1.

State the grounds upon which a contract may be discharged under the provisions of Indian Contract Act, 1872 Answer Discharge of a Contract: A Contract may be discharged either by an act of parties or by an operation of law which may be enumerated as follows : (1) Discharge by performance which may be actual performance or tender of performance. Actual performance is said to have taken place, when each of the parties has done what he had agreed to do under the agreement. hen the promisor offers to perform his obligation, but the promisee refuses to accept the performance. !t amounts to attempted performance or tender : (") Discharge by mutual agreement : #ection $" of the !ndian Contract Act, 1%&" provides if the parties to a contract agree to substitute a new contract for it or to refund or remit or alter it, the original contract need not to be performed. 'ovation, (escission, Alteration and (emission are also the same ground of this nature. ()) Discharge by impossibility of performance : *he impossibility may e+ist from its initiation. Alternatively, it may be supervening impossibility which may take place owing to (a). unforeseen change in law (b). *he destruction of sub,ect matter (c). *he non-e+istence or non-occurrence of particular state of things d). the declaration of war (#ection .$). (/) Discharge by lapse of time : A contract should be performed within a specific period as prescribed in the 0aw of 0imitation Act, 11$). !f it is not performed the party is deprived of remedy at law. (.) Discharge by operation of law : !t may occur by death of the promisor, by insolvency etc. ($) Discharge by breach of contract : 2reach of contract may be actual breach of contract or anticipatory breach of contract. hen a person repudiates a contract before the stipulated time, for its performance has arrived, it is an anticipatory breach. !f one of the parties to a contract breaks the contract the party in,ured thereby has a right of action for damages as well as he is also discharged from performing his part of the contract (#ection $/). (&) A promise may dispense with or remit the performance of the promise made to him or may accept any satisfaction he thinks fit. !n the first case, the contract will be discharged by remission and in the second it is accord and satisfaction (#ection $)). (%) hen a promisee neglects or refuses to afford the promisor reasonable facilities for the performance of the promise, the promisor is e+cused by such neglect or refusal (#ection $&). hat are his rights#

2. hat is the status of a !finder of goods" under the Indian Contract Act, 1872# Answer Status of a Finder of Goods & his Rights:

A person, who finds goods belonging to another and takes them into his custody is sub,ect to the same responsibility as a bailee. 3e is bound to take as much care of the goods as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, 4uality and value. 3e must also take all necessary measures to trace its owner. !f he does not, he will be guilty of wrongful conversion of the property. *ill the owner is found out, the property in goods will vest with the finder and he can retain the goods as his own against the whole world (e+cept the owner, of course). A finder of goods has the following rights under the !ndian Contract Act, 1%&"

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Right of lien : *he finder of goods has a right of lien over the goods for his e+penses. As such he can retain the goods against the owner until he receives compensation for trouble and e+penses incurred in preserving the goods and finding out the owner. 2ut he has no right to sue the owner for any such compensation (#ection 1$%). Right to sue for reward . *he finder can sue for any specific reward which the owner has offered for the return of the goods. 3e may also retain the goods until he receives the reward. (#ection 1$%) Right or resale : *he finder has a right to sell the goods in the following cases: (a) where the goods found is in danger of perishing5 (b) where the owner cannot, with reasonable diligence, be found out5 (c) where the owner is found out, but he refuses to pay the lawful charges of the finder5 and (d) where the lawful charges of the finder, in respect of the goods found, amount to "6)rd of its value.

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$.%&p'ain the genera' ru'es of re'ating to !Acceptance" under the Indian Contract Act, 1872. (enera' )u'es of Acceptance* 7ollowing are the general rules regarding acceptance under the !ndian Contract Act, 1%&": 1. ". ). /. .. $. &. %. 1. Acceptance must be absolute and un4ualified 8#ection &(!)9. Acceptance must be in the prescribed manner. !f the offer is not accepted in the prescribed manner, then the offeror may re,ect the acceptance within a reasonable time. Acceptance must be communicated to the offeree. !f acceptance is communicated to the person, other than the offeror, it will not create any legal relationship. Acceptance must be given by the party to whom the offer is made. Acceptance must be given within the prescribed time or within a reasonable time. Acceptance cannot be given before communication of an offer. Acceptance must be made before the offer lapses or is withdrawn. Acceptance must show intention to fulfill the promise. Acceptance cannot be presumed from silence.

1:. ;oing of desired act amounts to acceptance. +. hat tests can be app'ied in determining whether a person is an agent of another# State any five circumstances where under an agent is persona''y 'iab'e to a third party for the acts during the course of agency Determining Agency & Agent *he test for determining whether a person is or is not an agent is whether that person has the capacity to bind the principal and make him answerable to a third person by bringing him (the principal) into legal relations with the third person and thus establish a privity of contract between the party and the principal. !f yes, he is agent, otherwise not. *his relationship of agency may be created either by e+press agreement or by implication: <nder the following circumstances an agent is personally liable.

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hen he represents that he has authority to act on behalf of his principal, but who does not actually posses such authority or who has e+ceeded that authority and the alleged employer does not ratifies his acts. Any loss sustained by a third party by the acts of such a person (agent) and who relies upon the representation is to be made good by such an agent. here a contract is entered into by a person apparently in the character if agent, but in reality on his own account, he is not entitled to re4uired performance of it. here the contract e+pressly provides for the personal liability of the agent. hen the agent signs a negotiable instrument in his own name without making it clear that he is signing as an agent. here the agent acts for a principal who cannot be sued on account of his being a foreign #overeign, Ambassador, etc. here the agent works for a foreign principal. here a =overnment #ervant enters into a contract on behalf of the <nion of !ndia in disregard of Article "11 (1) of the Constitution of !ndia, !n such a case the suit against the agent can be instituted by the third party only and not by the principal (Chatturbhuj v. Moheshwar). here according to the usage of trade in certain kinds of business, agents are personally liable. hat is the effect of ratification# -oint out any

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,. hat do you understand by !Agency by )atification"# four e'ements of a va'id ratification. Answer

