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UNIT- 1
INDIAN CONTRACT ACT 1872
WHAT IS CONTRACT?
As per section 2(h) of the Indian contract Act, 1872, Contract may be defined as
“An agreement which is enforceable by law’’.

AGREEMENT
As per section 2(e) of the Indian contract Act, 1872, an agreement may be defined
as ‘every promise or every set of promises forming consideration for each other.’’

PROMISE
As per section 2(b) of the Indian contract Act, 1872, a promise may be defined as
“a proposal when accepted becomes a promise.’’

ENFORCEABLE BY LAW
Enforceable by law means an agreement become a contract must give rise to a
legal obligation. The intention of both the parties of a contract must be to create
legal relationship. It must not be a social or domestic in nature.

THE ESSENTIAL ELEMENT OF A VALID CONTRACT

As per section 10 of the Indian contract Act, 1872, a valid contract must possess
the essential elements of a valid contract i.e.
1. Offer and acceptance
2. Intention to create legal relationship
3. Lawful consideration
4. Capacity of parties
5. Free consent
6. Lawful object
7. Certainty of meaning
8. Possibility of performance
9. Not declared to be void or illegal
10.Legal formalities

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1. OFFER AND ACCEPTANCE: There must be a ‘lawful offer’ and a

‘lawful acceptance’ of the offer in an agreement. Lawful means that the offer
and acceptance must satisfy the requirements of the contract Act.
2. INTENTION TO CREATE LEGAL RELATIONSHIP: There must be
an intention among the parties that the agreement should be attached by
legal consequences and create legal obligation. Agreement of a social or
domestic nature does not create any legal relations, and such that they do not
give rise to a contract. Example ; Mr. A promise his wife Mrs. B to get a
saree if she will sing a song but Mrs. B did not bring an action in a court to
enforce the agreement because it is a domestic agreement.
3. LAWFUL CONSIDERATION: The Third essential element of a valid
contract is presence of a lawful consideration. Consideration means
‘something in return’. Consideration has been defined as the price paid by
one party for the promise of the other. An agreement is legally enforceable
when each of the parties has to give something and get something.
4. CAPACITY OF PARTIES: The parties to an agreement must be
competent to a contract; otherwise it cannot be enforceable by a court of
law. In order to be competent to contract the parties must be attain the age
of majority and of sound mind and must not be disqualified from contracting
by law.
5. FREE CONSENT: Free consent is another essential element of a valid
contract. ‘Consent’ means that the parties must have agreed open the same
thing in the same sense. There is absence of free consent, if the agreement is
obtained by
i. Coercion
ii. Undue influence
iii. Fraud
iv. Misrepresentation
v. Mistake
If the agreement is affected by any of the above factors, the contract will be
voidable.
6. LAWFUL OBJECT: For the formation of a valid contract it is also
necessary that the parties to an agreement must agree for a lawful object.
The object of the agreement must not be fraudulent or illegal or immoral or
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opposed to public policy nor must not injury to the person or property of
another.
7. CERTAINTY OF MEANING: Section 29 of the contract Act provides that
‘‘Agreements the meaning of which is not certain or capable of being made
certain are void’’. In order to give rise a valid contract the terms of the
agreement must not be vague or uncertain.
Example: Mr. A agrees to sale Mr. B a hundred ton of oil. There is nothing
to show what kind of oil was intended, the agreement is void for uncertainty.
8. POSSIBILITIES OF PERFORMANCE: If the Act is impossible itself,
physically or legally, it cannot be enforcing at law. Example; Mr. A agree
with Mr. B to discover a treasure by magic such agreement is not
enforceable.
9. NOT DECLARED TO BE VOID: The agreement must not have been
expressly declared to be void under the Indian contract Act, 1872. Section
24-30 specifies certain types of agreements which have been expressly
declared to be void. Example
a. An agreement in restraint of marriage
b. An agreement in restraint of trade
c. An agreement by way of wagering
10. LEGALFORMALITIES
An oral contract is perfectly valid contract. As expect in those cases where
writing, registration etc. is required by some status. In India writing is
required in case of sale, mortgage, lease, and gift of immovable properties,
negotiable instrument, memorandum and article and association of a
company.

CLASIFICATION OF CONTRACT
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Contract has been classified on the basis of their
a. Validity or enforceability
b. Formation
c. Performance
A. VALIDITY OR ENFORCEABILITY
1. Valid contract
2. Void contract
3. Void agreement
4. Voidable contract
5. Unenforceable contract
6. Illegal agreement
B. FORMATION
1. Express contract
2. implied contract
3. Quasi contract
C. PERFORMANCE
1. Executed contract
2. Executory contract
a. unilateral contract
b. Bilateral contract

A. VALIDITY OR ENFORCEABILITY
1. Valid contract: An agreement enforceable at law is a valid contract. An
agreement becomes a contract when all the essential of valid contracts as
laid down in section 10 are fulfilled. Example: Mr. A offer to sale his house
for rupees Five lack to Mr. B agrees to buy it for this price. It is a valid
contract.
2. Void contracts: The word “void” means “not binding in law”. Void
contract is a useless contract which has no intention to create legal
relationship. As per section 2 [j], “A contract which ceases not to be
enforceable by law become void, when it ceases to be enforceable." A void
contract is invalid from its beginning.
Example;
a. Contract with a minor
b. Contract with a unsound mind.
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c. Contract with a insolvent person.
3. Void agreement: According to section 2(g), “an agreement which is not
enforceable by law by either of the parties is void.” No legal rights or
obligations can arise out of a valid agreement. It is void-ab-initio i.e. cancel
from its beginning. Example: - Agreement without consideration, agreement
with the minor.
4. Voidable contract: According to 2(i), “An agreement which is enforceable
by law at the option of one or more of the parties but not at the option of the
other or other is a voidable contact.’’ Voidable contract is happened due to
coercion, undue influence, fraud or misrepresentation. A voidable contract is
valid and enforceable until it is repudiated by the aggrieved party.
5. Unenforceable: It is a contract which is otherwise valid, but cannot be
enforced because of some technical defect like absence of a written form or
absence of a proper stamp such contract cannot be proved in the court such
contact will not be enforced until and unless the defect is rectified.
6. Illegal agreement: A contract which is either prohibited by law or otherwise
against the policy of law is an illegal agreement. It is ‘void-ab-initio’ that
means cancel from the beginning. Thus, a contract commit dacoit is an
illegal contract and cannot be enforced at law. An illegal contract should be
different from a void contract .All illegal agreements are void but all void
agreements or contract are not necessarily illegal.
B .ON THE BASIS OF FORMATION
1. Express contract: An express contract is a contract which is enter in to by
words which may be either spoken or written. Where the offer or
acceptance is made in words, it is an express contract.
2. Implied contract: Implied contract is a contract which is made otherwise
than in words. It can be smelled out of the surrounding circumstances and
the conduct of the parties made them.
3. Quasi contract: Quasi contract is a contract in which there is no intention
on either side to make a contract but the law imposes a contract .In such a
contract rights and obligation arise not by any agreement between the
parties but by operation of law. Thus, a finder of lost goods is under an
obligation to find out the true owner and return the goods.
C. ON THE BASIS OF PERFORMANCE

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1. Executed contract: An executed contract is a contract where both the
parties have performed their obligation or carried out the terms of contract .
In other words, it is a completed.
2. Executory contract: Executory contract is a contract where the obligations
of both the parties are yet to be performed either wholly or partially.
Executory contract may be
a. unilateral contract
b. Bilateral contract
a. Unilateral contract: Unilateral contract is a contract where one party has
already performed his obligation but other party has not yet completes his
obligation. Example:-A sales a T.V set to B for rupees twenty thousand. B
pay the price but A has not yet handover the T.V to B.
b. Bilateral contract: Bilateral contract is a contract where both the parties
have yet to perform their obligation. Example; - A sales his T.V. set to B but
both A and B have not get their consideration.

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OFFER AND ACCEPTANCE

What is offer?
As per section 2(a) of the Indian contract Act, 1872, offer may be defined as “
When one person signifies to another his willingness to do or abstain from doing
anything with a view to obtaining the assent of that other to such act or
abstinence.’’
Example:-Mr. A offer to sell his car to Mr. B for Rs. 5,00,000. B agrees to pay Rs.
5,00,000 For the car. Here Mr. A is called the offeror or promisor and Mr. B is
called the offeree or promise.

KINDS OF OFFER
Offer or proposal may be classified on the basis of
1. How an offer is made ?
2. To whom an offer is made

1. How an offer is made: An offer may be either express or implied from the
conduct of the parties . An express offer is one which may be made by words
spoken or written such as letter, telegram, fax message, E-mail or through
internet , where as an implied offer is one which may be made from the conduct
of the party or the circumstances of the case.
2. To whom an offer is made
An offer may be made to a
a) A particular persons
b) A particular group
c) The public at large
An offer made to a particular person is called a specifies offer. A specifies offer
can be usually be accepted only by the person to whom offer is made. On the other

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hand, when an offer is made to the whole world it is called a general offer. A
general offer is accepted by any one.

ESSENTIAL OF A VALID OFFER

Following are the various essential of a valid offer
1. Offer must be capable of creating legal relations
The offer must intend the creation of legal relations. He must intend that if
his offer is accepted a legally binding agreement shall result. Example: -
Mr. A accepts an invitation to dine at Mr. B’s place on a certain date but
fails to turn up at the appointed date, A cannot be sued for breach of
contract because it is a social or domestic agreement.
2. Offer must be certain, definite or not vague:
No contract can come in to existence if the terms of the offer are vague and
indefinite. Both the parties should be clear about the legal consequences
arise out of contract.
3. Offer must be communicated to the offeree
An offer is effective only when it is communicated to the offeree. If an offer
is not communicated to the offeree it cannot be accepted. Thus an offer,
which is not communicated, it is not a valid offer. It applies to both specific
or general offer. Example: Mr. A without knowing that a reward for the
arrest of a particular criminal catches the criminal and informs the police.
Mr. A cannot recover the reward as he was not aware of it.
4. Offer must be made with a view to obtaining the assent of the other
party
In a valid offer the offeror must made the offeree to obtain his assent. If the
offeree agrees with the offer of offeror it turns in to an agreement.
5. An offer must be conditional
In a valid offer there must be a condition and it is accepted with that
condition .A conditional offer lapses when the condition is not accepted.
6. Offer should not contain a term of non-compliance of which would
amount to acceptance:
One person cannot say while making the offer that if the offer is not
accepted before a certain date, it will be presumed to have been accepted.

