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LLB Notes Part 1

According to HEC Law Syllabus

Best For Punjab Uni exam, BZU Uni, ISUB Uni, Quaid e azam Uni, CSS Exam, PMS, Judicial Services
Exam & Other all universities exams,

CONTRACT ACT 1872/ SALE OF GOODS

Lecturer: Mobushar Iqbal Chohan

Advocate High Court

LL.B, LL.M, MSC, DIPL Communication Skill.

Office: Fatima & Iqbal Law Chamber Lahore

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“I am very thankful to my almighty ALLAH for giving me such a courage, success and honor. I am also
very thankful to all the students who appreciated my work and received them warmly. In these
notes the law has been elaborated with the help of landmark judgments which is delivered by the
Hon’ble Courts and has been written for the examination point of view and i hope that these notes
will also be received warmly by the students and may led to the success in the examination as well
as in their profession.

The below-given notes prepared for the students of the LLB. The subject is very technical, and i have
taken every step to ensure that these notes may fulfill the need of the students, but there may be
some shortcomings or flaws in it, so every suggestion for the improvement of these notes will be
warmly welcome.”

I Am Very Thankful To You All

Your Well Wisher

Lecturer: Mobushar Iqbal

ADVOCATE HIGH COURT

LLB. LLM. Msc. Dipl communication skills

CELL NO: 0300-0096491

OFFICE : F ATIMA & IQBAL LAW CHAMBER LAHORE

INNOVATIVE LAW ACADEMY LAHORE

Address: Lower mall around Chauburji Oppo: Butt sweet Hajvari Tower Basement 10-B Lahore
Q # 01: What are the essentials of a valid contract?
Discuss them
briefly
1) Preface Statement
Law of contract 1872 provides the rules for commercial transactions. It is very important
branch of mercantile law.A contract is a legal arrangement between two or
more parties that is enforceable at law. Contract law legally binds the parties to do or not to
do some particular thing between the tenure of agreement. The major elements of a
contract are offer, acceptance, and its aim is to create legal relations, and consideration. The
contract act 1872 is prevail into the whole Pakistan and it does not goes against any other
law of the country

2) Meaning of Contract
Following is the meaning of contract, according to the oxford dictionary is as under

Oxford dictionary of law

“A legally binding agreement”

3) Definition of contract
A contract is written or spoken agreement between two or more persons to do something
or not to do something for a specified time and it legally binds them and it is enforceable by
law

4) Conditions for contract

There are two conditions for contract
I. An Agreement
II. An agreement should be enforceable by law. Contract = Agreement+ Enforceability

5) Classifications of Contract
Following are the classifications of contract are as under

1. According to its Validity

Validity of contract means, an agreement which fulfills all the legal requirements and
is enforceable at law is called valid contract

2. According to its formation

Formation of contract means, is the existence of offer and acceptance

3. According to its performance

Performance of contract' means contract should be capable of being performed

Example
If there is an agreement between A and B that , A will construct a house for B and B will pay
5 lakhs to A, that agreement is a contract

6) Essentials for valid contract

Following are the essentials for valid contract, details are given below

1. Proposal
There must be lawful proposal from one party to another party

2. Acceptance
There must be lawful acceptance from other party

3. Agreement
There should be an agreement between the two parties such as proposer and acceptor

4. Written
It is necessary elements that agreement between the two parties should be in written form

5. Lawful agreement
The agreement between the parties should be lawful, because unlawful agreement cannot
be enforceable at law

6. Legal relationship
The parties must create a legal relationship and both the parties must have intention to go
to the court it the other party does not meet his promise

7. Lawful object
The object of the contract should be lawful and does not violate the law, against the public
policy or unlawful such as someone hires a house for gambling so that it will be unlawful
object

8. Competency of Parties
Parties of the contract must be competent to enter into contract. According to the contract
act 1872, every person is competent to contract who
1) Attained the age of maturity
2) Is of sound mind
3) Is not disqualified by law to enter into the contract

9. Consideration
Consideration contract plays a vital role in contract. Consideration is a benefit and this
benefit itself is the reason of contract. Without consideration the contract would be
considered as invalid

10. Free consent

For a valid contract, it is necessary that the consent of the parties must be free, and should
be free from any pressure or undue influence among the parties

11. Certain and definite

The agreement should be clarified in terms because if the terms of the agreement will
uncertain or confusing it will not be enforceable at law

12. Not declared void

Contract has not been declared void (Cancelled) according to any law of the country
because a void agreement is not enforceable by law and it has no legal authority

13. Possibility of performance

The agreement must be capable of being performed. If the parties have agreed upon a
matter which is practically not possible to perform then the agreement will not be
considered as valid contract

14. Legal formalities

In contract the legal formalities should be performed according to law such as writing of
contract, attestation of contract or registration of contract is needed in law, otherwise it
should not be enforceable by law

7) Preclude Remarks
The agreement is a contract which is enforceable by law. An agreement becomes
enforceable by law when it fulfills some conditions given into the contract act 1872 and
these conditions may be called essentials of a valid contract. If any of the essential element
is missing from the contract in this case such contract will be considered as illegal or
unenforceable by law
Q # 02: What is the difference between voidable and void
agreement. Give your answer with example.
1) Preface Statement
Law of contract 1872 provides the rules for commercial transactions. It is very important
branch of mercantile law. A contract is a legal arrangement between two or
more parties that is enforceable at law. Contract law legally binds the parties to do or not to
do some particular thing between the tenure of agreement. The major elements of a
contract are offer, acceptance, and it’s aim is to create legal relations, and consideration.
The contract act 1872 is prevail into the whole Pakistan and it does not goes against any
other law of the country

2) Definition of Void contract

An agreement which is not enforceable by law is called void contract.

Explanation
The word void means “not binding in law” A contract which cannot be enforced by law even
no party can take legal action against one another.

3) Reasons of void contract

Following are the main reasons when contract becomes void.
1) When contract is illegal from the moment it is made
2) Contract was legal but declared unacceptable by the courts because it violates
fundamental principles
3) It becomes void due to the changes in law
4) Even it has been fully performed

4) Feature of void contract

Following are the feature of void contract

1. Enforceability by law
A void contract is not enforceable by law because it not fulfill the requirements of a valid
contract

2. Compensation
In void contract no compensation can be paid by any party because it not fulfill the
requirements of a valid contract

3. Nature of contract
According to its nature because it is against the public policy that’s why it is a void contract
because

4. No legal rights
A void contract does not create any legal rights because it not fulfill the requirements of a
valid contract

5. No obligation on any party

A void contract does not create any obligation on any party because it not fulfill the
requirements of a valid contract

5) Example of void contract

An agreement which is based upon illegal act is an example of a void agreement.
For example, a contract between drug dealers and buyers is a void contract because the
terms of the contract are illegal. In such a case, no party can go to court to enforce
the contract

6) Definition of Voidable contract

An agreement which is enforceable only with the option of one party who can cancel or
repeal the contract

I. Reasons of voidable contract

Following are the main reasons when contract becomes voidable
1) Mistake in facts makes the contract voidable
2) Getting consent by undue influence makes the contract voidable
3) Making contract by minor makes the contract voidable
4) Misrepresentation and fraud, makes the contract voidable
5) Failure of performance within specified time makes the contract voidable

7) Features of voidable contract

1. Enforceability by law
It is only enforceable by law on the option of one or more parties

2. Compensation
In voidable contract compensation will be paid by one party to another party if any party
cancels the contract

3. Nature of contract
A voidable contract is a valid contract until it is avoided by the party. Once it is avoided it
becomes void

4. Legal Right
It provides legal rights in hands of both parties who can claim that their consent has been
obtained by undue influence etc.

