with a view to obtaining theassent of that other to such act or abstinence, he is said tomake a proposal;

(b) when the person to whom the proposal is made signifies hisassent thereto, the proposal is said to be accepted, and aproposal, when accepted, becomes a promise;

(c) the person making the proposal is called the "promisor", andthe person accepting the proposal is called the "promisee";

(d) when, at the desire of the promisor, the promisee or any otherperson has done or abstained from doing, or does or abstainsfrom doing, or promises to do or to abstain from doing,something, such act or abstinence or promise is called aconsideration for the promise;

(e) every promise and every set of promises, forming theconsideration for each other, is an agreement;

(f) promises which form the consideration or part of theconsideration for each other, are called reciprocal promises;

(g) an agreement not enforceable by law is said to be void;(h) an agreement enforceable by law is a contract;(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 theother or others, is a voidable contract;


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(j) a contract which ceases to be enforceable by law becomesvoid.

(2) Notwithstanding the provisions of paragraphs (g) or (j) ofsubsection (1) of this section, where any written law in force in Tanzaniaon the date on which this Act comes into operation provides that an

agreement (howsoever described), of the kind specified therein, shall notbe enforceable by action unless or until certain requirements thereinspecified are complied with, or certain consents are obtained, no suchagreement shall be void by reason only that it is not enforceable by actionunder the provisions of that law for want of compliance with any suchrequirement or of the obtaining of any such consent.

(3) Nothing in this Act, other than section 23, shall affect anycustomary law; and in relation to any matter in which the law applicableis customary law, the provisions of the said section 23 shall be in additionto any relevant rule of customary law and the references to a law in thesaid section 23 shall be deemed to be references to the Acts of Tanzania.

PART IICOMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS

Communication,acceptance, andrevocation of proposals

3. The communication of proposals, the acceptance of proposals,and the revocation of proposals and acceptances, respectively, are deemedto be made by any act or omission of the party proposing, accepting orrevoking, by which he intends to communicate such proposal, acceptanceor revocation, and which has the effect of communicating it.

Communication, whencomplete

4.-(1) The communication of a proposal is complete when itcomes to the knowledge of the person to whom it is made.

(2) The communication of an acceptance is complete(a) as against the proposer, when it is put in a course of

transmission to him, so as to be out of the power of theacceptor;

(b) as against the acceptor, when it comes to the knowledge ofthe proposer.

(3) The communication of a revocation is complete(a) as against the person who makes it, when it is put into a

course of transmission to the person to whom it is made, soas to be out of the power of the person who makes it;

(b) as against the person to whom it is made, when it comes tohis knowledge.

Revocation ofproposals andacceptances

5.-(1) A proposal may be revoked at any time before thecommunication of its acceptance is complete as against the proposer, butnot afterwards.

(2) An acceptance may be revoked at any time before thecommunication of the acceptance is complete as against the acceptor, but


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not afterwards.

Revocation, how made 6. A proposal is revoked(a) by the communication of notice of revocation by the

proposer to the other party;

(b)

by the lapse of the time prescribed in such proposal for itsacceptance, or, if no time is so prescribed, by the lapse of areasonable time, without communication of the acceptance;

(c) by the failure of the acceptor to fulfil a condition precedentto acceptance; or

(d) by the death or insanity of the proposer, if the fact of hisdeath or insanity comes to the knowledge of the acceptorbefore acceptance.

Acceptance must beabsolute

7. In order to convert a proposal into a promise, the acceptancemust

(a)

be absolute and unqualified;(b) be expressed in some usual and reasonable manner, unlessthe proposal prescribes the manner in which it is to beaccepted; and if the proposal prescribes a manner in which itis to be accepted, and the acceptance is not made in suchmanner, the proposer may, within a reasonable time after theacceptance is communicated to him, insist that his proposalshall be accepted in the prescribed manner, and nototherwise, but if he fails to do so he accepts the acceptance.

Acceptance byperforming conditions,

or receivingconsideration

8. Performance of the conditions of a proposal, or the acceptanceof any consideration for a reciprocal promise which may be offered with aproposal, is an acceptance of the proposal.

Promises, express andimplied

9. In so far as the proposal or acceptance of any promise is madein words, the promise is said to be express; and in so far as such proposalor acceptance is made otherwise than in words, the promise is said to beimplied.

PART IIIVOIDABLE CONTRACTS AND VOID AGREEMENTS

Whatagreements arecontracts

10 . All agreements are contracts if they are made by the free consent ofparties competent to contract, for a lawful consideration and with a lawfulobject, and are not hereby expressly declared to be void:

Provided that nothing herein contained shall affect any law in force,and not hereby expressly repealed or disapplied, by which any contract isrequired to be made in writing or in the presence of witnesses, or any lawrelating to the registration of documents.


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Personscompetent tocontract

11 .-(1) Every person is competent to contract who is of the age ofmajority according to the law to which he is subject, and who is of sound mind,and is not disqualified from contracting by any law to which he is subject.

(2) An agreement by a person who is not hereby declared to be

competent to contract is void.What is a soundmind for thepurposes ofcontracting

12. -(1) A person is said to be of sound mind for the purpose of makinga contract if, at the time when he makes it, he is capable of understanding itand of forming a rational judgment as to its effect upon his interests.

(2) A person who is usually of unsound mind, but occasionally ofsound mind, may make a contract when he is of sound mind.

(3) A person who is usually of sound mind, but occasionally ofunsound mind, may not make a contract when he is of unsound mind.

"Consent"defined

13 . Two or more persons are said to consent when they agree upon the

same thing in the same sense."Free consent"defined

14 .-(1) Consent is said to be free when it is not caused by

(a) coercion, as defined in section 15;(b) undue influence, as defined in section 16;(c) fraud, as defined in section 17;(d) misrepresentation, as defined in section 18; or(e) mistake, subject to the provisions of sections 20, 21 and 22.

(2) Consent is said to be not free when it would not have been given butfor the existence of such coercion, undue influence, fraud, misrepresentation or

mistake.

"Coercion"definedCap.16

15. -(1) "Coercion" is the committing, or threatening to commit, any actforbidden by the Penal Code, or the unlawful detaining, or threatening todetain, any property, to the prejudice of any person whatever, with theintention of causing any person to enter into an agreement.

Cap.16(2) For the purposes of this Act it is immaterial whether the Penal Code

is or is not in force in the place where the coercion is employed.

"Undueinfluence"defined

16. -(1) A contract is said to be induced by "undue influence" where therelationship subsisting between the parties are such that one of the parties are

in a position to dominate the will of the other and uses that position to obtainan unfair advantage over the other.

(2) In particular and without prejudice to the generality of the foregoingprinciple, a person is deemed to be in a position to dominate the will ofanother

(a) where he holds a real or apparent authority over the other, orwhere he stands in a fiduciary relation to the other; or

(b) where he makes a contract with a person whose mental capacity is


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temporarily or permanently affected by reason of age, illness, ormental or bodily distress.