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Example:-Mr. A writes to Mr. B, I offer to sale my house for Rs.40, 000. If
I do not receive a reply by Monday next, I shall assume that you have
accepted the offer. There will be not contract if Mr. B does not reply.
7. Lapses of an offer:-
In the following condition an offer lapses
a. Before acceptance if either offeror or offeree dies.
b. If an offer not accepted within the specified time or at a
reasonable time, if no time is specified.
c. If the offeree does not make a valid acceptance
d. An offer can also be lapse by revocation.
8. An invitation to offer is not an offer
An offer must be distinguished from an invitation to offer. In case of an
invitation to offer, the aim is merely to circulate information of readiness to
negotiate business with anybody who on such information comes to the
person sending it. Such invitations are not offer in the eyes of law.

MEANING OF ACCEPTANCE [As per section 2(b)]

When the person to whom the proposal is made signifies his assent, it is an
acceptance of the proposal .Example:-Mr. A offers to sell his house to Mr. B for
Rs.500. Mr. B accepts the offer to purchase the house for Rs.500. This is
acceptance.

ESSENTIAL ELEMENTS OF A VALID ACCEPTANCE

1) Acceptance must be absolute and unconditional
2) Acceptance must be communicated to the offeror
3) Acceptance must be made within a reasonable time.
4) It must be according to the mode prescribed or usual or reasonable made
5) The acceptor must be aware of the proposal at the time of the offer.
6) Acceptance must be given before the offer lapses or before the offer revoked
7) Acceptance cannot be implied from silence

1. Acceptance must be absolute and unconditional

Acceptance must be absolute and unconditional. An acceptance must be
unconditional and unqualified. Acceptance of an offer with conditions amounts
to counter offer and rejection of original offer. The acceptor must comply with
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the terms of the offer. Any changes in original offer make the acceptance
invalid.
2. Acceptance must be communicated to the offeror
If the offeree remains silent and does not show that he has accepted the offer,
no contract is formed. The acceptor should be communicated to the offeror for a
valid acceptance.
3. Acceptance must be made with a reasonable time
Acceptance to be valid must be made within the time allowed by the offeror and
if no time is specified, it must made within a reasonable time.
4. It must be made according to the mode prescribed or usual or reasonable
mode
The acceptance must be made as per the prescribed mode or indicated mode by
the offeror. If the acceptance is not as per the prescribed mode or indicated
mode by the offeror, it will not a valid acceptance.
5. The acceptor must be aware of the proposal at the time of offer
Acceptance follows offer. The acceptor must be aware of the proposal
before accepting the offer. If the acceptor is not aware of the offer and
conveys his acceptance, no contracts come in to existence.
6. Acceptance must be given before the lapses or before the offer is
revoked
Acceptance must be made while the offer is in force i.e. before the offer has
been revoked or offer has lapse. An offer cannot be accepted after the lapse
of time.
7. Acceptance cannot be implied from silence
No contract is formed if the offeree remains silence or does nothing to show
that he has accepted the offer.

COMMUNICATION OF OFFER
According to section 4 of the Indian contract Act, 1872, A communication of
proposal is complete as soon as if comes to the knowledge of the offeree.
Example: - Mr. A proposes by letter to sell a house to Mr. B at a certain price. The
communication of proposal is complete when B receives the letter.

COMMUNICATION OF ACCEPTANCE

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According to section 4 of the Indian contract Act, 1872 communication of an
acceptance is complete
a. As against the proposer when it is put in course of transaction to him,
so as to be out the power of the accepter to withdraw the same,
b. As against the acceptor when it comes to the knowledge of proposer.
Example:-Mr. A proposes by a letter to sell a house to Mr. B at a certain price. B
accept Mr. A proposal by letter send by post. The communication of acceptance is
complete as against A, when the letter is posted, as against B when the letter is
received by A

COMMUNICATION OF REVOCATION OF PROPOSAL

A proposal may be revoked as any time before the communication of acceptance is
not after words. Example:-Mr. A proposes by letter, to sell a house to B at a certain
price. A revoked his proposal by telegram. The revocation is complete as against A
when the telegram is dispatched. It is complete as against B when B received it.

MODES OF REVOCATION OF OFFER

According to section 6 of the Indian contract Act, 1872 A proposal may be revoked
in any of the following ways
1. By notice of revocation
2. By lapse of time
3. By non-fulfillment of precedent
4. By death or insanity
5. By counter offer
6. By the non acceptance of the offer according to the prescribed or usual made
7. By subsequent illegality
1. By notice of revocation
Offer may be revoked by a communication of a notice of revocation by the
offeror to the other party before acceptance is complete against offeror himself.
An offer made in writing may be revoked by words of mouth. A notice of
revocation must be communicated to the offeree.
2. By lapse of time

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An offer will come to an end by the lapse of time prescribed in such offer for its
acceptance or, if no time is prescribed the offer will lapse in a reasonable time.
3. By non-fulfillment of precedent
An offer is revoked when the acceptor fails to fulfill a condition precedent to
the acceptance of the offer which was conditional offer.
4. By death of insanity
An offer is revoked by the death or insanity of the proposer if the fact of his
death or insanity comes to the knowledge of the acceptor before acceptance.
5. By counter offer
An offer comes to an end when the offeree makes a counter offer or reject the
original offer where an offer is accepted with some modification in the terms of
the offer is revoked. An offer once rejected cannot be received.
6. By the non-acceptance of the offer according to the prescribed or usual
mode
The offer will also stand revoked if it has not been accepted according to the
mode prescribed.
7. By subsequent illegality
An offer lapse if it becomes illegal after it is made and before it is accepted.

COMMUNICATION OF REVOCATION OF ACCEPTANCE

An acceptance can be revoked at any time before the communication of acceptance
is complete as against the acceptor but not after words.

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CONSIDERATION CHAPTER-3
Meaning of consideration
Consideration is the foundation of every contract because the general rule of
contract says that “No consideration no contract” . The law enforce only those
promises which are made for consideration. The word consideration means getting
something in return.
Defination:
According to section 2(d) of the Indian contract Act, 1872, A consideration is
defined as, “when at the desire of the promisor, the promisee or any other person,
has done or abstained from doing or dose or abstains from doing or promises to do
or abstain from doing, something, such act or promise is called a consideration for
the promise.
ESSENTIAL OF A VALID CONSIDERATION
following are the essential of a valid consideration
1) It must move at the desire of the promise
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2) It must move from the promisee or any other person
3) consideration may be past, present or future
4) It need not be adequate
5) consideration must be real
6) consideration must be lawful
1) It must be move at the desire of the promisor
The first essential characteristics of consideration is that the act or abstinence must
have been done at the desire of the promisor. Any act performed at the desire of a
third party can not be a consideration. The desire of the promisor may be express
or implied.
2) It must move from the promisee or any other person
The second essential of consideration is that it may pass on to promisor from
promisee or any other third person. Consideration move from a stranger but it must
be flow at the desire of the promise.
3) consideration may be past, present or future:
The words, “has done or abstained from doing; or does or abstains from doing: or
promises to do or abstain from doing . Indicate that, consideration may be past,
present or future.
Past consideration
When the consideration for a present promisee was given before the date of
promisee, it is said to be past consideration.
Present consideration:-
When the consideration for a promise is given simultaneously with the promise it
is called present consideration.
Future consideration:-
A future or executory consideration is a promise to do or give something in return
in future for the promise then made.
4) It need not be adequate:
It is nowhere laid down that consideration should be adequate to the promisee.
Adequacy is for the parties to decide at the time of making the agreement.
Inadequacy of consideration does not mean that we are refusing the performance of
the promise.
5) consideration must be real
The consideration for a promise need not be adequate but it must be real and not
illusory. It must have some value in the eyes of law for the consideration.
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6) consideration must be lawful
A consideration which is against law or public is not valid, it will become void and
unenforceable. Therefore, it is necessary that consideration should be lawful.
Exception to the general rule of consideration i.e. “NO CONSIDERATION NO
CONTRACT”
Every agreement to be enforceable at law must be supported by valid
consideration. An agreement without consideration will be valid and is
unenforceable except in certain cases. As per section 25 of the Indian contract Act,
1872 specifies the cases where an agreement without consideration wil be valid.
Following are the exception to the general rule of consideration i. e. no
consideration no contract
1) Natural love and affection:
An agreement made without consideration will be valid if it is in writing and
registration and is made on account of natural love and affection between parties
standing in a near relation to each other. Example:- ‘A’ for natural love and
affection, promise to give his son ‘B’ Rs. 1000. A puts his promise to ‘B’ in
writing and registered it. This is the contact.
2) compensation for services rendered:
An agreement made without consideration may be valid if it is a promise to
compensate wholly or inpart a person who has already voluntarily done something
for the promisor or something which the promisor was legally compellable to do.
To apply this rule, the following essential must exist
a) The act must have been done voluntarily.
b) It must be something which was the legal obligation of the promise.
c) The promisor must be present at the time when the act was done.
d) The promisor must be agree now to compensate the promisee.
Example:- Mr. A find Mr. B’s purse and gives it to him. Mr. B promise to give Mr.
A Rs.100. This is a contract.
3) time-barred debts
A promise to pay a time-barred debts is also enforceable if the following
conditions are satisfied
a) The debts is a time-barred debt
b) The debtor promise to pay the time-barred debt
c) The promise is made in writing
d) The promise is signed by the debtor
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Example:- Raghav owes Murli Rs.10,000.This debt is time-barred by the limitation
act even then, Murli promise in writing to pay Raghav Rs.4500 on account of debt.
This is a contract.
4) Completed gifts
The rule ‘‘No consideration no contract” does not apply to completed gifts.
According to section 1 to 25 states that “nothing in section 25 shall affect the
validity, as between the donor and done of any gift actually made.”
5) Agency (section 185)
According to section 185, No consideration is necessary to create an agency.
6) Guarantee (section 127)
A contract of guarantee is made without consideration.
7) Remission (section 63)
No consideration is required for an agreement to receive less than what is due.

