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The law relating to contract is codified in the form of

contract act ,1872.The main objective of the law of contract


act is to introduce definiteness in the business transaction :
Scheme Of the Act : It can be divided into two main groups: General principles of the law of contract (Sec1-75) Specific Kinds of contracts : Contract of Indemnity and Guarantee Contract s of Bailment and pledge(Secs 148-181) Contract of agency(Secs.182-238)

LAW OF CONTRACT CREATS RIGHT INPERSONAM AND NOT RIGHT IN -REM

Definition Sec 2h:

Contract is an agreement enforceable by law


All agreements are contracts if
They are made by free consent of parties
for a lawful consideration and with lawful object and are not expressly declared void.

Sec 10 ,

Essentials of valid contract


Plurality of parties Offer and acceptance

here there should be consensus ad-idem


Legal relation, Legal consequence, promise and obligation recognized by law

Balfour Vs Balfour: WeeksVs .Tybald Lawful consideration

Contractual capacity of party Free and genuine consent

Lawful object
Agreement not declared void Certainty and possibility of performance Legal Formalities ;Writing ,stamping

,registration and attestation ,witness

Classification of contract
Valid contract

Void contract
Void able contract Illegal contract

CLASSIFICATION ACCORDIND TO FORMATION

Express contract
Implied contract QUISE Contract it is obligation imposed by

law

CLASSIFICTION ON OBLIGATION TO PERFORM


Unilateral contract, where only one party performs his contract Bilateral contract

CLASSIFICATION ON THE BASIS OF EXECUTION Executed contract wholly performed by party Executory contract, here promise of both parties have yet to be performed

OFFER AND ACCEPTANCE


OFFER IS A STARTING POINT IN MAKING A

OFFER AND ACCEPTANCE

CONTRACT
SEC 2A SAYS : WHEN ONE PERSON SIGNIFIES TO ANOTHER HIS

WILLINGNESS TODO OR ABSTAIN FROM DOING ANYTHING , WITH A VIEW TO GET THE ASSENT OF THAT OTHER TO SUCH ACT OR ABSTINANCE IS CALLED A OFFER

CHARACTERSTIC OF OFFER
IT MUST BE AN WILLINGNESSTO DO OR ABSTAIN CH

FROM DOING SOMETHING


MADE TO ANOTHER PERSON

MADE WITH A VIEW TO OBTAINTHE ASSENT OF

SECOND PARTY
THE EXPERSSION OF WILLINGNESS MUST BE MADE

TO CREAT A LEGAL OBLIGATION

Types of offer: 1. EXPRESS AND IMPLIED expressed is by something spoken in words or written , Implied means by the conduct of the party we come to know that the want to enter into a contract ,eg:A bus run by a transport company in a particular route ,it is an implied offer from the company to carry the passengers on the route who are prepared to pay the specific fare , In a resturent ,there is implied promise to pay for consuming eatables

2. GENERAL AND SPECIFIC

3. POSITIVE AND NEGATIVE

LEGAL RULE RELATING TO OFFER


1.THEY MAY BE POSITIVE OR NEGATIVE

2. EXPRESS OR IMPLIED
3.OFER MUST INTEND TO CREAT A LEGAL RELATION 4. TERMS OF OFFER SHOULD BE CERTAIN

5 AN OFFER MAY BE MADE TO SPECIFIC PERSON OR TOANY ONE IN THE WORLD AT LARGE.CARLILV/S CARBOLIC SMOKE BALLS COMPANY

OFFER MUST EXPRESS THE FINAL WILLINGNESS OF THE OFFEROR EVERY OFFER MUST BE COMMUNICATED TO THE OFFEREE IN FITCH V/S SNEDKAR: S OFFERD TO REWARD TO ANY ONE RETURNS HIS LOST DOG F BROUGHT THE DOG WITH OUT KNOWLEDGE OF REWARD HELD HE IS NOT ENTITILED FOR

REWARD Lalman Shukla VsGauri Dutt,

MODE OF CREATION OF OFFER


EITHER BY WORDS OF MOUTH OR BY WRITING OR BY

CONDUCT AN OFFER MUST BE DISTINGUISHED FROM INVITATION


IT SHOULD BE MADE TO OBTAIN THE ASSENT

OFFER MUST NOT CONTAIN TERM ,THE

NONCOMPLIANCE OF WHICH WOULD AMOUNT TO ACCEPTANCE


A OFFER MAY BE CONDITIONAL
CROSS OFFER IS NOT HELD AS AN AGREMENT OR

BINDING CONTRACT

TERMINATION OF OFFER Sec 6 BY NOTICE OF REVOCATION BY LAPS OF TIME BY FAILURE TO FULFIL A CONDITION PRECEDENT TO ACCEPT
BY FAILURE TO ACCEPT THE MODE

PRESCRIBED BY DEATH INSANITYOF THE OFFEROR BY REJECTION BY SUBSEQUENT ILLEGALITY OR DESTRUCTION

ACCEPTANCE
It is an expression by the offeree of his willingness to be bound by the terms of offer DEFINITION SEC 2B When the person to whom the proposal is made signifies his assent there to ,the proposal is said to be accepted . A proposal when accepted becomes promise

LEGAL RULES OF VALID ACCEPTANCE

1.ACCEPTANCE MUST BE ABSOLUTE AND UN CONDITIONAL


A part or partial acceptance is no acceptance

2.ACCEPTANCE BY USUAL MODE AS DESIRED BY THE OFFEROR

3.Acceptance cannot precede an offer

4. Acceptance May Be Express Or Implied 5. Acceptance Must Be Given Within A

Reasonable Time
6. Acceptance Must be done to fulfill The Promise

7.Acceptance must be by an ascertained


person

8 Acceptance

Of Offer Means Acceptance Of All Terms Attached To Offer

9 Acceptance must be made before the lapse or revocation of offer 10 The accepter must be aware of the proposal at the time of offer 11 Silence does not imply acceptance

RULES FOR COMMUNICATION OF ACCEPTANCE S4

WHEN IT COMES TO THE KNOWLEDGE OF OFFERER

CONSIDERATION

Sec 2d the act tells consideration means When , at the desire the promisor, the promisee or any other person has done or abstained

from doing or does abstains from doing ,


or promise to do or to abstains from doing,

something ,such act or abstinence


or promise is called a consideration for the promise

Legal Rules Regarding Consideration 1 Consideration is required for both for formation and discharge of an agreement 2 Consideration may be past present or future 3 Consideration may be either positive or negative 4 Consideration must move i.e. must be done or promised to be done at the desire of the promisee

