Prepared By – Swapnil Shahane

Answers Prepared by – Swapnil Shahane

1)Rights and remedies under Sale of Goods Act. Remedies.

Rights of the seller under the Sale of Goods Act, 1930

1. To reserve the right to dispose of the goods until certain conditions are met in accordance with
Section 25(1).
2. To consider a sale on approval to be completed when the buyer conveys his acceptance,
performs an act adopting the sale, or retains the goods after the stated date (or a reasonable
amount of time) without providing notice of rejection. (Section 24)
3. To only deliver the goods upon request from the buyer. (Section 35)
4. To provide the goods in instalments when agreed upon. [Section 39(1)]
5. To assert a lien and maintain ownership of the items until the purchase price is paid [Section
47(1)]
6. Until the price is paid, the goods may be stopped in transit and returned to the owner
[Sections 49(2) and 50].
7. To resell the goods in certain conditions. (Section 54)
8. Keeping the goods from being delivered until the buyer acquires ownership. [Section 46(2)]
9. When ownership of the goods has been transferred to the buyer or when the price is due on a
specific date under the terms of the contract and the buyer does not make the payment, the
seller may bring a price claim against the buyer. [Section 55]

Rights of the buyer under the Sale of Goods Act, 1930

1. To receive the items in accordance with the contract. (Sections 31 & 32)
2. Rejecting the goods when they don’t match the contract’s specifications for description, quality,
or quantity. (Section 37)
3. When goods are given in instalments without a written agreement to that effect, the contract
may be terminated. [Section 38(1)]
4. The seller must inform the buyer when the goods are being shipped by sea so that the buyer can
make insurance arrangements. [Section 39(3)]
5. To be given a fair chance to inspect the goods and determine whether they are in compliance
with the contract. (Section 41)
6. To file a lawsuit against the seller if they don’t deliver the goods in order to get their money
back.
7. If the seller wrongfully fails or declines to deliver the goods to the customer, the buyer has the
right to sue the seller for damages. (Section 57)
8. To bring a specific performance claim against the seller.
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9. To file a claim against the seller for damages for failing to uphold a warranty or a situation that is
deemed to be a violation of a warranty (Section 59)
10. To file a claim against the seller for damages for a potential violation of the contract (Section 60)
11. When a seller breaches a contract and must refund the customer’s money, the buyer may sue
the seller for interest (Section 61)

Rights of an unpaid seller under the Sale of Goods Act, 1930

1. Right to lien
a. There is no stipulation as to credit. The seller is liable to deliver the goods to the buyer when
demanded by the buyer but he has no right to have possession of the goods till he pays the
price.
b. A sale on credit operates as a waiver of the lien during the currency of the credit,
c. If the buyer becomes insolvent before the price is paid, and the seller is in possession of the
goods, he is entitled to retain possession even if the goods are sold on credit and the term
of credit has not expired.
2. Rights of stoppage of goods in transit
a. By assuming actual possession of the goods.
b. By providing a statement to the seller identifying who is in possession of the goods
3. Suit for breach of contract
a. Suit for price by the seller against the buyer
b. Suit for damages by the seller against the buyer for non-acceptance of the goods
c. Suit for damages by the buyer against the seller for non-delivery of the goods
d. Suit for specific performance by the buyer against the seller
e. Suit by the buyer against the seller for breach of warranty
f. Suit for damages by seller or buyer for anticipatory breach of contract
g. Interest by way of damages and special damages