5. Voidable at the option of one party

The contract is voidable at the option of one party whose consent become cause of void of
the contract

8) Examples of voidable contract

Following are the examples of voidable contract
1) Agreement with a person of unsound minded
2) Agreement under undue influence
3) Agreement based upon fraud or misrepresentation
4) Agreement with the minor , are the examples of voidable contract

9) Difference between void and voidable contract

1. As to enforceability
A void contract is not enforceable
A voidable contract is enforceable at the option of one party

2. As to compensation
In void contract compensation cannot be paid
Compensation may be paid in voidable contract

3. Legal effect
A void contract has no legal effect
A voidable contract has legal effect until it is avoided

4. As to objection
In void contract no party can claim his objection against other party
In voidable contract each party can claim his objection against other party

5. Time factor
A void contract is invalid from the moment it is created
A voidable contract is valid till the time it is avoided

10) Preclude Remarks

Contract is legally binding agreement between two or more parties by which rights can be
acquired by parties. A void contract is not enforceable by the law due to failure of
fulfillments required by law, makes the such contract void. A voidable contract is
enforceable by the law but only the option of the one or more parties
Q # 03: What is consideration? Explain its exceptions.
1) Preface Statement
The meaning of consideration in legal sense is “ something in return”. Simply it can be said
that exchange of something against another thing. Contract without consideration is not
enforceable by the law as well as consideration can be ,in form of money, in form of other
thing or to do something or not to do something , consideration has multiple natures. An
agreement without consideration is void and consideration should be good and valuable.
Consideration is the backbone of the contract it means without it contract cannot create it is
vital element in the law of contract

2) Definition of consideration
Consideration is a such benefit which becomes the reason of creation of contract between
the parties
Consideration is an object which can be in form of money, in form of to do
something or not to do something or even other than these

Example
A agrees to sell his car to B for Rs. 3 lakh. Now B promises to pay such amount to A, this
amount is consideration in this contract or agreement

3) Types of consideration
Following are the three types of consideration

1. Past consideration
When consideration is given even before the creation of contract. It is consideration that is
already given is called past consideration

2. Present consideration
If the consideration is given at the time of creation of contract, it is called present
consideration

3. Future consideration
It the consideration is given after the creation of contract, it is called future consideration

4) Essentials of consideration
Following are the essentials of consideration
1) Consideration should be given by the promisee
2) Consideration should be given by the desire of promisor
3) Consideration should be lawful
4) Consideration should be real
5) Consideration may be, past, present, or future
6) It may be consisted of an act or money or other than these

5) Exceptions
It is a fact that without consideration an agreement cannot be created but it has following
exceptions

1. Love and affection

If an agreement has been created between the parties for natural love and affection, in such
case consideration is not necessary

2. Contract of agency
In the contract act of 1872, it has been mentioned that there is no consideration is required
for contract of agency

3. Voluntary services
A contract made without consideration is also valid if there is a promise to compensate, in
such case there is no consideration is required

4. Time barred debt

Money a person borrowed and didn't repay but is not legally collectable because too many
years have passed. In such case there is no consideration is required

5. Contract under seal

Under the English law, a contract which is made in form of a deed under seal is valid even it
is made without consideration

6. Extension in time limit

If agreement is made for extension in time limit for enforcement of the contract, in such
case, there is no need of any consideration

6) Unlawful consideration
If in a contract any object which violates the law or based upon a fraud or creates an injury
to others it will be considered unlawful consideration

7) Cases of unlawful consideration

Following are the cases of unlawful consideration which are being given below

1. Prohibited by law
If the object of an agreement is prohibited by the law, in this case the consideration will
be unlawful

2. Element of fraud
If the object of an agreement has element of fraud, in this case the consideration will
be unlawful

3. Immoral
If the object of an agreement is immoral in nature, in this case the consideration will be
unlawful

4. Against public policy

If the object of an agreement is against the public policy, in this case the consideration
will be unlawful

5. Injury to other person or property

If the object of an agreement which become cause of an injury to other person or
property, in this case the consideration will be unlawful

6. Unlawful object
If the object of an agreement is itself unlawful, in this case the consideration will be
unlawful

8) Preclude Remarks
It said that the consideration is the one of the most important essential of the valid
contract. Without consideration there is not contract but there are certain exception
according to them a contract can be valid without the consideration. Consideration
removes the fear from the mind of other persons those think that there is a chance of
lose in deal. Consideration an object which can be in form of money, in form of to do
something or not to do something or even other than these. Consideration play vital
role in the a valid contract and it is like a backbone in the human body which may help
the being to stand without any support
Q # 04: What is void contract? What contract are
specifically
declared void contracts under the contract act 1872.
1) Preface Statement
The word void means “not binding in law”. A contract which cannot be enforced by any
party is void contract. It cannot create legal relationship between the party because it is not
recognized by the law. A lot of reasons which makes such kind of contracts void and no one
can take legal action against other on the behalf of void contract

2) Definition of Void contract

An agreement which is not enforceable by law is called void contract.

Explanation
The word void means “not binding in law” A contract which cannot be enforced by law even
no party can take legal action against one another.

3) Reasons of void contract

Following are the main reasons when contract becomes void
1) When contract is illegal from the moment it is made
2) Contract was legal but declared unacceptable by the courts because it violates
fundamental principles
3) It becomes void due to the changes in law
4) Even it has been fully performed

4) Feature of void contract

Following are the feature of void contract

1. Enforceability by law
A void contract is not enforceable by law because it not fulfill the requirements of a valid
contract

2. Compensation
In void contract no compensation can be paid by any party because it not fulfill the
requirements of a valid contract

3. Nature of contract
According to its nature because it is against the public policy that’s why it is a void contract
4. No legal rights
A void contract does not create any legal rights because it not fulfill the requirements of a
valid contract

5. No obligation on any party

A void contract does not create any obligation on any party because it not fulfill the
requirements of a valid contract

5) Contracts which are specifically declared void

Following are the contract which declared to be void

1. Agreement in restraint of marriage

Any contract which restraints to any adult person from marriage for whole life or for
specified time is void contract.

