Chapter 1

Introduction to Business Law

Key Terms
Contract: A contract is a legal agreement between two or more
parties.
Agreement: An agreement is a mutual understanding between parties
about their rights and responsibilities.
Promise: A promise is a commitment made by one party to do or not
do something.
Offer: An offer is a proposal made by one party to enter into a
contract on specific terms.
Acceptance: Acceptance is the agreement by the other party to the
terms of an offer.
Enforceable by Law: Enforceable by law means that the terms of the
agreement can be legally executed by a court.
Consideration: Consideration is something of value exchanged
between parties as part of a contract.
Consent: Consent is the voluntary agreement of parties to the terms
of a contract.
1. What is mean by Business?
A business is an organization or entity engaged in commercial,
industrial, or professional activities with the aim of earning profit
2. What is Law?
Law is a body of rules that are used to regulate the conduct of the
members of a society and these rules are framed by the society
according to its needs. When there is a law in a country, it brings
uniformity and balance in human actions, and provides justice to the
aggrieved persons, which altogether brings welfare to the society as
a whole.
3. Define Law
Holland define the law as "Law is a rule of external human action
enforced by the sovereign political authority".
4. Two sources of law
There are two sources of law
 Parliament (legislation)
 Court (case) made law.
5. What is Business Law?
Business law which is otherwise known as Mercantile or Commercial
law is a part of Civil law Business law governs and regulates the
trade, the auxiliaries of trade and industry.
6. Define Business Law
According to Slater “the phrase business law or mercantile law is
generally used to denote that portion of the law which deals with the
rights and obligations arising out of transactions between mercantile
persons".
7. Nature of Business Law
Business law is a set of rules and regulations that govern the
formation, operation, and dissolution of businesses. It protects the
rights and obligations of businesses, employees, and consumers,
ensuring fair practices and resolving disputes. Business law covers
areas such as contracts, employment, intellectual property, and
consumer protection. It evolves with changes in the business
environment .By providing a legal framework, business law helps
maintain order and promotes ethical conduct in the marketplace.
There are laws governing treatment of labour and generally relations
with employees, safety and protection issues, (health and safety),
and discrimination laws, (age, gender, disabilities, race) minimum
wage laws, workers compensation laws and annual vacation and
working hours ,patent ,logo,copyright,trade secrets etc.
 Chapter 2
The Indian Contract Act

1. About Indian Contract Act

Indian Contract Act 1872, is the main source of law regulating
contracts in Indian Law, as subsequently amended. All of us enter
into a number of contracts knowingly or unknowingly. Each
contract creates some right and duties upon the contracting
parties, Indian contract deals with the enforcement of these rights
and duties up on the parties. It extends to the whole of India
except the state of Jammu and Kashmir, and it shall come into
force on the first day of September, 1872
2. Meaning of contract
A contract is a formal agreement between two or more parties
that is enforceable by law. It involves a promise or set of promises
where each party agrees to do something (or refrain from doing
something) in exchange for something of value from the other
party.
For example, two friends, Ravi and Sameer, agree to go out for
biryani together. Ravi’s promise to pay for the meal and Sameer’s
promise to cover transportation are each supported by
consideration (something of value), and they both intend to
create a mutual obligation. If either party fails to fulfil their
promise, the other party could potentially seek legal recourse.
3. Definition of contract
According to section 2 (h) of the Indian Contract Act, 1872, a
contract is defined as "an agreement enforceable by law is a
contract."
4. Meaning of Agreement
An agreement is a mutual understanding between parties
involving an offer and acceptance.
 For example, two friends, Ravi and Sameer, agree to go out for
biryani together. Ravi says, "Let's go out for biryani this weekend,"
and Sameer replies, "Sure.
5. Definition Of Agreement
According to Section 2(e) of the Indian Contract Act, 1872, an
agreement is defined as "every promise and every set of promises,
forming the consideration for each other."

Agreement = Offer + Acceptance

Contract = Agreement + Enforceability by law

6. Three essential aspects of agreement

1. At least two parties: Two parties are required to form an

agreement. One party makes the offer, and the other party
accepts it.
2. Consensus ad ideum or identity of minds: Consensus ad ideum
means the two parties of the contract must have agreed about
the subject matter of the contract at the same time and in the
same sense.
For example, Anu has two cars, one maruti, and the other
indica. She has offered to sell one car to Binu. Binu accepts
thinking to purchase the Indica, while Anu, when she offers,
she has in his mind to sell the maruti, there is no consensus and
hence no contract.
3. Promise or reciprocal promises : An agreement has been
defined as every promise or set of promises forming the
considerations for each other.
7. Essential elements of contract

1. Offer and acceptance: In order to create a valid contract,

there must be an agreement between two parties. An
agreement involves, a lawful offer by one party and
lawful acceptance
2. Intention to create legal relationship: When the two
parties enter into an agreement, their intention must be
to create legal relationship between them.
3. Lawful consideration : Another essential element of a
valid contract is the presence of 'consideration' .In simple
words it means ,”something in return”
4. Capacity of parties: The parties to an agreement must be
capable of entering into a valid contract, otherwise it
cannot be enforced by a court of law.
Accordingly, the following persons are incompetent to contract
(1) Minors;
(2) Persons of unsound mind;
(3) Persons disqualified by law to which they are subject.
5. Free consent: Another essential element of a contract is the free
. consent of the parties to the agreeme nt
6. Lawful object: The object of the agreement must be lawful.ie.
it must not be (i) illegal (ii) immoral or (iii) opposed to public
. policy
7. Agreement not expressly declared void: The agreement must
not have been expressly declared to be void. Under Indian
contract Act there are five catagories of agreements which
are expressly declared to be void. They are-
(a) Agreement in restraint to marriage (Section 26)
(b) Agreement in restraint of trade (Section 27)
(c) Agreement in restraint of legal proceedings (Section 28)
 (d) Agreements, the meaning of which is uncertain (Section 29)
(e) Agreements by way of wager (Section 30)

8. Certainty of meaning: The terms of the contracts must be

precise and certain.
9. Possibility of performance: An agreement to do an act
impossible in itself is void". If the act is impossible in itself, it
cannot be enforced at law
Example: A agrees B to discover treasure by magic and B agrees
to pay Rs 5000 to A. This agreement is void because it is an
agreement to do an impossible act.
10. Legal formalities: Another essential elements of a valid
contract is that it must be written, attested or registered if it
is so essential under any law prevailing in the country.

8. "All contracts are agreements but all agreements are not

contract" Justify.
All contracts are agreements because a contract is a specific type
of agreement that is legally enforceable, involving an offer,
acceptance, and consideration. However, not all agreements are
contracts. For an agreement to become a contract, it must fulfill
certain legal criteria, such as the intention to create legal relations
and the capacity of the parties involved. Thus, while every
contract is an agreement, only agreements that meet specific legal
requirements become contracts.
9. Classification pf contracts.
According to According to According to
validity Formation Performance
1. Valid contracts 1. Express 1.Executed
Contracts contracts

2. Void contracts 2. Implied Contracts 2.Executory

contracts
3. Void agreements 3. Quasi contracts 3.Unilateral
contracts
4. Voidable contract 4.Bilateral contract
5. Unenforceable
contracts
6. Illegal contracts

1. According to validity
1. Valid contracts: - An agreement enforceable at law is a valid
contract. An agreement becomes a contract, when all the
essentials of a valid contract as laid down in Section 10 of the
Indian Contract Act are fulfilled.
2. Void contracts: - The literally meaning of the word void is 'not
binding in law’. So the void contract implies a useless contract
which has no legal effect at all and is a nullity.
Example, a contract between a citizen of Pakistan and India
is a valid contract during peace but if war breaks out
between the two countries the agreement will become void
contract.
3. Void agreement: According to Section 2(g) of the Contract
Act, An agreement not enforceable by law is said to be void".
Void agreement is void ab-initio, which means that they are
unenforceable right from the time they are made.
Example: An agreement with a minor or a person of unsound
mind is void ab initio.
4. Voidable contracts: A voidable contract is an agreement
that one party can cancel if there is a legal reason like fraud
or coercion. Such a contract is voidable at the option of
aggrieved party.But the party chooses to affirm it then it will
become valid.
Example: Appu threatens to shoot Binu, if he does not sell
his new Maruti Car to Appu for Rs 1,00,000. Binu, agrees.
The contract has been brought about by coercion and is
voidable at the option of Binu.
5. Unenforceable contracts: It is a contract, which is valid in
itself, but not capable of being enforced in a court of law
because of some technical defect, such as absence of
writing, registration, requisite stamp etc, or time barred
by the law of limitation
Example : A plot selling contract was made between Binu
and Appu, but Appu accidentally wrote Ammu's name
instead of Appu’s name.
6. Illegal or unlawful contracts: Illegal contracts are those
which are prohibited by law or otherwise against the
policy of law.
Example : Agreement to commit murder
2. According to Formation
Express contracts: These are the contracts which are entered in to
between the parties, by words spoken or written
Example: A telephoned B, of his intention to sell his computer to B
for Rs 15,000. If B accepts the offer, the contract will be termed as
express contract.
2. Implied contracts: Contracts which come into being on account of
the act or conduct of the parties and not by their express words,
written spoken are known as implied contracts.
Example: If B takes a seat in a bus, which is plying between Calicut
and Trissur an implied contract emerge that he will pay the
prescribed fare for taking him to his destination.
3. Quasi contracts: Generally a quasi-contract is not a contract at all.
It is created by law. That is, in a quasi-contract, there is no intention
on either side to make a contract. Quasi-contract is also known as
constructive contract.
Example: Arun found a purse on the road; now he is the founder of
lost goods, so he has the obligation to find out the owner and return
the goods.
3. According to Performance
1. Executed contracts: A contract is said to be executed when both
the parties to the contract have fulfilled their respective obligations
and nothing remains to be done by either party.
Example: Appu sells a watch to Ammu for Rs1,500. Ammu pays the
price.
3. Executory contracts: A contract is said to be executory when
either both the parties to a contract have still to perform their
share of obligation in to or there remains something to be done
under the contract on both sides.
Example: Appu received an advance rs 10,000 from Binu to
paint his house next month.

There is another classification of contracts on the basis of

performance.