Remedies Under Sale of Goods Act

Seller’s Remedies against Buyer
Suit for Price: Section 55[1] of the Sale of Goods Act states two conditions. The first is that when any goods
are passed to the buyer under the contract to a sale, and the buyer intentionally neglects payment or
refuses to pay for the goods according to the terms stated in the contract, the seller may sue the buyer for
the payment of the price of the goods. The second provision states that when payment is due on a
particular day, irrespective of whether or not it has been delivered or not, and the buyer is neglecting the
payment or refusing to pay for the good, the seller may sue the buyer to recover the price of the goods. In
the case the buyer is required to pay the seller partly in kind and partly in cash, if either of the payment is
not given to the seller, then he has the right to sue the buyer.parcel11
Damage for Non-Acceptance: Section 56 of the Act states that when the buyer is intentionally and
wrongfully refusing to accept the goods and pay for the same, the seller may sue the buyer for non-
acceptance of goods. The damage is to be calculated on the basis of the principle which has been given
under Section 73 and 74 of the Indian Contract Act, 1872.[2] Section 73 of the Contracts Act states that
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when any breach of contract happens, the party who suffers any loss can recover the amount from the
person who breached the contract. The damage which can be recovered is the loss which would have
occurred in the usual course and about which the parties knew when the agreed to enter into a contract.
Buyer’s Remedies against the Seller
Damages for Non-Delivery: Section 57 of the Act states that if the seller is intentionally or wrongfully
neglecting the delivery of the goods to the customer, the customer can sue the seller for damages for non-
delivery. In the case where the property in the goods has been passed to the buyer, and the buyers have
the right to immediate possession, he gets all the remedies an owner of the goods will get against anyone
whose activities are inconsistent with his rights. When the amount of damage is to be calculated, it’ll be
done on the basis of the difference between the contract price and the market price on which the damage
occurred. In the case where the buyer had paid the money in advance, the date which is to be considered
for measuring the damages will be the day on which the payment was made. The buyer can also claim the
amount which was used to find an alternate remedy for the breach.
Remedy for Breach of Warranty: Section 59 of the Act states that when there is a breach of warranty on
the part of the seller, the buyer is not entitled to reject the goods on that basis, but he may sue the seller
breach of warranty in diminution or extinction of the price. The seller may also sue the buyer for breach of
warranty in the diminution or extinction of the price.
Specific Performance: Section 57 of the Act states that subject to provisions mentioned under Specific
Relief Act, 1877,[6] in a case of breach of contract, the Court may, on an application by the plaintiff direct
the defendant that the contract should be performed specifically. The decree passed by the court may be
unconditional, or s to terms and conditions as to price, amount of damages, etc. As stated above,
previously the provision which related to the sale of goods were governed by the Contracts Act.

Remedies available to both Seller and Buyer

Suit for Repudiation of Contract before the Date or Anticipatory Breach: Section 60 of the Act states that if
any party renounces the contract before the delivery of the goods, the other party may wait till the date of
delivery of the goods or may treat the contract as annulled and claim for damages. This provision is not a
part of the English Law on which the Indian Law is based. The party not in default can choose to keep the
contract alive by not accepting the repudiation of the defaulting party. In such a scenario, if at the time of
performance of the contract, he refuses to perform his part or is unable to perform his part, the defaulter
party would be discharged, and the position will be as it would have been as if there was no repudiation of
the contract before the date of the contract.
Interest by way of Damages and Special Damages:Section 62 of the Act states that the buyer or seller can
recover special damages where by law special damages or interest may be recoverable. There is a limitation
to this remedy. The parties should have contemplated that a particular loss may occur if the contract is
breached in any manner. And also, the particular loss must have taken place after the violation of the
contract.

Q2) Doctrine of cavate emptor with exception

Prepared By – Swapnil Shahane
The doctrine of Caveat Emptor is an integral part of the Sale of Goods Act. It translates to “let the buyer
beware”. This means it lays the responsibility of their choice on the buyer themselves.

It is specifically defined in Section 16 of the act “there is no implied warranty or condition as to the quality
or the fitness for any particular purpose of goods supplied under such a contract of sale“

A seller makes his goods available in the open market. The buyer previews all his options and then
accordingly makes his choice. Now let’s assume that the product turns out to be defective or of inferior
quality.

This doctrine says that the seller will not be responsible for this. The buyer himself is responsible for the
choice he made.

So the doctrine attempts to make the buyer more conscious of his choices. It is the duty of the buyer to
check the quality and the usefulness of the product he is purchasing. If the product turns out to be
defective or does not live up to its potential the seller will not be responsible for this.

Let us see an example. A bought a horse from B. A wanted to enter the horse in a race. Turns out the horse
was not capable of running a race on account of being lame. But A did not inform B of his intentions. So B
will not be responsible for the defects of the horse. The Doctrine of Caveat Emptor will apply.

However, the buyer can shift the responsibility to the seller if the three following conditions are fulfilled.

if the buyer shares with the seller his purpose for the purchase
the buyer relies on the knowledge and/or technical expertise of the seller
and the seller sells such goods
Learn more about Sale and Agreement of Sale here in detail

Exceptions to the Doctrine of Caveat Emptor

The doctrine of caveat emptor has certain specific exceptions. Let us take a brief look at these exceptions.

1] Fitness of Product for the Buyer’s Purpose

When the buyer informs the seller of his purpose of buying the goods, it is implied that he is relying on the
seller’s judgment. It is the duty of the seller then to ensure the goods match their desired usage.
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Say for example A goes to B to buy a bicycle. He informs B he wants to use the cycle for mountain trekking. If B
sells him an ordinary bicycle that is incapable of fulfilling A’s purpose the seller will be responsible. Another
example is the case study of Priest v. Last.

