Contracts – II (Specificity)

Course outline
Unit 1 – nature and formation of sale of goods.
1. History
2. Meaning of contract of sale
3. Difference between sale and agreement to sell
4. Compulsory contracts
5. Subject matter of contracts of sale
6. Difference between contract of sale and other contracts.
Unit 2 – obligations in contract of sale of goods
1. Conditions and warranties
2. Consequences of breach
3. Circumstances under which condition can be treated as warranty
4. Warranty of quite possession and freedom from encumbrance, express terms, implied
terms
5. Representations fundamental terms and innominate terms.
6. Description, satisfactory quality, fitness for purpose, sale by sample, usage and trade.
Unit 3 – transfer of property in goods and passing of property in goods
1. Property and its significance
2. Sellers right to sell the goods
3. Ascertained goods, specific goods, unascertained goods and future goods
4. Effect of passing of property
5. Goods delivered on approval or on sale or return
6. Undivided shares in a bulk
7. reservation of bank of disposal
8. Transfer of title by non-owner
9. Transfer of risks
10. Frustration and difference between risks and frustration
Unit 4 – performance of contract of sale
1. Meaning of delivery
2. Methods of delivery
3. Place of delivery
4. Time
5. Quantity
6. Delivery by installment
 7. Acceptance and payment
8. Unequal bargains
9. General contract law principles- contra proferentum, doctrine of fundamental breach
and unconscionability.
Unit 5 – contract of indemnity and guarantee
1. Meaning of indemnity
2. rights of indemnity holder
3. indemnifiers liability
4. commencement of liability
5. meaning of guarantee
6. essentials of a valid contract of guarantee
7. meaning of surety
8. nature and extent of surety’s liability
9. duration and termination and distinction
10. drafting
Unit 6 – contract of bailment and pledge
1. meaning of bailment, bailor and bailee
2. types of bailee
3. rights and duties of bailor and bailee
4. general lien and particular lien
5. rights of finder of goods
6. termination of bailment
7. meaning of pledge
8. difference between bailment and pledge
9. rights and liabilities of pawnor and pawnee
Unit 7 – contract of agency
1. meaning of agency
2. creation
3. principle and agent relationship
4. types of agents
5. rights and duties
6. distinction between agent and servant
7. extent of agent’s authority
8. delegation of authority
9. personal liability of agent
10. termination and drafting
Unit 8 – partnership
 1. meaning
2. difference between co-ownership, joint family and company
3. duration of the firm
4. rights and liabilities of the partners
5. holding out minor as a partner
6. dissolution registration and drafting
Unit 9 – limited liability partnership
1. background
2. need
3. Nature of LLP
4. Incorporation winding up and dissolution
Unit 10 – remedies
1. Remedies under ICA
2. Remedies under the Sale of Goods Act
a) Remedies of the seller – right of lien, stoppage in transit, resale, reservation of
title clauses, claim for price, claim for damages, etc.
b) Remedies of the buyer – specific performance, damages for non-delivery, delay
in delivery, buyers right to examine the goods, right to reject, rescission and
damages for breach of fundamental terms.
4/1/24
 When buy – sale is done – conveying of property is done but when agrees then later
things are not done
 Delibery has to be a voluntary transfer not by anything that is illegal. Symbolic delivery
where there is transfer of possession but not actually like when goods are still in my
godown and the keys are with buyer. Actual transfer of custody by shifting doesn’t
happen
 Custody and possession – diff is that like my car is in custody of my driver but actual
possession is with me, custody is mere who is keeping the goods while possession is who
has dominion over goods.
 After deliverable state is there the buyer cannot refuse
 Sometimes it is notpossible to physicaly displace the goods then documents are used to
take delivery, they represent the goods.
 Future, existing, acertain and uncertain are the types of goods
 For future goods it has to be that it will come into ownership of owner in future to sell it
 Special law prevails over general law
 Madras v genan hungerly case
 Domestic animals are considered goods
 Definition clause
1. Section 2(1) provides that the buyer is a person who buys or agrees to buy
the goods. A person is said to buy when the sale is complete (when
property of goods is transferred). It includes that person who is
contractually bound to purchase the goods.
2. Delivery [Section 2(2)] - the transfer of possession must be voluntary.
Symbolic delivery is also sufficient to constitute valid delivery eg- keys of
godown. Possession may exist without actual custody eg – an owner of the
goods is said to be in possession even if the custody is with servant.
Custody – means when there is not authority but duty of supervision,
possession means complete dominion over the goods.
3. Section 2(4) document to title of goods – the documents which represents
the goods and transfer of such documents operates as constructive
possession of the goods. Constructive possession is the authority over the
goods without having actual custody or charge of the goods.
4. DIFF BETWEEN POSSESSION, CUSTODY, CONSTRUCTIVE POSSESSION AND
DELIVERY.FIND DEFINITON AND SOURCES
5. Section 2(7) goods – the definition includes –
a. Moveable property of every kind
b. Stocks and shares
c. Growing crops, grass
d. Things attached to land or forming part of it which is agree to be
severed
Not included
a. Actionable claims – money due from someone on which claims
can be made. Eg – amount due under insurance policy. Defined in
transfer of property act.
b. Money – it’s a currency which is price received in exchange of
goods.
Definition of immovable property as per general clauses act –
moveable are those which are not immoveable and they are not
defined in the sale of goods act.
General clauses act defines immoveable property as it shall include
lands, benefits arising out of land, things attached to earth and
permanently attached to anything which is attached to earth except
standing timber, growing crop and grass.
 Land means determinate portion of earth surface which may be
covered by water, the column of surface above the surface, the
ground, and beneath the surface.
All objects which are on or under the surface in its natural state are
included in land.
 Constructive -
Constructive possession is a legal theory used to extend possession to situations where a person
has no hands-on custody of an object. 1st used in 1920s
 https://legal-dictionary.thefreedictionary.com/
Constructive+Possession#:~:text=Beginning%20in%20the%201920s%2C%20however
%2C%20courts%20began,expanding%20criminal%20possession%20to%20include
%20constructive%20possession.
 Possession -
The ownership, control, or occupancy of a thing, most frequently land or Personal
Property, by a person.

5/1/24
 Contract of sale (section 4) – Sale and agreement to Sale
 Promissory (when one party is in control of what can happen) and contingent (when the
condition is not in control) conditions
6. Benefits arising out of land (immovable property) – Anand Behera v state –
it was held that a right to catch fishes from a particular lake was included in
benefits arising out of land and hence immovable.
7. Water, oil, gases are capable of being separated and bought and sold as
goods.
8. State of madras v Gannon Dunkerly – it was held that in a building contract
the agreement is to construct a building according to the specifications
contained in the agreement and the contractor receives payment for that.
In such agreement there is neither a contract to sell the material used nor
there is any passing of property in that material as movables.
9. Gopal krishna pilai v K. M. mani – domestic animals are goods
10. Trading in human organs is opposed to public policy and unethical.
11. Transplantation of human organs act totally bans commercialization of
human organs.
12. Wigs and skeleton can be made subject matter of contract of sale.
13. Central England water transport corporation v BN Ganguly – public policy
concerns public good and public interest. It is decided upon the basis of
what is harmful for public good will be deemed to be against public policy, it
varies from time to time.
 14. Karnataka power transmission corporation v ashok iron work Pvt. Ltd. – it
was held that for limited purposes provisions of electricity is considered as
supply of services.
6/1/24
 Condition precedent – they must be done prior to transfer of property
 Condition subsequent – they must be complied in some time after transfer, if not then
the property gets transferred back to seller
 Sale is also called executed contract of sale and agreement to sale is also called
executory contract of sale.
 Contract of sale (formation) – sec 4
1. Contract of sale is defined as whereby a seller transfer or agrees to transfer
property in goods to the buyer for the price.
2. C.B.B. Draper v Edward turner – it was held that the word sale denotes
transfer of general property in a thing.
3. The basic purpose is exchange of property for money
4. (3) – includes sale and agreement to sell. Sale is an executed contract of
sale and agreement to sell is an executory contract of sale.
5. Generally in sale buyer bears the risk of loss however, in agreement to sell,
the seller bears the risk.
6. In sale unpaid seller has right to sue for price if not paid by the buyer
however, in agreement to sell the unpaid seller can claim for damages for
the breach.
7. Essential conditions –
a) There must be at least two parties
b) Payment should be made in terms of money
c) The subject matter is goods
d) All necessary conditions for a valid contract must be fulfilled
 Hiar purchase agreement is under hiar purchase act. In such agreements there is an
option to purchase or not. They are also in cases of bailment.
 Lee v butler
 Contract of work/service – mental or physical efforts
 Hindustan shipyard case
 Anandam vishwanathan v state of TN – college exam paper
 Northern india caterers v state – restaurant services are contract of service
 Sale and hiar purchase agreement
1. Under hire purchase, the owner of the goods agrees to transfer properties of the
goods to the hire purchaser when certain fixed number of installments are paid as
hire charges, till that time the hirer remains bailee. Option of purchase is with the
buyer.
2. It is governed by hire purchase act, 1972
 3. If there is a default in payment, the owner has right to resume the possession of
goods immediately without refunding the amount.
4. An option to purchase is available which may or may not be exercised.
5. The property in goods passes to the hirer after payment of last installment.
8/1/24
 Sec 4 tells what is contract of sale and 5 tells how it is made
 In compulsory contracts there is curtailment of freedom of contract and in them
subsection 1 of sec 5 of sale of goods act is violated. But if the product in ques is subject
to essential commodities act then it can be. Andhra sugar mills case.
 Specific goods sec 2 (14) are those which are identified from the bulk at the time of
making a contract.
 Even if you have only possession of goods than you can sell. Owned and possessed are
both future goods.
 When the goods are ascertained after the agreement to sell has been made than they
are ascertained goods.
 Sale and contract of work
1. Work involves physical or mental effort to do any activity
2. A contract, the substance of which is that skill and labor must be exercised and in
addition supplying of material is happening then it will be deemed to be contract of
work and not sale.
3. Hindustan shipyard ltd. v state of Andhra Pradesh – it was held that the court may
form an opinion that the contract is one whose main object is to transfer property in
a chattel, though some work may be required to be done under the contract or
incidental to it if the primary object of the contract is to carry out work than the
contract will be deemed to be for work and labor.
4. Therefore, predominant object of contract, the circumstances of the case, and
custom of trade provide a guidance in deciding whether the transaction is a sale or
work contract.
5. State of Tamil Nadu v Anandam Vishwanathan – the contract in question was
printing and supplying question papers to the university. The SC held that the
contract was a contract of work because the nature of the job was such that the
supply of paper was merely incidental.
6. Northern India Caterers v State (1980) – in this case it was observed by the SC that
where hoteliers prepare and serve food to the residents of the hotel and to casual
customers who come to eat in the restaurant there is no difference in services
rendered in both the cases and there is supply and service of food not amounting to
sale because in such cases the purpose of hoteliers is not to sell the food but to
serve in proper atmosphere so as to make it service and make consumption of the
food enjoyable.
11/1/24
 Conditional contracts
1. Contracts are conditional when there enforceability depends upon the
performance or fulfillment of some conditions.
2. Conditions may be contingent or promissory. Promissory are those which are in
control of the promisor, contingents are those which are not in control of the
promisor
3. Conditions precedent are those conditions which must be fulfilled before actual
sale. Conditions subsequent are those which if remains not fulfilled after the
contract of sale, the property reverts back to the seller.
 Section 5
1. (1) provides offer and acceptance to sell or buy the goods for price which clearly
indicates consensual nature of contract of sale.
2. A sale can be complete even without immediate delivery or immediate payment of
price
3. Implied word here is used in the sense in which it is used in sec 9 (promises express
or implied) of the ICA.
4. Sec 14-17 deals with the term implied by law.
 Existing and future goods (sec 6)
1. Existing (owned or possessed). Sec 6
2. Future goods (which will come into existence in future or will be acquired by seller
in future). In sec 2(6)
3. Acquisition of which depends upon contingency, also called as contingent goods.
4. An attempt to do a present sale of future goods will always be considered as
agreement to sell
5. According to Benjamin, future goods are
a. Goods to be manufactured by the seller from material now in existence or
which is not in existence
b. Which are to become or may become property of seller by purchase, gift,
succession or otherwise
c. Goods which are expected to come into existence in ordinary course of
nature
d. Crops to be grown in future
e. Things attached or forming part of land which are supposed to be
severed.
12/1/24
 Risk and property can be separated. Property can be given without giving risk. Risk is the
responsibility of loss or damage.
 Sec 7
 1. Specific goofs
2. Seller aware
3. Perish/damage – no longer of description of contract
4. At time of contract
5. Void
 Perishing and damaging does not only mean physical, by any other manner the seller has
to be deprived of the goods
 Varollin v vallard – 700 bags rice were agreed out of them 109 were stolen then it was
not matching the description matching the contract.
 Sec 7 is an immutable rule