(3) Where a person who is in a position to dominate the will of another,enters into a contract with him, and the transaction appears, on the face of it oron the evidence adduced, to be unconscionable, the burden of proving that

such contract was not induced by undue influence shall lie upon the person in aposition to dominate the will of the other:

Cap.6Provided that nothing in this subsection shall affect the provisions of

section 120 of the Evidence Act.

"Fraud" defined 17 .-(1) "Fraud" means any of the following acts committed by a partyto a contract, or with his connivance, or by his agent, with intent to deceiveanother party thereto or his agent, or to induce him to enter into the contract

(a) the suggestion, as to a fact, of that which is not true by one whodoes not believe it to be true;

(b) the active concealment of a fact by one having knowledge or

belief of the fact;(c) a promise made without any intention of performing it;(d) any other act fitted to deceive; or(e) any such act or omission as the law specially declares to be

fraudulent.(2) For the purposes of this Act, mere silence as to facts likely to affect

the willingness of a person to enter into a contract is not fraud, unless thecircumstances of the case are such that regard being had to them, it is the dutyof the person keeping silence to speak, or unless his silence is, in itself,equivalent to speech.

"Misreprese-ntation" defined

18 ."Misrepresentation" means

(a) the positive assertion, in a manner not warranted by theinformation of the person making it, of that which is not true,though he believed it to be true;

(b) any breach of duty which, without an intent to deceive, gains anadvantage to the person committing it, or anyone claiming underhim, by misleading another to his prejudice, or to the prejudice ofanyone claiming under him;

(c) causing, however innocently, a party to an agreement to make amistake as to the substance of the thing which is the subject of theagreement.

Effect ofagreementsinduced bycoercion, fraud,misrepre-sentation orundue influence

19 .-(1) When consent to an agreement is caused by coercion, undueinfluence, fraud, or misrepresentation, the agreement is a contract voidable atthe option of the party whose consent was so caused:Provided that if such consent was caused by misrepresentation or by silence, orfraud within the meaning of section 17, the contract nevertheless is notvoidable, if the party whose consent was so caused had the means ofdiscovering the truth with ordinary diligence.


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(2) A fraud or misrepresentation which did not cause the consent to acontract of the party on whom such fraud was practised, or to whom suchmisrepresentation was made, does not render a contract voidable.

(3) A party to a contract, whose consent was caused by fraud ormisrepresentation may, if he thinks fit, insist that the contract shall be

performed, and that he shall be put in the position in which he would havebeen if the representations made had been true.(4) A contract, which is voidable on the ground that the consent of a

party thereto was caused by undue influence, may be set aside either absolutelyor, if the party who was entitled to avoid it has received any benefit thereunder,upon such terms and conditions as to the court may seem just.

Agreement voidwhere bothparties are undera mistake as tomatter of fact

20 .-(1) Where both the parties to an agreement are under a mistake asto a matter of fact essential to the agreement, the agreement is void.

(2) An erroneous opinion as to the value of the thing which forms thesubject matter of the agreement is not to be deemed a mistake as to a matter of

fact.Effect ofmistakes as tolaw

21 . A contract is not voidable because it was caused by a mistake as toany law in force in Tanzania; but a mistake as to a law not in force in Tanzaniahas the same effect as a mistake of fact.

Unilateralmistake

22 . A contract is not voidable merely because it was caused by one ofthe parties to it being under a mistake as to a matter of fact.

23 .-(1) The consideration or object of an agreement is lawful, unlessWhatconsiderationsand objects arelawful and whatare not

(a) it is forbidden by law;(b) is of such a nature that, if permitted, it would defeat the provisions

of any law;(c) is fraudulent;(d) involves or implies injury to the person or property of another; or(e) the court regards it as immoral or opposed to public policy.(2) In each of cases referred to in subsection (1), the consideration or

object of an agreement is said to be unlawful; and every agreement of whichthe object or consideration is unlawful is void and no suit shall be brought forthe recovery of any money paid or thing delivered, or for compensation for anything done, under any such agreement, unless

(a) the court is satisfied that the plaintiff was ignorant of the illegalityof the consideration or object of the agreement at the time he paidthe money or delivered the thing sought to be recovered or did thething in respect of which compensation is sought, and that theillegal consideration or object had not been effected at the timewhen the plaintiff became aware of the illegality and repudiatedthe agreement;

(b) the court is satisfied that the consent of the plaintiff to theagreement was induced by fraud, misrepresentation, coercion or


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undue influence; or(c) the agreement is declared to be illegal by any written law with the

object of protecting a particular class of persons of which theplaintiff is one.

Agreementsvoid ifconsiderationsand objects areunlawful in part

24. If any part of a single consideration for one or more objects, or anyone or any part of any one of several considerations for a single object, isunlawful, the agreement is void.

Agreementwithoutconsideration isvoid, unless it isin writing andregistered; or isa promise tocompensate forsomething done;

or is a promiseto pay a debtbarred bylimitation of law

25 .-(1) An agreement made without consideration is void unless(a) it is expressed in writing and registered under the law for the time

being in force for the registration of documents, and is made onaccount of natural love and affection between parties standing in anear relation to each other;

(b) it is a promise to compensate, wholly or in part, a person who hasalready voluntarily done something for the promisor, or somethingwhich the promisor was legally compellable to do; or

(c) it is a promise, made in writing and signed by the person to becharged therewith, or by his agent generally or speciallyauthorised in that behalf, to pay wholly or in part a debt of whichthe creditor might have enforced payment but for the law for thelimitation of suits,

in any of the cases under paragraphs (a), (b) and (c), such an agreement is acontract.

(2) Nothing in this section shall affect the validity, as between thedonor and donee, of any gift actually made

(3) An agreement to which the consent of the promisor is freely givenis not void merely because the consideration is inadequate; but the inadequacyof the consideration may be taken into account by the court in determining thequestion whether the consent of the promisor was freely given.

Agreement inrestraint ofmarriage void

26 . Every agreement in general restraint of the marriage of any person,other than a minor, is void.

Agreement inrestraint of tradevoid

27. -(1) Every agreement by which any one is restrained from exercisinga lawful profession, trade or business is to that extent void, unless the restraintis reasonable in reference to the interests of the parties concerned and inreference to the interests of the public.

(2) In particular and without prejudice to the generality of the foregoingprinciple, an agreement in restraint of trade is not reasonable in reference to theinterests of the parties, if the restraint exceeds what is reasonably necessary toprotect a proprietary interest of the promisee.

(3) The burden of proving that any restraint is reasonable in referenceto the interests of the parties shall lie upon the promisee, and the burden ofproving that any restraint is unreasonable in reference to the interests of the


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public shall lie on the promisor.