2] Goods Purchased under Brand Name

When the buyer buys a product under a trade name or a branded product the seller cannot be held
responsible for the usefulness or quality of the product. So there is no implied condition that the goods will be
fit for the purpose the buyer intended.

3] Goods sold by Description

When the buyer buys the goods based only on the description there will be an exception. If the goods do not
match the description then in such a case the seller will be responsible for the goods.

4] Goods of Merchantable Quality

Section 16 (2) deals with the exception of merchantable quality. The sections state that the seller who is
selling goods by description has a duty of providing goods of merchantable quality, i.e. capable of passing
the market standards.

So if the goods are not of marketable quality then the buyer will not be the one who is responsible. It will be
the seller’s responsibility. However if the buyer has had a reasonable chance to examine the product, then this
exception will not apply.

5] Sale by Sample
If the buyer buys his goods after examining a sample then the rule of Doctrine of Caveat Emptor will not apply.
If the rest of the goods do not resemble the sample, the buyer cannot be held responsible. In this case, the
seller will be the one responsible.

For example, A places an order for 50 toy cars with B. He checks one sample where the car is red. The rest of
the cars turn out orange. Here the doctrine will not apply and B will be responsible.

6] Sale by Description and Sample

If the sale is done via a sample as well as a description of the product, the buyer will not be responsible if the
goods do not resemble the sample and/or the description. Then the responsibility will fall squarely on the
seller.

7] Usage of Trade
There is an implied condition or warranty about the quality or the fitness of goods/products. But if a seller
deviated from this then the rules of caveat emptor cease to apply. For example, A bought goods from B in an
auction of the contents of a ship. But B did not inform A the contents were sea damaged, and so the rules of
the doctrine will not apply here.
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8] Fraud or Misrepresentation by the Seller
This is another important exception. If the seller obtains the consent of the buyer by fraud then caveat emptor
will not apply. Also if the seller conceals any material defects of the goods which are later discovered on closer
examination then again the buyer will not be responsible. In both cases, the seller will be the guilty party.