5.Consideration may be furnished by the Promisee or any other person 6.Consideration must be lawful 7.Cosideration must be real and not illusory

8.Consideration must be of some value in the eyes of law


9.Consideration must not be the performance of existing duties

10 Consideration need not be adequate Here the inadequacy of the consideration will not make the contract void but it may be considered by the court of law in determining the question whether the consent to contract is freely given 11. Consideration must not be the performance of the existing duties

NO CONSIDERATION NO CONTRACT SEC 25 :the General rule is that an agreement made without consideration is void EXCEPTION A. Natural love and affection B. Compenseation for past volutary service C. Promise to pay time barred debt D. Completed gift E. Agency F. Remission Under sec 63 of contract act ,no consideration is necessary for an agreement to receive less than what is due G. Bailment H. Guarantee

CONTACTUAL CAPACITY

SEC 10 Speaks about contractual capacity


means the capacity to contract
SEC 11says every person is competent to contract who is

of
Sound mind ,
Age of majority and

Not disqualified from contracting by any law to which he is

subject

LEGAL DISABILITY

A. Foreign sovereigns ,ambassadors and envoys Because to sue such persons prior sanction of central

government is a must
Alien enemy Professionals in India, it is not a bar Corporation is restricted by the statue governing them Bankrupt Convict

FREE CONSENT Sec defines consent as follows two or more persons are said to consent when they agree up on the same thing in the same sense Consent is the very root of an agreement Consent is free if it is not caused by 1,Coersion 2. Undue influence 3.Fraud 4.Mis representation 5.Mistake

COERSION

A person is compelled to enter into a contract by use of force by the other party or under threat . Coercion means committing or threatening to commit act forbidden by I.P.C The unlawfull detention of property Threatening to detain any property wrong fully

The intention to get consent to the

agreement proceed from any party Coercion maybe directed against any party Such a contract is void able at the option of the party

Undue influence

Where one of the party is in a position to dominate


the will of other and he is in a position to obtain

an unfair advantage over the other sec l6(10)


eg master and servant father and son

Burden of proof lies up on the person who is in a


dominating position to show that the consent has not been taken by such undue influence

Fraud : sec 17 false suggestion as to fact , active concealment of fact the representation must relate to fact it may be by the party or his agent to contract. It should deceive and the other party is deceived or suffered damages mere silence does not amount to fraud unless the circumstances of the case show silence is equalent to speech
Effect of fraud :
The contract is void able Damages can be claimed

MISREPRESENTATION Where the representation is made falsely or believing it to be true with out the knowledge of statement being it to be true or any breech of duty with out intending to deceive other and

causing harm to other however innocently .A contract


becomes void able at the option of party

Mistake

Mistake may be defined as erroneous belief concerning


something ,consent cannot be said to be free when entered into under a mistake Types if Mistake
Mistake of law ,here agreement cannot be avoided Mistake of fact ,here agreement can be avoided

Mistake of fact may be bilateral or unilateral it may be regarding identity of person or nature of contract Mistake as to subject matter is void
a) Mistake as to existence of the subject matter
b) Mistake as to identity and quality of subject matter c) Mistake as to quantity of subject matter

d) Mistake as to title to subject matter


e) Mistake as to price of the subject matter

Unilateral mistake may be as to identification of persons or nature of transaction ,it generally does not affect the contract

Remedies for Mistake If the consent is caused by mistake of both the parties

then the agreement is void sec20 Where the contract is void on account of mistake ,any

person who has received any advantage under it is

bound to restore it or make compensation for it to


the person from whom he received it (s65)

Legality of object sec 23 of contract act says


The object or consideration of an agreement is unlawful in the following circumstances 1.If it is Forbidden by Law e.g. A agrees to pay Rs,600 to B if he steals Cs scooter 2 The Object and Consideration must not defeat the provision of any law e.g. a land lord agrees to pay consideration to tenant to induce him to vacate the

3.The Object and Consideration must not be fraudulent 4.If it involves or implies injury to the other person or property of another e.g. :A request b an editor of news paper to publish a defamatory statement against C

5.The object and Consideration must not be Immoral 6 The object and Consideration must not be opposed to public policy eg;trading with a enemy ,agreement interfering with the course of justice 7Agreement in restraint of trade is also regarded as to that extent Void Sec 27 Sale of good will Acc to Sec 30 wagering agreement is void eg:betting Illegal Agreement is also void abnition40

Contingent Contract

When the performance of the contract is not immediate

due but it becomes so only on the happening or non

happening of some contingency i.e. some uncertain ev


it is known as Contingent contract

e.g,contract of insurance .contract of indemnity

Sec 31 a contract indicating to do or not to do something

,if some event ,collateral to such contract ,does or does not happen

Characteristics of Contingent contract

There are three essential characteristic of a contingent contract Its performance depend upon the uncertainty of happening or non happening in future of some event .
It is this dependence on future which distinguishes a contingent

contract from other contract


The event must be collateral i.e. incidental to the contract The contingent event should not be mere will of the promisor

The rules regarding the performance of contingent contract is in sec 32 to 36 of the contract act ,are given below 1.The happening of a future uncertain Event Acc to Sec 32 Contingent contract to do or not to do any thing ,if an uncertain future event happens ,cannot be enforced by law unless and until that event has such event becomes impossible ,such contract becomes void . E.g. ,A makes a contract with B to sell a horse to B at a specified price ,if C to whom the horse has been offered ,refuses to buy the horse The contract cannot be enforced unless C refuses

2. The non happening of an uncertain future event

Acc to sec .33, if contingent contract depend on NON happening of


uncertain event it can be enforced when the happening of such event becomes impossible and not before e.g. ;a agrees to pay B a sum of money if a certain ship does not return. the ship is sunk .the contract can be enforced when the

ship is sunk .because when the ship is sink the event becomes
impossible as the ship cannot return. thus until the event becomes impossible the contract cannot be enforced

3.When Event to be Deemed Impossible sec34 4.THE Happening of an event within a Fixed time sec 35 If a person has undertaken to perform something with in a fixed time provided an event happens ,he is bound to perform his promise if the event happens with in the fixed time .if the time fixed lapse and the event does not happen ,or the event becomes impossible before the time fixed the contact becomes void eg; A promises to pay B a sum of money if a certain ship returns with in a year .the contract can be enforced if the ship returns with in one year and becomes void if it is burnt with in one year does not return