Agency by Ratification; its effect & essentials of valid ratification: .eaning* A person may act on behalf on another without his knowledge or consent. 0ater on such another person may accept the act of the former or re,ect it. !f he accepts the act of the former done without his consent, he is said to have ratified that act and it places the parties in e+actly the same position in which they would have been the former had later>s authority at the time he made the contract. 0ikewise, when an agent e+ceeds the authority bestowed upon him by the principal, the principal may ratify the unauthorised act. ffect of Ratification: *he effect of ratification is to tender the acts done by one person (agent) on behalf of another (principal), without his (principal>s) knowledge or authority, as binding on the other person (principal) as if they had been performed by his authority (#ection 11$: !ndian Contract Act, 1%&"). 7urther, ratification relates back to the date when the act was done by the agent. *his means the agency comes into e+istence from the moment the agent first acted and not from the time when the principal ratified the act. ssentials of a valid Ratification 1. ". ). /. .. $. &. *he agent must purport to act as agent for a principal who is in contemplation and is identifiable at the time of contract. *he principal must be in e+istence at the time of contract. *he principal must have contractual capacity both at the time of the contract and at the time of ratification. *he principal must have the full knowledge of all the material facts. (atification must be done with in a reasonable time of the act purported to be ratified. *he act to be ratified must be lawful and not void or illegal or ultra vires in case of a company. *he whole transaction can be ratified.

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(atification must be communicated to the party who is sought to be bound by the act done by the agent. (atification can be of the acts which the principal had the power to do.

1:. (atification should not put a third party to damages. 11. (atification relates back to the date of the act of the agent. ,./istinguish between Contract of Indemnity and Contract of (uarantee. Answer Contract of indemnity 1. *here are two parties to the contract vi?. indemnifier (promisor) and the !ndemnified (promise). 0iability of the indemnifier to the indemnified is primary and independent. *here is only one contract in case of a contract of indemnity, i.e., between the indemnifier and the indemnified. 1. Contract of Guarantee *here are three parties to the vi?. creditor, principal debtor and the surety 0iability of the surety to the creditor is collateral or secondary, the primary liability being that of the principal debtor. .!n a contract of guarantee there are three contracts, between principal ;ebtor and Creditor5 between creditor and the surety and between surety and principal debtor. !t is necessary that surety should give the guarantee at the re4uest of the debtor. *here is usually an e+isting debt or duty, the performance of which is guaranteed by the surety. A surety, on discharging the debt due by the principal debtor, steps into the shoes of the creditor. 3e can proceed against the principal debtor in his own right

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!t is not necessary for the indemnifier to act at the re4uest of the indemnified. *he liability of the indemnifier arises only on the happening of a contingency. An indemnifier cannot sue a third $. party for loss in his own name, because there is no privity of contract. 3e can do so only if there is an assignment in his favour.

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0. !An agreement made without consideration is void. ! ith reference to provisions of the Indian Contract Act, 1872 e&amine the va'idity of the statement and e&p'ain the cases in which the statement does not app'y. Answer !alidity of an Agreement without consideration: *he general rule is that an agreement made without consideration is void (#ection ".). !n every valid contract consideration is very important. A contract may only

be enforceable when an ade4uate consideration is there. 3owever, the !ndian Contract Act, 1%&" contains certain e+ceptions to this rule. !n the following cases, the agreement though made without consideration, will be valid and enforceable. "# $atural %ove and Affection: A written and registered agreement based on 'atural 0ove and Affection between the parties standing in near relation (e.g., husband and wife) to each other is enforceable even without consideration. A contract in writing, registered on account of natural love and affection between parties standing near relation to each other are the essential re4uirements for valid contract though it is without consideration. (Rajlukhee Devee vs. hootnath). &# Com'ensation for 'ast voluntary services: A promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, is enforceable under (#ection ".("). !n order that a promise to pay for the past voluntary services is binding, the following essential factors must e+ist: (i) (ii) the services should have been rendered voluntarily. the services must have been rendered for the promisor.

(iii) the promisor must be in e+istence at the time when services were rendered. (iv) the @romisor must have intended to compensate to the promisee. (# )romise to 'ay time barred debt: here a promise in writing signed by the person making it or by his authori?ed agent, is made to pay a debt barred by limitation it is valid without consideration 8#ection ".())9. *# Agency: According to #ection 1%. of the !ndian Contract Act, 1%&" no consideration is necessary to create an agency.s +# Com'leted gift: !n case of completed gifts, the rule no consideration no contract does not apply. A+planation (1) to #ection ". of the Act states B'othing in this section shall affect the validity as between the donor and donee, of any gift actually made.C *hus, gifts do not re4uire any consideration. 7.%&amine the va'idity of a contract when the acceptance from the offeree is obtained under 1Coercion2 or under 13ndue inf'uence2. -oint out the distinction between 1Coercion2 and 13ndue inf'uence2. Answer According to #ection 11 of the !ndian Contract Act, 1%&" when consent to an agreement is given due to coercion or undue influences, such a contract is voidable at the option of the party whose consent was so obtained. *he difference between coercion and undue influence is as under: Coercion (a) !t involves the physical force or threat. *he aggrieved party is complete to make the contract against its will. !t involves committing or threatening to commit an act forbidden by !ndian @enal Code for detaining or threatening to detain property of another person. !t is not necessary that there must be some relationship between the parties. Coercion need not proceed from the promisor nor need it be directed against the promisor. ,ndue -nfluence !t involves moral or mental pressure. *he aggrieved party believes that he or she would make the contract. 'o such illegal act is committed or a threat is given.

(b)

(c) (d)

#ome sort of relationship between the parties is absolutely necessary. <ndue influence is always essential between the parties to the contract.

(e)

*he contract is voidable at the option of the party whose consent has been obtained by the coercion. !n case of coercion where the aggrieved party, as per #ection $/, rescinds the contract any benefit received has to be restored back to the other party.

here consent is induced by undue influence, the contract is either voidable or the court may set it sale or enforce it in a modified form. *he court has the distinction to direct the aggrieved party to return the benefit in whole or in part or not to give any such directions.