Q3)”No once can transfer a better title than he himself possesses”. Explain the rule and exception
Introduction
Section 27 of the Sale of Goods Act, 1930[3] expresses the general proposition that no one can give what
he has not got, and if one deals with the goods of another without his authority, the transaction is as
against that other nugatory in law.[4] A person, therefore, however innocent, who buys goods from
someone who is not the owner, obtains no property whatsoever.[5]
Section 27 of the Sale of Goods Act, 1930-
Sale by person not the owner.—Subject to the provisions of this Act and of any other law for the time
being in force, where goods are sold by a person who is not the owner thereof and who does not sell them
under the authority or with the consent of the owner, the buyer acquires no better title to the goods than
the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s
authority to sell.[6]
This section protects the interests of the owner by laying down the principle that when a person who is not
the true owner of the goods, sells them without the consent or under the authority of the true owner, the
title acquired by the buyer is no better than what the seller had.
In Farquharson Bros & Co v. King & Co,[7] it was observed that if a watch or a ring was left by the owner in
a café or a seat in a park, the finder cannot say that it was the owner’s carelessness and nothing else that
enabled the finder to pass off the said watch or ring as his own.[8]
Exceptions
1. Estoppel
After declaring in the first paragraph that a purchase of goods from a person who had no authority
to sell confers no good title, Section 27 of the Sale of Goods Act, 1930[17] concludes with the
remark that the purchaser might get a good title if the owner of the goods is by his conduct
precluded from denying the seller’s authority to sell. These words refer to the estoppel of the
owner.[18]
When the owner is not permitted to deny the seller’s authority that is known as an estoppel against
him.[19] Estoppel may arise from an act or omission to fulfil a legal obligation or due to negligence
resulting in the disregard of obligations owed towards another.[20]
a. Estoppel by act or omission-
An omission to perform one’s duty may create an estoppel provided that the duty is a legal
obligation.[21] The estoppel can arise in any of the following ways:
i. By the owner standing by when the sale is effected.[22]
ii. By the owner assisting the sale of the goods.[23]
iii. By the owner’s permission for the goods to go into the possession of another.[24]
iv. If the owner acts or makes representations so as to induce the buyer to alter his
position to his prejudice.
b. Estoppel by Negligence-
Where the owner of goods, by reason of his negligence or negligent failure to act, allows the
seller of the goods to appear to the buyer as the true owner or as having the true owner’s
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authority to sell the goods, an estoppel by negligence is created against the owner.[30] It
must be shown that the owner of the goods had a duty to take care so as not to act
negligently for this kind of estoppel to arise
2. Sale by Mercantile Agent
Proviso to Section 27 of the Sale of Goods Act, 1930[41] states-
Where a mercantile agent is, with the consent of the owner, in possession of the goods or of a
document of title to the goods, any sale made by him, when acting in the ordinary course of
business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of
the goods to make the same, provided that the buyer act is good faith and has not at the time of
the contract of sale notice that the seller has no authority to sell.
3. Sale by one of the Joint-owners
If one of several joint owners of goods has the sole possession of them by permission of the co-
owners, the property in the goods is transferred to any person who buys them of such joint owner
in good faith and has not at the time of the contract of sale notice that the seller has no authority to
sell.
4. Sale by person in possession under voidable contract
Section 29 of the Sale of Goods Act, 1930[53] states-
When the seller of goods has obtained possession thereof under a contract voidable under section
19 or section 19A of the Indian Contract Act, 1872 (9 of 1872), but the contract has not been
rescinded at the time of the sale, the buyer acquires a good title to the goods, provided he buys
them in good faith and without notice of the seller’s defect of title.
5. Sale by Seller in possession after sale
Section 30(1) of the Sale of Goods Act, 1930[64] states-
Where a person, having sold goods, continues or is in possession of the goods or of the documents
of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him
of the goods or documents of title under any sale, pledge o other disposition thereof to any person
receiving the same in good faith and without notice of the previous sale shall have the same effect
as if the person making the delivery to transfer were expressly authorised by the owner of the gods
to make the same.
6. Sale by Buyer in possession before sale
Section 30(2) of the Sale of Goods Act, 1930[69] states-
Where a person, having bought or agreed to buy goods, obtains with the consent of the seller,
possession of the goods or the documents of title to the goods, the delivery or transfer by that
person or by a mercantile agent acting for him, of the goods or documents of title under any sale,
pledge or other disposition thereof to any person receiving the same in good faith and without
notice of any lien or other right of the original seller in respect of the gods shall have effect as if
such lien or right did not exist.
7. Re-sale by an Unpaid Seller
Section 54(2) of the Sale of Goods Act, 1930[73] states-
"Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right
of lien or stoppage in transit gives notices to the buyer of his intentions to re-sell, the unpaid seller
may, if the buyer does not within a reasonable time pay or tender the price, re-sell the goods within
a reasonable time and recover from the original buyer damages for any loss occasioned by his
breach of contract, but the buyer shall not be entitled to any profit which may occur on the re-sale.
If such notice is not given, the unpaid seller shall not be entitled to recover such damages and the
buyer shall be entitled to the profit, if any, on the re-sale.
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Conclusion
The principle ‘no one can transfer a better title than what he himself possesses’ as laid down by Willes J. as
a general rule of law in the case Whistler v. Forster[79] is not an absolute right granted to the true owner of
the goods. This legal principle has with time, developed certain exceptions through precedents that later
became part of legislations to benefit the innocent buyer who used to suffer loss without any default on his
part due to this principle and expanded the ambit for the application of this principle. Now, Nemo dat quod
non habet and its exceptions are used under various statutes such as Indian Contract Act, 1872, Sale of
Goods Act, 1930, Civil Procedure Code, 1908, Companies Act, 2013, Negotiable Instruments Act, 1881, etc.
These exceptions include:

4)What is dissolution of partnership and how does differ from winding up firm? State circumstance in
which firm is automatically dissolved.
Dissolution
As we know that after the dissolution of partnership firm the existing relationship between the partner’s
changes. But, the firm continues its activities. The dissolution of partnership takes place in any of the following
ways:

1. Change in the existing profit sharing ratio.

2. Admission of a new partner

3. The retirement of an existing partner

4. Death of an existing partner

5. Insolvency of a partner as he becomes incompetent to contract. Thus, he can no longer be a

partner in the firm.

6. On completion of a specific venture in case, the partnership was formed specifically for that
particular venture.

7. On expiry of the period for which the partnership was formed.

Section 39 of the Indian Partnership Act 1932 states that the dissolution of partnership firm among all the
partners of the partnership firm is the Dissolution of the Partnership Firm. The dissolution of partnership firm
ceases the existence of the organization.
Dissolution of partnership means the end of the partnership business and dissolution of partnership firm
means the end of partnership business along with the firm.
The dissolution of a partnership firm means termination of every contractual relationship between the
partners and that all the operations which are being performed in a company are suspended and all the
assets and liabilities are settled and disposed off.