1. Unilateral or one-sided contract: A contracts is said to be

unilateral, where one party has performed his obligation either
before or at that time when the contract comes into existence
Example: Indhu lost her purse and placed an advertisement in
the newspaper, offering a 5000 rupee reward to anyone who
finds it. Here, Indhu only execute the actions.

2. Bilateral contract: When the obligation of both the parties are

outstanding at the time of the formation of the contract, it is
known as bilateral contract.
Example: Indhu went to a restaurant and ordered Biriyani, and
they accepted the order. After a few minutes, they served
biryani, and Indhu paid the money. Here, both parties executed
their parts.
 Chapter 3
Offer And Acceptance
Offer = Proposal
1. Define Proposal
Section 2(a) of the Indian Contract Act defines a proposal as "when
one person signifies to another his willingness to do or to abstain
from doing any thing with a view to obtaining the assent of that
other to such act or abstinence, he is said to make a proposal"
Example: If Binu offers to sell his maruti car to Ajith for Rs 2,25,000
and Ajith agrees to pay Binu Rs 2,25,000 for the Maruti car.
Here Binu is called the offeror or promisor
Ajith is the offeree or promisee.
2. Essentials and Legal Rules for a Valid Offer
1. Legal relationship is required
2. The terms of the offer must be certain, definite and not vague:
3. The offer must be communicated to the offeree.
4. Offer must be made with a view to obtaining the assent of the
other
5. Offer may be conditional
6. Offer should not contain a term the non-compliance of which
may be assumed to amount to acceptance
7. An invitation to offer is not an offer
3. Types of Offer
On the basis of On the basis of On the basis of
mode of offer offerees nature of offer
Express offer Specific offer Cross offer
Implied offer General offer Standing offer
Counter offer

On the basis of mode of offer

Express offer: An offer made, by words, spoken or written is an
express offer.
Example: Arun advertises in a newspaper, "I will pay Rs. 10,000 to
anyone who traces my missing son"
Implied offer: An offer made otherwise than in words is an implied
offer.
Example: When a transport company runs a bus on a particular
route, there is an implied offer, by the transport company to carry
passengers for a certain fair.
On the basis of offerees
Specific offer: When an offer is made to a definite person or class of
persons,it is called a specific offer. This can be accepted only by the
person or persons to whom it has been made and by no one else.
Example: Appu offers to buy a scooter from Babu for Rs. 50,000. This
offer is a specific offer which has been made to a definite person
Babu. No person other than B can accept this offer.
General offer: When an offer is made to the world at large, it is
called general offer. General offer can be accepted by any person
having notice of the offer.
Example: "Anyone who finds my lost dog and returns it to me will
receive a $100 reward."
On the basis of nature of offer

A. Cross offer: When two parties make identical offers to each

other in ignorance of each other's offer, the offers are cross
offers. Example: Imagine two friends, Alice and Bob, both want
to sell their bicycles to each other. They have not discussed this
with each other and do not know the other's intentions. On the
same day, Alice writes a letter to Bob offering to sell her bicycle
for $100. At the same time, Bob writes a letter to Alice offering
to sell his bicycle for $100. Both letters are sent without
knowledge of the other’s offer. These are cross offers because
Alice and Bob have made identical offers to each other without
knowing the other party's offer.
B. Standing offer (open offer) Offers made for the continuous
supply of a certain article at a certain rate over a definite period
of time, are known as standing offers.

Example: Imagine a bakery, DailyBakery, that needs flour

regularly. They make a standing offer with a flour supplier,
FlourCo. The agreement is that FlourCo will supply flour to
DailyBakery at $20 per bag for the next six months. Every time
DailyBakery needs more flour, they can call FlourCo and place an
order, and FlourCo will deliver the flour at the agreed price of $20
per bag. This agreement continues for the six-month period.

This standing offer allows DailyBakery to get flour at a consistent

price whenever needed throughout the agreement period.

C. Counter offer when an original offer is rejected and a new offer

is made, it is known as counter offer.
4. Acceptance
Acceptance is the assent of the offeree to an offer made to him. It is
a communication of his intention to be bound by the terms of the
offer.
Section 2(b) states that, "when the person to whom the proposal is
made signifies his assent there to the proposal is said to be
accepted".
5. Essentials and Legal Rules for a Valid Acceptance
1. Acceptance may be express or implied
2. . Acceptance must be absolute and unqualified
3. Acceptance must be communicated to the offeror
4. Acceptance must be made within a reasonable time
5. Acceptance must be according to the mode prescribed or usual
and reasonable mode
6. 6. The acceptor must be aware of the proposal at the time of
the offer
7. Acceptance must be given, before the offer lapses or before
the offer is withdrawn
8. Acceptance cannot be implied from silence

6. Revocation
Revocation means "taking back" or "withdrawal". Both offer and
acceptance may be revoked.
1. By Communication of notice of revocation (Section 6(1): An offer
may be revoked by the offeror at any time as it has not been
accepted by the offered A person who makes an offer can
withdraw it at anytime before acceptance. Notice of revocation
will take effect only when it comes to the knowledge of the
offeree. Notice of revocation must come from the proposer or his
duly authorised agent.
2. By lapse of time [Section 6(2): An offer lapses if it is not accepted
with in the prescribed time. If no time has been prescribed, the
proposal lapses after the expiry of a reasonabte time.
3. By the failure of the acceptor to fulfill a condition precedent to
the acceptance [Section 6 (3)]: An offer lapses by the failure of
the acceptor to fulfil a condition precedent to acceptance, where
such a condition has been prescribed.
4. By death or insanity of the proposer [Section 6(4)): An offer
lapses by the death or insanity of the proposer, if the fact of his
death or insanity comes to the notice of the acceptor before
acceptance.
5. By counter offer: An offer lapses if the counter offer is made
because a counter offer amounts to rejection of the original offer.
6. By rejection: An offer lapses, if it is rejected by the offeree. An
offer is said to be rejected if the offeree expressly rejects it or
accept it subject to certain conditions. It may be noted that once
an offer is refused it cannot be revived subsequently.
7. An offer lapses by subsequent illegality or destruction of subject
matter: An offer lapses, if it becomes illegal after it is made and
before it is accepted. An offer also lapses, if the thing which is the
subject matter of he offer is destroyed betore its acceptance.
 Chapter 4
Consideration
1. What is consideration?
Consideration is an essential element of a valid contract. It is the
price paid by the promisee for the obligation of the promisor. It
does not mean payment of money only.
2. Definition of consideration
Section 2(d) of the Indian Contract Act, defines consideration as
when at the desire of the promisor, the promisee or any other
person has done or abstained from doing, or does or abstains
from doing, or promises to do or to abstain from doing something,
such act or abstinence or promise is called a consideration for the
promise"
3. Essentials and legal rules for a valid consideration
A. Consideration must be move at the desire of the promisor
B. Consideration may move from the promisee or any other
person.
Example: Arun promises to paint Indhu’s house for $1,000.
Indhu accepted and then tells that her friend Manu will give
him the $1,000 upon completion of the painting.
 Promisor: Arun (the person who will receive the painting
service)
 Promisee: Indhu
 Third Party: Manu (the person who will actually give the
$1,000 to Arun)
C. Consideration may be past ,present or future
Past consideration: If the promisor had received the
consideration before the date of the promise. It is known as
past consideration.
 Present or executed consideration: If the promisor receives
consideration simultaneously with his promise, it is known as
present consideration.
Future or executory consideration: When the consideration on
both sides is to move at a future date, it is called future
consideration or executory consideration.
Example: X promises to sell and deliver a computer to Y for Rs
33,000 after a week, upon Y's promise to pay the agreed price
at the time of delivery.
D. Consideration need not be adequate
Example: B sells his scooter worth Rs 28,000 for a sum of Rs
15,000 to A. The consideration, though inadequate, will not
affect the validity of the contract.
E. It must be real and not illusory
F. Consideration must be lawful
G. It must be something which the promisor is not already bound
to do
Example: A police constable gives information which helps the
convictions of a criminal. He sued for the reward offered for
giving such information. Held that, the police constable was
entitled for the reward.
4. Stranger to Contract (Privity of Contract)
A person who is not a party to contract cannot claim rights, even
though the contract is for his benefit, and such a person is known
as stranger to contract.
5. Stranger to Consideration (Privity of Consideration)
The term privity of consideration means stranger to the
consideration or consideration given by any other person than the
promisee.
 Note :- Arun promises to paint Indhu’s house for $1,000. Indhu
accepts and informs him that her friend Manu will give him the
$1,000 upon completion of the painting. In this example, Manu is
a third party. Therefore, if any issues arise regarding the painting,
Manu cannot directly file a case or move to court.

6. Exceptions to the rule that a stranger to a contract cannot sue

A. Trust
B. Where provision is made in a marriage settlement
A contract is made between the mothers of the bride and
groom. The groom’s mother promises to give ₹10 lakh in
exchange for the bride’s mother agreeing to give her daughter
in marriage. The bride’s mother happily accepts the terms.
However, at the time of the wedding, the groom’s family only
provides ₹5 lakh.In this situation, although the bride is not a
party to the contract (a stranger to the contract), she can still
take legal action and move to court to enforce the agreement.
C. . Where provision is made in a partition or family arrangement
for maintenance or marriage expenses of female members
D. Contracts entered into through an agent: The principal can
enforce the contracts enterd into by his agent provided the
agent acts within the scope of his authority and in the name of
the principal.
E. An assignee can also sue on the basis of assignment:
Anu took a loan from the bank and failed to pay the interest.
Consequently, the bank sent a representative, called an
assignee, to discuss the matter with Anu. Although the original
contract was made between Anu and the bank, if the assignee
encounters any issues, he can move to the court for resolution.
7. Contract without consideration
The general rule is that "no consideration no contract"
Consideration is an essential element of a valid contract. A
promise without consideration is null and void. It is called a naked
promise
8. Exceptions to consideration
A. A promise made on account of natural love and affection
1. They are must be expressed in writing
2. Registered under the law
3. Made on account of natural love and affection
4. Between parties standing in a near relation to each other.

A father promises his son that he will send ₹2,000 every month
to the son’s hostel for pocket money. The father writes this
promise in an agreement and registers it. In this case, the
father and son share a close, affectionate relationship, and the
son does not provide any consideration in return.

B. Promise to compensate for voluntary services

Examples: B finds A's purse and gives it to him. A promises to

give B Rs.500. This will be a contract valid without any formal
consideration.