(f)

8.%&p'ain the circumstances whereunder a party to a contract may be e&empted from the performance of contract on the ground of 1Supervening impossibi'ity2 under the Indian Contract Act, 1872. Answer Su'ervening im'ossibility: hen performance of a promise becomes impossible or illegal by occurrence of an une+pected, event or a change of circumstances beyond the contemplation of parties, is called supervening impossibility. !n case of supervening impossibility the contract becomes void. Circumstances: A party to a contract may be e+cused from the performance of his promise on the ground of Dsupervening impossibility> under the !ndian Contract Act, 1%&" in the following circumstances. (a) Accidental destruction of the sub,ect matter of the contract: !f the sub,ect matter of the contract is destroyed by an accident both the parties are e+cused from the performance of the contract. (b) 'on-e+istence or non occurrence of a particular state of things: 'on-e+istence or non occurrence of a particular state of things of the contract e+empts the parties from the performance of the contract. (c) !ncapacity to perform a contract of personal services: !n case of contract of personal service, disability or incapacity to perform, caused by the act of =od e.g. illness, constitutes lawful e+cuse for non-performance of the contract. (d) Change in law: @erformance of a contract may also become impossible due to a subse4uent change in the law. *he law passed after the contract may prohibit performance of some act, which may be very basis of the contract. As such the contract is discharged due to subse4uent impossibility and the parties become free from their mutual obligations. (e) Eutbreak of war: Contracts may be affected by war in a variety of ways, vi?., (i) by emergency legislation controlling prices or otherwise relating to restriction of trade5 (ii) by prohibiting or restraining transaction with alien enemy. 4.%&p'ain the provisions of 'aw re'ating to unpaid se''er2s 1right of 'ien2 and distinguish it from the !right of stoppage the goods in transit". Answer Right of lien of an un'aid seller *he legal provisions regarding the right of lien of an unpaid seller has been stated from #ections /& to /1 of the #ale of =oods Act, 11): which may be enumerated as follows :

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According to #ection /& the unpaid seller of the goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases namely : (a) (b) (c) where the goods have been sold without any stipulation as to credit. where the goods have been sold on credit, but the term of credit has e+pired5 or where the buyer becomes insolvent.

*he seller may e+ercise his right of lien not withstanding that he is in possession of the goods as agent or bailee for the buyer. (ii) #ection /% states that where an unpaid seller has made part delivery of the goods, he may e+ercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien. According to #ection /1 the unpaid seller loses his lien on goods : (a) (b) (c) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods. when the buyer or his agent lawfully obtains possession of the goods 5 by waiver thereof

(iii)

*he unpaid seller of the goods, having a lien thereon, does not lose his lien by reason only that he has obtained a decree to the price of the goods (ight of lien and (ight to stoppage the goods in transit5 distinction: (i) (ii) *he essence of a right of lien is to retain possession whereas the right of stoppage in transit is right to regain possession. #eller should be in possession of goods under lien while in stoppage in transit (i) #eller should have parted with the possession (ii) possession should be with the carrier and (iii) 2uyer has not ac4uired the possession.

(iii) (ight of lien can be e+ercised even when the buyer is not insolvent but it is not the case with right of stoppage in transit. (iv) (ight of stoppage in transit begins when the right of lien ends. *hus the end of the right of lien is starting point of the right of stoppage the goods in transit. 15. hat are the conse6uences of !destruction of goods" under the Sa'e of (oods Act, 14$5, where the goods have been destroyed after the agreement to se'' but before the sa'e is affected. Answer Destruction of Goods.Conse/uences: (i) !n accordance with the provisions of the #ale of =oods Act, 11): as contained in #ection &, a contract for the sale of specific goods is void if at the time when the contract was made5 the goods without the knowledge of the seller, perished or become so damaged as no longer to answer to their description in the contract, then the contract is void ab initio. *his section is based on the rule that where both the parties to a contract are under a mistake as to a matter of fact essential to a contract, the contract is void. !n a similar way #ection % provides that an agreement to sell specific goods becomes void if subse4uently the goods, without any fault on the par of the seller or buyer, perish or become so damaged as no longer

(ii)

to answer to their description in agreement before the risk passes to the buyer. *his rule is also based on the ground of impossibility of performance as stated above. !t may, however, be noted that section & F % apply only to specific goods and not to unascertained goods. !f the agreement is to sell a certain 4uantity of unascertained goods, the perishing of even the whole 4uantity of such goods in the possession of the seller will not relieve him of his obligation to deliver the goods. 11. hat do you understand by !Caveat7%mptor" under the sa'e of (oods Act, 14$5# e&ceptions to this ru'e# Answer DCaveat emptor> means Blet the buyer bewareC, i.e. in sale of goods the seller is under no duty to reveal unflattering truths about the goods sold. *herefore, when a person buys some goods, he must e+amine them thoroughly. !f the goods turn out to be defective or do not suit his purpose, or if he depends upon his skill and ,udgment and makes a bad selection, he cannot blame any body e+cepting himself. *he rule is enunciated in the opening words of section 1$ of the #ale of =oods Act, 11): which runs thus: B#ub,ect to the provisions of this Act and of any other law for the time being in force, there is no implied warranty or condition as to the 4uality or fitness for any particular purpose of goods supplied under a contract of saleC *he rule of caveat emptor does not apply in the following cases: 1. !itness for buyer"s purpose : here the buyer, e+pressly or by implication, makes know to the seller the particular purpose for which he re4uires the goods and relies on the seller>s skill or ,udgment and the goods are of a description which it is in the course of the seller>s business to supply, the seller must supply the goods which shall be fit for the buyer>s purpose. (#ection1$(1). #ale under a patent or trade name : !n the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition that the goods shall be reasonably fit for any particular purpose (#ection 1$(1). Merchantable $uality : here goods are bought by description from a seller who deals in goods of that description (whether he is in the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable 4uality. 2ut if the buyer has e+amined the goods, there is no implied condition as regards defects which such e+amination ought to have revealed. (#ection 1$("). %sage of trade : An implied warranty or condition as to 4ualify or fitness for a particular purpose may be anne+ed by the usage of trade. (#ection 1$()). Consent by fraud : here the consent of the buyer, in a contract of sale, is obtained by the seller by fraud or where the seller knowingly conceals a defect which could not be discovered on a reasonable e+amination, the doctrine of caveat emptor does not apply. hat are the

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12.In what ways does a !Sa'e" differ from !8ire7-urchase"# Answer Distinction between 0Sale1 and 02ire )urchase1 1. ". !n case of hire purchase, the agreement is that the hirer regularly pays the various installments agreed between the parties. !n #ale the payment-may be made cash -down or through installments. *he sub,ect matter of the hire, on payment of the last installment, shall become the property of the hirer, if such installments are not paid, the article will remain the property of the hire-vendor (seller) and the hire vendor will be entitled to regain possession thereof. !n #ale, the property in goods is transferred to the buyer immediately on signing the contract. A hire purchase agreement is both a bailment and an option to buy. !n case of #ale it is not so. !n case of hire purchase the hirer cannot sell the article to a third party. !n #ale the purchaser can do so. *his is based on the concept of ownership.