5.The Non happening of an event with in a Fixed Time sec35

E.g.A Promises to pay b a sum of money if a certain ship does not


return with in a year. The contract may be enforced if the ship

does not return with in the year ,or is burnt with in the year

6 .Impossible Event Acc to Sec .36. contingent contract to do or not to do any thing if an impossible event happens is void ,whether the impossibility is know to the party or not The

agreement is void

QUASI-CONTRACT

Certain obligation are imposed by law .these obligations are


similar to those which are created by contract .when such obligations are imposed by law in the absence of contract it is called as Quasi contract Kinds of Quasi contract

1 Necessaries Supplied to Person incapable of Contracting


sec68 If a Person is ,incapable of entering into contract ,or any one whom he is legally bound to support ,is supplied by another person with necessaries

Suited to his condition in life ,the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person sec68 .

Thus ,though the contract by minor ,idiot ,lunatic are void

but sec 68 provides that their estate are liable to reimburse


the trader who supplies them with necessaries of life .this is on the basis of Quasi contract

2.PAYMENT BY AN INTRESTED PERSON


A Person Who is interested in payment of money, in which another is bound by law to pay ,and who there fore pays it ,is entitled to be reimbursed by the

other Sec(69): E.g. B is the tenant of A s land and pays the Land revenue which A is bound to pay than B is supposed to get back the money from A which he has paid on behalf of A

3.LIABILITY FOR NON-GRATUITOUS ACT;

Where a person lawfully does anything for another person or delivers

anything for another person ,not intending to do so gratuitously and


such other person enjoys the benefit ,there of the latter is bound to make compensation to the former in respect of or to restore ,the thing so done or delivered a) A ,a tradesman, leaves goods at Bs house by mistake .B treats the

goods as his own. he is bound to pay for them


4]Responsibility of finder of goods sec71 he is like bailee he is bound to take as much care of the goods bailed to him as a man of ordinary prudence and except the owner he has full right over the goods found against the whole world howling v\s fowler

5.Action for Money paid or things delivered ,by mistake or

under Coersionsec72 he is bound to repay the same 6 Account Stated; here obligation arises from acceptance of indebtedness

Distinction between Quasi Contract and General

Contract Essentials for the formation of a valid contract are absent in Quasi Contracts Essentials for the formation of a valid contract are Present in Contract In Quasi Contract obligation is imposed by law In contract obligation is created by the consent of the parties But in case of Breach of Both the contracts the remedy is same

7]Quantum Meruits It is to re compensate the party or person for value of work he has done .It is reasonable compensation where one person has rendered service to another in circumstances which indicates an understanding between them that it is to be paid for although no particular remuneration has been fixed the law will

infer a promise to pay Quantum Meruit i.e. as much as the


party doing the service deserved

Under following circumstance Quantum meruit can be claimed

1.When an agreement is discovered to be void sec65

Any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it ,to the person from whom he has received it

e. g. A pays B ,RS 1,000 in consideration of B promise to marry C,


As daughter, C is dead at the time of the promise .the agreement

is void but B must repay A RS 1,000

.In case of Act preventing the Completion of contract


If one party to the contract himself does not complete the contract or prevents the other from completing the contract the aggrieved can sue on Quantum meruit E.g. C an owner of a magazine engaged P to write a book to

be published as series in the magazine .After a few series


were published ,the publication of the magazine was stopped .It was held that P could claim payment on quantum meruits for the part already published

In case of Indivisible contract performed completely but

badly the party at default may claim the lump sum after

deduction for bad work


E.g. X agrees to decorate Y ,s flat for a lump sum of Rs,

20,000. X did the complete work but Y complained of faulty workman ship . It cost Y another 3,000 to remedy the defect .it was held that X Could recover only RS 17,000from Y

DISCHARGE OF A CONTRACT

A contract may be terminated or discharged in an of the following ways 1)Performance of the promise or tender 2) By Mutual consent canceling the agreement substituting a new agreement in the place of t old 3)Subsequent impossibility of performance 4)Operation of law 5)Breach made by one party

DISCHARGE BY PERFORMANCE Performance may be 1.Actual performance 2.Attempted performance When both the parties perform their respective promises a contract is said to have been actually performed .Actual performance brings the contract to an end Attempted performance

When the parties to contract offers to perform their respective


promises it is a offer of performance or may be called as

Attempted Performance

Time for performance 1)Sec 46 tells : Where no time is specified The engagement should be performed within a reasonable time 2)when time is specified Sec 47 The promisor may perform it at any time during the

usual hour of business of such day and at the place at which


the promise ought to be performed 3)On Application for performance by promisee Sec 48 Than it is the duty of promisee to apply for performance at a proper place and with in a usual hour of business

PLACE FOR PERFORMANCE OF CONTRACT Sec49

Without application for performance by promisee


When a promise is to be performed with out application by the promisee,and no place is fixed for

performance of it , it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise ,and to perform it in such place . If ,however a place is fixed for performance of the promise by the contract ,the promisor is bound to perform at that place only .place to be fixed should be reasonable to both the party's

DISCHARGE OF CONTRACT BY NEW AGREEMENT The rights and obligation created by an agreement can be discharged with performance by means of

another agreement between the parties which


provide for extinguishment of the earlier rights

and obligations. The parties may agree to terminate


the existence of the contract by any of the following ways.