C. Agreement to pay a time barred debt

Example: A owes B Rs. 2000 but the debt is barred by The

Limitation Act. A signs a written promise to pay B Rs. 1000 on
account of the debt. This will be a valid contract.

D. Contract of agency:

No consideration is necessary to create an agency. An agency

with or without consideration has the same effect.
E. Completed gift
F. Remission : No consideration is necessary for compromising a
due debt i.e; agreeing to accept less than what is due.
 Chapter 5
Capacity to Contract
1. Capacity to Contract
Section 11 of the Contract Act deals with the competency of the
parties. It states that, "every person is competent to enter into a
contract if he has, attained the age of majority according to the law
to which he is subject, and who is of sound mind and is not
disqualified from contracting by any law to which he is subject."
2. Thus, every person is legally competent to contract if he fulfils
three conditions or possesses three qualifications namely;
 He has attained the age of majority;
 He is of sound mind; and
 He is not disqualified from contracting by any other law to
which he is subject.
3. Following persons to be incompetent to contract.
 Minors
 Persons of unsound mind
 Persons disqualified by any law to which they are subject.
4. Who are minors?
A minor is a person who has not attained the age of majority.
According to the Indian Majority Act 1875, a minor is one who has
not completed his or her 18th year of age.
5. The Rules Governing Judicial Philosophy as to Minors
(i) The Law must protect the minors
(ii) The law should not cause unnecessary hardship to other party
(iii) Enforcement of agreement possible if minor is beneficiary or
promisee
6. Position of Agreements by a Minor
1. An agreement with a minor is void ab initio
2. Minor can be promisee or beneficiary
There is no restriction on a minor from being beneficiary or
promisee. If in a contract minor is a beneficiary or he suffered
loss or he is a promisee, he can demand the enforcement.
3. Ratification on attaining the majority is not allowed: A minor
cannot ratify a promise entered into during his minority, after
attaining majority. A minor's agreement is void. Hence there can
be no question of its being ratified on attaining majority.
Example: A minor borrowed a sum of money, executing a bond
for it. It is not enforceable. After attaining majority executed a
second bond in place of the original loan plus interest. It was
held, the second bond was not maintainable as that bond was
without consideration.
4. A minor cannot be asked to compensate or pay for any benefit
received under a void agreement
If a minor retained any benefit under the agreement, he is not
liable for repay or compensate the same. The reason is that the
original contract is void in the beginning itselt.
Example: A minor obtains a loan by mortgaging his property. He
is not liable to refund the loan. Not only this, even his
mortgaged property cannot be made liable to pay the debt.
5. Minors can always plead his minority; no estoppel against him:
6. No specific performance of the agreement: A minor's contract
being absolutely void, there can be no question of the specific
performance of such a contract.
7. Minor cannot enter into a Contract of Partnership
8. Minor can be an agent
9. He cannot be adjudged insolvent: Minor cannot be adjudged
insolvent. A minor cannot be adjudged insolvent as he is not
competent to enter into contracts for debts.
10. A minor is liable for necessaries supplied or necessary services
rendered to him
Necessary goods: Necessary goods are not restricted to articles
which are required to maintain a bare existence, such as bread and
clothes, but include articles which are reasonably necessary to the
minor having regard to his status in life. A watch and a bicycle may
be considered necessaries to a minor. At the same time, a well
placed minor a 'car' may be cosidered as necessary but to another it
is luxuries of life.
Services rendered certain services rendered to a minor have been
held to be necessaries. These include: education, medical advice,
legal advice, house given to minor on rent etc.

7. Persons of Unsound Mind

Section 12 of the Contract Act lays down that, "a person is said to be
sound mind for the purpose of making a contract if, at the time when
he makes it, he is capable of understanding it and of forming a
rational judgement as to Its effect upon his interests".
Types of persons of unsound mind and their contract
1. Idiot : A person whose mental powers are completely absent are
known as idiots Idiocy is a congenital defect caused by lack of
development of the brain. This is a permanent incapacity and at
no time, these persons are of sound mind.
2. Lunatic : lunatic is a person who suffers a serious mental disorder
due to some mental strain or serious mental shock or any highly
tragic event Such a person undergoes periodic disorder. A lunatic
is not liable for agreements entered into during the period of his
madness.
3. Drunken or intoxicated persons
Persons Disqualified by Other Laws
1. Alien enemies: A person who is not a citizen of India is called an
alien. An alien may either an alien friend or an alien enemy. An alien
whose country is at peace with the Republic of India is called an alien
friend. He has usually the full contractual capacity. An alien whose
country is at war with the Republic of India is called an alien enemy.
The following rules will apply in respect of contract with an alien
enemy.
2. Foreign Sovereigns, and Ambassadors: Foreign sovereigns and
accredited representative of a foreign state or ambassadors enjoy
special privilege, by which they cannot be sued in Indian Courts.
However, they can, if they choose enter into contracts and can
enforce such contracts in Indian Courts.
3. Convict: A convict is a person, who is sentenced by a competent
court to the death sentence or imprisionment

4. Professional persons: In England, barristers can not sue their

clients for their professional fees. So also are members of The Royal
College of Physicians. 1 But they can sue and be sued for all claims
other than Professional fees. These personal disqualification do not
than their Canter ding to the Bar Council Act 1927 an advocate of the
High Court can enter into a contract with his client and can also bring
a suit against him for his fees. Similarly in India there is no restriction
upon doctors as regards filing of suits for their fees.
5. Insolvents When debtor is adjudged as insolvent his property
vests not enter into a contract. Official receiver or official Assignee
alone can make contract as to sale of his property and sue and be
sued on his behalf. This disqualification of an insolvent is
automaticaly removed after he is discharged.
6. Corporations and Companies: Coporations and companies are
artificial person created by law. It exists only in the eyes of law. A
corporation is formed under some special statute passed by the
Legislature. As contractual capacity is determined by the statute
creating it. It is competent to contract with in the provisions of the
statute creating it. A company is formed, under the Companies Act.
Its contractual capacity is determined by the 'object clause' of its
Memorandum of Association It can enter into contracts only through
its agents, such as Board of Directors, Managing Director and Chief
Officers) in accordance with its Memorandum of Association.
7. Women: Regarding contractual capacity, in India there is no differ-
ence between men and women. A woman (whether married or not)
can en- ter into a valid contract and bind her property, sue and be
sued on such contract. As regards a married woman, she has a right
to pledge the credit of her husband for necessaries except when she
is forbidden to do so
 Chapter 6
Free Consent
Section 13 of the Act defines 'Consent' as "Two or more persons are
said to consent when they agree upon the same thing in the same
sense."
1. According to Section 14 of the Contract Act, consent is said to be
free when it is not caused by
1) Coercion as defined in Section 15, or
2) Undue influence as defined in Section 16, or
3) Fraud as defined in Section 17, or
4) Misrepresentation as defined in Section 18 or
5) Mistake, subject to the provisions of Section 20, 21 and 22.
2. Coercion
When consent is obtained by 'coercion', the consent is not free. In
simple language, when a person is compelled to enter into a contract
by the use of force by the other party or under threat; coercion said
to be employed.
1. Committing or threatening to commit any act forbidden by
the Indian Penal Code
2. Unlawful detaining or threatening to detain any property
3. Intention of causing any person to enter into an agreement:
The intention of compelling any person to enter into an
agreement.
4. Coercion can be applied either by a party to the contract or
even by a stranger
Example: X and Y are negotiating to enter into a contract but X
is unwilling at the moment. A third person Z threatens to
assault X if he does not enter into the contract with Y.
 5. The place of coercion is immaterial: An act to amount to
coercion must be such as has been forbidden by the Indian
Penal Code. However, it is immaterial whether the penal
code is or is not in force at the place where it is performed.
3. Effect or result of coercion
Thus it will be a voidable contract. However, the aggrieved party
decides not to avoid the contract, then it will remain valid
4. Duress
Duress is an equivalent term to coercion as per English Law. Duress
involves actual or threatened violence over the person of another
5. Undue Influence
Undue influence is the improper use of any power possessed over
the mind of the contracting party.
6. Define undue influence
“A contract is said to be induced by undue influence where the
relations subsisting between the parties are such that one of the
parties is in a position to dominate the will of the other and uses that
position to obtain an unfair advantage over the other.”
7. Persons in Dominant Position
The fact of undue influence is involved only when one party is in a
position to dominate the will of the other.
(i) He holds a real or apparent authority over the other.
Eg The relationship between manager and worker
(ii) He stands in a fiduciary relation to the other-
Eg The relationship between parent and child, guardian and ward,
doctor and patient
(iii) He makes a contract with a person whose mental capacity is
temporarily or permanently affected by reason of age, illness or
mental or bodily distress.
8. Contracts with Pardanashin Woman
Contract with pardanashin woman require special reference at the
time of discussing undue influence. A contract with pardanashin
woman is presumed to have been influence by undue influence. A
pardanashin woman is one who observes complete seclusion
because of the custom of the particular community to which she
belongs. She is a lady, who is kept under parda i.e., veil due to
religious or family customs. She is not allowed to mix up with
outsiders. She is deemed to be ignorant of outside tricks.The person
entering into the contract must prove that no undue influence was
exercised and that the terms were fully explained, understood, and
agreed upon by the woman with independent advice. Courts require
clear evidence to ensure her consent was freely given, offering her
special protection under the law.