Distinguish between dissolution and winding up

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Particulars Winding up Dissolution

Dissolution means to dissolve the

Winding up means appointing a liquidator to
company completely. Any further
Meaning sell off the assets, divide the proceeds among
operations cannot be done in the
creditors, and file to the NCLT for dissolution.
company name.

Dissolution is the end

Winding up is one of
process/result of winding up and
Process the method through which the dissolution of a
getting the name stuck off from
company is carried on.
the Register of Companies.

The legal entity of the company continues and

The dissolution of the company
Existence of exists at
brings an end to its legal entity
Company the commencement and during the winding up
status.
process.

A company can be

allowed to continue its

Continuation
business during the winding up process if it is The company ceases to exist
of
required for the upon its dissolution.
Business
beneficial winding up of

the company.

The NCLT passes the order of

Moderator Liquidator carries out the process of winding up.
dissolution.
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Filling of winding up resolution or petition, the Filing of resolutions, declarations

Activities appointment of the liquidator, receiving and other required documents to

Included declarations, preparation of reports, disclosures the NCLT to pass dissolution

to ROC and filing for dissolution to the NCLT. order.

Circumstances in which firm automatically dissolved

(i) Expiry of Fixed Period

A firm constituted for a term is of course not exempt from dissolution by any of the other possible cause
before the expiration of the term. The contract may expressly provide that the partnership will determine
in certain circumstances but even if there is no such express term, an implied term as to when the
partnership will determine may be gathered from the contract and the nature of the business. The
provision of this section make it clear that unless some contract between the partners to the contrary is
proved, the firm, if constituted for a fixed term would be dissolved by the expiry of that term.

(ii) On achievement of specific task

A partnership constituted to carry out contracts with specified persons during a particular season would be
taken to be dissolved once the contracts are closed. In the case of Basantlal Jalan v. Chiranjilal, Where the
firm was constituted for a specific undertaking to supply certain quantity of grain and the contract was
prematurely terminated after supply of a part of the goods, it was held that the partnership did not come
to an end and was dissolved only on the final realization of the assets

(iii) Death of Partner

When the deed of partnership did not provide that the death of a partner would not dissolve the
partnership, the partnership stood dissolve on the death of a partner. Firm, stands dissolved automatically
on death of one partner. Continuance of business after such death would not tantamount to continuance
of earlier partnership.

(iv) Insolvency of Partner

In the absence of a contract to the contrary, the insolvency of any of the partner may dissolve the firm.the
rule shall apply even though the partnership has been constituted for a fixed term and the term has not yet
expired or has been constituted for particular ventureand the same has yet not been completed.

(v) Resignation of Partner

Resignation by any of the partners dissolves the partnership

5)State the nature and extent of surety’s liability under contract of guarantee
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Introduction
According to Black’s law dictionary, the word “guarantee is used, as a noun, to denote the contract of
guarantee or the obligation of a guarantor, and, as a verb, to denote the action of assuming the
responsibilities of a guarantor.”
A contract of guarantee enables an individual to get a loan or buy goods on credit or acquire means of
livelihood. A contract of guarantee is a tripartite agreement, that is, it concerns three parties- the principal
debtor, the creditor, and the surety.

Contract of guarantee
A contract of guarantee is precisely stated under Section 126 of the Indian Contract Act, 1872.
According to this section, a contract of guarantee can be understood as a contract that requires an
individual or a group of individuals to perform a promise made or to discharge their liability under the
contract when the third party to the contract failed to fulfill their part of the promise. This guarantee can
be oral or written.
A contract of guarantee requires three parties: the principal debtor, the creditor, and the surety. The
individual on whose non-payment the guarantee has to be given is the principal debtor or the borrower,
the creditor is the individual who is given the guarantee and the surety is the individual who gives the
guarantee.
Surety makes a promise to the creditor that on the principal debtor’s default, they will discharge the
third party’s liability or fulfill the promise which was made by the principal debtor. Therefore, the surety
gives assurance to the creditor for the principal debtor’s act.

Nature of liability of surety

As laid down in Section 128 of the Indian Contract Act, 1872, the liability of the surety is coextensive. It has
the same extent as that of the principal debtor. It emphasizes the maximum degree as well as the scope of
the surety’s liability.
Coextensive
‘Coextensive’ is an attribute to the word extent and refers to the amount or the quantum of the
principal debt. This particular section only explains the ambit of the extent of surety’s obligation
when no limit has been stipulated against the validity of the principal debtor’s obligation.

