RIGHTS OF UNPAID SELLER

An unpaid seller has certain rights under the law to protect their interests when the buyer fails to pay
for the goods sold. These rights arise under the Sale of Goods Act, which grants the seller specific
remedies in cases of non-payment. Here’s an overview of the primary rights of an unpaid seller:

### 1. **Right of Lien**

- **Definition**: The right of lien allows the unpaid seller to retain possession of the goods until
the full payment is made by the buyer. This right is available when the seller is still in possession of
the goods and is particularly applicable when the sale is on credit, and the credit period has expired,
or if the buyer becomes insolvent.

- **Conditions**:

- The goods are still in the seller’s possession.

- No unconditional payment or agreement has been made.

### 2. **Right of Stoppage in Transit**

- **Definition**: If the goods have already been handed over to a carrier or are in transit, the
unpaid seller has the right to stop the goods and regain possession if they discover that the buyer is
insolvent. This right allows the seller to intercept the goods before they reach the buyer’s possession.

- **Conditions**:

- The buyer must be insolvent.

- The goods are in transit (they have left the seller but have not yet reached the buyer).

### 3. **Right of Resale**

- **Definition**: The unpaid seller has the right to resell the goods if the buyer defaults on
payment. This right is typically exercisable under specific conditions, such as when the goods are
perishable, when the seller has provided notice of resale to the buyer, or when the contract
expressly provides for it.

- **Conditions**:

- The goods are perishable, or notice of resale has been given to the buyer.

- If the seller resells without the right to do so, they may be liable to the buyer for damages.
However, if the resale is legitimate, the seller may retain the profits to cover losses.

### 4. **Right to Sue for the Price**

- **Definition**: If the buyer refuses to pay for goods delivered, the unpaid seller can sue them to
recover the contract price. This right is particularly applicable when the property in the goods has
already passed to the buyer, and they are refusing or failing to pay.
 - **Conditions**:

- The seller has delivered the goods, and the buyer refuses or neglects to pay.

- In cases of specific goods, if the buyer wrongfully refuses to accept the goods, the seller may sue
for damages rather than the price.

### 5. **Right to Sue for Damages for Non-Acceptance**

- **Definition**: If the buyer wrongfully refuses to accept and pay for the goods, the seller can sue
for damages. The damages are generally assessed based on the difference between the contract
price and the market price at the time of breach.

- **Conditions**:

- The goods must be ready and available for delivery, and the buyer refuses to accept or pay for
them.

### 6. **Right to Withhold Delivery**

- **Definition**: This right allows the seller to withhold delivery of goods if payment is not made,
especially if the sale is on a cash-on-delivery basis or if it becomes evident that the buyer will not
pay.

- **Conditions**:

- The buyer has not paid or is likely to default.

- Withholding is only valid until the buyer makes the payment as agreed in the contract.

7) Suit for special damage and interest

In the context of commercial law, especially in relation to an unpaid seller's rights, a "suit for special
damage and interest" generally refers to a legal action taken by an unpaid seller against a buyer who
has failed to pay for goods or services.

Here's a breakdown:

1. Special Damages: This refers to specific, calculable losses suffered by the unpaid seller due to
the buyer's failure to pay. These damages must be directly attributable to the breach and can
include costs like storage fees, re-shipping charges, or lost profits.

2. Interest: In addition to damages, the unpaid seller may claim interest on the unpaid amount.
Interest compensates the seller for the time they were deprived of the payment.
 RIGHTS OF SURETY

The *right to the benefit of creditor’s securities* is a protection for the surety in case they end up
paying the debt. Here's how it works in simple terms:

When a creditor (like a bank) gives a loan, they often take *security* from the borrower to protect
themselves. This security could be something valuable, like property, stocks, or any other asset,
which the creditor can claim if the borrower doesn’t repay.

If the borrower fails to pay, and the surety has to step in to cover the debt, the surety gains the *right
to benefit from any securities* that the creditor holds. This means:

1. **Using the Security to Recover**: The surety can use or claim those assets to recover the amount
they paid for the borrower.

2. **Protecting the Surety’s Interests**: This right ensures that if the surety has to pay, they are not
left with a total loss. They get access to the same assets the creditor would have used to recover the
loan.

3. **Avoiding Unfair Advantage to the Creditor**: If the creditor still holds securities after the surety
pays, they can’t keep both the payment and the securities. The securities must benefit the surety
instead.