CAPACITIES OF PARTIES CHAPTER-4

For a valid contract, the parties to a contract must have capacity to enter in to a
contract. The person who are competent can enter in to a contract.
Following persons are competent to enter in to a contract such as
a) major
b) sound mind
c) and the person who is not disqualified by the law
persons who are incompetent to enter in to a contract
following are the person who are incompetent to enter in to a contract
a) minor
b) person of unsound mind
c) Insolvent person
d) person disqualified by law
e) drunken
EFFECTS OF MINOR AGREEMENT
A minor’s agreement is void from the very beginning of the contract. When a
contract with a minor is void , that means there is no contractual obligation on
either side.
Following are the various rules regarding minor’s agreement
1) An agreement with or by a minor is void

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According to section 10 of the Indian contract Act, says that the parties to a
contract must be competent but section 11 says that a minor is not competent to
enter in to a contract, so contract with a minor is void-ab-initio.
2) No Ratification
An agreement with a minor is completely void. A minor cannot ratified the
agreement even on attaining majority, because a void agreement can not ratified.
3) minor can be a promisee or beneficiary
If a contract is beneficiary to a minor it can be enforced by him. There is no
restriction on a minor from being a beneficiary. For example:-being a payee or
promisee is a contract . Thus, a minor is capable of purchasing immovable property
and he may sue to recover the possession of the property upon tender of the
purchase money.
4) No estoppels against a minor
The rule of estoppels is only a rule of evidence i.e. a rule of formal law. This rule is
not applicable to minors.
A minor who falsely representations himself to be a major and induces another
person to enter in to a contract, can plead minority as a defense.
5) No specific performance except in certain cases
Neither the minor nor the other party can ask for a specific performance of a
minor’s agreement. A guardian of a minor can not bind the minor by an agreement
for the purchase of immovable property, so the minor can not ask for the specific
performance of the contract which the guardian has no power to enter in to.
6) No Insolvency
A minor can not be declared insolvent as he is incapable of contracting debts and
dues are payable from the personal properties of minor and he is no personally
liable.
7) Partnership
A minor is incompetent to contract and can not be a partnership firm , but under
section 30 of the Indian partnership Act, he can admitted to the partnership firm.
8) minor can not bind parent or guardian
In the absence of authority, express or implied a minor is not capable of binding
his parent or guardian for necessaries. The parents will liable only when the child
is acting as an agent for the parents.
10) Joint contract by minor and adult
In such a case the adult will be liable on the contract and not the minor.
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11) surety for a minor
In a contract of guarantee when an adult stands surety for a minor then the adult is
liable to third party as there is direct contract between the surety or third party.
12) Minor as shareholder
A minor is incompetent to contract and can not be a shareholder of a company. If
by mistake he become a member ,the company can rescind the transaction and
remove his name from register. But a minor can acting trough his lawful guardian.
PERSONS DISQUALIFIED FROM CONTRACTING BY ANY OTHER LAW:
Following are the persons who are disqualified from contracting by any other law
1) ALIEN ENEMIES
An Alien competent to contract with citizens of India living in India. He can
contract with an Indian during peace time. But if a war is declared , an alien enemy
can not enter in to contract with an Indian citizen.
2) FOREIGN SOVEREIGNS AND MINOR
Foreign sovereigns have some special privilege generally, they can not sued unless
they, themselves surrender under the jurisdiction of Indian court of law. They can
not enter in to a contact unless an Indian citizen obtained a prior sanction of the
government of Indian , in order to sue them in the Indian court of law.
Insolvent
An insolvent can not enter in to a contract as his property vests in the official
receiver or official assignee. This disqualification of an insolvent is removed after
he is discharged.
4. convict
A convict while under going imprisonment is incapable of entering into a contract.
But this disability comes to an end on the expiry of the sentence.
5) corporation
A corporation is an artificial person in the eyes of law. It exists only eyes of law. It
is competent to enter into a contract only through its agents.

FREE CONSENT CHAPTER-5

Free consent is an essential part of a valid contract .It means the consent of both
the parties to a contract must be identical that means they should agree upon the
same thing in the same sense or we can say that meeting of minds of all the parties.
Definition:-

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According to section 13of the Indian contract Act, 1872, two or more persons are
said to be in consent when they agree on the same thing in the same sense.
(consensus-ad-idem)
When a consent is said to be free
Accoding to section 14, a consent is said to be free when it is not caused by
a) coercion
b) undue influence
c) fraud
d) misrepresentation
e) mistake
A) COERCION
Coercion is a threat or force used by one party against another for compelling him
to enter into a contract.
Definition
According to section 15 of the Indian contract Act ,defines coercion as the
committing or threatening to commit any act forbidden by the Indian penal code or
an unlawful detaining or threatening to detain, any property to the prejudice of any
person with the intention of inducing any person to enter into an contract.
Examlpe:- consent obtained at the point of gun, threat of imprisonment and threat
to commit suicide with the intention of causing a person to enter into agreement is
an act of coercion.
Effects of coercion:-
Section 19 provides that an agreement the consent to which obtained by coercion is
voidable at the option of the party whose consent is so obtained.
A person to whom money had been paid or anything delivered under
coercion must reply or return it.
B) undue influence
A contract is said to be induced by undue influence, “where the relation between
the parties are such that one of the parties is in a position to dominate the will of
the other and uses that position to obtained and unfair advantages of other.
Essential of undue influence are
One of the parties dominates the will of the other and
1) He has real or apparent authority over the other,
2) He is in a position to dominate the will of the other and
3) The dominating party takes advantages of the other.
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Example :- 1) A owner can dominate the will of the agent.
2) A teacher can dominate the will of a student
3) A doctor can dominate the will of a patient.
4) A trustee can dominate the will of a beneficiary
DIFFERENCE BETWEEN COERCION AND UNDUE INFLUENCE
Basic Coercion Undue influence
Nature of Coercion involves physical Undue influence involves only
action force and threat moral pressure.
Involves of Coercion involves of In undue influence there is no
criminal committing and threatening to such illegal act involve.
action commit any act forbidden by
law.
Relationship In coercion there is no need of In undue influence there must be
between any relationship between the some kind of relationship
parties parties. between the parties.
Exercise by Coercion need not proceed Undue influence is always
whom from promisor. exercised by one on the other.
Enforceabilit Where there is coercion, the Where there is undue influence
y contract is voidable. the contract is also voidable.

D) FRAUD
Fraud is the willful representation mode by a party to a contract with the intention
to deceive the other party or to induce such party to enter in to a contract . It means
a false statement made knowingly with out belief in its truth or recklessly without
coring whether it is true or false .
Definition of fraud
According to section 17 of the Indian contract Act , fraud means an induces any of
the following act committed by a party to a contract or with his convenience or by
his agent with intent to deceive another party thereto or his agent or to induce to
him to enter into the contract.
1) The suggestion, as to a fact, of that which is not true by one who does not
believe it be true.
2) The active concealment of a fact by one having knowledge or belief of the fact .
3) A promise made without any intention of performing it.
4) Any other act fitter to deceive and
5) Any such act or omission as to law spelling declared to be fraudulent.

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E) MISREPRESENTATION
The word representation means a statement of fact made by one party to the other
before or at the time contract is made with regard to some existing fact or some
past event which materially induces the formation of the agreement. A wrong
representation when made innocently is misrepresentation .
DIFFERENCE BETWEEN FRAUD AND MISREPRESENTATION
Basic Fraud misrepresentation
Meaning A deception act done The representation of a
intentionally by one party misstatement made
in order to influence the innocently, which
other party to enter in to persuades the other party
the contract is known as to enter in to the contract
fraud. is known as
misrepresentation.
Defined it Section 2 (17) of the Section 2 (18) of the
Indian contract Act, 1872. Indian contract Act, 1872.
Purpose to deceive other Yes No
party
Variation in extend of In a fraud, the party In misrepresentation the
truth making the representation party, the representation
knows that the statement believe the statement
is not true. made by him is true,
which is subsidiary
turned out as false.
Claim The aggrieved party, has The aggrieved party has
the right to claim for no right to sue the other
damages. party for damages.
Voidable The contract is voidable The contract is not
even if the truth can be voidable if the truth can
discovered in normal be discovered in normal
diligence diligence.

ESSENTIAL REQUREMENT OF MISREPRESENTATION:-

Following are the essential requirements of misrepresentation
1) There should be a representation or assertion
2) Such representation must related to a matter of fact which has become untrue.
3) It was made before the finalization of transaction with a view to induce the other
party to enter into a contract.