Illustration
If A agrees with B that she will not marry C.it is a void marriage

2. Agreement in restraint of trade

Any agreement which restraint to any businessman from establishing lawful business is
void contract

3. Agreement in restraint of legal proceeding

Each and every body is allowed to obtain his legal rights through the legal proceeding. So
following agreements is void
Any agreement which restrains from taking legal proceedings, while law enable
the same person to take action against any one

4. Agreement when both parties are at mistake

Any agreement in which both the parties are under mistake as to a matter of fact, such
agreement is void contract

5. Agreement by way of wager

Literally the word ‘wager’ means ‘a bet’ something stated to be lost or won on the result
of a doubtful issue, and, therefore, wagering agreements are nothing but ordinary
betting agreements and it is void contract

6. Uncertainty
Any agreement, whose meaning are not clear and certain is called void contract

Example
A agreement to sell his car to B for R.s 1 lakh or 50 thousand. It is not clear
which amount will be given. In such case contract is void

7. Immoral
Any agreement which is against the moral values of the society, in this case it is void
contract

8. Element of fraud
Any agreement which has element of fraud, in such case it a void contract

9. Against public policy

Any agreement which is against the public policies, is a void contract

10. Injury to others

Any agreement which become cause of an injury to other person or property, in this case
the contract will be void

11. Unlawful object

Any agreement which is in itself unlawful, it will make the contract unlawful

12. Impossible act

Any agreement in which such act is mentioned which is impossible to perform, it will
make to contract void

13. Contract forbidden by law

If the object of an agreement is forbidden by the law, it will be void contract

6) Preclude Remarks
Void contracts are not enforceable by law, because these are not recognized by the law.
It does not create any rights on any party and party is not responsible to perform such
contracts. So void contract is not contract in the eye of law
Q # 05: What do you understand by capacity of contract?
1) Preface Statement
Under contract act 1872 parties must be competent to contract. Every is not competent to
enter into the contract unless he fulfills the conditions laid down in the contract act. A
contract made by un-competent person is invalid or void contract. There are several things
that make a person legally able to do contract, including age and state of mind. Minors, the
mentally insane, and persons who are under the influence do not have legal capacity to
enter into a contract.

2) Contractual capacity
According to section 11 of the contract act” Every person is competent to contract who is of
the age of majority according to the law, & who is of sound mind , and has not been
disqualified by any law from contracting

3) Persons competent to contract

Following are the persons who are competent to enter into the contract

1. Adult
A person who has attain 18 years of age in adult under contract act 1872. And an adult can
enter into the contract

2. Persons of sound mind

The person who want to perform a legal contract should be sound mind, he must has ability
to judge the matter and must be able to perform civil duties is a sound mind person.
The unsoundness of mind has been categorized into following types
Person usually unsound minded
Person who is usually unsound mind. But occasionally of sound mind. He can make a
contract when he is of sound mind
Person usually sound minded
Person who is usually sound mind. But occasionally of unsound mind. He cannot make a
contract when he is unsound mink
Example
A patient in an insane, who is at intervals of sound mind, can make contract during
intervals

3. Persons not disqualified by law

Persons who have not been disqualified by law. If a person who has not disqualified by law,
is capable to enter into contract

4) Persons not competent to contract

Following are the persons who are not competent to enter into the contract

1. Minor
A minor is a person who has not attained the age of 18 years. And people below this age are
sometimes called minors in the context of contract law. Such person who are minor cannot
enter into the contract
a. Rules relating to minor’s agreement
A minor is not competent to contract
A minor’s agreement has no validity in the eye of law
A minor cannot be compelled to pay back the money received by him under an
agreement
A minor cannot be held responsible for breach of contract
The parent can be held liable if the minor act as agent of the parent
Where a minor and an adult jointly enter into the contract with another person, the
minor will not be held responsible but only adult would be held responsible
A minor cannot be declared bankrupt
A minor can only be receiver

2. Persons of unsound mind

Mentally disturbed person cannot make a valid contract because he is unable to understand
the terms and conditions of the contract that’s why he is incompetent to enter into the
contract
a. Causes of unsoundness of mind
Following are the causes of unsoundness of mind
1) Insanity
2) Drunkenness
3) Old age
b. Effect on agreement
A contract made by a person of unsound mind is void
c. Burden of proof
The burden of proof is in hands of the party who wants to cancel the contract

3. Persons disqualified by law

Persons who have been disqualified by law. If a person who is disqualified by law he is
incompetent to enter into contract
a. Joint stock company
Joint stock Company whose stock is owned jointly by the shareholders, has been
declared in-competent by the court of law to enter into the contract
b. Foreigner
Foreigners have been declared in-competent by the court of law to enter into the
contract
c. Convict
A person who is under imprisonment has been declared in-competent by the court
of law to enter into the contract
d. Bankrupt
A person bankrupt has been declared in-competent by the court of law to enter
into the contract
e. Diplomat
Diplomat and ambassadors have been declared in-competent by the court of law
to enter into the contract

4. Intoxicated Persons
It has been declared by the court that contract made by a person who drunk because he
does not know the consequences of his act is that’s why such a contract is not void but
merely voidable, but if the drunken party, upon coming to his senses, approves the contract,
he is bound by it

5) Preclude Remarks
Every person is not competent to enter into the valid contract. A contract made by impotent
person is invalid or void in the eye to the law. Mentally disturbed person have been
declared incompetent by the court of law for entering into the contract. As well as minors
also are not capable to enter into the contract. All those person can enter into the contract
who are declared competent by the court of law such as an adult who has attained age of 18
years and has sound mind and legally authorized person can make the contract
Q # 06: What is consent and free consent? When consent
said to
be free?
1) Preface Statement
Consent is very important essential of the contract because without the consent of parties
there is no valid contract. When consent could be taken by coercion, undue influence,
misrepresentation or mistake the agreement is voidable which can be cancelled on the
option of that party whose consent was taken by unfair means. Free consent is the
foundation of valid contract. Without free consent any agreement cannot bear the status of
valid contract. Without free consent any agreement does not amount the valid contract and
such contract cannot be enforced by the court of law

2) Definition of consent
When all the parties of a contract may agree upon the same thing in the same sense is
called consent

3) Definition of Free consent

Consent will be considered free when it has been taken without coercion, undue influence,
fraud, misrepresentation or mistake

4) Age of consent
Consent only can be given by an adult. A consent which is given by minor in contract will be
considered invalid. The age of consent is the age at which a person is considered to
be legally competent to consent to sexual acts. The ages of consent are currently set
between 14 and 18

5) Consent of unsound person

A consent which has been taken by unsound person has no legal value. If a contract has
been made upon such consent in this case such contract shall be void. Because unsound
person is unable to judge the consequences of his consent against any agreement that’s
why such contract has no value in the eye of the law and it is not enforceable by the law

6) Essentials of consent
Following are the essential of consent

1. Free consent
It is also necessary that the consent should be free from any pressure. Free consent is one of
the essential elements of valid contract. Parties to a contract may agree upon the same
thing in the same sense.