1.Novation or substitution(sec62) Their being a contract in existence some new contract is substituted for it ,either between the same parties or between different parties ,the consideration being the discharge of the old contract . The old contract is revoked and substituted by new contract All the parties of the old contract must agree to it
The new agreement should be valid and made

before the breech of the original one If new agreement is unenforceable than the old contract is unenforceable

2.Recission If the party want to rescind the contract the

original contract need not be performed


3.Alteration it means the change in one or more terms in the

contract
4.Remission sec{63} It is acceptance of lesser sum than that was contracted for 5.Waiver Abandonment of right which a person is entitled to 6.Merger When a superior right and an inferior right coincide and meet in one and the same person the inferior right vanishes into the superior right

DISCHARGE OF CONTRACT BY OPERATION OF LAW 1.INSOLVENCY 2.MERGER 3.DEATH 4. LAPES OF TIME

5.MATERIAL ALTERATION OR UNAUTHORISED


ALTERATION

DISCHARGE OF CONTRACT BY IMPOSSIBILITY SEC.56 1Pre contractual impossibility or initial impossibility 2.Subsequent impossibility also known as post contractual impossibility The agreement in the first case is void ab initio due to absolute impossibility Even though the act was not impossible ,or unlawful in itself at the moment of time the agreement was made but becomes

impossible or unlawful after wards the contract becomes


impossible or unlawful

1.Destruction of the object necessary for performance of the contract 2.Change in Law 3.Personal incapacity 4.None existence or none occurrence of the event or state of thing necessary for performance 5.Out break of war CASES NOT COVERED BY SUPERVENING IMPOSSIBILITY Where a contract is not discharged on the ground of supervening Impossibility 1.Difficulty of performance 2.Commercial impossibility

3.Impossibility due to the behavior of a third party 4 Self induces impossibility 5 Strikes ,Lock outs and civil Disturbance 6 partial impossibility or failure of one of the object 7.Rights and Obligation under a transfer of property under a

case
8.Temporary interruption or interventions

9.Matter with the contemplation of party


IN such circumstances the contract is not discharged

EFFECTS OF SUPERVENING IMPOSSIBILITY


Sec 56 says that when the performance of the contract becomes

impossible subsequently the contract becomes impossible


Sec 64 of the contract Act further provides that when a contract

becomes void, any person who received any advantage under it

may restore it, or make compensation for it to the person whom


he received it .

3.SEC56(para3)provides that ,
Where one person has promised to do something which he

knows, or with reasonable diligence ,might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance

of the promise.
Eg P contracts to marry B P being already married to C, and

being forbidden by the law to which he is subject to practice polygamy .P must make compensation to B for any loss caused to her by non performance of his promise

DOCTRINE OF FRUSTRATION
When the common object of the contract can no longer be

carried out ,the court may declare the contract to be at end

BREACH OF CONTRACT

IF a party to contract breaks his obligation which the contract


imposes, there takes places breach of contract," If the

contract is unilateral ,the only remedy available to the party


is to claim relief for the breach. IF the contract is bilateral ,the party who suffer ,by breach has two remedies . He can claim for breach In certain cases he can be absolved from the further

performance of the contract

BREACH OF CONTRACT MAY BE


1.Actual breach of contract 2.Anticipatory breach of contract ACTUAL BREACH OF CONTRACT a) At the time when the performance is due ; It occurs when one party fails to perform or refuses to perform his obligation under the contract at the time when the

performance is due
b) During the Performance of the contract ;

Actual breach of contract also occurs when during the performance

of the contract ,one party fails or refuses to perform his obligation


under the contract ,This may be discussed under two heads Express repudiation (by words or by act) Where there has been some performance of the contract and one party by words or act refuses to continue to perform his obligation in some essential respect ,the other party can treat the contract as no longer binding on him and sue the former party for breach of

contract .

2.Implied repudiation or Impossibility created by the act of party

to the contract :If a party during the performance of contract


,makes by his own act the complete performance of the contract impossible ,the effect is as if he has breached the contract and the other party is discharged from the further performance of the contract

ANTICIPATORY BREACH OF CONTRACT :


This occurs when a party repudiates his liability or obligation under

the contract before the performance arrives .this may happen in


one of the following ways :

1.

BY RENUNCIATION (EXPRESS REPUDIATION) Anticipatory breech of contract takes place when one party express his inability to perform or renounce his inability to perform or renounce his liability under the contract expressly before the performance is due .This is know as express anticipatory breach of contract.

2.BY CREATING SOME IMPOSSIBILITY (IMPLIED REPUDIATION)

A promisor may, before the time for performance arrives ,by doing some act makes the performance of his promise impossible .The effect in such a case is the same as though he had renounced the contract at the time .This is know as Implied anticipatory breach of contract.

RIGHTS OF THE PROMISEE IN CASE OF ANTICIPATORY BREACH : 1.He can treat the contract as discharged so that he is absolved from the performance of his part of the promise 2. He can immediately take a legal action for Breach of contract Remedies in case of breach of contract 1 Suit for damages 2 Bring an action for specific performance 3 suit for injunction 4 Claim for quantum meruit 5 Restitution 6 suit to bring the contract to an end

DOCTRIN OF PRIVITY OF CONTRACT THAT MEANS PRIVITY OF CONTRACT THERE FORE A STRANGER TO CONTRACT CANNOT MAINTAIN A SUIT

EXCEPTION TO THE RULE 1,Benificiary in a trust or charge 2,ACKNOWLEDGMENT OF PAYMENT OR ESTOPPEL 3 AGREEMENT CREATING A CHARGE ON LAND 4.Family settlement 5.Assignee of contract

Bailment And Pleadge Bailment Definition : Sec 148 of the Indian Contract Act defines a Bailment as A Bailment is the delivery of goods ,by one person to another ,for some specified purpose ,and upon a contract that they shall ,when the purpose is accomplished ,be returned or other wise disposed of according to the direction of the person delivering them . The person delivering the goods is called the Bailor.The person to whom they are delivered is called the Bailee.

Characteristics of Bailment : It is based upon a contract , The finder of an goods is an exception to this ,he is a bailer even

though no contract is arrived between the finder and the true owner It involves delivery of goods either actual or constructive The possession of goods must changes ,though temporarily Ownership over goods is retained by the owner Delivery of goods here is for some purpose May be safe custody security of debt ,repair Conversion

When the purpose for which the bailment is

create is accomplished ,the goods are to be returned or disposed according to the instruction of the bailor ,The goods returned should be the same ones which were bailed Bailment is possible only for goods movables and not to immovables Gratuitous and Non gratuitous Bailment A Gratuitous bailment is that in which neither the bailor nor the bailee is entitled to any remuneration Non gratuitous B ailment here either the bailee or the bailor gets remuneration

Rights of Bailor

Restoration of goods lent gratuitously


Entitled to increase the profit to goods bailed Enforcement of rights

Claim damages
Right of termination Right to share in the compensation received in any suit by the

bailee Duties of the Bailor To disclose fault in the goods bailed Repayment of the expenses

Responsibility for lack of title

To receive back the goods


Rights of Bailee Right to Compensation

Right to Remuneration
Right to Particular lien Right to general lien Right to claim compensation in case of faulty goods Right to Inter plead Right to bailment by several owners Right to sue against wrong doers

Duties of Bailee Duty of reasonable care of goods bailed Not to make unauthorized use of goods bailed Duty not to mix goods bailed with other goods Duty to return goods with out demand to retain the same Duty not to set up adverse title Termination of Bailment Lapse of time Accomplishment of purpose Inconsistent use of goods (Sec153) Death(sec162) Gratuitous bailment (Sec159)

Pledge Sec172 of Indian contract Act says Pledge is a bailment of goods as security for payment of debt or performance of promise The person offering the security is called as the Pawnor or the pledger, And The person who receives the goods is called as the pawnee or the pledgee Here there should be bailment of goods The object of such bailment should be to hold the goods as a security for payment of a debt or performance of promise and not for safe custody or any other purpose

It must satisfy the essential requirement of a bailment i.e.