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4) It must actually have been acted upon by the party.
5) It must have been made either by the party himself or by his duty authority
agent
5)MISTAKE
Mistake may be defined as an erroneous belief relating to something. It means that
parties intending to do one thing have by intentional error done something else.
Mistake may be of two types
a) Mistake of law
b) Mistake of fact
A) Mistake of law:- Mistake of law may be of three kinds
i) Mistake of general
ii) Mistake of foreign law
iii) Mistake of private rights of a party relating to property and goods etc.
i) Mistake of general law of country
The contract is binding because every body is supposed to know the law of the
country. The maxim ignoratia juris non-excusat (ignorance of law is no excuse) is
applicable and the party can not be allowed any relief on that ignorance.
ii) Mistake of fact
In general, a mistake of fact generally refers to a mistaken understand the mistake
results in the person committing an illegal act.
Mistake of fact may be either bilateral mistake or unilateral mistake
i) Bilateral mistake :-
When both the parties to a contract are under a mistake of fact essential to the
agreement, such a mistake is called bilateral mistake.
ii) Unilateral mistake:-

A unilateral mistake is one where only one party to a contract is mistake as to the
term or subject matter contained in a contract.
LEGALITY OF CONTRACT AND AGREEMENT DECLARED VOID
CHAPTER-6
VOID AGREEMENT:
According to section 2(g), “ An agreement which is not enforceable by law is
called void agreement.
OR

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 An agreement which is not enforceable at law and does not fulfill laid down
in section 10 of the Indian contract Act, 1872. All the void agreements are
concel from the beginning i.e. void-ab –initio.
What are the agreement which are expressly declared as void by Indian contract
Act
Following are the agreements which have been expressly declared as void by the
Indian contract Act:-
1) Agreements made by incompetent parties
2) Agreements made under a mutual mistake of fact
3) Agreements, the consideration or object of which is unlawful.
4) Agreements made without consideration.
5) Agreements in restraint of marriage(section 26)
6) Agreements in restraint of trade
7) Agreements in restraint of legal proceedings
8) Agreements the meaning of which is uncertain
9) Agreements by way of wager.
10) agreements to do impossible acts.
AGREEMENT IN RESTRAINT OF MARRIAGE (section 26)
According to section 26 of the Indian contract Act, 1872, An agreement in restraint
of marriage of any person other than a minor is void. Every person has the rights to
marry . A person is not bound by law to marry, but an agreement restraining a
person not marry is illegal. Similarly, an agreement restraining a person from
marrying anybody or from marrying anybody a particular person is void. Example
:- Mr. A promised to marry none else except Miss.B , and in default to pay her a
sum of Rs.2,00,000. Miss. B sued against Mr. A for the recovery of that sum on
the ground that Mr. A married some one else. It is an agreement in restraint of
marriage so it is an agreement in restraint of marriage so it will void.
AGREEMENT IN RESTRAINT OF TRADE
According to section 27 of the Indian contract Act , 1872, any agreement through
which a person is restrained from exercising a lawful profession , trade or business
of any kind is to that extent void.
Example:- Mr. X a shopkeeper , in a particular locality agrees to pay Mr. Y his
rival in business certain compensation , if Mr. Y close his business in that locality,
the agreement is void.
EXCEPTION TO THE AGREEMENT IN RESTRAINT OF TRADE
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Following are the various exception to the agreement in restraint of trade
1) where a person sell his business along with the goodwill to another person ,
agrees not to carry on the same line of business in certain reasonable local limits,
such an agreement is valid.
2) An agreement through which outgoing partner will not carry on the business of
the firm for a reasonable time will be valid , through it is in restraint in of trade.
3) Partner among themselves may agree that upon dissolution of the firm some of
them may not carry on the business of the business of the firm such an agreement
is valid.
4) When a full firm is sold by partners along with goodwill to a buyer, there can be
an agreement that they would not carry on the business of the dissolved firm for
certain period and with in certain local limits and such an agreement will be valid.
5) An agreement of service through which an employer commits not to complete
with his is not in restraint of trade. Example:- Mr. B is a doctor and he employees
Mr. A a gunior doctor as his assistant. Mr. A agrees not to practice as doctor during
the period of his employment with Mr. B as a doctor independently. Such an
agreement will be valid.
AGREEMENT IN RESTRAINT OF LEGAL PROCEDING
According to section 28 of the Indian contract Act, 1872, an agreement in restraint
of legal proceeding resulting in restriction of one’s rights to enforce legal rights is
valid.
Exception to this rule
1) An agreement to refer all future disputes in connection with a contract to
arbitration .
2) An agreement to refer all present dispute with regard to a contract to arbitration.
3) An agreement restricting the right of either party to sue in a particular court.
AGREEMENT BY WAY OF WAGER :-
According to section 30, of the Indian contract Act 1872, Agreement by way of
wager are voi. No suit will lie for recovering anything alleged to be won on any
wager or entrusted to any person to abide by the results of any game or other
uncertain events on which any wager is mae.
OR
Wagering agreement is one which involves of a sum of money upon the
determination of an uncertain events. The essence of wagering agreement is where
there are two parties , one wins, the other losses upon an uncertain event taking
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place in which neither of them has legitimate interest .Example:- Mr. A agree to
pay Rs. 500 to Mr. B if it raised and similarly B agree to pay A if it does not. It is a
case of wagering agreement. But where one party has control over the event, the
agreement is valid.
DISCHARD OF CONTRACT
A contract is said to be discharged or terminated when the rights and obligation
created by it are extinguished. A contract may be discharged in the following
modes:-
1) Discharged by agreement
2) Discharged by operation of law
3) Discharged by breach
4) Discharged by performance
5) Discharged by impossibility
6) Discharged by lapse of time
1) DISCHARGED BY AGREEMENT( SECTION 62,63)
A contract is created by the parties to it. Similarly it can be terminated or end by
their mutual agreement. The rights and obligation created by an agreement can be
discharged by means of another agreement.
A contract may be discharged by any of the following wages:-
i) Novation
ii) alteration
iii) Rescission
iv) Remission
v) waiver
vi) accord and satisfaction
2) DISCHARGED BY OPERSTION OF LAW
A contract can be discharged by operation of law where the promisor dies or goes
insolvent.
3) DISCHARGED BY BREACH
Where there is a default by one party from performing his part of contract on due
date then there is breach of contract . Breach of contract can be actual breach or
anticipatory breach. Where a person repudiates a contract before the stipulated due
date, it is anticipatory breach. In both the events, the party who has suffered injury
is entitled for damages.
4) DISCHARGED BY PERFORMANCE
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A contract can be discharged after performing the obligation of the contract it is
automatically discharged when both the parties to the contract fulfill their
obligations with in time and in the manner prescribed. Here each party has done
what he has to do under the contract .
5) DISCHARGED OF IMPOSSIBILITY
A contract can be discharged by impossibility of performance, agreements, which
are impossible in itself are void because does not compare the impossible.
Impossiblity can be arise when :-
a) There is an unforeseen change in law
b) Destruction of subject matter
c) Non existence or non-acceptance of a state of thing to facility happening of the
agreement
d) personal incapability of promisor
e) Declaration of war
6) DISCHARGED BY LAPSE OF TIME
A contact can be discharged by lapse of time for every contract time time is
prescribed and if the time is lapsed automatically the contract is discharged .
i) NOVATION:-
Novation means change in the rights and obligation of existing contract and
discharged the old by a new contract. It is a transaction by which , with the consent
of all the parties concerned, the old contract is revoked and substituted by a new
contract.
ii) ALTERATION:-
It means a change in one or more of the terms of a contract. Alteration is valid if it
is done with the consent of all the parties to the contract. In alteration , unlike
novation , there is change in the terms of contract but no change of the parties.
Alteration made with the consent of all the parties results in the discharged of the
original contract.
iii) RECISSION:-
If the parties to a contract agree to rescind it, the original contract need not be
performed. This is discharged by rescission which requires mutual consent and
consideration. Rescission means cancellation of contract. Rescission results in the
dissolution of contract while novation results in dissolution and replacement of
contract.
iv) REMISSION:-
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Remission means acceptance of lesser amount or lesser degree of performance than
what is actyally due under the contract. It is a unilateral act of the promisee
discharged at his will and pleasure of the obligation.
REMEDIES FOR BREACH OF CONTRACT
When a promise or agreement is broken by any of the parties we can call it a
breach of contract. So when either of the parties does not keep their end of the
agreement or does not fulfil their obligation as per the terms of the contract it is a
breach of contract.
Following are the remedies for breach of contract
1) Rescission of the contract
2) sue for damages
3) Sue for specific performance
4) Injunction
5) Quantum meruit
1) RESCISSION OF THE CONTRACT:-
When one of the parties to a contract does not fulfill his obligations then the other
party can rescind the contact and refuse the performance of his obligation. As per
section 65 of the Indian contract Act, the party that rescinds the contract must
restore any benefits he get under the said agreement . And section 75 states that the
party that rescind the contract is entitled to receive damages or compensation for
such a rescission .
2) SUE FOR DAMAGES:-
Section 73 clearly states that the party who has suffered since the other party has
broken the promises can claim compensation for lose or damages caused to them in
normal course of business. Such damages will not be payable if the lose is
abnormal in nature, i.e. not in the ordinary course of business.
3) SUE FOR SPECIFIC PERFORMANCE :-
This means the party in breach will actually have to carry out his duties according
to the contract. In certain cases, the court may insist that the party carryout the
agreement so if any of the parties fails to perform the contract the court may order
them to do so. This is decree of specific performance and is granted instead of
damages.
4) INJUNCTION:-
An aggrieved party can sue for an injunction i. e. an order of the court restraining
the wrong doer from doing or continuing the wrongful act complained of.
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Injunction are usually granted to enforce negative stipulation in case where damage
are not adequate relief. Injunction is a preventive relief it is particular appropriate
in case of anticipatory breach of contract.
5) QUANTUM MERUIT:-
The phrase quantum meruit means ‘ payment in proportion to the amount of work
done’.
A right to sue on a quantum meruit arise where a contract, partly performed by one
party, has become discharged by the breach of contract by the other party.
CONTINGENT CONTRACT CHAPTER-9
Definition:-
As per section 31 of the Indian contract Act, 1872, a contingent contract is defined
as, “a contract to do or not to do something if some event collateral to such
contract does or does not happened.”
Meaning:-
The word contingent means when an event or situation is depends on some other
event or fact. The contingent contract means enforceability of that contract which
directly depends upon happening or non-happening of an event.
ESSENTIAL OF A CONTRACT CONRACT:-
Following are the various essential of a contingent contract:-
1) There must be a contract to do or not to do something.
2) It must be depend upon the happening or non-happening of an uncertain event.
3) The event must be collateral or incidental
RULES REGARDING CONTINGENT CONTRACT
Section 32 to 36 contains the rules regarding contingent contract.
Following are the rules regarding contingent contract:-
1) contingent contract depend on the happening of future uncertain event:-
Contingent contract ti do or not to do anything if an uncertain future event
happens, can not be enforced unless or until the event has happened. If event
become impossible such contract become void.
2) contingent contract depend on the non-happening of a future uncertain event :-
When a contract is depend upon non-happening of a future event it can be enforced
only when that event become impossible and not before.
3)Event linked with human conduct :-
If a contract is a contingent as to how a person will act an unspecified time, the
event shall be considered , to become impossible when such person does anything
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which renders is impossible that he should so act with in any definite time or other-
wise than under for the contingencies.
4) Contingent contract depend upon happening of an event with in a specified
time:-
When such event has been happened with in the specified it can be enforced and if
the happening of such event becomes impossible void.
5) Contingent contract depend on non-happening of an event with in a specified
time:-
When the happening of such event becomes impossible with in the specified time it
can be enforced and if the happening of such event has happened with in the
specified time it become void.
6) Contingent contract depend upon impossible events:-
Such an agreement can not be enforced since it is void. Whether the impossibility
of the event was known to the parties .
DIFFERENCE BETWEEN A WAGERING CONTRACT
Wagering contract Contingent contract
In a wagering contract there must be In a contingent contract it is not
mutual promises. necessary that there should be mutual
promises.
In a wagering contract the parties must This is not in case of contingent
contemplate determination of uncertain contract. The future event is merely
event as sole condition of their contract . collateral or incidental to the contract.
In a wagering contract, neither party In case of contingent contract, the
intends to perform the contract itself. parties intend to perform their respective
obligations.
Wagering contract is void under section Contingent contracts are good unless
30 of the Indian contract Act. theu are declared by the law to be bad.
In case of wagering contract there is a In case of a contingent contract there is
sense of contingency. no sense of wagering.

