Business Law Question Bank What are the salient features of contract Discharge of contracts Capacity to contracts.

Free Consent Coercion, undue influence, mistake, misrepresentation, fraud 5. Pledge, Bailment and Agency 6. Directors 7. Memorandum and Articles of Association 8. Prospectus 9. Rights of unpaid seller against goods 10. Write on the Negotiable Instrument Act And Elaborate the provisions of section 138 of the Negotiable Instrument Act 11. Short Notes . Certificate of Incorporation . Ultra Virues . Contingent contracts . Types of companies . Caveat Emptor . Indoor Management . Competition act 1. 2. 3. 4. 12. Distinguish between . Company and Partnership firm . sale and Agreement to Sell . Agreement and Contract . contract and quasi contract . Indemnity and Guarantee . Bills of Exchange and Cheque . Promissory note and Bills of Exchange

1. What are the salient features of contract

A: Indian Contract defines Contract as an agreement enforceable by law. It consists of two important elements of a contract 1) It is an agreement between two or more person. 2) It is enforceable by law i.e. which r5ise to legal obligation and legal rights. Essential Elements of Valid Contract : Section 10 lays down the essential elements of a valid contract. All agreement are contract if they are made by free consent of the parties competent to contract, for lawful consideration and with lawful object and not hereby expressly declared to be void. 1) Offer and acceptance : There must be at least two parties to an agreement i.e. one party making an offer (proposal) and the other party accepting it. The party making an offer is called an offerrer/ Offeror. The party to whom the offer is made is called an offeree. The acceptance must be according to the mode prescribed and must be communicated to the offerer/ offeror. 2) Intention to create legal relationship: When the two parties enter into an agreement, then the intention must be to create legal relationship between them. Agreement of a social or domestic in nature do not create a legal relationship. As they are not contract. For eg. Case Balfour Vs Balfour A husband agreed to pay 70 pounds to his wife every month He failed to pay the said amount to his wife. The wife filed a case on her husband for the said amount. Wife cannot recover the said amount through court of law because it was social agreement and the intention of the parties was not to legal bind them. In the commercial or business agreements the presumption is usually that the intention of the parties is to create legal relations. But if it is specially shown that the parties did not intent to be legally bound. For eg. Rose and Frank Co Vs Cromption Bros. There was an agreement between R Co and C Company by the means of which the former was appointed as the agent of the latter. One Clause in the agreement was - This agreement is not entered into .. As a formal or legal agreement, and shall not be subject to legal jurisdiction in the law courts. Held There was not binding contract as there was not intention to create legal relationship. 3) Lawful Consideration: An agreement to be enforceable law must be supported by consideration. The term consideration in simple words means something in return. The agreement is legally enforceable only when both the parties give and get something in return. (Promise to do something getting nothing in return is not enforceable by law.. Consideration need not necessarily be in cash or kind. But it must be real and lawful in nature 4) Competent parties to contract / Capacity to contract : Parties to contract should be capable of entering into a valid contract. Every person is competent to contract if he is. A) age of Majority b) Sound Mind c) Is not disqualified by any law from contracting 5) Free and genuine consent: It is essential to the creation of every contract that there must be free and genuine consent of the parties to the agreement. The consent of the parties is said to be free when the parties are of the same mind on all the material terms of the contract. 6) Lawful Object : The object of the agreement should be lawful. In other words it means that the object must be a) It is not forbidden

(not allowed) by any law c) If permitted, it would defeat the provision of any law or c) It is fraudulent in nature d) illegal e) immoral f) opposed to public policy g) Or involves an injury to another person or property of another person. 7) Agreement must not be expressly declared to be void : The agreement must not be expressly declared by the Indian Contract Act 1872 to be void. a) An agreement in restraint of trade b) An agreement in restraint of legal proceedings c) An agreement in restraint of marriage d) An Agreement of Wager e) Agreement to do an impossible act f) Minors agreement is void ab initio 8) Observance of legal formalities : A contract can be oral, written or implied it is however, in the interest of the parties that the contract should be in the written form 9) Possibility of Performance: A contract should not be to do impossible act. Such agreement are not enforceable and not valid in law. For eg. A promises to share with B 75% of the treasure, if creates a treasure by magic. As it is an impossible act to create a treasure by magic, the above agreement is incapable of performance and therefore void.