 Sec 2(14) defines specific goods as identified and agreed upon at the time of contract of
sale.
 In Ram Narayan v State of MP – the SC said that goods which are not identified and agreed
upon at the time of contract are generic or unascertained.
 Goods which are identified and agreed upon after the contract is made are ascertained
goods.
 Sec 7
1. Essential conditions
a. This section applies to specific goods only
b. The seller must not be aware of it
c. The goods are perished or damaged
d. At the time when the contract was made
e. The contract shall be void
2. This section applies to those cases where the seller is deprived of the goods for
example if they are stolen or lost
3. Barrow lane v Phillip and company – there was a contract of sale of 700 bags of
goods identified by marks, and were kept in a specific warehouse. Unknown to the
seller before contract of sale, 109 bags were stolen. The contract was void and the
buyer could not be compelled to take delivery of the remainder.
4. Knowledge of the seller is material and if he knowingly enters into an agreement,
he would be liable to pay damages to the other party.
5. If the person promises to do something which he knows is not possible and he
cannot perform will be liable to compensate the other party.
 Sec 8 essentials
1. Specific goods
2. Risk transfer is imp
 Sec 8
1. It deals with goods perishing before sale but after agreement of sale
 2. This section applies to cases where goods were in existence at time of making
of contract but perished without fault of buyer/seller before risk has passed to
buyer.
3. Default rule – risk shall pass with ownership
4. Perishing of goods must not be due to wrongful act/default of buyer/seller if
any party to contract is responsible for loss/destruction of goods, he would be
liable to pay price or for non-delivery as case may be
5. Under the section contract is not void ab initio but it is avoided, which means
the rights vested before the event shall not be affected.
6. Following conditions must be satisfied for application of sec 8
a. Contract of sale must be agreement to sell and not actual sale
b. Agreement to sell must be for specific goods
c. Goods must be perished before property passes
d. Goods must be perished without fault of buyer/seller
e. Risk must not have been passed, contract shall be avoided
7. If property remains with the seller and risk is with buyer, section shall not apply
 Section 9 – ascertainment of price
1. It is not necessary that contract should have specific amount to be paid as a
price. Parties may leave the price to be determined by any other method
2. Even if, contract is silent as to method by which price is to be determined,
agreement to pay reasonable price will be implied in contract.
3. An agreement that one of the parties shall have power to fix price is valid and
binding but there should be bona fide intention of parties fixing price and there
has to be an agreement to that effect.
4. Reasonable price is a question of fact, it can be market price/ may depend upon
the course of dealing etc.
5. If there is an agreement to subsequently agree upon the price, it will be a valid
and binding agreement
6. Agreement must have a payment clause.
7. If in any manner price is not ascertained then agreement shall be void due to
uncertainty (S-29 of ICA).
 Section 10
1. Price can be determined by 3rd party and contract is conditional upon it
2. If buyer has received/used any part of goods, then he must pay reasonable
price
3. If one party prevents valuation, the other party may take action for damages
4. If valuer is negligent/fraudulent then he shall be personally liable for loss to the
parties.
 Section 11
 1. Timely payment does not go into root of consideration and if buyer fails to pay
on appointed date, seller cannot treat contract repudiated unless agreed
otherwise.
2. The seller may withhold delivery until price is paid or may maintain a suit for
price if delivery is already made
3. Other stipulations as to time may be essence of contract depending upon
terms. Ex – time of delivery, date of shipment etc.
4. Martin dale v smith – in this case there was a contract of sale of goods and it
was agreed that the goods shall remain with the seller for four months, the
buyer was supposed to pay the price within 12 week. He defaulted in payment
and requested seller for extension to pay the price. The seller refused to extend
the time and the buyer tendered price after expiry of 12 weeks. The seller said
that you did not pay price within said time and therefore I resold the goods to a
third party. The buyer was held entitled to recover damages for breach as time
of payment is not the essence and does not go to the root.
 Section 12
1. Stipulation in a contract which are made about goods may be condition or
warranty
2. Conditions are stipulation essential for main purpose of contract breach of
which gives right to treat contract as repudiated and reject goods. A warranty is
stipulation collateral to main purpose of contract and if it is breached, the non-
breacher may claim for damages in such a case, he may ask for compensation
for the deficiency. A stipulation may be a condition even if called as warranty in
contract, if it goes to root of the matter.
3. In breach of condition, non-defaulter may reject goods and also sue for
damages. In cases where the term which is breached is flexible, court may not
allow rejection of goods and can hold deficiency not that serious which may
lead to breach of conditions.
4. If the representations do not form part of contract i.e., if its neither conditions
nor warranty then it may be expression of opinion or puff and non-fulfillment
of such representation won’t give rise to any right of legal action.
5. A condition normally includes warranty and buyer may waive it
6. When conditions are annexed by law, they are called implied
conditions/warranty
7. Puffs are statement which reasonable man won’t believe and are not binding
also.
24/1/24
 S 14 (1) – title
 S 14 (2) – quiet possession – means you won’t be disturbed by any random person in ur
use and possession of the goods.
  Charge is specific as defined in transfer of property act and encumberance is general
term.
 Three sections of 14 are overlapping but diff in 2 and 3 is that (as per mam) apart from
encumbrance, that comes in 3, rest comes under 2
 Stipulations are requirements that are specified in an agreement or demanded under it
while entering into an agreement the party may make representations or statements
which may be condition or warranty or mere expression of opinion or puff. Puff and
mere expression of opinion are not binding.
 Implied undertaking as to title (S 14)
1. S 14 provides that there is an implied condition on the part of the seller that in
case of sale he has right to sell and in case of agreement to sell he will have
right at the time when the property shall be passed in favor of the buyer.
2. It also provides an implied warranty that the buyer shall enjoy quiet possession.
(Eg – trademark infringement of third party.)
3. This section also provides an implied warranty that the goods shall be free from
charge or encumbrance which is not known to the buyer till the time the
contract was made. (For eg – if the goods are pledged)
4. The seller must have complete rights to dispose the goods
5. Niblett Ltd v Confectioners Material Co. Ltd. – in this case the seller sold tins of
condensed milk to the buyer named as Nissly brand. This was infringement of
registered trademark of manufacturers of condensed milk. The buyers in order
to make use of the goods had to sell them in the market unlabeled at a very
low price. It was held that the seller committed breach of an implied condition
(title, right to sell) that the buyer should have and enjoy quiet possession of the
goods (It is warranty)
6. The property in goods remains with the owner and will be returned to him
even if a person with defective title sold it.
7. Rawland v Diball – there was a sale of a car, after using it the buyer came to
know that it was stolen. The buyer was compelled to return it to the owner. He
was held entitled to recover the price from the seller.
8. (c) provides that there will be a promise by the seller that the buyer’s
possession shall not be disturbed by reason of existence of an encumbrance
and there will be a breach if the buyer is compelled to discharge it without
knowledge.
9. Under (b) there is an implied warranty that the buyer shall have and enjoy
quiet possession of the goods. It may be possible that the seller may be
innocent but still the loss shall be suffered by him.
25/1/24
 In S 15 description includes general purpose and identification. Not for a specific
purpose. Specific is provided in 16
 S 15 does not include quality nor it includes quantity
 Wallice v prat – common English sanfoin seeds were asked by buyer and child English
seeds were sent by seller. In this sale was by description and sample. Sample was diff
and even the bulk sent later was diff. when the crops grew that time the buyer got to
know abt it. And in this the buyer was allowed to get compensation.
Also, the seller in this have added exclusion clause in contract that they are not
responsible for quality. The court however didn’t allow this as it was a fundamental
breach.
 Description also includes other things like packaging
 S 15 - Sale by description
1. There may be sale by description only where it is clarified as to what kind of
goods are subject to sale. Eg – glass bottle, basmati, dog food
2. There may be a sale by sample as well as by description in which along with
description the sample is also sent. In both the cases the goods must
correspond with the description provided and if the sample is attached then it
must also correspond with the sample
3. The word description is not defined, but it generally means the kind of goods
which are sold or by which a specific identity may be attached to the goods. It
includes packaging, types of goods, there nature etc.
4. Defect in quantity of goods is provided in S 37 and not included in S 15
5. Suitability of goods for specific purpose is also not considered as part of
description under this section. Whether a dog food is fit for a cat.
6. General purpose is included as a part of description under S 15. Eg – cough
syrup
7. Description deals with identification of goods whereupon the parties will be
able to identify the kind of goods which are supplied and if they are different
the buyer may refuse to accept them.
8. Sometimes sample is the only description of the goods and in such cases the
goods must correspond with the sample. Eg – cloth, shoes etc.
9. If the goods are selected by the buyer himself this section still applies
10. Wallis v Pratt – in this case a sale by sample of the seeds described as common
English sainfoin seeds. The seller gave no warranty as to the growth,
description, quality etc. neither the bulk nor the sample was common English
sainfoin. This was discovered after the seeds were already sown and the crop
was already produced. The buyer was allowed to recover damages for the
breach of condition.
11. It is a fundamental rule clause in the contract in favor of the seller cannot be
relied on by him if he delivers goods which are not of stipulated description. It
is deemed that he has entirely failed to perform his contract and such clauses
are applicable only when the contract is at least being performed.
27/1/24
 S 16 – quality or fitness
a) No implied C/W
b) Makes – knowledge – seller
c) Relies on skill and judgement
d) Course of dealing
e) Implied condition
f) Sale - Patent name or trade name – no implied condition or warranty
g) Bouldry v Marshall – sale of car, buyer asked for a car for touring purpose,
seller suggested Bugatti, it was unfit but seller convinced so here there was a
sale of car under a trade name but the seller was liable here cause here the
buyer relied on the skill of the seller
h) Merchantable quality means a reasonable man would buy those goods
i) 16 (2) – is not just restricted to particular purpose, it is in gen that the goods
should be of merchantable quality
j) Jones v just – sale of manilla hem (fibre). In this the goods were shipped and at
that time only the goods were not of good quality and then due to sea water
also they deteriorated, so when they reached they lost all quality of manilla
hem. So court said the goods were not of merchantable quality
k) Horners v wiers and sons – reasonable classification. Glue containers were
sold, buyer was asked to see and buyer saw upar se hi and then decided to take
them. He just saw the container and not the glue and later when he bought it
and used it it was not of merchantable quality. Court held it against the buyer
cause a reasonable man should have seen what is inside the container.
 Implied condition as to quality and fitness (Sec 16)
1. Ingredients
No implied C/W – particular purpose
Makes – knowledge – seller
Relies on skill and judgement
Course of dealings
Implied C/W fitness for particular purpose
Sale – patent – trade name – no implied C/W
2. Under S 16 it is clearly provided that there is no implied condition or warranty
as to quality or fitness for a particular purpose. But, if the buyer makes known
to the seller the purpose for which the goods are required and relies upon the
skill and judgement of the seller who deals in those goods (description) there is
an implied condition that the goods shall be reasonably fit for that purpose.
3. In case of sale of an article under its patent or trade name there is an
application of presumption that the buyer does not rely on skill and judgement
of the seller but relies on his own judgement.
 4. It is possible that the person may order an article under patent or trade name
and may also make it clear to the seller that he relies upon the skill and
judgement to ensure that the goods are fit for particular purpose.
5. Baldry v Marshall – it was held that the mere fact that an article sold under the
contract is described by its patent or trade name does not mean that the sale is
under trade name where the buyer asks the seller for an article which will fulfill
some particular purpose and in answer to that request the seller to sell him an
article by a well-known trade name there it is clear that the proviso will not
apply and that the buyer relied upon the seller
6. Jones v padgett - there was a sale by sample of indigo cloth by a manufacturer
to a merchant who was also tailor. The buyer required it for the purpose of
making uniforms, but he did not made this known to the seller. Owing to latent
defect in the sample as well as bulk it was unfit for the particular purpose but
there was nothing to show that the cloth was unfit for other purposes for which
it can be used the buyer sought to reject it but was not allowed and also could
not claim damages absolutely.
 Merchantable quality and caveat emptor
1. Under sub section 2, it is provided that if the goods are sold by description by a
seller who deals in such goods is responsible for latent defects in the goods
whoch render them unmerchantable, wether buyer has examined them or not
2. Implied condition under subsection 2 applies to all goods whether they are sold
under patent/ trade name or otherwise
3. Merchantable quality is not defined in sale of good sbut it generally means that
goods are of such quality and in such condition that a reasonable man, acting
reasonably, would after examination acceptit in performance of the offer to buy
the goods.
4. Jones v Just – there was a contract of sale of goods bu description of manilla
hemp (fibre used for making ropes). It was agreed to arrive from Singapore via
ships. After that it got damages due to seawater and became unmerchantable.
The buyer was allowed to recover loss from the seller
5. Thronett v Beerc & sons – in this case there was a sale of vegetable glue. The
buyer came and examined the containers in which glue was kept and agreed to
purchase. The glue was unmerchantable due to a defect which the buyer
would’ve easily discoevered if he had examined the goods properly. After the
delivery, the buyer tried to reject it which was not allowed because of patent
defects easily discoverable (caveat emptor)
6. (3) provides that an implied warranty or condition may be annexed by usage of
trade
7. Usage or trade here means a practice or method of dealing which is regularly
observed in a place or trade ir both and it is expected that it shall eb followed in
a commercial transaction
 8. Jones v Bowden – in this case it was said that any such usage must be proved if
it is relied upon, it must be certain, consistently followed, uniform and
reasonable. Eg – in sale ofspecific types of ships, if this is a constant practice
that implied promise is given by the seller that the goods shall be seaworthy/
made if copper wires, this will be annexed impliedly in sale of those goods due
to observance of consistent practice of such promise.
31/1/24
 Lorell v smthing – two parcels were sold but buyer could examine only 1 as seller didn’t
have other, so buyer asked for recession and court allowed it as buyer should have the
option to examine the whole bulk not just a part
 Weighing, measuring is also a kind of ascertainement
 If express term is inconsistent with the term implied by law, express will prevail and
implied term will usually be negated, if not inconsistent then both will apply
 (S 17) sale by sample
1. A contract must have a term in a contract to make it a contract of sael by
sample, it may be an express or implied term
2. Whenever there is a sale by sample, the implied conditions are as follows
a. The bulk shall correspond with the sample in quality
b. The buyer shall have a reasonable opportunity to examine and
compare the bulk with the sample
c. The goods shall be free from latent defect rendering them
unmerchantable
3. The extent to which goods must correspond with the sample would depend on
the contract, in some cases it can be mere visual comparison and there may be
cases in which microscopic examination, chemical analysis may be required.
4. Lorymer v smith – there was a contract of sale by sample of two parcels of
wheat. The buyer went to examine the goods in the seller’s warehouse was
given to the buyer for examination but the seller refused to show him the other
parcel which was not in his warehouse, the buyer was entitled to rescind the
contract
 Transfer of goods (sec 18)
1. Whenever there is a contract for sale of unascertained goods the property in
goods shall not be transferred unless the goods are ascertained
2. Ascertainment depends upon circumstances, it may be by severance, by
measurement or in any other way.
3. The risk usually passes with the property (s 26), it means after ascertainment
along with the property risk shall also pass.
4. State of Karnataka v West coast paper mills – there was a contract of sale in
which the company was permitted to remove bamboos from forest at Rupees
10per ton and the govt by a subsequent order enhanced the price to 20/ton. It
 was held that enhanced rate was not applicable to those bamboos which are
already cut prior to the govt order because property is transferred due to
ascertainment.
1/2/24
 Sec 19
1. Specific and ascertain
2. Intention of parties
3. Terms of contract
4. No intention, then 20 to 24 will apply
 Sec 18 was just talking about ascertained goods but in 19 its both specific and
ascertained
 Sec 20
a. Specific goods
b. Deliverable state
c. Unconditional
d. Prop passes – contract made
e. Time of payment/ delivery immaterial
 Section 19 (sale of specific or ascertained goods)
1. It provides that whenever there is a contract for sale of specific or ascertained
goods, the property shall transfer to the buyer at the time when it is agreed to
be transfer
2. For ascertaining the intention of the parties as to when they intend to transfer
the property in goods regard shall be held to the terms of the contract, conduct
of the parties and circumstances of the case.
3. Rules provided from sec 20 to 24 helps in ascertainment of the intention as to
the time at which the property is supposed to be passed in absence of any
contrary intention of the parties.
4. Parties are free to decide the time of passing of property
 Sec 20 (specific goods in deliverable state)
1. This section provides that under the contract of sale specific goods are subject
matter and are in deliverable state and there is no other condition attached by
the parties with respect to the transfer of properties in goods then by default
the property in goods shall be transferred to the buyer at the time when the
contract is made.
2. This section applies even if time of payment of price or delivery of goods is
postponed i.e., the transfer of property is independent of payment or price or
delivery.
3. This section exclusively applies upon those goods which are identified and
agreed at the time when the contract is made so that contract attaches to
those goods since inception.
  Sec 20 – specific goods not in deliverable state, buyer should be notified thereof when
put in deliverable state
 Rug v minnet – a specific oil tanker was there but they were not in deliverable state as
they need to be bottled. Some bottles were filled in presence of buyer and some in his
absence. Before they could be taken entire bottles were lost in fire. So loss of only those
which were in his presence that only were delivery, the ones in absence the buyer was
not notified.
 Lakshmi niwas rice smthing – rice to be made in deliverbale state hasd to be kept in bag
and in a warehouse and seller will dispatch them in wagon, after these three conditions
only the buyer had to buy them. These were preconditions to make the gooods
deliverable. These three conditions were imp as parties intended that the buyer will buy
only when all they are fulfilled. So here they could not dispatch by wagons as they were
not avaibale so they compelled buyer to come and take them, but court said the buyer
cannot be compelled to take goods in deliverable state.
 Sec 21
1. This section applies to goods which are specific and to be put into deliverable
state by the seller, the rule is that the property does not pass until such thing is
done by the seller which is rewuired to put them in deliverbale state and the
buyer is notified about it
2. The risk should not be transferred without the notice of the fact that the seller
has done what was required upon his part, in such cases the property transfers
only when the buyer has notice and the risk follows property in general.
2/2/24
 Description – the deed of sale of a good/phone
 Date – this agreement is executed on 2nd day of February, 2024
 Parties – Narendra Modi, a corporate lawyer, who resdies in Connaught Place, Sector 14,
delhi, son of shri X modi.
Mr. Amit shah, son of Y shah, a businessman who deals in apple products, resides in
Shadra Sector -4, delhi
 Recitals – whereas the parties met on 28 th January in a meeting. whereas mr. modi
expressed his interest to buy an iPhone from Mr. Amit Shah who is an old friend of his.
Whereas Mr., Amit shah is a dealer in apple products agreed to sell him an iphone.
 Testatum – the two parties have agreed to buy an iphone.
But due to sec 18, which states that the property in goods does not get transferred until
and unless the goods are ascertained and here the goods are not certain as to which
iphone is to be bought, hence the property in the iphone which Mr. Modi will buy will
get transferred once the iphone has been made certain.
 Parsons – which iphone has to be bought has not been described here, it is merely said
that an iphone will be bought, which makes the product unascertain.
  Testimonials – the parties hereto, submit that this agreement between them is valid and
they are doing it in their full senses and not under any duress or force. The parties have
not here said any lie and it is valid in law what they are doing.