Agreement inrestraint of legalproceedingsvoid

28 . Every agreement, by which any party thereto is restrictedabsolutely from enforcing his rights under or in respect of any contract, by theusual legal proceedings in the ordinary tribunals, or which limits the time

within which he may thus enforce his rights, is void to that extent:Provided that this section shall not(a) render illegal

(i) a contract by which two or more persons agree that anydispute which may arise between them in respect of anysubject or class of subjects shall be referred toarbitration, and that only the amount awarded in sucharbitration shall be recoverable in respect of the disputeso referred; or

(ii) any contract in writing by which two or more personsagree to refer to arbitration any question between them

which has already arisen; or(b) affect any provision of any law in force for the time being as toreferences to arbitration.

Agreement voidfor uncertainty

29 . An agreement, the meaning of which is not certain, or capable ofbeing made certain, is void.

Agreement byway of wagervoid

30. An agreement by way of wager is void; and no suit shall bebrought for recovering anything alleged to be won on any wager, or entrustedto any person to abide the result of any game or other uncertain event on whichany wager is made.

PART IVCONTINGENT CONTRACTS

"Contingentcontract"defined

31 . A "contingent contract" is a contract to do or not to do something,if some event, collateral to such contract, does or does not happen.

Enforcement ofcontractcontingent on anevent happening

32 . A contingent contract to do or not to do anything if an uncertainfuture event happens cannot be enforced by law unless and until that event hashappened; and if the event becomes impossible, such contract becomes void.

Enforcement ofcontractcontingent on anevent nothappening

33 . A contingent contract to do or not to do anything if an uncertainfuture event does not happen can be enforced when the happening of that eventbecomes impossible, and not before.

When event onwhich contractis contingent tobe deemed

34 . If the future event on which a contract is contingent is the way inwhich a person will act at an unspecified time, the event shall be considered tobecome impossible when such person does anything which renders it


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impossible, if itis the futureconduct of aliving person

impossible that he should so act within any definite time, or otherwise thanunder further contingencies.

A contingentcontract

35 .-(1) A contingent contract to do or not to do anything if a specified

uncertain event happens within a fixed time becomes void if, at the expirationof the time fixed, such event has not happened, or if, before the time fixed,such event becomes impossible.

(2) A contingent contract to do or not to do anything if a specified oruncertain event does not happen within a fixed time may be enforced by lawwhen the time fixed has expired and such event has not happened, or, beforethe time fixed has expired if it becomes certain that such event will not happen.

Agreementcontingent onimpossibleevents void

36. A contingent agreement to do or not to do anything, if animpossible event happens, is void, whether the impossibility of the event isknown or not to the parties to the agreement at the time when it is made.

PART VPERFORMANCE OF CONTRACTS

Contracts which must be Performed

Obligations ofparties tocontracts

37 .-(1) The parties to a contract must perform their respectivepromises, unless such performance is dispensed with or excused under theprovisions of this Act or of any other law.

(2) Promises bind the representatives of the promisor in case of thedeath of such promisor before performance, unless a contrary intention appearsfrom the contract.

Effect of refusalto accept offerof performance

38 .-(1) Where a promisor has made an offer of performance to thepromisee, and the offer has not been accepted, the promisor is not responsiblefor non-performance, nor does he thereby lose his rights under the contract.

(2) Every such offer must fulfil the following conditions(a) it must be unconditional;(b) it must be made at a proper time and place, and under such

circumstances that the person to whom it is made may have areasonable opportunity of ascertaining that the person by whom itis made is able and willing there and then to do the whole of whathe is bound by his promise to do;

(c) if the offer is an offer to deliver anything to the promisee, thepromisee must have a reasonable opportunity of seeing that thething offered is the thing which the promisor is bound by hispromise to deliver.

(3) An offer to one of several joint promisees has the same legalconsequences as an offer to all of them.


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Effect of refusalof party toperform promisewholly

39 . When a party to a contract has refused to perform, or disabledhimself from performing his promise in its entirety, the promisee may put anend to the contract, unless he has signified, by words or conduct, hisacquiescence in its continuance.

Persons bywhom promiseis to beperformed

40. If it appears from the nature of the case that it was the intention ofthe parties to any contract that any promise contained in it should be performedby the promisor himself, such promise must be performed by the promissory;and in other cases the promisor or his representatives may employ a competentperson to perform it.

Effect ofacceptingperformancefrom thirdperson

41. When a promisee accepts performance of the promise from a thirdperson, he cannot afterwards enforce it against the promisor.

Joint Liabilities and Rights

Devolution of joint liabilities

42 . When two or more persons have made a joint promise, then, unlessa contrary intention appears by the contract, all such persons, during their jointlives, and after the death of any of them, his representative jointly with thesurvivor or survivors, and after the death of the last survivor, therepresentatives of all jointly, must fulfil the promise.

Obligations andliabilities of

joint promisors

43 .-(1) When two or more persons make a joint promise, the promiseemay, in the absence of express agreement to the contrary, compel any one ormore of such joint promisors to perform the whole of the promise:

Provided that where a promisee institutes a suit against any one or moreof such joint promisors and obtains a decree therein, nothing in this subsectionshall be construed as permitting the promisee to institute any further suitarising out of the same cause of action against any other of such jointpromisors.

(2) Each of two or more joint promisors may compel every other jointpromisor to contribute equally with himself to the performance of the promise,unless a contrary intention appears from the contract.

(3) If any one of two or more joint promisors makes default in suchcontribution, the remaining joint promisors must bear the loss arising fromsuch default in equal shares.

(4) Nothing in this section shall prevent a surety from recovering fromhis principal payments made by the surety on behalf of the principal, or entitlethe principal to recover anything from the surety on account of payments madeby the principal.

Effect of releaseof one jointpromisor

44. Where two or more persons have made a joint promise, a release ofone of such joint promisors by the promisee does not discharge the other jointpromisor or joint promisors; neither does it free the joint promisor so releasedfrom responsibility to the other joint promisor or joint promisors.


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Devolution of joint rights

45 . When a person has made a promise to two or more persons jointly,then, unless a contrary intention appears from the contract, the right to claimperformance rests, as between him and them, with them during their joint lives,and, after the death of any of them, with the representative of such deceased

person jointly with the survivor or survivors, and, after the death of the lastsurvivor, with the representatives of all jointly.

Time and Place for Performance

Time forperformance ofpromise whereno application isto be made andno time isspecified

46 . Where, by the contract, a promisor is to perform his promisewithout application by the promisee, and no time for performance is specified,the promise must be performed within a reasonable time, which is, in eachparticular case, a question of fact.

Time and placefor performanceof promisewhere time isspecified and noapplication is tobe made

47 . When a promise is to be performed on a certain day, and thepromisor has undertaken to perform it without application by the promisee, thepromisor may perform it at any time during the usual hours of business on suchday and at the place at which the promise ought to be performed.

Application forperformance oncertain day to beat proper timeand place

48 .-(1) When a promise is to be performed on a certain day, and thepromisor has not undertaken to perform it without application by the promisee,it is the duty of the promisee to apply for performance at a proper place andwithin the usual hours of business.

(2) The question as to what is a proper time and place is, in each

particular case, a question of fact.