QUASI-CONTRACT CHAPTER-10
A Quasi- contract is a contract i.e. created by court when no such official contract
exists between the parties, and there is a dispute with regard to payment for goods
or services provided. Court create quasi-contract to prevent a party from being
unjustly enriched, or from benefitting from the situation when he does not deserve
to do so.

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Definition :-
A Quasi-contract is a retroactive agreement between two parties who have no prior
contractual commitment.
VARIOUS CASES DEEMED AS QUASI-CONTRACT:-
Following are the various cases deemed quasi-contract:-
1) Claim for necessaries supplied.
2) Payment by an interested person.
3) Obligation of a person enjoying benefit of non-gratuitous act.
4) Responsibility of finder of goods
5) Money paid by mistake or under coercion
SPECIFIC CONTRACT
CONTRACT OF INDEMNITY AND GUARANTEE
 CONTRACT OF INDEMNITY:-
According to section 124 of the Indian contract Act, 1872, A contract by which
one party promises to save the other from loss cost to him by the conduct of the
promisor himself or by the conduct of any other person is called a contract of
indemnity.
The person who undertaken or agree to compensate the loss is called
indemnifier, and the person whose loss is to be made good is called indemnity
holder.
 RIGHTS OF INDEMNITY HOLDER
Following are the rights of a indemnity holder according to section 125 of
the Indian contract Act, 1872,
An indemnity holder can recover from the indemnifier
a) All damages which may be compel to pay under the contact in any suit.
b) All cost he may be compeled to pay in any such suit
c) All sums which he may have paid under the terms of any compromise of
any such suit
 RIGHTS OF INDEMNIFIER
 Indian contract Act is silent regarding the rights of the indemnifier
CONTRACT OF GUARNTEE:-
According to section 126 of the Indian contract Act, 1872, A contract of
guarantee is a contract to perform the promise or to discharged the liability of a
third person in case of his default.
In a contract of guarantee there are three parties involve i.e.
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1) The creditor
2) The surety
3) The principal debtor
The person who gives guarantee is surety, the person in respect of whose
default the
Guarantee is given is caused is called the principal debtor and the person to
whom guarantee is given is called creditor.
DIFFERENCE BETWEEN CONTRACT OF INDEMNITY AND
CONTRACT OF GUARANTEE
Contract of indemnity Contract of guarantee
In a contract of indemnity, the liability In a contract of guarantee, the liability
of indemnifier is primary in nature. of surety is secondary and it is arise
only on the default of the principal
debtor.
In a contract of indemnity there are In a contract of guarantee there are
two parties to the contract i.e. three parties which is the creditor, the
indemnity holder and indemnifier. principal debtor and the surety.
In a contract of indemnity the liability In a contract of guarantee the liability
of the indemnifier arise only on the of the surety is arise when the
happening of the contingency. principal debtor fails to pay the debt.
In a contract of indemnity in most In a contract of guarantee there is an
cases there is no existing debt or duty existing debt or duty, the performance
of which is guaranteed by the surety.
A contract of indemnity is for the A contract of guarantee is for the
reimbursement. security of the creditor
All parties to a contract of indemnity In a contract of guarantee a principal
must be competent to contract. debtor may be a minor and the
contract of guarantee is still valid.

RIGHTS OF SURETY
Rights of surety are discussed under the following three heads
1) Against the principal debtor
2) Against the creditor
3) Against the co- sureties
1) Rights of surety against principal debtor
Following are the rights of the surety against the principal debtor
i) Rights of subrogation

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When the principal debtor makes a default in the performance of his duty, the
surety makes the necessary payment or makes performance of all what he is
liable for he becomes invested with all the creditor had against the principal
debtor. This is known as rights of subrogation.
ii) Right to indemnity:-
In a contact of guarantee, when the principal debtor makes a default, the surety
has to makes payment to the creditor. This payment is made by surety on behalf
of the principal debtor . After making such payment, the surety can recover the
same from the principal debtor. Such a claim can be made by the surety only in
respect of the sums he has rightfully paid under the guarantee.
2) Rights of surety against creditor:-
Following are the rights of surety against creditor
i) Right in case of fidility guarantee :-
In case of finding guarantee i.e., guarantee as to good behavior, honesty, etc., of
the principal debtor, the surety can ask the employer to dispense with the
services of the employee if the latter is proved to be dishonest.
ii) Before the payment of debt guarantee:-
A surety may, after the debt has become due but before he is called upon to pay,
require the creditor to sue the principal debtor to recover the debt. But, in such
cases, the surety must undertake to indemnify the creditor for any risk.
iii) Right to claim securities:-
After payment of the debt to the creditor, the surety can recover all the
securities which the creditor had with him either before or after the contract of
guarantee was entered in to.
iv) Right of equity:-
After payment the amount due to the creditor, the surety is entitled to all
equities of the creditor that he had against the debtor as well as any other person
with regard to the debt.
v) Right of set off :-
sometimes the principal debtor is entitled to certain counter claim or deductions
from the loan obtained from the creditor. In such cases, the surety is entitled to
the benefit of such counter claim or deductions, if the creditor files a suit
against the surety.
3) Right of sureties against the co-sureties :-
Following are the rights of sureties against the co-sureties
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i) right to contribute equally :-
If two or more person are co-sureties for the some debt either jointly or
severally, or whether under the same or different contract and whether with or
without knowledge of each other, the co-sureties are liable to pay equal share of
the whole debt.
ii) Liability of co-sureties bound in different sums :-
If the co-sureties are bound in different sums, they are liable to pay equally but
not more than the maximum amount guaranteed by each one of them .
Discharged of surety :-
A surety is said to be discharged when his liability comes to an end. The
liability of a surety comes to an end under the following circumstances
1) By notice of revocation :-

In case of continuing guarantee, a surety is discharged from liability when he

gives due notice to the creditor in respect of any future transaction. In such
cases , the surety will not responsible for the future transaction which may by
the principal debtor after the surety has revoked the contract of guarantee.
2) Revocation by death of surety :-
In case of a continuing guarantee, the death of surety discharged him from
contract of guarantee . In other words, the surety’s survivors or legal
representation would not be liable unless expressly mention in the contract.
3) Novation :-
When the terms of a contract of guarantee is renew the contract between
principal debtor and the creditor, without the surety’s consent, the surety is
discharged from the liability as to transaction made after the variance.
4) Alteration :-
Any variance or alteration in the terms of contract made between the principal
debtor and the creditor, without the surety’s consent, discharges the surewty as
to the transaction taking place further.
5) By release or discharge of principal debtor :-
The surety is discharged by any contract between the creditor and the principal
debtor, by which the principal debtor is release.
6) Agreement between principal debtor and creditor :-
When the creditor, without the consent of surety arrives at a settlement with the
principal debtor, to give him more time or promises not to sue him by a contract
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between the creditor and the principal debtor, the surety is discharged from the
liability.
7) Impairing surety’s remedy :-
A surety is discharge if the creditor does any act which is inconsistent with the
right of surety or omits to do any act which his duty to the surety requires him
to do, such that the eventual remedy of the surety himself against the principal
debtor is impaired.
8) Loss of security :-
If the creditor losses, or without the consent of the surety, parts with such
security, the security discharged to the extent of the value of the security.
9) Invalidation of the contract :-
A surety is also discharged upon invalidation of the contract.

CONTRACT OF BAILMENT

Meaning of Bailment :-
The term bailment is derived form French word “Baillior’’ which means to
deliver. Under the contract of bailment possession of goods or items are change
but ownership does not change.
Definition :-
According to section 148 of the Indian contract Act, 1872, “ A Bailment is the
delivery of goods by one person to another for some purpose, upon a contract
that they shall, when the purpose is accomplished, be returned or otherwise
disposed of according to the direction of the person delivering them.”

PERSONS INVOLVE IN THE CONTRACT OF BAILMENT

In a contract of Bailment there are two persons involve i.e.
1) Bailor
2)Bailee
1)Bailor
The person who delivered the goods is called the bailor .
2) Bailee
The person to whom the goods are delivered is called bailee.
Meaning of Bailment:-
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Bailment means a delivery of goods an condition to redelivered to the goods when
the condition is satisfied or purpose is satisfied. Delivery of goods to the bailee
must be for some purpose. When the purpose is achieved the identical goods are to
be returned.
Example:-
1)Giving cloth to tailor to make a coat
2) Delivery a car for repair
3) Delivery goods to railway company for carriage from one place to another.
4) Something left with a friend for use or to be looked after.