02. Discharge of contracts A: Discharge means termination of a contract. By discharge the rights and obligations of the parties come to an end. A contract may be discharged in the following ways : a) By Performance If both the parties to the contract have performed what they had agreed to do the contract is discharged. A party is released from the contract where the performance of the contract is excused under the provisions of this law or any other law. Eg. A delivers the goods to B where by B makes the payment of the same. b) By Agreement or consent i. By express consent ii. By Implied consent a. Novation When the parties to a contract agree to substitute the existing contract for a new contract it is called novation b. Rescission- It takes place when all or some of the terms of the contract are cancelled. c. Alteration Takes place when one or more terms of the contract is/are altered by the mutual consent of the parties to the contract. d. Remmission - It means acceptance of a lesser fulfilment of the promise made. e. Waiver It takes place when the parties to a contract agree that they shall no longer be bound by the contrct.

f. Merger It takes place when an inferior right accruing to a party under a contract merges into a superior right accruing to the same party under the same or some other contract. c) By Impossibility of Performance i. Unknown by the parties Where at the time of making the contract both the parties are ignorant of the impossibility . ii. Supervening impossibilities : Impossibility which arises subsequent to the formation of a contract is called supervening impossibility. d) By Lapse of time As per the Limitation Act 1963 that a contract should be performed with in a specific period called period of limitations. If it is not performed, the contract is terminated due to lapse of time. e) By Operation of Law i. Death : - The Death of the Promiser shall discharge the contract ii. Merger : When and inferior right accruing to a party merges into a superior right accruing to the same party under the same of some other contract. iii. Insolvency :- When a person is adjudged insolvent. iv. Unauthorised alteration of the terms Where a party makes any material alteration in the contract without the consent of the other party the other party can avoid the contract. f) By Breach of Contract i. Actual breach When during the performance of the contract, one party fails or refused to his obligation under the contract ii. Anticipatory breach It take place when the promisor repudiates the contract even before the date of the performance of the contract.

3. Capacity to contracts. A: 1. Person who are competent to contract under section 11 Every person is competent to contract, who is of the age of majority, according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law. In capacity to contract arise from the following three circumstances or conditions : Age of Minority Unsound mind i.e. madness, lunacy, or mental incapacity Disqualification under any law 2. Agreement By Minor : A minor is a person who has not attained the age of majority, according to the law, by which he/she is governed. According to Sec 3 of Indian Majority Act 1875 a person becomes major on completion of 18 yrs of age. It means that minor domiciled in India is a person who has not completed 18 years of age. However when a guardian of the minors person and/or property is appointed by the court the age of majority of such minor is 21 years. Rules Relating to Minors Agreement

a) A minors agreement is VOID AB INITIO and inoperative because a minor has no capacity to contract. A minor cannot bind himself by a contract. However under the English Law a contract by a minor is voidable. For Eg. Case law : Mohari Bibee V/s Dharmodas Ghose. Facts : A monor executed a mortgage for Rs. 20,000/- out of which she received Rs. 8000/- from the mortgagee. Subsequently, the minor sued for setting aside the mortgage. The mortgage claimed refund of Rs. 8000/- paid by him. Held That a minors agreement is void ab initio, hence the question of refunding the money die not arise at all. Even if the minor misrepresents his age, at the time of entering into a contract, the contract is void. b) A minor who has entered into a contract cannot ratify it subsequently on attaining the age of majority because minors agreement is void ab initio c) A minors property is liable to a person who supplies necessaries of life to a minor. d) There is no estoppels against a minor. If a minor misrepresents himself to be a major and induces another person to enter into a contract with him even then he can plead minority as a defence in 3. Agreement by Person of unsound Mind - A person is said to be of sound mind if at the time of making the contract is capable of understanding the terms and conditions of the contract and has ability to form a rational judgement as to its effect on his interests. a) Contract by Lunatics = Section 12 says that a person who is usually of unsound mind but occasionally of sound mind make a contract when he is sound mind. A person who is usually f sound mind but occasionally of unsound mind may not make a contract when he is of unsound mind. b) Contract by Drunkards Contract by drunken person is absolutely void and cannot be ratified 4. Agreement by Disqualified person Disqualification or incompetence to contract arises from political status, corporate status, maritial status, legal status. a. Contract by Corporation A Corporation is an artificial person created by Law under the Companies Act or formed SpecialAct or Legislature. b. Maritial Status A married woman is competent to contract she can sue or be used in the court of law. Q4. Free Consent Coercion, undue influence, misrepresentation, fraud A : Consent is said to be free when it is not caused by Coercion Undue influence Fraud Misrepresentation mistake,

