2 VIJAY LAW SERIES. Contents

Transcription

1 CONTRACTS-II 1

2 2 VIJAY LAW SERIES Contents I. INDEX i-ii II SHORT NOTES INDEX iii-iv III ESSAY QUESTIONS AND ANSWERS 1-81 IV. SHORT NOTES III. DICTIONARY OF CONTRACTS-II IV. IMPORTANT QUESTIONS 101 Indemnity and Guarantee 1 1 Contract of Indemnity 1 2 Contract of Guarantee 3 3 Contract of Indemnity and Contract of Guarantee 4 4 Liability of Surety 5 5 Continuing Guarantee 7 6 Discharge of Surety 9 7 Rights of Surety 11 Bailment 12 8 Bailment 12 9 Rights and Duties of Bailor Finder of lost goods 17 Pledge Pledge Agency Delegatus non potest delegare Creation of agency Ratification Termination of agency 33 The Sale of Goods Act, Sale or Contract of sale Distinction between Sale and Agreement to Sell Goods 38

3 CONTRACTS-II 3 20 Conditions and Warranties Implied Conditions and Warranties Caveat emptor Transfer of property or Passing of Ownership Nemo dat quod non habet or Transfer of Title Rights and Duties of the Seller and Buyer Unpaid Seller Auction Sale 54 The Indian Partnership Act, Partnership and Its Essential elements Distinction between Partnership firm and Joint Hindu Family Firm Kinds of Partnership Law of Partnership is an extension of Law of Agency Mode of Determining the existence of Partnership Registration of Partnership Firm Rights and Duties of Partners Relations of Partners to Third Parties Minor partner Rights and liabilities of Incoming and Outgoing Partners Dissolution of Partnership and Firm 68 The Negotiable Instrument Act, Negotiable Instrument and its Special characteristics Promissory note Bill of Exchange Cheque Crossing of Cheque Holder in Due Course Dishonour of a Cheque 80

4 4 VIJAY LAW SERIES CONTRACT OF INDEMNITY Section-124 CONTRACT OF INDEMNITY: Indemnity means to compensate or to make good the loss. Indemnifier is a promisor and Indemnity-holder is a promisee. According to Section 124 Contract of Indemnity is A contract by which one party promises to save the other party from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person. Illustration: A contracts to indemnify B against the consequences of any proceedings, which C may take against B in respect of a certain sum of 200 rupees. This is a contract of indemnity. A person who promises to indemnify is called indemnifier and the person to whom the promise of indemnity is made is called indemnity-holder or indemnified. It is a protection against loss. This section applies only when the loss is caused by human agency. Hence, a contract of insurance in which insurer promises to pay compensation in the even of loss by fire is not covered by the definition of Section 124, but they are valid contracts under Section 31. Promise to indemnify may be express or implied under English law. Illustration: B says to the shopkeeper- let A have the goods, I will see you paid. This is a contract of indemnity. Essentials: 1. There must be two parties 2. There must be a promise to save the other party from loss 3. The loss may be due to promisor himself or any other person. 4. The contract must fulfil all the essentials of a valid contract. Rights of Indemnity Holder (Promisee): Section Right to recover damages 2. Right to recover costs 3. Right to recover sums paid under compromise

5 CONTRACTS-II 5 4. Right to sue for specific performance of the contract. Letter of credit: A letter of credit deals with bargain between the banker and the vendor of the goods which imposes on the banker an absolute obligation to pay. An obligation under an irrevocable letter of credit to pay, his buyer-customer cannot instruct him not to pay. A letter of credit sometimes looks like and is analogous to a contract of guarantee. Liability of Indemnifier: Under English Law no action can be taken against the indemnifier until the indemnity-holder had suffered actual loss. Under Indian law, a person must be indemnified before he can be indemnified. Gajanan Moreshwar v. Moreshwar Madan AIR 1942 Bom 302 at 304 the Bombay High Court held that if the indemnified has incurred a liability and that liability is absolute, he is entitled to call upon the indemnifier to save him from that liability and to pay it off. This judgement was also recommended by the Law Commission in its 13 th report on Indian Contract Act, 1872 Oriental Insurance Co. Ltd v. Meena Variayal and Others 2007 (3) ALD 99 (SC) a regional manager of a company died in an accident when he was using the car given to him by the company. The Court held that in the absence of any special contract relating to indemnity, the insurance company is not liable to indemnify CONTRACT OF GUARANTEE CONTRACT OF GUARANTEE: Guarantee means assurance or promise. According to Section 126 Contract of Guarantee is: A contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of his default. Con ract of guarantee is also known as contract of surety-ship. The person who gives the guarantee is called the surety, the person in respect of whose default the guarantee is given is called principal debtor, and the person to whom the guarantee is given is called the creditor. A guarantee may be either oral or written. (S126) It may be expressed or even be implied. A contract of guarantee must be supported by consideration. e.g. A gives a loan of Rs to B and C promises to A that if B does not repay loan, he (C) will pay. This is a contract of guarantee. Here