The Section further explains how the surety may, however, in the agreement impose certain limits
to the extent of his liability entering into a special contract. They can make a declaration and impose
a certain limit or restriction to their liability.
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Unless it is expressly mentioned in the terms of the contract, neither can the surety be held liable
by the creditor nor can he sue him, till the principal debtor makes a default. Therefore, the surety’s
liability is secondary or peripheral in nature.

Condition precedent to the surety’s liability

Where there is a condition precedent to the surety’s liability, he will not be liable unless that
condition is first fulfilled. Section 144 is based on this principle to an extent. For example, when an
individual gives a guarantee to undertake a task unless another individual joins as a co-surety, the
guarantee will be invalid if another co-surety does not join the contract.

The extent of liability of surety

It is still a critical issue to measure the maximum extent of surety’s liability and to what extent it is being
invoked presently. Herein the question is at what time the surety’s liability comes under scrutiny- when the
debtor has not fulfilled their part of the promise of all the remedies that have been availed by the creditor
against the debtor.

Is creditor bound to exhaust his remedies before suing the surety

The surety’s liability is not removed in case of the omission of the creditor in suing the borrower. The
creditor does have to necessarily exhaust his remedies against the principal debtor before they sue the
surety. They can still maintain a suit if no proceedings have been initiated beforehand against the borrower.
However, the surety cannot be held liable until the contingency takes place.

Difficulties arise in interpreting the principle of co-extensiveness when the surety has guaranteed
performing a contractual liability to make payments by way of instillments to the creditor.

Conclusion
The principle of co-extensiveness cannot be classified as a rigid principle. The exact degree and extent of
the surety’s liability would be governed by the provisions mentioned in the guarantee on the actual
constructed document and the parties have the freedom to impose certain restrictions towards the surety’s
liability without deviating from the actual nature of the contract of guarantee.

6)Define bailment. What are the essential features of bailment? How does differ from pledge
Introduction
There are many cases of bailment in our day to day life. For example, in the case of laundry, we give our
clothes for getting washed. Once they are washed, they are to be returned back to us. We place the other
person in temporary possession of our clothes for a specific purpose and there is an express or implied
understanding between the two to return the good once the purpose has been fulfilled
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Meaning
The word ‘bailment’, is derived from ‘bailler’, a french word which means ‘to deliver’. Bailment has been
defined under the Section 148 of the Indian Contract Act, 1872, according to which Bailment involves the
delivery of goods from one person to another for a specific purpose and upon a contract, when the
purpose is fulfilled, the good has to be returned or dealt with on the direction of the person who has
delivered the goods.
Essential Features
Delivery of Possession
There must be a delivery of goods, which means, delivery of possession of the goods by the bailer
to the bailee to fulfill the purpose of bailment. Possession refers to exercising control over the good
and excluding any other person to do the same.
Section 149 of the Indian Contract Act, 1872 talks about the same. The delivery of possession can
either be actual or constructive. It means that either the good can directly be put in the actual
physical possession of the bailee or put the bailee in a position of power over such goods that can
be physically possessed later, if possible. In constructive delivery, the bailor gives the bailee means
of accessing the custody of the good and not its actual delivery.
Delivery upon Contract
There must be a contract between the bailor and the bailee for such transfer or good and its return.
If there is no contract, there cannot be bailment. Moreover, the contract can either be expressed or
implied.
Delivery must be for some purpose
It is essential that there must be a purpose for which the delivery of the goods takes place. If after
the completion of the purpose of bailment the good is not accounted for, then bailment cannot
arise. This is an important feature as it separates it from other relations like agency, etc..
Return of goods
After the completion of the purpose, the good must be delivered to the bailor or dealt with as per
his instructions. If he/she is not bound to return the good then there is no bailment. Even if there is
an agreement to return an equivalent and not the same good, it will not amount to bailment.
Difference Between Bailment and Pledge
Legal Definitions
Bailment is legally defined under section 148 of the Indian Contract Act, 1872, while pledge is
defined under section 172 of the same act.
Consideration
In bailment, the presence or absence of consideration may vary. It is not necessary for consideration
to be present in a bailment agreement. However, in the case of a pledge, consideration is always
present, as it serves as security for the Purpose
Bailment is primarily intended for the safekeeping or repair of the goods entrusted to the bailee. On
the contrary, the main purpose of pledging goods is to serve as collateral for the repayment of a
debt.
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Sale of Goods
In a bailment, the receiver (bailee) does not have the right to sell the goods entrusted to them.
However, if the pawnor (person who pledged the goods) fails to redeem the goods within a
reasonable time, the pawnee (person who received the goods as security) can sell the goods after
providing notice to the pawnor.
Use of Goods
In bailment, the bailee is allowed to use the goods solely for the intended purpose mentioned in the
agreement. In contrast, the pawnee in a pledge arrangement has no right to use the goods pledged
as security. debt.
Conclusion
In conclusion, understanding the key differences between bailment and pledge is essential for navigating
legal agreements involving the transfer of goods. While bailment focuses on temporary transfer for
safekeeping or repair, a pledge involves using goods as collateral for a debt.