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1$. hat are the imp'ied conditions in a contract of 1Sa'e by samp'e2 under the Sa'e of (oods Act, 14$5# State a'so the imp'ied warranties operatives under the said Act. Answer *he-following are implied conditions in a contract of sale by sample in accordance with #ection 1& of the #ale of =oods Act, 11):5 (a) that the bulk shall correspond with the sample in 4uality5 (b) that the buyer shall have a reasonable opportunity of comparing the bulk with the sample. (c) that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on a reasonable e+amination of the sample 8#ection 1&(")9. -m'lied 3arrants: 1. 'arranty of $uiet possession (#ection )*(b)+, !n a contract of sale, unless there is a contrary intention, there is an implied warranty that the buyer shall have and en,oy 4uiet possession of the goods. !f the buyer is in any way distributed in the en,oyment of the goods in conse4uence of the seller>s defective title to sell, he can claim damages from the seller. 'arranty of freedom from encumbrances (#ection )*(c)+, *he buyer is entitled to a further warranty that the goods are not sub,ect to any charge or encumbrance in favour of a third party. !f his possession is in any way disturbed by reason of the e+istence of any charge or encumbrances on the goods in favour of any third party, he shall have a right to claim damages for breach of this warranty. 'arranty as to $uality or fitness by usage of trade (#ection )-(.)+. An implied warranty as to 4uality or fitness for a particular purpose may be anne+ed by the usage of trade, 'arranty to disclose dangerous nature of goods, here a person sells goods, knowing that the goods are inherently dangerous or they are likely to be dangerous to the buyer and that the buyer is ignorant of the danger, he must warn the buyer of the probable danger, otherwise he will be liable in damages.

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1+. -oint out the differences between conditions and warranties under the Sa'e of (oods Act, 14$5. Answer Condition and 3arranty S# $o# 1. 4asis of distinction 'ature Condition A condition is a stipulation which is essential to the main purpose of the contract. *he aggrieved party can repudiate the contract of sale in case there is a breach of a condition A breach of condition may be treated as a breach of a warranty. *his would happen where the aggrieved party is contended with damages only 3arranty A arranty is a stipulation which is collateral to the main purpose of the contract. *he aggrieved party can claim damages only in case of breach of a warranty. A breach of a warranty, con not be treated as a breach of a condition.

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1,.State brief'y the essentia' e'ement of a contract of sa'e under the Sa'e of (oods Act, 14$5. %&amine whether there shou'd be an agreement between the parties in order to constitute a sa'e under the said Act. Answer ssentials of Contract of Sale *he following elements must co-e+ist so as to constitute a contract of sale of goods under the #ale of =oods Act, 11):. (i) (ii) *here must be at least two parties *he sub,ect matter of the contract must necessarily be goods

(iii) A price in money (not in kind) should be paid or promised. (iv) A transfer of property in goods from seller to the buyer must take place. (v) A contract of sale must be absolute or conditional 8section /(")9. (vi) All other essential elements of a valid contract must be present in the contract of sale. *he #upreme Court has held in the case of B#tare of Madras /s. 0annon Dunkerley and Co. 12R ()3&3) # (&44)5 that according to the law in order to constitute a sale, it is necessary that there should be an agreement between the parties for the purpose of transferring title of goods which of course presupposes capacity to contract, that it must be supported by money consideration that as a result of transaction the property in the goods must actually pass etc.