Delivery of goods
Delivery for specific purpose Delivery with a condition that the goods shall be returned in

specific time when the purpose is over or disposed of according to the direction of the bailor Only the possession and not the ownership is transferred Rights of the Pledgee Right of retainer Security for subsequent Advances\debts

To recover any extraordinary expenses

To bring civil suits for amount due


Sale after notice Rights to damages

Right to indemnity
Right against deprivation

Duties of a Pledgee\Pawnee Take reasonable care Not to make any unauthorized use Return on repayment Return any increase or profit Right to increase or profit

Duties of a Pledgor \Pawnor

Disclose the faults


Meet extraordinary expenses Indemnify the pledgee

Negotiable Instrument Act 1881 Meaning and Definition of Negotiable Instrument A Negotiable Instrument is a written contract evidencing a right to receive money and it may be transferred by negotiation i.e. either by delivery or by endorsement . The term Negotiable Instrument", Literally means A document transferable by delivery This act came into force on 1-3-1882 Sec 13(1) of NIA says NI means a promissory note,bill of exchange or Cheque payable either to order or to bearer

Essential Features of Negotiable Instrument

Easy transferability
Title :A bonafide transferee for value i.e holder in due course of a

NI gets a complete ,independent and indefeasible title to the instrument even though there are some defect in the title of the transferor Right to file Suit The transferee of NI is entitled to file a suit in his own name for enforcing any right or claim on the basis of the instrument i.e. there is a right of action in itself and he is not dependent on another's title No need of giving a Notice of transfer of NI to the party liable to pay

Presumption as to Negotiable Instruments

Sec 118 and 119 of NIA provides the following presumptions


Consideration :Every NI was made or drawn ,accepted

,endorsed negotiated for consideration Date :Every NI are made drawn on the date it bears Time of acceptance : Every accepted bill was accepted within a reasonable time after its date and before its maturity Order of endorsement :The endorsement on a NI were made in the order they appear Stamping :A lost PN,BOE or cheque was duly stamped

Holder in due course :The holder of a negotiable instrument is a

holder in due course Proof of Protest :In a suit upon an instrument which has been dishonored ,the court shall ,on proof of protest, presume the fact of dishonor ,unless and until such fact is disapproved This presumption would not arise if an instrument has been obtained by fraud or for unlawful consideration Parties to Negotiable Instrument Drawer : The maker of a negotiable instrument Drawee:He is person on whom the instrument is drawn

Privileges of Holder in due Course :


He gets a better title to the instrument than that of

the transferor or any of the previous parties .His title is not affected even if the person from whom he has taken the instrument had defective title

He can give a better title to the subsequent transferees

Party liable to pay on a NI cannot contend against the HIDC that

he had lost the instrument or the instrument had been taken from him by fraud or for unlawful consideration Every prior party to the NI is liable there on to the HIDC until the instrument is duly paid The party liable on PN or BOE cannot avoid their liability to the HIDC by pleading that the delivery of the instrument is conditional or restrictive

No maker of the PN, BOE,Cheque can deny as against the holder in due courses the validity of the instrument NO endorser of NI can deny as against the HIDC the signature or capacity to contract of any prior party to the instrument The acceptor of a BOE drawn in a fictitious name cannot raise against the HIDC the plea that the

drawer is a fictitious person PROMISSORY NOTE Sec 4 of NI defines PN It Is an instrument in writing not being a bank note or a currency note containing an unconditional undertaking signed by the maker ,to pay a certain sum of money only to, or the order of a certain person or to the bearer of the instrument Parties to the PN Maker Payee Holder Endorser

Essential Features of a PN

IT must be in writing
IT must contain a express promise or clear undertaking to pay Promise must be definite and unconditional

The maker of Pronote must be certain


It should be signed by the maker The amount must be certain The promise should be to pay money The payee must be certain IT is payable on demand or after a certain period It should bear the required stamp

It should be dated

The rate of interest :Must be paid at the rate from the date of

the instrument

Legal Presumption :Consideration is presumed to have passed

between the transferor and the transfree Procedure for Suits: In India a special procedure is provided for suit on promissory note and BOE under order 37-a of CPC Number of transfer :These instrument can be transferred in infinitum till they are at maturity Rule of Evidence These instruments are in writing and signed by the parties :they are used as evidence of the fact of indebtedness because they have special rule of evidence Exchange ;NI are considered as substitute for money

Bill oF Exchange According to Sec 5 of the N.I.Act A bill of Exchange is an instrument in writing containing an unconditional order ,signed by the maker ,directing a certain person to pay a certain sum of money only to,or to the order of ,a certain person or to the bearer of the instrument There are usually three parties to a bill of Exchange : The maker of the Bill of Exchange called the Drawer(Creditor) The person who is directed to pay Drawee(Debtor) The person who is entitled to receive the money (payee)

Besides them there may be Endorser ,The endrosee,Drawee in

case of Need ,Acceptor for Honour Essential feature of BILL Of Exchange IT is an Instrument in writing IT must contain an order to pay, which is express, certain and unconditional The Drawer must be certain The drawee must be certain The payee must be certain The instrument must be duly signed by the drawer The amount of the money to be paid must be certain

and ascertainable The payment must be in legal tender money The money must be payable to a definite person or according to his order The bill may be payable on demand or after a specified or definite period of time IT must be properly stamped It must be dated Acceptance of The Bill :A mere drawing of the Bill does not make it valid and legal document .It must be accepted by the drawee before payment can be claimed .When the Drawee of BOE signifies his

assent to the order of the drawer by signing his name across the face of the bill with or with out the word Accepted", It is called the acceptance of the bill. Than the drawee becomes the Acceptor of the Bill. An acceptance is complete when it is given in writing on the bill, Signed by the drawee or his agent and it is delivered to the holder ,or Notice of acceptance is given to him or his agent Acceptance must be absolute and unconditional Presentment for acceptance is compulsory