2. Coercion
Consent should be free from coercion. Such consent is the most important element of the
valid contract.

3. Undue influence
Consent should be free from undue influence which can be mental or physical threat.

4. Misrepresentation
False statement in the agreement can cause the contract void. So there should be no
Misrepresentation between the parties

5. Fraud
Consent should be free from fraudulent element

7) Types of consent
Following are the three types of consent

1. Explicit Consent
Explicit consent also known as direct consent which means that an individual has been given
options to agree or disagree with the treaty even after disclosure of personal information

2. Implied consent
Implied consent also known as indirect consent which means that an individual who has not
been given options to agree or disagree with the treaty even nothing to disclose upon him
about personal information

3. Written consent
Written consent also known as informed consent which means an individual who gives
consent even after knowing the all written risk involved which may occur in the future and
promise may disclose sufficient information upon him

8) Reasons which makes consent unfree

Case law
It was held that If a contract has been made by obtaining consent by coercion of a party, it
does not remain a free consent, and the contract becomes voidable
Following are the reasons which make the contract unfree
1. Coercion
When consent for an agreement is taken by coercion, the contract becomes voidable at the
option of the party whose consent was taken by coercion. But If such party want to continue
this agreement then contract shall be valid in the eye of law

2. Undue influence
Undue influence is a mental or moral threat. When consent for an agreement is taken by
undue influence, the contract becomes voidable at the option of the party whose consent
has been taken by undue influence.

3. Fraud
The element of fraud in a contract makes the contract voidable in the eye of law and there is
no legal obligation on the parties. The contract becomes voidable at the option of the party
whose consent has been taken by fraud

4. Misrepresentation
When a false statement is made with the knowledge that it is false in order to get consent of
the party in this case, contract become voidable at the option of the party whose consent
has been taken by Misrepresentation

5. Mistake
Sometimes, one or both parties are working under some misunderstanding about fact
relating to the subject matter of contract and enter into a contract. Because such contract is
based on a mistake so in this case it is not free consent and contract is voidable

9) Preclude Remarks
Free consent is the consent which obtained by the free will of the parties. Free consent is an
essential element of the valid contract. A contract is voidable if there is no free will and
consent of the parties have been taken by undue influence, mistake, fraud or
Misrepresentation in such cases contract is void and there is no obligation on the parties
and they cannot take legal actions against one another. It is not free consent which is
necessary for the validity of a contract there are a lot of other factors which makes contract
valid
Q # 07: Explain the rules which govern the appropriation of
payment made by the debtor to the creditor.
1) Preface Statement
When a debtor takes several loans from creditor and return the payment which is less than
to whole amount then the question arises which is known as appropriation of payment.
When once made, the appropriation cannot be changed. Section 59,60 & 61 of the contract
act 1872 provides the rules for the appropriation of the payment in case when debtor takes
loan and when return the payment to his creditor. When a debtor gives the payment to his
creditor, he has right to indicate this payment to any particular debt which he has taken,
and it a duty of creditor to discharge the payment accordingly.

2) Definition of Appropriation of payment

When a debtor returns the money to his creditor and instructs to his creditor that from in
which debt, the payment to be discharged, it is called appropriation of payment. And
according to law, creditor is bound to discharge the payment accordingly

3) Meaning of Creditor
A creditor is a person or enterprise that gives money to another person or party

4) Meaning of debtor
A debtor is a person or enterprise that have a loan from any other person or party

5) Rules of appropriation of payment

Following are the rules of appropriation of payment. Details are as under

1. Appropriation by debtor
First rule of appropriation of the payment is laid down in sec 59 of contract act 1872 and it
gives the right to debtor about the appropriation of the payment
According to the section 59.
Each debtor who takes several debts from a single creditor, he has right to
instruct his creditor that payment to be discharged from particular debt, and it a duty of
creditor to discharge the payment accordingly. The creditor has to follow the debtor’s
instruction.

Application of rule
This rule of appropriation of payment applies upon where are several debts and it not
applies upon a single debt which is payable by the installments
Example
A gives to B three different debts of 20,000, 30,000 and 50,000. And B returns 50,000 to
A and instructs that the payment should be discharged against the first two debts
(20,000 & 30,000). A is bound to discharge the payment from first two debts

A. Indirect appropriation by debtor

Each debtor who takes several debts from a single creditor and debtor makes a payment
to his creditor without any expressed instructions that from which debt, payment to be
discharged. In such case it is duty of creditor to discharge the payment from the debt
which is intended by the debtor

Example
When debtor gives an amount of 800 to creditor and there no similar amount pending
from debtor. It is the duty of creditor to clear the payment of a particular debt because
his intention is to clear particular debt. Such appropriation should be done by the
creditor

2. Appropriation by creditor
Second rule of appropriation of the payment is laid down in sec 60 of contract act 1872 and
it gives the right to creditor about the appropriation of the payment
According to the sec 60.
If the debtor does not give any direct or indirect instruction about the
appropriation of the payment to creditor. The creditor has right to discharge the payment
on his own discretion from any debt. He can discharge the received amount from any lawful
debts but he cannot discharge the payment from unlawful debts

Example
A have several loans from B. One of them R.s 2 Lac is time barred. A send R.s 4 Lac to B
without instruction that from which debt, payment to be discharged. B may discharge
the amount R.s 2 Lac against the time barred debt.

3. Appropriation by law
Third rule of appropriation of the payment is laid down in sec 61 of contract act 1872.
Details are as under.

According to the sec 61
When the debtor does not instruct expressly or impliedly to his creditor, and
creditor does not discharge the payment on his own discretion then sec 61 would apply. In such
cases, the payment by the debtor will be discharged towards the debts in order to the time. In
sec 61 this method of appropriation of the payment applies as per rule of law

Application
This rule of appropriation of the payment applies when no party makes any
appropriation. In this situation the law gets the right to appropriate the payment

Example
A have a two loans of R.s 4 lac each which are time barred and another loan of R.s 8 Lac.
A sends R.s 4 Lac and no party makes any appropriation of R.s 4 Lac. In this case it would
automatically be discharged from the payment of time barred

I. When principal and interest both are due?

If a payment has been made without expressly stating that it is towards interest or principal,
payment must be discharged from interest first, and then from the principal
It is emphasized by law that if the creditor accepts the payment, he must follow the above
rules of appropriation; otherwise he must refuse to accept the payment.