"5 luminate the rules to delivery of goods under sale of goods act6 "# 7ode of delivery 8sec#((9- ;elivery should have the effect of putting the goods in the possession of the buyer or his duly authori?ed agent. ;elivery of goods may be (1) actual, (") constructive, or ()) symbolic. &# Delivery and 'ayment- concurrent conditions. ;elivery of goods and payment of the price must be according to the terms of the contract, delivery and payment are concurrent conditions, the seller shall be ready and willing to give possession of goods to the buyer in e+change for the price and vice versa. (# ffect of 'art delivery- A delivery of part of the goods in progress of the delivery of the whole has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole. *# 4uyer to a''ly for delivery- Apart from any e+cess contract, the seller of goods is not bound to deliver them until the buyer applies for delivery (sec.).). <nless otherwise agreed, the buyer has no cause of action against the seller if he does not apply for delivery. +# )lace of delivery- here the place at which the delivery of goods is to take place is specified in the contract, the goods must be delivered at that place during business hours on a working day. 5# :ime of delivery- here under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fi+ed, the seller is bound to send them within a reasonable time 8#ec.)$(/)9 ;# Goods in 'ossession of third 'arty- hen at the time of sale the goods are with a third party, there is no delivery by the seller to the buyer until such third party acknowledges to the buyer that he holds them on his behalf. <# Cost of delivery- <nless otherwise agreed, all e+penses of and incidental to making of delivery are borne by the seller, but all e+penses of and incidental to obtaining of delivery are borne by the buyer 8#ec.)$ (.)9 =# Delivery of wrong /uantity# 8Sec# (;9-*he delivery of the 4uantity of goods contracted for should be strictly according to the terms of the 4uantity of goods contracted for should be strictly according to the terms of the contract. A defective delivery entitles the buyer to re,ect the goods. *he three different contingencies which may arise in case of a defective delivery, i.e., delivery of wrong 4uantity, are: (1) ;elivery of goods less than contracted for: here the seller delivers to the buyer a 4uantity of goods less than he contracted to sell the buyer may re,ect the goods. !f he accepts them, he shall pay for them at the correct rate 8#ec. )& (1)9 (") ;elivery of goods in e+cess of 4uantity contracted for: here the seller delivers to the buyer a 4uantity of goods larger than he contracted to sell, the buyer may either accept or re,ect the whole 4uantity. ()) ;elivery of goods contracted for mi+ed with other goods: here the seller delivers to the buyer the goods he contracted to sell mi+ed with goods of a different description. "># -nstallment deliveries 8Sec# (<9 - <nless otherwise agreed, the seller is not entitled to deliver the goods by installments and if he does so, the buyer is not bound to accept the goods 8#ec. )%(1)9. ""# Delivery to a carrier or wharfinger 8Sec# (=9- here in pursuance of a contract of sale, goods are delivered to a carrier for the purpose of transmission to the buyer or to a wharfinger for safe custody, delivery of goods to them is prima facie deemed to be a delivery of the goods to the buyer Distinguish between 0Sale and agreement to sell16 1. :ransfer of 'ro'erty- !n a sale, the property in the goods passes from the seller to the buyer immediately so that the seller is no more the owner of the goods sold. !n the sense, a sale is an e+ecuted contract and an agreement to sell is an e+ecutory contract. ". :y'e of goods-A sale can only be in case of e+isting and specific goods only. An agreement to sell is mostly in case of future and contingent goods although in some cases it may refer to unascertained e+isting goods. ). Ris? of loss-!n a sale, if the goods are destroyed, the loss falls on the buyer even though the goods are in the possession of the seller. !n an agreement to sell, if the goods are destroyed, the loss falls on the seller, even though the goods are in the possession of the buyer. /. Conse/uences of breach-!n a sale, if the buyer fails to pay the price of the goods the seller can sue the buyer. !n an agreement to sell if there is a breach of contract by the buyer, the seller can sue only for damages. .. Right to re.sell-!n a sale the seller cannot re-sell the goods e+cept in certain cases. !n an agreement to sell in case of resale, the buyer, who takes the goods for consideration and without notice of the prior agreement, gets a good title.

$. General and 'articular 'ro'erty-A sale is a contract plus conveyance, and creates ,us in rem. An agreement to sell is merely a contract, pure and simple, and creates ,us in personem. &. -nsolvency of buyer- !n a sale if the buyer becomes insolvent before he pays for the goods, the seller, in the absence of a lien over the goods, must return them to the Efficial (eceiver or Assignee. %. -nsolvency of seller- !n a sale if the seller becomes insolvent, the buyer, being the owner, is entitled to recover the goods from the Efficial (eceiver or Assignee. !n an agreement to sell, if the buyer, who has paid the price, finds that the seller has become insolvent, he can only claim a rate able dividend and not the goods because property in them has not yet passed to him. 18.%&p'ain the provisions of 'aw re'ating to unpaid se''er2s 1right of 'ien2 and distinguish it from the !right of stoppage the goods in transit". Answer Right of lien of an un'aid seller *he legal provisions regarding the right of lien of an unpaid seller has been stated from #ections /& to /1 of the #ale of =oods Act, 11): which may be enumerated as follows : (i) According to #ection /& the unpaid seller of the goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases namely : (a) (b) (c) where the goods have been sold without any stipulation as to credit. where the goods have been sold on credit, but the term of credit has e+pired5 or where the buyer becomes insolvent.

*he seller may e+ercise his right of lien not withstanding that he is in possession of the goods as agent or bailee for the buyer. (ii) #ection /% states that where an unpaid seller has made part delivery of the goods, he may e+ercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien. According to #ection /1 the unpaid seller loses his lien on goods : (a) (b) (c) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods. when the buyer or his agent lawfully obtains possession of the goods 5 by waiver thereof

(iii)

*he unpaid seller of the goods, having a lien thereon, does not lose his lien by reason only that he has obtained a decree to the price of the goods (ight of lien and (ight to stoppage the goods in transit5 distinction: (i) (ii) *he essence of a right of lien is to retain possession whereas the right of stoppage in transit is right to regain possession. #eller should be in possession of goods under lien while in stoppage in transit (i) #eller should have parted with the possession (ii) possession should be with the carrier and (iii) 2uyer has not ac4uired the possession.

(iii) (ight of lien can be e+ercised even when the buyer is not insolvent but it is not the case with right of stoppage in transit.

(iv) (ight of stoppage in transit begins when the right of lien ends. *hus the end of the right of lien is starting point of the right of stoppage the goods in transit.

14. hat do you understand by !Caveat7%mptor" under the sa'e of (oods Act, 14$5# e&ceptions to this ru'e# Answer

hat are the

DCaveat emptor> means Blet the buyer bewareC, i.e. in sale of goods the seller is under no duty to reveal unflattering truths about the goods sold. *herefore, when a person buys some goods, he must e+amine them thoroughly. !f the goods turn out to be defective or do not suit his purpose, or if he depends upon his skill and ,udgment and makes a bad selection, he cannot blame any body e+cepting himself. *he rule is enunciated in the opening words of section 1$ of the #ale of =oods Act, 11): which runs thus: B#ub,ect to the provisions of this Act and of any other law for the time being in force, there is no implied warranty or condition as to the 4uality or fitness for any particular purpose of goods supplied under a contract of saleC *he rule of caveat emptor does not apply in the following cases: 1. !itness for buyer"s purpose : here the buyer, e+pressly or by implication, makes know to the seller the particular purpose for which he re4uires the goods and relies on the seller>s skill or ,udgment and the goods are of a description which it is in the course of the seller>s business to supply, the seller must supply the goods which shall be fit for the buyer>s purpose. (#ection1$(1). #ale under a patent or trade name : !n the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition that the goods shall be reasonably fit for any particular purpose (#ection 1$(1). Merchantable $uality : here goods are bought by description from a seller who deals in goods of that description (whether he is in the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable 4uality. 2ut if the buyer has e+amined the goods, there is no implied condition as regards defects which such e+amination ought to have revealed. (#ection 1$("). %sage of trade : An implied warranty or condition as to 4ualify or fitness for a particular purpose may be anne+ed by the usage of trade. (#ection 1$()). Consent by fraud : here the consent of the buyer, in a contract of sale, is obtained by the seller by fraud or where the seller knowingly conceals a defect which could not be discovered on a reasonable e+amination, the doctrine of caveat emptor does not apply. hen can

".