Three days of Grace is given for a BILL of Exchange after the

due date Presentment for payment should be made with in a reasonable time to the person who is liable A bill is said to be dishonored if it is not accepted The drawer and all the endorsers are liable for holder for dishonor Any person to whom the notice of dishonor is not given is discharged from his obligation Noting and Protesting It is a procedure taken on the dishonor In order to get evidence for that purpose the dishonoured instrument is handed to a Notary Public

Who present it on behalf of the holder so as to obtain legal proof

of dishonor ,Noting is not compulsory in case of inland bills . Protest : When a pronote or a bill has been dishonored by non acceptance or non payment ,the holder may ,with in a reasonable time ,cause such dishonor to be noted and certified by a notary public. Such certificate is called as Protest . It is a formal notaries certificate attesting the dishonor of the PN or BOE

Distinction Between a Promissory Note and Bill of Exchange Acceptance :A bill needs to be accepted to make it valid. The drawee puts his signature as acceptor. No such acceptance is required in case of PN Nature of Liability : The liability of the drawer of a BOE is secondary and conditional .The drawee or the acceptor is primarily liable . The liability of the maker of the PN is primary and absolute as he himself is the main debtor Immediate Relation :The drawer of the BOE stands in the immediate relation with the acceptor or the payee .The maker of the PN stands in the immediate

relation with the payee Notice to the prior parties :Notice to the prior party is a must in case of dishonor of BOE.This is not needed in case of PN Sets :Foreign bills are drawn in 3 sets .In case of PN this is not there Protest: Foreign bills must be protested .In case of PN this is not required Conditional Acceptance :A bill may be accepted conditionally .NO such condition may be laid by the maker of PN Acceptor for Honour:Acceptor for honour can even make the payment of a bill.PN cannot be paid so

Payable to the Maker:BOE may be payable to the maker

himself PN cannot be made payable to the maker himself

Cheques
Definition: Sec 6 of the NI Act defines , A cheque is a BOE and not expressed to be payable other wise than on demand and payable only through a banker. Essentials It is a Instrument in writing Order to pay money only Order should be unconditional It must be signed by the maker or the drawer It must be drawn on a specified banker Sum must be certain It is always payable on demand It is in a printed form

The payee of the amount should be certain

It should bear a date


Delivery of the cheque is essential The banker will be liable to the customer if he wrong fully

dishonors the cheque Types of Cheques: Cheques may be broadly classified as open chequeand crossed cheques . A crossed cheque is one which has two transverse parallel lines, markedAcross its face ,with or without the words and company or any abbreviation there of .There are two kinds of crossing:

General crossing and Special crossing : General crossing is were a cheque bears in its face an additional words and company or any abbreviation there of between two parallel transverse lines, or of two parallel transverse line simply, either with or without the word as not negotiable That addition shall be deemed a crossing and the cheque shall be deemed to have been crossed generally Special crossing: Sec 124 says where a cheque bears across its face an addition of the name of the banker, either with or with out the word not negotiable that addition shall be deemed to be crossed specially and to be crossed to that banker

Double crossing : when a cheque contains the name of two

bankers with in the crossed lines it is called double crossing .Its purpose is to enable the payee or holder to get the cheque collected through any one of the banker . Restrictive Crossing: Not negotiable crossing and account payee crossing are said to be Restrictive crossing Not negotiable crossing loses its special feature of negotiability ,but remains transferable like other goods Account payee crossing are like Account payee only

Who can cross a cheque

The drawer
The holder of the cheque Banker on whose favor the cheque is crossed can again specially

cross it A crossing can be opened by the drawer by writing the word pay cash and put his full signature Dis honouring of cheques When payment must be refused When the drawer has countermanded payment When banker has received the notice of customers death

On adjudicated insolvency of the customer

When the banker receives the notice of Insanity of the customer


When the Banker receives the garnishee order or other legal

order prohibiting the payment When the banker receives a notice of assignment by the customer of the credit balance of his account When money is held in trust If there is defect in the title of the party presenting it When the customer has closed his account In case off out break of war and the customer is a foreigner

Wrongful Dishonor of cheque :

Under such circumstances he become liable to pay compensation


to the customer Penal action for dishonor of the cheque Sec 138 0f NI Act says He or she will be deemed to have committed an offence and punishable with fine with imprisonment for a term which may extended to one year ,or with fine may go up to twice the amount of the cheque or both Notice shall be issued regarding dishonour to the drawer And he has an option to make the payment with in 15 days of receipt of notice

Banker has to issue a Certificate of bouncing

It is used as a evidence in the court


6 months time limit has been given for disposal of the case Notice to be issued to the victim from 15 days to 30 days

Court should take the case with in one month


Statutory Protection to the collecting Banker Sec 131 says A banker who has in good faith and with out

negligence received payment for the customer of the cheque crossed generally or specially to himself shall not ,in case the title to the cheque proves defective incurs any liability to the

True owner of the cheque by reason only of having received

the payment Protection for collection of crossed cheque only Collection on behalf of the customer As an agent of customer Received payment in good faith With out negligence Statutory protection to the paying Banker NI Act gives legal protection to the paying banker if the payment is done in good faith and with out negligence

Distinction between Cheque and Bill of Exchange

Drawee:
A cheque is drawn on a specified banker only A BOE can be drawn on any one including the banker

Payable on Demand :A cheque is always payable on demand


A BOE may be drawn payable on demand or on the expiry of a

certain period after date or sight Payable to the bearer on demand :Cheque is always payable on demand and may be made payable to bearer or order .a BOE cannot be drawn payable to the bearer on demand

Acceptance :A cheque requires no acceptance .A BOE must be

accepted before payment can be claimed NO days of grace is allowed in case of cheque .IN case of time bill there is a grace period of three days In case of cheque there is a presumption that customer is having sufficient credit balance ,In case of BOE no such presumption is there A cheque can be crossed generally or specially BOE cannot be crossed Stamping is not needed in case of cheque Stamping is a must in case of BOE except in the case of demand bill