9. Difference Between Coercion and undue influence

1. In coercion, the consent of the aggrieved party is given under the
threat of an offence forbidden by Indian Penal Code; where in undue
influence, the consent of the aggrieved party is obtained by misusing
the dominant position.
2. Coercion involves use of physical pressure or violent force, but
undue influence is a kind of mental pressure.
3. In case of coercion, the threat or pressure may come from a third
party who is a stranger to the contract. While on the other hand, the
undue influence must be exercised by or against a person who is a
party to the contract.
4. Coercion involves a criminal act while there is no criminal act in
undue influence.
5. In case of coercion, relationship between the parties to the
contract is not necessary, where as in case of undue influence some
sort of relationship is generally exists between the two parties. Eg:
Parent and son, teacher and student etc.
10. Fraud
Fraud means intentional or wilful representation of fact When a
wrong representation is made by a party with the intention to
deceive the other party or to cause him to enter into a contract, it is
said to be fraud The term "fraud" includes all acts committed by a
person with a view to deceive another person. "To deceive" means
to "induce a man to believe that a thing is true which is false".
11. Elements of Fraud
1. The fraudulent act must have been committed by a party to the
contract
2. There must be a representation or suggestion or assertion of a fact
which must be false
3. There must be active or wilful concealment of a fact
4. Promise made without intention of performing it
5. An act or representation etc. must be done or made with an
intention to deceive the other party
6. If an act or omission has specially been declared by law to be
fraudulent, it amounts to fraud:
7. The representation etc. must relate to a fact
8. The other party must have been deceived
9. The party acting on the representation must have suffered some
12. Misrepresentation
A false representation made with intention to induce other party is
fraud. But if misrepresentation is made innocently; it resulted only
simple misrepresentation. Misrepresentation means misstatement
of a fact material to a contract. Misrepresentation is a false
statement which the person making it honestly believes to be true or
which he does not know to be false.

13. Essentials of Misrepresentation

1. The representation should be made innocently; that is honestly
believing it to be true and without the intention of deceiving the
other party.
2. Misrepresentation should be of facts material to the contract and
not to mere opinion or hear say.
3. The representation must be untrue, but the person making it
should honestly believe it to be true.
4. The representation must be made with a view to inducing the
other party to enter into a contract and the other party must have
acted on the faith of the representation.

14. Mistakes
Mistake may be defined as an erroneous belief concerning
something. If the agreement is made under a mistake, it means that
there is no consent and when the consent is nullified by such
mistake, then the agreement has no legal effect i.e., the effect of
mistake is to make a contract invalid.
15. Classification of MistakeS
Mistakes
Mistake of law Mistake of fact.
Mistake of Indian law Bilateral mistake
Mistake of Foreign law. Unilateral mistake.

Mistake of law
1. Mistake of Indian law There is a derived general rule that
"ignorance of law is no execuse". Here law means the law of
the land. Hence if a person does not know the law of his
country, he must then suffer the consequences As such, a
mistake of Indian law will not effect the validity of the contract
and it will remain valid. According to section 21 of Contract Act,
a contract is not voidable if it is caused by a mistake concerning
any law in force in India.Example: A and B makes a contract, on
this erroneous belief that, a particular debt is barred by the
Indian Law of Limitation. This contract is not voidable, but is
valid.
2. Mistake of Foreign law: Mistake of foreign law is a mistake of
fact. A person is supposed to know, the laws of his country but
he cannot be expected to know the laws of other countries.
Thus if both the parties are under a mistake relating to a
foreign law, the contract will be void.Example: A purchases a
plot of land of 192sq. metres from B in Dubai, believing that a
house can be constructed over it. Actually in Dubai, no house
can be constructed on a plot of less than 200sq. metres. The
contract can be avoided.
Mistake of fact
1. Bilateral mistake: If both the parties to an agreement are
under a mistake of fact essential to the agreement, such
mistake is called bilateral mistake of fact.
  The mistake must be mutual
 Mistake must be of facts and not of law
 Mistake must be relate to a fact which must be essential to
the agreement
16. Types of Bilateral mistake
 Mistake as to the subject matter
 Mistake regarding the existence of the subject matter
 Mistake regarding the identity of the subject matter
 Mistake regarding the title of the subject matter
 Mistake regarding the quantity of the subject matter
 Mistake regarding the quality of the subject matter
 Mistake regarding the price of the subject matter
 Mistake regarding the possibility of performance

2. Unilateral mistake
This is a situation where only one party is under a mistake. It
will not invalidate the agreement. Section 22 of the Contract
Act provides that "A contract is not voidable merely because it
was caused by one of the parties to it being under a mistake
regarding a matter of fact". When the contract is clear, mistake
of one of the parties cannot affect it.
 Chapter 7
Legality of Object and Consideration
Section 10 of the Contract Act lays down that all agreements are
contracts if they are made for a lawful consideration and with a
lawful object. It implies that if the consideration or object of any
agreement is not lawful, the agreement is void.
1. Circumstances under which the object and consideration are
unlawful.
1. If it is forbidden by law
2. If it defeats the provisions of any law
Example : An agreement between an employer and employee
that the employee will work for 12 hours a day without
overtime pay would defeat the provisions of labor law, which
mandates overtime pay for work beyond standard hours. This
agreement would be void because it violates the law's intent to
protect workers' rights.

3. If it is Fraudulent
4. It it involves or implies injury to the person or property of
another
5. If it is immoral
Example: A give his building for rent for the sale of drugs to B.
The agreement is not enforceable for recovering rent.
6. If it is opposed to public policy

Agreements Opposed to public policy

1. Agreements for trading with Alien enemy
2. Agreements to commit a crime or to indemnify a person for
his criminal act
3. Agreements interfering with course of justice
4. Agreements interfering with course of justice
5. Agreements of Champerty and maintenance
6. Agreement in restraint of legal proceedings
Agreements restricting enforcement of rights
Agreements curtailing period of limitation
7. Agreements for sale of Public office, Titles and
appointments
8. Agreements in restraint of parental right
9. Agreement restraining personal liberty
10. Agreement for marriage brokerage
11. Agreement in restraint of marriage
12. Agreement in restraint of trade
13. Agreements to defraud creditors or revenue authorities
14. Agreements create monopolies
15. Agreements not to bid
16. Agreements waiving an illegality
17. Other agreements opposed to public policy
18. to influence election to public office
 Chapter 8
Void Agreements
1. Void agreement
According to Section 2(g) of the Indian Contract Act, a void
agreement is an agreement which is not enforceable by law. The
agreements which are not enforceable by law right from the time
when they are made, are void ab initio. So void agreement is void ab
initio.
2. Uncertain Agreement
An agreement, the meaning of which is not certain or capable of
being made certain, are void". The uncertainty may be in respect of
the quantity, the quality, the price and the title of the subject matter
of the agreement.
3. Essentials of Wagering Agreement
1. Uncertain event
2. Mutual chances of gain and loss
3. Neither Party’s control over the event
4. No other interest in the event
5. Promise to pay money or money’s worth
6. The bet money should come out of the pockets of the parties
themselves
4. Exceptions in the Wagering Agreements
Commercial transactions: Agreement for sale and purchase of any
commodity is not a wagering agreement but a valid contract.
Speculative transactions: Speculative transactions are generally
valid, unless it is proved that there is no intention of the parties to
call for or give delivery of shares or goods.
Horse racing: Subscription or contribution made for a prize or a
sum of money to be awarded to the winner of a horse race is not
 unlawful if the value of such prize or money is Rs.500 or more.
lawfal legaly.
Lotteries: A Lottery is a game either of gain or loss of the absolute
right to a prize is a wagering agreement
An agreement to buy a ticket for a lottery is also a wagering
agreement.
Prize competition: Some time skill and intelligence plays a major
part for the successful solution of certain competitions such as
cross-word puzzle, picture puzzle, athletic competition etc
Athletic competition: The athletic competitions also fall under the
category of games of skill. Hence they do not wagers but valid and
hence are enforceable.

5. Contracts of Insurance
A contract of insurance is a contract between two parties whereby
one party undertakes to indemnify the other party against the loss
which may arise on the happening of an event (which is certain as
in the case of death of a person or expiry of a period of time or
uncertain as in the case of fire, burglary, etc.

6. There are resemblances between contracts of insurance and

wagering agreements.
1. Contract of insurance is valid and can be enforced in court of
law, where as wagering agreement is void under section 30,
without any legal effect.

2. In insurance, the assured has an insurable interest in the

subject matter, but in wagering agreement there is no insurable
interest

3. Contract of insurance, except life insurance is a contract of

indemnity, but in a wagering agreement the amount is fixed and
as such is not a contract of indemnity.
4. In insurance, both the parties are interested in the protection of
the subject matter where as in a wagering agreement it is only
one of the parties who is interested in its protection.

5. There are scientitic and actuarial calculations of risks in

insurance contracts, where as, wagering agreements are gamble
with out any scientific calculation of risks.
 Chapter 9
CONTINGENT CONTRACTS

The contracts may be an unconditional contracts or conditional

contracts. An unconditional contract' is one whose performance
does not depends upon any event but it takes its normal course in a
usual manner.
Definition
Section 31 of the Contract Act defines Contingent Contract as "a
contract to do or not to do something if some event collateral to
such contract, does or does not happen". Insurance contracts
provided the best example of contingent contracts.
Characteristics of Contingent Contract
1. Dependence on a future event
2. Uncertain event
3. Collateral event
Rules Regarding Performance of Contingent Contract
1. Contingent contract dependent on the happening of an
uncertain future event
2. Contingent contracts dependent on the non – happening of an
uncertain future event
3. When event to be deemed impossible
4. Contingent contracts dependent on the happening of a
specified uncertain event within a fixed time
5. Contingent contracts dependent on the 'non happening' of a
specified uncertain event within a fixed time
6. Contingent agreements dependent on the happening of
impossible event
Differences between Contingent Contract and Wagering Agreement
1. Validity: Contingent contract is a valid contract and can be
enforced in a court of law, whereas wagering agreement is void and
cannot be enforced in a court of law.
2. Reciprocal promise: Wagering agreement consist of mutual or
reciprocal promises whereas there may not be reciprocal or mutual
promises in a contingent contract.
3. Nature of event: In a contingent contract the future uncertain
event is merely collateral whereas in a wagering agreement the
uncertain event is the sole determining factor of the agreement.
4. Interest in the subject matter: In a contingent contract either
party or both may have an interest in the subject matter of the
contract, but in a wagering agreement the parties have no interest
except getting or paying money.
5. Nature of contract: A contingent contract is not of a wagering
nature, where as a wagering agreement is essentially of a contingent
nature.
 Chapter 10
Quasi Contracts
1. Quasi Contracts
The obligation which are created and imposed by law in the absence
of any contract to that effect, are called quasi-contracts. 'Quasi'
means 'to a certain extent' or 'almost'
Quasi-contracts are also called 'constructive contracts' or 'contracts
in law' or implied contracts'
2. Definition
According to Dr. Jenks, "Quasi contract or implied contract is a
situation in which law imposes upon one person on the grounds of
natural justice, an obligation similar to that which arises from a true
contract, although no contract, express or implied, has in fact been
entered into by them.”
3. Essential Features of a Quasi Contract
1. This contract is not a real contract, but an obligation imposed by
law.
2. It does not arise from any agreement, but it is a creature of law. It
is a contract implied in law.
3. A quasi - contract arises from a duty of a party and not by
promise of any party.
4. It grants to one person a right to money or its equivalent, or to
some other benefit and imposed a liability on the other person in
connection with such money or its equivalent, or some other
benefit that he has already received.
5. The right under it is available against specific person (s) and not
against the world.
6. When an obligation created by quasi contract has not been
discharged, the injured party is entitled to receive the same
compensations from the party in default, as in the case of an
ordinary contract.

