LAW OF CONTRACT-II 2024

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YO
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YF
RIF
CLA

ZAKIR HUSSAIN SHAIK ADVOCATE

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LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 1
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YO
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ADVOCATE ZAKIR HUSSAIN SHAIK

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 3
 CLARIFY FOR YOU

INDEX

PART –A
01.Indemnity ?

02. Contract of Indemnity?

03.Bailment?

04. Pledge?

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05. Contract of guarantee?

06. Rights of Indemnity holder?

YO
07. Kinds of Guarantee?

8. Pledge by non-owner?
OR
9. pawnor and pawnee?

10. Universal agent?

11. Termination of Agency?

YF
12. sub agent?

13. Rights of pawner?

RIF

14. Caveat Emptor?

15. Dissolution of Partnership?

CLA

16. Hire purchase Agreement?

17. Unpaid seller?

18. Sleeping partner?

19. Surety?

20. Limited Liability Partnership (LLP)?

21. Liability of Bailor?

22. Minor's contract?

23. Registration of a firm?

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 4
 PART -B
01.Define bailment. What ‘re the essentials of Bailment ?

02.Define contract of guarantee. What are the effects of misrepresentation and

concealment on contract of guarantee?

03.What do you mean by pledge? Who can pledge? Discuss with latest
examples?

04.How partnership firm are registered? What are the consequences of

registration and non-registration of partnership firm? According to the

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provisions of the Indian Contract Act, 1872 ?

YO
05.What are the rights of the surety against the principal debtor, creditor and
co sureties?

06.Define condition and warranty. Distinguish between condition and

warranties?
OR
07.Discuss the rule "Himself a delegate an agent shall not delegate his
authority"?
YF
08.What is the legal position of a minor partner in a fim?

09.When is a seller deemed to be an unpaid seller of goods and what are his
rights?
RIF

10.Discuss the different modes in which the authority of an agent may be

terminated?
CLA

PART-C
01‘A' lends a horse to 'B' for his own riding only. ‘B’ allows ‘C’, a member of
his family, to ride the horse. 'C' rides with care but the horse accidentally falls
and is injured. Decide?

02 ‘A' holds a lease from 'B' terminable on three months' notice. ‘C’ without
‘B's authority, gives notice of termination to 'A'. ‘B’ ratifies the notice and files
a suit for rejectment. 'B' is entitled to get decree or not?

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 5
03. 'P’ gives authority to ‘A' to sell 'P's land to pay himself, out of the proceeds,
the debt due to him from ‘P'. Subsequently ‘P’ revokes the authority given to
'A'. Advise 'P' ?

04.'A' stands as a surety for the good conduct of 'B. Who is employed in a
Bank. 'B misappropriates some moneys. The bank excuses him without
informing 'A' of 'B' is misconduct B again misappropriates Rs.50,000/-, The
bank files a suit against 'A' on the strength of guarantee. Decide giving
reasons?

05. 'D' a carrier discovers that a consignment of tomatoes owned by "E" has
deteriorated badly before the destination is reached. He, therefore, sells the
consignment for about a third of the market price. 'E' sues 'D' for damages.

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Decide?

YO
06. Mohan Lal delivers diamonds to Neel Kamal on sale or return basis. Neel
Kamal delivers the diamonds to Om Prakash on sale or return. An unknown
person takes away the diamonds from Om Prakash. Can Mohan Lal file a
case against Neel Kamal for the price of the diamonds?
OR
07. ‘A’ agrees to indemnify 'B', a newspaper proprietor against claims
arising out of the libel printed in the newspaper concerning a person of
repute. Is this a valid agreement?
YF
08. 'G' Contracts with ‘H’ to buy 50 easy chairs of a certain quality. ‘H’ delivers
25 chairs of the type agreed upon and 25 chairs of some other type. Does 'G
reject the chairs?
RIF

09. Raju, a partner of a firm, borrows money on his own credit by giving his
own promissory note for the same, but he subsequently uses the proceeds
of the note in the partnership concern of his own free will without any
reference to the lender to do so. Is the firm liable for the loan?
CLA

10. ‘X’ a active partner of a firm with ‘Y’ and ‘Z’. ‘X’ retires without giving a
public notice. Whether ‘X’ is liable to the creditors to a loan sanctioned after
his retirement. Decide?

11. ‘A’ entrusted some books to ‘B’ for binding ‘B’ promised to complete the
work and return the same within ten days. ‘B’ failed to retum the books within
the agreed time. Subsequently the books were burnt in an accidental fire. Can
‘A’ recover damagas for the loss from ‘B’? Decide?

12. An unregistered partnership firm borrows Rs. 1,00,000/- from x the firm
failed to repay it within time. Now that can Mr ‘X’ do to recover the amount?
Advise ?

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 6
13. ‘ A’ directs ‘B’ his agent to buy a certain house for him. ‘B’ tells ‘A’ that, it
can't be bought at it is already sold out, but buys the house for himself. A
came to know about the travel committed by ‘B’. Can ‘A’ compel ‘B’ to sell the
house to himself? Decide?

14. ‘A’ sells goods to 'B'. ‘B’ pays to 'A' through a cheque. Before ‘B’ could
obtain the delivery of goods, his cheque has been dishonoured by the bank.
‘A’, therefore refuses to give delivery of the goods until paid. Is ‘A’'s action
justified or not?

15. ‘B’ is the principal debtor of 'A'. ‘C’ is the surety of the debt. ‘A’, the creditor
makes a promise to a neighbour of 'B' to give time to 'B'. Discuss the effect if
any of this promise on the contract of guarantee ?

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16. ‘A' being ‘Y's agent for the saie of goods, induces ‘K’ to buy them by a

YO
misrepresentation, which ‘X' was not authorised by "Y’’ to make. Can this
contract be set side at the option of ‘K’? State the reasons for your answer ?

17. ‘A' and 'B’ are the partners in a firm. "A' is the managing partner who
managed the firm for 3 years and misappropriated the funds. ‘B' wanted to file
OR
a suit regarding settlement of accounts. Advise ‘B’.?

18. ‘A’ sells to ‘B’ a horse and agrees to deliver it the coming week. ‘B’ agreed
to pay the price on delivery. But the horse died beforeit is delivered. Who has
YF
to suffer the loss?

19.’’A’' lends a book to 'B’ and 'B' promises to return it one week before
examinations. ‘B’ did not return it in spite of ‘A's' repeated demands. ‘A’ sues
RIF

‘B’ for breach of contract and claims damages. ‘B’ pleads absence of
consideration and therefore not a contract. Decide?
CLA

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 7
 PART –A
01.Indemnity ?

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Indemnity, as per the Indian Contract Act, 1872, refers to a
contractual arrangement where one party (the indemnifier) agrees

YO
to compensate the other party (the indemnity holder) for any loss,
damage, or liability incurred due to specified actions or
circumstances. It aims to secure the indemnity holder against
OR
potential financial risks arising from certain events. The indemnifier
undertakes to make the indemnity holder whole for losses suffered
due to the actions of a third party or as a result of the indemnifier's
YF
own actions.

The provisions related to indemnity are covered from Sections 124 to

147 of the Act.
RIF

Section 124 defines indemnity as a contract where one party agrees to

save the other from any loss caused by the conduct of the promisor or
any other person. Section 125 states that the promisee in a contract of
CLA

indemnity should act prudently to minimize the loss.

Sections 126 to 129 outline the rights and obligations of the indemnifier
and the promisee. For instance, Section 126 talks about the promisee's
duty to communicate information about the loss, while Section 128
discusses the promisee's obligation to allow the indemnifier to take
necessary actions to minimize the loss.

Sections 130 to 134 deal with contracts of guarantee and the distinction
between guarantee and indemnity. Section 135 states that the

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 8
indemnifier is entitled to reimbursement from the promisee for all
expenses incurred while fulfilling the indemnity obligation.

Finally, Sections 136 to 147 provide guidance on the discharge of the

indemnifier's liability, rights of subrogation, and the extent of the
indemnifier's liability. These sections collectively govern the principles
and framework of indemnity contracts in India as per the Indian Contract
Act, 1872.

02. Contract of Indemnity?

A contract of indemnity is a legal agreement in which one party, called

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the indemnifier, promises to compensate or protect another party, called

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the indemnitee, against any loss or liability that the indemnitee may
suffer as a result of a specified event. In other words, it is a contract
where one party agrees to bear the financial consequences of another
party's actions.
OR
Under the Indian Contract Act, 1872, a contract of indemnity is defined in
Section 124.
YF
The key elements of a contract of indemnity are as follows:

Parties: There must be two parties involved - the indemnifier and the
indemnitee.
RIF

Promise to Compensate: The indemnifier must promise to compensate

the indemnitee for any loss, damage, or liability that may arise.
CLA

Loss or Liability: The contract of indemnity is triggered by a loss or

liability suffered by the indemnitee due to the actions of a third party or
any other event specified in the contract.

Causa Proxima: The loss or liability must be caused by an event that is

covered by the terms of the contract.

Lawful Act: The contract of indemnity must be for a lawful act and not
against public policy.

Mutual Understanding: Both parties must have a mutual understanding

of the terms and conditions of the indemnity.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 9
Written or Oral: While a contract of indemnity can be oral, it is advisable
to have it in writing to avoid any disputes later.

It's important to note that a contract of indemnity is a type of contract and

is subject to the general principles of contract law, such as offer,
acceptance, consideration, and intention to create legal relations. In
case of breach of the contract, the indemnitee can seek compensation
from the indemnifier for the actual loss or liability suffered.

03.Bailment?
Bailment is a legal relationship defined under the Indian Contract Act,

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1872, where one person (the bailor) delivers goods to another person

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(the bailee) for a specific purpose, with an understanding that the goods
will be returned or disposed of according to the bailor's instructions.

The key elements of bailment are as follows:

OR
Delivery of Goods: There must be a voluntary delivery of goods by the
bailor to the bailee. The goods may be actual or constructive, and the
delivery can be made directly or through an agent.
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Specific Purpose: The goods are delivered to the bailee for a specific
purpose, and the bailee holds the goods on behalf of the bailor. The
purpose may vary, such as safekeeping, repair, transportation, or use.
RIF

Return or Disposal: The goods are either returned to the bailor after the
purpose is fulfilled or are disposed of as per the bailor's instructions.
CLA

Legal Relationship: Bailment establishes a legal relationship between

the bailor and the bailee. The bailee becomes responsible for the care
and custody of the goods during the bailment period.

Ownership Retained: In bailment, the ownership of the goods remains

with the bailor. The bailee holds possession and control over the goods
but doesn't acquire ownership rights.

Duty of Care: The bailee has a duty of care to exercise reasonable care
and diligence in handling the goods. The degree of care depends on the

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 10
nature of the bailment (gratuitous, for mutual benefit, or in return for
payment).

Return of Goods: The bailee is obligated to return the goods to the

bailor after the purpose is fulfilled or according to the bailor's
instructions.

Termination: Bailment ends when the purpose of the bailment is

fulfilled, the agreed time period expires, or when the bailee returns the
goods to the bailor.

There are different types of bailments, such as:

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Gratuitous Bailment: No consideration is involved, and the bailee is

YO
expected to exercise slight care.

Bailment for Reward: The bailee receives some consideration, and

higher care is expected.
OR
Bailment for Mutual Benefit: Both the bailor and bailee derive benefits,
and reasonable care is required.
YF
Bailment serves as a legal framework for individuals and businesses to
entrust their goods to others for various purposes. It outlines the rights
and responsibilities of both parties involved and provides remedies in
RIF

case of breach of duty or loss of goods during the bailment period

Bailment is a legal concept where the owner (bailor) transfers

possession of an item to another person (bailee) for a specific
CLA

purpose, with the bailee having a duty of care to protect the item.
The bailor retains ownership, and the bailee is responsible for its
safekeeping until the purpose is fulfilled. Once the purpose is
completed, the item is returned to the bailor.

04. Pledge?
In the context of the Indian Contract Act, 1872, pledge is a legal concept
that pertains to the act of delivering goods or valuable assets as security
for a debt or the performance of a contractual obligation. This
arrangement involves three parties: the pledgor, the pledgee, and the

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 11
thing pledged (goods or assets). The act of pledging creates a special
type of bailment, where possession of the pledged goods is transferred
to the pledgee while ownership remains with the pledgor.

Key points regarding pledge under the Indian Contract Act, 1872:

Parties Involved:

Pledgor: The person who delivers the goods/assets as security.

Pledgee: The person to whom the goods/assets are delivered as

security.

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Transfer of Possession:

YO
The possession of the goods/assets is transferred from the pledgor to
the pledgee. The pledgee has a special right to possess the goods until
the debt or obligation is discharged.

Purpose:
OR
Pledge is typically used to secure a loan, credit, or other obligations. The
pledge serves as collateral for the debt.
YF
Rights and Duties:

Pledgee's Rights: The pledgee has the right to retain possession of the
RIF

pledged goods until the debt is repaid or the obligation is fulfilled.

Pledgor's Duties: The pledgor must provide accurate information about

the pledged goods and maintain them in good condition.
CLA

Right to Sell:

If the pledgor defaults on the debt or obligation, the pledgee has the right
to sell the pledged goods after providing proper notice to the pledgor.
The sale proceeds are used to satisfy the debt.