Place forperformance ofpromise whereno application tobe made and noplace fixed forperformance

49 . When a promise is to be performed without application by thepromisee, and no place is fixed for the performance of it, it is the duty of thepromisor to apply to the promisee to appoint a reasonable place for theperformance of the promise, and to perform it at such place.

Performance inmanner or attime prescribedor sanctioned bypromisee

50. The performance of any promise may be made in any manner, or atany time which the promisee prescribes or sanctions.

Performance of Reciprocal Promises

Promisor notbound toperform unlessreciprocalpromisee ready

51 . When a contract consists of reciprocal promises to besimultaneously performed, no promisor need perform his promise unless thepromisee is ready and willing to perform his reciprocal promise.


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and willing toperform

Order ofperformance ofreciprocalpromises

52 . Where the order in which reciprocal promises are to be performedis expressly fixed by the contract, they shall be performed in that order; and,where the order is not expressly fixed by the contract, they shall be performedin that order which the nature of the transaction requires.

Liability ofparty preventingevent on whichcontract is totake effect

53 . When a contract contains reciprocal promises, and one party to thecontract prevents the other from performing his promises, the contract becomesvoidable at the option of the party so prevented; and he is entitled tocompensation from the other party for any loss which he may sustain inconsequence of the non-performance of the contract.

Effect of defaultas to thatpromise whichshould be first

performed, incontractconsisting ofreciprocalpromises

54 . When a contract consists of reciprocal promises, such that one ofthem cannot be performed, or that its performance cannot be claimed till theother has been performed, and the promisor of the promise last mentioned failsto perform it, such promisor cannot claim the performance of the reciprocalpromise, and must make compensation to the other party to the contract for anyloss which such other party may sustain by the non-performance of thecontract.

Effect of failureto perform atfixed time incontract

55 .-(1) When a party to a contract promises to do a certain thing at orbefore a specified time, or certain things at or before specified times, and failsto do any such thing at or before the specified time, the contract, or so much ofit as has not been performed, becomes voidable at the option of the promisee,if the intention of the parties was that time should be of the essence of thecontract.

(2) If it was not the intention of the parties that time should be of theessence of the contract, the contract does not become voidable by the failure todo such thing at or before the specified time; but the promisee is entitled tocompensation from the promisor for any loss occasioned to him by suchfailure.

(3) If, in case of a contract voidable on account of the promisor's failureto perform his promise at the time agreed, the promisee accepts performance ofsuch promise at any time other than that agreed, the promisee cannot claimcompensation for any loss occasioned by the non-performance of the promiseat the time agreed, unless, at the time of such acceptance, he gives notice to thepromisor of his intention to do so.

Agreement to doimpossible act,subsequentimpossibility orunlawfulnessand relatedcompensation

56 .-(1) An agreement to do an act impossible in itself is void.(2) A contract to do an act which, after the contract is made, becomes

impossible, or, by reason of some event which the promisor could not prevent,unlawful, becomes void when the act becomes impossible or unlawful.

(3) Where one person has promised to do something which he knew or,with reasonable diligence, might have known, and which the promisee did not


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know to be impossible or unlawful, such promisor must make compensation tosuch promisee for any loss which such promisee sustains through the non-performance of the promise.

Reciprocalpromise to do

things legal, andalso other thingsillegal

57 . Where persons reciprocally promise, first, to do certain things

which are legal, and, secondly, under specified circumstances, to do certainother things which are illegal, the first set of promises is a contract, but thesecond is a void agreement.

Alternativepromise, onebranch beingillegal

58 . In the case of an alternative promise, one branch of which is legaland the other illegal, the legal branch alone can be enforced.

Appropriation of Payments

Application ofpayment where

debt to bedischarged isindicated

59 . Where a debtor, owing several distinct debts to one person, makes

a payment to him, either with express intimation, or under circumstancesimplying that the payment is to be applied to the discharge of some particulardebt, the payment, if accepted, must be applied accordingly.

Application ofpayment wheredebt to bedischarged is notindicated

60. Where the debtor has omitted to intimate and there are no othercircumstances indicating to which debt the payment is to be applied, thecreditor may apply it at his discretion to any lawful debt actually due andpayable to him from the debtor, whether its recovery is or is not barred by thelaw in force for the time being as to the limitation of suits.

Application ofpayment where

neither partyappropriates

61 . Where neither party makes any appropriation, the payment shall beapplied in discharge of the debts in order of time, whether they are or are notbarred by the law in force for the time being as to the limitation of suits; and ifthe debts are of equal standing, the payment shall be applied in discharge ofeach proportionably.

Contracts Which Need Not Be Performed

Effect ofnovation,rescission andalteration ofcontract

62 . If the parties to a contract agree to substitute a new contract for it,or to rescind or alter it, the original contract need not be performed.

Promisee maydispense with orremitperformance ofpromise

63 . Every promisee may dispense with or remit, wholly or in part, theperformance of the promise made to him, or may extend the time for suchperformance, or may accept instead of it any satisfaction which he thinks fit.

Consequencesof rescission ofvoidablecontract

64 . When a person at whose option a contract is voidable rescinds it,the other party hereto need not perform any promise therein contained in whichhe is promisor; and the party rescinding a voidable contract shall, if he has


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received any benefit thereunder from another party to such contract, restoresuch benefit, so far as may be, to the person from whom it was received.

65 . When an agreement is discovered to be void, or when a contractbecomes void, any person who has received any advantage under such

agreement or contract is bound to restore it, or to make compensation for it, tothe person agreement from whom he received it:

Obligation ofperson who hasreceived

advantage undervoid or contractthat becomesvoid Provided that where a contract becomes void by reason of the

provisions of subsection (2) of section 56, and a party thereto incurredexpenses before the time when that occurs in, or for the purposes of, theperformance of the contract, the court may, if it considers it just to do so in allthe circumstances of the case, allow such party to retain the whole or any partof any such advantage as aforesaid received by him, or discharge him whollyor in part from making compensation therefore, or may make an order thatsuch party recover the whole or any part of any payments or other advantagewhich would have been due to him under the contract had it not become void,

being, in any such case, an advantage or part thereof, discharge or payment,not greater in value than the expenses so incurred.

Mode ofcommunicatingor revokingrescission ofvoidablecontract

66. The rescission of a voidable contract may be communicated orrevoked in the same manner, and subject to the same rules, as apply to thecommunication or revocation of a proposal.

Effect of neglectof promisee

67 . If any promisee neglects or refuses to afford the promisorreasonable facilities for the performance of his promise, the promisor is

excused by such neglect or refusal as to any non-performance caused facilitiesthereby.

PART VICERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT

Claim fornecessariessupplied toperson incapableof contracting,or on hisaccount

68 . If a person incapable of entering into a contract, or anyone whomhe is legally bound to support, is supplied by another person with necessariessuited to his condition in life, the person who has furnished such supplies isentitled to be reimbursed from the property of such incapable person.