In essence, this right helps ensure that the surety is not unfairly disadvantaged and can recover any
amount they paid on behalf of the borrower by using whatever securities were originally given to the
creditor.
BREACH OF CONTRACT

A breach of contract occurs when one party fails to fulfill their obligations under the terms of a
contract. This failure can be partial or total, and it can happen in various ways, such as not
performing on time, delivering substandard goods or services, or failing to perform altogether. When
a breach occurs, the non-breaching party is entitled to seek remedies to compensate for the loss or
harm suffered.

Here are the main types of breaches and the remedies typically available:

Types of Breach

1. Minor (Partial) Breach: When a party fulfills most of their contractual obligations, but there’s
a minor failure. The non-breaching party can sue for actual damages incurred but cannot
cancel the contract entirely.

2. Material (Fundamental) Breach: When a party fails to perform a major obligation, affecting
the essence of the contract. This can allow the non-breaching party to terminate the contract
and sue for damages.

3. Anticipatory Breach: When a party indicates they won’t fulfill their obligations in the future.
The non-breaching party may seek remedies immediately, even before the actual breach
happens.

4. Actual Breach: When a party fails to perform when performance is due.

Remedies for Breach of Contract

When a promise or agreement is broken by any of the parties we call it a breach of contract. So when
either of the parties does not keep their end of the agreement or does not fulfil their obligation as
per the terms of the contract, it is a breach of contract. There are a few remedies for breach of
contract available to the wronged party. Let us take a look.

1] Recession of Contract

When one of the parties to a contract does not fulfil his obligations, then the other party can rescind
the contract and refuse the performance of his obligations.

As per section 65 of the Indian Contract Act, the party that rescinds the contract must restore any
benefits he got under the said agreement. And section 75 states that the party that rescinds the
contract is entitled to receive damages and/or compensation for such a recession.

2] Sue for Damages

Section 73 clearly states that the party who has suffered, since the other party has broken promises,
can claim compensation for loss or damages caused to them in the normal course of business.

Such damages will not be payable if the loss is abnormal in nature, i.e. not in the ordinary course of
business. There are two types of damages according to the Act,

 Liquidated Damages: Sometimes the parties to a contract will agree to the amount payable
in case of a breach. This is known as liquidated damages.
  Unliquidated Damages: Here the amount payable due to the breach of contract is
assessed by the courts or any appropriate authorities.

3] Sue for Specific Performance

This means the party in breach will actually have to carry out his duties according to the contract. In
certain cases, the courts may insist that the party carry out the agreement.

So if any of the parties fails to perform the contract, the court may order them to do so. This is a
decree of specific performance and is granted instead of damages.

For example, A decided to buy a parcel of land from B. B then refuses to sell. The courts can order B
to perform his duties under the contract and sell the land to A.

4] Injunction

An injunction is basically like a decree for specific performance but for a negative contract. An
injunction is a court order restraining a person from doing a particular act.

So a court may grant an injunction to stop a party of a contract from doing something he promised
not to do. In a prohibitory injunction, the court stops the commission of an act and in a mandatory
injunction, it will stop the continuance of an act that is unlawful.

5] Quantum Meruit

Quantum meruit literally translates to “as much is earned”. At times when one party of the contract
is prevented from finishing his performance of the contract by the other party, he can claim quantum
meruit.

So he must be paid a reasonable remuneration for the part of the contract he has already performed.
This could be the remuneration of the services he has provided or the value of the work he has
already done.
QUASI CONTRACT

A quasi-contract is a legal concept used to impose an obligation on one party to prevent unjust
enrichment of another, even though there is no formal contract between them. It is not an actual
contract but a legal substitute that allows courts to enforce fairness when one party has received a
benefit at the expense of another. Quasi-contracts are often referred to as implied-in-law contracts
or constructive contracts because they are obligations created by the court rather than by mutual
agreement of the parties.

Features of Quasi-Contracts

1. Absence of Agreement: Unlike regular contracts, quasi-contracts do not arise from an

agreement between parties. They are imposed by law based on the situation.

2. Prevention of Unjust Enrichment: The main purpose of a quasi-contract is to prevent one

party from unfairly benefiting at the expense of another without payment.

3. Obligation to Pay: The party who has received a benefit is legally required to pay reasonable
compensation to the party who conferred the benefit, even though there was no prior
contract.

Types of Quasi-Contracts Under Indian Law

Under Section 68-72 of the Indian Contract Act, 1872, specific situations are defined as quasi-
contractual obligations:

1. Supply of Necessities (Section 68): If a person supplies necessities to someone who cannot
contract for themselves (e.g., a minor or a person of unsound mind), they are entitled to
reimbursement from the person’s property.

2. Payment by Interested Party (Section 69): If someone pays money on behalf of another
person who is legally bound to pay it, they can claim reimbursement from that person.