The payment of the cheque can be countermanded by the

drawer .The payment of BOE cannot be counter minded by the drawer Cheque is not intended for circulation but immediate payment The BOE may be circulated by endorsing it A cheque is not generally discounted ,A bill can be discounted and rediscounted IF the cheque is not presented for it is discharged from payment on the due date , The drawer of a BOE is discharged if it is not duly

presented to the acceptor for payment or else Liability :The drawer of a cheque is primaryly laible for payment The drawee or the acceptor of a bill is primarily liable ;Statutory protection; is provided to the banker in case of forged endorsement The drawee of BOE has no such protection Noting and Protesting :A cheque need not be noted and protested .A BOE must be noted and protested when it is dishonoured Cheques are not issued in sets Foreign bills are generally drawn in sets of 2 or 3

Endorsement Sec15 of NIAct says : when the maker or holder of a NI signs the same ,other wise than as maker, for the purpose of negotiation ,on the back or face there of on a slip of paper annexed there to ,or so signs for the same purpose ,a stamped paper intended to be completed as aNI he is said to endorse the same ,and called as :endorser Parties to Endorsement Endorser Endorsee

Types of Endorsement

Blank or General
Full or special Restricted endorsement Partial Endorsement

Conditional or Qualified endorsement


SanRecurse Endorsement :excluding his liability in other words

with out recourse to me SanFrais :No expenses should be incured on my account Facultative Endorsement :He waives his rights to receive notice of dishonor

Discharge of a negotiable Instrument :

BY Cancellation
BY release or waiver BY payment

Operation of Law

LAW OF INSURANCE General Principles of insurance The law of insurance is a branch of Law of contract the parties of insurance also have the Right and duties against each other IT should have the essential elements of a valid contract It should be in writing ,printed stamped ,signed by the insurer and handed over to the insured IT must have like contract offer,acceptance,consideration,freeconsent,contractual capacity,lawfulobject etc;

The document evidencing the contract of insurance called Cover-

note Principle of cooperation and probability is the bases of insurance Utmost good faith Indemnity Contingent contract Insurable interest The policy specifies the term or period of time it covers THE risk of the insurer commences after the contract of insurance is entered into Premium is the consideration paid by the assured to the insurer for the risk undertaken

Cause Proxima :The assures can recover the loss only if it is

proximately caused by any perils insured against MITIGATION OF LOSS :IN the event of mishap to the insured property if the assure does not take necessary step to mitigate the loss the insurer can avoid the payment of loss which is attributed to the assured negligence Contribution :the aim of contribution is to distribute the actual amount of loss among the different insurers who are liable under different policies in the same subject matter SUBROGATION: The doctrine of subrogation

comes into play if the insured elects to be indemnified by the

insurer and as a result the insurer shall subrogate to all the rights
and remedies of the insured against the third party . SOme times their may be reinsurance and some times there may be double insurance

LIFE INSURANCE:

Meaning: IT is a contract under which one person ,in consideration of the premium paid ,Either in lumpsum,monthly,quarterly,halfyearly or yearly ,undertake to pay to the person for whose benefit the insurance is made ,a certain sum of money either on the death of the person whose life is insured or on the expiry of a specified period of time The person who agrees to pay is called the insurer The person whose life is insured is called as the assured The consideration payed is called the premium

Insurable Interest :

A person has an unlimited insurable interest in his life A child has an insurable interest in the life of the father But a father has no insurable interest in the life of his son unless he is dependent on the son .Same in the case of elder brother A husband has an insurable interest in the life of his wife and vice versa A creditor has an insurable to the extent of his debt in the life of the debtor A surety has an insurable interest in the life of the co-surety

A parter in the partnership has an insurable interest in the life of

the copartner AN employee employed for a specified period has an insurable interest in their life of the employer AN employer in the life of the employee Kinds of Life policies Whole life policies Endowment policy Joint Life policy ANNUITY :Here the amount is payable not in one lumpsum but montly ,qurterly or half yearly or annual installments after the assured attains a certain

age and he will get money back after a certain period Child endowment policy LIFE POLICY With profit or with out profit policy Group Insurance MONey back policy Sinking found policy Janta policy :This covers risk of death by accident for one year only with nominal premium Limited payment policy

Procedure for effecting a life Policy :

any person ,who attains majority and who can enter into a valid contract can take out a life insurance policy HE has to fill up a proposal Form supplied by the insurer The proposer is required to undergo a medical examination NO need of medical examination if the proposer is a government or semi government employee in the age of 18-45 and the policy amount does not exceed 4 lakhs RS EVEN though is not a semgovt or govt employee

And the amount does not exceeds RS 1 lakes

The proposal form is accompanied by the first premium amount


and if the insurer accepts the same unconditionally at the

issuance of the First premium Receipt there comes into existence a binding contract and the risk commences from the date of issuance of notice Policy Conditions: Premium Days of grace i.e30 days Proof of age Incontestable clause :under sec 45 of IIAct 1938 ,no policy can be disputed by the insurer after it has

Remained in force for ful two years

Suicide Clause :If the assured commits suicide with in one year

of the commencement of the risk on the policy whether the policy holder was insane or not the LIC will not be liable for the money Nomination or Assignment Surrender Value Paid up Value Loan value Assignment of Life policies : On the death of the insured ,the legal representatives of the insured can collect the sum assured The holder of the LI p can deal with it like any other property he can sell, assign or transfer it as a security for loan or give it away as gift

LIP can be either assigned or any other person can be

nominated on behalf of the policy holders claim can be made by them Conflicting Claim :Sec 47 of Insurance Act 1928 provides were an insurer is of the opinion that, by reason of conflicting claim to insufficiency of the proof of title or any other reason ,it is impossible for the insurer to obtain a satisfactory discharge for the payment of the money insured for ,the insurer may apply to pay the money in the court having jurisdiction over the place where the money is payable

Fire Insurance Definition: It is insurance against any loss caused by fair Characteristics of Fire Insurance Indemnity Good faith Contract Insurable Interest Contribution subrogation and Reinsurance Cause Proxima :Fire policies cover losses caused proximately by fire Specific Exception :i.e. Fire policies generally

contains a condition that the insurer will not be liable if the fire is caused by riot ,civil disturbance ,war or explosion. In case of absence of any specific exception the insurer is liable for the losses caused b fire what ever may be the cause of fair Assignment :Assignment can be done as a chose in action under TP Act ,But assignee cannot recover damages unless he has as insurable interest in the property at the time when the loss occurred a stranger cannot sue on the FP Payment of Claims :Upon occurrence of fire the insurer shall be immediately notified so as to that the insurer can take step to salvage the remainder compaines keep