4. Types of Quasi Contracts

1. Claims for necessaries supplied: According to Section 68 (if a
person, who is incapable of entering into a contract, or any one
whom he is legally bound to support, is supplied by another
person with necessaries suited to his condition in life, the person
who has furnished such supplies is entitled to be reimbursed
from the property of such incapable person"
2. Reimbursement of payment made by an interested person
According to Section 69, A person who is interested in the
payment of money which another is bound by law to pay, and
who therefore pays it, is entitled to be reimbursed by the other"
3. Obligation to pay for the benefit enjoyed from non-gratuitous
act According to Section 70 if a person lawfully does anything for
or delivers anything to another person with the intention of
payment for that, and such other person enjoys the benefit
thereof, then such other person is bound to make compensation
to the first person in respect of the thing so done, or to restore
the thing so delivered
4. Responsibility of finder of goods: According to Section 71 “A
person who finds goods belonging to another and takes them
into his custody, is subject to the same responsibility as bailee".
Thus an agreement is implied by law between the owner and the
finder of goods and the latter is deemed to be a bailee. This
obligation is imposed on the basis of quasi contract. Thus, as a
bailee, the finder is bound to take as much care of the goods
 found as a man of ordinary prudence would under similar
circumstances take of his own goods. Besides, he must take
reasonable efforts in finding out the real owner.
5. Money paid or things delivered by mistake or under coercion
According to Section 72 "A person to whom money has been paid
or anything delivered by mistake or under coercion must repay or
return it".
 Chapter 11
Performance of contracts
1. Performance of a contract takes place when the parties to the
contract fulfil their obligations arising under the contract with in
the time and in the manner prescribed.
2. Types of Performance
 Actual performance
When both the parties have actually performed their respective
promises or obligations, the contract is said to be discharged or
terminated.
 Attempted performance (or Tender)
Where a promisor has made an offer of performance to the
promisee, and the offer has not been accepted by the promisee, it is
called an attempted performance (Section 38). Thus an attempted
performance is otherwise known as an offer to perform or tender.
A tender or attempted performance is of two types
1. Tender of goods or services: Where the attempted offer involves
the supply of goods or services it is known as tender of goods. It is
thus a 'tender' to perform a promise to do something'.
2. Tender of money: If the attempted performance is for the
payment of money, it is known as tender of money.
3. Essentials of valid Tender
 It must be unconditional
 It must be made at proper time and place
 It should be in respect of the whole obligation
 It must be in proper form
 It must be made to a proper person
 Reasonable opportunity to inspect
 The person making the tender must be able to willing to perform
his obligation

4. Who may perform the contracts

 Promisor
 Legal representatives
 Promisors agent
 Third person
 Joint promisors
5. Who can demand the performance of a contract
 Promisee
 Legal representatives
 Thitrd party
 Joint Promisees
6. Time as Essence of the contract
Time is the essence of contract" means that time is an essential
factor and therefore the concerned parties must perform their
promises within the stipulated time. The time for performance if
mentioned in the contract must be strictly observed.
In the case of commercial transactions, the time fixed for delivery
of goods is always taken as the essence, but not the time for
payment of price, unless otherwise agreed. This is because the
price of goods fluctuate very rapidly and hence, punctuality in the
time of delivery of goods must be observed.

In the following circumstances, time is always considered to be

the essence of the contract.
(ii) Where the delay operates as an injury to the party.
(iii) Where the nature and necessity of the contract requires the
time to be the essence of the contract.
 Following are the circumstances, when time is not the essence of
the contract.

(i) The parties have not expressly agreed to treat the time as of
the essence of the contract.
(ii) The delay in performing the contract does not have an effect as
an injury to the party.
(iii) The nature of the contract does not establish that the time is
of the essence of the contract.
7. Reciprocal Promises
A contract consists of reciprocal promises when one party makes a
promise (to do or not to do something in the future) in
consideration of a similar promise (to do or not do something in
future) made by the other party Such a contract is an exchange of
promises. Promises which form the consideration or part of the
consideration for each other are called reciprocal promises.
1. Mutual and independent
2. Mutual and dependent
3. Mutual and concurrent
8. Rules Regarding performance of reciprocal promises
 Regarding simultaneous performance
 Regarding order of performance
 Effects of preventing the performance
 Effect of non performance by the party who is to perform
first
 Reciprocal promises ;one legal and other is illegal
 Chapter 12
Discharge of a Contract

1. Discharge means the termination of contractual relationship.

2. Modes of Discharge of a Contract
(I)By performance;
(II)By Agreement;
(III) By lapse of time;
(IV) By operation of law;
(V) By impossibility of performance;
(VI) By breach of contract;

1. Discharge by performance of contract When the parties to a

contract not fulfil their obligations arising under the contract with
in the time, and in the manner prescribed, it is known as discharge
by performance
2. Discharge by mutual agreement or consent As contract is created
by an agreement between two parties, hence it can be discharged
or terminated by mutual agreement.
a) Novation: Novation means that a new contract is substituted
for the existing contract. The new contract may be either
between the same parties or between different parties and the
consideration for the new contract is the discharge of old
contract.
b) Rescission: Rescission means cancellation of the contract
Rescission results in the dissolution of the contract. If the
parties to a contract agree to rescind it, the original contract
need not be performed.
c) Alteration: Alteration of contract may take place when one or
more of the terms of the contract altered by the mutual
consent of the parties to the contract. Alteration is valid only if
it is done with the consent of all the parties to the contract.
 d) Remission: Remission means acceptance by the promisee of a
lesser fulfilment of the promise made.
e) Waiver: Waiver means the deliberate abandonment or giving
up of a right which a party is entitled to under a contract,
where upon the other party to the contract is released from his
obligation.
f) Merger: Merger means merger of two or more rights into one
contract. When an existing inferior right of party merges into a
newly acquired supe- rior right by the same party, it is called
merger of rights. In such a case, the inferior rights
automatically stands discharged.
Example: Under a lease, A is holding the house of B. Later on, A
purchase that house from B. In this case, the lease right shall
stand automaticaly discharged.

3. Discharge by lapse of time

When a period is specified for the performance of the contract,
it is known as period of limitation. If the contract is not
performed and if no legal action is taken by the promisee
within the period of limitation, the contract in such cases is
terminated.
4. Discharge by operation of law
a) Death: Where performance of a contract is required to be
made in person and the personal skill or qualification of the
promisor are important, the death of the promisor discharges
the contract.
b) Insolvency: When a person is adjudged insolvent, he is
discharged from all the liabilities incurred before the
adjudication. His rights (assets) and Liabilities are transferred to
the official assignee or official receiver, as the case may be.
 c) Material alteration: If the document containing the terms of
a contract is materially altered by a party to a contract without
the consent of the other parties the contract is discharged.
d) Merger of rights: This is a condition by which, an inferior
right contract merges into a superior right contract. In this case,
the inferior right contract stand discharged automatically.
5. Discharge by impossibility of performance
Sometimes, the performance of a contract is or becomes impossible
due to its own nature or due to some reasons which are beyond the
control of the parties.
So impossibility is of the following two types
1. Initial impossibility: When the impossibility exists at the time
of the formation of contract, it is known as initial impossibility
Initial impossibility is of the following two types.
(i) Known impossibility: It is an imposibility which is known to the
parties at the time of making the contract In this case, the agreement
is void ab initio
(ii) Unknown impossibility: It is an impossibility which is not known
to any of the party at the time of making the agreement In such case,
the contract becomes void as soon as that impossibility is discovered.
2. Subsequent or supervening impossibility : When the
performance of the contract is possible at the time of its
formation but subsequently impossible.
VI. Discharge by breach of contract
When a contract is made, parties to a contract are liable to perform
their respective obligations Breach of contract means a breaking of
the obligation which a contract imposes result in breach of contract.
Breach of contract is also resulted in discharge of contract
(a) Actual breach or
(b) Anticipated breach
a) Actual breach of contract: Actual breach of conctract takes place
when a party to a contract refuses or fails to perform his obligation
when it is due.
i) On due date of performance: If any party to a contract refuses or
fails to perform his obligation under a contract at the time when the
performance is due it is called an actual breach of contract on due
date of performance.
(ii) During the course of performance any party starts performance
of a contract, but before completing, if he fails or refuses further
performance, it is called an actual breach of contract during the
course of performance.
b) Anticipatory breach or constructive breach of contract:
Anticipatory breach of contract occurs when the promisor declares
his intention of not performing the promise before the time for
performance is due) Such a breach is also known as "constructive
breach of contract". The intention may be declared either expressly
or impliedly.
 Chapter 13
Breach of contracts and Remedies
1. Every contract imposes obligations on both the parties to perform
their respective promises When one of them fails or neglects or
refuses to perform his promise, he is said to have committed a
breach of contract.
2. Following remedies.
i. Rescission of the contract.
ii. Suit for damages.
iii. Suit upon quantum meruit.
iv. Suit for specific performance of the contract.
V. Suit for injunction.