7)Define “contract of agency” and explain essential elements. What are the right and duties of agent.

Introduction
“Agency is a relationship which exists where one person (the principal) authorizes another (the agent) to act
on his behalf, and the agent agrees to do so.”

While the contract of agency has been very diligently explained under chapter 10 (section 182-238) of the
Indian Contract act, 1872 and by the Hon’ble courts of justice, time and again; A contract of agency, in its
essence, is nothing but a fiduciary relationship between two parties where one party (the principal)
contracts-with and authorizes (implicitly or explicitly) another person (the agent) to act on his behalf and
provides him with the capacity to create legal relationships between the principal and third parties.

Essentials: Contract of Agency

Competency of the Principal

The requirement for the competency of the principal has been repeated (as Sec.10 of the “act” also
requires for “parties competent to contract”) and laid down in the Indian Contract Act under sec.
183, where the requirements for a competent principal have been listed down to;

• Majority, i.e. the principal must have attained the age of majority, under the relevant
laws.
• Sound mind, i.e. the principal must be of sound mind, at least at the moment of
appointing the agent.
The basic rule of thumb here is that the principal should be capable of performing the tasks (in law),
which he wants his agent to do for him.

Thus any appointment of an agent by a minor[2] or a person of unsound mind is explicitly declared
to be void.
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Competency of the Agent

The requirements regarding the competency of the agent have been listed down in Sec. 184 of ICA,
1872, where it has been explicitly mentioned that anyone between the principal and the third party
may become an agent, regardless of its age or soundness of his mind. It prescribes that any person,
including a minor and an unsound person, may become an agent. However, they (the agent) may
not be liable to the principal unless they have attained the age of majority and are of sound mind.

From the general description provided under the section, it can be interpreted that, any person,
including ones who themselves might not be competent enough to contract (minors and persons of
unsound mind included), have the capacity to represent and bind their principals into direct and
valid contractual relationships.

Consideration not required

As per the view of the Indian Contract Act, even consideration is not an essential element for the
creation of an Agency; hence no consideration is required to be presented while the formation of
an agency.

However, these provisions do not deprive the agent of his legal and justified remunerations unless
proven to be specified otherwise in the contract.

These principles of the contract act are based upon the ideologies of Common Law, which specify
that no consideration is required to give an individual the authority of an agent, neither does it bar
any one of the parties from suing each other, either it be for the negligence on part of the agent or
for the recovery of due compensation from the principal.

Formalities required by Law

While the Contract Act sets out certain general guidelines for the contract of agency, it is not to be
considered exhaustive. Thus to prevent disagreements later on, certain additional formalities have
been prescribed by numerous statues and the Hon’ble courts, dependent on the diverse kinds of
agencies; such as:

• The Registration act, 1908; provided that an agent for the purpose of registration and
execution of a document must be effected in writing[3].
• A proxy to be appointed for attending the meeting of a company should be registered in
writing and that too only in the prescribed form[4].
• A Power of attorney issued on behalf of the company should only be under the
company’s common seal[5].
These guidelines, while simple hold the potential to declare the principal contracts void, thus
demand to be followed very cautiously.

Rights of agent

Rights of retainer
Prepared By – Swapnil Shahane
Agency is a very important topic of the Indian contract Act and Agent is an important aspect of the
same. Indian Contract Act gives certain rights and places some obligations/duties for the agent.

Rights of remuneration

Receiving the remuneration from the principal is one of the rights of the agent. Section 219 of the
Indian Contract Act, 1872 states that the agent is entitled to get remuneration from the principal
for the conduct of business. An agent must get the remuneration as agreed by the principal and the
agent at the time of making the contract. For instance, if there is no agreement between the
principal and agent for specific remuneration, then reasonable remuneration should be given to the
agent for the services rendered by him. The agent can get the remuneration if the services provided
by him are involuntary or gratuitous. However, the agent will be able to get the remuneration only
if he completes the assigned work. When the right to decide the remuneration is left at the
discretion of the principal, then also the reasonableness would be applicable. To know when the
agent’s act will be complete, the particular terms and conditions of that contract should be
checked.