Redemption:

The pledgor can redeem the pledged goods by repaying the debt or
fulfilling the obligation. Once this is done, the pledgee must return the
goods to the pledgor.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 12
Lien:

The pledgee has a right of lien over the pledged goods, which means
they can retain possession until the outstanding debt is cleared.

Document of Pledge:

Pledge can be created by an agreement or a document that outlines the

terms and conditions of the arrangement.

The provisions related to pledge in the Indian Contract Act, 1872,

provide a framework for the legal aspects of this transaction. Pledge is a

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crucial tool in securing financial transactions and ensuring that parties
fulfill their obligations.

YO
05. Contract of guarantee?
A contract of guarantee, as defined in the Indian Contract Act, 1872,
OR
involves three parties: the creditor, the principal debtor, and the surety. In
this type of contract, the surety agrees to undertake the responsibility of
fulfilling the debtor's obligation if the debtor defaults. The contract of
guarantee provides an additional layer of security for the creditor,
YF
ensuring that they receive the payment or performance owed by the
principal debtor.
RIF

The key elements of a contract of guarantee are:

Creditor: The party to whom the debt or obligation is owed. They are the
beneficiary of the guarantee and have the right to demand payment from
CLA

the surety in case of default by the principal debtor.

Principal Debtor: The party who owes the debt or obligation to the
creditor. They are the primary party responsible for fulfilling the
obligation, but the surety provides a secondary source of payment or
performance if the debtor fails to do so.

Surety: The party who undertakes the responsibility to fulfill the debtor's
obligation if the debtor defaults. The surety's liability arises only when
the principal debtor fails to perform as agreed. The surety's obligation is
collateral to that of the principal debtor.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 13
For a contract of guarantee to be valid, certain conditions must be met:

Consent: The surety's consent must be freely given, without any undue
influence or coercion.

Consideration: Like any other contract, a guarantee also requires

consideration from the creditor, which could be in the form of goods,
services, or money.

Writing: In some cases, a contract of guarantee must be in writing,

especially when it falls under the ambit of the Indian Registration Act,
1908.

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Legal Object: The guarantee must be for a legal purpose and not

YO
against public policy.

Communication of Acceptance: The guarantee needs to be accepted

by the creditor for it to become effective.
OR
It's important to note that a contract of guarantee is distinct from a
contract of indemnity. In a contract of indemnity, the indemnifier agrees
to compensate the promisee for any loss suffered due to the conduct of
YF
the promisor or a third party, whereas in a contract of guarantee, the
surety is liable for the debtor's default.
RIF

Sections 126 to 147 of the Indian Contract Act, 1872, provide detailed
provisions related to contracts of guarantee, covering topics like the
extent of surety's liability, discharge of surety's liability, co-sureties, and
creditor's rights against the surety.
CLA

06. Rights of Indemnity holder?

Under the Indian Contract Act, 1872, an indemnity holder refers to a
party who is entitled to receive compensation or reimbursement from
another party (the indemnifier) in case of a loss or liability incurred due to
the actions of the indemnifier or a third party. The rights of an indemnity
holder are outlined in Sections 125 to 129 of the Act:

Right to Damages: The indemnity holder has the right to claim

damages from the indemnifier in case of any loss or liability suffered due

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 14
to the actions of the indemnifier or a third party. This compensation is
aimed at restoring the indemnity holder to the position they would have
been in if the loss had not occurred.

Right to Expenses: The indemnity holder has the right to claim

reasonable expenses incurred to protect their interests or to avoid the
loss. These expenses may include legal costs, litigation fees, and other
costs directly related to the indemnity holder's efforts to mitigate the loss.

Right to Sue Third Parties: If the indemnity holder has suffered a loss
due to the actions of a third party, they have the right to sue that third

U
party and recover the damages or expenses from them. The indemnity
holder's right to sue third parties is based on the principle of subrogation.

YO
Right to Indemnity Payment: The indemnity holder has the right to
demand and receive the indemnity payment from the indemnifier. The
indemnifier is legally bound to provide compensation as per the terms of
OR
the contract of indemnity.

Right to Enforce Contract: If the indemnifier fails to fulfill their

obligation to provide indemnity, the indemnity holder has the right to
YF
enforce the contract of indemnity and seek legal remedies for the
breach.
RIF

Right to Security: The indemnity holder has the right to demand

security from the indemnifier to ensure that the indemnity will be
provided in case of a loss or liability. This security can take the form of a
monetary deposit or any other agreed-upon arrangement.
CLA

Right to Reimbursement: The indemnity holder has the right to be

reimbursed for any payment made to the third party as a result of the
loss or liability covered by the indemnity.

It's important to note that the rights of an indemnity holder may vary
based on the specific terms and conditions of the contract of indemnity.
The Act provides a legal framework to ensure that the indemnity holder
is adequately protected and compensated in case of any loss or liability
for which the indemnifier is responsible.

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07. Kinds of Guarantee?
Specific Guarantee (Section 126): A specific guarantee is a guarantee
given for a single transaction or a specific debt. In this type of guarantee,
the liability of the guarantor arises only if the principal debtor defaults on
that particular transaction or debt. The guarantee is limited to a specific
event or obligation.

For example; A guarantees to pay Rs. 50,000 to B for the supply of

goods to C. If C defaults in payment, A's liability as a guarantor arises
only for that specific debt.

U
Continuing Guarantee (Section 129): A continuing guarantee is a

YO
guarantee that extends to a series of transactions or debts over a period
of time. The guarantor's liability is not limited to a single transaction but
continues until it is revoked by the guarantor. It covers any transaction
within the agreed limit and duration unless the guarantor revokes it. The
OR
guarantee remains in force until notice of revocation is given to the
creditor.

For instance; A gives a guarantee to B for any goods supplied by B to

YF
C up to a limit of Rs. 1,00,000 for one year. A's liability as a guarantor is
continuing and will apply to any transactions within the specified limit and
time frame.
RIF

Conditional Guarantee (Section 128): A conditional guarantee is a

guarantee that becomes enforceable only when a certain condition is
CLA

met. If the condition specified in the guarantee is fulfilled, the liability of

the guarantor arises. If the condition is not met, the guarantee does not
become effective. The validity and enforceability of the guarantee are
dependent on the occurrence of the specified condition.

For instance; A guarantees to pay B's debt if C fails to do so, but only if
C becomes insolvent. A's liability as a guarantor depends on the
occurrence of the condition (C's insolvency).

These different kinds of guarantees allow parties to structure their

agreements based on the specific circumstances and level of risk
involved. Guarantees play a crucial role in facilitating transactions and

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 16
ensuring the fulfillment of obligations in case of default by the principal
debtor. The terms and conditions of the guarantee agreement are
essential to defining the rights and responsibilities of all parties involved.

8. Pledge by non-owner?
In the context of the Indian Contract Act, 1872, a "pledge by a
non-owner" refers to a situation where a person who is not the owner of
certain goods pledges them as security for a debt or obligation. The act
of pledging involves delivering the possession of goods to a creditor or
lender to secure a debt. The provisions related to pledge are primarily

U
covered under Sections 172 to 176 of the Indian Contract Act.

YO
According to Section 178 of the Act, a pledge by a person who is not the
owner of the goods is not considered void if certain conditions are met:

Pledge by Mercantile Agent (Section 178): If a mercantile agent, who

OR
is in possession of the goods with the consent of the owner, pledges the
goods in the ordinary course of business, and the pledgee (creditor)
takes the goods in good faith and without notice of the agent's lack of
authority, the pledge is valid.
YF
Pledge by Seller in Possession After Sale (Section 178): If a person,
who has sold goods but retains possession of them after sale, pledges
RIF

the goods as security for a debt, and the pledgee takes the goods in
good faith and without notice of the sale, the pledge is valid.

In both cases, the key elements are the good faith of the pledgee and
CLA

their lack of notice regarding the owner's lack of consent or possession.

These provisions protect the interests of innocent third parties (creditors)
who deal with agents or sellers in good faith.

It's important to note that these provisions do not apply to cases where
the pledgor has obtained possession of the goods by unlawful means or
under a voidable contract. Additionally, the Indian Contract Act does not
protect the rights of the pledgee if they had notice of the pledgor's lack of
authority or possession.

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Overall, the Indian Contract Act provides safeguards to ensure that
pledges made by non-owners, under specific circumstances, are not
automatically void. However, these safeguards are designed to protect
the rights of innocent third parties who have acted in good faith.

For example; imagine you have a friend who owns a fancy camera.
They let you borrow the camera for a special occasion. Now, let's say
you urgently need some money. You can go to a shop that lends money
and offer the camera as a pledge. They give you money in exchange for
holding onto the camera temporarily.

U
In this case:

YO
You don't actually own the camera, but your friend let you use it.

You pledge the camera to the shop to get the money you need.

The shop is okay with this because they believe you have the right to
OR
use the camera.

So, even though you're not the owner, you can still pledge the camera as
long as you're allowed to use it. This is a common practice when
YF
someone needs money quickly and has something valuable to offer as
security
RIF

9. pawnor and pawnee?

In the context of the Indian Contract Act, 1872, "pawnor" and "pawnee"
are terms used to describe the parties involved in a pledge, which is a
CLA

type of security arrangement for loans. Let's break down these terms:

Pawnor: The pawnor is the person who is delivering a valuable item to

another party as security for a debt or loan. In simpler terms, the pawnor
is the one who is giving something valuable (like jewelry, electronics,
etc.) to a lender as collateral in exchange for money. The pawnor retains
the ownership of the item during the pledge period.

Pawnee: The pawnee is the person or entity to whom the valuable item
is given as security. The pawnee is usually a lender or a pawnbroker
who provides money or a loan in exchange for the valuable item. The

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 18
pawnee holds the item until the debt is repaid. If the pawnor fails to
repay the debt within the agreed timeframe, the pawnee has the right to
sell the pledged item to recover the money.

For example: let's say you need money urgently and decide to pledge
your gold necklace to a pawn shop. In this scenario:

You are the pawnor because you're giving the gold necklace as security
for the loan.

The pawn shop is the pawnee because they are receiving the gold
necklace and providing you with the loan.

U
The relationship between the pawnor and the pawnee is based on trust

YO
and legal agreements. The pawnee holds the pledged item to ensure
repayment, and once the debt is settled, the item is returned to the
pawnor. If the debt is not repaid, the pawnee can sell the item to recover
the loan amount.
OR
10. Universal agent?
In the context of the Indian Contract Act, 1872, a "universal agent" refers
YF
to a person who is authorized to act on behalf of another person (the
principal) with a very broad scope of authority. This authority covers a
wide range of transactions and decisions, often allowing the agent to act
RIF

as if they were the principal themselves.

Universal Agent: A universal agent is someone who has been given

CLA

authority by the principal to handle a variety of matters on their behalf.

Unlike a specific or limited agent who is appointed for a particular task or
purpose, a universal agent has a much broader mandate. The actions
taken by a universal agent bind the principal as if the principal
themselves had taken those actions.

Key Characteristics of a Universal Agent:

Broad Authority: A universal agent has the power to act on behalf of

the principal in a wide range of matters, including both routine and
significant decisions.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 19
Binding Actions: Any actions taken by the universal agent within the
scope of their authority are legally binding on the principal. This means
that the principal is responsible for the consequences of the agent's
actions.

Principal's Interests: A universal agent is expected to act in the best

interests of the principal. Their actions should align with what the
principal would do if they were personally involved.

Scope of Authority: The scope of a universal agent's authority can be

specified in a power of attorney or agency agreement. It's essential for

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the principal to clearly define the limits of authority to avoid any
misunderstandings.

YO
Fiduciary Duty: A universal agent owes a fiduciary duty to the principal,
meaning they must act with utmost good faith and loyalty while carrying
out their responsibilities.
OR
Example: Suppose Mr. Smith appoints Mr. Johnson as his universal
agent through a power of attorney. This means that Mr. Johnson can
handle a wide range of financial, legal, and business matters on Mr.
YF
Smith's behalf. If Mr. Johnson signs a contract with a third party on
behalf of Mr. Smith, that contract is legally binding on Mr. Smith.
Similarly, if Mr. Johnson makes investments, manages properties, or
RIF

enters into agreements, Mr. Smith will be held responsible for those
actions.

It's important for both the principal and the agent to clearly understand
CLA

the scope and implications of a universal agency relationship. This

ensures that the agent acts in accordance with the principal's wishes
and avoids exceeding their authorized powers

11. Termination of Agency?

Termination of agency in the context of the Indian Contract Act, 1872
refers to the end of the relationship where one party (the principal)
authorizes another party (the agent) to act on their behalf. There are
various ways in which an agency can be terminated, either by the
actions of the parties involved or by operation of law.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 20
Here's an explanation of the different ways agency can be
terminated:

1. By Mutual Agreement: The agency relationship can be terminated by

mutual agreement between the principal and the agent. Both parties
agree to end the agency arrangement, and this termination should
ideally be in writing to avoid any misunderstandings.

2. By Revocation: The principal can revoke the agent's authority at any

time, provided that the agency relationship is not coupled with an
interest. A revocation should be communicated to the agent, and it takes

U
effect once the agent receives the notice. If the agent has already taken
action based on the authority given, the principal may be liable for any

YO
resulting damages.

