made liaDIe
13.3 Distinction between Indemnity and Guarantee
The contractof indemnity differs from the contract of guarantee in the aspects shown in the following table:
SI. Contract of Indemnity
No.
- In this contract there are two parties - the
indemnifies and the indemnified
The primary liability ison the indemnifier
2
The indemnifier is not acting at the request
3
of the debtor.
The possibility of any loss happening is
4 the only contingency against which the
indemnifier undertakes to indemnify.
The indemnifier cannot sue the third party
5 in his own, unless there is an assignment.
The contract is between the indemnifier and
indemnified.
7 Defined u/s 124
2.13.4 Liability of surety
Contract of Guarantee
In this contract three parties are involved
principal debtors, surety and creditor
The principal liability is on the principal debtors.
Secondary liability is on the surety.
The surety gives contract at the request of the
principal debtor.
There is an existing debt for which the surety
gives guarantee to the creditor on behalf of the
principal debtor.
The surety is entitled to proceed against the
principal debtor when he is obliged to perform
the guarantee
The contract is between the principal debtor -
creditor; surety - creditor; principal debtor -
surety.
Defined u/s 126
Difference between Contact of Sale and Agreement to Sell

Basis Contract of sale Agreement to sell

Transfer of property The property of the goods passes from The transfer of property takes place
the buyer to the seller. at a future time or subject to certain
conditions to be fulflled.
lype of contract It is an executed contract. It is an executory contract.
 Business Laws and Ethics

Basis Contract of sale Agreementto sell

Type of goods Sales takes place only for existing and Future and contingent goods
specific goods.
Risk of loss If the goods are destroyed, the loss falls If the goods are destroyed, the loss als
on the buyer despite the goods are in the on the seller despite the goods are in he
possession of the seller. possession of the buyer.
Breach of contract The seller can sue the buyer for price and The seller can sue for damages oniy
for damages in case ofbreach by the buyer. case of breach by the buyer.
General and particular Itgives buyertoenjoy the goods as against It gives aright to the buyer agains e
property the world at large including the seller. seller to sue for damages.
Insolvency of the In the absence of lien over the goods the The seller is not bound to part with the
buyer seller is to return the goods to the Official goods until the price is paid to him
receiver or assignee. He is entitled to
get the dividend declared by the Official
receiver which will be at the reduced rate.
goods bu'
Insolvency of the seller The buyer, becoming the owner, is entitled The buyer cannot claim the Otticta
to recover the same from the Official the dividend declared by the
receiver or assignee. receiver or assignee.
was set for discharge on aspeiti.
Example: Mr.Aentered into a contract to sell his car to Mr. B. The contract
amount was not given on the specitied date, the
date and for acertain specified amount. However, if the certain
ld not take nlace.
petrol pump. as they had resevedthe same for the petrol pump
3.3.3 Difference between Condition and Warranty
SL Ve. Condition Warranty
Acondition is a stipulation which is essential to AWarranty is a stipulation which is collateral to
the main purpose of the contract. the main purpose of the contract
2
The aggrieved party can repudiate the contract of The aggrieved party can claim damages only in
sale in case there is a breach of a condition. case of breach ofa warranty
3.
Abreach of condition may be treated as a breach Abreach of a warranty, can not he treated as a
of a warranty. This would happen where the breach of a condition.
aggrieved party is contended with damages only.
Business Laws and Eihies

Distinction betwwn Promissory Note and Bill of Exehange Distin

SL No
Promlssory Nge Billof Eschange
Itis detined in Sec. 4 of NI Act, I881 It is defined in Sec. 5 of thc NI Act, l321
There are two parties Therc are three parties:
Maker. Drawer.
Payee Acceplor
Payec.
3 It contains a Promise to pay. It contains an order to pay.
3.
4 No conditions shall be made in a promissory A billmay be accepted conditionally 4
note.