Reimbursementof person payingmoney due byanother inpayment ofwhich he isinterested

69. A person who is interested in the payment of money which anotheris bound by law to pay, and who therefore pays it, is entitled to be reimbursedby the other.


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Obligation ofperson enjoyingbenefit of non-gratuitous act

70 . Where a person lawfully does anything for another person, ordelivers anything to him, not intending to do so gratuitously, and such otherperson enjoys the benefit thereof, the latter is bound to make compensation tothe former in respect of, or to restore, the thing so done or delivered:Provided that no compensation shall be made in any case in which the person

sought to be charged had no opportunity of accepting or rejecting the benefit.Responsibilityof finder ofgoods

71. A person who finds goods belonging to another, and takes theminto his custody, is subject to the same responsibility as a bailee.

Liability ofperson to whommoney is paid orthing deliveredby mistake orunder coercion

72 . A person to whom money has been paid, or anything delivered,by mistake as to a matter of fact which, if true, would give rise to a legalobligation or under coercion, must repay or return it.

PART VIICONSEQUENCES OF BREACH OF CONTRACT

Compensationfor loss ordamage causedby breach ofcontract, etc.

73 .-(1) When a contract has been broken, the party who suffers by suchbreach is entitled to receive, from the party who has broken the contract,compensation for any loss or damage caused to him thereby, which naturallyarose in the usual course of things from such breach, or which the partiesknew, when they made the contract, to be likely to result from the breach of it.

(2) The compensation is not to be given for any remote and indirectloss or damage sustained by reason of the breach.

(3) When an obligation resembling those created by contract has beenincurred and has not been discharged, any person injured by the failure todischarge is entitled to receive the same compensation from the party in defaultas if such person had contracted to discharge it and had broken his contract.

(4) In estimating the loss or damage arising from a breach of contract,the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.

Compensationfor breach ofcontract wherepenaltystipulated

74 .-(1) When a contract has been broken, if a sum is named in thecontract as the amount to be paid in case of such breach, or if the contractcontains any other stipulation by way of penalty, the party complaining of thebreach is entitled, whether or not actual damage or loss is proved to have beencaused thereby, to receive from the party who has broken the contractreasonable compensation not exceeding the amount so named or, as the casemay be, the penalty stipulated.

(2) A stipulation for increased interest from the date of default may be astipulation by way of penalty.

(3) Notwithstanding the foregoing provisions of this section, when anyperson enters into any bail-bond, recognisance or other instrument of the samenature, or under the provisions of any law, or under the orders of theGovernment or the President gives any bond for the performance of any public


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duty or act in which the public are interested, he shall be liable, upon breach ofthe condition of any such instrument, to pay the whole sum mentioned therein.

(4) For the avoidance of doubt, it is hereby declared that a person whoenters into a contract with the Government or the President does notnecessarily thereby undertake any public duty, or promise to do an act in which

the public are interested.Party rightfullyrescindingcontract entitledto compensation

75. A person who rightly rescinds a contract is entitled tocompensation for any damage which he has sustained through the non-fulfilment of the contract.

PART VIIIINDEMNITY AND GUARANTEE

"Contract ofindemnity"defined

76 . A contract by which one party promises to save the other from losscaused to him is called a "contract of indemnity".

Rights ofindemnity-holder whensued, etc.

77 . The promisee in a contract of indemnity, acting within the scope ofhis authority, is entitled to recover from the promisor

(a) all damages which he may be compelled to pay in any legalproceedings in respect of any matter to which the promise toindemnify applies;

(b) all costs which he may be compelled to pay in any suchproceedings if, in bringing or defending them, he did notcontravene the orders of the promisor, and acted as it would havebeen prudent for him to act in the absence of any contract of

indemnity, or if the promisor authorised him to bring or defendthe proceedings; and(c) all sums which he may have paid under the terms of any

compromise of any such proceedings, if the compromise was notcontrary to the orders of the promisor, and was one which it wouldhave been prudent for the promisee to make in the absence of anycontract of indemnity, or if the promisor authorised him tocompromise the proceedings.

"Contract ofguarantee","surety",

"principaldebtor", and"creditor"defined

78 . A "contract of guarantee" is a contract to perform the promise, ordischarge the liability, of a third person in case of his default and the person

who gives the guarantee is called the "surety"; the person in respect of whosedefault the guarantee is given is called the "principal debtor", and the person towhom the guarantee is given is called the "creditor"; and guarantee may beeither oral or written.

Considerationfor guarantee

79 . Anything done, or any promise made, for the benefit of theprincipal debtor may be a sufficient consideration to the surety for giving theguarantee.


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Surety's liability 80 . The liability of the surety is co-extensive with that of the principaldebtor, unless it is otherwise provided by the contract.

"Continuingguarantee"

defined

81 . A guarantee which extends to a series of transactions is called a

"continuing guarantee".

Revocation ofcontinuingguarantee

82 . A continuing guarantee may at any time be revoked by the surety,as to future transactions, by notice to the creditor.

Revocation ofcontinuingguarantee bysurety's death

83. The death of the surety operates, in the absence of any contractto the contrary, as a revocation of a continuing guarantee, so far as regardsfuture transactions.

Liability of two

persons,primarily liable,not affected byarrangementsbetween themthat one shall besurety onanother's default

84 . Where two persons contract with a third person to undertake acertain liability, and also contract with each other that one of them shall beliable only on the default of the other, the third person not being a party to suchcontract, the liability of each of such two persons to the third person under thefirst contract is not affected by the existence of the second contract, althoughsuch third person may have been aware of its existence.

Discharge ofsurety byvariance interms of contract

85 . Any variance, made without the surety's consent in the terms of thecontract between the principal debtor and the creditor, discharges the surety asto transactions subsequent to the variance.

Discharge ofsurety by releaseor discharge ofprincipal debtor

86 . The surety is discharged by any contract between the creditor andthe principal debtor, by which the principal debtor is released, or by any act oromission of the creditor, the legal consequence of which is the discharge of theprincipal debtor.

Discharge ofsurety whencreditorcompoundswith, gives timeto, or agrees notto sue, principaldebtor

87 . A contract between the creditor and the principal debtor, by whichthe creditor makes a composition with, or promises to give time to, or not tosue, the principal debtor, discharges the surety, unless the surety assents tosuch contract.

Surety notdischarged whenagreement madewith thirdperson to givetime to principaldebtor

88 . Where a contract to give time to the principal debtor is made by thecreditor with a third person, and not with the principal debtor, the surety is notdischarged.


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Creditor'sforbearance tosue does notdischarge surety

89 . Mere forbearance on the part of the creditor to sue the principaldebtor or to enforce any other remedy against him does not, in the absence ofany provision in the guarantee to the contrary, discharge the surety.

Release of oneco-surety doesnot dischargeothers

90. Where there are co-sureties, a release by the creditor of one ofthem does not discharge the others; neither does it free the surety so releasedfrom his responsibility to the other sureties.