 Mistake When there is no consent there will be no contract all. When there is consent but not free consent, the contract is voidable at the option of party whose consent was not free. a) Coercion is committing, or threatening to commit, any act forbidden by the Indian Penal Code, or the lawful detaining or threatening to detain any property to the prejudice of any person whatever with the intention of causing any person to enter into an agreement. b) Undue Influence A contract is said to be induced by undue influence where the relations subsisting between the parties are such that on the parties is a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. c) Fraud : Fraud means and includes any of the following acts committed by party to a contract or with his connivance or by his agent with intent to deceive another party thereto or his agent or to induce him to enter into the contract. d) Misrepresentation Consent given under misrepresentation of facts is no consent at all. A statement made which in fact is not true, under the belief that it is true is misrepresentation. e) Mistake An erroneous belief about something is called mistake When an agreement is entered into under a mistake consent is not free. 05. Pledge, Bailment and Agency A: Pledge The bailment of goods as security for payment or a debt or performance of a promise is called Pledge. The bailor in this case is called the pawnor. The baille is called the Pawnee. The transaction is czlled the Pledge or Pawn. Bailor in this case is also called the Pledgor and the a bailee is called the Pledgee Pledge is therefor a kind of bailment. Bailment : A bailment is the delivery of goods by one person to another for some purpose upon a contract that they shall be returned or otherwise disposed off.. according to the direction of the person delivering them after the purpose has been accomplished. The person delivering the goods is called as the bailor and the person to whom they are delivered is called as the bailee. The transaction is called as bailment. It means the delivery or handing over of goods. Change of position of goods for specific purpose is the essence of delivery. For eg. A delivers his bike to service to the service station to do service of the bike. Essentials of Bailment : a) Contract : The delivery of goods is upon a contract between the bailer and the bailee. However a person already in possession may become a bailee by a subsequent agreement. Being a contract, it must have all the essential elements of a valid contract.

b) Minimum two parties Bailor and a Bailee c) Delivery of goods and Change of possession There is a change of transfer of possession of the goods and or ownership. Change of possession of goods by delivery from one person to another is essential. However this must be for a temporary period. d) For a specific Purpose - The delivery of goods in a bailment must be for a specific purpose. When the purpose is accomplished they shall be returned or disposed off according to the direction of the bailer. e) Movable Property The bailment of the goods can be only in respect of movable properties except money and actionable claims (Share, debenture, promissory note, cheque ect) Money is not included as a moveable property for the purpose of bailment. f) Return of the Specific goods The bailee must return the specific goods either to the bailor or to somebody according to the directions of the bailor as soon as the specific purpose for which goods were bailed is accomplished. Agency : An agent is a person employed to do any act for another or to represent another in dealing with third persons.. The person for whom such an act is done or who is represented is called as the principal. The person employed OR who represents is called as the Agent. The relation b/w them is called the Agency. An agent therefore brings together his principal and the third person. An agent is bound to follow the lawful instructions of his principal Essentials of Agency: 1. The principal must be a competent person 2. Any person can become an agent 3. No consideration is necessary for the creation of an agency 4. Agency by operation of laws In a particular firm a partner is an agent of the other partner and of the partnership firm while dealing with 3rd parties. The act of the partner while carrying on the business of the firm in the usual way binds the firm and its partner. This is an implied agency created by the operation of law. 5. Agency by ratification - Where a person on behalf of another but without his knowledge does an act and if he ratifies them the same effect will follow as if the act had been done with previous authority. The ratification may be expressed or implied by the conduct on whose behalf the act has been done. 06. A: Directors The company being an artificial person carries on its activities and business through individuals called DIRECTOR A Director is a person who should A) Have an effective control and power over the business of the company B) Represent the company before an outsider C) Manage the day to day affairs of the company D) Be authorised to take important decisions relating to the companies business