1. Rescission of the Contract

Rescission means cancellation, revocation or putting an end to a
contract where one of the parties to contract commits breach, the
other party treats the contract as rescinded or cancelled and refuses
the further performance.
2. Suit for Damages
When a contract is broken, the injured party can claim damages from
the other party. It is the monetary compensation, for the loss
sustained by the injured party for the non-performance of the
obligation.
Kinds of Damages
(a) General or ordinary or compensatory damages.
(b) Special damages.
(c) Exemplary or punitive or vindictive damages.
(d) Nominal damages

(a) General or ordinary or compensatory damages: When a

contract has been broken, the injured party can recover from
the other party such damages as naturally and directly arose in
the usual course of things from the breach. These damages
include the direct loss suffered by the aggrieved party.
(b) Special damages: These are damages which result from a
breach of contract under some special or unusual
circumstances.
(c) Exemplary or punitive or vindictive damages Exemplary
damages are awarded with a view to punishing the guilty party
for the breach, and not with the idea of awarding
compensation to the injured party.
(d) Nominal damages: These damages are awarded simply to
recognise the right of the party to claim damages for the
breach of the contract this is the case, where only a technical
violation of legal right but no substantial loss is there. Nominal
damages are only nominal in value, and is also known as
contemptuous damages. The court may or may not award
these nominal damages.
Liquidated Damges
Liquidated damages are the genuine pre-estimate of the probable
loss. It is the amount agreed between the parties in case of breach of
contract is in the nature of a fair and honest pre-estimation of
probable damages.
(i) To avoid uncertainities of the amout of damages; and
(ii) To avoid expenses of proving damages in the court
Penalty
A penalty is a sum named in the contract at the time of its formation,
which is disproportionate to the damage likely to acquire as a result
of the breach. It is fixed for securing the performance of the
contract.

3. Suit Upon Quantum Meruit

The term 'Quantum Meruit' literally means 'as proportion to the
work done' (In legal sense it means 'payment in proportion to the
work done for reasonable value for work done or services
rendered That is when a person had done some work under a
contract and the other party repudiates the contract, or some
event happens which makes the further performance of the
contract impossible, then the party who has performed the work
can claim remuneration for the work he has already done.
Claim for Quantum Meruit
(a) When a contract is found to be void
(b) When something is done without any intention to do so
gratuitously
(c) When a contract is divisible
(d) When one party abandons or refuses to perform the contract:
(e) When an indivisible contract is performed badly
4. Suit for Specific Performance of the Contract
In certain cases, damages are not an adequate remedy for the
breach of the contract. In such circumstances, the court directs the
defaulting party, to carry out the performance of the contract
specifically i.e., according to the terms of the contract. This is known
as specific performance
V. Suit for Injunction
An injunction is a court order. In cases of breach of contract, an
injured party can under certain circumstances, get a negative
injunction that is Can an order prohibiting a party from doing
something Injunction are usually granted to enforce negative
stipulations in cases where damages are not adequate relief. It is
particularly appropriate in cases of anticipatory breach of contract.
 Chapter 14
SPECIAL CONTRACTS - CONTRACTS OF
INDEMNITY AND GUARANTEE

Special contracts are

1. contracts of indemnity and guarantee (Section 124)
2. Bailment and pledge (Sec.148)
3. Contract of agency (Sec-182)
1. Contract of indemnity
A contract of indemnity is a type of contingent contract. The term
'indemnity means to compensate or make good the loss'. Thus
indemnity is an act to compensate or protect somebody against loss,
or to make good the loss suffered.
Contract of indemnity has been defined under Sections 124 of the
Contract Act as a contract by which one party promises to save the
other from the loss caused to him by the conduct of the promisor
himself or by the conduct of any other person is called contract of
indemnity"
Promises to make good the loss is called indemnifier (promisor) and
the person whose loss is to be made good is called the indemnified
or indemnity holder (promisee)
2. Rights of Indemnity Holder (Indemnified)
1. Right to recover damages
2. Right to recover costs
3. Right to recover sums paid
3. Rights of Indemnifier
1. Right to subrogation
2. Right to equities
3. Right to refuse indemnity
4. Contract of guarantee
A contract of guarantee is also a special type of contract. Its object is
to enable a person to obtain an employment, or a loan, or some
goods or service in credit.
According to Section 126 of the Contract Act “A contract of
guarantee is a contract to perform the promise or discharge the
liability of a third person in case of his default”.
5. Features of Contract of Guarantee
 Three parties: There are three parties and all of them must join
the contract
(i) The creditor (ii) The principal debtor, and (iii) The surety
 Three contracts: As mentioned earlier, there are three contracts in
a guarantee, i.e.,
(i) Between the creditor and the Principal debtor;
(ii) Between the surety and the creditor; and
(iii) Between the surety and the principal debtor.
 Capacity to contract
 Concurrence
 At the request of the principal debtor
 Debt or Liability
 Consideration
 Free consent
 Writing not necessary
 Other essentials of a contract
6. Kinds of Guarantee
1. On the Basis of purpose: There are three types of guarantee on
the basis of purpose.
a) For payment of debt: A guarantee may be for payment of debt or
loan. This may either be for an existing debt or for a future debt.::
b) For price: A guarantee may be for the payment of the price of the
goods to be sold on credit.
c) For honesty: A guarantee given for the honesty or good conduct is
known as fidelity guarantee. This is generally given when a person is
employed as an agent or servant.
2. On the basis of transaction: On the basis of transaction the
guarantee may be (a) simple or specific and (b) continuing
a) Simple or specific guarantee: When a guarantee is given in respect
of a single debt or specific transaction, it is called a specific or simple
b) Continuing guarantee: When a guarantee extends to a series of
transactions it is called a continuing guarantee
7. Revocation of Continuing Guarantee Cancellation.
1. By notice
2. By death of the surety
3. By modes of discharge of surety

8. Rights of Surety
I. Against the principal debtor
II. Against the creditor
III. Against the co-sureties
1. Rights against the principal debtor:
a) Right of subrogation
b) Right to indemnity
2. Rights against the creditor
a) Right to securities
b) Right to claim set-off
c) Right of subrogation
d) Right to insist on the creditor sueing
3. Rights against the co-sureties
1. Right to claim contribution
a) Co-sureties liable to contribute equally
b) Liability of co-sureties bound in different sums
2. Release of co-surety
3. Right to share benefits of securities:
 Chapter 15
Contract of Bailment and Pledge
The word 'bailment is derived from the French word "Bailer" which
means to deliver'. So it is a contract from delivery.
Bailment is a voluntary change of possession of goods from one
person to another for some purpose. The ownership of the goods is
with one person and the possession is with another person
According to Section 148 of the Indian Contract Act” A bailment is
the delivery of goods by one person to another for some propose
upon a contract that they shall, when the purpose is accomplished,
be returned or otherwise disposed of according to the direction of
the person delivering them"
The person delivering the goods is called the "bailor"
And the person to whom they are delivered is called the "bailee."
1. Features of Bailment Following are the essential features of
bailment

1. Delivery of goods: One of the essential features of bailment is

the delivery of goods from one person to another for some
specific purpose.
2. Specific purpose: In Bailment, the goods are delivered for some
purpose which must be specific and temporary.
3. Return of the same goods Return of goods which were given by
the bailor to the bailee is one of the essential feature of
bailment. The bailee is under a duty to return the goods, when
the purpose is accomplished
4. Contract Bailment arises from express or implied contract.
 5. Ownership In bailment, ownership remains with the person
who deliver the goods.
6. Goods Bailment is concerned with only movable goods which is
defined in the Sale of Goods Act.

2. Kinds of Bailment
On the basis of reward: There are two types of bailment on the basis
of reward i.e., gratuitous bailment and non gratuitous bailment
(a) Gratuitous bailment: A gratuitous bailment is one were no
consideration or remuneration passess between the bailor and
bailee.) In this case the bailee keeps the goods for the bailor without
any charge or reward. Example: lending of a scooter to a friend, or
borrowing some books from a friend.
(b) Non-gratuitous bailment: Non gratuitous bailment on the
contrary is one where some considerations passes between the
parties. So it is known as bailment for reward.
Example: Motor car let out for hire, goods given to a carrier for
carriage at a price, articles given for a charge etc.
On the basis of benefit derived: On the basis of benefit derived a
bailment may be of the following three types
(a) Bailment for the exclusive benefit of the bailor: It is bailment
where the goods are delivered by the bailor to the bailee only for the
benefit of the bailor himself, and the bailee does not derive any
benefit from it.
Example: X is going out of station. He leaves his valuable goods with
his neighbour for safety. Here, X alone is being benefited by this
bailment.
(b) Bailment for the exclusive benefit of bailee: It is a bailment
where the goods are delivered by the bailor to the bailee only for the
exclusive benefit of the bailee. It may be in the case of delivery of a
thing to someone else for his use without any charge.
Example: Lending a scooter to a relative for some time without any
charge.
(c) Bailment for the mutual benefit of both the bailor and bailee: It
is a bailment where goods are delivered by the bailor to the bailee
for the mutual benefit of both of them
Example: Giving a cloth to a tailor for stitching a shirt, giving a
scooter for repair etc.
3. Duties and Rights of Bailor
1. Duty to disclose faults in goods bailed
2. Duty to bear expene
3. Duty to indemnify the bailee due tro lack of title to goods
bailed
4. Duty to indemnify bailee for excess loss
5. Duty to bear normal risks
6. Duty to receive back the goods bailed

4. Duties and liabilities of Bailor

1. Take reasonable care
2. Not to make unauthorised use of the goods bailed
3. Not to mix the bailors goods with his own goods
4. Not to set up an adverse title
5. Duty to return any accretion
6. Duty to return the goods
5. Rights of Bailor
1. Enforcement of rights
2. Right to claim damages:
3. Right to terminate the contract
4. Restoration of goods lent gratuitously
5. Right to claim compensation
6. Right to get back the goods bailed on expiration of time or
accomplishment of purpose
7. To claim increase of profit from the goods

6. Rights of the Bailee

1. Enforcement of rights
2. Deliver the goods to any one of the joint bailors
3. To claim damages
4. Right to be indemnified
5. To claim necessary expenses
6. To recover loss due to defective title of the bailor
7. To file a suit to decide the title of goods bailed
8. Right of particular lien
9. Right of general lien

Lien
Lien is a right available to a person to retain that which is in his
possession and which belongs to another, until the demands of
the person in possession are satisfied. Thus lien means a right to
retain or detain the possession of the goods till the promise made
by its owner is fulfilled. If the possession is lost, lien is lost.

Essentials of a Valid Lien

1. The possession of goods is very important for the person
claiming the lien.
2. The possession must be of a lawful nature that it must not be
obtained by way of coercion, misrepresentation or fraud.
3. The possession must be of a continuous possession of goods of
the per son claiming lien.
4. The lien is available only when the person in possession of
goods have certain unsatisfied demands or claims against the
owner.
5. There must not be any contract contrary to the right of lien.
6. Lien is a right of defence but not of action.
7. Lien is a right to retain the goods and not to use the goods.
8. Lien is a personal right of a person conferred either by contract
or by law. It cannot be transferred to anybody else.