3. By Renunciation: An agent can also choose to renounce their

authority by notifying the principal. This renunciation takes effect when
OR
the principal receives the notice. If the renunciation is not justified by the
terms of the agency agreement, the agent may be liable for any resulting
damages.
YF
4. By Completion of Purpose: If the agency was established for a
specific purpose or a particular transaction, the agency is automatically
terminated once that purpose or transaction is completed.
RIF

5. By Operation of Law: An agency can also be terminated by

operation of law due to certain circumstances, such as:
CLA

Death or insanity of either the principal or the agent.

Insolvency or bankruptcy of either party.

Destruction or loss of subject matter (if the agency was created for a
specific property).

Change in law making the agency illegal.

Mutual agreement between the principal and the agent.

6. By Expiry of Time: If the agency was established for a specific period

of time, it will automatically terminate upon the expiry of that period.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 21
7. By Impossibility: If the subject matter of the agency becomes
impossible to perform, the agency relationship may be terminated. For
example, if an agent is appointed to sell a property that is later destroyed
by fire, the agency becomes impossible to perform.

It's important for both the principal and the agent to be aware of the
various ways in which an agency relationship can be terminated. Proper
communication and understanding of the terms of termination can help
prevent any legal disputes or complications.

12. sub agent?

U
In the context of the Indian Contract Act, 1872, a "sub-agent" refers to a

YO
person who is appointed by an agent to perform certain duties or
functions on behalf of the agent within the scope of the original agency
relationship. The sub-agent operates under the authority and control of
the primary agent, rather than directly under the principal.
OR
1. Appointment of Sub-Agent: A sub-agent is appointed by the agent
with the consent of the principal or as implied by the circumstances. The
agent remains responsible for the actions and obligations of the
YF
sub-agent in relation to the principal.

2. Authority and Scope: The sub-agent's authority is derived from the

RIF

agent, and their actions are considered binding on the principal as long
as they fall within the scope of the original agency. The agent must have
the authority to appoint a sub-agent; otherwise, the sub-agent's actions
CLA

may not be binding on the principal.

3. Relationship with the Principal: While the sub-agent has a direct

relationship with the agent who appointed them, they do not have a
direct contractual relationship with the principal. Any obligations or
liabilities arising from the sub-agent's actions are ultimately the
responsibility of the agent who appointed them.

4. Duties and Obligations: The sub-agent owes duties and obligations

primarily to the agent who appointed them. They are expected to
perform their tasks diligently and in accordance with the instructions of

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 22
the agent. The agent, in turn, is responsible for ensuring that the
sub-agent's actions are in the best interests of the principal.

5. Liability and Accountability: The agent remains accountable for the

acts of the sub-agent. If the sub-agent's actions result in any breach of
duty or negligence, the agent may be held liable to the principal for any
resulting damages.

6. Termination: The agency relationship between the agent and the

sub-agent can be terminated by the agent at any time. Similarly, the
principal can revoke the agent's authority to appoint a sub-agent.

U
It's important to note that the appointment of a sub-agent should be done

YO
with careful consideration, and the agent should ensure that the
sub-agent is competent and trustworthy. The agent must also maintain
clear communication with both the sub-agent and the principal to avoid
any misunderstandings or conflicts. The sub-agent's role is a crucial
OR
aspect of the overall agency relationship, and proper management is
essential to ensure that the principal's interests are protected

13. Rights of pawner?

YF
In the context of the Indian Contract Act, 1872, a "pawner" refers to a
person who delivers their movable property to another party, known as
RIF

the "pawnee," as security for a loan or debt. The rights of the pawner are
important to ensure a fair and equitable transaction in a pledge
arrangement. Here's an explanation of the rights of a pawner:
CLA

1. Right to Regain Possession: The pawner has the right to regain

possession of the pledged property once the debt for which it was
pledged is repaid. This right is exercised by the pawner upon full
repayment of the debt or performance of the obligation secured by the
pledge.

2. Right to Receive Surplus Proceeds: If the pawnee sells the pledged

property to recover the debt and the sale proceeds exceed the amount
owed, the pawner has the right to receive the surplus amount after
deducting the debt and any legitimate expenses incurred by the pawnee.

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3. Right to Notice of Default: If the pawner fails to repay the debt or
fulfill the obligation within the agreed-upon time, the pawnee has the
right to sell the pledged property. However, before selling, the pawnee
must provide the pawner with a reasonable notice of the intended sale.
This notice allows the pawner an opportunity to redeem the property by
repaying the debt and any reasonable expenses.

4. Right to Redeem: The pawner has the right to redeem the pledged
property by repaying the debt and fulfilling the obligation for which the
property was pledged. This right can be exercised at any time before the
pawnee sells the property or at the agreed-upon time.

U
5. Right to Sue for Excessive Sale: If the pledged property is sold by

YO
the pawnee at an excessive price or below its market value, the pawner
has the right to sue for damages. The pawner can seek compensation
for any losses suffered due to an unfair sale of the property.
OR
6. Right to Claim Damages for Wrongful Sale: If the pawnee
wrongfully sells the pledged property without providing proper notice or
without the pawner's consent, the pawner has the right to claim
YF
damages for the loss suffered as a result of the unauthorized sale.

7. Right to Terminate the Pledge: In cases where the pawner has

fulfilled the obligation or repaid the debt before the agreed-upon time,
RIF

the pawner has the right to terminate the pledge. This entails ending the
security arrangement and regaining full ownership and possession of the
pledged property.
CLA

The rights of the pawner are designed to ensure fairness, transparency,

and protection in a pledge arrangement. It is essential for both parties to
understand and respect these rights to maintain a mutually beneficial
and lawful transaction.

14. Caveat Emptor?

"Caveat Emptor" is a Latin term that translates to "let the buyer beware."
In the context of the Indian Contract Act, 1872, this principle refers to the
legal doctrine that places the responsibility on the buyer to thoroughly
examine and assess the goods or property they intend to purchase. The

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 24
idea is that the buyer should exercise caution and diligence before
making a purchase, as the seller is not obligated to disclose every detail
or defect about the goods.

In simple terms, "Caveat Emptor" means that when a person buys

something, they need to be cautious and make informed decisions. The
seller is not required to inform the buyer about all potential issues or
defects with the product unless the buyer specifically asks or the law
mandates disclosure.

This principle encourages buyers to take the initiative in researching the

U
product, asking relevant questions, and conducting due diligence before
entering into a contract to purchase. If the buyer fails to inspect the

YO
goods properly and discovers defects or issues after the purchase, they
typically cannot hold the seller responsible for the lack of disclosure.

It's important to note that while "Caveat Emptor" is a guiding principle,

OR
modern consumer protection laws and regulations in various jurisdictions
may limit its application, especially when it comes to cases of fraud,
misrepresentation, or products that are inherently dangerous. In such
YF
cases, sellers may be required to provide accurate and complete
information to buyers, regardless of the "Caveat Emptor" principle

15. Dissolution of Partnership?

RIF

Dissolution of partnership refers to the termination or end of a

partnership business arrangement. The Indian Contract Act, 1872,
CLA

contains provisions governing the dissolution of a partnership.

Partnership dissolution can occur due to various reasons, such as the
expiration of a fixed term, completion of a specific project, mutual
agreement among partners, death of a partner, insolvency of a partner,
or occurrence of events that make the partnership illegal.

The Act outlines the following modes of dissolution of a

partnership:

Dissolution by Agreement: Partners can mutually agree to dissolve the

partnership. This can be done at any time, even before the expiration of

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 25
the partnership's fixed term. The agreement should be in writing and
signed by all partners.

Dissolution by Notice: If the partnership is at will (no fixed term), any

partner can give notice to the other partners expressing their intention to
dissolve the partnership. The partnership will dissolve after the expiration
of the notice period, which may vary as per the terms of the partnership
agreement or as prescribed by law.

Dissolution due to the Death of a Partner: The death of a partner

results in the automatic dissolution of the partnership. However, the

U
partnership can continue if the partnership agreement allows for the
same, and the remaining partners agree to continue the business.

YO
Dissolution due to Insolvency: If a partner becomes insolvent or
bankrupt, it can lead to the dissolution of the partnership. Insolvency can
trigger the dissolution process unless the partnership agreement
OR
provides otherwise.

Dissolution by Court Order: A court can order the dissolution of a

partnership if a partner becomes of unsound mind, engages in
YF
misconduct detrimental to the partnership, or persistently breaches the
partnership agreement.
RIF

Dissolution due to Illegality: If the business of the partnership

becomes illegal due to changes in law or regulations, the partnership is
automatically dissolved.
CLA

Upon dissolution, the partners must settle the affairs of the partnership,
including the division of assets and liabilities. The Act also addresses the
liability of partners after dissolution, which may extend beyond
dissolution in certain cases.

It's important to note that while the Indian Contract Act, 1872, provides
the framework for partnership dissolution, partnerships may have their
own specific terms and agreements that govern dissolution. It's
advisable for partners to consult legal professionals and adhere to the
provisions of the Act while dissolving a partnership.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 26
16. Hire purchase Agreement?
A Hire Purchase Agreement is a contract governed by the Indian
Contract Act, 1872, which combines elements of both a hire agreement
and a sale agreement. It is commonly used for the purchase of goods
where the buyer, also known as the hirer, agrees to take possession of
and use the goods immediately, while making regular payments over a
period of time. The ownership of the goods is transferred to the hirer
upon completion of the payment schedule.

Key features of a Hire Purchase Agreement:

U
Nature of Agreement: The agreement is a hybrid contract that involves

YO
both hiring and selling of goods. The hirer has the option to buy the
goods at the end of the agreed term.

Transfer of Possession: The goods are delivered to the hirer who can
OR
use and possess them during the hire period. This distinguishes it from a
pure hire agreement.

Payment Schedule: The hirer makes regular payments to the owner

YF
(seller) over a predetermined period. These payments usually include
the principal amount and interest.

Option to Purchase: At the end of the hire period, the hirer has the
RIF

option to buy the goods by paying an additional amount, usually referred

to as the "purchase price" or "option to purchase price."
CLA

Ownership Transfer: The ownership of the goods is transferred to the

hirer upon the payment of the full purchase price. Until then, the
ownership remains with the seller.

Default and Repossession: If the hirer defaults on payments, the seller

has the right to repossess the goods. In such cases, the hirer loses the
right to purchase the goods.

Termination: The agreement may include provisions for early

termination, which would allow the hirer to return the goods without the
obligation to pay the full purchase price.

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Hire Purchase Agreements are commonly used for financing consumer
goods like vehicles, appliances, and equipment. They provide an option
for individuals or businesses to acquire goods without making a large
upfront payment. These agreements are regulated by specific laws and
regulations in various jurisdictions to protect the rights of both parties.

It's important for both the hirer and the seller to carefully review and
understand the terms and conditions of the Hire Purchase Agreement
before entering into it. The agreement should clearly outline the rights,
obligations, and responsibilities of both parties, including payment terms,
ownership transfer, termination clauses, and default provisions.

U
17. Unpaid seller?

YO
An unpaid seller, according to the law of contract under the Indian
Contract Act, 1872, refers to a situation where a seller of goods has not
received the full payment or the price for the goods sold by them. The
OR
Act defines the rights and remedies available to such an unpaid seller
when the buyer fails to make the payment as agreed.

Key points related to the concept of an unpaid seller:

YF
Definition: An unpaid seller is a person who has not received the full
payment for the goods sold or who has received a negotiable instrument
RIF

(such as a cheque) as payment and it has been dishonored.

Rights of an Unpaid Seller: The Act grants several rights to an unpaid

seller, which include:
CLA

Lien: The seller has the right to retain the goods until the full payment is
made by the buyer.

Stoppage in Transit: If the goods are in transit and the buyer becomes
insolvent, the seller can stop the delivery of the goods and reclaim
possession.

Resale: In case of default by the buyer, the seller can resell the goods
after giving notice to the buyer, and claim damages for any loss incurred.

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Suit for Price: The seller can file a lawsuit against the buyer for the
unpaid price of the goods.

Damages: The seller can claim damages for non-acceptance or

non-payment of the goods.

Conditions for Exercising Rights: The rights available to an unpaid

seller depend on certain conditions, such as the goods being in the
seller's possession, the seller's title to the goods, and the buyer's default
in payment.

Seller's Right of Lien: The seller's right of lien means the seller's right

U
to retain possession of the goods until the full payment is received. This

YO
right is available even if the seller has part-delivered the goods.

Right of Resale: If the goods are perishable or the buyer is in default,

the unpaid seller can sell the goods and claim damages from the buyer
for any loss incurred.
OR
Notice of Resale: Before reselling the goods, the seller must give
reasonable notice to the buyer of their intention to do so.
YF
Suit for Damages: If the seller chooses not to exercise the right of
resale, they can file a lawsuit for the price of the goods or claim
damages for non-acceptance.
RIF

The concept of an unpaid seller is designed to protect the interests of

sellers in transactions where payment is not received as agreed. It
provides sellers with legal remedies to recover the unpaid price of the
CLA

goods and take appropriate actions in cases of buyer default

18. Sleeping partner?

A sleeping partner, according to the law of contract under the Indian
Contract Act, 1872, refers to a person who invests capital in a
partnership firm but does not actively participate in the management and
operations of the business. Also known as a dormant partner or silent
partner, a sleeping partner's role is mainly limited to providing financial
support to the partnership without engaging in the day-to-day affairs of
the business.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 29
Key points related to the concept of a sleeping partner:

Definition: A sleeping partner is a person who contributes capital to a

partnership firm but does not take an active role in managing the
business. They typically remain in the background and are not involved
in making business decisions.