WHAT ARE THE ESSENTIAL OF A CONTRACT OF BAILMENT

Following are the essential of a contract of bailment under section 148 of the
Indian contract Act, 1872,
i)Delivery of goods :-
The first essential of a contract of bailment is the delivery of goods from one
person to another person for some purpose. Delivery means change in possession
from one person to another and not a change of ownership. The goods must be
handed over to the bailee for what ever is the purpose of bailment. Once this is
done bailment is constituted.
ii) Delivery of goods must be for some purpose:-
Under a contract of bailment, a bailor must deliver the goods to bailee for some
purpose. Where some goods are deliver by mistake, there is no bailment. When the
purpose of the goods delivered is accomplished, the bailee returned the goods to
bailee.
iii) contract :-
Under a contract of bailment there must be contract between the bailor and bailee.
Since, a minor can not enter in to a contract, he can not be liable as a bailee if he
misuses the goods or incurs losses. However, he can not be compelled to redeliver
the goods to the bailor if the goods are in his possession.
iv) movable goods:-
In a contract of bailment only movable goods can be delivered. Transfer of
immovable property does not constitute bailment.
v) Return of goods:-

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In a contract of bailment the goods is delivered by bailor to bailee for some
purpose. When the purpose of deliver is accomplished the goods is return to the
bailor.
RIGHTS OF BAILOR:-
Following are the rights of bailor
1)Enforcement of rights:-The bailor has a right to sue the bailee for enforcing all
the liabilities and duties of him.
2)Avoidance of contract:-The bailor has a right to terminate the bailment if the
bailee does any act with regard to the goods bailed, inconsistent with the
conditions of the bailment.
3)Return of goods:-When the goods are lent for consideration, the bailor has a
right to demand their return as and when he wants even if he lent them for a
specific period of time or purpose.
4) Compensation from wrong doer:-If the bailee is deprived of the use or
possession of the goods bailed by a third person wrongfully or if the goods are
damaged, the bailee or bailer has a right to sue the third person for such damage.
RIGHTS OF BAILEE:
Following are the rights of bailee
1) Delivery to one of several joint bailers of the goods bailed:- If goods several
joint owner are being bailed the bailee may deliver them back to one joint owner
without the consent of all owners when there is no agreement to the contrary.
2) Delivery of goods to bailor without title:-If any person other than the bailor
claims the goods bailed, the bailed has a right to apply to court to prevent the
delivery of goods to the bailor and to decide the title of such goods.
3)Right to take action against traspassers:-If any third person deprives the bailee
wrongfully of the possession or use of goods bailed to him , the bailee can file a
suit against that person in respect of the goods bailed.
4)Bailee’s lien:-When the charged incurred by the bailee in regard to the goods
bailed are not paid to him , he has a right to line i.e. right to retain the goods with
him.
DUTIES OF BAILOR:-
Following are the important duties of bailor
1) Duty to disclose known defect:-The bailor is bound to disclose to the bailee all
those defects of which he is aware and which expose the bailee to extra ordinary
risk.
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2) Duty to bear extra ordinary expenses of bailment:-
In the contract of bailment all the expenses incurred by the bailee must be
reimbursed by the bailor.
3) Duty to indemnify bailee :-
A bailor is also bound to indemnify the bailee for any loss suffered by the bailee,
by reason of the fact that the bailor was not entitled to bail the goods because of the
defective title.
4 )Duty to receive back the goods:-
It is the duty of the bailor to receive back the goods when the bailee return them
after the time of bailment has expired or the purpose of bailment has been
accomplished.
5) Duty to bear the normal risk :-
It is the duty of the bai;lor to bear the risk of normal loss, deterioration and
destruction of the things bailed if the bailee has taken proper care of the things
bailed.
DUTIES OF BAILEE
Following are the important duties of bailee
1) Duty not to take reasonable care of goods delivered to him :-
It is the duty of the bailee to take proper care of goods delivered to him . He can
not be misutilised the product which is delivered to him.
2) Duty not to make unauthorised used of goods :-
The bailee shall not make any unauthorized use of goods bailed, then bailor can
terminate the bailment. Bailor can also claim for damages caused to goods bailed
due to unauthorized use.
3) Duty not to mix bailor’s goods with his own goods:-
The bailee needs to keep the goods separately from his own goods. He should not
mix the goods under bailment with his own goods . In case the bailee mixes the
goods with the own goods without the consent of the bailor, then
a)Bailor has also interest in the mixture
b) If the goods can be separated or divided the property in the goods remain with
the both the parties. But, the bailee bears the expenses of separation or any
damages arising from the mixture.
c) if it is not possible to separate the goods, the bailee shall compensate the bailor
for the loss of goods.

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4)Not set adverse title:-
A bailee must not set an adverse title to the goods bailed.
5)Return goods:-The duty of bailee is to return the goods without demand on the
accomplished of the purpose or the expiration of the time period.
6) Return increase or profits:-A bailee shall return the goods along with any
increase or profit acquiring to the bailor in the absence of any contract to the
contrary.

TERMINATION OF BAILMENT
Following are the cases where a contract of bailment terminations
1) If the contract of bailment is for a specified period, the bailment terminates as
soon as the specified period expires.
2) If the contract of bailment is for a specific purpose, the bailment terminates as
soon as the purpose is achieved.
3) Where a bailee does something which is inconsistent with the term of contract
the bailment is terminated.
4) Where the bailment is gratuitous, the bailor may terminate the bailment even
before the specified time or before the purpose is fulfilled.
5) The death of bailor and bailee terminates a gratuitous bailment.

RIGHTS OF FINDER OF LOST GOODS

Following are the rights to the finder of goods
1) He can retain the goods until compensation for trouble and expenses incurred by
him in preserving the goods and finding out the true owner is paid to him. This
right is known as the finder’s lien on the goods. The lien extends till he is paid
compensation.
2) In case the owner has offered any specific reward for the return of goods, the
finder may sue for such reward and he may retain the goods until such reward is
paid.

PLEDGE OR PAWN
Pledge is a kind of bailment, where the goods are delivered by one person to
another as security for payment of a debt or performance of a promise. It means
when the goods are served as a security, it is pledge.

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Definition:-
According to section 172 of the Indian contract Act, 1872, the term ‘pledge’ is
defined as, “The bailment of goods as security for payment of a debt or
performance of a promise is called pledge.”
Persons involved in pledge
In a contract of pledge there are two persons involved i.e.
1) Pledge
2) pledge
The person pledging the goods is known as pledger or pawnor and the person to
whom goods are pledge is known as pledgee or pawnee.
Essential of pledge
Following are the essential elements of pledge according to the section 172 of the
Indian contract Act, 1872
1.Delivery of goods : Delivery of goods is essential to constitute a contract of
pledge. The delivery to the pawnee may be actual or constructive. Delivery of the
key of warehouse where the pledged goods are stored is a constructive delivery and
is sufficient to create a pledge.
2. The delivery of goods should be by way of security: A contract of pledge
must be supported by a valid consideration. The pawnor must give some property
of goods by way of security for securing a loan from pawnee.
3. The security being for the payment of a debt or performance of a promise :
A pledge is made to secure debts and obligation by delivery of some security.
Debts may be present, past or future. The pawnee does not acquire the right of
ownership for the goods pledged.
Difference between Bailment and pledge
Bailment Pledge
It is performed for a specific purpose. It is performed for obtaining a debt and
deliver goods as a security.
It is governed under section 148, of the It is governed under section 172, of the
Indian contract Act, 1872. Indian contract Act, 1872.
The parties to a bailment are bailee and The parties to a pledge are pledger and
bailor. pledge.
In case of bailment bailee can use In case of pledge pledgee can not use
bailers properties with his permission. pledger’s properties.
In case of bailment bailee can not sale In case of pledge pledge can sale the
the goods. goods if the borrower defaults.

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RIGHTS AND DUTIES OF PAWNEE
Following are the rights and duties of pawnee
1) Right of Retainer: It is the rights and duties of the pawnee to retain the goods
pledged till he is paid not only the debt but also interest there on, and all expenses
incurred in respect of the possession or the preservation of the goods pledged. The
pawnee can only retain the security but can not sold it.
2) Right of particular lien:- A pawnee can not retain the goods for only debt other
than that for which the pledge was made.
3) Right to extra ordinary expenses:- A pawnee has a right to recover from the
pawnor extra ordinary expenses incurred by him for the preservation of the goods
pledged.
4) Right in case of a default of the pawnor:- When a pawnor make a default in
the payment of the debt or performance of the promise, at the stipulation time, the
pawnee may file a suit against the pawnor upon the debt or promise and may retain
the goods pledged as a collateral security or he may sale the property pledged after
giving a notice to pawnor.

DUTIES
Following are the duties of the pawnee
1) A pawnee has the duty to take reasonable care of the goods pledged.
2) A pawnee is not permitted to use the goods pledged and if he does so, he will
responsible for the damages for any loss due to use.
3) A pawnee is bound to surrender the pledged goods on the payment of the debt.

RIGHTS OF PAWNOR
1) Right to file a suit for redemption of goods by making payment of debt.
2) Right to claim for damages on the ground of convertion.
DUTIES OF PAWNOR
1) Pawnor must meet the obligation regarding the contract with in specified time.
2) He should also pay the extra ordinary expenses.

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CONTRACT OF SALE OF GOODS

What is contract of sale:-
According to section 4 of the sale of goods Act, 1930, “A contract of sale of goods
is a contract where by the seller transfer or agree to transfer the property in goods
to a buyer for a price.’’
A contract of sale has been classified in to two types
1) sale ( absolute sale)
2) Agreement to sell (or conditional sale)
1) What is sale:-Where the ownership in goods is immediately transferred from
the seller to the buyer, and nothing is left on the part of the seller it is a sale or
absolute sale.
2) Agreement to sale or conditional sale :- Where the ownership in the goods is
transferred in future or on the fulfillment of certain conditions, it shall be an
agreement to sale or a conditional sale. The possession of the goods is immediately
transfer to the buyer but the ownership is not transferred to the buyer.
ESSENTIAL OF A CONTRACT OF SALE
To constitute a valid contract of sale the following essential must be present.
1) A valid contract
2) Two parties
3) Transfer of property
4) Transfer of goods
5) Price
1) A VALID CONTRACT:- A contract of sale is just like other contract made
under Indian contract Act, 1872. Therefore, to constitute a valid contract of sale all
the essential of a valid contract must be present.
2) TWO PARTIES:-To constitute a contract of sale, there must be two parties i.e.
the seller and buyer. The seller and buyer must be two persons and must be
competent to contract.
3) TRANSFER OF PROPERTY:-To constitute a valid contract of sale, there
should be immediate transfer or agreement to transfer general property in goods
sold or agreed to be sold. It is essential to transfer the general property in goods
from seller to the buyer with or without physical possession of the goods.