Types of Lien

1. Particular lien
This is a right to retain particular goods until claims arising on
those goods are satisfied. Thus particular lien is restricted to those
goods which are the subject matter of the contract and are liable
for certain demands of the person in whose possession the goods
are lying.
2. General lien
This is a right to retain all the goods or any property which is in
the possession of bailee until all the claims of the holder are
satisfied. It is a right to retain the goods of another as a security
for a general balance account.
Termination of Bailment
1. On the expiry of the period
2. Accomplishment of purpose
3. Inconsistent use of goods
4. Destruction of subject matter
5. Demand of goods by gratuitous bailor
6. Death of the bailor or bailee

Finder of Lost Goods

A finder of lost goods is a person who finds goods belonging to
another and takes them into custody.
Duties of a Finder of Goods
1. Take reasonable care of the goods found.
2. Try to find out the real owner of the goods and then to entrust
the goods
3. He should not use the goods for his own purpose.
4. He should not mix the found goods with his own goods.
5. He should also return any accretion or profit occured to the
found goods
Rights of Finder of Goods
1. Right of lien
2. Right to claim the reward
3. Right of sale of goods
PLEDGE or PAWN
Pledge is a special kind of bailment. According to Section 172 the
bailment of goods as security for payment of debt or performance
of promise is called pledge or pawn. Hence every contract by
which the possession of goods is transferred as security is deemed
to be a pledge.
In the bailment of pledge, the parties are known as "pawnor" and
"pawnee".
(i) Pawnor: The person who pledges the goods as security for
payment of debt or performance of promise is called the
"pawnor" or pledger
(ii) Pawnee: The person receiving the goods as security for the
payment of a debt or performance of a promise is called the
'pawnee' or 'pledgee'
Essentials of a Pledge
1. Delivery of goods
2. Delivery of goods by way of security
3. The security is meant for the payment of a debt or performance
of a promise
4. Transfer of possession
5. Returning of goods
6. Movable goods
7. Existing Goods
8. Contract

Rights and Duties of Pawnor and Pawnee:

Rights of Pawnee or Pledgee
1. Rights of retainer
2. Retainer for subsequent advance
3. Extra ordinary expenses
4. Right in case of default of the pawnor
Duties of Pawnee or Pledgee
1. The pawnee has to take reasonable care of the goods pledged,
and should not make any unauthorised use or mix the goods with
his own goods.
2. He should not do any act in violation of the terms of the
contract of pledge i.e. should not sell the pledged goods, without
a reasonable notice to the pawnor.
3. Return the goods to the pawnor when the amount of debt has
been paid by him.
4. Deliver any accretion to the goods pledged.
5. Pay the surplus of the proceeds of the sale of the goods
pledged.
Rights of Pawnor or Pledger
1. Right to get back goods
2. Right to redeem the goods
3. Preservation and maintenance
4. Rights of an ordinary debtor
5. Right to receive any increase of profits from pledged goods
Duties of Pawnor or Pledger:
1. Duty to repay the loan
2. To pay extraordinary expenses incurred by the pawnee
 Chapter 16
Contract of Agency
1. An agent is a person employed to do any act for another or to
represent another in dealings with third person
2. An agency is the relation between an agent and his principal
created by an express or implied agreement whereby an agent is
authorised by his principal to act or represent him in dealing with
third parties and to establish principal’s contractual relations with
them.
3. Essential features of Agency
 Name of a relation
 An agreement
 Competency of principal
 Intention of the agent
 Consideration not necessary
 Free consent
 Other essentials
4. Agent and Servant
1. An agent act according to the instruction of the principal where as
a servant act according to the orders of the principal.
2. The act of the agent brings Contractual relationship with third
parties, but the servant cannot do that.
3. An agent can bind the principal with to the third parties, where as
a servant cannot do so.
4. An agent may be paid on commission basis but a servant is
generally paid by way of salary or wages.
5. An agent may generally work for several principal, but a whole
time servant serves only one master.
5. Creation of an Agency
I Agency by express agreement or authority.
II. Agency by implied agreement or authority. This includes:
a) Agency by estoppel,
b) Agency by holding out,
c) Agency by necessity.
III. Agency by ratification.
IV. Agency by operation of law.

I. An Agency by express agreement: A contract of agency may be

created by express agreement) When principal appoints an agent
either by words a spoken or written
II. Agency by implied agreement: An agency by agreement may be
implied under certain circumstances from the conduct of the parties
or the relationship between them
(a) Agency by estoppel: Agency may be created by estoppel. Thus an
agency is created by implication of law.
b) Agency by holding out: Agency by holding out is a branch of
agency by estoppel.
C. Agency by necessity: Sometimes, extra ordinary circumstances
require that a person who is not really an agent should act as an
agent of another such an agency is called agency by necessity
III. Agency by ratification Ratification means the subsequent
adoption and acceptance of an act originally done without
instruction or authority
6. Kinds of Agent
I. On the basis of extent of their authority
(a) General agent: A general agent is one who is employed to
transact generally all the business of the principal in regard to which
he is employed. Example: Manager of a firm.
(b) Special agent: When an agent is to do some particular act or
represent his principal in some particular transaction, he is known as
special agent.
(c) Universal agent: When a person is authorised to transact all the
business of his principal of every kind and to do all the acts which the
principal can lawfully do and can delegate, such a person is known as
universal agent.
II. On the basis of the nature of work performed:
i) Mercantile agents or commercial agents: A mercantile agent is a
person having the authority to sell goods or to consign goods or to
raise money on the security of goods on behalf of the principal.
(a) Commission agents A commission agent is a person who is
employed to do a certain act for his principal in return for a
commission.
(b) A delcredere agent delcredere agent is one who, for extra
remuneration guarantees the performance of the contract by the
other party.
(c) Factor A factor is a mercantile agent with whom goods are kept
for sale. He has got discretionary powers to enter into contracts of
sale with third parties.
(d) Auctioneers: An auctioneer is an agent who is employed by the
owner to sell his property publicly by calling on the public to bid for
it.
 (e) Broker: A broker is an agent who brings buyers and sellers into
contract with one another
ii) Non-mercantile agents or non-commercial agents: Non
mercantile agents may be estate agents, who are employed to
negotiate the sale and purchase, or lease of immovable property, or
house agents who are similarly engaged with respect to house, shops
etc. or law agents, whose business is to look after the legal affairs of
their principals. Counsel, attorney and wife are also non-mercantile
agents.
7. Rights and Duties of an Agent
1. Right to retainer
2. Right to receive remuneration
3. Right to lien
4. Right of indemnification
5. Right to compensation
6. Right to stoppage of goods in transit
8. Duties of an Agent
1. Duty in conducting principals business
2. Duty to act with skill and diligence
3. Duty to render accounts
4. Duty to communicate
5. Duty not to deal on his own account
6. Duty to pay the amounts received for the prinicipal
7. Duty not to delegate his authority
8. Duty on termination of agency by principals death or insanity

9. Duties of the Principal

1. Duty to pay the remuneration
2. Agent to be indemnified
3. Duty to indemnity the loss for principals neglect
4. Indemnify the agent against the consequences of the act done
in good faith
10. Delegation of Authority
Delegation is the process of transferring responsibility for a task
or decision from one person to another.
Generally, an agent is supposed to perform his duties
personally. A general rule is that "A delegate cannot further
delegate". Thus, as an agent himself is a delegate of his
principal, he cannot further delegate his powers to another
person.
11. Sub-agent
An agent appointed by an agent is called a sub agent. A sub
agent is a person employed by, and acting under the control of
the original agent in the business of the agency"
12. Substituted or Co-agent
When an agent has an express or implied authority of his
principal to name another person to act for the principal and
the agent names another person accordingly, such person is
known as substituted agent.
13. Pretended Agent
A pretended agent is one who untruly represent himself to be
the authorised agent of another, and there by induce a third
party to deal with him as agent.
14. Termination of Agency
Termination of agency means, cancellation of authority of the
agent.
1. Termination of agency by act of the parties:
(a) Agreement
(b) Revocation of authority by the principal:
c) Renunciation by the agent
2. Termination of agency by operation of law:
(a) Performance of contract
(b) Expiry of time
(c) Destruction of the subject matter
(d) Death or insanity of either party
(e) Insolvency of the principal
(f) Principal becoming an alien enemy
(g) Impossibility:
 Chapter 17
The Sale of Goods Act 1930
According to Section 4 of the Sale of Goods Act contract of sale of
goods is a contract whereby the sellers transfer or agrees to transfer
the property in goods to the buyer for a price."
1. Essential Features of a Contract of Sale:
1. Two parties:
2. Contract
3. Movable goods
4. Transfer of property
5. Price
6. Formalities
7. Form