Investment and Profits: A sleeping partner invests money in the

partnership and shares in the profits and losses of the business as per
the terms of the partnership agreement. Their share in the profits is
generally in proportion to their capital contribution.

U
Limited Role: Unlike active partners who are involved in the

YO
management, operations, and decision-making of the business, a
sleeping partner's involvement is limited to providing funds.

Liabilities: A sleeping partner's liability is typically limited to the extent of

their capital contribution. They are not personally liable for the firm's
OR
debts beyond their investment, unless they have expressly guaranteed
such liabilities.
YF
Disclosure: In most cases, the existence of sleeping partners may not
be publicly disclosed, and their names may not be included in business
promotions or documents.
RIF

Consent and Agreement: The partnership agreement should explicitly

define the role, rights, and responsibilities of sleeping partners. The
consent of all partners is usually required to admit a sleeping partner into
CLA

the firm.

Rights and Benefits: A sleeping partner has the right to inspect the
accounts of the firm and can exercise their share of the profits. However,
they may not have the authority to make binding decisions on behalf of
the firm.

Termination: The partnership agreement may outline the conditions

under which a sleeping partner can withdraw their investment or exit the
partnership.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 30
Sleeping partners play a crucial role in providing financial support to the
partnership while allowing active partners to manage the day-to-day
operations. Their participation can enhance the financial strength of the
business without the need for direct involvement in management tasks.

19. Surety?
Surety, according to the law of contract under the Indian Contract Act,
1872, refers to a person who agrees to be responsible for the debt,
default, or obligation of another person (principal debtor) to a creditor.
The surety provides a guarantee that if the principal debtor fails to fulfill

U
their obligations, the surety will step in to fulfill those obligations on their
behalf.

YO
Key points related to the concept of a surety:

Definition: A surety is a person who undertakes the legal obligation to

OR
fulfill the obligations of another person (principal debtor) in case the
principal debtor defaults on their responsibilities.

Agreement: The suretyship arrangement involves a contract between

YF
three parties: the creditor (to whom the principal debtor owes money),
the principal debtor (who owes the debt), and the surety (who
guarantees the payment or performance of the debt).
RIF

Liability: The surety's liability arises only when the principal debtor
defaults on their obligations. The surety becomes legally bound to fulfill
those obligations on behalf of the principal debtor.
CLA

Types: There are two primary types of sureties:

Contractual Surety: This type of suretyship arises from a specific

contract between the surety and the creditor. The surety's liability is
limited to the terms and conditions of the contract.

Statutory Surety: This type of suretyship is imposed by law. For

example, in certain legal proceedings, sureties may be required as a
condition for granting bail.

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Rights of the Surety: Once the surety has fulfilled their obligations, they
may have certain rights against the principal debtor, such as the right to
recover the amount paid from the principal debtor.

Liabilities of the Surety: The surety's liability is co-extensive with that

of the principal debtor. This means that the surety is liable to the creditor
to the same extent and under the same conditions as the principal
debtor.

Release of Surety: The surety's liability can be discharged if there is a

material alteration to the terms of the contract without the surety's

U
consent or if the creditor releases the principal debtor from their
obligations without the surety's consent.

YO
Rights of Subrogation: After fulfilling the obligations of the principal
debtor, the surety has the right to step into the shoes of the creditor and
recover the amount paid from the principal debtor.
OR
Suretyship is a common practice in various commercial transactions and
financial dealings. It provides a layer of security to creditors by ensuring
that even if the principal debtor defaults, the creditor's interests are
YF
protected through the surety's guarantee.

20. Limited Liability Partnership (LLP)?

RIF

The Limited Liability Partnership (LLP) is a business structure that is not

directly governed by the Indian Contract Act, 1872. Rather, it is regulated
by the Limited Liability Partnership Act, 2008. The Indian Contract Act,
CLA

1872, primarily deals with the general principles of contract law in India.

Limited Liability Partnership (LLP): An LLP is a legal structure that

combines the benefits of a partnership firm and a limited liability
company. It was introduced in India through the Limited Liability
Partnership Act, 2008, to provide a more flexible business structure for
professionals and entrepreneurs.

Key Features of LLP:

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 32
Separate Legal Entity: An LLP is a distinct legal entity separate from its
partners. It can own assets, enter into contracts, and sue or be sued in
its own name.

Limited Liability: The liability of partners is limited to their agreed

contribution in the LLP. This means that the personal assets of partners
are generally protected from the debts and liabilities of the LLP.

Perpetual Succession: An LLP has a continuous existence regardless

of changes in partners. It is not affected by the retirement or death of
partners.

U
Management: Partners can actively participate in the management of

YO
the LLP, unlike shareholders in a company. The LLP agreement outlines
the roles and responsibilities of partners.

Flexible Agreement: Partners have the freedom to define their roles,

responsibilities, profit-sharing arrangements, and other terms in the LLP
OR
agreement.

Taxation: LLPs are taxed as separate legal entities. However, the

YF
income distributed to partners is not subject to dividend distribution tax.

Limited Compliance: LLPs have fewer compliance requirements

compared to companies. They are required to file annual returns with the
RIF

Registrar of Companies (RoC).

Partnership Agreement: The partnership agreement is a crucial

document that defines the rights, responsibilities, and obligations of
CLA

partners within the LLP.

21. Liability of Bailor?

In the context of the Indian Contract Act, 1872, the term "bailor" refers to
the person who delivers goods to another person, known as the "bailee,"
for a specific purpose or under certain terms. The liability of a bailor
pertains to the responsibilities and obligations they have towards the
goods that are being entrusted to the bailee.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 33
1. Duty to Disclose Known Defects: The bailor is required to disclose
any known defects or faults in the goods being bailed. This is to ensure
that the bailee is aware of any potential issues with the goods and can
take appropriate precautions.

2. Compensation for Damages: If the bailor fails to disclose known

defects and the bailee suffers damages as a result, the bailor may be
held liable for such damages. The bailee has the right to seek
compensation for losses incurred due to the bailor's non-disclosure.

3. Duty to Indemnify: The bailor is responsible for indemnifying the

U
bailee against any loss or damage that may arise in connection with the
goods, except when the bailee is at fault or when the loss occurs due to

YO
natural deterioration or normal wear and tear.

4. Duty to Reimburse Expenses: If the bailor instructs the bailee to

perform any necessary repairs or improvements to the goods, the bailor
OR
is generally obligated to reimburse the bailee for reasonable expenses
incurred in carrying out such instructions.

5. Duty to Pay Charges: The bailor must reimburse the bailee for any
YF
expenses incurred in the course of bailing the goods, such as
transportation costs, storage charges, and other reasonable expenses.
RIF

6. Duty to Accept Return: Upon the completion of the purpose for

which the goods were bailed, the bailor is generally obligated to accept
the return of the goods from the bailee. Failure to do so may result in the
bailor being held liable for any damages caused by the delay.
CLA

It's important to note that the liability of a bailor is determined by the

terms of the bailment agreement and the specific circumstances of each
case. The Indian Contract Act, 1872, provides a legal framework for the
rights and obligations of both bailor and bailee, ensuring a fair and
balanced relationship between the parties involved.

22. Minor's contract?

In the context of the Indian Contract Act, 1872, a minor refers to an
individual who has not yet attained the age of majority, which is 18 years

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 34
in most jurisdictions. A minor's contract refers to a contract entered into
by a person who is below the age of majority. The law treats contracts
involving minors differently due to their limited legal capacity and
protection of their interests

1. Voidable Contract: A contract entered into by a minor is generally

considered voidable at the option of the minor. This means that the
minor has the right to either affirm the contract upon reaching the age of
majority or void it. The minor can choose to ratify or reject the contract
based on their own judgment.

U
2. No Obligation to Perform: A minor who enters into a contract has
the option to avoid their obligations under the contract. If they decide not

YO
to perform their part of the contract, the other party cannot enforce it
against them.

3. Restitution of Benefits: If a minor chooses to void the contract, they

OR
are required to return any benefits or consideration they received under
the contract. This is done to restore the parties to their original positions
before the contract was entered into.
YF
4. Exceptions: There are certain types of contracts that are binding on
minors, even though they are generally not bound by their contracts.
These include contracts for necessities like food, clothing, education,
RIF

and medical care. A minor can be held responsible for paying a

reasonable price for these necessities.

5. Avoiding Exploitation: The law protects minors from being taken

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advantage of by adults in contractual matters. Adults are expected to

deal fairly with minors and not exploit their lack of legal experience.

6. Ratification: Upon reaching the age of majority, a minor can ratify a

contract that was entered into while they were a minor. Ratification
means confirming and accepting the terms of the contract. Once ratified,
the contract becomes legally enforceable.

It's important to note that a minor's contract is a complex area of law,

and its application can vary based on the jurisdiction and specific
circumstances of each case. The primary goal of treating minor's

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 35
contracts differently is to safeguard their interests and ensure that they
are not unfairly burdened by contractual obligations that they may not
fully understand

In the Indian Contract Act, 1872, several sections address the concept of
a minor's contract and its implications. Here are the relevant sections:

1. Section 10: Defines who is competent to contract and mentions that

minors are generally incompetent to contract.

2. Section 11: States that every person is competent to contract if they

are of the age of majority, are of sound mind, and are not disqualified

U
from contracting by any law.

YO
Section 11A: Added by the Indian Contract (Amendment) Act, 1930,
this section deals with a minor's capacity to contract for necessities. A
minor can enter into contracts for necessities, which are valid and
binding on them.
OR
Section 12: Declares that a person who is disqualified by law from
entering into a contract is not competent to contract, including minors.
YF
Section 64: Deals with supplying necessaries to a person incapable of
contracting or anyone they are legally bound to support. The person
supplying necessaries is entitled to be reimbursed from the property of
RIF

the incapable person.

Section 65: Provides for restitution when a contract becomes void due
to incapacity of a party to contract, such as a minor. The person who has
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received an advantage under the contract must restore it or compensate

for it.

Section 68: Pertains to the responsibility of a minor for necessaries

supplied to them or to someone they are legally obligated to support. A
minor is liable to pay a reasonable price for such necessaries

23. Registration of a firm?

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Registration : Under Section 58 of the Indian Partnership Act, 1932,
a firm may be registered at any time (not merely at the time of its
formation but subsequently also)

Registration of a Firm: Registration of a partnership firm is not

mandatory but is advisable due to several benefits it offers. According to
the Indian Partnership Act, 1932, a firm may be registered by filing an
application with the Registrar of Firms of the respective state where the
firm's principal place of business is situated. The application should
include the following details:

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Name of the firm.

YO
The principal place of business.

Names and addresses of partners.

Date of commencement of the partnership.

OR
Duration of the partnership, if specified.

Any changes in the partnership details that may occur subsequently.

YF
Benefits of Registration:

Legal Evidence: A registered firm enjoys the status of a legal entity, and
RIF

the partnership deed becomes legal evidence in case of disputes among

partners or with third parties.

Rights of Suit: A registered firm can file a suit against third parties for
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the enforcement of its rights and claims.

Setoff and Recovery: A registered firm can claim setoff or counterclaim

in a dispute with a third party.

Partner's Rights: Partners of a registered firm can sue each other for
the enforcement of their rights under the partnership contract.

Rights in Property: A registered firm can file a suit to recover

possession of immovable property or specific performance of a contract.

Remedies: A registered firm has access to certain legal remedies that

unregistered firms do not have.
LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 37
 U
YO
OR PART -B
01.Define bailment. What ‘re the essentials of Bailment ?
YF
Bailment is a legal relationship that arises when one person (the bailor)
delivers goods to another person (the bailee) for a specific purpose, with
the understanding that the goods will be returned or disposed of
RIF

according to the bailor's instructions. The Indian Contract Act, 1872,

defines bailment under Section 148.

The essentials of bailment under the Indian Contract Act, 1872, are
CLA

as follows:

Delivery of Goods: There must be a voluntary transfer of possession of

goods from the bailor to the bailee. The possession of the goods is
transferred, but not the ownership.

Purpose of Bailment: The goods must be delivered to the bailee for a

specific purpose. This purpose can be anything from safekeeping, repair,
transportation, or any other lawful purpose.

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Mutual Benefit: There must be a mutual understanding or agreement
between the bailor and the bailee regarding the purpose of bailment.
Both parties should benefit from the arrangement in some way.

Return of Goods: The goods must be returned by the bailee to the

bailor once the purpose of bailment is fulfilled or the agreed period
expires. If no specific time is mentioned, the bailee must return the
goods when the bailor demands them.

No Transfer of Ownership: In a bailment, the ownership of the goods

remains with the bailor. The bailee possesses the goods for a specific

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purpose and is obligated to return them as per the agreement.

YO
Care and Responsibility: The bailee is responsible for taking
reasonable care of the goods and ensuring their safety during the period
of bailment. The level of care required may vary based on the nature of
the goods and the terms of the agreement.
OR
Return of Profits: If any profits are earned from the use of the bailed
goods, the bailee is generally required to share those profits with the
bailor.
YF
Return of Accessory: If the goods are bailed along with any
accessories (e.g., a car with spare parts), the accessories must also be
RIF

returned.