The Directors are collectively termed as BOD Board of Directors) Role of Director a) Director as a Managing Partner A partner who manages the business of a partnership firm is called a Managing Partner. A director could be compared to the managing partner as he manages the business of the company. b) Director as an agent A company being an artificial person acts through the Director. The Director therefore acts for and on behalf of the company as its agent. c) Director as a Trustee A Trustee holds an office of trust and faith, Similarly a Director holds an office of trust and faith. It is only because of this reason that the shareholders have full faith in them and hence appoint them and give the entire assets of the company under their control. d) Director as an employee The company Act states that a Director may hold an office OR place in the company as a salaried employee. e) Director as an Organ of the Company A Director is compared to an organ of the body of the company. Just as the body is responsible for the acts of its organ the Company is responsible for the acts of the Director\

Appointment of Director 1) Appointment of 1st Director 2) Appointment by member at the AGM 3) Appointment at the AGM by the Shareholders by an Ordinary resolution 4) Appointment by proportionate representation 5) Appointment by BOD 07. A: Memorandum and Articles of Association Memorandum of Association It is a public document that has to be submitted along with the application for Incorporation of a Company, by a public document means that any member of the public is entitled to inspect document from the office of the Registrar. The Memorandum contains the following clause. a) Name Clause This clause states the name of the company If the company is a private company and the liability of its members is limited the word Private Limited must appear in the name of the company. If the company is a public company with limited liability the word Limited must be written in the name of the company. b) Registered Office Address Clause This clause mentions the registered Office address of the company i.e. the place from where the company will carry on its business.

c) Object Clause This clause specified the object of the company. It is divided into 2 parts. a. Main Object clause This clause must mention the objects that are pursued by the company on incorporation as well as any other object that may have to be carried out for attaining the main object. b. Other Object Clause: This part contains those object which the company may carry out in future. d) Capital Clause In this clause the company has to mention the total capital it would be authorised to raise by the Balance Sheet. If the company is limited by share it should specify the total number of shares as well as the value of the share. e) Liability Clause In this clause the liability of the members should be specified f) Association/Subscription Clause In this clause the subscribers give a declaration that they intend to form an association in accordance with the M?A . Article of Association It is a contract between the company and its members. It contains the rules and regulations for the internal management of the company. It is a public document. Each rule in the A/A must be mentioned in a separate paragraph which must be numbered. The following companies must have an Article of Association a) Unlimited Companies b) Companies limited by Guarantee c) Private Companies limited by shares The Article of Association is a contract between the company and its members therefore a) The members are bound to the company by the A/A b) The Company is bound to its members by the A/A c) The A/A is not a contract between the member A member cannot enforce the A/A on another member. d) The A/A cannot be enforced against an outsider nor can an outsider enforce the A/A on the Company. 8. Prospectus A: A Prospectus means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in, or debentures of a body corporate. Contents of the Prospectus a) Dating of Prospectus b) Registration of Prospectus c) Every Person named as a Director or Proposed Director must sign it d) It must state on its fact that a copy of the prospectus has been delivered to the Registrar for Registration e) The Prospectus must be issued within 90 days of its registration