Discharge ofsurety bycreditor's act oromissionimpairingsurety's eventualremedy

91 . If the creditor does any act which is inconsistent with the rights ofthe surety, or omits to do any act which his duty to the surety requires him todo, and the eventual remedy of the surety himself against the principal debtoris thereby impaired, the surety is discharged.

Rights of suretyon payment orperformance

92. Where a guaranteed debt has become due, or default of the

principal debtor to perform a guaranteed duty has taken place, the surety, uponpayment or performance of all that he is liable for, is invested with all therights which the creditor had against the principal debtor.

Surety's right tobenefit ofcreditor'ssecurities

93 . A surety is entitled to the benefit of every security which thecreditor has against the principal debtor whether such security was in existenceat the time when the contract of suretyship is entered into or came intoexistence subsequent thereto, and whether the surety knows of the existence ofsuch security or not; and, if the creditor loses or, without the consent of thesurety, parts with such security, the surety is discharged to the extent of thevalue of the security.

Guaranteeobtained bymisrepresentation invalid

94. Any guarantee which has been obtained by means of isrepresentation made by the creditor, or with his knowledge and assent,concerning a material part of the transaction, is invalid.

Guaranteeobtained byconcealmentinvalid

95. Any guarantee which the creditor has obtained by means ofkeeping silence as to material circumstances invalid.

Guarantee oncontract thatcreditor shall notact on it untilco-surety joins

96. Where a person gives a guarantee upon a contract that a creditor

shall not act upon it until another person has joined in it as co-surety, theguarantee is not valid if that other person does not join.

Implied promiseto indemnifysurety

97 . In every contract of guarantee there is an implied promise by theprincipal debtor to indemnify the surety; and the surety is entitled to recoverfrom the principal debtor whatever sum he has rightfully paid under theguarantee, but no sums which he has paid wrongfully.


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Co-suretiesliable tocontributeequally

98 . Where two or more persons are co-sureties for the same debt orduty, either jointly or severally, and whether under the same or differentcontracts, and whether with or without the knowledge of each other, the co-sureties, in the absence of any contract to the contrary, are liable, as betweenthemselves, to pay each an equal share of the whole debt, or of that part of it

which remains unpaid by the principal debtor.Liability of co-sureties boundin different sums

99 . Co-sureties who are bound in different sums are liable to payequally as far as the limits of their respective obligations permit.

PART IXBAILMENT

"Bailment","bailor" and"bailee" defined

100 .-(1) A "bailment" is the delivery of goods by one person to anotherfor some purpose, upon a contract that they shall, when the purpose isaccomplished, be returned or otherwise disposed of according to the directions

of the person delivering them; and the person delivering the goods is called the"bailor" while the person to whom they are delivered is called the "bailee".(2) If a person already in possession of the goods of other contracts to

hold them as a bailee, he thereby becomes the bailee, and the owner becomesthe bailor, of such goods although they may not have been delivered by way ofbailment.

Delivery tobailee, howmade

101. The delivery to the bailee may be made by doing anything whichhas the effect of putting the goods in the possession of the intended bailee or ofany person authorised to hold them on his behalf.

Bailor's duty todisclose faults ingoods bailed

102 .-(1) The bailor is bound to disclose to the bailee faults in the goodsbailed, of which the bailor is aware, and which materially interfere with the useof them, or expose the bailee to extraordinary risks; and, if he does not makesuch disclosure, he is responsible for damage arising to the bailee directly fromsuch faults.(2) If the goods are bailed for hire, the bailor is responsible for such damage,whether he was or was not aware of the existence of such faults in the goodsbailed.

Care to be takenby bailee

103. In all cases of bailment the bailee is bound to take as much care ofthe goods bailed to him as a person of ordinary prudence would, under similar

circumstances, take of his own goods of the same bulk, quality and value as thegoods bailed:Provided that nothing in this section shall be construed as applying to

or qualifying the liability at common law of a common carrier or an inn keeper.

When bailee notliable for loss,etc., of thingbailed

104. The bailee, in the absence of any special contract, is notresponsible for the loss, destruction or deterioration of the thing bailed, if hehas taken the amount of care of described in section 103.


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Termination ofbailment bybailee's actinconsistentwith conditions

105 . A contract of bailment is voidable at the option of the bailor, ifthe bailee does any act with regard to the goods bailed, inconsistent with theconditions of the bailment.

Liability ofbailee makingunauthorised useof goods bailed

106 . If the bailee makes any use of the goods bailed, which is notaccording to the conditions of the bailment, he is liable to make compensationto the bailor for any damage arising to the goods from or during such use ofthem.

Effect ofmixture, withbailor's consent,of his goodswith bailee's

107 . If the bailee, with the consent of the bailor, mixes the goods of thebailor with his own goods, the bailor and the bailee shall have an interest inproportion to their respective with shares, in the mixture thus produced.

Effect of

mixture, withoutbailor's consent,when the goodscan be separated

108 . If the bailee, without the consent of the bailor, mixes the goods ofthe bailor with his own goods, and the goods can be separated or divided, theproperty in the goods remains in the parties respectively; but the bailee isbound to bear the expense of separation or division, and any damage arisingfrom the mixture.

Effect ofmixture, withoutbailor's consent,when cannot beseparated

109 . If the bailee, without the consent of the bailor, mixes the goods ofthe bailor with his own goods, in such a manner that it is impossible to separatethe goods bailed from other goods and deliver them back, the bailor is entitledto be compensated by the bailee for the loss of the goods.

Repayment by

bailor ofnecessaryexpenses

110 . Where, by the conditions of the bailment, the goods are to be keptor to be carried, or to have work done upon them by the bailee for the bailor,and the bailee is to receive no remuneration, the bailor shall repay to the baileethe necessary expenses incurred by him for the purpose of the bailment.

Restoration ofgoods lentgratuitously

111. The lender of a thing for use may at any time require its return, ifthe loan was gratuitous, even though he lent it for a specified time or purpose;but, if, on the face of such loan made for a specified time or purpose, theborrower has acted in such a manner that the return of the thing lent before thetime agreed upon would cause him loss exceeding the benefit actually derivedby him from the loan, the lender must, if he compels the return, indemnify theborrower for the amount in which the loss so occasioned exceeds the benefit soderived.

Return of goodsbailed, onexpiration oftime oraccomplishmentof purpose

112. It is the duty of the bailee to return, or deliver according to thebailor's directions, the goods bailed, without demand, as soon as the time forwhich they were bailed has expired, or the purpose for which they were bailedhas been accomplished.


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Bailee'sresponsibilitywhen goods arenot dulyreturned

113 . If, by the default of the bailee, the goods are not returned,delivered or tendered at the proper time, he is responsible to the bailor for anyloss, destruction or deterioration of the goods from that time.

Termination of

gratuitousbailment bydeath

114. A gratuitous bailment is terminated by the death either of thebailor or of the bailee.

Bailor entitled toincrease orprofit fromgoods bailed

115 . In the absence of any contract to the contrary, the bailee isbound to deliver to the bailor, or according to his directions, any increase orprofit which may have accrued from the goods bailed.