It's important to note that bailment is based on trust and a fiduciary

relationship. The bailee is expected to exercise reasonable care and
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diligence in handling the bailed goods and must not use them for any
unauthorized purpose. If the bailee fails to fulfill their obligations, the
bailor may have the right to claim compensation or take legal action for
any losses suffered.

02.Define contract of guarantee. What are the effects of

misrepresentation and concealment on contract of
guarantee?
A contract of guarantee is a legal agreement in which one person (the
surety) agrees to be responsible for fulfilling the obligations or debts of

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 39
another person (the principal debtor) in case the principal debtor fails to
do so. The Indian Contract Act, 1872, defines a contract of guarantee
under Section 126.

Effects of Misrepresentation and Concealment on a Contract of

Guarantee:

Misrepresentation: Misrepresentation occurs when one party makes a

false statement that induces another party to enter into a contract. In the
context of a contract of guarantee, if the surety is induced to give the
guarantee based on false information provided by the principal debtor or

U
the creditor, the contract of guarantee may be voidable at the option of
the surety. If the misrepresentation is material and has a significant

YO
impact on the surety's decision to give the guarantee, the surety may
seek to rescind the contract of guarantee.

Concealment: Concealment refers to the deliberate suppression of

OR
material facts by one party, which prevents the other party from making
an informed decision. If the principal debtor or the creditor conceals
important information that would have affected the surety's decision to
YF
give the guarantee, the contract of guarantee may be voidable. Similar to
misrepresentation, the surety may have the option to avoid the contract if
concealment is proven.
RIF

It's important to note that the effects of misrepresentation and

concealment on a contract of guarantee depend on the materiality of the
information withheld or misrepresented. If the misrepresentation or
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concealment is trivial or has no significant impact on the surety's

decision, the contract of guarantee may remain valid. However, if the
surety can prove that their consent to the contract was vitiated due to
misrepresentation or concealment, they may have the right to seek
remedies such as rescission, damages, or other appropriate relief.

misrepresentation and concealment can potentially render a

contract of guarantee voidable if they have a material impact on the
surety's decision to give the guarantee. The surety may choose to
avoid the contract and seek legal remedies if they believe that they

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 40
were misled or not provided with essential information before
entering into the guarantee.

03.What do you mean by pledge? Who can pledge?

Discuss with latest examples?
A pledge is a type of bailment where a person (the pledgor) delivers
movable property to another person (the pledgee) as security for a debt
or obligation. The pledgee holds the property until the debt is repaid, and
upon repayment, the property is returned to the pledgor. The Indian
Contract Act, 1872, contains provisions related to pledges in Sections

U
172 to 181.

YO
Who Can Pledge

Ownership: The pledgor must be the owner of the property or

authorized to pledge it. Only the owner or a person with the right to
OR
pledge the property can create a valid pledge.

Contractual Capacity: Both the pledgor and pledgee must have the
legal capacity to contract.
YF
Goods in Possession: The property being pledged must be in the
actual possession of the pledgor, which is then delivered to the pledgee.
RIF

Latest Example: Suppose John owns a car and he wants to borrow

money from a bank. In order to secure the loan, he pledges his car as
collateral. Here, John is the pledgor who owns the car, and the bank is
CLA

the pledgee. The bank holds the car as security until John repays the
loan. If John fails to repay the loan, the bank has the right to sell the car
to recover the debt.

It's important to note that the concept of pledge is widely used in various
financial transactions, such as loans, mortgages, and credit agreements.
Businesses and individuals often pledge assets as collateral to secure
financing from banks or financial institutions. The provisions of the Indian
Contract Act, 1872, govern the rights and obligations of both the pledgor
and the pledgee in such transactions.

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A pledge is a form of bailment where movable property is delivered
as security for a debt or obligation. The pledgor must own the
property and have the legal capacity to pledge it, while the pledgee
holds the property until the debt is repaid. Pledges are commonly
used in financial transactions to secure loans or credit.

04.How partnership firm are registered? What are the

consequences of registration and non-registration of
partnership firm? According to the provisions of the Indian

U
Contract Act, 1872 ?

YO
Partnership firms in India can be registered under the Indian Partnership
Act, 1932.
OR
The process involves the following steps:

Choosing a Name: The firm should have a unique name that is not
similar to any other registered firm or company.
YF
Drafting Partnership Deed: A partnership deed is a written agreement
that outlines the terms and conditions of the partnership, including the
RIF

rights, responsibilities, and profit-sharing arrangements of each partner.

Stamp Duty: The partnership deed needs to be executed on a

non-judicial stamp paper, the value of which depends on the capital
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contribution of the partners.

Submission of Documents: The partnership deed, along with the

prescribed application form, needs to be submitted to the Registrar of
Firms in the respective state.

Payment of Fees: A nominal registration fee is payable along with the

documents.

Verification: The Registrar verifies the documents, and if everything is

in order, the partnership firm is registered and assigned a Registration
Certificate.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 42
Consequences of Registration:

Legal Proof: A registered firm can provide the partnership deed as legal
evidence in case of disputes among partners or with third parties.

Enforceable Rights: Registered firms can enforce their rights against

other partners in a court of law.

Third-Party Rights: Registered firms can sue third parties for the
enforcement of rights arising from the partnership.

Claiming Set-Off: A partner of a registered firm can claim a set-off in a

U
legal proceeding against a third party.

YO
Consequences of Non-Registration:

No Legal Suit: An unregistered firm cannot file a lawsuit against any

third party for the enforcement of rights arising from the partnership.
OR
No Claim: Partners of an unregistered firm cannot claim a set-off in a
legal proceeding against a third party.

No Legal Proof: The partnership deed of an unregistered firm cannot be

YF
used as legal evidence in case of disputes among partners or with third
parties.
RIF

It's important to note that while registration is not mandatory, it offers

several benefits in terms of legal protection and enforceability of rights.
Partnerships that are not registered have limited legal standing and may
face difficulties in enforcing their rights. Therefore, registration is often
CLA

recommended to ensure smooth operations and legal clarity within the

partnership.

05.What are the rights of the surety against the principal

debtor, creditor and co sureties?
Under the provisions of the Indian Contract Act, 1872, a surety has
certain rights against the principal debtor, creditor, and co-sureties.

Rights Against the Principal Debtor:

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Right of Subrogation: If the surety has to pay the creditor on behalf of
the principal debtor, the surety is entitled to all the rights and remedies
that the creditor had against the principal debtor. The surety can step
into the shoes of the creditor and recover the amount paid from the
principal debtor.

Right of Indemnity: The surety has the right to claim reimbursement

from the principal debtor for any amount paid to the creditor on their
behalf. The principal debtor is obligated to compensate the surety for
any loss or liability incurred.

U
Rights Against the Creditor:

YO
Right of Discharge: If the creditor releases or discharges the principal
debtor without the consent of the surety, the surety is discharged from
any liability to the extent of the value of the security or right lost due to
the discharge.
OR
Right of Set-Off: If the creditor owes any sum to the principal debtor,
the surety has the right to set off that sum against the amount payable
by the surety.
YF
Rights Against Co-Sureties:

Right of Contribution: If there are multiple co-sureties for the same

RIF

debt, each co-surety is liable to contribute equally to the debt. If one

co-surety pays more than their share, they have the right to claim
contribution from the other co-sureties for their proportionate share.
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Right of Subrogation: If one co-surety pays the entire debt, they are
entitled to step into the shoes of the creditor and recover the
proportionate share from the other co-sureties.

Right of Contribution After Payment: If one co-surety pays more than

their share of the debt, they can claim contribution from the other
co-sureties for their proportionate share.

It’s important to note that these rights are subject to the terms of the
contract between the parties and the specific circumstances of the case.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 44
The rights of the surety aim to provide protection and equitable treatment
to the party assuming the financial responsibility for another’s debt

06.Define condition and warranty. Distinguish between

condition and warranties?
In the context of the Indian Contract Act, 1872, conditions and warranties
are important terms that govern the rights and obligations of parties in a
contract for the sale of goods. These terms define the level of
performance and the consequences of any breach.

Definition and distinction between conditions and warranties:

U
Condition: A condition is a crucial term in a contract that is essential to

YO
the main purpose of the contract. It is a fundamental promise that must
be fulfilled for the contract to be executed. If a condition is not met, the
innocent party has the right to treat the contract as void and claim
OR
damages. In other words, conditions are terms that go to the root of the
contract.

Warranty: A warranty is a secondary term in a contract that is not

YF
essential to the main purpose but is subsidiary to it. If a warranty is
breached, the innocent party can claim damages, but they cannot treat
the contract as void. In simple terms, a breach of warranty does not
RIF

entitle the innocent party to cancel the contract.

Distinction Between Condition and Warranty:

CLA

Nature and Importance:

Conditions: They are essential terms that form the basis of the contract
and go to the root of the agreement.

Warranties: They are less crucial terms that are subsidiary to the main
purpose of the contract.

Breach Consequences:

Conditions: A breach of a condition gives the innocent party the right to

repudiate the contract and claim damages.

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Warranties: A breach of warranty entitles the innocent party to claim
damages but does not allow them to cancel the contract.

Remedies Available:

Conditions: The innocent party can either continue with the contract
and claim damages for the breach or reject the contract and claim
damages.

Warranties: The innocent party can only claim damages for the breach
but cannot reject the contract.

U
Effect on the Contract:

YO
Conditions: Breach of a condition renders the contract voidable, and
the innocent party has the choice to continue or terminate the contract.

Warranties: Breach of a warranty does not affect the existence of the

contract, and the innocent party cannot void the contract solely based on
OR
the breach.

Termination:
YF
Conditions: The innocent party can terminate the contract if a condition
is breached.
RIF

Warranties: The innocent party cannot terminate the contract due to a

breach of warranty.

It's important to note that the classification of a term as a condition or

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warranty may depend on the specific circumstances of the case and the
intention of the parties at the time of entering into the contract. The
Indian Contract Act recognizes the significance of these terms in
regulating the rights and liabilities of the parties involved in a contract for
the sale of goods.

07.Discuss the rule "Himself a delegate an agent shall not

delegate his authority"?
The rule "Himself a delegate an agent shall not delegate his authority" is
a fundamental principle of agency law, outlined in the Indian Contract

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 46
Act, 1872. According to this rule, an agent who has been entrusted with
the task of representing the interests of the principal and carrying out
certain duties on their behalf cannot further delegate these duties to
another person without the explicit consent or authority from the
principal. This rule ensures that the principal maintains control over who
is representing their interests and performing tasks on their behalf.

Key points related to this rule:

Principle-Agent Relationship: In an agency relationship, the principal

(the one who appoints the agent) entrusts certain tasks and

U
responsibilities to the agent to act on their behalf. The agent acts as an
intermediary and is expected to fulfill their duties with care and loyalty.

YO
Limitations on Delegation: The rule restricts agents from further
delegating their authority to others. This is because the principal has
placed their trust in the agent to carry out specific tasks and make
OR
decisions that align with the principal's interests. Allowing unlimited
delegation could lead to loss of control and accountability.

Exception: While the general principle is that an agent should not

YF
delegate their authority, there are situations where such delegation might
be permissible:
RIF

If the principal gives explicit permission for delegation.

If the nature of the agency requires the agent to delegate tasks to others,
as long as this is customary and does not lead to a conflict of interest.
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If the agent's duty is to perform only ministerial or administrative acts

that do not require personal discretion.

Liability and Accountability: If an agent delegates their authority

without proper authorization, they can be held liable for any losses or
damages incurred as a result of such delegation. The agent remains
accountable for the actions of the person to whom they delegated
authority.

Notification to Principal: If an agent wishes to delegate their authority,

they should seek the principal's permission before doing so. Proper

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 47
communication and transparency are essential to maintaining a healthy
principal-agent relationship.

The rule "Himself a delegate an agent shall not delegate his

authority" emphasizes the importance of maintaining the integrity
of the principal-agent relationship. It ensures that agents act with
due diligence and take responsibility for their actions, while also
safeguarding the interests of the principal.

08.What is the legal position of a minor partner in a fim?

U
According to the Indian Contract Act, 1872, a minor partner in a

YO
partnership firm holds a specific legal position that has certain
implications for their rights and liabilities within the firm.

The key points regarding the legal position of a minor partner are
OR
as follows:

No Capacity to Contract: A minor is considered to lack the legal

capacity to enter into contracts. As a result, a minor partner's agreement
YF
to become a partner in a firm is not considered a valid contract. This
means that a minor's admission into a partnership does not create a
legally binding partnership agreement between the minor and the other
RIF

partners.

No Personal Liability: A minor partner is not personally liable for the

obligations and debts of the partnership. This is because a minor's
CLA

contract is voidable at the option of the minor. Therefore, if the

partnership firm incurs debts or liabilities, the minor partner cannot be
held personally liable for the repayment of those debts.

No Right to Share Profits: While a minor may enjoy a share in the

profits of the partnership, they do not have the legal right to demand their
share from the firm. However, if the minor partner chooses to continue in
the partnership after attaining the age of majority, they may be entitled to
the profits accrued during their minority.

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Right to Access Accounts: A minor partner has the right to inspect and
access the books of accounts and other business records of the firm.
This is to ensure transparency and prevent any potential misuse of
funds.

No Right to Management: A minor partner cannot take part in the

management and administration of the partnership business. They
cannot represent the firm or act on behalf of the partnership.

Retiring from Partnership: A minor partner has the option to

discontinue their association with the partnership firm upon attaining the

U
age of majority. They can choose to either continue as a partner or retire
from the firm.