6) Preclude Remarks
Under the contract act 1872 in which sec 59,60 & 61 deals with the rules of appropriation of
the payment . There are certain conditions for debtor and creditor which legally bound
them to follow these rules. Section 59 give authority to debtor meanwhile sec 60 give
authority to creditor according to these rules both of debtor and creditor can exercise their
rights according to the law. Section 61 which empowers the law to use his own discretion
when there is no express or implied instructions from both the parties in such case law has
right the appropriation of the payment . All rules apply then a number of debts have been
taken from creditor and in case of single debt taken by creditor , these rules not apply in
such conditions
Q # 08: Describe the various modes in which a contract
may be
discharged
1) Preface Statement
The discharge of a contract means that when the rights & obligations of the contract come
to an end. When discharge occurs, all duties attached with contract are detached. Discharge
of the contract actually is the termination of the contractual relationship between the
parties. And there are certain reasons which may discharge the contract. Contract act 1872
provides various modes of discharge of contract

2) Meaning of Discharge
Discharge of a contract means termination of the contractual relations between the parties
of the contract. A contract is said to be discharged when the rights and obligations upon
contract come to an end.

3) Modes of Discharge of Contract

Following are the five modes of discharge of the contract
1) By Performance
2) By Agreement
3) By Impossibility
4) by laps of time
5) By Breach of contract

1) By Performance
Performance is a common mode of discharge of the contract. It is a legal mode of discharge
when the parties of a contract perform their duties according to the agreement then
contract automatically gets discharge
Following are the two types of performance

I. Actual performance
When each party of the contract performs his legal duties according to the terms and
conditions of the contract. It is called actual performance

II. Offer of performance

Offer is also equivalent to performance, when one party offers to another party for
performance of legal duties according to the terms and conditions of the contract and
it depends upon the discretion of the other party who can refuse to perform or perfor
Essential of valid offer of performance
Following are the essential of valid offer of performance
a) Offer of performance should be unconditional
b) Offer of performance should be at proper time
c) Offer of performance should be at a proper place
d) Offer of performance must be presented to contractor or his agent
e) Offer of performance presented to stranger is invalid offer

2) BY Agreement
A contract can also discharge by the new agreement on the place of old agreement between
the parties
Following are the ways of discharge of a contract by agreement

I. Novation
When the parties of the contract creates a new contract on the place of old contract. It
is called novation

Kinds of novation
Following are the kinds of novation
1) Sometime novation changes the party
2) Sometime novation creates a new contract

II. Rescission
When all or some of the terms of the contract are cancelled. It is called rescission

Modes of rescission
Following are the modes of rescission
1) It may be by mutual consent of the party
2) When a party fails to perform his contractual obligation, the other party may rescind
the contract

III. Alteration
When one or more of the terms of the contract are altered by mutual consent of the
parties. It is called alteration

IV. Remission
When a party discharges the contract without making new agreement. It is called
remission

V. Merger
When parties of the contract merges multiple lesser rights into superior rights. It is
called merger

3) By Impossibility
A contract also can discharge by Impossibility of performance. If the act becomes impossible
to perform after the formation of contract, in this case contract becomes void
Following are the impossibilities

I. Initial impossibility
When one or both the parties do not have the knowledge that a promise is impossible
to perform even they enter into an agreement

II. Subsequent impossibility

Sometimes a contract is capable of being performed when entered into. But later on
under some circumstances it becomes impossible to perform

Factors of impossibility
Following are the factors causing impossible to performance of the contract
a) Destruction of the subject matter
b) Death of the person
c) Personal incapacity
d) Change of the law
e) Declaration of the war

4) By laps of time
A contract can also discharge by the laps of time because the contract should be performed
within the specified time if it is not performed within the time then it will be discharged

5) By operation of law
A contract can also discharge by the operation of law
Following are the ways of discharge the contract under operation of law

I. Bankruptcy
When court declares a person as insolvent (Bankrupt) the contract automatically will
be discharged and all rights and obligation will be removed and contract will come to
an end

II. By unauthorized alteration

When one party alters the written terms of the contract without the consent of other
party. In this case contract is discharged

6) By Breach of contract
Contract can also discharge by breach. When one of the parties fails to perform any term of
the contract and does not fulfill his contractual responsibilities, in this case contract is
discharged

I. Actual breach
When a party fails to perform a contract, at that time when performance is needed

II. Anticipatory breach

An action that shows a party's intention to fail to perform its contractual obligations to
another party

III. Express breach

When one of the parties of the contract clearly refuses to perform a contract, in this
case contract gets discharge

IV. Implied breach

When one of the parties of the contract not clearly refuses to perform a contract, in
this case contract gets discharge

4) Preclude Remarks
When the rights and obligation of the contract removed even by failure of performance ,
operation of law, breach of contract, by agreement or whatever the reason in above cases
the contract gets discharge. Under contract act 1872 there are a lot of reason which may
discharge the contract or terminate it by failure of required procedures
Q # 09: What is contract of bailment? Explain fully the
rights and
duties of the bailee and revocation of contract of bailment.
1) Preface Statement
Bailment is a process when owner of the certain goods delivers possession of his personal
property to another person under an agreement but with the obligation to return it to his
original possessor when the purpose has been achieved. For example, a man visits a repair
shop for getting his television set fixed. The television set is left at the shop where the repair
man examines it and fixes the problem. Once fixed, the television set has to be returned to
its owner. There is a contract of bailment between the man and the repair-man

2) Meaning of Bailment
The word ‘bailment’ has been derived from the French word ‘bailer’ which means ‘to
deliver’.

3) Definition of bailment
A bailment is the delivery of goods by one person to another person for some purpose upon
an agreement that the goods shall be returned when the purpose will be completed. In a
contract of bailment such kind of delivery is for temporary purpose.

4) Kinds of bailment
Following are the kinds of bailment

1. Bailment for benefit of bailer.

In this type of bailment, the bailer gives goods to bailee upon his own responsibility. While
bailee is not responsible for any loss in this condition

2. Bailment for benefit of the bailee.

In this case the bailee takes possession of the goods upon his own responsiblity. The bailer
gets nothing. But the bailee is rewarded by the possession of the goods.