The liabilityof a maker of the promissory note is The liability of thedrawee ofa bill of exchange
primary and absolute. is secondary and conditional.
Distinetion between Promissory Note and Cheque
SI. No. Promissory Note Cheque
It is defined in Sec. 4 of NIAct, 1881. It is defincd in Sec. 6 of the NI Act, 1881.
2 There are two partics: There are three parties:
Maer. (" Drawer.
Payee Drawee.
) Payee.
3. Promissory note contains a promise to pay the
sum with interest or without interest at a later Acheque is payable immediately on demand
date. without any days of grace.
4. Promissory note is not crossed.
Cheque can be crossed.
S. No protecction is available to the payce of
note. Statutory protection is given to the drawee
banker. (Sec. 128)
6 A promiSsory notecannot be self drawn.
A cheque can be self-drawn or bearer cheque. 4.1.
7 No criminal liability shall be
maker. imposed on the Criminal Liability may be imposed on drawe draw
for the dishonour of cheques in certain
8. circumstances. dravw
Stamp is necessary. D
Stamp is not necessary.
9 Limitation: 3 ycars
Limitation: 6 months
addi
Ac
one
on h
A
secu
SI. No. Holder Holder in due course

Holder is entitled in his own name to possess Holder in due course possesses the instrument
theinstrument and the amount thereon from for consideration before maturity and in good
parties involved. faith.

2. Title of the holder is subject to title of the Holder in due course gets a better title than
transferor. transfero.

3. Holder may receive the instrument without Holder in due course always receives the
consideration. instrument for consideration.

4. Holder does not get certain privileges available Holder in due course always gets privileges nol
available to holder.
to the holder in due course.
lenor
Section 10 defines this expression as payment in accordance with the apparent
Payment in due course oence to any person in possession thereof under circunstn
 Negotiation
Consideration is presumed until contrary is proved.
It transferee is a holder in due course he takes the
instrument free from any defects.
Notice of transfer is not necessary.
Negotiation iseffected by delivery in case of
instruments payable to bearer and by delivery and
endorsement in case of instrument payable to order.
Transteree can sue the third party in his own name.
There are a number of presumptions in favor of holder There are no such presumptions.
in due courses.
Assignment
Consideration must be proved
Assignee's title is always subject to defenses and
equities between the original debtor and assignor
Notice of assignment must be given.
Assignment is effected only by writing
Assignee cannot do so.

Discharge from liability

Chapter VIldeals with the discharge from liability onnegotiable instruments. Section 82
5.1.3 DDifleren

Basis Partnership Company

Legalentity It isnot a separate legal entity. Acompany is a separate legal entity.

The liability of the members of the companv
Iiability The liability of the partners is unlimited.
islimited.

required is two. Maximum number Minimum number of members tor a pnvate

Number of Minimum
company is 2and maximum 200 Minmum
members can be l00subject to some exceptions present number of members for a puble limted
Rules provide 50. limited tor
company Is 7 and there Is no
maximum.

transfer his share without the Transter of shares in apublic Imited compn
Transfer of partner
A cannot
IS not a restricted one.
shares consent of other members
be run by all or any of the The Boardof Directors has responsibility to
Management The firm can
partners.
run the management
No such relationship in the compny
Relationship The relationship with partners is of that of
agency.
 Basis Partnership Company
Profit Profit is distributed according to the agreement No requirement of profit distribution to
distribution entered between partners: if noagreement equal members. It is at the discretion of the
distribution. management to declare dividend that too
oniy out of profits.
Remedy to The crcditors of a firm can proceed against the The
creditors partners jointly and severally. creditors can proceed only aga1nst the
company and not against shareholders.
Audit Audit is not compulsory for the
partnership firm. Various types of audit are compulsory tor
the company
DIssolution Firm can be dissolved on the eve of
death of A company can be dissolved only by u
partner, retirement of partner etc., unless other-
Wise than agreed to in the agreement. winding up process as ordered by the CoU

in Gurugubilli Chendran Naidu V. Achanti Pydisetti - AIR 1985

sharc the NOC 135 (AP) it