YO
Liabilities upon Attaining Majority: If a minor partner continues to be
associated with the partnership after reaching the age of majority without
expressing an intention to discontinue, they may become personally
OR
liable for the obligations and debts of the firm incurred during their
minority.

The legal position of a minor partner in a partnership firm is

YF
characterized by the fact that the minor is not bound by the contractual
obligations of the partnership, is not personally liable for debts, and
cannot actively participate in the management of the firm. The minor's
RIF

status changes upon attaining the age of majority, and their decision to
continue or discontinue as a partner will determine their future liabilities
and entitlements within the partnership.
CLA

09.When is a seller deemed to be an unpaid seller of goods

and what are his rights?
In accordance with the Indian Contract Act, 1872, a seller is considered
an unpaid seller under certain circumstances, and such a designation
comes with specific rights. An unpaid seller is a seller who has not
received the full payment for the goods sold or who has received a
payment that was subsequently dishonored.

The following situations determine when a seller is deemed an

unpaid seller:

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Goods Sold on Credit: If the goods are sold on credit, and the due date
for payment has passed, the seller is considered an unpaid seller.

Goods Delivered on Conditions or Installments: If the goods are

delivered to the buyer on the condition that payment will be made later or
in installments, and the buyer defaults on such payment, the seller
becomes an unpaid seller.

Bill of Exchange or Promissory Note: If the buyer has given a bill of

exchange or promissory note as a mode of payment, and such
instrument is dishonored by non-acceptance or non-payment, the seller

U
is treated as an unpaid seller.

YO
Rights of an Unpaid Seller: When a seller becomes an unpaid seller,
they are endowed with certain rights to protect their interests and
recover the due payment. The rights of an unpaid seller include:

Right of Lien: The unpaid seller has the right to retain possession of the
OR
goods sold until full payment is received. This right is applicable even if
the seller has extended credit to the buyer.
YF
Right of Stoppage in Transit: If the seller learns that the buyer has
become insolvent after the goods are in transit, the seller can stop the
goods in transit and regain possession until the full payment is made.
RIF

Right of Resale: If the goods are perishable in nature, or if the seller

has given notice to the buyer of their intention to resell the goods due to
non-payment, the seller can sell the goods and claim damages from the
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buyer for any loss incurred.

Right to Sue for Price: The unpaid seller can sue the buyer for the
payment of the price of the goods sold, plus any additional charges like
interest and expenses.

Right to Sue for Damages: If the buyer wrongfully refuses to accept the
goods or repudiates the contract, the unpaid seller can sue for damages
for non-acceptance or non-performance.

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Right to Rescind the Contract: In cases of buyer's default, the unpaid
seller has the right to treat the contract as rescinded and reclaim
possession of the goods.

It's important to note that these rights are contingent upon the goods
being in the possession of the seller or in transit, and the seller being an
unpaid seller as per the conditions defined by the Indian Contract Act,
1872.

10.Discuss the different modes in which the authority of an

agent may be terminated?

U
Under the Indian Contract Act, 1872, the authority of an agent can be

YO
terminated in various ways. The termination of an agent's authority
brings an end to the agent's power to act on behalf of the principal.

The different modes of terminating an agent's authority are as

follows:
OR
By Acts of the Parties:
YF
Revocation: The principal can revoke the agent's authority at any time
by giving notice to the agent. However, if the agent has an interest in the
subject matter of the agency, revocation may lead to compensation for
RIF

the loss suffered.

Renunciation: An agent can renounce their authority by giving notice to

the principal. The principal may then decide to terminate the agency.
CLA

By Operation of Law:

Death or Insanity: The authority of the agent terminates upon the death
or insanity of the principal or the agent.

Insolvency: If the principal becomes insolvent, the authority of the agent

terminates.

Change of Circumstances: If the circumstances under which the

agency was created change significantly, making it impossible to
continue the agency, the authority of the agent may terminate.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 51
By Performance:

Fulfillment of Purpose: When the purpose of the agency is

accomplished or the task for which the agent was appointed is
completed, the agency terminates.

By Expiry of Time:

Fixed Period: If the agency is created for a specific period of time, the
authority of the agent automatically terminates at the end of that period.

Completion of Task: If the agency is created for a particular purpose

U
and the purpose is achieved, the agency terminates.

YO
By Mutual Agreement: The principal and the agent can mutually agree
to terminate the agency.

By Death or Insanity of the Principal or Agent: The death or insanity

of the principal or the agent automatically terminates the agency.
OR
By Bankruptcy: If the principal becomes bankrupt, the agency is
terminated.
YF
It's important to note that the termination of an agent's authority does not
relieve the agent of their responsibility to the principal for any actions
taken during the course of the agency. The termination of authority
RIF

should be communicated effectively to all concerned parties to avoid any

confusion or legal issues.

In addition to the above modes of termination, the agency may also

CLA

come to an end in situations where the agent exceeds their authority,

breaches the terms of the agency contract, or if the agency is of a
specific nature that it automatically terminates after its purpose is
fulfilled.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 52
 PART-C

U
01. ‘A' lends a horse to 'B' for his own riding only. ‘B’

YO
allows ‘C’, a member of his family, to ride the horse.
'C' rides with care but the horse accidentally falls and
is injured. Decide?
OR
In the scenario provided, the situation involves the legal concept of
bailment under the Indian Contract Act, 1872. Bailment occurs when
one person (the bailor) delivers possession of goods to another person
YF
(the bailee) under an agreement for a specific purpose.

In this case, 'A' is the bailor, 'B' is the bailee, and the horse is the
RIF

subject of bailment.

In bailment, the bailee is expected to take reasonable care of the goods.

In this context, 'B' was lent the horse by 'A' for his own riding only.
CLA

However, 'B' allowed 'C' (a family member) to ride the horse, which
expands the situation. Although 'C' rode with care, the horse accidentally
fell and got injured.

In accordance with the principles of bailment and the law of

contract, here are the key points to consider:

Duty of Care: The bailee ('B') owes a duty of reasonable care towards
the bailed goods (the horse) as well as any third party using the goods
with the bailor's consent. In this case, 'B' allowed 'C' to use the horse,
which implies that 'B' extended his responsibility to include 'C's usage.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 53
Standard of Care: Even though 'C' rode the horse with care, the
standard of care expected from the bailee ('B') is that of a reasonable
person. If an accident occurred despite taking reasonable care, it might
not necessarily make 'B' liable for the injury.

Consent and Responsibility: Since 'B' allowed 'C' to ride the horse, he
assumed the responsibility for 'C's usage to some extent. However, 'B'
did not breach any contract with 'A' by allowing 'C' to ride the horse.

Injury: If the horse's fall and injury occurred despite 'C' riding with care
and 'B' fulfilling his duty of reasonable care, it might be considered an

U
unfortunate accident that does not necessarily lead to 'B' being held
liable.

YO
In summary, 'B' allowed 'C' to ride the horse, extending his responsibility
beyond his own usage. However, if 'B' and 'C' exercised reasonable
care, and the accident occurred despite their best efforts, 'B' may not be
OR
held liable for the horse's injury. Legal outcomes can be influenced by
various factors, so seeking professional legal advice for specific
situations is recommended.
YF
2. ‘A' holds a lease from 'B' terminable on three months'
notice. ‘C’ without ‘B's authority, gives notice of
termination to 'A'. ‘B’ ratifies the notice and files a suit for
RIF

rejectment. 'B' is entitled to get decree or not?

In the situation described, where 'A' holds a lease from 'B' terminable on
CLA

three months' notice, and 'C' without 'B's authority gives notice of
termination to 'A', the key factor here is whether 'B' subsequently ratified
the notice given by 'C'. If 'B' ratified the notice, 'B' may be entitled to a
decree for ejectment based on the provisions of the Indian Contract Act,
1872.

Ratification refers to the approval or confirmation of an act that was

originally unauthorized. If 'B' subsequently ratified the notice of
termination given by 'C', it would imply that 'B' accepted and affirmed the
act of termination performed by 'C', even though it was initially
unauthorized.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 54
If 'B' ratified the notice of termination, it means that 'B' has accepted the
termination of the lease and has decided to proceed with eviction of 'A'.
Consequently, 'B' would be entitled to seek a decree for ejectment in
court.

However, if 'B' did not ratify the notice of termination, 'C's act of giving
notice without authorization would not be legally valid, and 'B' would not
be entitled to a decree for ejectment based on that notice.

The outcome of the case depends on whether 'B' ratified the notice of
termination given by 'C', and this would need to be established through

U
appropriate evidence and legal proceedings. It's important for 'B' to
consult with legal professionals to determine the validity of the notice

YO
and the available legal options in the situation.

3. 'P’ gives authority to ‘A' to sell 'P's land to pay himself,

out of the proceeds, the debt due to him from ‘P'.
OR
Subsequently ‘P’ revokes the authority given to 'A'. Advise
'P' ?
YF
The situation described involves the principles of agency and contract
law as per the Indian Contract Act, 1872. Let's break down the scenario
and provide advice to 'P' (principal) based on these legal principles:
RIF

Agency Relationship: An agency relationship is established when one

party (the principal) grants authority to another party (the agent) to act on
their behalf. The agent's actions within the scope of the granted authority
CLA

bind the principal.

Authority and Revocation: Generally, the principal has the right to

revoke an agent's authority at any time before the agent has acted on
behalf of the principal. However, if the agency is coupled with an interest,
the principal cannot unilaterally revoke the authority.

Coupled with an Interest: An agency is said to be coupled with an

interest when the agent has a personal interest in the subject matter of
the agency. In such cases, the agent's authority cannot be revoked by
the principal without the agent's consent.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 55
Scope of Authority: The agent's authority is limited to the scope
defined by the principal. Any actions performed by the agent outside this
scope may not be binding on the principal.

In the given scenario:

'P' granted authority to 'A' to sell 'P's land and use the proceeds to pay a
debt owed by 'P' to 'A'.

The purpose of the agency is to fulfill the debt obligation of 'P' to 'A'
using the sale proceeds of the land.

U
The agency is coupled with an interest because 'A' has a personal
interest (debt repayment) in the subject matter (sale of land).

YO
Based on these legal principles:

If 'P' revokes the authority granted to 'A' to sell the land, it may not be
valid since the agency is coupled with an interest.
OR
'A' may argue that the agency is coupled with an interest and cannot be
revoked unilaterally by 'P'.
YF
Advice to 'P':

'P' should carefully consider the circumstances and nature of the agency
RIF

before attempting to revoke the authority.

If the agency is indeed coupled with an interest, 'P' may need to

negotiate and come to an agreement with 'A' before revoking the
CLA

authority.

Seeking legal advice and proper documentation may be crucial in such

situations to ensure compliance with the principles of agency law.

It's important to note that legal advice from a qualified legal professional
should be sought to address the specific details and implications of the
situation

4 . 'A' stands as a surety for the good conduct of 'B. Who

is employed in a Bank. 'B misappropriates some moneys.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 56
The bank excuses him without informing 'A' of 'B' is
misconduct B again misappropriates Rs.50,000/-, The bank
files a suit against 'A' on the strength of guarantee. Decide
giving reasons?
The situation described involves the principles of suretyship and contract
law as per the Indian Contract Act, 1872. Let's break down the scenario
and provide a decision based on these legal principles:

Suretyship: In a suretyship agreement, one person (the surety)

promises to fulfill the obligations of another person (the principal debtor)

U
in case the principal debtor defaults.

YO
Liability of Surety: The liability of a surety arises when the principal
debtor defaults on their obligation. The surety becomes liable to fulfill the
obligations as promised in the agreement.
OR
In the given scenario:

'A' stood as a surety for the good conduct of 'B', who was employed in a
bank.
YF
'B' misappropriated some money, and the bank excused him without
informing 'A' of his misconduct.
RIF

Subsequently, 'B' misappropriated Rs. 50,000.

The bank filed a suit against 'A' on the basis of the guarantee provided
CLA

by 'A' as a surety.

Based on these legal principles:

A surety's liability arises when the principal debtor (in this case, 'B')
defaults on their obligation.

If 'B' misappropriated money and the bank excused him without

informing 'A', it might have an impact on 'A's liability.

The bank's decision to excuse 'B' and not inform 'A' could potentially
weaken the bank's claim against 'A' as a surety.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 57
Decision:

In this scenario, whether the bank's suit against 'A' is successful would
depend on various factors, including the terms of the guarantee
agreement, the bank's actions in excusing 'B,' and the overall conduct of
the parties involved.

If the bank's actions suggest that they waived 'B's default without
informing 'A,' it could impact the enforceability of the surety agreement.
However, if the guarantee explicitly states 'A's liability in case of default
by 'B,' and if the bank's excuse was not meant to absolve 'A' of liability,

U
the bank may still have a valid claim against 'A.'

YO
Advice:

'A' should consult with a legal professional to assess the terms of the
surety agreement, the bank's actions, and the potential impact on 'A's
liability.
OR
Legal advice can help 'A' understand the legal implications of the
situation and the strength of the bank's claim against them as a surety.
YF
It's important to note that legal decisions are context-specific, and
professional legal advice should be sought to address the specific details
and implications of the situation
RIF

5. 'D' a carrier discovers that a consignment of tomatoes

owned by "E" has deteriorated badly before the destination
CLA

is reached. He, therefore, sells the consignment for about a

third of the market price. 'E' sues 'D' for damages. Decide?
In this scenario, the legal principles of the Indian Contract Act, 1872,
pertaining to bailment and the duties of a bailee come into play.