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4) TRANSFER OF GOODS:- In a contract of sale the subject of the contract of
sale must be goods. It is transferred to the buyer from the seller. According to
section 2(7), “ Goods means every kind of immovable property other than
actionable claims and money, and includes stock and share, growing crops, grass,
trees and things attached to or forming part of the land which are agreed to be
served it before sale or under contract of sale.
5) PRICE:-To constitute a valid contract of sale, there must be money paid or
promised for transfer of the goods.
DIFFERENCE BETWEEN SALE AND AGREEMENT TO SELL
Basis Sale Agreement to sell
1) Nature of contract sale is a executed An agreement to sale is a
contract. executory contract.
2) Transfer of property In sale the property in In an agreement to sale
goods passes from seller the property in goods
to buyer immediately with passes from seller to
the ownership. buyer at some future date
after fulfillment of certain
conditions i.e. the
ownership is still remains
with the seller.

3) Risk of loss In a sale, if the goods are In an agreement to sell, if

destroyed the risk of loss goods are destroyed the
falls on the buyer even if risk of loss falls on the
goods are in the seller even if goods are in
possession of the seller. the possession of buyer
because ownership has
not passed from seller to
buyer.
4) consequence of breach In case of sale, if the In case of an agreement to
buyer wrongfully neglects sell, if the buyer breaks
or refuse to pay the price his promise, the seller can
of the goods the seller can only sue for damages and
sue for the price, even not for the price, even
through the goods are still though the goods are in
in his possession. the possession of buyer.
5) Rights of resale In a sale, the property is In an agreement to sale,
with the buyer and as the property in the goods

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such the seller can not remain with the seller and
resale the goods. as such he can dispose of
the goods as he likes and
the original buyer can sue
him for the breach of the
contract.

DIFFERENCE BETWEEN SALE AND BAILMENT

Basic Sale Bailment
1) transfer of property and In case of sale, the In case of bailment the
possession property in the goods is possession of the goods is
transferred from seller to transferred from bailor to
buyer. baliee, but the ownership
is remains with the bailor.
2) Return of goods A goods can not be return In case of bailment, the
once it is sold. bailee must return the
goods to bailor after
fulfilling the purpose.
3) consideration In case of sale, the In case of bailment the
consideration is money. consideration is return the
goods after the
accomplishment of
purpose.

KINDS OF GOODS
Goods have been divided in to three types i. e.
1) Existing goods
2) Future goods
3) contingent goods
1) EXISTING GOODS:- Goods owned and possessed by the seller at the time of
the making of the contract of sale are called existing goods. The existing goods can
be further divided in to three types i.e.
a)Specific goods:- Specific goods are those goods which are identified and agreed
upon at the time of contract of sale is made. Example:-Mr. A agreed to sale his
house to Mr. B. Here a particular house is selling to Mr. B, so the house is specific
goods here.

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b)Ascertained goods:- Some times the terms specific goods and ascertained goods
are used interchangeably. But actually they are not same. Ascertain goods are
identified after the contract of sale as per the terms decided.
c) Unascertained goods :- when the goods are not separately identified or
ascertained at the time of making a contract of sale, are known as unascertained
goods.
2) FUTURE GOODS:- It means goods to be manufactured or produced or
acquired by the seller after the making of the contract of sale. Any person may sale
or offer to sale at any price after the production of goods . We can say a contract of
sale of future goods is always an agreement to sale. Example:- Ram agrees to sale
Sita all the mangoes which will be produced in his garden next year. This is an
agreement for the sale of future goods.
3) CONTINGENT GOODS:- There are a types of future goods, the acquisition
of which by the seller depend upon a contingency which by the seller depend upon
a contingency which may or may not happened. A seller may contract to sell goods
conditionally on the their acquisition, i.e. goods which might be expected to come
in to existence. Example:- X agrees to sell Y a certain ring provided he able to
purchased it from its present owner. This is known as an agreement for the sale of
contingent goods.

CONDITION AND WARRANTIES

Condition and warranties:-
According to section 12( 1) of the sales of goods Act, 1930, “A stipulation in a
contract of sale with reference to goods which are subject matter thereof, may be a
conditions or a warranty”. The stipulation of a contract has been divided in to two
types i.e.
1) condition
2) Warranties
1) CONDITIONS:- According to section 12(2) of the sale of goods Act, 1930, “ A
condition is a stipulation essential to the main purpose of the contract, the breach
of which gives rise to a right to treat the contract as repudiated.”
ESSENTIAL OF A CONDITION:-

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Following are the essential of a condition
1) It is essential to the main purpose of the contract.
2) The non-fulfillment of condition causes damage to the aggrieved party which
would defeat the very important purpose for which the contract is made.
3) The breach of a condition gives a right to the aggrieved party to rescind the
contract and recover the damages for breach of condition.
2) WARRANTIES:- According to section 12(3) of the sale of goods Act, 1930,
“A warranty is a stipulation collateral to the main purpose of the contract, the
breach of which gives rise to a claim for damages but not a right to reject the goods
and treat the contract as repudiated.

ESSENTIAL OF A WARRANTIES:-
Following are the essential of a warranties :-
1) It is collateral to the main purpose of the contract.
2) The breach of warranty causes damages to the aggrieved party and does not
defeat the main purpose of the contract.
3) The aggrieved party can only claim the damages for breach of warranty but can
not repudiated the contract.

DIFFERENCE BETWEEN A CONDITION AND WARRANTY

Basic Condition Warranty
1) Importance in contract Condition is a stipulation Warranty is a stipulation
which is essential to the which is collateral the
main purpose of the main purpose of the
contract. contract.
2) Consequence of breach The breach of condition The breach of warranty
gives a right to the gives the aggrieved party
aggrieved party to a right to claim damages
repudiate the contract and only but can not repudiate
claim damages. the contract.
3) option of treatment In the case of condition, a In the case of condition
breach of condition can be the breach of warranty
treated as a breach of can never be treated as
warranty. breach of condition.

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WHAT ARE THE SITUATION WHEN CONDITION TO BE TREATED AS
WARRANTY :
In the following situation, a condition may be treated as warranty:-
1) VOLUNTARY WAIVER BY BUYER:-where a contract of sale subject to any
condition to the fulfilled by the seller. The buyer may waiver the condition or elect
to treat the breach of condition as a breach of warranty and not as a ground for
relating the contract as repudiated. Example:- Mr. X agree to sell Mr. Y , 100bags
of particular quality of basmati rice Rs. 4500 per bag. But Mr. X supply second
quality basmati rice Rs. 350. Per bag. It is a breach of condition and Mr. Y can
refuse to accept the delivery by rejecting the goods. But if the buyer elect to treat
the breach of condition as breach of warranty, he can accept the second quality
basmati rice and claim damage of RS. 1000 per bag.
2) CONTRACT SEVERABLE:- where a contract of sale is not severable and the
buyer has accepted the goods or part thereof, the breach of any condition to be
fulfilled by the seller can only be treated as breach of warranty and not as a ground
for rejecting the goods and treating the contract as repudiated, unless there is a
term of contract, express or implied to that effect.
3) ACCEPTANCE OF GOODS BY BUYER:- Where a contract of sale is not
severable, i.e. it is indivisible and the buyer has accepted the goods or part thereof,
the breach of any condition is to be treated as a breach of warranty. Example:-
certain goods were promised to be delivered on June 1, time being made the goods
essence of the contract. The goods were delivered on June 2, the buyer accept the
goods.

WHAT IS EXPRESS CONDITION AND WARRANTIES

In a contract of sale may either be express or implied . The condition and
warranties which are agreed upon between the parties in express words, either
spoken or written are called express conditions and warranties.
IMPLIED CONDITION AND WARRANTIES
In a contract of sale conditions and warranties are said to be implied where the
conditions and warranties are applicable by operation of law.
IMPLIED CONDITIONS IN A CONTRACT OF SALE
Following are the implied condition in a contract of sale:-
1) condition as to title:- In a contract of sale, there is an implied condition on the
part of the seller that, he has a right to sale the goods and that, in the case of an

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agreement to sale he will have a right to sale the goods at the time when the
property is to pass to the buyer in future.
2) sale by description:-where goods are sold by description there is an implied
condition that the goods sale attached with the description .
3) Sales by sample :- In a sale by sample, there is an implied condition that the
bulk shall attached with the sample with the quality.
4) sale by description as well as sample:- If the sale is by sample as well as
description, the goods must not only attached with the sample but also with the
description .
5) Fitness of the goods:- Normally, there is no implied condition that the goods
shall be fit for a particular purpose of the buyer. It is the duty of the buyer to see
and satisfy himself whether the article will be suitable for the purpose for which he
buys it. But there is an implied condition on the part of the seller that the goods
supplied shall be reasoning fit for the purpose for which the buyer wants them.
6) Condition as to merchantability :- Where the goods are bought by description
from a seller who deals in goods of that description there is an implied condition
that goods shall be merchantable quality.