f) The company and every person who is responsible for issuing a prospectus without registration shall be punishable with a fine extending upto Rs. 5000/g) A Prospectus must accompany the following documents a. The consent of the experts if their reports are to be published in the prospectus b. A copy of every contract relating the appointment and remuneration of the managerial personnel 09. A: Rights of unpaid seller against goods An Unpaid seller is one who has not been paid or tendered the whole of the price or one who receives a bill of exchange or other negotiable instrument as conditional payment and the condition on which it was received has been fulfilled by reason of the dishonour of the instrument or otherwise. The term seller includes any person who is in position of a seller, for eg. An agent of the seller to whom the bill of lading has been endorsed or a consignor or agent who has himself paid or is directly responsible for the price.. A seller who has been partly paid is also considered as an unpaid seller for part unpaid. Therefore. Unpaid seller is one who has not received the whole of the price, he has received payment in the form of bill of exchange or negotiable instrument which is dishonoured. Right of Unpaid Seller a) When the property in the goods has passed to the buyer a. Right of Lien It means right to retain the possession of the goods or property until the claim is paid or satisfied b. Right of Stoppage in Transit - When the buyer of goods become insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit he may resume possession of the goods as long as they are in the course of transit and may retain them until payment or tender of the price c. Right of Re-sale When the unpaid seller has exercised his right of lien on his retaining the possession of the goods or resume possession of the goods by exercising his right of stoppage in transit upon insolvency of the buyer. He can re-sell the goods under the following circumstances i. Where the goods are of perishable nature ii. Where the seller gives notice to the buyer of his intention to resell the goods iii. Where the seller has expressly reserved his right of resale in case the buyer makes default b) When the property in the goods has not passed a. Right of Withholding Delivery - Where the property in the goods has not passed to the buyer, the seller has a right to withhold delivery of the goods. b. Other Right i. Sue the buyer for the price of the goods

ii. The seller may sue the buyer for damage for wrongfully neglecting or refusing to accept the goods iii. Recover interest from the buyer where there is specific agreement to that effect 10. Write on the Negotiable Instrument Act A: Section 13 of the Negotiable Instrument Act 1881 defines a negotiable instrument as A negotiable instrument means a promissory note, bill of exchange, or cheque payable either to order or to bearer. Negotiable literally means transferable, Instrument means a document. Therefore negotiable instrument means a transferable document. 11. Short Notes

a) Certificate of Incorporation : (COI) It is a document which certifies that the company has been registered with the Registrar of Companies under the Companies Act on a particular date. COI is issued by the Registrar of Companies when the procedure for registration of a company under the Act is complied with. The COI is a documentary proof to establish the registration of the company. For the purpose of Incorporate of a Company the members are required to make an appointment with the Registrar alongwith the following documents:i. MOA should be signed by at least 7 person in case of a Public Co and at least 2 person in case of Pvt Co. ii. A/A should be submitted in case of companies with unlimited libalities, Public companies limited by Guarantee and Pvt Companies limited by shares. iii. A letter of approval from the Registrar stating that the name of the company has been approved iv. A declaration that all requirements of a company are compiled with and the same has to be signed by an Advocate / CA or a person named as Director v. A list of persons who have given their names to be the Director of the Company. b) Ultra Virues Doctrine of ULTRA VIRES Ultra Vires means beyond powers i,.e any act done by the company beyond its legal power and authority. Any Act done by the company which is neither authorised by its object nor by the Companies Act that act is called Ultra Vires An act which is ultra vires the company is void and cannot bind the company. For eg In Ashbury Railway Carriage and Iron Co. Ltd The object clause of the company contained the following object a) To manufacture & Sell railway carriages b) To Act as Mechanical engineers Or General Contractors. The company entered into a contract with MR. Riche in which the company agreed to finance the construction of railway lines. At the time of performance the company

refused to finance on the ground that financing was an Ultra Vires act. Mr. Riche filed a case against the company on the grounds that the object clause mentioned that the Company could act as general contractors that would include a contract to finance. The contract was ultra vires and the company was not bound to finance. c.) Contingent contracts A contract to do or not to do something, if some event, collateral to such contract, does or does not happen . For eg A contract to pay B Rs. 10,000/- of Ns house is burnt. This is contingent Contract. Characteristics of a Contingent Contract a) There should be existence of a contingency happening or nonhappening of some event in future b) Contingency must be uncertain c) The event must be collateral for eg. Incidental to the contract. Rules Regarding of Contingent Contract 1) Enforcement of contracts contingent on happening of a future uncertain event 2) Enforcement of contract on the non-happening of a future uncertain event 3) When the event is deemed to be impossible 4) Happening of an event with in a fixed time. 5) Non happening of an event with in a fixed time 6) Agreement contingent on impossible event.