Shri Narendra modi shri Amit shah

Draft

SALE OF GOODS AGREEMENT

This SALE OF GOODS AGREEMENT (this “Agreement”), dated as of February 2, 2024, is entered into by
and between Shri Amit Shah, son of Y, R/O Connaught place, delhi, a businessman and dealer in apple
products (‘Seller’) and Shri Narendra Modi, a corporate lawyer, S/O Y, R/O Shadra, Delhi, on behalf of the
Facilities set forth on Exhibit A (‘Buyer’, and together with seller, the “Parties”, and sometimes each, a
“Party”)

Recitals

WHEAREAS, Seller is in the business of selling iphone under the brand-name “Apple”.

And Whereas, Buyer is a corporate seller who is need of an iphone for use

And Whereas, buyer desires to purchase from Seller, and seller desires to sell to buyer the goods (as
defined below)

Now, therefore, in consideration of the mutual covenants and agreements hereinafter set forth and for
other goods and valurable consideration, the receipt and sufficiency of which are herbey acknowledged,
the parties hereto agrees as follows:

(1). The parties agree to sell and buy an iphone which the seller wants to sell

(2). The parties have agreed that the buyer will go and choose the model and color of iphone he desires
to buy

(3). The parties have agreed that the goods are not ascertained yet and hence under Section 18 of Sales
of goods act the property has not been transferred to the buyer.