3. Non-Gratuitous Act (Section 70): When one person does something for another non-
gratuitously, and the other person benefits, the beneficiary must compensate for the benefit
received.

4. Finder of Goods (Section 71): If a person finds lost goods and takes care of them, they have a
right to retain the goods until compensated for the expenses incurred.

5. Mistake or Coercion (Section 72): If money or goods are delivered by mistake or under
coercion, the person who received it is bound to return it.

Example of Quasi-Contract

Imagine that Person A accidentally transfers ₹10,000 to Person B’s bank account due to a bank error.
Even though Person B did not ask for this money, they are legally obligated to return it under the
quasi-contractual obligation. The court imposes this duty on Person B to prevent unjust enrichment.

Quasi-contracts allow for fair compensation in scenarios where no formal agreement exists, ensuring
that individuals or parties are not unfairly enriched at the expense of others.
CREATION OF AN AGENCY

The creation of an agency refers to establishing a relationship between two parties where one (the
agent) is authorized to act on behalf of the other (the principal). This agency relationship allows the
agent to create, modify, or terminate contractual relations between the principal and third parties.

Under the Indian Contract Act, 1872 (specifically Sections 182–238), the formation of an agency can
happen through different methods:

1. Agency by Agreement (Express or Implied)

 Express Agreement: The agency relationship is created through a formal agreement

between the principal and agent, which can be oral or written. The principal expressly
appoints the agent to perform certain duties on their behalf.

 Implied Agreement: An agency can also arise based on the conduct of the parties, even
without a formal agreement. For example, if a person regularly acts on behalf of another and
the latter accepts it, an implied agency may be established.

2. Agency by Ratification

 If an agent performs an act on behalf of the principal without prior authorization, the
principal can choose to "ratify" or approve these actions later. Once the principal accepts
these actions, an agency relationship is created retrospectively, as if the agent had been
authorized from the start.

 Conditions for Ratification:

o The principal must be aware of all the facts before ratifying.

o Ratification should cover the entire transaction.

o It must be made within a reasonable time.

 Example: Suppose an agent negotiates a contract for the principal without prior
authorization. If the principal later approves the contract, an agency by ratification is created.

3. Agency by Necessity

 This type of agency arises in emergency situations where the agent must act in the best
interest of the principal without prior consent. In such cases, the agent is expected to take
reasonable action to protect the principal’s interests.

 Examples of Agency by Necessity:

o A ship captain selling perishable cargo to prevent loss when the ship is delayed.

o A caretaker incurring expenses to repair damages to a principal's property during an

emergency.

4. Agency by Estoppel

 When a principal, by words or conduct, leads a third party to believe that a certain person is
their agent, the principal cannot later deny this agency relationship. This is known as agency
by estoppel.
  Example: If the principal allows someone to repeatedly act on their behalf in front of third
parties, they cannot later deny the authority of this person as their agent if a third party
relies on that representation.

5. Agency by Operation of Law

 Certain relationships, like partnerships, automatically create an agency relationship under

law. In a partnership, each partner is an agent of the others and can bind the partnership in
transactions within the scope of the partnership’s business.

Termination of Agency

Agency relationships can be terminated in various ways, including the completion of the task, mutual
agreement, revocation by the principal, renunciation by the agent, death or insanity of the principal
or agent, or the principal's insolvency.

The creation of an agency relationship provides flexibility in conducting business and transactions,
allowing the principal to delegate tasks while holding the agent responsible for acting in the
principal’s best interest.
RIGHTS AND DUTIES OF AN AGENT

Rights of an Agent

1. Right to Remuneration (Section 219): The agent is entitled to receive agreed-upon

remuneration for the services rendered, unless otherwise agreed. If no remuneration
amount is specified, the agent is entitled to a reasonable amount.

2. Right to Retain Outlays (Section 217): The agent has the right to retain any amounts due to
them from the principal, including any outlays, advances, or other expenses incurred in
executing the agency duties.

3. Right to be Indemnified (Section 222): The principal must indemnify (compensate) the agent
for lawful acts done in the exercise of the authority conferred by the agency, especially if
these acts result in loss or liability to the agent.

4. Right of Lien (Section 221): The agent has a right of lien over the principal’s property in their
possession. This means the agent can retain goods, papers, or other property of the principal
until dues are settled.

5. Right to Compensation (Section 225): If the principal’s conduct injures the agent, the agent
has a right to be compensated. This applies when the agent suffers due to the principal’s
negligence or lack of support.

6. Right to Act on Principal’s Behalf in Emergencies (Section 189): In emergencies, the agent
can take reasonable action to protect the principal’s interests and is entitled to be
compensated for any expenses incurred in doing so.