Right of lien

The term lien has been described in the case of Houghton v. Mathewas as the right of a man to retain
certain goods that he possesses, belonging to another, until certain demands of the person who
possesses the goods are not satisfied. Section 221 of the Indian Contract Act provides for the right of
lien that an agent has on the principal’s property.

Right to indemnity

Section 222 Right of indemnification for lawful acts: The principal is sure to indemnify the agent
against all consequences of lawful acts wiped out the exercise of his authority.

Right to compensation

Subject to the contract terms with the Agency, an Agent may claim compensation, whether general
or particular, for damages above pay. The ‘immediate and proximate’ consequences of the breach of
the contract create widespread damage. Usually, compensation may be provided for loss or harm,
which may be connected directly or nearly to the contract breach. One way of determining damages
is to differentiate the contract price from the market price the day before the contract infringement,
plus reasonable expenses incurred due to the breach plus court costs. Special damages or
consequences will arise in the event of extraordinary circumstances. Such effects may only be
granted if the persons infringing have the specific circumstances predicted or expressly known to
them.

Duties of agent

Agent duty to avoid conflict of interest

The conflict between duty and interest of the principal. Agent duty to avoid conflict between his duty
and the interest of the principal. The agent is not allowed to carry any work which resulted in any
kind of conflict between his duty and the interest of the principal. Section 215 and 216 of the Indian
Contract Act deals with the present disused situation
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Duty to maintain accounts

The duty to maintain accounts has been provided under Section 213 of the Indian Contract Act. The
provision provides that an agent ought to render proper accounts to his principal on demand. It was
laid down in the case of S. Paul & Co. v State of Tripura that the maintaining of accounts is necessary
in order to properly perform other duties of an agent like- duty to remit sums to the principal. This
duty of maintaining accounts lies only on the agent, not on the principal. However, the courts have
granted agents the equitable right of demanding accounts in special circumstances. The term special
circumstances include a scenario where all accounts are in the possession of the principal.

Agent’s duty to take reasonable care

Section 212 sets forth the level of care and competence that an agent requires.

Common law mandates an agent to do his duty with appropriate caution and competence. Agents
that do not comply with this criterion are prima facie negligent.

In general, an agent in a particular profession, business, or vocation who carries out his job with the
anticipated degree of care and competence of a decent, average member of a related profession,
trade, or calling fulfils the required level.

Conclusion

The contract of agency is a contract that the principal, as well as the agent, mutually enter into with their
respective consent. The principal through the use of the contract of agency grants powers to an agent to act
on his behalf and under his control. Both the parties to the contract share a fiduciary relationship and the
actions of the agent bind the principal. The agent as a result of the contract of the agency has a lot of rights
and duties placed upon his shoulders.

8 a)Difference between condition and warranty

BASIS FOR
CONDITION WARRANTY
COMPARISON
Meaning A requirement or event that should A warranty is an assurance given by
be performed before the the seller to the buyer about the state
completion of another action, is of the product, that the prescribed
known as Condition. facts are genuine.
Defined in Section 12 (2) of Indian Sale of Section 12 (3) of Indian Sale of Goods
Goods Act, 1930. Act, 1930.
What is it? It is directly associated with the It is a subsidiary provision related to
objective of the contract. the object of the contract.
Result of breach Termination of contract. Claim damages for the breach.
Violation Violation of condition can be Violation of warranty does not affect
regarded as a violation of the the condition.
warranty.
Remedy available to Repudiate the contract as well as Claim damages only.
the aggrieved party on claim damages.
breach
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Q8 b)Difference between bailment and pledge

BASIS FOR
BAILMENT PLEDGE
COMPARISON
Meaning When the goods are temporarily When the goods are delivered to act as
handed over from one person to security against the debt owed by one
another person for a specific purpose, person to another person, it is known as
it is known as bailment. the pledge.
Defined in Section 148 of the Indian Contract Act, Section 172 of the Indian Contract Act,
1872. 1872.
Parties The person who delivers the goods is The person who delivers the goods is
known as the Bailor while the person known as Pawnor while the person to
to whom the goods are delivered is whom the goods are delivered is known
known as Bailee. as Pawnee.
Consideration May or may not be present. Always present.
Right to sell the The party whom goods are being The party whom goods are being
goods delivered has no right to sell the goods. delivered as security has the right to sell
the goods if the party who delivers the
goods fails to pay the debt.
Use of Goods The party whom goods are being The party whom goods are being
delivered can use the goods only, for delivered has no right to use the goods.
the specified purpose.
Purpose Safe keeping or repairs, etc. As security against payment of debt.