The parties hereto, submit that this agreement between them is valid and they are doing it in
their full senses and not under any duress or force. The parties have not here said any lie and it
is valid in law what they are doing
3/2/24
 Sec 22 ingredients
1. Specific goods
2. Deliverable state
3. seller has to do it
4. buyer should be notified
 Simmons v swift – here there was stock of bark which was to be sold and the price was
to be decided. Price was decided but it was left for the seller to weight and then buyer
will take it. Seller only weighed half the stock and notified the buyer and buyer came and
took the half but the other half was not weighed and due to flood the whole property
got damaged. It was held that the property which was weighed and buyer was notified
os the property was transferred and half was not weighed so no ascertainment so seller
was liable.
 Section 22
1. It deals with specific goods in deliverable state and the seller is required to do
anything for ascertainment of price
2. The rule is that the property shall not pass until such act or thing is done
3. Ingredients
a) Goods must be specific
b) Must be in deliverable state
c) The seller is bound to weigh, measure, test or do some other thing in
order to ascertain price
d) The property shall not pass until that thing is done
e) The buyer is notified
4. Simmons v Swift – in this case there was sale of stock of bark which was
supposed to be weighed by seller’s agent, a part of stock was weighed and
taken away by the buyer and the remaining was not weighed and destroyed by
the flood. The loss of the part not weighed fell upon the seller.
5. Its been observed that where anything remains to be done for purpose of
ascertaining price, the performance of those things are condition precedent for
the transfer of property although the goods may be specific and in that state
which the buyer agreed for delivery.
 Sec 23
 Appropriation here allocation to the buyer
 Right of disposal – it is a condition where the seller says to the carrier that till the time
buyer don’t give full money the buyer should not be given the goods. There should be
any reserved conditons
 Romalpa clause –
 Section 23 (unascertained goods, future goods, deliverable state and unconditional
appropriation)
1. To constitute appropriation of the goods towards the contract the parties must
have intention to attach the contract to those goods and to no others.
 2. The selection of goods by one party and adoption of the act by other converts
an agreement to sell into actual sale and the property is deemed to be passed.
3. Where the goods are delivered to a carrier or a bailee for the purpose of
transmission to a buyer, the carrier is presumed to be buyer’s agent and if the
seller doesn’t reserve right of disposal it will be deemed that he has
unconditionally appropriated the goods and the property shall pass.
4. If the seller reserves right of disposal, not final appropriation takes place and
ultimately the property should not pass by mere delivery.
5. Unconditional appropriation is one of the means to transfer property in goods
by establishing identity and attaching contract to them.
6. Rohde v Thwaites – In this case, there was a contract of sale of 20 bags of
sugar. The seller filled four bags which were taken away by the buyer. He filled
the remaining 16 bags out at a larger quantity, informed the buyer and asked
him to come and take it away. The buyer promised to take them after being
informed. The property is passed to the buyer because by promising to take, he
has assented to the appropriation done by the seller.
 Section 24
1. The person described in this section does not necessarily fall within the
definition of buyer, provided in section 2
2. In such cases, there is generally no complete sale until the buyer has:
a. Signified his approval as expressly or impliedly
b. Dealt with the goods (pledged/ agreed To sell to someone else)
c. Cap the goods until lapse of prescribed or reasonable time without
returning them
d. Maid return impossible by his own actor default, example by letting
the goods be destroyed or spoiled
3. The Burden of proving that loss or damage to the goods occurred without his
fault will lie upon the person who holds such good.
 Section 25
1. The title to the goods shall remain vested in the seller and shall not pass to the
buyer until the purchase price for the goods is paid in full by the buyer and
received by the seller.
2. The seller may provide in the terms of the contract that he reserves right of
disposal until certain conditions are fulfilled, in such cases irrespective of the
delivery to the buyer or to a carrier or a bailee which is done for the purpose of
transmission to the buyer, the property shall not pass until such conditions are
fulfilled.
3. Romalpa clauses – under this type of clauses a seller can retain ownership of
the goods until they are paid for or other conditions are fulfilled, however the
buyer maybe allowed to take delivery of the goods, retention of title clauses or
reservation of title clauses.
  Damly Hamilton case- buyer was supposed to take delievvry of crushed apple juise, risk
was passed, property was not passed. Buyer delayed delivery so risk was with buyer.
 Usually express prevails over implied but in s-26 it is not, here it is an immutable rule
 Byrden of proof is in indian evidence act sec 111
 Accession means addition to the goods. Profit to the property.
 Section 26 (prima facie risk passes with the property)
1. The parties may agree that risk shall pass at some time or upon some condition
which are not necessarily simultaneous with the passing of property and the
ownership may be separated by the parties from risk.
2. If the property has passed and goods remained in possession of the seller and
are accidentally destroyed without his fault, he will not be liable for breach of
contract for not delivering the goods.
3. The accession to the goods when risk and property are with different persons
normally be regarded as belonging to the owner of the goods rather than the
person who is in the possession or have risks
4. The seller is duty bound to take reasonable care of the goods even if the goods
remains with him at buyer’s risk and there possession of goods is given to the
buyer, the buyer must take reasonable care even if the property has not passed
and the risk remains with the seller.
5. Denvy Hamilton & Co. v Barden – in this case the defendant contracted to
purchase 30 tons of apple juice, the plaintiff crushed apples, packed it in a
container and kept it for delivery. The defendant delayed in taking delivery, and
due to his default it got perished. The defendant was liable to pay full price,
irrespective of the fact that the risk and property remain with the seller,
because the buyer defaulted.
8/2/24
 Section 27 (sale by person who is not owner)
1. This section embodies nemo dat cuad non habet which means no one can give
better title than he himself has and if a person deals with the goods belonging
to other persons without any authority the transaction is not valid in law.
2. This rule is subject to certain exceptions. Eg – a pledgee may sell pledged article
in the event of non-payment of money advanced as loan and he is accountable
to the pledger for surplus of proceeds of sale.
3. Section 27 provides that the owner is precluded from disputing the validity of
transaction i.e., he may be estopped from setting up his title against the buyer
one eg is when the owner ostensible authority to deal with his goods in
ordinary course of his business.
4. Estoppel may also arise in other ways for eg by the owner assisting in the sales
or by not objecting etc.
 5. Section 27 provides statutory exception to this rule when the sale is by
mercantile agent who is in possession of goods or document of title with the
consent of the owner, any sale made by him acting in ordinary course of
business shall be valid if the buyer acts in good faith and he has not at the time
of contract notice of the fact that the seller has no authority to sell.
6. Conditions for application of proviso
a. The agent must be a mercantile agent (see def under S-2) and a sale
done by a clerk or a servant is not covered under this section
b. Mercantile agent must be in possession of goods or document of title
with the consent of the owner.
c. Consent here means free consent as defined in section 14 of ICA.
d. Eg – X by falsely representing that he is authorized by Y to purchase
and take delivery of certain goods on Y’s behalf obtains possession
from Z. He resells the goods to A. here A shall not acquire title of the
goods against Z.
7. A mercantile agent is a person who is appointed by a principal in a business to
act on his behalf or to represent him in dealing with third persons.
 Sec 28 (sale by one of the joint owners)
1. One joint owner should have sole possession with permission of the others.
2. If it is sold by him
3. If the buyer acts in good faith and have no notice of the fact that he is not
authorized to sell
4. The property shall transfer
 Sec 29
1. When the seller obtains possession of the goods voidable under section 19 or
19A of ICA and the contract is not rescinded at the time of sale the buyer
acquires good title if he has acted in good faith and without notice of seller’s
defected title.
2. The seller may transfer a better title than he himself has even if he is not in
possession of the goods with free consent.
3. This possession must be obtained in pursuance of a contract which is voidable
i.e., the consent obtained is vitiated by factors mentioned in ICA.
4. The seller in possession of goods under voidable contract may do so before the
contract is rescinded.
 Section 30 (Seller or Buyer in Possession after sale)
1. If the seller who has complete the sale in favour of the buyer and is in
possession of the goods or document of title the delivery or transfer of such
goods or document of title by him or mercantile agent under any sale, pledge,
etc. the transaction shall be valid as if he was expressly authorised by the
owner and the subsequent buyer acts in goods faith (seller in possession sfter
sale)
 2. If a person who has bought the goods or agreed to buy obtains possesion of the
goods or documnet of title any delivery or transfer made by him or his
mercantile agent of such goods or document of title under sale, pledge or other
disposition the transaction shall be valid as if any lien or other right never
existed in respect to those goods subject to condition that the buyer acts in
good faith and has no notice of lien or any other right
3. Case law: Staff motors guarantee ltd. v British Wagon company: X was dealing
in motor vehicle, he sold a car to the defendants who lent it back to X on hire
purchase agreement subsequent to this X sold the car to the plaintiffs, the
plaintiffs were not aware of the transaction between X and the defendants it
was held that X was not a person who having sold the goods continues in the
possession of goods but he was having possession as a bailee under hire
purchase agreement and therefore the transfer of property in vehicle was not
valid
12/2/24
Contract of Sale/Purchase
 This agreement is executed on ____ at _____ between the parties as under
1. _____ s/o ____ r/o _____ (hereinafter referred as the seller)
and
2. Y s/o ____ r/o _____ (hereinafter referred to as buyer)

Whereas the seller is manufacturer and distributer of the goods (give description)

And Whereas, the buyer is desirous to purchase above mentioned goods from the seller
according to the terms agreed and set forth in this agreement.

Now, the parties hereto mutually agree as follows

1. The seller agrees to sell the goods to the buyer in consideration of INR ___ via ______
(mode of payment)
2. It shall be responsibility of the seller to ship the goods, bear the shipping costs,
insurance expenses any other expenses during shipment. The seller shall also provide
relevant documents including an invoice to the buyer at the time of delivery.
3. The buyer shall pay the agreed amount within _____ days from the date of delivery.
And if the buyer fails he shall be liable for an additional amount of ___/day until agreed
payment.
4. After the delivery is complete the buyer shall be responsible for any further payments
including taxes or third party expenses with respect to the goods.
 5. The seller shall deliver the goods to the buyer at ___ (location) and on _____ (date)
and it shall constitute a valid and complete delivery only when the buyer gives
acceptance to it at the above mentioned location.
6. in the event of risk of loss of the goods during shipment, the seller shall bear the costs
and once the delivery is accepted by the buyer the risk of loss shall transfer to the buyer.
7. the buyer shall have right to examine the goods after delivery within 5 days and if not
satisfied than he shall have the right to return the goods to the seller within 5 days.
14/2/24
 Section 31 (duties of buyer and seller)
1. It is the duty of the seller to deliver the goods and give possession to the buyer
and the buyer should accept and pay for it
2. If the buyer unjustifiably rejects the goods there will be a breach of duty on his
part
3. Acceptance maybe given even without taking actual delivery
 Section 32 (Payment and delivery are concurrent conditions)
1. The seller is not bound to deliver when the buyer is not ready and willing to pay
the price upon delivery and the buyer is not bound to pay the price unless the
seller is not ready and willing to give goods on demand
2. Readiness and willingness includes capacity (eg. if the buyer has become
insolvent it will be deemed that he is not ready and willing to pay)
3. This rule applies where there is no agreement showing contrary agreement to
the parties (eg. sale on credit)
 Section 33
1. The parties are free to decide the mode of delivery
2. Any act which has an effect of putting goods in possession of the buyer or any
person authorised by him shall constitute delivery
3. Delivery can be symbolic (keys of godown)
4. Case law: Marvin v Wallis: there was a sale of a horse the seller asked buyer to
keep the horse for some time and pay rent here the buyer agreed and left the
horse in custody of the seller this is a valid delivery of the horse.
5. Edan v dudfield – the buyer was already holding the goods as seller’s bailee
and the seller agrees with him that he shall hold them as owner. The character
of possession has changed accordingly. The buyer ceases to hold the goods as
bailee and begin to hold them as owner, it’s a valid delibvery.
15/2/24
 Sec 34 – for the purpose of passing of property it should be deemed that part is a whole
 Sec 36(1) – it depends where the goods are at the time the contract is made. For
agreement to sell
  Delivery by attornment – the third party must atton that the good in his possession are
on the buyer’s behalf.(36(3)). In document of title there is not need of the attornment as
we have the constructive possession of the goods by the document of title
 Section 34
1. Delivery of part operate as delivery of whole for the purpose of passing of
property but the delivery of part with the intention of severing it from the
whole doesn’t operate as delivery of the remainder. Eg – goods are sold and
kept in godown. The seller instructed the caretaker of the godown to deliver
the goods to the buyer who has already paid the price. The buyer weighed
them and took away a part of it. This will be deemed to be delivery of whole
because there appears to be no intention to severe it from the whole.
2. Eg – where X sold 5 packets of goods to Y to be paid on delivery, Y received and
paid for 1 packet and refused to take the other for not being according to the
description. There will be no deemed delivery of the whole because there is an
intention to severe it from the whole.
16/2/24
 If it has been the course of dealing that somewhat mixing happens in the products than
the buyer don’t have the right to reject the goods
 This section is subject to de minimus non cusat lex – like if there is slight variation in the
goods than court don’t entertain them
 Eg – in case where sale of charcoal was there and it was 30% less than agreed amount so
court agreed that it was not a slight variation.
 In 36 – if the buyer has paid some money for making the goods deliverbale than he can
recover
 Section 35 –
1. the buyer has no cause of action against the seller if he has not applied for
delivery.
2. When the buyer applies for delivery and the seller fails to deliver he shall be
guilty of breach of contract.
 Section 36
1. This provision fixes place of delivery and the rule under sub section 1 applies
subject to express or implied contract.
2. Generally, in contract of sale conditions relating to delivery are essence, breach
of it gives right to the buyer to reject the goods.
3. Sub section 3 talks about delivery by attornment, in which the third-party
having possession must acknowledge that he keeps the goods for the buyer.
4. Demand of delivery by the buyer and tender of delivery by the seller must be
made at reasonable hour and the expenses to make goods deliverable falls
upon the seller.
 Sec 37 (Delivery of wrong quantity)
 1. If the seller delivers less quantity the buyer may reject or may accept or pay at
the contract rate.
2. If the seller delivers a larger quantity, the buyer may accept the whole or reject
the whole or reject the access and pay according to the contract rate
3. If the seller delivers goods which he has contracted mixed with goods of other
description the buyer may accept the goods which are contracted and reject
the rest or may reject the whole
4. The rules provided in 37 are subject to any usage of trade, special agreement
between the parties or course of dealing.
5. De minimis non curat lex applies here which means slight defficiency or
variation in the quantity will not entitle the buyer to reject the goods or claim
damages because some flexibility in such contracts is unavoidable.
 The diff between course of dealing and usage of trade is usage of trade has wider area
than course of dealing. Cod is limited to the parties to a contract but uot is related to
maybe a geographical area etc.
6. Under subf section 2 the buyer is not bound to accept the excess nor he is
bound to put himself in trouble of separating the goods.
7. Where the buyer receives mixed goods he is not bound to separate them
however easy it may be.
8. Forest cooperation laborers v m/s mohd sayed & others – in this the contract
was for delivery of specific quantity of charcoal. When it came it was 30-35%
less than what was agreed at the time of auction. This is not a slight variation.
Dde minimis cannot apply.
 Section 38 (installment deliveries)
1. Neither the buyer nor the seller can demand or tender delivery by installment
until they have agreed to do so, this agreement may be express or implied and
may be inferred from the circumstances of the case.
2. A contract may provide for delivery by installment and payment for each
installment separately. Here the circumstances are such that each delivery is
done under a separate contract and paid separately.
3. A contract is severable or divisible if liability under it accrues from time to time
as performance of a part of the contract.
19/2/24
DRAFTING
 This agreement is executed on 18/2/24 at bhopal between the parties as under
1. X s/o A r/o Shahpura, Bhopal (hereinafter referred as the seller)
and
2. Y s/o B r/o MP Nagar (hereinafter referred to as buyer)
 Whereas the seller is manufacturer and distributer of the goods (100 Asus zenbook
laptops)