Bailor'sresponsibility tobailee

116 . The bailor is responsible to the bailee for any loss which the baileemay sustain by reason that the bailor was not entitled to make the bailment, orto receive back the goods, or to give directions respecting them.

Bailment byseveral jointowners

117 . If several joint owners of goods bail them, the bailee maydeliver them back to, or according to the directions of, one joint owner withoutthe consent of all, in the absence of any agreement to the contrary.

Bailee notresponsible onredelivery tobailor withouttitle

118 . If the bailor has no title to the goods and the bailee, in good faith,delivers them back to, or according to the directions of, the bailor, the bailee isnot responsible to the owner in respect of such delivery.

Right of thirdperson claiminggoods bailed

119 . If a person, other than a bailor, claims goods bailed he may apply

to the court to stop the delivery of the goods to the bailor, and to decide thetitle to the goods.

Right of finderof goods

120 . The finder of goods has no right to sue the owner forcompensation for trouble and expense voluntarily incurred by him to preservethe goods and to find out the owner; but he may retain the goods against theowner until he receives such compensation; and, where the owner has offered aspecific reward for the return of goods lost, the finder may sue for such reward,and may retain the goods until he receives it.

When finder ofthing commonlyon sale may sellit

121 . When a thing which is commonly the subject of sale is lost, if

the owner cannot with reasonable diligence be found, or if he refuses, upondemand, to pay the lawful charges of the finder, the finder may sell it

(a) when the thing is in danger of perishing or of losing the greaterpart of its value; or

(b) when the lawful charges of the finder, in respect of the thingfound, amount to two-thirds of its value.


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Bailee'sparticular lien

122 . Where the bailee has, in accordance with the purpose of thebailment, rendered any service involving the exercise of labour or skill inrespect of the goods bailed, he has, in the absence of a contract to the contrary,a right to retain such goods until he receives due remuneration for the serviceshe has rendered in respect of them.

General lien ofbankers, factors,wharfingers,advocates,policy-brokers

123 . Bankers, factors, wharfingers, advocates and policy-brokers may,in the absence of a contract to the contrary, retain, as a security for a generalbalance of account, any goods and bailed to them; but no other persons have aright to retain, as a security for such balance, goods bailed to them, unless thereis an express contract to that effect.

Bailments of Pledges

"Pledge","pawnor", and"pawnee"

defined

124 . The bailment of goods as security for payment of a debt orperformance of a promise is called "pledge"; and he bailor is in this case called

the "pawnor" while the bailee is called the "pawnee".Pawnee's rightof retainer

125 . The pawnee may retain the goods pledged, not only for paymentof the debt or the performance of the promise, but for the interest of the debt,and all necessary expenses incurred by him in respect of the possession or forthe preservation of the goods pledged.

Pawnee not toretain for debt orpromise otherthan that forwhich goodspledged

126 . The pawnee shall not, in the absence of a contract to that effect,retain the goods pledged for any debt or promise other than the debt or promisefor which they are pledged; but such contract, in the absence of anything to thecontrary, shall be presumed in regard to subsequent advances made by thepawnee.

Presumption in Case of Subsequent Advances

Pawnee's rightas toextraordinaryexpensesincurred

127 . The pawnee is entitled to receive from the pawnor extraordinaryexpenses incurred by him for the preservation of the goods pledged.

Pawnee's rightwhere pawnormakes default

128 .-(1) If the pawnor makes default in payment of the debt orperformance, at the stipulated time of the promise, in respect of which thegoods were pledged, the pawnee may bring a suit against the pawnor upon thedebt or promise, and retain the goods pledged as a collateral security; or hemay sell the thing pledged, on giving the pawnor reasonable notice of the sale.

(2) If the proceeds of such sale are less than the amount due in respectof the debt or promise, the pawnor is still liable to pay the balance but if theproceeds of the sale are greater than the amount so due, the pawnee shall payover the surplus to the pawnor.


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Defaultingpawnor's right toredeem

129. If a time is stipulated for the payment of the debt or performanceof the promise, for which the pledge is and the pawnor makes default inpayment of the debt or performance of the promise at the stipulated time, hemay redeem the goods pledged at any subsequent time before the actual sale ofthem; but he must, in that case, pay, in addition, any expenses which have

arisen from his default.Pledges bymercantileagents andpersons inpossessionunder voidablecontracts

130 .-(1) Where a mercantile agent is, with the consent of the owner, inpossession of goods or the documents of title to goods, any pledge made byhim, when acting in the ordinary course of business of a mercantile agent, shallbe as valid as if he were expressly authorised by the owner of the goods tomake the same; provided that the pawnee acts in good faith and has not at thetime of the pledge notice that the pawnor has no authority to pledge.

(2) Where a mercantile agent validly pledges the documents of title togoods, the pledge shall be deemed to be a pledge of the goods.

(3) Where a pawnor has obtained possession of the goods pledged by

him under a contract voidable under section 19, but the contract has not beenrescinded at the time of the pledge, the pawnee acquires a good title to thegoods; provided he acts in good faith and without notice of the pawnor's defectof title.

Cap.214

(4) In this section the expressions "mercantile agent" and "documentsof title to goods" shall have the meanings ascribed to them respectively in theSale of Goods Act.

Pledge wherepawnor has onlya limited interest

131 . Where a person pledges goods in which he has only a limitedinterest, the pledge is valid to the extent of that interest.

Suits by Bailees or Bailors against Wrongdoers

Suit by bailor orbailee againstwrongdoer

132 . If a third person wrongfully deprives the bailee of the use orpossession of the goods bailed, or does them any injury, the bailee is entitled touse such remedies as the owner might have used in the like case if no bailmenthad been made; and either the bailor or the bailee may bring a suit against athird person for such deprivation or injury.

Apportionmentof relief orcompensation

obtained by suchsuits

133 . Whatever is obtained by way of relief or compensation in anysuch suit shall, as between the bailor and the bailee, be dealt with according to

their respective interests.


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PART XAGENCY

Appointment and Authority of Agents

"Agent" and"principal"defined

134. An "agent" is a person employed to do any act for another or torepresent another in dealings with third persons and the person for whom suchact is done, or who is so represented, is called the "principal".

Who mayemploy agent

135. Any person who is of the age of majority according to the lawto which he is subject, and who is of sound mind, may employ an agent.

Who may be anagent

136. As between the principal and third persons any person maybecome an agent; but no person who is not of the age of majority and of soundmind can become an agent, so as to be responsible to his principal according tothe provisions of this Act.

Considerationnot necessary

137 .No consideration is necessary to create an agency.

Agent'sauthority may beexpress orimplied

138. The authority of an agent may be express or implied.

Definitions ofexpress andimpliedauthority

139 . An authority is said to be express when it is given by wordsspoken or written and to be implied when it is to be inferred from thecircumstances of the case; and things spoken or written, or the ordinary courseof dealing, may be accounted on circumstances of the case.