Duties of an Agent

1. Duty to Follow Instructions (Section 211): The agent must carry out the principal’s
instructions diligently. If they act contrary to instructions, they are liable for any resulting loss
to the principal.

2. Duty to Act with Skill and Care (Section 212): The agent is expected to perform their duties
with reasonable skill, diligence, and care as they would in their personal affairs. Negligence
or a lack of care can make the agent liable to the principal.

3. Duty to Render Accounts (Section 213): The agent must keep proper records of their actions
on behalf of the principal and produce accounts when requested by the principal.

4. Duty to Communicate (Section 214): In situations where the agent faces difficulties, they are
expected to communicate with the principal and obtain their instructions before proceeding.

5. Duty Not to Make Secret Profits (Section 216): The agent must not make any undisclosed
profit beyond the agreed remuneration. Any secret profits made by the agent must be
disclosed to the principal, and if found, can be claimed by the principal.

6. Duty Not to Delegate Authority (Section 190): An agent must not delegate their authority to
another person unless they have the principal’s permission or there is a customary practice
allowing delegation. This rule is based on the maxim "delegatus non potest delegare" (a
delegate cannot further delegate).
 7. Duty to Protect and Preserve Principal’s Property (Section 209): If the agent holds the
principal's property, they are obligated to safeguard it and return it when their agency role
ends.

8. Duty Not to Compete with Principal’s Interests (Section 215): The agent must avoid conflicts
of interest and act solely in the principal’s interest. They should not accept roles or perform
actions that could harm the principal.

RIGHTS AND DUTIES OF A PRINCIPAL

The rights and duties of a principal govern how the principal interacts with their agent, ensuring that
the agency relationship functions smoothly and fairly. The principal, as the party appointing the
agent, is primarily responsible for providing guidance and compensation while also expecting loyalty
and diligence from the agent. These rights and duties are largely defined under the Indian Contract
Act, 1872.

Rights of a Principal

1. Right to Demand Proper Conduct: The principal has the right to expect that the agent will
act honestly and in their best interest, following the principal’s instructions diligently and
responsibly.

2. Right to Be Informed: The principal has the right to be informed about any material
developments in the agent’s work or in matters that affect the principal’s interests. The agent
must communicate all relevant information to the principal.

3. Right to Compensation for Misconduct: If the agent breaches their duties or acts outside
their authority, causing loss or damage to the principal, the principal has the right to seek
compensation or indemnity from the agent.

4. Right to Disown Unauthorized Acts: If an agent acts beyond their authority or contrary to
the principal’s instructions, the principal has the right to reject or disown such acts. However,
if the principal ratifies these acts, they are bound by them.

5. Right to Recover Secret Profits: If the agent makes any secret profit or gains an advantage
without the principal’s knowledge, the principal has the right to claim these profits. This
reinforces the duty of loyalty from the agent to the principal.

6. Right to Terminate Agency: The principal can terminate the agency relationship if the agent
is found to be incompetent, negligent, dishonest, or in breach of duty. However, this must
comply with the terms of the contract between them or be done with reasonable notice if
there’s no fixed period specified.
Duties of a Principal

1. Duty to Pay Remuneration (Section 219): The principal is obligated to pay the agreed-upon
remuneration to the agent once the agent has fulfilled their duties. If no remuneration is
specified, the principal should pay a reasonable amount for the agent’s services.

2. Duty to Indemnify (Section 222): The principal must indemnify the agent for lawful acts
done within the scope of their authority. If the agent incurs expenses or liabilities while
performing duties on behalf of the principal, the principal must compensate these losses.

3. Duty Not to Prevent Completion of Duty: The principal should not obstruct the agent’s
performance of their duties. They must provide the necessary support and access to
resources needed for the agent to fulfill their role effectively.

4. Duty to Reimburse for Lawful Expenses (Section 217): The principal is obligated to
reimburse the agent for all lawful expenses incurred in the course of executing the agency
work, as long as these are within the scope of the agent’s authority.

5. Duty to Accept Liability for Authorized Acts: When an agent acts within the scope of their
authority and in accordance with the principal’s instructions, the principal is bound by these
actions and must honor agreements made by the agent with third parties.

6. Duty of Good Faith and Fair Dealing: The principal should act in good faith and deal fairly
with the agent. This includes not misleading the agent or creating conditions that make it
difficult for them to perform their duties.

7. Duty to Protect Agent Against Consequences of Lawful Acts: If the agent faces legal or other
risks as a result of performing lawful acts on behalf of the principal, the principal is duty-
bound to protect or defend the agent.