3. Bailment for mutual benefit.

In this type, both the bailer and bailee benefits. If a person gives his vehicle for repairing.
The bailer will get his vehicle repaired and the bailee will be lawfully charged

5) Parties of the contract of bailment

Following are the two parties in the contract of bailment
1. Bailer
The person who delivers the goods is called bailer in the contract of bailment

2. Bailee
The person who receives the goods is called bailee in the contract of bailment

6) Essentials of contract of bailment

Following are the essential of contract of bailment

I. Contract
Contract is a basic essential for the bailment, without contract nothing can be proceeded

1. Moveable property
In contract of bailment property should be moveable or any property which can be moved
from one location to another location

2. Delivery of goods
In the contract of bailment goods should be delivered for some purposes

3. Change of possession
In the contract of bailment possession should be changed from one person to another
person

4. Specific purpose
The goods should be delivered for some specific purpose to another person

5. Ownership is not changed

In contract of bailment the ownership should not be changed. It remains of bailer

6. Parties of contract
There should be two parties of the contract of bailment. One is bailer and second one is
bailee

7. Returnable
The good should be returned to the owner of the property after the completion of the
purpose

7) Duties of bailee
Following are the duties of bailee

1. Care of goods
Bailee is responsible to take care of the goods of the bailer as he takes care of his own goods

2. Return the goods

Bailee is responsible to return the goods to bailer after the completion of the purpose

3. Return at proper time

Bailee is responsible to return the goods at proper time to bailer according to the contract

4. Return of profit
Bailee is responsible to return the profit to bailer for example if a cow gives birth to a calf
and bailee is responsible to return the cow along with calf to the bailer

5. Proper use of goods

Bailee should use the goods according to the contract of bailment

6. Duty not to mix

Bailee should not mix his goods with bailor's good without bailor's consent. If he does so,
and if the goods are separable, he is responsible for separating them and if they are not
separable, he will be liable to compensate

8) Rights of bailee
Following are the rights of bailee

1. Recovery of loss
Bailee has right to recover all the loss which has been occured during the completion of the
purpose

2. Recovery of compensation
Bailee has right to receive compensation from the bailer for any loss during the completion
of the purpose

3. Recovery of expenses
Bailee has right to recover all the expenses which has been expensed during the completion
of the purpose

4. Right to possession
Bailee has right to keep the possession of the property of the bailer until that bailer pays
lawful charges to the bailee

5. Right of security
Bailee has right to receive the amount of security from bailer for any loss likely to be
possible in future during the completion of purpose

6. Rights against third person

He has the right to bring an action against that party. If a third person wrongfully deprives
the bailee from the use of the goods bailed to him

7. Right of wage
Bailee has the right to give lawful charges to him for providing services against the contract
of bailment

9) Termination of bailment
Following are the reasons which can cause the termination of bailment

1. Expiry of time
Bailment comes to an end on the expiry of specified time according to the contract of
bailment

2. Completion of purpose
Bailment comes to an end on the completion of the purpose. Bailment terminates as soon
as bailment completes

3. Unauthorized use
Bailment comes to an end if the bailee makes unauthorized use of the goods delivered to
him

4. Death of either party

Bailment comes to an end by the death of the any party before the completion of the
purpose

5. Termination by bailer
Bailment comes to an end if it is terminated by bailer before completion of the purpose

6. Destruction of subject matter

Bailment comes to an end if the subject matter of the bailment gets destroyed

10) Preclude Remarks

A bailment is an intentional transfer of the possession of the goods by the owner to another
person under a contract. The contract of bailment can be terminated under some
circumstances as well as it enforces different rights and duties upon bailer and bailee
Q # 10: Define Agency. Duties and rights of agent.
1) Preface Statement
Such source which creates relationship between principle and an agent is called agency. And
the principle grants authority to agent and agent acts on the behalf of principle. Both the
agent and principal can be an individual or an entity, such as a corporation etc. Agent has no
his own authority and he can be terminated by principle at any stage. Agent is such person
who creates a legal relationship between the principle and the third party

2) Definition of Agency
Such source which creates relationship between principle and an agent is called agency

3) Parties to agency
Following are the two parties in the contract of agency

1. Agent
A representative of an agency who acts on the behalf of another person (Principle) in order
to legally bind the third party in particular business

2. Principle
Principle is a such person who is being represented before the third party by the agent

4) Appointment of agent
Every person can be appointed as agent who has attained the age of majority according to
the law and is of sound mind.

5) Who can be agent

Between the principle and third person, any person can become an agent. But no person
who has not attained the age of majority according to law and is not of sound mind, cannot
become an agent.

Kinds of Agent
1. Sub-Agent
Sub agent is a person who is acting under the control of original agent and is working on the
behalf of original agent

2. Co-agent
Co-agents are persons who are working together with one another on behalf of principle
are called co-agent
3. Advocate
Advocate is a person who acts as an agent. He appears on the behalf of principle before the
court

4. Banker
Banker is a person who acts like an agent on the behalf of bank. The relationship between
banker and customer is a legal relation

5. Broker
Broker is a person who acts like an agent on the behalf of principle. He employed for buying
or selling the goods between the two parties

6. Auctioner
An autioner is a person who acts like an agent on the behalf of principle and he is authorized
to sell goods on the highest price during the public sale

7. Mercantile agent
A mercantile agent is a person who acts on the behalf of principle and is authorized to sell or
buy goods, and collect a loan by using the principle’s goods

8. Delcredere Agent
Deccredere agent is an agent who guarantees to his principle that the person to whom he
sells will pay, if he will not pay, I will be liable

9. Factor
A factor is an agent whom goods have been given for sale

10. Indenter
An indenter is an agent who sells or buys on the behalf of his principle

6) Kinds according to extent of authority

Following are the kinds of an agent according to extent of authority

1. General agent
A general agent is a person who is authorized to do all acts in connection with particular
business. To whom third party can assume that this is a person who has all power to do all
acts

2. Special agent
Special agent is a person who is authorized to do some particular acts in connection with
particular business. He represents his principle in some particular business

3. Universal agent
Universal agent is a person who is authorized to do all act and he has unlimited powers
which have been given by his principle

7) Rights of Agent
1. Right of Wage
Agent has the right to give lawful charges to him for providing services against the contract
of agency

2. Right of possession
Agent has right to keep the possession of the property of the principle until that principle
pays lawful charges to the agent

3. Right of commission
Agent has right of commission upon the thing which is under his possession

4. Right of compensation
Agent has right to receive compensation from the principle for any loss during the
completion of the purpose

5. Right of security
Agent has right to receive the amount of security from principle for any loss likely to be
possible

6. Right of expenses
Agent has right to recover all the expenses which has been expensed during the completion
of the purpose

7. Right of stoppage
Agent has right to stop the process of delivery of goods

8) Duties of an agent
Following are the duties of an agent

1. Obey the instructions

It is the duty of an agent to obey the instructions of the principle otherwise he will be held
responsible for any loss

2. Use of skills and knowledge

It is the duty of an agent to use his skills and knowledge for furtherance of the business of
the principle

3. Should not make any secret profit

It is the duty of an agent that he should not make any secret profit from the business of
principle

4. Return of profit
It is the duty of an agent that if he earned the profit from the business he should return it to
principle