2. Subject Matter of contract of sale

1. Existing goods: Goods which are owned or possessed by the seller
at the time of contract of sale are called existing goods. Existing
goods may be of three types such as specific goods, ascertained
goods and unascertained goods.
(a) Specific goods: These are the goods which are identified and
agreed upon at the time when the contract of sale is made
(b) Ascertained goods: These are the goods which are identified by
the parties subsequent to the information of the contract of sale.
The identification takes place at a later date.
(c) Unascertained goods: These are the goods which are not
specifically identified and agreed at the time when the contract of
sale is made.
2. Future goods: These are the goods which are to be manufactured
or produced or acquired by the seller after the contract of sale is
made. (Section 2(6)
3. Contingent goods: Contingent goods are a type of future goods,
the acquisition of which by the seller depends up on a contingency
which may or may not happen. They are also a type of future goods
and therefore a contract for sale of contingent goods operate as an
agreement to sell'.
3. Sale and Agreement to Sell
Generally sales means transfer of property from one person to
another in consideration of the price paid or promise of another
valuable consideration.
But where under a contract of sale the transfer of the property in the
goods is to take place at a future time or subject to some conditions
thereafter to be fulfilled, the contract is called an agreement to sell.
4. Distinction between Sale and an Agreement to Sell
1. Nature of contract: Sale is an executed contract i.e., it is a present
contract. Where as agreement to sell is an executory contract, i.e.,
which is yet to be executed, and therefore, is a future contract.
2. Transfer of property: In case of sale the transfer of property from
the seller to the buyer takes place immediately so that the seller is
no more the owner of the goods sold. In case of agreement to sell
the transfer of property is to take place at a future date or subject to
some conditions to be fulfilled. Seller continues to be the owner.
3. Risk of loss: In a sale, as the buyer becomes the owner of the
goods he has to suffer the loss if the goods are subsequently
damaged or destroyed. But in case of agreement to sell, since
ownership does not pass to the buyer the risk also does not pass to
him and remains with the seller.
4. Type of goods: In a sale, the subject matter can be only the
existing and specific goods where as in an agreement to sell, the
future and contingent goods are usually the subject matter.
Sometimes, it is unascertained existing goods.
5. Sale and Hire Purchase
A hire-purchase agreement is a contract where the buyer acquires
the possession of goods immediately and agrees to pay the total hire
purchase price in instalments. Each instalment is treated as a hire
charge until the payment of the last instalrnent
6. Sale and Bailment
Bailment is defined by Section 148 of Indian Contract Act 1872 as the
delivery of goods by one person to another for some purpose, upon
a contract that they shall, when the purpose is accomplished, be
returned or otherwise disposed of according to the directions of the
person delivering them".
7. Sale and Mortgage
Mortgage is an important method of creating charge over securities
while granting loans and advances to borrowers. It is a method of
creating charge on immovable properties like land and bulldings.
8. The Price of the Goods: According to Section 2(10) "price" means
the money consideration for a sale of goods. It is one of the essential
elements of contract, and is expressed in monetary terms.
9. Meaning and Definition of Warranty
A warranty is a stipulation collateral to the main purpose of the
contract, the breach of which gives rise to a claim for damages but
not to a right to reject the goods and treat the contract as
repudiated
10. Document of Title to Goods (Section 2 (4): Document of title to
goods is a proof of ownership of the goods. It enables the holder to
receive the goods mentioned there in or to further transfer such
right to another person by proper endorsement or delivery.
11. Earnest Money: Money deposited with the seller by the buyer as
security for due fulfilment of the contract is called earnest or
deposit) As the contract is carried through, earnest money counts as
part payment and only the balance of the price is required to be paid
12. Doctrine of Caveat Emptor
It is an important doctrine in connection with sale of goods. The term
Caveat Emptor means “let the buyer beware". According to this
doctrine (it is the duty of the buyer to be careful while purchasing
the goods, and he should satisfy himself that, the article which he
buys, is one which he wants.
13. Transfer Of Property In Goods
The most important feature of a contract of sale is transfer of
property or ownership. When the goods are sold, it is the property in
the goods that is transferred to the buyer. It may be noted that there
is a difference between property in goods and possession of goods.
Property in goods means the ownership of goods whereas
possession of goods refer to custody or control of goods. Thus the
transfer of possession is not the same thing as the transfer of
ownership. The ownership of goods may pass with or without the
transfer of possession.
14. Auction Sale B
An auction sale is a public sale to any person bidding the highest
price upon terms and conditions previously announced. The auction
is made public by advertising and being open to the public. In auction
sale, the property is available for viewing. Auctions are good ways for
buyers to find bargains on the items they most want and make
purchases that are far be- low current market value.
 Chapter 18
The Consumer Protection ACT 1986
Consumer Protection Act was passed with a view to provide for the
better protection of the interest of consumers and for that purpose
to make provisions for the establishment of consumer councils and
other authorities for the settlement of consumer's disputes and
other connected matters The Consumer Protection Act, 1986 is a
milestone in the history of socio- economic legislation of the country
1. Objectives of the Act
1. To provide for the promotion and protection of the rights of the
consumers.
2. To provide simple, speedy and in expensive redressal to the
consumers grievances and relief of a specific nature and award of
compensation to the consumers.
3. The Act is intended to provide better protection against
exploitation.
4. To make provisions for the establishment of consumer councils
and other authorities for the settlement of consumer’s disputes and
for the matters connected with it.
2. Salient features
1. The Consumer Protection Act covers all private public and
cooperative sector.
2. There are provisions for compensation and extra help to the
consumers in the Act.
3. The Act provides several rights to the consumers such as right to
safety, information, choice, representation, redressal and education.
4. The Act also safeguards the consumer against the risk of faulty or
defective goods and any risk, it may cause to the consumers.
5. The three tier redressal system i.e., the District Forum at district
level, State Commission at the state level and National Commission
at national level are the most important aspects of this Act.
6. The complaints are to be addressed and resolved within the
stipulated time limit and hence all cases are time bound.
7. The Act also has the provision to establish Consumers Protection
Council, to make the consumer aware of their rights.
3. Scope of the Act
The Act extends to the whole of India except the state of Jammu and
Kashmir The scope of the Act is concerned, it deals with buyer and
user of goods and also covers the beneficiary of services.
4. Definitions of Important Terms
1. Appropriate laboratory (Appropriate laboratory means a
laboratory or Organisation
(i) Recognised by the Central Government.
2. Branch office: Branch office means (i) any establishment described
as a branch by the opposite party; or (ii) any establishment carrying
on either the same or substantially the same activity as that carried
on by the head office of the establishment as that carried on by the
head office of the establishment
3. Complainant: Complainant means a consumer
4. Complaint: Complaint means any allegation in writing made by a
complainant
5. Consumer: The Act defines two types of consumers (a) consumer
of goods, (b) consumer of services.
6. Consumer dispute: Consumer dispute means a dispute where the
person against whom a complaint has been made, denies or disputes
the allegations contained in the complaint. [Section 2(1)
7. Defect: Defect means any fault, imperfection or shortcoming in
the quality, quantity, potency, purity or standard which is required to
be maintained by or under any law for the time being in force or
under any contract, express or implied or as is claimed by the trader
in any manner what so ever in relation to any goods. [Section 2 (1)
(f)) goods
8. Deficiency: Deficiency means any fault, imperfection, shortcoming
or inadequacy in the quality, nature and manner of performance
which is required to be maintained by or under any law for the time
being in force or
9. Goods: Goods means goods as defined in the Sale of Goods Act,
1930. [Section 2 (1)(i))
According to the Sale of Goods Act, goods means every kind of
movable property other than actionable claims and money
10. Manufacturer: Manufacturer means a person who makes or
manufactures any good
11. Person: Person includes;
(i) A firm whether registered or not;
(ii) A Hindu Undivided Family;
(iii a co-operative society;
(iv) Every other association of persons whether registered under the
Societies Registration Act 1860 or not.
5. Rights and Remedies for consumers
Rights
1. Right to be protected or right to safety
2. Right to be informed
3. Right to choose
4. Right to be heard
5. Right to seek redressal
6. Right to consumer education
Remedies or Relief to Consumers:
1. Removal of defects from the goods.
2. Replacement of defective goods.
3. Refund against defective goods or deficient services.
4. Award of compensation for the loss or injury suffered.
5. Removal of defects or deficiencies in the services.
6. Discontinuance of unfair trade practices or restrictive trade
practices or direction not to repeat them.
7. Prohibition on sale of hazardous goods.
Responsibilities of a Consumer:
1. Every consumer should aware of their rights under the
Consumer Protection Act and should practice the same in case of
need.
2. They should be well aware of the product they are buying, and
act as a cautious consumer while purchasing the product.
3. While making the purchase, he should demand a proper bill for
the pur- chase.
4. He should file a complaint if the product is faulty or not
satisfactory.
5. He should check the standard marks that have been introduced
for the authenticity of the quality of the product like ISI or
Hallmark etc.
 Chapter 19
Limited Liability Partnership Act 2008
Limited Liability Partnership is a combination of both partnership and
corporation. It has the features of both these forms. This form of
business becomes very popular now a days as many entrepreneurs
are opting this. All Limited Liability Partnership is governed under the
Limited Liability Partnership Act 2008 However in India LLP was
introduced in April 2009.
Limited Liability Partnership Act: As per the Act, LLP means a
partnership formed and registered under the Act. This Act extends to
the whole of India
Salient Features or Nature and Characteristics
1. Legal entity: The LLP shall be a body corporate formed and
incorporated under the LLP Act 2008, and is a legal entity separate
from that of its partners.
2. Continuous existence: An LLP shall have perpetual succession. Any
change in the partners of LLP shall not affect the existence, rights
and liabilities of the LLP.
3. Number of partners: Every LLP shall have at least two partners and
shall also have at least two individuals as designated partners of
whom at least one shall be resident in India. There is no maximum
limit to the number of partners are concerned.
4. Type of partners: Any individual or body corporate may be a
partner in LLP. Body corporate means a company as defined in the
Indian Companies Act
5. Rights and duties of partners: The mutual rights and duties of the
partners are governed by the agreement between the partners or
between the LLP and the partners subject to the provisions of the
LLP Act 2008.
6. Partners as agent: Every partner of a LLP is for the purpose of the
business of the LLP, the agent of the LLP but not of other partner.
7. Limited liability: The liability of the partners of LLP are limited only
the amount contributed by them.
9. Financial disclosure: Every LLP is under an obligation to maintain
annual account reflecting true and fair view of its state of affairs.
10. Winding up: An LLP may be wound up either voluntary or by the
Tribunal and an LLP so wound up may be dissolved.
Formation:
An LLP is a body corporate formed and incorporated under the LLP
Act, 2008. It has a legal entity separate from that of its partners and
have a perpetual succession Every limited liability partnership shall
have atleast two partners and there is no maximum limit .
Capital Contribution:
In case of LLP, there is no concept of any share capital, but every
partner is required to contribute towards the LLP in some manner as
specified in the LLP agreement. The contribution of the partner may
consist of tangible, movable or immovable or intangible property or
other benefit to the LLP including money, promissory notes, other
agreements to contribute cash or property, and contracts for
services performed or to be performed.
LLP Agreement:
LLP agreement means any written agreement between the partners
of the limited liability partnership or between the limited liability
partnership and its partners which determines the mutual rights and
duties of the partners and their rights and duties in relation to that
limited liability partnership.
Penalty for Improper Use of words "Limited Liability Partnership"
or "LLP":
If any person or persons carry on business under any name or title of
which the words "Limited Liability Partnership" or "LLP" or any
contraction or imitation thereof is or are the last word or words, that
person or each of those persons shall, unless duly incorporated as
limited liability partnership, be punishable with fine which shall not
be less than fifty thousand rupees but which may extend to five lakh
rupees.