6 6 VIJAY LAW SERIES B is the principal debtor, C is the surety, and A is the creditor. Essentials of Guarantee 1. There must be an existing recoverable principal debt or 2. There must be duty to perform an obligation 3. Primary liability in some person 4. There must be tripartite agreement 5. Concurrence of all the three parties 6. Essentials of a valid contract must be fulfilled 7. There must be consideration (Section 127) 8. Writing is not necessary but in England it must be in writing A guarantee for the past and future debt is invalid but it is enforceable only when some further debt is incurred after the guarantee. All the three parties to the contract of guarantee must accept the terms of contract. There must be a primary liability in some person other than the surety. There is no contract of guarantee without an element of liability. Minor is an exception to such rule. The liability of the principal debtor is primary and the liability of the surety is secondary. The principle debtor is liable only when there is a default. On failure of principal debtor, the money is claimed from the surety and the surety executes promissory note, he becomes a principal debtor. Banks and Contract of guarantee: Sometimes, banks on behalf of a party in a contract may give performance guarantee which is otherwise known as performance bond. Banks are bound by such undertaking. BSES Ltd. v. Fenner India Ltd. and another 2006 SCC 728 The Supreme Court held that the bank is bound to pay according to the tender of its guarantee. The relation between the supplier and the customer is immaterial. Consideration for Guarantee: Section 127: According to Section 127 anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee. Like every other contract, a contract of guarantee should also be supported by some consideration. Thus, where a loan is given or goods sold on credit on the basis of a guarantee that is sufficient consideration. A guarantee without consideration is void.

7 CONTRACTS-II 7 Shortnotes Index Active partner 84 Actual delivery 84 Agency 84 Agency arising after the event 32 Agency by estoppel 84 Agency by express agreement 30 Agency by holding out 84 Agency by implied agreement 31 Agency by necessity 84 Agency by operation of law 32 Agency by ratification 31 Ascertained goods 38 Auction sale 84 Bailment 85 Bailment for Hire 15 Bailment for Reward 15 Bailment without reward 15 Bill of Exchange 85 Broker 85 Caveat emptor 85 Caveat venditor 85 Cheque 85 Classification of agents 23 Co-agent 85 Commission agent 86 Condition 86 Conditions and warranties 86 Constructive delivery 86 Contingent goods 39 Continuing guarantee 86 Contract of Guarantee 86 Contract of indemnity 87 Contract of sale of goods 87 Crossing 87 Damping 55 Del credere agent 87 Delegatus non potest delegare 87 Delivery of possession 14 Discharge of surety 87 Dishonour of a cheque 87 Dissolution 88 Dissolution of partnership 68 Doctrine of Relation Back 88 Dormant partner 88 Effect of ratification 33 Existing goods 38 Expost facto agency 32 Factor or Mercantile agent 88 Finder of lost goods 88 Future goods 88 General agent 88 General crossing 78 Generic goods 39 Goods 88 Goodwill 89 Gratuitous Bailment 89 Holder 89 Holder in due course 89 Implied authority 89 Implied bailment 89 Implied Conditions 90 Implied warranty 90 Incoming partner 67 Irrevocable agency 34 Letter of credit 90 Liability of Co-surety 07 Liability of Indemnifier 02 Liability of Surety 90 Lien 90 Limited partnership 58 Minor partner 90 Mutual Agency 90

8 8 VIJAY LAW SERIES Table of Cases A. Subash Babu v. State of A.P Akbar Sheikh and others v. State of West Bengal Anuradha Kshirasagar v. State of Maharastra Arjuna v. State of Orissa Asharam and Another v. State of U.P Arvind Kumar & Another v. State of M.P Attorney General v. Lachma Devi, B N. Srikantiah v. Mysore State Bachan Singh v. State of Punjab, Baladin v. State Baldevji v. State of Gujarat Balkrishna Shetty v. State of Mysore Balwant Singh v. State of Punjab Barendra Kumar Ghosh v. King Emperor (Postmaster s Murder Case) Basudev v. State of Pepsu Bhalchandra v. State of Maharashtra Bidhuti Bhusan v. Bhuban Ram Byomkesh Battacharya v. L.N. Datta C.V. Govindappa and Others v. State of Karnataka CBI v. Kishore Singh Chahat Khan v. State of Haryana Chaman Lal and Others v. State of Punjab and Another Chirangi v. State Chokkalingam Pillai v. State Dara Singh v. Republic of India Darshan Singh v. State of Punjab and another Deep Chand v. State of Rajasthan Devendra and others v. State of U.P. and another Devi Lal v. State of Rajasthan Dhanonjoy v. Provat Chandra Biswas Dr. Vimla v. Delhi Administration Gabbu v. State of M.P Ganesh Chandra v. Jiw Raj Ganesh D. Savarkar Ghanshyam Misra v. State