d). Types of companies

A Company is an incorporated association which is an artificial person created by law having a separate entity with a perpetual succession and a common seal. A Company means a company formed and registered under Companies Act 1956 or an existing company. Types of Company a) Chartered Company These companies are incorporated under special Royal Charter issued by the Kind or Queen. For eg. East India Company, Bank of England b) Statutory Company these Companies are formed under the Special Statutory Act of the Parliament or State Legislature For eg. RBI, SBI, LIC c) Registered Companies Companies registered under Companies Act 1956 or any previous Companies act are companies registered under the Companies Act. All companies are now regulated by the provisions of the Companies Act 1956. Companies registered under the companies act are either Companies limited by shares In this type of company there is a share capital which has a nominal value, Company limited by shares may be a public limited company or Private Limited Company Companies limited by Guarantee In this case the member undertake to contribute up to a certain limit towards the assets of the company in the event of liquidation Companies with unlimited liability- In such a company the liability of the members are unlimited d) Government Company It is a company in which not less then 51% of the total paid up capital is held by the Central Government or State Government or Partly by the Central Government and Partly by one or more state governments e) Based on Holdings a. Holding Company Company which ahs a control over a Subsidiary company through any one of the several methods b. Subsidiary Company A company is deemed to be subsidiary Company under the following conditions i. The company controls the majority composition of the Board of Director with the sole intention of having control over the management ii. Where the other company hold a majority of its shares iii. The holding company subsidiary has its own subsidiary f) One Man Company Where a single individual holds almost all the share of a company is termed as one man company eg Soloman & Company ltd d) Caveat Emptor It means let the buyer beware, for eg the buyer must take care. As a general rule the buyer purchases goods after satisfying himself as to quality and fitness and therefore the buyer purchases the goods at his own risk relying

upon his own skill and judgement In a contract for sale of goods there is no implied warranty or condition as to quality or fitness for any particular purpose of goods and therefore the buyer purchases the goods at his risk relying on his own skill and judgement

Ward Vs Hobbs H Sent Pigs to market to be sold by auction. Pigs were sold to W with all faults and errors of description. He knew the pigs were suffering from Swine Fever, but he never disclosed this to W. Held Sale was valid as there was no implied warranty or condition for the sale. Explanation The seller is not bound to supply goods which should be fit for any particular purpose or which should posses any particular quality. It is the buyers duty to select goods of his requirement. It is for the buyer to make himself acquainted with qualities and defects of the goods he contemplated purchasing. Exceptions i. ii. iii. iv. v. vi. g) to Doctrine of Caveat Emptor Fitness for the buyer purpose Merchantable quality Conditions implied by trade usage Express terms Fraud committed by the seller When buyer relies on seller skills and judgement.

Indoor Management : - Though every person is bound to read the Article and Memorandum of the company, he is bound to enquire into the internal management of the company whether they are being conducted according to the Article of the Company or not. An outsider is entitled to presume that the directors are acting lawfully in all respects. This is called Doctrine of Indoor Management. Expectations to the Doctrine of Indoor Management a) Knowledge of Irregularity Where the third person dealing with the company has actual or constructive notice regarding the non compliance and irregularity of the internal procedure prescribed by the Articles of Association b) Suspicion of irregularity Where the outsider had some suspicion of some irregularity and contracts with the company without investigating into it c) Forgery or Fraud : - Where the act is ultra vires. d) Representation through Article- Where the outsider deals with the company without going through the public document e) Acts outside apparent authority Where an office of the company does an act which apparently is outside his authority

h)

Competition act : Competition Act, 2002 proposes to control aspects of anti-competitive agreements, abuse of dominant position and regulation of competitions. All over the world it was found that private monopolies can be detrimental to national economy and control is required. It is now felt that fail and free competition si required for growth of health economy.