Let's analyze the situation and provide a decision based on these

principles:

Bailment: Bailment is a legal relationship where the possession of

goods is transferred from one person (the bailor) to another (the bailee),

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 58
with an understanding that the goods will be returned or dealt with as
agreed upon.

Duties of Bailee: A bailee is expected to take reasonable care of the

goods bailed to them and to act in accordance with the bailor's
instructions.

In the given scenario:

'E' owns a consignment of tomatoes and entrusts them to 'D' as a carrier.

'D' discovers that the tomatoes have deteriorated badly before reaching

U
the destination.

YO
Instead of delivering the consignment, 'D' sells the tomatoes for a
significantly lower price than the market value.

Based on these legal principles:

OR
'D' acted as a bailee since he was entrusted with the consignment for
transportation.

As a bailee, 'D' had a duty to take reasonable care of the tomatoes

YF
during transit.

Decision:
RIF

In this case, 'D' appears to have breached his duty as a bailee by selling
the consignment of tomatoes for a much lower price due to their
deterioration. Such an action could be considered a breach of his
CLA

obligation to exercise reasonable care and diligence.

As a result, 'E,' the owner of the consignment, has a valid ground to sue
'D' for damages. The damages could include the difference between the
actual sale price and the market value of the consignment at the time of
delivery, as well as any other losses 'E' incurred due to 'D's actions.

Advice:

'E' should consult with a legal professional to assess the extent of the
damages and gather evidence to support the claim against 'D.'

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 59
Legal advice can help 'E' understand the legal implications of 'D's breach
of duty and the potential compensation that may be claimed.

'D' should also consider seeking legal advice to understand his legal
obligations as a bailee and the potential consequences of his actions.

It's important to note that legal decisions are based on the specific facts
and circumstances of the case, and professional legal advice should be
sought to address the individual situation accurately

6. Mohan Lal delivers diamonds to Neel Kamal on sale or

return basis. Neel Kamal delivers the diamonds to Om

U
Prakash on sale or return. An unknown person takes away

YO
the diamonds from Om Prakash. Can Mohan Lal file a
case against Neel Kamal for the price of the diamonds?
In this scenario, the legal principles of the Indian Contract Act, 1872,
OR
regarding the concepts of "sale or return" and the rights and liabilities of
parties in such arrangements are applicable.
YF
Let's analyze the situation and determine whether Mohan Lal can
file a case against Neel Kamal for the price of the diamonds:

Sale or Return: "Sale or return" is a contractual arrangement where the

RIF

goods are delivered by the seller to the buyer with the understanding
that the buyer has the option to return the goods if they are not sold
within a specified time or under specific conditions. Until the buyer
CLA

exercises this option, the transaction is treated as a sale.

Rights and Liabilities: In a "sale or return" arrangement, the buyer

(Neel Kamal) has the option to return the goods if they are not sold.
However, until the buyer exercises this option, they are treated as the
owner of the goods and are liable for any loss or damage to the goods.

In the given scenario:

Mohan Lal delivers diamonds to Neel Kamal on a sale or return basis.

Neel Kamal, in turn, delivers the diamonds to Om Prakash on a similar

sale or return basis.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 60
However, an unknown person takes away the diamonds from Om
Prakash, which results in the loss of the goods.

Explanation:

In a "sale or return" arrangement, Neel Kamal has the option to return

the diamonds if they are not sold. Until Neel Kamal exercises this option
and returns the diamonds to Mohan Lal, Neel Kamal is treated as the
owner of the goods. Therefore, Neel Kamal would be liable for the loss
of the diamonds due to the unknown person taking them away.

However, Mohan Lal's ability to file a case against Neel Kamal for the

U
price of the diamonds depends on whether Neel Kamal had exercised

YO
the option to return the diamonds within the agreed-upon time or under
the specified conditions. If Neel Kamal has not exercised this option and
the time or conditions for returning the goods have not been fulfilled,
Neel Kamal is considered to have purchased the diamonds, and Mohan
OR
Lal may be entitled to file a case against Neel Kamal for the price of the
diamonds.

Advice:
YF
Mohan Lal should review the terms of the sale or return agreement and
any communication between him and Neel Kamal regarding the
RIF

diamonds.

If Neel Kamal has not exercised the option to return the diamonds and
the agreed-upon time or conditions for returning the goods have not
CLA

been met, Mohan Lal may consult with a legal professional to explore his
options for recovering the price of the diamonds.

Legal advice can help Mohan Lal understand his rights and obligations
under the contract and determine whether a case can be filed against
Neel Kamal based on the specific facts of the situation.

It's important to note that legal decisions are based on the specific terms
of the contract and the circumstances of the case, and professional legal
advice should be sought to address the individual situation accurately.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 61
7. ‘A’ agrees to indemnify 'B', a newspaper proprietor
against claims arising out of the libel printed in the
newspaper concerning a person of repute. Is this a valid
agreement?
In this scenario, we need to determine whether the agreement between
A and B to indemnify B against claims arising from libel printed in the
newspaper is valid according to the provisions of the Indian Contract Act,
1872.

Explanation:

U
The agreement between A and B involves indemnification, where A

YO
agrees to compensate B for any claims that may arise due to libel
printed in the newspaper. Indemnity is a contract by which one party
promises to compensate another party for any loss or damage that the
OR
second party may suffer. However, the validity of such an agreement
depends on certain legal principles:

Lawful Object and Consideration: For an agreement to be valid, it

YF
must have a lawful object and consideration. The object of the
agreement should not be illegal or against public policy.

Against Public Policy: If the object of an agreement is against public

RIF

policy, it will be considered void. An agreement that encourages or

promotes defamation or libel may be considered against public policy.

Libel: Libel refers to the publication of false information that harms a

CLA

person's reputation. It is a civil wrong (tort) and is generally considered

against public policy to create agreements that encourage or facilitate
libel.

Conclusion:

In the given scenario, the agreement between A and B to indemnify B

against claims arising from libel printed in the newspaper may likely be
considered against public policy. The purpose of the agreement appears
to be the protection of B in case of libelous content, which may
encourage or support the publishing of potentially defamatory material.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 62
As defamation is a civil wrong and against public policy, any agreement
that promotes it could be void.

Advice:

A and B should consider seeking legal advice to understand the

implications of the agreement and its validity under the law.

It's important to evaluate whether the object of the agreement is lawful

and whether it adheres to principles of public policy.

Given the potential legal complexities, consulting with a legal

U
professional will help both parties make informed decisions and
determine the best course of action.

YO
Remember that legal decisions are context-specific and depend on the
interpretation of specific contract terms and the prevailing laws.
Professional legal advice should be sought to address individual
OR
circumstances accurately.

8. 'G' Contracts with ‘H’ to buy 50 easy chairs of a certain

quality. ‘H’ delivers 25 chairs of the type agreed upon and
YF
25 chairs of some other type. Does 'G reject the chairs?
In this situation, we need to analyze whether 'G' has the right to reject
RIF

the chairs delivered by 'H' based on the provisions of the Indian Contract
Act, 1872.

Explanation:
CLA

The situation involves a contract between 'G' and 'H' for the purchase of
50 easy chairs of a certain quality. However, 'H' delivers 25 chairs of the
agreed-upon type and 25 chairs of a different type. This raises the
question of whether 'G' has the right to reject the chairs due to the partial
fulfillment of the contract.

As per the provisions of the Indian Contract Act, 1872:

Partial Performance: If a contract is partially performed or not

performed according to its terms, the innocent party has the right to
either accept the performance to the extent it was done correctly or
LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 63
reject the entire performance if it does not meet the terms of the
contract.

Right to Reject: If 'G' contracted with 'H' for a specific quality and type
of chairs, 'G' has the right to reject the chairs that do not conform to the
agreed-upon specifications. This means that 'G' can reject the 25 chairs
of the different type delivered by 'H'.

Acceptance of Partial Performance: If 'G' chooses to accept the 25

chairs of the agreed-upon type, 'G' cannot reject them. However, 'G' still
retains the right to reject the 25 chairs that do not conform to the

U
contract.

YO
Conclusion:

'G' has the right to reject the 25 chairs of a different type delivered by 'H'
since they do not conform to the agreed-upon terms of the contract. 'G'
can either reject the entire performance due to the non-conformity or
OR
accept the performance to the extent it meets the agreed specifications.
The decision ultimately rests with 'G' based on their preferences and the
terms of the contract.
YF
It's important for parties in such situations to communicate clearly,
maintain records of communications, and seek legal advice if there are
RIF

disputes or uncertainties regarding the contract and its performance.

9. Raju, a partner of a firm, borrows money on his own

credit by giving his own promissory note for the same,
CLA

but he subsequently uses the proceeds of the note in the

partnership concern of his own free will without any
reference to the lender to do so. Is the firm liable for the
loan?
According to the provisions of the Indian Contract Act, 1872, the liability
of the firm for a loan obtained by one of its partners using their own
credit depends on the specific circumstances and actions taken by the
partner. In the scenario described:

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 64
Use of Partner's Own Credit: Raju, a partner of the firm, borrowed
money using his own credit by giving his own promissory note.

Subsequent Use in Partnership Concern: Raju subsequently used

the proceeds of the promissory note in the partnership concern without
any reference to the lender.

The legal principle that applies here is the doctrine of "holding out"
or "holding forth." According to this doctrine:

If a partner borrows money on behalf of the firm or for the purposes of

the firm's business and the lender believes, based on the partner's

U
actions or the firm's representation, that the partner has the authority to

YO
borrow on behalf of the firm, then the firm will be liable for the loan.

However, if the partner borrows money for his own personal use and not
for the firm's business, and the lender is aware of this, then the firm will
not be liable for the loan.
OR
In the scenario given:

Raju borrowed money on his own credit and used the proceeds for the
YF
partnership concern without informing the lender.

If the lender had no knowledge of Raju's actions or believed that Raju

RIF

was borrowing on behalf of the firm, the lender could argue that the firm
is liable for the loan under the doctrine of holding out.

However, if the lender knew that Raju was borrowing for his own
CLA

purposes and not on behalf of the firm, it would be difficult to argue that
the firm is liable.

In conclusion, whether the firm is liable for the loan depends on whether
the lender had a reasonable belief that Raju was borrowing on behalf of
the firm. If the lender believed so, the firm may be held liable. If the
lender was aware that Raju was borrowing for his own use, the firm is
less likely to be held liable.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 65
10. ‘X’ a active partner of a firm with ‘Y’ and ‘Z’. ‘X’ retires
without giving a public notice. Whether ‘X’ is liable to the
creditors to a loan sanctioned after his retirement. Decide?
According to the provisions of the Indian Contract Act, 1872, when a
partner retires from a firm, the retiring partner can still be held liable for
certain obligations incurred by the firm after their retirement, unless
proper public notice of the retirement has been given.

In the scenario described:

U
X's Retirement: X was an active partner of a firm along with Y and Z.

Absence of Public Notice: X retired from the firm without giving a

YO
public notice of his retirement.

Loan Sanctioned After Retirement: A loan was sanctioned to the firm

after X's retirement.
OR
Under the principle of holding out or holding forth, if a partner retires
from a firm and fails to give public notice of his retirement, he may
YF
continue to be held liable for obligations incurred by the firm after his
retirement. This is because third parties who deal with the firm may
continue to believe that the retired partner is still a part of the firm.
RIF

In this case, since X did not give a public notice of his retirement, third
parties, including creditors who sanctioned a loan to the firm after X's
retirement, may reasonably assume that X is still a partner and may hold
CLA

him liable.

Therefore, X could potentially be liable to the creditors for the loan

sanctioned after his retirement, especially if the creditors were not
informed of his retirement. It's important for retiring partners to give
proper public notice of their retirement to avoid such situations and
protect themselves from liabilities arising from the firm's post-retirement
activities.

11. ‘A’ entrusted some books to ‘B’ for binding ‘B’

promised to complete the work and return the same within

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 66
ten days. ‘B’ failed to retum the books within the agreed
time. Subsequently the books were burnt in an accidental
fire. Can ‘A’ recover damagas for the loss from ‘B’?
Decide?
According to the provisions of the Indian Contract Act, 1872, when one
party fails to perform their contractual obligations, the other party may
seek damages for any losses suffered as a result of that breach of
contract.

In this scenario:

U
Entrusting of Books: A entrusted some books to B for binding.

YO
Promise to Complete Work: B promised to complete the work and
return the books within ten days.
OR
Breach of Contract: B failed to return the books within the agreed time,
which constitutes a breach of contract.

Subsequent Loss: The books were burnt in an accidental fire.

YF
In this case, A can potentially recover damages from B for the loss of the
books due to B's failure to return them within the agreed time. B's breach
of contract resulted in the loss of the books in the subsequent fire, and A
RIF

suffered a loss as a consequence. A has a right to seek compensation

for this loss, which is a foreseeable consequence of B's breach of
contract.
CLA

It's important to note that the damages recoverable would be limited to

the loss directly caused by B's breach. In this case, the loss of the books
due to the fire can be directly attributed to B's failure to fulfill his promise
to complete the work and return the books within the specified time.