Extent of agent'sauthority

140 .-(1) An agent having on authority to do an act has authority to doevery lawful thing which is necessary in order to do such act.

(2) An agent having authority to carry on a business has authority to doevery lawful thing necessary for the purpose, or usually done in the course ofconducting such business.

Agent'sauthority in anemergency

141. An agent has authority, in an emergency, to do all such acts forthe purpose of protecting his principal from loss as would be done by a personof ordinary prudence, in his own case, under similar circumstances.

Sub-Agents

When agentcannot delegate

142 . An agent cannot lawfully employ another to perform acts whichhe has expressly or impliedly undertaken to perform personally unless by theordinary custom of trade a sub-agent may, or from the nature of the agency, asub-agent must, be employed.


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"Sub-agent"defined

143. A "sub-agent" is a person employed by, and acting under thecontrol of, the original agent in the business of the agency.

Representationof principal bysub-agent

properlyappointed

144 .-(1) Where a sub-agent is properly appointed, the principal is, sofar as regards third persons, represented by the sub-agent, and is bound by and

responsible for his acts, as if he were an agent originally appointed by theprincipal.(2) The agent is responsible to the principal for the acts of the sub-

agent.(3) The sub-agent is responsible for his acts to the agent, but not to the

principal, except in case of fraud or wilful wrong.

Agent'sresponsibilityfor sub-agentappointedwithoutauthority

145 . Where an agent, without having authority to do so, hasappointed a person to act as a sub-agent, the agent stands towards such personin the relation of a principal to an agent, and is responsible for his acts both tothe principal and to third persons; the principal is not represented by or

responsible for the acts of the person so employed, nor is that personresponsible to the principal.

Relationbetweenprincipal andpersonappointed byagent to act inbusiness ofagency

146 . Where an agent, holding an express or implied authority to nameanother person to act for the principal in the business of the agency, has dulynamed another person accordingly, such person is not a sub-agent, but an agentof the principal for such part of the business of the agency as is entrusted tohim.

Agent's duty innaming such

person

147. In selection such agent for his principal, an agent is bound toexercise the same amount of discretion as a man of ordinary prudence wouldexercise in his own case; and if he does this, he is not responsible to theprincipal for the acts or negligence of the agent so selected.

Ratification

Right of personas to acts donefor him withouthis authority andeffect ofratification

148. Where acts are done by one person on behalf of another, butwithout his knowledge or authority, he may elect to ratify or to disown suchacts and if he ratifies them, the same effects will follow as if they had beenperformed by his authority.

Ratification maybe express orimplied

149 . Ratification may be express or may be implied in the conduct ofthe person on whose behalf the acts are done.

Knowledgerequisite forvalid ratification

150. No valid ratification can be made by a person whose knowledgeof the facts of the case is materially defective.


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Effect ofratifyingunauthorised actforming part ofa transaction

151. A person ratifying any unauthorised act done on his behalf ratifiesthe whole of the transaction of which such act formed a part.

Ratification of

unauthorised actcannot injurethird person

152. An act done by one person on behalf of another without suchother person's authority, which, if done with authority, would have the effect ofsubjecting a third person to damages, or of terminating any right or interest of athird person, cannot, by ratification, be made to have such effect.

Revocation of Agency

Termination ofagency

153. An agency is terminated by the principal revoking his authority;or by the agent renouncing the business of the agency; or by the business of theagency being completed; or by either the principal or agent dying, becoming ofunsound mind or being adjudged bankrupt under the provisions of any law forthe time being in force relating to bankruptcy.

Termination ofagency, whereagent has aninterest insubject-matter

154. Where the agent has himself an interest in the property whichforms the subject-matter of the agency, the agency cannot, in the absence of anexpress contract, be terminated to the prejudice of such interest.

When principalmay revokeagent's authority

155. The principal may, save as is otherwise provided by section 154,revoke the authority given to his agent at any time before the authority hasbeen exercised so as to bind the principal.

Revocation

where authorityhas been partlyexercised

156 . The principal cannot revoke the authority given to his agent afterthe authority has been partly exercised, so far as regards such acts andobligations as arise from acts already done in the agency.

Compensationfor revocationby principal orrenunciation byagent

157. Where there is an express or implied contract that the agencyshould be continued for any period of time, the principal must makecompensation to the agent, or the agent to the principal, as the case may be, forany previous revocation or renunciation of the agency without sufficient cause.

Notice ofrevocation orrenunciation

158. Reasonable notice must be given of such revocation orrenunciation; otherwise the damage thereby resulting to the principal or theagent, as the case may be, must be made good to the one by the other.

Revocation andrenunciationmay be expressor implied

159 . Revocation and renunciation may be express or may be impliedin the conduct of the principal or agent respectively.

Whentermination ofagent's authoritytakes effect as to

160 . The termination of the authority of an agent does not, so far asregards the agent, take effect before it becomes known to him, or so far asregards third persons, before it becomes known to them.


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agent, and as tothird persons

Agent's duty ontermination ofagency byprincipal's death

or insanity

161 . When an agency is terminated by the principal dying or becomingof unsound mind, the agent is bound to take, on behalf of the representatives ofhis late principal, all reasonable steps for the protection and preservation of theinterests entrusted to him.

Termination ofsub-agent'sauthority

162. The termination of the authority of an agent causes thetermination (subject to the rules herein contained regarding the termination ofan agent's authority) of the authority of all sub-agents appointed by him.

Agent's Duty to Principal

Agent's duty inconductingprincipal'sbusiness

163 . An agent is bound to conduct the business of his principalaccording to the directions given by the principal or, in the absence of any suchdirections, according to the custom which prevails in doing business of thesame kind at the place where the agent conducts such business. When the agentacts otherwise, if any loss be sustained, he must make it good to his principal,and, if any profit accrues, he must account for it.

Skill anddiligencerequired fromagent

164. An agent is bound to conduct the business of the agency with asmuch skill as is generally possessed by persons engaged in similar business,unless the principal has notice of his want of skill. The agent is always boundto act with reasonable diligence, and to use such skill as he possesses; and tomake compensation to his principal in respect of the direct consequences of hisown neglect, want of skill or misconduct, but not in respect of loss or damage

which are indirectly or remotely caused by such neglect, want of skill ormisconduct.

Agent's accounts 165. An agent is bound to render proper accounts to his principal ondemand.

Agent's duty tocommunicatewith principal

166. It is the duty of an agent, in cases of difficulty, to use allreasonable diligence in communicating with his principal, and in seeking toobtain his instructions.

Right ofprincipal whenagent deals, onhis own account,in business ofthe agencywithoutprincipal'sconsent

167. If an agent deals on his own account in the business of the

agency, without first obtaining the consent of his principal and acquainting himwith all material circumstances which have come to his own knowledge on thesubje

the law of contract act, cap. 345 r.e 2002.pdf

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