9 CONTRACTS-II 9 Shortnotes Ab d uction:abduction means taking away a person illegally by force or deception. According to section 362 whoever by force compels, or by any deceitful means induces, any person to go from any place is said to abduct that person. Abduction may be committed against a person of any age Abduction is an auxiliary (helping) act. Abetment: Abetment means encouraging or instigating to commit a crime. A person who helps or encourages another to commit a crime is called an abettor. Eg: A encourages B to kill C. A is an abettor.it is an offence to encourage or instigate another to commit crime. Criminal law punishes all those who support and encourage the other to commit crime. Abetment by Aid: Aiding means assisting or facilitating the commission of crime. It is an offence to assist or supply a thing which facilitate the commission of crime by another. Abetment by Conspiracy: It is an offence of abetment to engage with one or more persons in a conspiracy to commit an offence. Mere agreement is not sufficient there must be an agreement between one or more persons to do a legal act by illegal means, or to do an illegal act. Abetment by illegal omission: When a person is bound legally to do a thing but deliberately omit doing his duty, then the person will be liable for abetment by illegal omission. Abetment by instigation: It is an offence of abetment to provoke, incite, urge or encourage another to do a crime. Mere advice is not an abetment active suggestion or stimulation to commit crime amounts to instigation.. Accident: Accident means an unexpected act which results injury to another. A man is not criminally responsible for unintended and unknown consequences of his lawful acts done in a lawful manner, by a lawful means, with proper care and caution. Act of public servant: Culpable homicide is not a murder if a public servant or a person helping the public servant exceeds the power given to him and if the public servant exceeds the power given to him by law and causes death by an act, while discharging the official duties with good faith, without any ill intention, it is not a murder. It is only culpable homicide not amounting to murder Actus non facit reuim, nisi mens sit rea : it means the act itself does not constitute crime unless done with

10 10 VIJAY LAW SERIES Dictionary Abandon: leave, forsake Aberration: mental disorder Abolish: do away with, annul Abortion: miscarriage Absolute: perfect, unconditional Abusing: misuse Accessories:partners in crime Accompany: go with, follow Accomplice: guilty associate Accomplishment: completion Accord: agreement Accost: speak to someone Accusation: allegation, blame Accused: charged with crime Acquittal: discharge Addicted: habituated Administered: given Admissible: acceptable,valid Affidavit: a written statement Affray: quarrel, fight Aggravated: make worse Aiding: help,assist Amputation: cutting of limb Annoy: trouble Annoyance: vexation, trouble Apology: begging pardon Appellants: one who appeals Apprehension: fear Appropriate: use for oneself Arbitrator: umpire Arrears: balance, still due Assault: attack Assent: consent Atrocities: cruel acts Attempt: trial, behaviour Auxiliary: helping Averment: assent, affirm Bad faith: ill will Bailable: which can released under security Barbarous: uncivilized,rude Battery: beating Bigamy: marrying somebody while being married to somebody else Blackmail: extortion of money by threats Blasphemous: grossly irreligious Bonafide: good faith Bonafide belief: faith of goodness Breach of duty: violation of responsibility Breach of trust: violation of belief Burden of proof: responsibility to prove Bystander: spectator Capital punishment: death punishment Cattle: cows, sheep and other domestic animals Censure: blame, fault Cessation of motion: end of movements Chastity: sexual purity, sexual morality Cheating: deceive,falsification Circumstantial evidence: proof based on inference Co-conspirators: co-member of criminal plan Coercion: compulsion,force Cognizable offence: crime falling under judicial notice

11 CONTRACTS-II 11 Reference Books Author Title, Edition, Publisher and Place Achuthan Pillai P.S Gandhi B.M Gaur. K.D Gaur. K.D Criminal Law (1995) Eastern Book Co, Lucknow. Indian Penal Code (1996), Eastern Book Co, Lucknow A Text Book on the Indian Penal Code (1998), Universal, Delhi. Criminal Law: Cases and Materials (1999), Butterworths, India Hidayathullaw, M., et.al., Ratanlal and Dhirajlat s The Indian Penal Code (1994 reprint), Wadhwa & Co., Nagpur. Ratanlan-Dhirajlal Indian Penal Code (1994 reprint)