And whereas, the buyer is desirous to purchase above mentioned goods from the seller
according to the terms agreed and set forth in this agreement.
Now the parties mutually agree as follows
1. The seller is selling the goods to the buyer for INR 20,000/- laptop in
installments for each laptop.
2. The responsibility is on the seller to deliver the goods to the buyer.
3. The buyer will pay the price of the goods in proper installments as he receives
the goods. Each delivery will be considered as a complete delivery.
4. The installments should be made within a week of receiving the delivery.
5. The parties have agreed that the delivery will be made in installments and each
installment will be considered as a separate contract and will not lead to
repudiation of whole. The parties have the right to not send or accept the
goods which will not affect their dealing which have already been done and
which will be done.
6. The defaulted installment can be made in the further installments.
 Section 39
1. When under the contract of sale the seller is authorized or required to send the
goods to carrier for the purpose of transimission to the buyer or delivery of
goods to the wharfinger for custody is prima facie deemed to be delivery to the
buyer.
2. The seller is duty bound to make such contract with a carrier or wharfinger as
maybe reasonable having regard to the nature of goods and other
circumstances of the case if the seller omits to do so and the goods are lost or
damaged during transit in custody of wharfinger the buyer amy decline to treat
the delivery to the carrier or to the wharfinger as delivery to himself or may
hold seller responsible for damages. The purpose of this section is to impose
duty upon the seller to secure a reasonable contract of carriage. To enable the
buyer to sue the carriers in case the goods are lost or damaged.
3. Clark v Hutchins – in this case the carrier to whom the goods were delivered
required a notice that the goods were over certain value otherwise the carrier
shall not be liable for loss. The seller failed to give such notice, it was held that
he failed in his duty to make a reasonable contract and therefore liable for the
loss.
4. Thomas young and sons ltd v hobson and partners – In this case 14 machines
were sold and it was agreed between the buyer and seller that the machine
should be sent to buyer through railways. The seller dispatched them at owners
 risk and not at companies risk. There was no difference in freight charges the
only difference was that before accepting at companies risk the company would
have inspected their packaging and required machines to be properly secured
when kept in the wagon for transportation. Ad owners risk they did not bother
about these things. Machines were not properly packed and got damaged. It
was held that the seller had not secured a reasonable contract with the carrier
and the buyer was allowed to reject the goods and he was not liable for
payment of price.
5. According to subsection 3 where the goods have to be sent via sea transit
where insurance is usual. The seller should give to the buyer such notice which
will enable him to ensure the goods. If the seller fails to do so, the goods shall
be at his risk during the sea transit. This principle can also be excluded by a
contract which is contrary.
6. If the buyer had sufficient information about the goods. He cannot insist upon
particular information from the seller.
 Section 40 – where the seller agrees to deliver the goods at a place other than that
where they were sold. The goods shall be at the seller’s risk unless contrary intention.
 Section 41 – under this, it is clarified that when the goods are delivered to buyer who
has not examined the goods previously. He is not deemed to have accepted them unless
is given reasonable opportunity to examine them and the seller is dutybound to afford
such reasonable opportunity to the buyer unless agreed otherwise.
 Section 42 – The buyer is deemed to have accepted the goods either he intimates this
acceptance to seller or does any act inconsistent with the ownership of seller or retains
good after lapse of reasonable time.
 Shah Mohanlal manilal v firm running in the name and style – in this case the buyer
and seller contracted to buy specific type of coal. The goods were delivered and the
buyer without examining them delivered some part of it to a sub purchaser on the
same date. The sub purchaser complained that goods were not in conformity with the
discussion. The buyer stopped payment via check and tried to terminate the contract
which was not allowed (refer section 41 and 42).
 Section 43 – It provides that unless otherwise agreed the buyer is not bound to return
the rejected goods.
 Under section 44, when the buyer neglects and refuses to take delivery ever after
request Shall be liable to compensate the seller for such neglect in taking delivery.
22/2/24
 Vishnu agency case – the question was related to ocmpulsary sale. Vishu agency was
delaling in cement and it was subject to govt order accordingly the cement was supposed
to be sold. The cement was subject to certain regulation. When sales tax was applied by
Vishnu they refused to take saying that it is not sale the reason being they are not seller
and they were acting as agents og govt and even they do not have any profit, also since it
was compulsory sale it was under govt order and hence freedom of contract was
curtailed. Court said that it was a contract of sale and sales tax will be leived and
regarding ownership and possession there was transfer of possession. Possession if going
through u then it is thought to be possession.
 AFTER MID SEMS
4/3/24
 Section 45 –
1. wholly or partly paid
2. BOE or negotiable instrument has been exchanged – conditional payment – dishonour
 Negotiable instruments act
 The negotiable instrument should be honored
 (2) – position of seller – agent or surety or bill of lading (a doc of title)
 Section 45 – unpaid seller
1. A seller is unpaid so long as he has not received whole of the price also if the
buyer has given him bill of exchange or other negotiable instrument which is
dishonored will be deemed to be an unpaid seller.
2. A seller who is partially unpaid stands at par with one who is wholly unpaid.
3. It means the person who has sold or agreed to sell for price and the payment
has not been made.
4. The term unpaid seller includes the person who is in position of the seller for
example an agent of the seller in whose name bill of lading has been endorsed
or a consigner or an agent who has himself paid the price.
5. Bill of lading here is a document issued by a carrier or agent to acknowledge
receiving of cargo of a shipment. It legally implies that carrier has received the
cargo and is under obligation to deliver the goods to a person who is authorized
to receive them.
6. Bill of lading is a document of title and it authorizes the buyer to receive the
goods but if agents name is endorsed upon it he has right to receive them and
may ct as an unpaid seller if other conditions are met.
7. Bill of exchange is a document which is a written order to pay a sum of money
to a particular person on a particular date
8. In case of surety for the buyer who has paid price has right to stand in the
seller’s palace and can act as an unpaid seller under this act.
 Section 46
1. property has passed
a. lien – possessory right
b. stoppage in transit – insolvency
c. resale – possession – talked in sec 54
2. property ahs not passed – withholding delivery
 Section 46 – rights of unpaid seller
1. The unpaid seller has by implication of law notwithstanding that the property
has passed to the buyer, following rights are available
a) A lien on the goods while he still has possession
 b) If the buyer become insolvent before payment then a right to stop the
goods in transit after he has parted with the possession
c) Right of resale as provided in the act
2. The term lien implies that property in goods has vested in the buyer because no
men can have lien on his own goods and he cannot possess a right of lien on his
own property which is in nature of distress over the property of another.
3. According to Black’s law dictionary – right of lien is a legal right or interest that
a creditor has in another’s property lasting usually until the debt or duty that is
secured is satisfied.
4. Right of lien is exercised when the payment has become due and the seller is
unpaid it doesn’t matter whether the buyer is insolvent or not.
5. The right of stoppage in transit arises only when the buyer has become
insolvent and the seller has parted with the possession of the goods.
6. (2) provides for a situation where the property has not passed to the buyer and
he becomes insolvent before the price is paid, here the seller being still the
owner cannot have a right of lien on his own goods but he has right to withhold
delivery until the price is paid, this right is analogous to right of lien and
sometimes called as quasi-lien.
6/3/24
 Against goods – lien, stoppage in transit and resale
 Against buyer – suit for price, damages and interest
 Without cause of action the seller can keep the goods, it is only possible when it arose in
favor of the seller
 Seller’s lien is always a particular lien. Particular lien – is when it is on a particular object,
he can keep only those goods which are not paid for.
 Even if character of possession is changed then also lien can be exercised, its just that the
seller should have the possession, no matter in what capacity
 Section 47 (unpaid seller’s lien)
1. (1) provides that the seller can retain possession in the following cases
a. where the goods have been sold without any stipulation as to credit
b. where the goods are sold on credit but the term of credit is expired
c. where the buyer become insolvent whether the term of credit has expired or
not
2. Right of lien can be exercised even if the seller has possession of goods as
bailee or agent
3. The seller’s lien is a particular lien arising in precise circumstances provided
under the act and not a general lien
4. Particular lien means retaining possession of those goods the price for which is
not paid
 5. A sale is on credit when the seller agrees to accept payment at a future date
and there is nothing to show that buyer is not entitled for immediate delivery.
6. Sale on credit implies that the seller is prepared to deliver the goods without
payment and the seller shall have no lien during currency of credit period. The
lien will revive after the period is expired.
7. If the buyer becomes insolvent before price is paid and the seller is in
possession of the goods he is entitled to retain the sale if the goods are sold on
credit or the term of credit has not expired
 Delivery of part should be delivery of whole (sec 34) only in regard to possession.
 Waiver is there when u have drafted a term in contract which shows it
 Once a lien is terminated after that it cannot be exercised
 Section 48 – part delivery
1. It clarifies that when the unpaid seller has partly delivered the goods he is
entitled to retain the possession or the remainder unless there is a waiver
2. Even where the contract is for delivery or payment by distinct installments and
the seller remains unpaid he is entitled to refuse to deliver any further
installment until he is paid the due amount.
3. If under the contract separate payment is to be made for each delivery and it is
agreed that each delivery shall be treated as a separate contract, the seller will
have no lien for any further installments.
4. Eg – A agrees to sell goods to B in 5 monthly installments. 3 were delivered and
paid for, 4th was delivered but not paid. A is entitled to retain the possession of
the 5th installment until he is being paid for 4th and 5th.
7/3/24
 Section 49 – termination
 Delivery to C/B w/o reserving ROD
 Lawfully obtains possession
 Waiver
 Decree – formal document of an adjudication which conlusively decides the right of the
parties
 Walpi v gibbson –
 Whenever there is delivery the lien will be terminated
 A,B,C suit in CPC regarding money. One is retaining of possession
 Section 49
1. The unpaid seller loses his lien if he delivers goods to the carrier or a bailee for
the purpose of transmission to the buyer w/o reserving the right of disposal or
if buyer obtains possession lawfully or by waiver (eg – goods on credit)
2. The unpaid seller’s right of lien is not affected by the fact that he has obtained
decree for price of goods.
 3. When the property is passed and the goods have reached the actual possession
of the buyer, the seller’s sole remedy is personal claim against the buyer. He
stands in the position of any other creditor to whom the buyer may owe debt
and all the special remedies in his favor are lost.
4. A seller cannot enforce his right for price of goods by seizing the goods from a
buyer who has both property and possession.
5. If the buyer by some wrongful act obtains possession of the goods, the seller
may take them back and if the buyer refuses to give them back the seller may
sue the buyer for recovery of possession.
6. When the person has sold the goods on credit he is deemed to have waived his
lien during currency of credit period
7. The seller may reserve the right of disposal and will not lose lien even if he
delivers the goods to carrier.
8. When he reserves right of disposal the carrier acts as his agent.
9. The seller may also waive his right to retain possession by expressely having a
term in the contract of sale.
10. Valpy v Geison – in this case the goods were sold and sent by the seller at the
request of the buyer to shipping agents of the buyer and were put on board by
those agents in a ship. Subsequent to this the goods were sent back to the
seller for the purpose of repacking and while they were still in possession of the
goods the buyer became insolvent. Thereupon the seller refused to deliver
them back except upon payment of price. It was held that the seller has lost his
lien by delivering goods to the shipping agent and the refusal was wrongful.
11. Eduljee v John Brothers – in this case a second-hand refrigerator was sold and
delivered to the buyer but later on two parts of the refrigerator were taken
away by the seller for repair thereafter the seller refused to deliver the parts
back to the buyer on the ground that the cost has not been fully paid. It was
held that the seller has no lien and the refusal was wrongful.
11/3/24
 In line there is retain of possession but in Stoppage in transit it is regain of poseession.
 Sec 50
1. Subject to provisions of this act, when the buyer of goods becomes insolvent,
the unpaid seller who has parted with possession of goods has right to stop
them in transit i.e., he may resume possession and retain it as long as the price
is not paid or tendered
2. After delivery the seller loses his right of lien however he may exercise his right
of stoppage in transit if the buyer becomes insolvent and the goods are still in
transit.
3. If the buyer is not insolvent the goods shall ultimately be delivered
 4. The ultimate right of stopping the goods in transit doesn’t mean that the seller
cancels the sale and that the property revests in him, the seller just get right to
repossess.
5. After repossessing the seller is bound to deliver the goods if the price is
tendered or paid

lien SIT
In lien the essence is to retain possession In SIT it is to regain possession
Seller’s possession of goods is essential Its essential that
1) the seller is parted with the possession
2) it is with the carrier
3) the buyer has not acquire it