).

/. &.

25. hat do you understand by the term !unpaid se''er" under the Sa'e of (oods Act, 14$5# an unpaid se''er e&ercise the right of stoppage of goods in transit# Answer ,n'aid Seller

According to #ection /. of the #ale of =oods Act, 11): the seller of goods is deemed to be an D<npaid #eller> when(a) the whole of the price has not been paid or tendered. (b) a bill of e+change or other negotiable instrument has been received as conditional payment, and it has been dishonoured.

Right of sto''age of goods in transit hen the unpaid seller has parted with the goods to a carrier and the buyer has become insolvent, he can e+ercise this right by asking the carrier to return the goods back, or not to deliver the goods to the buyer. 3owever, the right of stoppage in transit is e+ercised only when the following conditions are fulfilled: (a) *he seller must be unpaid. (b) *he seller must have parted with the possession of goods. (c) *he goods must be in the course of transit. (d) *he buyer must have become insolvent. (e) *he right is sub,ect to provisions of the Act. 21. -oint out the differences between conditions and warranties under the Sa'e of (oods Act, 14$5. Answer Condition and 3arranty S# $o# /. 4asis of distinction 'ature Condition A condition is a stipulation which is essential to the main purpose of the contract. *he aggrieved party can repudiate the contract of sale in case there is a breach of a condition A breach of condition may be treated as a breach of a warranty. *his would happen where the aggrieved party is contended with damages only 3arranty A arranty is a stipulation which is collateral to the main purpose of the contract. *he aggrieved party can claim damages only in case of breach of a warranty. A breach of a warranty, con not be treated as a breach of a condition.

..

(ights

$.

Eption

22. State brief'y the essentia' e'ement of a contract of sa'e under the Sa'e of (oods Act, 14$5. %&amine whether there shou'd be an agreement between the parties in order to constitute a sa'e under the said Act. Answer ssentials of Contract of Sale *he following elements must co-e+ist so as to constitute a contract of sale of goods under the #ale of =oods Act, 11):. (i) (ii) *here must be at least two parties *he sub,ect matter of the contract must necessarily be goods

(iii) A price in money (not in kind) should be paid or promised.

(iv) A transfer of property in goods from seller to the buyer must take place. (v) A contract of sale must be absolute or conditional 8section /(")9. (vi) All other essential elements of a valid contract must be present in the contract of sale. *he #upreme Court has held in the case of B#tare of Madras /s. 0annon Dunkerley and Co. 12R ()3&3) # (&44)5 that according to the law in order to constitute a sale, it is necessary that there should be an agreement between the parties for the purpose of transferring title of goods which of course presupposes capacity to contract, that it must be supported by money consideration that as a result of transaction the property in the goods must actually pass etc.

2$. /istinguish between a 1Condition2 and a 1 arranty2 in a contract of sa'e. hen sha'' a 1breach of condition2 be treated as 1breach of warranty2 under the provisions of the Sa'e of (oods Act, 14$5 # %&p'ain. 1nswer Difference between Condition and 3arranty (i) (ii) A condition is a stipulation essential to the main purpose of the contract whereas a warranty is a stipulation collateral to the main purpose of the contract. 2reach of condition gives rise to a right to treat the contract as repudiated whereas in case of breach of warranty, the aggrieved party can claim damage only.

(iii) 2reach of condition may be treated as breach of warranty whereas a breach of warranty cannot be treated as breach of condition. According to #ection 1) of the #ale of =oods Act, 11): a breach of condition may be treated as breach of warranty in following circumstances: (i) (ii) (iii) (iv) here a contract of sale is sub,ect to any condition to be fulfilled by the seller, the buyer may waive the condition, here the buyer elects to treat the breach of condition as breach of a warranty. here the contract of sale is non-severable and the buyer has accepted the whole goods thereof. or any part

here the fulfillment of any condition or warranty is e+cused by law by reason of impossibility or otherwise.

2+. hether a minor may be admitted in the business of a partnership firm# %&p'ain the rights of a minor in the partnership firm. Answer 7inor as a 'artner : A minor is incompetent to do the contract and such contract is void-ab-initio (Mohiribibi vs. Dharam Das 0hose). *herefore, a minor cannot be admitted in the business of the partnership firm because the partnership is formed on a contract. *hough a minor cannot be a partner in a firm, he can nevertheless be admitted to the benefits of partnership under section ): of the @artnership Act, 11)". 3e may be validly have a share in the profit of the firm but this can be done with the consent of all the partners of the firm. Rights of the minor in the firm :

(i) (ii)

a minor has a right to his agreed share of the profits and of the firm. he can have access to, inspect and copy the accounts of the firm.

(iii) he can sue the partners for accounts or for payments of his share but only, when severing his connection with the firm, and not otherwise. *he amount of share shall be determined by a valuation made in accordance with the rules upon a dissolution. (iv) on attaining ma,ority he may within $ months elect to become a partner or not to become a partner. !f he elects to become a partner, then he is entitled to the share to which he was entitled as a minor. !f he does not, then his share is not liable for any acts of the firm after the date of the public notice served to that effect. 2,. hat is the procedure of registration of a partnership firm under the Indian -artnership Act, 14$2 # hat are the conse6uences of non7registration# Answer Registration of a )artnershi' & Conse/uences of $on.Registration )rocedure: (#ection .% F .1 !ndian @artnership Act, 11)") *he registration of a firm may be effected at any time by filing an application in the form of a statement, giving the necessary information, with the (egistrar of 7irms of the area. *he application shall be accompanied by the prescribed fee. !t shall also state: (a) the name of the firm5 (b) the place or principal place of business of the firm5 (c) the names of other places where the firm carries on business5 (d) the date when each partner ,oined the firm (e) the names in full and permanent address of the partners5 (t) the duration of the firm. *he statement shall be signed by all the partners or by their agents specially authori?ed in this behalf #ection .%(i). !t shall also be verified by them in the prescribed manner (#ection .%("). hen the (egistrar is satisfied that the above provisions have been duly complied with, he shall record an entry of the statement in the (egister of 7irms and file the statement (#ection .1). 3e shall then issue under his hand a certificate of registration. 6he non7registration of the firm does not affect the following, 1. ". ). *he right of a firm or partners of a firm having no place of business in !ndia. *he right to file any suit or claim of set off e+ceeding (s. 1:: in value. *he right of a partner to sue for the dissolution of the firm, or for the accounts of the dissolved firm, or for share of the property of the dissolved firm. *his disability of a partner to sue disappears with the dissolution of the firm. *he powers of an Efficial (eceiver, Assignee, or Court to reali?e the property of an insolvent partner of an unregistered firm. *he right of a third party to proceed against an unregistered firm or any of its partners. *he right of an unregistered firm to enforce a right arising otherwise than out of a contract (#ection $1()) and (/).