Distinguish between 1). 1 2 Company and Partnership firm Company Registration of a company is compulsory under the Companies Act Minimum two or Maximum fifty constitute a Pvt Ltd Co and Minimum Seven and Maximum Unlimited constitute a Public Ltd Co. Partnership Firm Registration of a firm is not compulsory under the Partnership Act Minimum two persons constitute a partnership. Maximum membership in case of partnership doing banking business is ten persons and for other business is 20 person A company has a separate legal A firm has no individual legal existence of it sown and is status. considered a separate person from its members Property belongs to the Property of the firm is the company property of the partners. Partnership has no perpetual Company has a perpetual existence existence The liability of shareholders is Partners of the firm are liable to usually limited unlimited extent. i.e in Partnership there is an unlimited liability Death of a shareholder does not Death of a partner may mean affect the existence of a dissolution of partnership company.

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2. Sale and Agreement to Sell 1 2 3 4 Sale of Agreement It is an executed contract In Sale of Agreement the right on the goods against the whole world The property in the goods passes to the buyer with the risk immediately The seller is entitled to sue for Agreement to Sell It is an executor contract Right of goods is in personal The property and risk does not pass to the buyer immediately The seller has the right only to

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the price of the goods and also the right of lien, stoppage in transit and re-sale In case of loss to goods The loss will be borne by the buyer even if the possession of goods is with the seller If buyer become insolvent seller must deliver the goods to official assignee If seller becomes insolvent, buyer can recover the goods from official assignee

sue for damages for non performance of the contract The seller will have to pay for the loss since the ownership in the goods has not passed to the buyer If buyer becomes insolvent the seller may refuse to deliver the goods unless paid for If seller is insolvent the buyer has to prove the amount paid by him

3. Agreement and Contract Agreement 1 An offer by one party and its acceptance by the other party constitute an agreement 2 Offer and acceptance together constitute an agreement 3 Every promise and every set of promise forming consideration for each other is an agreement 4 Agreement may not create any legal obligation. All agreements are not contracts 5 An agreement is a wider concept or a genus 6. Agreement is not a concluded or a binding contract 4. Contract and quasi contract 1 Contract A contract comes into existence out of the will of the parties, expressed with the sole intention of creating an obligation A contract is an agreement A contract is characterized by certain essential elements A contract is a full fledged contract and is binding

Contract An agreement and its enforceability at law together constitute a contract Agreement and enforceability together constitute a contract A contract is an agreement enforceable by law A contract necessarily creates a legal obligation. All contracts are agreements. Contract is a specie of an agreement Contract is concluding and binding

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Quasi Contract A quasi contract is an obligation which resembles that created by a contract even where there is no contract between the parties There is no agreement at all The essential for the formation of a contract are absent A Quasi contract is not full fledged contract. It is implied contact

5. Indemnity and Guarantee Indemnity Guarantee

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There are two parties Indemnifier and Indemnity Holder The liability of the indemnifier is primary The liability of Indemnifier arises only on the happening of a contingency There is only one contract between the 5indemnifier and indemnified

Indemnifier cannot sue a third party for the loss suffered

There are three parties Creditor, Principal Debtor and Surety The liability of the surety is secondary. The surety is liable only if the principal debtor fails There is an existing debt or duty, the performance of which is guaranteed by the surety There are three contract, one contract between the creditor and the principal debtor, second between the surety and the creditor and the third, between the surety and the principal debtor. Surety can se the principal debtor.

6. Bills of Exchange and Cheque 1 2 3 Bills of Exchange Any one can be a drawee, including a banker It must be presented for acceptance, Drawee is liable only after his acceptance A bill is normally entitled to three days of grace after maturity, unless payable on demand Drawer is discharged, if bill is not presented for payment to the acceptor Cheque Only a banker can be a drawee A cheque require no acceptance Payable on demand without any days of grace

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If not presented to the banker for payment it does not discharge the drawer unless he suffers injury or damages Notice of dishonours is to be In case of dishonour no notice of given to all the parties liable to dishonour is necessary pay Bills of exchange can never be A cheque may be crossed crossed Bills must be properly stamped Cheques requires no stamp A bill may be noted or protested A cheque is not required to be for dishonour noted or protested for dishonour