This right can be exercise even if the buyer is This right can be exercised only when the buyer
not insolvent is insolvent
When lien ends SIT begin Vice versa

 Section 51
1. The moment the goods are delivered by the seller to a carrier to be carried by
the purchaser the transit begins and when the goods arrive at their destination
and deliver to the buyer the transition ends, or when the carrier holds them as
agent for the purchaser the transit ends by acknowledgement.
2. The transition also ends when the buyer is ready and willing to take delivery
but the carrier wrongfully refuses to deliver.
3. If the buyer or his agent takes delivery before appointed destination the transit
ends.
4. If the goods are rejected by the buyer the transit is not at an end.
13/3/24
 Pledgee’s claim and rights will be heard first before the seller’s
 While transferring doc of title the seller transfers the constructive possession
 Section 52 (how stoppage in transit affected)
1. The unpaid seller may exercise his right of stoppage in transit by either taking
actual possession or by giving notice to carrier/ bailee having possession the
notice may also be given to the principal of the carrier or bailee.
2. When the notice is given by the seller to carrier or bailee he is under obligation
to redeliver it to, or according to the directions of the seller. The expenses of
the delivery fall upon the seller.
3. This section doesn’t prescribe any specific mode and form of notice and
therefore it may be oral or in writing or may be given to a person having actual
possession or to his principal.
 4. When the notice is given to the principal then it must be given in advance so as
to enable him to communicate it effectively to the person having actual
possession.
5. Once a notice is received the carrier has no other option but to comply with the
direction and if he fails he may be sued by the seller.
6. X is a grain merchant who carries on his business in Delhi. Y orders 10 bags of
grain from X, accordingly X handed over 10 bags to Z to be carried to Bhopal.
Here Z was a carrier appointed by Y. the goods arrived at Bhopal and placed by
Z upon Y’s request, in Z’s warehouse while the goods were still in possession of
Z, Y became insolvent. Thereafter, instructed Z and directed him not to deliver
the goods to Y because the price was not paid. Even after his direction Z
handed over the goods to Y.
where the transit ended – acc to 51(3) ended at Bhopal, at Z’s warehouse.
Whether X can retake possession
Whether X can sue Z for the loss sustained by him due to delivery
Identify issues, argue from both side and predict likely outcome
14/3/24
7.
 Sec 53
1. It deals with the situation where the buyer without paying the price sells the
goods or makes other disposition and under sub-section 1 it is provided that
neither the right of stoppage in transit or right of llien is affected by sub-sale or
pledge by the buyer unless the seller assents to it.
2. It also contemplates the situation where the seller has issued or lawfully
transferred the doc of title to the buyer and the buyer transfer that doc by way
of sale pledge to a person who takes them in good faith for consideration. If
there is a sale and doc of title is involved then unpaid seller’s lien or stoppage in
transit is lost and if it was by way of pledge then the right of lien or stoppage in
transit is not completely lost which means he may still keep the possession
subject to the debt given by the pledgee (transferee) is satisfied if not then he
will be bound to deliver it back to the pledgee because his right prevails.
3. (2) clarifies that where the pledgee has other security besides the goods
comprised in the doc of title, the unpaid seller may insist to resort to those
securities before resorting to the goods covered under doc of title.
4. US Steel Products & Co. v GWR Railways – in this case the railway company
was in possession of goods as carrier, the seller gave notice of stoppage of
transit to the carrier a sum was due to be paid by the buyer to the company.
The company was not entitled to set up in priority to the seller’s right of
stoppage in transit, a general lien exercisable by the company against the buyer
as owners of the goods.
 Section 54
1. There is no recession of contract of sale upon exercise of lien or stoppage in
transit which means that the contract of sale is not terminated and it doesn’t
come to an end.
2. It is also provided that the unpaid seller can resale the goods if the buyer fails
to pay the price under the following circumstances
1. where the goods are perishable
2. when the unpaid seller has exercised his right of lien or stoppage in transit
and gives a notice to the buyer of intention to resell the goods.
3. he expressly reserves his right of resale
3. When the seller expressly reserves the right of re sale he is not required to give
notice and he is entitled to recover damages w/o notice.
4. When he exercises right of lien or stoppage in transit and there is not express
reservation of right of resale. In such a case if he gives notice and the buyer
doesn’t pay the price the seller may resale the goods and also entitle to
1. recover the diff between the contract price and re-sale price as damages
2. retain profit if the resale price is higher
5. The word rescinded in this sec means treated as discharged by the seller or
terminated by the seller even upon the buyers insolvency the contract is not
rescinded because the benefit vests in the official assignee and it may still be
possible to complete the contract for the benefit of creditors
 Section 55
1. It provides that where the property in goods is passed irrespective of delivery
the seller may sue for price. This involves two types of cases –
1. suit for price of goods sold and delivered
2. suit for price of goods bargained and sold but not dleivered
2. The term wrongfully refused must be determined from the terms of the
contract. Eg – if the buyer refuses to pay before the expiry of period of credit. It
cannot be considered as wrongful refusal.
3. (2) provides where under a contract of sale the price is payable on a day certain
irrespective of delivery and the buyer wrongfully neglects or refuses to pay the
price, the seller neglects or refuses to pay the price, the seller may sue him for
the price although the property in goods has not passed and the goods have
not been appropriated towards the contract.
4. This is not a repudiation of contract and it still survives which means seller shall
be bound to pass property in goods if the payment is made.
 Section 56
1. Provides that where the buyer wrongfully neglects or refuses to accept and pay
the price the seller may sue him for damages for non-acceptance.
2. This section is silent as to measure of damages as it is dealt in sec 73 of ICA.
 3. The general intention is to place the non-defaulter in the position in which he
would have been if the contract had been performed.
4. In all the cases where the contract is breached the injured party is entitled to
receive from the party in default compensation for the loss of damage caused
to him thereby which naturally arises is usual course of things. Refer Hadley v
Baxendale (gen and special damages)
5. Where there is an available market for the goods the measure of damages is
prima facie to be ascertained by the difference between contract price and
market price at the date of breach.
6. Where no market price is available it is the estimated loss directly or naturally
resulting in the ordinary course of events from the breach of contract.
7. When the time for performance is fixed by the contract but it is extended and
another date substituted by the agreement b/w the parties the substituted
date must be taken as the date for ascertaining the damages.
8. Suresh kumar rajendra kumar v koya and sons – in this case the plaintiff sold
goods to the defendant who wrongfully rejected them while doing so the
plaintiff took all the necessary measures to sell the goods urgently. It was held
that the plaintiff was entitled to claim the difference between price at which
the goods were supposed to be sold to the defendant and the price at which it
was finally sold (the date at which the market price is to be ascertained is the
day on which the contract was supposed to be performed by delivery and
acceptance as fixed by the contract)
 Section 57 (buyer’s remedy)
 Section 58 (specific performance)
1. It is the only section in the act which deals with the equitable rights and
provides remedy to the buyer, there is no corelative right to the seller.
2. It is only upon the application of buyer when suing as plaintiff that the contract
shall be specifically performed and this section is limited to specific and
ascertained goods.
3. The discretion shall be exercised in cases where the goods in question are of
some peculiar value and the court shall not interfere where the goods are
articles of commerce readily available in the new market.
4. The remedy of specific relief is generally granted where compensation in
money couldn’t afford the buyer adequate relief for the loss of goods. It also
applies to the cases where it is extremely difficult to ascertain actual damage
caused by the loss of goods. Therefore, the cases in which the buyer can rely
upon this section are limited.
5. The rule provided in this section gives effect to the discretionary power of the
civil court for passing a decree for specific performance that is delivery. This
section applies to such cases where money is not adequate relief or it is
extremely difficult to ascertain the actual damage cause due to the loss of
 goods and therefore the cases in which the buyer can rely on this section are
limited.
6. The courts have discretion to impose conditions while passing decree for
example while allowing specific performance the court may impose upon the
buyer a condition that he must pay interest on the price otherwise he will not
get the goods delivered.
7. Dominion coal co. v dominion iron and steel – there was a contract for supply
of all coal that may be required for buyers steel works. In this case the buyer
asked for specific performance which was not allowed on the gorunds that the
goods were not specific or ascertained.
20/3/24
 Diminution is reduction in price and extinction is not giving any price
 Counter claim -
 Set off
 Section 59 (REMEDY IN THE EVENT OF BREACH OF WARRANTY)
1. It provides that where there is a breach of warranty by the seller or buyer
elects or is compelled to treat a breach of condition as a breach of warranty
then the buyer shall not be entitled to reject the goods only because of this
reason however he may
1. set up against the seller in diminution or extinction of price (when the loss is
less or equal to price)
2. he may also sue the seller for damages for the breach of warranty
2. If the buyer has set up a breach of warranty in diminution or extinction of price
this will not prevent him from suing for the same breach of warranty if he has
suffered further loss.
3. Refer section 14-17 with cases
4. A breach of condition entitled the buyer to reject the goods but he may elect to
treat this breach as breach of warranty and he will be entitled for remedy
under this section.
5. If the buyer has already accepted the goods the breach of condition can only be
treated as breach of warranty
6. In a suit for price by the seller the buyer may take defense under this section by
pleading that he will not pay the entire price or pay the less price and if the
damages exceed the amount of price he may counter claim for the excess or
bring an independent claim for it. He may also pay price and take distinct action
for any damage sustained due to seller’s breach.
21/3/24
 In sec 60 it should be before delivery
 Frost v knight – if the party is waiting than the contract will be taken to be subsisting
  It is open for the parties to either keep it subsisting or at rescind it
 Rescission is in response to the repudiation
 As we don’t have any specific rule in this section for measure of damages or mitigation
hence sec 73 applies here.
 In 61 special damages are more clarified than in the previous section. As gen damages are
always given but this section clarifies the point about special damages
 Interest date can be even prior to the suit date
 Sec 60 (anticipatory breach of contract of sale)
1. This section provides that if before the date of delivery either party repudiates
the contract the other may treat it subsisting or may rescind and sue for
damages for the breach.
2. This section gives an option to the promisee to wait till the date of performance
or may rescind.
3. If he treats the contract as subsisting then the contract shall be alive for the
benefit of the other party as well as his own benefit which enables the other
party not only to complete the contract irrespective of previous repudiation but
also can take advantage of super weaning events which would justify him in
declining of performance (refer Frost v Knight).
4. If the party accepts repudiation he must minimize the loss (mitigation).
5. Measure of damages – section 73 applies
6. Frost v Knight –
1/4/24
 Section 61
1. It relates to interest and special damages.
2. Section 73 and 74 of ICA applies here.
3. It provides that wherever interest or special damages are recoverable the court
may allow it.
4. The parties may agree at the rate of interest to be paid in case of default and if
there is no agreed rate then the court may award interest as it thinks fit.
 Section 64 – auction sale
1. Whenever there is a sale by auction and the goods are put up for sale in
different lots it will be prima facie deemed to be subject to separate lot.
2. The bidder may retract his bid at any time before the completion of the sale by
auction and the auctioneer may announce such completion by fall of hammer
or any other customary manner.
3. The seller may reserve right to bid expressly in an auction and the sale is not
notified subject to right of bid by the seller such sale may be treated as
fraudulent by the buyer. The seller may reserve upset price or base price and
may be conditional upon reaching that minimum price.
 4. If by any manner the seller makes use of pretended bidding to stifle fair
competition in the bidding process such sale is voidable at the auction of the
buyer.
5. Bid-rigging knockout agreements etc.