/. .. $.

20. hen does disso'ution of a partnership firm ta9e p'ace under the provisions of the Indian -artnership Act, 14$2# %&p'ain. Answer Dissolution of Firm: *he ;issolution of 7irm means the discontinuation of the ,ural relation e+isting between all the partners of the 7irm. 2ut when only one of the partners retires or becomes in capacitated from acting as a partner due to death, insolvency or insanity, the partnership, i.e., the relationship between such a partner and other is dissolved, but the rest may decide to continue. !n such cases, there is in practice, no dissolution of the firm. *he particular partner goes out, but the remaining partners carry on the business of the 7irm. !n the case of dissolution of the firm, on the other hand, the whole firm is dissolved. *he partnership terminates as between each and every partner of the firm. ;issolution of a 7irm may take place (#ection )1 - //) (a) as a result of any agreement between all the partners (i.e., dissolution by agreement)5 (b) by the ad,udication of all the partners, or of all the partners but one, as insolvent (i.e., compulsory dissolution)5 (c) by the business of the 7irm becoming unlawful (i.e., compulsory dissolution)5 (d) sub,ect to agreement between the parties, on the happening of certain contingencies, such as: (i) effluence of time5 (ii) completion of the venture for which it was entered into5 (iii) death of a partner5 (iv) insolvency of a partner. !n case of death, it is to be noted that the partners may make a contrary agreement only if their number e+ceeds two. !f there are only two partners the only result of either>s death will necessarily be the dissolution of the firm. *his was made clear by the #upreme Court in Commissioner of 2ncome7ta8 vs. 0.#. Mills. (e) by a partner giving notice of his intention to dissolve the firm, in case of partnership at will and the firm being dissolved as from the date mentioned in the notice, or if no date is mentioned, as from the date of the communication of the notice5 and (f) by intervention of court in case of: (i) a partner becoming the unsound mind5 (ii) permanent incapacity of a partner to perform his duties as such5 (iii) Gisconduct of a partner affecting the business5 (iv) willful or persistent branches of agreement by a partner5 (v) transfer or sale of the whole interest of a partner5 (vi) improbability of the business being carried on save at a loss5 (vii) the court being satisfied on other e4uitable grounds that the firm should be dissolved.

27. ho is a ho'der in due course of a :egotiab'e Instrument# In what respects does he differ from a ho'der# Answer 2older -n Due Course: !t means any person who, for consideration became its possessor before the amount mentioned in it became payable. !n the case of an instrument payable to order, Hholder in due courseH means any person who became the payee or endorsee of the instrument before the amount mentioned in it became payable. !n both the cases, he must receive the instrument without having sufficient cause to believe that any defect e+isted in the title of the person from whom he derived his title. !n other words, holder in due course means a holder who takes the instrument bona fide for value before it is overdue, and without any notice of defects in the title of the person, who transferred it to him. *hus a person who claims to be Hholder in due courseH is re4uired to prove that:

"# &# (#

on 'aying a valuable consideration@ he became either the 'ossessor of the instrument if 'ayable to order; 2e had come into the 'ossession of the instrument before the amount due thereunder became actually 'ayable; and 2e had come to 'ossess the instrument without having sufficient cause to believe that any defect eAisted in the title of transferorBs from whom derived his title#

Distinction between 2older & 2older in Due Course: "# A holder may become the.'ossessor or 'ayee of an instrument even without consideration@ whereas a holder in due course is one who ac/uires 'ossession for consideration# &# A holder in due course as against a holder@ must become the 'ossessor 'ayee of the instrument before the amount thereon become 'ayable# (# A holder in due course as against a holder@ must have become the 'ayee of the instrument in good faith i#e#@ without having sufficient cause to believe that any detect eAisted in.the transferorBs title#

28. %&p'ain c'ear'y the meaning of the term 1-romissory2 :ote as provided in the :egotiab'e Instruments Act, 1881. In what way does a 1-romissory :ote2 differ from a 1;i'' of %&change2# Answer 7eaning of 'romissory note & distinction with bill of eAchange: A promissory note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of a certain person, or the bearer of the instrument. D-S:-$C:-C$: "# &# (# *# :here are two 'arties in a )romissory $ote D ma?er and the 'ayee# -n a bill there are three 'arties . the drawer@ the drawee and the 'ayee# )romissory $ote contains an unconditional 'romise to 'ay# A 4ill of unconditional older to 'ay# Achange contains an

7a?er of a note is the debtor and he himself underta?es to 'ay# :he drawer of a bill is the creditor who directs the drawee 8his debtor9 to 'ay# 7a?er of a note corres'onds in general to the acce'tor of a bill# 4ut the ma?er of the note cannot underta?e to 'ay conditionally whereas the acce'tor may acce't the bill conditionally because he is not the originator of the bill# :he liability of a ma?er of a note is 'rimary and absolute@ whereas the liability of the drawer of a bill is secondary and conditional 8Section (> and (&9; A note cannot be made 'ayable to the ma?er himself@ whereas in a bill the drawer and the 'ayee may be one and the same 'erson# A note re/uires no acce'tance and it is signed by the 'erson who is liable to 'ay# A bill 'ayable after sight or after a certain 'eriod must be acce'ted by the drawee before it is 'resented for 'ayment#

