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1. Law is set of rules 2. Legislator creates rules 3. Judge takes the decisions basing on the guiding principles 4. Law includes all the rules and principles which regulate relations with other individuals and with the state. 5. Law is a rule of human conduct and acts in society through the medium of social change.
Need
Ignorantia juris non-excusat Ignorance of law is not excusable Knowledge relating to law avoids conflicts No businessmen can solve his legal problems without the expert legal advice
Characteristics
Social engineering Habit and thought of mankind Distant formal regulation Uniform rules Authority and power Not static
Exceptions are 1. In case of trusts 2. In case of family settlements 3. In case of acknowledgement 4. Assignment of a contract
Minor can become a shareholder Minor can not be adjudged as insolvent Contract for the benefit of minor: He can become a promisee. Minors guardian on behalf of the minor can enter in to contract, but not for purchase of property for self Contract for supply of necessaries: Minor is liable for supply of necessaries Minor is liable for Tort (Civil wrong)
Free consent
Two or more persons are said to be consent when they agree upon the same thing in the same sense.(Sec.13) According to Sec.14 of Indian Contract Act, consent is said to be free when it is not caused by Coercion (as defined in Sec 15) Undue influence (Sec.16) Fraud (Sec.17) Misrepresentation (Sec 18) Mistake (Sec 20-22)
1. 2. 3. 4. 5.
Coercion
It consists of committing or threatening to commit an act, forbidden by Indian penal code or the unlawful detaining or threatening to detain any property to the prejudice of any person whatever with the intention of causing any person to enter in to agreement.
Coercion
Actual act of violence or unlawful imprisonment Threatening to commit unlawful imprisonment To a mans person and not merely to his goods Coercion is to the party or to his wife, child, parent or any relative
Undue influence
There must be some sort of relationship between the parties. Such relationship must be such where one of the parties is in a position to dominate the will of others and uses the position to obtain unfair advantage. 1. Ex: Money lender & Borrower 2. Spiritual Guru & Illiterate villager 3. Doctor & Patient
fraud
1. 2. 3. 4. Deceit or Trickery Two types of fraud. (1) Actual fraud and (2) Constructive fraud Actual fraud means: Suggestion as a fact which is not true The actual concealment of fact Promise made without any intention to fulfill Any other deceiving
Constructive fraud means a person keeping silence when one party asked something or inquires about the subject matter of contract even though the person knows the fact. The person playing fraud not only to pay damage for breach of contract but also is liable to punishment under the I.P.C
Misrepresentation
It is a positive assertion, in a manner not warranted by the information of the person making it, though he beliefs it to be true. There is no intention to deceive Mere expression of opinion doesnt amount to misrepresentation Misstatement made negligently or recklessly Misrepresentation may not direct. It is made to third person also.
Fraud Intention to deceive Misstatement is made knowing untrue He can claim damage Liable under criminal law
Misrepresentation No intention to deceive Misstatement is made knowing it is true No damage Not liable under criminal law
Mistake
1. 2. 3. 4. 5. Erroneous belief Mistake by law or mistake by fact Mistake by fact: Mistake as to the existence of subject matter Identity of the subject matter Quality of the subject matter Quantity of the subject matter Possibility of performance
Void contract It is invalid from the very beginning It need not be avoided by a decree of court Benefits received by the party need not be refunded It does not require any option of the party to declare it void
Voidable contract It is valid unless avoided It can be avoided by the party for which a decree of court necessary Benefits received by the party need be refunded It is optional by declaration of a party to avoid it.
Illegal agreements
It is against the law in force in India There is a question of punishment under the relevant law Collateral agreement is also void
Quasi contract
It is a contract only in law and not in fact. There is no offer and acceptance between the parties Such obligation stands on equitable considerations in law. It is based on the principle of equity. Objective behind that is no one should become rich at the cost of others Law does not favor unjust enrichment
Mode of performance
The promiser himself perform the contract The death or insanity may terminate the contract The promises may pass on to the legal representative in case of death Personal cause of action dies with the death of person. Promisee may however accept performance by a third party by assignment
Assignment of contract means transfer of rights and liabilities under the contract from the assignor to assignee. If there are joint promises all must perform and after the death of any of them the survivor and the representative of the deceased must perform. When two or more persons made a joint promise a release of one such joint promisers by promisee does not discharge the other promiser
Tender of performance
Promiser must perform the promise or offer to perform the promise. Such offer is known as tender of performance. It must be unconditional Made at proper time and place Person to whom it is offered must have reasonable opportunity of ascertaining identity of goods that are to be delivered. In case of joint promises tender made to one is tender for all.