ICA
 Sec 124 – in this it is talking about loss by human conduct and not by peril or fire etc.
 Human conduct is where human agency are involved
 Insurance contracts all are not indemnity contract under 124 as under 124 only human
conduct is there. As if we resort to other damages then we have to go to 31 or 32
section
 English law is wider in scope as it protects the damage caused due to other reasons also
like fire etc.
 Section 124 defines contract of indemnity
1. whereby one party promises to save the other from loss occurred to him due to
conduct of promisor or any other person
2. the term indemnity generally means to compensate for the loss
3. indemnifier is a person who gives indemnity, indemnity holder (indemnified) is
a person for whose protection such promise is given.
4. The definition is limited to the cases where there is a promise to indeminify loss
caused due to
a. by the promisor
b. by conduct of any other person
5. The definition excludes cases where the loss happens due to other perils like
fire earthquake etc. (sec 31 contingent contract)
6. Loss must be caused by some human agency
7. English law is wide enough to include a promisor of indemnity against loss
arising from any cause whatsoever. Eg – loss caused due to fire or other
accidents.
8. Adamson v Jarvis (meaning and effect of indemnity) – in this case the plaintiff
was an auctioneer and upon instruction of the defendant he sold cattle in the
market. It turned out that it didn’t belong to the defendant and the owner
made auctioneer liable under. Thereafter the auctioneer sued the defendant
for the loss he has suffered by acting upon the direction of the defendant. It
was held that the plaintiff was entitled for the compensation of the loss he has
suffered.
9. Essentials
1. two parties involved
2. protection of loss due to conduct of promisor or any person
3. general contract applies
 4. there is only once contract that is between indemnifier and indemnified.
10. Gajanand moreshwar v moreshwar madan – dealing with commencement of
liability of indemnifier –
o Court deviated from the English rule that one must be deminified
before he can be indemnified
o It was held that once the liability of the holder becomes absolute, the
indemnifier may be directed to pay that amount or to deposit in the
court.
11. Praful kumar v oriental insurance company ltd – a motor vehicle was lost, the
assured immediately lodged the FIR. Under the insurance contract he was
required to give notice of such loss to the company immediately. It was held
that the assured acted promptly, lodged FIR which shows his good faith and the
claim cannot be denied only on the basis that he has not given notice
immediately.
3/4/24
 Madan case – a party has to be demnified before to be indemnified
 We sometimes deviate form strictly adhering to the clauses of the contract
 126 defines contract of guarantee
 A promise by the guarantor to the creditor that if 3rd person default then surety will
perform the obligation of the 3rd person
 Default should be there
 Damodar prqsasd – dafult by orinipal debtor and creditor sued the surety for discharge of
obligation, surety plead that first creditor should proceed against PD and once
everything is settled then only he should be approached. Court of first instance allowed
it but SC reversed it as if we allow this then we are defeating the very purpose of this
thing.
 Section 126
1. It is a collateral undertaking for being liable in case of default of another
person. Any independent liability not connected with the default will not be
covered under sec 126.
2. There is no direct consideration to surety however anything done or any
promise made for the benefit of the principal debtor is deemed to be sufficient
consideration for surety.
3. Contract of guarantee is not contract of utmost good faith but if there is any
misrepresentation or concealment amounting to misrepresentation upon the
surety then the contract is invalid.
4. The surety liability is coextensive with that of principal debtor which means
whatever liability will fall upon the principal debtor will be covered under the
contract of guarantee and the guarantor shall be liable for the same.
5. Coextensive shows the maximum extent of the liability which may be reduced
by the contract
6. Bank of Bihar v Damodar Prasad (1969 SC) – in this case the defendant
guaranteed a bank loan, a default took place and he was sued by the bank. The
trial court held that the bank should enforce against the principal debtor first
and then may proceed against the surety. The SC overruled it. It was held that
the basic object of the guarantee is defeated if the creditor is asked to
postpone his remedies against the principal debtor. The SC said that the trial
court gave more justification for such extraordinary direction but it was held
that the principal debtor was solvent but the solvency of the principal debtor is
not a sufficient ground for restraining execution of the decree against the
surety. It is the duty of the surety to pay the agreed amount, he will be
subrogated the rights of the creditor.
7. In case of UOI v Manku Narayana the SC held that the creditor must proceed
against the mortgaged property first and against the surety for balance.
8. State Bank of India v Index Port – in this case the SC said that is not necessary
for the creditor, before proceeding against the surety to request the principal
debtor to pay or sue even if he is solvent unless it is expressly stipulated.
9. Suit against the surety alone w/o impleading the principal debtor as defendant
is maintainable.
10. The surety can limit his liability or put conditions on it
11. Bank guarantee – an agreement made by the bank or other financial
organizations to pay a debt if the person or any company who owes it cannot
pay
12. A bank guarantee is an absolute undertaking to pay the amount whenever
demanded by the guarantee holder and it has nothing to do with the state of
relations between the guarantee holder and the person on whose behalf the
guarantee was given.
13. Maharashtra State Electricity Board v Official liquidator – a bank gave
guarantee for sum not exceeding sum 50,000 within 48 hours of demand. The
guarantee was issued on behalf of the supplier who had deposited with the
bank sufficient securities, the only condition was that the bank shall pay on
demand. The payment was demanded by the guarantee holder and the
liquidator tried to prevent it i.e., to stop the bank from paying it. No such action
was allowed and it was held that the guarantee holder has the right to enforce
the payment of guarantee and the bank has right to reimburse it from
securities.
14. Banwarilal v Punjab State Corp Ltd. – it was held that the scrutiny, if
commenced in respect of the underlying contract the autonomy and
independence of an absolute guarantee will be lost and the enforcement of it
 will depend upon the result of the inquiry relating to underlying contract. This
could defeat the purpose of bank guarantee.
15. Hindustan steel works corporation ltd v Tarapore & Co. – in this case the SC
laid down the following rules
1. the bank guarantee is an independent and distinct contract b/w the bank
and the beneficiary and is not qualified by underlying transaction and the
primary contract b/w the person at whose instance the bank guarantee is given
and the beneficiary.
2. in case of an unconditional bank guarantee the nature of obligation of the
bank is absolute and it does not depend upon the dispute b/w the person at
whose instance the guarantee was given and the beneficiary.
3. the commitment of bank must be honored free from interference by the
court and it is only in exceptional cases i.e., in case of fraud or in case where
irretrievable justice will be done if bank guarantee is allowed to be encashed.
16. UP Cooperative Federation Ltd. v Singh consultants
17. U.C.M. (investments) v royal bank – the commercial purpose for which the
system of irrevocable documentary credit is developed in international trade is
to give the seller an assurance that he will be paid before he parts with the
control of goods and doesn’t permit any dispute with the buyer as to the
performance of the contract of sale being used as a ground for non-payment or
reduction or deferment of payment.
18. Centax (Ind ltd) v Vinmar Impex Corp. – in this SC clarified that the
commitments of the bank must be honored free from interference from the
court, otherwise trust in international commerce will be irretrievably damaged.
19. A guarantee has to be enforced within a period of limitation from the date of
execution of the bank guarantee.
4/4/24
 Index bank case – creditor has all the right to proceed against the surety unless it is
written expressly in the contract
 Another case – it was a mrtgage and property was as a surety so court held that here first
property should be exercised before sueing surety
 There is a concept of necessary party in CPC
 Bank guarantee is unconditional to pay
8/4/24
 Right of surety –
1. against PD –
a) subrogation – to step into the shoes of another – no need of express contract or
stipulation in the contract – SC – invested with rights foes not require stoipulation in the
 contract expressly – the law allos so that he will be incested with the rights of the
principal debtor
b) right of indemnity – if surety has paid any rightful amount to the creditor, and he has
sustained any loss then he is to be indemnified from the PD
2. against creditor
a) right of securities
b) right to set-off – once creditor invokes the guarantee, then the surety can set off so
that he don’t pay the whole amount and it reduces the amount as it was already given.
 Distinction b/w guarantee and indemnity
 Rights of sirety
1. Surety has following rights against the principla debtor
a. subrogation (sec. 140)
b. right of indemnity (sec. 145)
2. Upon payment or performance of guaranteed debt or the promise, the surety
steps into the shoes of the creditor i.e., subrogation and he is invested with all
the rights which the creditor has against the principal debtor.
3. Amrit Lal Govardhan Lal v State Bank of Travancore – the SC elaborated on
investing of right and said that section 140 makes it clear that even w/o
necessity of transfer, the law vests all the rights in surety even if there is no
stipulation to that effect.
4. Mamta Ghosh v United Industrial bank – it was held that if in any suit it is
proved that principal debtor threatens or is about to remove or dispose off his
property with the intent to de fraud his creditors, the court may grant
temporary injection to prevent such removal or disposal.
5. Right to indemnity –
a. in every contract of guarantee there is an implied promise by the principal
debtor that he will indemnify the surety.
b. this right enables the surety to recover rightfully paid amount from the
principal debtor.
Read illustrations a and c
6. Rights against creditor
a. under section 141 the surety has the right to benefit of every security which
the creditor has against the principal debtor irrespective of whether the surety
knows the existence of such security or not. If the creditor loses w/o consent of
surety or parts with such security the surety is discharged to the extent of value
of security.
Read illustration A and C
b. Industrial finance corp of india v Cannanore Spinning Mills ltd. – in this case
it was held that the surety is entitled to every security which the creditor has to
get enforced in his favour.
 c. State of MP v Kalu ram – it was held that security includes all right. In this
case the state sold a specific lot of felled trees to a person for fixed price
payable in 4 equal installments. The payment was guaranteed by the
defendant. The contract provided that if a default is made in payment, the state
has right to prevent removal and has right to sell the remaining timber for
realization of the price. The buyer defaulted but still the state allowed the
removal. The surety was sued but not held liable.
d. Right of set-off
7. Rights against the co-sureties - Read Sec 138, 146 and 147
8. Distinction between indemnity and guarantee
 Contract of bailment
 Sec 148 – talks abt bailment
 Finder is also a kind of bailee but this rule is not strictly applies
 Upon a contract is usual but not necessary
 State of guj v mohammad – state authority took custody of goods and vehicles belonging
to the person, after taking custody goods were elft unattended and hence they wre lost.
Court said that state is under obligation to take care of the goods due to a bailment
contract. State contended that there was no contract and that they had the custody due
to customs act. The court said that this particular ingredient is usual, but even w/o a
contract it can be there.
 States are like bailees and they are under obligation to take care of the motorvehicles
 Its made for some purpose
 It’s a conditional deliveyr, based on some conditions
 Bailer can exercise lien on the goods
 Union Bank of India v Venu goappalan – court held that bank cannot exercise lien on the
money as it was not the same notes which were deposited. As one essential is that what
u have given that only u should receive.
15/4/24
 There has to be a contract of bailment
 Money cannot be treated as goods
 If the bailor is ware of the defect and then also he gave it then he will be liable. So it is a
lesser obligation than the one who gives for reward.