+# 5# ;#

<# =# ">#

A note cannot be drawn 'ayable to bearer# A bill can be so drawn# 4ut in no case can a note or bill be drawn 0'ayable to bearer on demand1# :he ma?er of a note stands in immediate relation with the 'ayee@ the drawer of a bill stands in immediate relation with the acce'tor and not the 'ayee# 8 A'lanation to Section **9 Certain 'rovisions li?e 'resentment for acce'tance 8Section 5"9@ acce'tance 8Section ;+9@ acce'tance for honour 8Section "><9@ and bill in sets 8Section "(&9 a''ly to bills but not to notes#

24. hen is an a'teration of an instrument treated as a materia' a'teration under the :egotiab'e Instruments Act, 1881# hat is the effect of such an a'teration# Answer Material alteration, An alteration is material whichI 8i9 8ii9 alters the character or identity of the instrumentEor which sha?es the very foundation of the instrument@ or changes the rights and liabilities of the 'arties@ any of the 'arties to the instrument; or

8iii9 alters the o'eration of the instrument# 8iv9 any changes in the instrument which causes it to s'ea? a different language in effect from that which it originally s'o?e or which changes the legal identity or character of this instrument@ either in its terms or the relation of the 'arties to it@ is a material alteration# -t ma?es no difference whether the alteration is beneficial or 'reFudicial# 8Ram'adarath v# 2ari $arain9# *he following alterations are material and vitiate the instrument, vi? alterations of 8i9 8ii9 8iii9 8iv9 8v9 8vi9 Date Sum 'ayable :ime of 'ayment )lace of 'ayment Rate of interest Addition of 'lace of 'ayment

*he following alterations, though material, are permitted by the 'egotiable !nstruments Act, 1%%1 and do not invalidate the instrument: "# &# (# *# Filling blan?s of inchoate instruments# 8Section &>9 Conversion of a blan? indorsement into an indorsement in full 8Section *=9 Gualified acce'tance 8Section <59 Crossing of che/ues 8Section "&+9

%ffect of materia' a'teration* *he effect of a material alteration of a negotiable instrument is only to discharge those who become parties thereto prior to the alteration5 2ut if an alteration is made in order to carry out the common intention of the original parties, it does not render the instrument void. Any material alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof.

(># 3hat do you understand by Hcrossing of che/uesI6 3hat is the obFect of crossing6

Answer Crossing of Che/ues: .eaning* Crossing of che4ue means putting on the che4ue two parallel transverse lines with or without the words (F Co.) written between the lines. *herefore, crossing is a direction to the drawee banker to pay the amount of money on the crossed che4ue generally to a banker or a particular banker so that the party who obtains the payment of the che4ue can be easily traced. <b=ect* *he ob,ect of crossing che4ue is to provide safety to the che4ue. !n order to prevent the losses which might be incurred if a che4ue is an open one, (i.e.- without crossing) and going to wrong hands, the crossing has been introduced. -m'lications of: 8i9 )estrictive Crossing* -n this ty'e of crossing the words 0 Account )ayee1 are added to the general or s'ecial crossing# Sometime@ words li?e 0Account )ayee & $ot $egotiable1 or 04an? of -ndia 8it could be any 4an?9 Account 7r# J1 may be added# :he words 0Account )ayee1 on a che/ue are a direction to the collecting ban?er that the amount collected on the che/ue is to be credited to the account of the 'ayee# Such che/ues are negotiable# :ot :egotiab'e* :he im'lication of this ?ind of crossing is that@ the title of transferee of such a che/ue cannot be better than of its transferor# :he use of the words Hnot negotiableI in a crossed che/ue does not render the che/ue non.negotiable but only affects one of the main features of negotiability# Che/ues with not negotiable crossing are negotiable so long as their title is good# Cnce the title of the transferor or endorser becomes defective the title of the transferee is also affected by such defect and the transferee cannot claim the right of a holder in due course# -n other words@ nobody can 'ass on a title better than what he himself has# Any one who ta?es a che/ue mar?ed Hnot negotiableI ta?es at his own ris?#

8ii9

$1. State the grounds on the basis of which a che6ue may be dishonoured by a ban9er, inspite of the fact that there is sufficient amount in the account of the drawer. Answer Dishonour of che/ue by ban?er: A banker is ,ustified to dishonour a che4ue in the following circumstances: 1. ". ). /. .. $. &. %. 1. 1:. 11. 1". !f a che4ue is undated. !f it is stale - i.e. not been presented within reasonable period. !f the instrument is inchoate or not free from reasonable doubt. hen che4ue presented before ostensible date. hen customer>s funds are not properly applicable. hen customers draws che4ue upon another branch of the same bank. !f the banker receives notice of customer>s insolvency or lunacy. !f the customer countermands the payment of che4ue. !f the court has given order to the 2anker not to make payments. !f the customer dies and there is notice to the 2anker. !f notice in respect of closure of the account is served by either party on the other. !f it contains material alteration.

(&# 3hat is the rule of evidence with regard to entries in the Register of firms6 Answer *he !ndian @artnership Act, 11)" provides that registration of firms may be effected at any time by filing an application in the form of a statement, giving the necessary information, with the (egistrar of 7irms of the area. #ection .& of the Act empowers the #tate =overnment to appoint (egistrar of 7irms for the purposes of the @artnership Act and defines the areas within which they shall e+ercise their powers and perform their duties. Application for registration of a firm shall be accompanied by the prescribed fee. !t shall state: (a) the name of the firm (b) place or principal place of business of the firm5 (c) names of other places where the firm carries on business5 (d) date when each partner ,oined the firm5 (e) names in full and permanent addresses of the partners5 (f) duration of the firm. *he application shall be signed by all the partners or by their agents specially authori?ed in this behalf. !t shall also be certified by them in the prescribed manner. hen the (egistrar is satisfied that the above provisions have been complied, he shall record an entry in the (egistrar of 7irms and issue a certification of registration. (egistration takes effect from the date on which the (egistrar makes entries in the (egister of 7irms. Any statement, notice or intimation recorded with the (egistrar by any person shall be a conclusive proof against him of any fact therein stated. *he third parties can, however, challenge the fact of statement and prove that it is false and is based on mis-representation or fraud