Reciprocal promises
A promises to make furniture to B, B promises to pay the price on delivery, both parties made reciprocal promises
By performance
Actual Attempted or Tender
By agreement
By express consent 1. 2. 3. 4. 5. 6. By implied consent Novation Rescission Alteration Remission Wavier merger
By impossibility of performance
1. Known to the parties 2. Unknown to the parties 3. Supervening impossibility
Not excuse 1. Difficulty of performance 2. Commercial impossibility 3. Failure of third party 4. Strikes, lockouts & civil disturbances 5. Failure of one of the objects
An excuse 1. Destruction of subject matter 2. Non-existence of things 3. Death or incapacity for personal services 4. Change of law 5. Out break of war
By operation of law
Death Merger Insolvency Unauthorized alteration of terms of contract Rights and liabilities are resting in the same person
Breach of contract
Actual At the time of performance During the performance Anticipatory By the act of promiser making performance impossible i.e. implied repudiation By renunciation of obligation i.e. express repudiation
Contingent contract
It is a contract to do or not to do something, if some event, collateral to such contract does or does not happen. Essentials: 1. The performance of this contract is made dependent upon the happening or nonhappening of some event. 2. The event on which the performance is made to depend, is an event collateral to the contract i.e it does not form part of the reciprocal promises which constitute the contract 3. It is valid and legal
Indemnity
Indemnity means to make good the loss or to compensate the party who has suffered some loss. The person who promises to make good the loss is called the indemnifier. The person whose loss is to be made good is called indemnity-holder. In addition to the implied or express promise to indemnify, all the essentials of a valid contract must also be present.
Guarantee
Parties to a contract of Guarantee are principal debtor, creditor, surety. Principal debtor: The person in respect of whose default the guarantee is given is called the principal debtor. Creditor: The person whom the guarantee is given, is called the creditor. Surety: The person who gives the guarantee is called surety.
Essential features
Tripartite agreement: There are three parties. Consent of three parties: There must have consent Existence of a liability Essentials of a valid contract Guarantee not be obtained by concealment
Types of Guarantee
1. 2. 3. Specific Guarantee Continuing Guarantee Revocation of Continuing Guarantee By notice of revocation By death of surety By modes of discharging liability
Contract of agency
Person employed to do any act for another in dealings with third person. The function of an agent is to bring about contractual relations between the principal and the third parties. Any person who is of the age of majority according to the law to which he is subject and who is of sound mind. A minor or lunatic cannot contract through an agent .
Creation of Agency
1. Express agency: appointed as agent, either by word of mouth or by writing 2. Implied agency: It arises from the conduct, situation or relationship of parties. 3. Agency by ratification: where an agent does an act for his principal but without knowledge or authority or where he exceeds the given authority, the principal is not held bound by the transaction. Section 196 permits the principal , if he so desires, to ratify the act of the agent.
Classification of agents
1. 2. 3. 4. 5. 6. 7. Mercantile or commercial agents Broker Factor (possession of goods) Commission agent (lien) Del credere agent (Guarantee) Auctioneer Banker Indentor (foreign country) Non-mercantile or non-commercial agents
Duties of an agent
To conduct the business of agency according to the principals directions and not to deviate even for the benefit of the principal To conduct the business with the skill and carefulness To render proper accounts Not to make any secret profits Not to deal on his own account Not entitled to remuneration for business mis-conducted
Rights of an agent
Right to receive agreed or reasonable remuneration Right to retain money of the principal towards advances made or express properly incurred by him. Right of lien i.e. to retain properties of the principal for the amount due to himself for commission, disbursements and services rendered Right of stoppage-in-transit in case of delcredere agent
Termination of Agency
By revocation by principal On the expiry of fixed period of time On the performance of specific purpose In the event of insanity or death of the principal or agent On the destruction of the subject-matter of agency In the event of insolvency of the principal By renunciation of agency by the agent
Bailment
Bailment is a contractual relationship which is established when an owner vests the possession of his goods in another person. Bailee is required to take care of goods just like his own goods in similar circumstances Bailee is not liable for loss etc of thing bailed Care to be taken by bailee
To disclose known faults in the goods bailed. Bailer, in case of bailment for hire or reward, shall be liable for damages for faults whether they were known or unknown. Bailer to be liable for damages due to lack of authority to make bailment To bear expenses in case of gratuitous bailment. (no remuneration) To bear only extra-ordinary expenses in case of non-gratuitous bailment
Duties of Bailer
Duties of Bailee
To take as much care of the goods as a man of ordinary prudence would take of his own goods Not to make unauthorized use of goods Not to mix bailors goods with his own To return the goods bailed without demand To return any goods bailed
Pledge
Pledge is a bailment where the goods are bailed for security of loan The bailor is in this case called the pawnor The bailee is called the Pawnee. Suit by bailor or bailee against wrongdoer.