Companies keep experts and determined the extent of loss and to

detect the fraud Type of Fire Insurance Ordinary Fire Insurance Specific Policy: here the liability of the insurer is limited to give a specific sum which is less than the value of the property Valued policy :Here insurer agrees to pay a specific sum irrespective of the actual loss suffered Average policy : Where a property is insured for a sum less than its value and a clause is their in the policy stating the same this is called Average policy

Replacement policy :here the insurer undertakes not to pay the value of the property lost but the cost of replacement of the property destroyed or damaged . Floating policy :Where one policy covers property situated in different places is called as floating policy Combined policy :A signal policy may cover losses due to variety of causes Clauses of a Fire policy Average clause :This clause provides that if the sum insured under the policy is less than the value of the property on the date of fire ,the amount of lo

payable will be proportionately reduced ,and the insurer shall be deemed to be his own insurer for the balance Alteration clause: This clause provides that the insurance will cease to attach if ,with out the previous sanction of the insurer ,the trade or manufacture carried on the premises is changed, so as to increase the risk ,or if the building insured becomes unoccupied or if the property insured is removed to place other than stated in the policy Marine clause :When goods are insured both under marine and fire policy ,this clause in that case reliefs

insurer of any liability for losses which is recoverable under a marine policy except in respect of any excess beyond the amount recoverable there under Reinstatement clause; This clause gives an option to the insurer to reinstate the premises instead of paying money to the insured .The object of this clause is to prevent any fraudulent claim being presented Contribution clause :this Clause is inserted when the subject matter insured is insured with more than one insurer .It provides that the insured shall claim from each insurer a rateable proportion of his loss

Arbitration clause :It provides for arbitration for settlement of

dispute and prescribes the procedure Procedure for effecting Fire policy : Proposer has to fill a proposal form describing the location with the principle of at most good faith The insurer asses the risk to be insured The property is fully inquired and examined by the surveyor If the insurer thinks that the property is fit to be insured he gives his acceptance on payment of the premiume After this the insurer issue a cover note by stamping tha policy

Fire claim :on the happening of the loss the assured

Register and recover his claim by a notice of loss Rights of the insurer : Right to avoid the policy Right of entry and control over the property Right of reinstatement Right to subrogation :Stepping in to the shoes of insured Right of contribution: Right of salvage :Where the insurer pays for the loss in full he is entitled by way of salvage to all that remaining things

Report to Police in case of deliberate act of burning

Submitting statement of claim :With in 15 days after the loss

or damage the insured is further required to submit to the insurance company a claim in writing for the loss or damage containing the particulars of item of property damaged or destroyed Evidence in support of claim has to be produced

MARINE INSURANCE ACT,1963 IT is defined as an agreement where by the insurer undertakes to indemnify the assured in the manner and to the extent there by agreed, against marine losses, that is to say ,the losses incidental to marine adventure (sec 3), An instrument containing the contract is called as a Marine Policy. The consideration for policy is called as premium. The insurer is called Under writer The person who is there by indemnified is call the Insured

Types of Marine Insurance


1.Hull insurance Insurance of the vessel and its equipment 2.Cargo insurance i.e. cargo 3.Freight Insurance 4.Liability Insurance liability to third party

Content of Marine Insurance Policy(sec25)


1.Name of the assured 2Subject matter insured and the risk insured against 3 The voyage or period of time or both, as the case may be covered by the insurance :

4 The sum insured 5.The name or names of the insurer or insurers. it must be signed by or on behalf of the insurer ESSENTIALS OF A MARINE INSURANCE POLICY ; It should fulfill all the conditions of a valid contract It is a contract of indemnity It must be in writing and duly stamped The insured must have a insurable interest in the subject matter insured at the time when the losses occurs

It must not provided to cover for more than twelve months at a

time

It is a contract of at most good faith The doctrine of subrogation and contribution applies A marine policy is invariably subject to average clause

,warranties etc; Types of marine policy: 1 Voyage Policy : It covers a particular voyage 2 Time Policy : It covers a specified period of time 3 Mixed Policy 4Valued policy :Policy which mentions the value

Of the subject matter . Unvalued or open policy :It does not specify the value of the subject matter .but subject to the limits of the sum insured Floating policy :It is a policy Which describes the insurance in general terms and leaves the name of the ship and other particulars to be defined by subsequent declaration Honorary or Wagering policy :Here assured has no insurable interest in the subject matter It is void and value less in a court of law Lost or Not policy :the insurer insures the goods

Irrespective whether it is lost or not Determination of a Insurable value That is the amount of the valuation of the insurable interest for the purpose of insurance . and representation has to be made in a proper manner Expressed and implied Warranties; In commercial transaction a breach of warranties may give raise to claim for damages ,but in insurance law ,the party aggrieved is entitled to repudiate the his liability. A warranty is given for the benefit of the insurer and as provided under Sec 36

Thus if a ship is warranted as well or in good safety on a particular day ,it would constitute a warranty with in the meaning of this section . Express warranties : It must be included in or written upon the policy or must be contained in some document referred to in the policy E.g. : the ship is safe on a particular day or the ship will proceed to its destination with out any deviation Implied Warranties: Sea worthiness of Ship Legality of adventure Neutrality

Voyage (sec44to 47): Where the subject matter is insured by a voyage policy .There is an implied condition that the adventure must be commenced with in a reasonable time and on its failure the insurer may avoid the contract In case of change of voyage or deviation also the insurer is discharged from liability as from the time of change of voyage ASSIGMENT OF POLICY :Policy can be transferred by assignment either before or after loss .It can be done either by writing endorsed on the policy or in other customary manner

The insurer need not be informed at all MARINE LOSSES :FOR a particular policy to cover a loss ,the direct or dominant cause of loss will be taken in to consideration i.e. proximate cause Kinds of losses : a) Total losses: 1. Actual total losses 2. Constructive total losses b) Partial losses : 1.General average loss 2.Particular average loss

Ultimately the Marine insurance is mainly based upon these

objects and the insurance is provided basing upon these losses . some times there may be abandonment of the subject matter of the insurance It should be in writing or by words of mouth ,with reasonable diligence .On a valid abandonment ,the insurer is entitled to take over the interest of the assured