5. Payment of all sums

It is the duty of an agent to pay all amounts received on his amount from the business of
principle

6. Showing of accounts
It is the duty of an agent to show his account on the demand of the principle

7. Separate accounts
It is the duty of an agent to maintain his accounts and keep them separate from principle
accounts and not to mix them

8. Duty in case of principle die or become insane

It is the duty of an agent in case of death or insanity of the principle that he should protect
the interests of his legal heirs

9. Delegation of authority
It is the duty of an agent that he should not delegate his authority to any other person
without the consent of the principle

10. Communicate with principle

It is the duty of an agent to communicate with principle and share all the information with
him related to matters of business

11. Performance with honesty

It is the duty of an agent that he should deal the business honestly. If he deals the business
dishonestly then he is not entitled to receive the wage of his services

12. Conducting business

It is the duty of an agent to conduct the business of principle
9) Termination of authority of agent
Following are the ways by which authority of an agent gets terminated
1) In case of death of principle
2) In case of death of agent
3) In case of insanity of principle
4) In case of insanity of agent
5) If agent gives up of the business
6) In principle becomes bankrupt
7) In case of destruction of the subject matter of the business
8) In case of expiry of the time

10) Preclude Remarks

An agent is authorized to create a contract between the third party and principle and he
plays his role as middle person in the contract of agency. Agent act on the behalf of principle
and his authority can be terminated by principle at any stage or any time without any
reason because all powers are vested in principle. Actually agent has no powers but there
are a different kinds of agents according to their authorities
Sales Of Goods

Q # 01: Define condition and warranty. What is the

difference
between two.
1) Preface Statement
In contract, condition is an act which binds the contractual party to perform certain act
which has been obligated upon the party at the time contract signed. For example, let's say
that I promise my brother that I'll wash the car if he'll clean my room. This agreement has a
condition. I'm not bound to wash the car unless my brother cleans my room. Contracts are
common in the business world. A contract is a type of legally binding written or spoken
agreement. A valid contract will create a mutual obligation. This means that each of the
parties is obligated, or required, to perform a duty under the contract. warranty has various
meanings but generally means a guarantee or promise which provides assurance by one
party to the other party that specific facts or conditions are true or will happen

2) Definition of warranty
warranty means a guarantee or a promise which provides assurance by seller to buyer that
specific facts or conditions are true or will happen

3) Definition of condition
In contract, condition is an act which binds the contractual party to perform certain act
which has been obligated upon the party at the time contract signed

4) Types of Warranty
Following are the two types of conditions and warranties. Details are as under

1. Expressed warranty
Under the sale contract, written warranty or express warranty is an agreement between
the seller and the buyer according to which seller is liable to repair or replace the thing
which has been sold by seller.

2. Implied warranty
The warranties which are applicable automatically by operation of law are called implied
warranties. And implied warranties ensure that purchased item is fit for the purpose

a. implied warranty of habitability

Implied warranty of habitability is a guarantee that a house is fit for live in

b. Implied warranty of fitness

This type of warranty provides a guarantee that the product recommended by a
salesperson is fit for a particular use for example if ali purchases of blender to crush the
ice under the recommendation of seller, and blender does not crush the ice ,buyer will
return the item under the implied warranty of fitness

c. Implied warranty of title

This warranty is implied in which it is not required to be placed in writing, ensuring the
buyer that the property will not be stolen, or will not to belong to someone else. This
ensures to customer that they will not pay twice for an item

d. implied warranty of merchantability

An implied warranty of merchantability applies to nearly all purchases as it guarantees
that the product will work for its intended purpose. For example, Rob buys a new bulb,
but it when he plugs it in at home, it does not work. Rob has the right to return the
bulb and exchange it for a working one, or receive a refund.

5) Types of conditions
Following are the two types of conditions and warranties. Details are as under

1. Expressed condition
These are those conditions which has clearly been defined and agreed by the parties
while entering into the contract. And such conditions may be written or spoken

2. Implied condition
These are those conditions which has not clearly been defined and agreed by the parties
while entering into the contract. The conditions which are applicable automatically by
operation of law are called implied condition

6) Difference between conditions & warranty

The following are the major differences between condition and warranty

1. As to nature
Condition is an obligation in his nature which requires to being fulfilled for
completion of contract
Warrant is a surety in nature given by the seller regarding the facts of the goods
2. Termination of contract
Breach of any condition may result in the termination of contract
Breach of warranty may not result the termination of the contract

3. Claim for damages

In case of breach of condition, the innocent party has the right to cancel the
contract and can claim for damages
In case of breach of warranty, the innocent party only can take legal action against
the other party

4. As to violation
Violation of a condition means violation of warranty too
But violation of warrant is not a violation of condition

5. As to importance
Condition is an important and integral part of the condition and it directly affects
the contract
Warranty is not so important part of the contract as condition and it does not
directly affect the contract

7) Preclude Remarks
At the time of contract of sale, both the buyer and seller define some conditions regarding
payment, delivery, quality, quantity, etc. These can be either condition or warranty. Every
contract of sale has some implied conditions and warranties. Condition is such part of
contract which needs to be fulfilled by other person so that agreement between the parties
may complete. And warrant is surety which assures and protects the buyer rights and
enables him to take legal action against the seller if describes facts not prove true of happen
Q # 02: What is difference between agreement to sell and
contract
of sale? Discuss the essential features which govern the
formation of two.
1) Preface Statement
If ownership is transferred by seller to buyer under a contract for a price, is called sale. If
there is a promise that ownership will be transferred by seller to buyer at a future time
under a contract for a price, is called agreement to sell. In contract of sale the buyer
becomes full owner of the property and in agreement to sell buyer does not become owner
of the property because there is only agreement to sell

2) Definition of Contract of sale

Such contract when seller transfer or agrees to transfer the property or the goods to the
buyer for a price is called contract of sale
And agreement to sell does not create any right in immovable property

3) Parties of the contract

Following are the two parties of a contract

1. Seller
Seller is a person who sells his property or goods to buyer for a price

2. buyer
buyer is a person who purchases the property or goods from a seller for a price

4) Types of contract of sale

Following are the three types of the contract of sale

1. Stamped contract
A contract is an enforceable legal document only if it was stamped by legal authority. The
stamp shows that the parties are agree to take legal action if something happened unlawful.

2. Express contract
In an express contract, the parties state the terms and conditions either orally or in writing,
at the time of its formation. The expression shows that the parties are agree to take legal
action if something happened unlawful

3. Implied contract
In an implied contract, the parties do not state the terms and conditions of the contract by
words such kind of contract is called implied contract of sale

5) Essential elements of sale

Following are the essential feature of the contract of sale

1. Buyer and seller

One person cannot become buyer and also the seller; there should be two persons to a
contract of sale, buyer and seller.