Immovable property
It includes land, benefits to arise out of land and things attached to the earth or permanently , but shall not include standing timber, growing crops or grass. Movable Property: It is the property of every description except immovable property. It includes standing timber and growing crops.
General principles
Intention of the parties goods must be ascertained. Seller has the right to sell the goods in the case of sale. Where goods are sold by description, goods correspond with the description Where goods are sold by sample, goods correspond with the sample.
Where goods are sold by sample as well as description, bulk of goods should not only correspond to the sample but also to description. The goods shall be reasonable fit for such purpose Goods shall be of merchandisable quality (fit for merchant purpose) Goods shall be of wholesomeness. (human consumption)
Specific goods in deliverable state Where goods are not in deliverable state put them in deliverable state Unascertained or future goods Delivery to carrier Goods sent on approval or sales or return basis Risk prima facie passes with property Passing property in sea carriage: F.O.B contracts, F.O.R contract, C.I.F contract, C&F contract.
Condition
Warranty
It is a stipulation A stipulation upon the fulfillment collateral to the of which depends main purpose of on the contract circumstances essential to the things in existence.
Delivery when the goods are in possession of a third person: No delivery by seller until such third person acknowledges to the buyer that he holds the goods Demand of delivery to be treated as ineffectual unless it is made in reasonable hour Expenses of delivery: The expenses of putting the goods in to deliverable state shall be borne by seller
Short delivery: May reject or accept Excess delivery: May reject or accept up to requirement Mixed delivery: mixing the goods of different description Delivery by installments: buyer not bound to accept delivery by installments unless otherwise agreed. Delivery through carrier: Seller shall make a reasonable contract with the carrier. The seller should give notice to buyer to enable him to insure the goods
3. 4. 5. 6. 7.
An unpaid seller is a seller who has not been paid the whole of the price or who has received any negotiable instruments which is subsequently dishonored.
2. Right of stoppage in transit: Right preventing the goods from being delivered to buyer. The right of stoppage in-transit may be effected either by making actual possession of the goods or by giving notice of claim to the carrier or other person having control of the goods
3.
Right of resale: An unpaid seller exercising the right of lien or stoppage in transit can re-sell the goods and sue the buyer for damages provided he has given notice of his intention to re-sell to the buyer and asked him to pay the price within reasonable time: Where the goods are of a perishable nature When the buyer does not pay or tender for the price.
4. Right to with hold delivery: where the property in goods has not passed to the buyer, the unpaid seller has a right of with holding delivery.
Assignment
An instrument is said to be assigned when a Promissory Note, Bill of Exchange or Cheque is transferred document under the provisions of the Transfer of the Property Act, 1882. The person who assign the rights is called Assignor. The person to whom such rights are transferred is called assignee.
Promissory Note
A promissory Note is an instrument in writing. Not being a bank note or currency note. Containing an Unconditional undertaking Signed by the maker To pay certain sum of money only to or to the order of, a certain person or bearer of the instrument. Two parties: Promiser or Maker, Promisee
Bill of Exchange
A Bill of Exchange is an instrument in writing Containing an Unconditional Order Signed by the Maker Directing a certain person to pay certain sum of money Only to, or to the order of, a certain person or to a bearer of the instrument. Parties to Bill of Exchange: Maker (Drawer), Drawee (Person directed to pay), Payee (Person named in the instrument)
Cheque
Cheque is a Bill of Exchange drawn on a specified banker and payable on demand. Always signed by the maker Unconditional order Always drawn on a specified banker Always payable on demand
Dishonor of cheques
When the drawee does not accept within 48 hours of presentment. When the drawee is fictitious person When the drawee can not found after reasonable search When the drawee is incompetent Maker signature differs Cheques out of date Cheques post dated