IMPLIED WARRANTY IN A CONTRACT OF SALE

Following are the implied warranties in a contract of sale :-

1)Implied warranty of quiet possession:- In every contract of sale, there is an

implied warranty that the buyer shall have enjoy quiet possession of goods. If
buyer’s possession is distributed by an one having a superior title than that of the
seller, the buyer is entitle to hold the seller liable for breach of this warranty and he
can claim damages from the seller.
2) Freedom from any charge or encumbrances :- In a contract of sale there is an
implied warranty that the goods shall be free from any charge or encumbrance in a
favour of any third party not declared or known to the buyer before or at the time
when the contract is made. If the goods of a third party the seller is liable to the
buyer to pay damages.
3) Usage of trade:-An implied warranty or condition as to quality or fitness for a
particular purpose may be annexed by the usage of trade.
CAVEAT EMPTOR

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Caveat emptor means the buyer must buy goods only after satisfying himself of
their quality or fitness. If a buyer purchase goods without proper checking of
goods, he can not blame the seller and claim damage. It is the duty of the buyer to
purchase right goods after choosing the appropriate goods. Caveat emptor means,
“lets the buyer beware.”
EXCEPTION TO THE RULE OF CAVEAT EMPTOR
Following are the exception to the rule of caveat emptor:-
1) Where the buyer relies on the skill and judgment of the seller:-
The rule of caveat emptor will not apply and the seller will held liable for breach of
implied condition as to quality or fitness of the goods, if the buyer has known to
the seller the particular purpose for which the buyer require the goods and the
buyer relied on the skill and judgment of the seller.
2) Merchantable quality of goods :-Where the goods are bought by description
from a seller who deals in goods of that description, there is an implied condition
that the goods shall be of merchantable quality. The exception to caveat emptor
will not apply if the buyer has defect which could not have been revealed earlier.
3) Condition by fraud:- The rule of caveat emptor will not apply to all those
purchases which have been made by a buyer under a contract where his consent
was obtained by the seller by fraud.
4) Uses of trade:-An implied condition as to quality or fitness for a particular
purpose may be annexed by the usage of trade.

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TRANSFER OF OWNERSHIP
Meaning:-Transfer of ownership means transfer of property of the goods seller to
the buyer which constitutes and ownership in the buyer. The person who transfers
the goods is called transferor and the person to whom the goods are transferred is
called transferee.

Rules regarding transfer of property:

Following are the rules regarding transfer of property in sale of goods Act:-

1. When there is a contract for sale of uncertain goods, no property in goods is

transferred to the buyer unless and until the goods are ascertained.
2. When there is a contract for the sale of specific or ascertained goods, the
property in such goods passes to the buyer at the time the parties intend to
pass. The terms of the contract and the circumstances of the case will
indicate the intention of the parties.
3. When there is an unconditional contract for the sale of specific goods in a
deliverable state, the property in the goods passes to the buyer when the
contract is made. The fact that the time of payment of the price or the time of
delivery of goods has been postponed does not prevent the property in goods
to pass to the buyer.
4. When there is a contract for specific goods not in a deliverable state, the
property in the goods does not pass until the seller has made it in a
deliverable state.
5. When there is a contract for sale of specific goods in a deliverable state and
the seller has to weight or measure the goods to determine the price, the
property in such goods does not pass until the price is determine.

C.I.F. contracts:-The word C.I.F. stands for cost, Insurance and freight. Under
such a contract the seller himself has to pay the cost of the goods, insurance
charges during transit to the buyer and the freight. The price agreed to be paid
between the parties to a contract of sale included all these three.

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F.O.B. contracts:- The word F.O.B. means “free on board.” In a F.O.B. contract
the seller is to put the goods on board a ship at his own expenses for carriage to the
buyer. When the delivery complete the property and risk in goods pass to the
buyer. Under this contract the seller does not insurance the goods, and the buyer
has to do it if he likes.

EX- SHIP CONTRACTS:-Ex-ship contracts is a contract where the seller

delivered the goods to buyer at the port. The property in the goods does not pass to
the buyer until the goods are delivered to the buyer at the port of delivery.

SALE BY NON- OWNERS:-In case of transfer of ownership of goods from the

seller to the buyer, it is presumed that the seller is a full owner of the goods and on
transfer the buyer also becomes an absolute owner of the goods. But where seller is
not an absolute owner of the goods, the buyer will not get it better title than what
the seller himself has. As a general rule, no man can sell goods and give a goods
title unless he is the owner. The rule is expressed by the word “Nemo Data Quod
Non Habet”. It means no one can pass a better title than he himself has.

Following are the certain exception to the rule Nemo Data Quod Non Habet.

1. Sale by a mercantile agent:-A mercantile agent can give a better title to the buyer
because he has authorized to sell the goods on behalf of seller. This exception will
hold good if the following condition are fulfilled :-
a. The person making the sale must be a mercantile agent,
b. The mercantile agent must be in possession of the goods or documents
of title of the goods.
c. Such possession must be with the consent of the owner.
d. He must have made the sale when acting in the ordinary course of
business of a mercantile agent.
e. The buyer should not in good faith
f. The buyer should not have at the time of the contract of sale notice
that the agent has no authority to sale.
2. Sale under the implied authority of owner or title by estoppels: - Where the
true owner of the goods by his words or conduct made by the buyer believe that
the seller was the owner of the goods or that the seller had authority to sell them,

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then he cannot later on deny the fact that the seller had no authority to sell the
goods. In such a case, the buyer gets a better title than the seller.

3) sale by one of the joint owner:- Where one of several joint owners, one has
possession of the goods by permission of the co-owners, the property in the goods
is transfer to any person who buys them from such joint owner in good faith and
without notice that the seller had no authority to sale.

4) Sale by a person in possession of goods under a voidable contract:-It

provides that a person in possession of goods under a voidable contract which has
not been rescinded can transfer a good title to the buyer who buys the goods in
good faith and without notice of the seller’s defective of title.

5) Sale by seller in possession after sale :-It provides that where a person has sold
goods but continuous in possession of them or of the document of the title to them
he may sale them to a third person if such persons obtain delivery thereof in good
faith and without notice of the previous sale, he get a good title to them.

6) Sale by buyer in possession before buying :-Where a person having bought or

agreed to buy goods, obtain with the consent of seller, had possession of goods
documents of title of goods and sell to a third party who buys it in good faith and
without notice of defective title then the third party get a better title.

7) Sale by unpaid seller :- Where an unpaid seller who has right of lies or
stoppage in transit resale the goods, the buyer acquires a good title there to as
against the original buyer. Thus, a buyer at a resale acquires a good title.

REMEDIAL MEASURE ON UNPAID SELLER

Unpaid seller:- The seller of the goods is deemed to be an unpaid seller if when
the whole of the price has not been paid or where a bill of exchange or other
negotiable instrument has been received as a conditional payment.

Rights of an unpaid seller :- An unpaid seller has two fold rights i.e.

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1) Right of unpaid seller against the goods and

2) Right of unpaid seller against the buyer personally

1) Right of unpaid seller against the goods :

Following are the rights of unpaid seller against the goods i.e.

i) Right of lien

ii) Right of stoppage of goods in transit

iii) Right of resale

i) Right of lien: “Lien” is the right to retain possession of goods and refuse to
deliver to them to the buyer until the price due in respect of them is paid. An
unpaid seller in possession of goods sold is entitled to exercise his lien on the
goods in the following cases

a) Where the goods have been sold without any stipulated as to credit,
b) Where the goods have been sold on credit but the term of credit has expired.

c) Where the buyer become insolvent even through the period of credit may not
have yet expired

ii) Right of stoppage of goods in transit :- The second important right

which is available to an unpaid seller is the right of stoppage in transit. The right to
stoppage means the right to stop further transit of the goods, to resume possession
thereof and to retain the same till the price is paid. The right can be exercised
under the following circumstances :-

a) The seller must be unpaid

b) The seller must have possession of the goods and the buyer must not have
acquired it.

c) The property must have passed from seller to the buyer.

iii) Right of resale :- Another right of unpaid seller is the right to resale the
goods. An unpaid seller resale the goods in the circumstances i.e.

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a) Where the goods are of a perishable nature. In this case the unpaid seller need
not to give a notice to the buyer of his intention to resale the goods,

b) Where the unpaid seller has exercised his right of lien, he can give notice to the
buyer of his intention to resale the goods. If after such notice the buyer does not
within a reasonable time pay or tender the price the seller can resale the goods
within a reasonable time.

c) Where the seller expressly reserves a right of resale if the buyer commits a
default in making payment.

2) Right of unpaid seller against the buyer personally

Following are the rights of unpaid seller against the buyer personally

i. Rights to suit for price :- Under the contract of sale if the property of the
goods is already passed but he refuse to pay for the goods, the seller
becomes an unpaid seller. In such a case the seller can sue the buyer for
refusing to pay him his due.
ii. Right to suit for damages for non-acceptance :-Where the buyer
wrongfully neglects or refuse to accept and pay the goods the seller may sue
him for damages for non-acceptance. The measure of damage is determine
by the rules contain in section 73 and 74 of the Indian contract Act.
iii. Right to suit for interest:-If there is a specific agreement between the
parties the seller can sue for the interest amount due to him from the buyer.
This is when both the parties have specifically agreed on the interest rate to
be paid to seller from the date on which the payment becomes due.

Consequences of breach of contract of sale

The sale of goods Act provides the following remedies to a seller and a buyer when
there is breach of contract of sale.

Seller’s Remedies :-

Following are the remedies to a seller when there is breach of contract of sale

1) Suit for price

2) Suit for damages for non-acceptance of the goods

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3) Suit for interest
4) Suit for damages of repudiation of the contract by the buyer before the due
date.
BUYER’S REMEDIES:
Following are the remedies to a buyer when there is breach of contract of
sale.

1) Suit for damages for non-delivery of the goods.

2) Suit for specific performance
3) Suit for breach of warranty
4) Suit for damages for repudiation of contract by the seller before due date
5) Suit for interest

CONSUMER PROTECTION ACT,1986

The consumer protection Act implemented in 1986, gives easy and fast
compensation to consumer grievances. It safeguards and encourages consumer
to speak against insufficiency in goods and services. If traders and
manufacturers practice any illegal trade these Act protects their rights as a
consumer.

OBJECTIVE OF CONSUMER PROTECTION ACT

Following are the objectives of consumer protection Act:-

1) It applies to all goods, services and unfair trade practices unless

specifically exempted by the central government.
2) It covers all sectors i.e. private, public or co-operative.
3) It provide for establishment of consumer protection councils at the
central, state and districts levels to promote and protect the rights of
consumers and a three tier quasi-judicial machinery to deal with
consumer’s grievances and disputes.
4) It provides a statutory recognisation to the six rights of consumer i.e.
a) Right to consumer education
b) Right to safety
c) Right to seek redressal
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d) Right to be heard
e) Right to choose
f) Right to information

g) Right to choose
h) Right to information

a) Right to consumer education

The right to consumer education is an important right available to the consumers.

Each and every consumer should be properly educated about their rights for the
available product.

2)

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