Therefore, A may be entitled to recover damages for the loss of the

books from B, subject to proving the extent of the loss and its direct
connection to B's breach of contract

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 67
12. An unregistered partnership firm borrows Rs.
1,00,000/- from x the firm failed to repay it within time. Now
that can Mr ‘X’ do to recover the amount? Advise ?
In a scenario where an unregistered partnership firm has borrowed Rs.
1,00,000/- from Mr. X and has failed to repay it within the agreed time,
Mr. X's options to recover the amount may be as follows, taking into
consideration the provisions of the Indian Contract Act, 1872:

Negotiation: Mr. X can initially attempt to negotiate with the partnership

firm and its partners to amicably resolve the issue. They may agree on a

U
new repayment schedule or an arrangement that suits both parties.

YO
Demand Notice: Mr. X can send a legal notice to the partnership firm
and its partners demanding payment of the outstanding amount. The
demand notice serves as a formal communication indicating his intention
to take legal action if the amount is not repaid.
OR
Filing a Lawsuit: Mr. X can file a lawsuit against the partnership firm
and its partners to recover the outstanding amount. However, due to the
YF
unregistered status of the partnership firm, there might be limitations on
the firm's ability to sue or be sued. Mr. X might need to sue the individual
partners for recovery.
RIF

Personal Liability of Partners: Under the Indian Contract Act, partners

of an unregistered firm are personally liable for the debts and obligations
of the firm. Mr. X can hold the individual partners liable for repayment of
CLA

the borrowed amount.

Attachment of Assets: If the firm or its partners do not comply with the
demand notice or court orders, Mr. X might seek the court's permission
to attach the assets of the partnership firm to recover the outstanding
amount.

Bankruptcy Proceedings: If the partnership firm and its partners are

unable to repay the debt and meet their obligations, Mr. X might explore
initiating bankruptcy proceedings against the individual partners, if
applicable.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 68
Mediation or Arbitration: In some cases, mediation or arbitration might
be a viable option to settle the dispute outside of court. Both parties can
agree to a neutral third party who can help in reaching a settlement.

It's important for Mr. X to consult with legal professionals who specialize
in contract and partnership law to understand the specific legal remedies
available to him in his jurisdiction and to determine the best course of
action for recovering the outstanding amount from the unregistered
partnership firm

U
13. ‘ A’ directs ‘B’ his agent to buy a certain house for him.

YO
‘B’ tells ‘A’ that, it can't be bought at it is already sold out,
but buys the house for himself. A came to know about the
travel committed by ‘B’. Can ‘A’ compel ‘B’ to sell the
OR
house to himself? Decide?
In the situation described, where A directed B, his agent, to buy a certain
house for him, but B bought the house for himself and committed a
YF
breach of trust, A may have the option to compel B to sell the house to
him. This situation pertains to the concept of "Specific Performance"
under the provisions of the Indian Contract Act, 1872.
RIF

Specific performance is a legal remedy available to a party in a contract

when monetary compensation (damages) is not considered sufficient to
provide adequate relief. It is essentially a court order that compels the
CLA

breaching party to fulfill their contractual obligations.

In this case, A had given clear instructions to B to purchase the house

for him. B, as an agent, had a fiduciary duty to act in the best interest of
A and follow his instructions. However, B acted in his own interest by
buying the house for himself, which is a breach of his fiduciary duty.

If A chooses to do so, he can approach the court and seek an order of

specific performance, compelling B to sell the house to A. This remedy
ensures that the original contractual intent is fulfilled and that B is held
accountable for his breach of trust and fiduciary duty.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 69
It's important to note that specific performance is a discretionary remedy,
and the court will consider various factors such as the nature of the
property, the feasibility of enforcing the contract, and the overall equities
of the case before granting such an order.

A should consult with legal professionals to understand the specific legal

options available to him and the likelihood of success in compelling B to
sell the house to him based on the circumstances and applicable laws.

14. ‘A’ sells goods to 'B'. ‘B’ pays to 'A' through a cheque.
Before ‘B’ could obtain the delivery of goods, his cheque

U
has been dishonoured by the bank. ‘A’, therefore refuses
to give delivery of the goods until paid. Is ‘A’'s action

YO
justified or not?
A's action of refusing to give delivery of the goods until payment is
OR
justified according to the provisions of the Indian Contract Act, 1872. In
this scenario, the key consideration is the dishonoring of the cheque
given by 'B' as payment.
YF
As per Section 55 of the Indian Contract Act, 1872, when goods are
sold and delivered, but the buyer fails to pay the agreed price, the seller
has a right to retain possession of the goods until payment or tender of
RIF

the price by the buyer. In this case, since 'B's cheque has been
dishonored by the bank, the payment has not been completed as per the
terms of the contract.
CLA

Additionally, under Section 39 of the Negotiable Instruments Act,

1881, when a cheque is dishonored, it is treated as a failure of
consideration for the underlying transaction, in this case, the sale of
goods. This justifies A's action in withholding the delivery of goods until
'B' makes the payment in a valid manner.

Therefore, A's refusal to deliver the goods until the payment is

made is legally justified based on the provisions of both the Indian
Contract Act, 1872, and the Negotiable Instruments Act, 1881.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 70
15. ‘B’ is the principal debtor of 'A'. ‘C’ is the surety of the
debt. ‘A’, the creditor makes a promise to a neighbour of
'B' to give time to 'B'. Discuss the effect if any of this
promise on the contract of guarantee ?
In the scenario described, 'B' is the principal debtor, 'C' is the surety, and
'A' is the creditor. 'A' makes a promise to a neighbor of 'B' to give time to
'B'. The question pertains to the effect of this promise on the contract of
guarantee.

According to Section 133 of the Indian Contract Act, 1872, any

U
contract of guarantee may be discharged or released by any act or

YO
omission of the creditor which would discharge the principal debtor or
would otherwise operate to release him. In this context, the term
"discharge" refers to the release of the surety's liability.
OR
If 'A' makes a promise to 'B's neighbor to give time to 'B', it essentially
means that 'A' is giving an extension or postponement of the time for
payment to 'B'. This can be seen as an act that operates to release 'B',
the principal debtor, from his liability to pay the debt within the original
YF
agreed-upon time. As a result, this action of 'A' could potentially
discharge the surety 'C' from his liability under the contract of guarantee.
RIF

However, it's important to note that if the promise to give time to 'B' is
made without the consent of the surety 'C', then 'C' may be discharged
from his liability. If the surety's position is adversely affected by such an
act of the creditor, the surety is discharged to the extent of the loss
CLA

caused by such act, as per Section 134 of the Indian Contract Act,
1872.

In summary, if 'A' makes a promise to give time to 'B', it could potentially

discharge the surety 'C' from his liability under the contract of guarantee,
provided that 'C' did not consent to such an extension of time. This is in
accordance with the provisions of the Indian Contract Act, 1872.

16. ‘A' being ‘Y's agent for the saie of goods, induces ‘K’ to
buy them by a misrepresentation, which ‘X' was not

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authorised by "Y’’ to make. Can this contract be set side at
the option of ‘K’? State the reasons for your answer ?
Yes, the contract between K and 'A' can be set aside at the option of K
due to the misrepresentation made by 'A', even though 'A' was not
authorized by 'Y' to make such a misrepresentation. This is based on the
provisions of the Indian Contract Act, 1872.

According to Section 18 of the Indian Contract Act, 1872,

misrepresentation is defined as a positive assertion, in a manner not
warranted by the information of the person making it, of that which is not

U
true, though he believes it to be true. In this case, 'A' induced K to buy
the goods by making a misrepresentation, which means providing false

YO
information to K in order to induce the contract.

Section 19 of the Act states that when consent to an agreement is

caused by coercion, fraud, or misrepresentation, the agreement is
OR
voidable at the option of the party whose consent was so caused.
Therefore, K has the option to set aside the contract due to the
misrepresentation made by 'A'.
YF
Furthermore, Section 20 of the Act specifies that if a party to a contract
whose consent was caused by misrepresentation had an option to
discover the truth with ordinary diligence, they cannot avoid the contract.
RIF

However, in this case, since the misrepresentation was made by 'A', who
was acting as an agent for 'Y', and 'Y' did not authorize this
misrepresentation, K can argue that he had no reason to doubt the
CLA

accuracy of the information provided by 'A'.

In conclusion, the contract between K and 'A' can be set aside at the
option of K due to the misrepresentation made by 'A', as per the
provisions of the Indian Contract Act, 1872. The misrepresentation by 'A'
induced K to enter into the contract, and 'A' not being authorized by 'Y' to
make such a misrepresentation further strengthens K's position to set
aside the contract.

17. ‘A' and 'B’ are the partners in a firm. "A' is the
managing partner who managed the firm for 3 years and

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misappropriated the funds. ‘B' wanted to file a suit
regarding settlement of accounts. Advise ‘B’.?
In the given scenario, where 'A' and 'B' are partners in a firm and 'A' has
misappropriated funds while acting as the managing partner, 'B' has the
right to take legal action to address the situation, based on the
provisions of the Indian Contract Act, 1872 and the Partnership Act,
1932.

Firstly, 'B' can initiate a suit for the settlement of accounts with the firm.
As per Section 32 of the Indian Partnership Act, 1932, every partner has

U
the right to have the accounts of the partnership firm settled and the
property of the firm applied in the payment of the debts and liabilities of

YO
the firm. Since 'A' has misappropriated funds, 'B' has the right to ensure
a fair settlement of accounts to determine the extent of misappropriation
and the financial status of the firm.
OR
Secondly, 'B' can seek remedies for 'A's misappropriation of funds.
Misappropriation by a partner is a breach of fiduciary duty and is
considered a violation of the terms of partnership. 'B' can sue 'A' for his
YF
wrongful act of misappropriation, seeking damages for any financial loss
caused to the firm due to 'A's actions.

Thirdly, 'B' can also explore options to remove 'A' as the managing
RIF

partner. The partnership agreement or the Partnership Act might provide

provisions for the removal of a partner who has engaged in misconduct
or mismanagement.
CLA

Overall, 'B' has the right to take legal action against 'A' for the
misappropriation of funds and to ensure a fair settlement of accounts
and proper management of the firm as per the provisions of the Indian
Contract Act, 1872 and the Partnership Act, 1932.

18. ‘A’ sells to ‘B’ a horse and agrees to deliver it the

coming week. ‘B’ agreed to pay the price on delivery. But
the horse died beforeit is delivered. Who has to suffer the
loss?

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According to the provisions of the Indian Contract Act, 1872, the doctrine
of "Doctrine of Caveat Emptor" applies in this scenario. Caveat Emptor
means "let the buyer beware." It implies that the buyer should exercise
caution and ensure due diligence before purchasing a product. In cases
of sale of goods, the risk of loss due to any defects or circumstances
generally falls on the buyer unless there is a specific provision in the
contract stating otherwise.

In the given scenario, since A agreed to sell a horse to B and deliver it

the coming week, and B agreed to pay the price on delivery, the risk of
loss of the horse passes to B upon delivery. However, the horse died

U
before it could be delivered to B. In this case, B would generally bear the
loss of the dead horse since the risk of the horse's condition passed to B

YO
upon delivery.

Unless there is a warranty or representation made by A regarding the

condition of the horse or a provision in the contract specifying the
OR
passing of risk under different circumstances, B would typically have to
bear the loss of the horse due to its death before delivery. This situation
illustrates the application of the principle of Caveat Emptor and the
YF
general rule that the buyer assumes the risk of loss after the contract is
formed but before delivery.
RIF

19.’’A’' lends a book to 'B’ and 'B' promises to return it one

week before examinations. ‘B’ did not return it in spite of
‘A's' repeated demands. ‘A’ sues ‘B’ for breach of contract
CLA

and claims damages. ‘B’ pleads absence of consideration

and therefore not a contract. Decide?
According to the provisions of the Indian Contract Act, 1872, for a
contract to be valid, it must have the essential elements of a valid
contract, which include an offer, acceptance, consideration, and an
intention to create legal relations. In this scenario,

it appears that the elements of a contract are present:

Offer and Acceptance: 'A' offers to lend a book to 'B', and 'B' accepts
the offer by promising to return the book one week before examinations.

LAW OF CONTRACT-II, LLB 3YDC -2ND Sem- by ZAKIR HUSSAIN SHAIK @9032404009 Page 74
Consideration: 'B's promise to return the book one week before
examinations can be considered as consideration. Consideration is a
key element of a contract and involves something of value exchanged
between the parties.

Intention to Create Legal Relations: In this case, it can be assumed

that both 'A' and 'B' intended to create a legal relationship, as 'B'
promised to return the book by a specific date in exchange for 'A' lending
the book.

Therefore, based on the presence of offer, acceptance, consideration,

U
and intention to create legal relations, there is a valid contract between
'A' and 'B'. 'B' cannot plead the absence of consideration as a defense

YO
since there is a clear promise made by 'B' to return the book in exchange
for lending it. 'A' has the right to sue 'B' for breach of contract and claim
damages for not returning the book as promised.
OR
YF
RIF
CLA

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I Am Happy To Assist You,

I am launching a series of videos focused on legal awareness and

tips for AIBE preparation. Additionally, I will be uploading courses
and judiciary preparation content in a dedicated YouTube playlist.
Stay informed by subscribing to my YouTube channel: Clarify For You.
Please remember me in your prayers.

U
Thank you.

YO
OR
YF
RIF
CLA

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