2. Price
Price is the consideration in the contract of sale for which good is being sold. If goods are
being exchanged with goods it is not a contract of sale.

3. Goods
The subject matter of the sale is goods. All moveable property or goods and immoveable
property or goods are the most important essentials of the contract of sale because without
goods it is not possible of formation of contract of sale

4. Transfer of ownership
In contract of sale, ownership of the property or goods should be transfer to the buyers

5. Transfer of possession
In contract of sale, possession of the property or goods should be transfer to the buyers

6. Sale
When ownership is transferred by seller to buyer under a contract is called sale

7. Agreement to sell
When ownership will be transferred by seller to buyer at a future time under a contract is
called agreement to sell

8. Essentials of a valid contract

The contract of sale must have all the essentials of a valid contract

6) Difference between sale and agreement to sell

Following are the differences between the sale and agreement to the sale

1. Transfer of property
In contract of sale, property transfers from seller to buyer and buyer becomes the owner
In agreement to sell, the seller only does the promise with buyer to transfer the property in
future

2. Risk
In contract of sale, all risks transfers with the buyer
In agreement to sell, all risks remain with the seller

3. Tax
In contract of sale, tax imposed at the time of sale
In agreement to sell, there is no tax on agreement to sell

4. Availability of goods
In contract of sale, goods exists at the time of formation of the contract
In agreement to sell, goods may exist or may not exist at the time of formation of the
agreement to sell

5. Nature of contract
In contract of sale, the nature of contract is absolute
In agreement to sell, the nature of contract is conditional

6. Right of resale
In contract of sale, seller cannot resale the goods to another buyer
In agreement to sell, the seller can resale the goods to another buyer

7. Damages or lost
In contract of sale, if goods get destroyed or lost after handing over, in this case buyer is
liable
In agreement to sell, if goods get destroyed or lost in this case seller is liable

8. Bankruptcy of buyer
In contract of sale, if buyer becomes bankrupt. Seller can use his right of stoppage
In agreement to sell, seller can refuse to deliver the goods

9. Bankruptcy of seller
In contract of sale, if seller becomes bankrupt. Buyer has right to recover the goods from
seller
In agreement to sell, buyer only can claim

7) Preclude Remarks
A contract of sale and agreement of sell are two different terms. In contract of sale
ownership transfers from owner to buyer and buyers becomes the new owner of the
property or goods but in agreement to sell ,seller makes promise with buyer to sell the
property or goods at the future time. In contract it is necessary the existence of offer and
acceptance without both of these ,contract cannot be framed
Q # 03: Explain the classifications of Civil Law.
1) Preface Statement
Unpaid seller means a person who sells the goods for a price but price has not been paid to
him. Unpaid seller has rights against the goods and buyer. Because payment is consideration
and reason of the contract so that payment should be paid timely even partly or wholly. The
seller is not unpaid seller if buyer has offered to pay the price and if seller refuses to accept
it. In such case, the seller loses all the rights against goods and buyer

2) Definition of unpaid seller

When whole or part of the price of goods has not been paid in such case seller to be called
unpaid seller Or when price of goods remain unpaid even after the expiry of the decided
period in this case seller is to be called unpaid seller

3) Features of unpaid seller

Following are the features of unpaid seller
1) Seller must sell the goods on cash basis and must be unpaid
2) Must be unpaid either wholly or partly
3) The decided period has expired and the price has not been paid to him.
4) If the price is paid through a bill of exchange
5) He must not refuse to accept the payment when he offered

4) Rights of unpaid seller

Following are the two types of rights of a seller
A. Rights of unpaid seller against goods
B. Rights of unpaid seller against buyer

A. Rights of unpaid seller against goods

Unpaid seller has following rights against the goods. Details are as under.

1. Right of possession
If a buyer fails to pay the price within the decided time, unpaid seller has right to keep
the goods in his possession and he can refuse to deliver the goods to the buyer until due
payment is paid

When right of possession can be exercised

Following are the conditions when right of possession can be exercised
1) When the goods have been sold without legal agreement
2) When the goods have been sold on cash basis, but payment is unpaid
3) When the goods have been sold on credit basis, the term of credit has
expired
4) When the buyer become bankrupt even within the decided period

Termination of right of possession

Following are the conditions when right of possession is terminated
1) When seller delivers the goods to buyer without having the legal right
on goods
2) When buyer has obtained possession lawfully
3) When buyer further sales the goods
4) When seller loses his possession on goods

2. Right of stoppage of goods in transit

If a buyer fails to pay the price within the decided time, unpaid Seller has right to stop
the goods in transit

Conditions for stoppage of goods

Following are the condition of stoppage of goods and seller can stop the goods to
deliver to the buyer
1) When the seller must be unpaid
2) When buyer become bankrupt
3) When the goods are not in possession of seller, but have not reached
buyer’s possession such as goods are in transit with career

Methods of stoppage
Following are the methods for stoppage of goods by the seller. Details are as
under
1) By taking possession of the goods
2) By giving legal notice to the carriers under whose possession the goods are

3. Right of resale
If a buyer fails to pay the price within a decided time, the unpaid seller has the right to
resell the goods

Conditions
Following are the condition in which seller can resell the goods. Details are as
under
1) When buyer fails to pay the price of the goods
2) When buyer become bankrupt
3) When the goods are fresh in their nature
4) When unpaid seller has expressly reserved his right of resale
5) After receiving the notice from seller ,buyer does not pay the price , seller
can resale the goods

B. Rights of unpaid seller against buyer

If a buyer fails to pay the price of the goods and unpaid seller has rights against the buyer

4. Suit for price

When the ownership of the goods have been transferred to buyer and buyer refuses to
pay the price of the goods according to the terms and condition of the contract ,the seller
has right to take legal action against buyer for the price of the goods

5. Suit for breach of contract

When the buyer cancels the contract before the date of the delivery. The unpaid seller
can take legal action against the buyer in order to recover the damages in the contract

6. Suit for damages for non-acceptance

When the buyer refuses to accept and pay for the goods, the seller can take legal action
against him for damages for non-acceptance. The seller can recover damages only and
not the full price

7. Suit for special damages and interest

The seller can take legal action against the buyer for special damages where the parties
are aware of such damages at the time of contract. The unpaid seller can recover interest
at a reasonable rate on the total unpaid price of goods, from the time it was due until it is
paid

5) Preclude Remarks
Unpaid seller under sales of goods act 1872, is a person who has not been paid. He has
rights to resale the goods, stoppage of goods or keep them in his possession as well as he
also can take legal action against buyer because he has been awarded with these rights
by the law
‫آپ سب کی دعاؤں کا ہمہ وقت طلب گار ہو میں‬

‫لیکچرار‪ :‬مـبشراقبال‬
‫‪LL.B, LL.M, MSC, Dipl Communication Skills‬‬

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