 Contract of bailmet (sec 148)
1. Essentials
a. delivery for some purpose
b. transfer of possession
c. not mere custody (lady gave jewelry to goldsmith and everyday used to lock
them and keep the keys in goldsmith’s room, she was having possession.)
 d. delivery upon a contract – it is usual but not essential (state of Gujarat v
Memon Mohd. 1967 SC – motor vehicles were taken into custody by the state –
left uncared – there was a loss of goods – SC held state is a bailee even w/o
contract and was held liable.)
e. conditional delivery – return the goods upon achieving/ accomplishing the
purpose.
f. Deposit of money not bailment – same coins money not returned – Union
Bank of India v K.V. Venu Gopalan.
2. Duty of bailor (sec 150) –
Types
a. bailor for reward – higher degree of duty
b. w/o reward – less degree
If bailor for reward gives goods, then its not necessary for liability that he
should have knowledge of the defect. However, bailor w/o reward may escape
his liability if he is not aware. (Reed v Dean King’s Bench – Plaintiff hired launch
code – caught fire on use – held that it is an implied undertaking by the bailor
that it is fit for the purpose).
3. Duties of bailee (sec 151)
a. Duty of reasonable care – no uniform standard – degree of care which a
man of ordinary prudence would take of his own goods.
b. Gopal Singh v PNB – held no castion standard can be led down for
measure of care due from a bailee and it varies with posture of each
case.
c. Burden of proof – bailee
d. UOI v New India Insurance company ltd. - Plaintiff’s car was lost in fire
in a garage – deliver of repairs – bailee could not lead to any evidence as
to how incidence took place and they acted reasonably – held liable.
e. Duty not to make unauthorized use (154)
I. Alias v KM Paul – car was delivered for repairs – bailee allowed
unlicensed driver to take it – accident caused death – bailee held
liable to compensate deceased family also bailor
f. Duty not to mix (155 to 157)
g. Duty to return (160and 165) – the bailee is not entitled to set up against
the bailor defense of jus tertii i.e, goods belong to a third person
h. Duty to return increase (163) – standard chartered bank v custodian
(2000 SC) – shares and securities were pledged with the bank – banks
received onus – held bank could not be compelled to return increase
unless pledged securities were redeemed.
i. Finder of goods (168 and 169) – duty to take reasonable care – finder
can retain the goods until he receives compensation for trouble and
expenses.
 If there is specific reward finder may sue for it and may retain unless
receives the reward.
He may sell the goods in
1. when the goods are in danger of perishing
2. if the lawful charges exceeds 2/3rd of its value
4. Rights of bailee
a. Compensation (164)
b. Necessary expenses or remuneration (158) – lien can be exercised so
long as the possession and the right to charges remains alive even if
after he has parted with the possession.
c. Surya investments company ltd v state trading corp. – STC hired
plaintiff’s storage tank for oil, dispute arose corporation appointed
special officer to take charge of the tank and deliver his contents to
others as directed. Plaintiff’s lost possession of the oil but had right to
recover charges it was held that the bailor enjoyed plaintiff’s services
must pay.
d. Section 170 and 171 (right to lien) – bailee – lien
e. Conditions –
1. bailee must render services in respect of goods by exercise of labor or
skill must have been exercised in accordance with prupose of bailment.
2. only those goods can be retained upon which the bailee ahs exercised
such skill or labor.
f. Eduljee v John brothers – purchased old refrigerator –vendor agreed for
repair – repaird was done – work satisfactory - delivered – part of reapir
charges unpaid – machine broke down – vender carried another part for
further repair – claimed lien on these parts for outstanding charges -
held that once the possession was lost lien ended which the repairer
had for outstanding charges of repair and cannot be revived.
g. General lien (sec 171) – bankers, wharfinger, attorneys, policy brokers
and factors
h. Right to sue (180 and 181) –
i.
5.
 Pledge is defined in 172
 172 – securing a payment of debt or a performance of promise of promise
1. delivery of goods and transfer of possession
2. merchantile bank ltd v UOI – goods were cosnigned with railways and railway reciet
was endorsed in favor of bank for advance of 20,000 rs. Goods lost in transit, bank as
endorsee/pledgee sued railways. Trial court rejected, high court allowed limited
recovery, SC – delivery of railway recieipt is same thing as delivery of goods. Pledge is
valid
 3. pledge msut be done in pursuance of a contract
4. right of pawnee
a. Right of retainer (173-174) (lien) – maybe exercised not only for the amount as
debt or performance of promise but also for the interest and necessary
expenses. - Particular lien. Only for payment of debt or performance, interest and
all necessary expenses
b. Right to extraordinary expenses (175)
c. Right to sale (176) – reasonable notice must be given – statutory requirement
d. Until the amount is recovered the pledgee may retain. Lalan Prasad v Rehmat Ali
– defendant borrowed 20000 – gave promissory note and goods for security
plaintiff sued for repayment but could not produce security, action no allowed
e. Right of redemption (177) –
f. Pledge by mercantile agent is valid (178) – conditions
1. possession must be with consent
2. agent should act in ordinary course of business
3. good faith
g. Pledge by a person who obtained possession under voidable contract (178A) is
valid before recession provided there is good faith and no notice of defecting
title. Philips v brook – fraudulent person receives a ring from plaintiff and gave
him a cheque, before the contract could be rescinded the ring was pledged with
the defendant’s, held valid.
h. Pledge by pledgee (179) – is valid only to the extent of his interest that is the
amount of security.
 Contract of agency
 Defined in 182, defines agent and principal.
 Essentials – a person is appointed, who represents before 3rd persons. Eg- brokers whom
we appoint
 Krishna v ganwati farms – this nature of contract was discussed and It was compared with
others. In agency one is employed by others =, then what is diff b/w servant employed
by master. SC said that agent is directed to do something and there is no micro
regulations and servant is acting in behalf of master and w/o if and buts he has to act. A
domestic servant cannot be an agent as he is not representing u
 Essentials of agency – principal should be competent to contract
Though agent can be incompetent
eokikl
 Factors (possession is there with them) broker(no possession per se, w/o factors other
things that they can sell the goods in the market, dispose etc.), dell credare (higher
responsibility, not only represents but also take legal responsibilty)
 Agency can be created by orally, implied estoppel
 Picanary v buzz – the relationship of husband and wife as agent was discussed. The court
said that if the thing is of necessity then yes wife is an agent and if she was given
sufficient allowance to buy such things then no extra thing
 Situations which may lead to agencies – necessities – when it was necessary to act on
that person’s behalf

 Agency
1. Section 182 – an agent is aperosn who is employed to do work for another or
who represent another in dealing with 3rd person.
2. Every person who acts for another is not an agent (eg - servant). It is only when
he acts as representative of the other in business negotaitions that is in
creation, modification or termination of contractual obligations b/w that other
and third person.
3. Agency being an employment contract in which a principal gets entered into
legal relations with third parties, it is a pre-requisite that principal should be
competent to contract (read section 183).
4. But the agent need not be competent to contract i.e., as between the principal
and third person anyone can become agent but a person who is incompetent
will not be responsible to his principal (section 184).
5. No consideration is necessary to create an agency generally agent is
remunerated by way of commission and therefore immediate consideration is
not required at the time of appointment (185).
6. Lakshmi Narayan Ram Gopal v Govt of Hyd – held
a) The agent has authority to act on behalf of his principal and to create
contractual relations between third party and principal. This kind of
power is not enjoyed servant.
b) A principal has right to direct what the agent has to do but the master
also has right to direct as to how it is to be done.
c) A mode of remuneration in agency is commission but when a servant is
employed it is by way of salary.
d) A master is liable for wrongs of his servant during course of
employment, however principal is liable for his agents wrongful act
which is done within the scope of his authority.
7. Kinds of agent
1. factor – entrusted with possession – purpose is to sell – a mercantile agent
2. Broker – appointed to negotiate and make contract to sell and purchase a
commodity – no possession.
3. Del credre – such agent undertakes to be liable to the [principal for failure of
third party for non-performance, he may be sued or may sue if required – extra
commission paid.
8. Creation of agency –
 a. express agreement – agent is expressly appointed to act (write example)
b. implied agencies – arises form conduct, situation or relationship
where principal by his voluntary act places an agent in such a situation that a
person of ordinary prudence conversant with the business, usages and nature
of that business and is justified in presuming that the agent has authority to do
such act and deals with him, in such a situation, the principal shall be estopped
as against the third parties from denying agent’s work.
c. agency of necessity – when agent is justified in assuming extraordinary
power due to necessity and acts for him it is binding upon the principal for
example unforeseen situation generally arises marine adventures, voyages and
the goods and the property is exposed to perils, the master of ship (consigner
etc.) may act whatever is necessary and it shall be binding upon the principal.
Sims & Co. v Midland Railway authority and co. – butter was consigned with
railways delay due to strike, there was a threat of loss of goods being
perishable, company sold it, action was justified.
When a person acts as agent of necessity in case of medical emergencies.
Matheson v smiley – in this case the surgeon was allowed to recover form
deceased estate a reasonable remuneration for the services he provided in
necessity.
Conditions
Inability to communicate to principal – eg - when the master of ship is not able
to communicate with the owner of goods he can act and sell goods. Eg – an
omnibus was drove by agnet and stopped by a policemen very near to to
principal’s place, agent’s asked a passer by to take vehicle to the principal –
communication was easily possible and pirnicpal shall not be liable for the
accident which happened due to the negligence of the passerby.
The act must be necessary – Prager v bastpiel ltd. – during the WWI, the
defendant were chased for plaintiff as their agents a quantity of fur skin to be
dispatched to the defendant but later it became impossible. In the last year it
was returning peace, they sold it in the market, the defendant pleaded that the
agent of necessity in response to the claims for return of goods by the plaintiff
held that there was no necessity, goods were not likely to deteriorate.
In addition to this the agent must also prove before the court that he was
acting in good faith.
Pickering v Puck – a wife living with a husband has an implied authority given
by the husband to buy articles conditions
1. the articles must be necessary
2. if husband making reasonable allowance already to the wife he shall not be
liable.
22/4/24
 Ratification – if agent do something beyond authority, then princi can ratify it later. Its
also a way of creation of agency
 It must be done on behalf on person who can ratify
 Doctrine of relation pact – ratification is effective from the day when the act was done.
 Only lawful acts can be ratified
 It is primary duty of agent that he should cary out the mandate of the princi
 Proper delegation
 Sub agent
 230
 Ratification
1. It comes into play when a person has done an act on behalf of another without
his knowledge or consent – this doctrine gives option to that person to adopt
that act or to refuse it. (read 196)
2. Effect – will be same as if the act has been performed under authority.
3. Conditions for ratification –
a. act must be done on behalf of the person who wants to ratify
b. it relates back to the date when the act was originally done
c. only lawful acts can be ratified (state of up v Morari Lal – no ratification
of govt contract made in contravention of article of 299)
d. there msut be full knwoeldge to the princi of the act which is to be
ratified
e. raitification in part not effective
4. doctrine of realtion pact – ratification relates back to the date on which the
agent contracted or the act was done.
5. Duties of agent
a. To carry out mandate and follow instructions – failure will make him
liable towards principal. Eg – pannalal jankidas v mohan lal – a
commission agent purchased goods, stored them in a godown, pending
dispatch but he failed to ensure, goods lost in explosion, agent liable to
compensate.
Lily v double day – agent was ismtructed to keep the goods at
warehouse, he placed part of them at named place and part was kept at
a place different from what was instructed. Goods were destroyed.
There was no negligence on aprt of the agent but still held liable.
b. Reasonable care and skill (212)
c. Duty to avoid conflict of interest (215) – company appointed agent to
sell a ship, agent himself bought it and did not disclose, war broke out –
ships were in demand. He sold it on high price, company was allowed to
recover profit.
 d. Duty not to make secret profit (216) – eg – should not divelge
confidential info, or should not divelge trade secrets or make use of it
for his own business etc.
e. To maintian accounts (213)
f. Not to delegate (190)
6. Rights of agents
a. Agreed remuneration or reasonable remuneration (219) – green v
bartlet – agent was appointed to sell a house – failed after holding
auction – one person received information form him and directly
contacted principal and purchased house – held that agent entitled to
remuneration
b. Right of lien (221) – conditions
i. Agent must be lawfully entitled
ii. Agent’s possession must be lawful
iii. Property must belong to pirnci
iv. Particular lien (gopal das v thakur das – it was held that
agents lien does not gives him unrestricted authority i.e, he can
retain but not sell unless there is a contract or consent.)
c. Right to indemnity – case admason v Jarvis
d. Right to compensation in respect of injury when acting under direction
of princi (225)
7. Personal liability of agent – in absence of contract the agent is not personally
laible that he cannot personally enforce contract nor he is personally bound
except in the following:
a. Where there are foreign pricni
b. Undisclosed princi
c. Pretended agents
8. Determination of agency (201) –
a. By revocation by pirnci – it operates prospectively. If agency is for fixed
period than notice msut be given before revocation
b. By renunciation – sec 206 – if done w/o insufficient cause agent msut
compensate princi.
c. Completion of business
d. Death or insanity of princi or agent
e. Principal’s insolvency
f. Expiry of time

 Partnership
1. Section 4 defines partnerships as relation between persons who have agreed to
share profit of a business carried on by all or any of them acting for them.
2. Essentials
a. Agreement – it is created by contract not by inheritance, succession etc.
formal agreement is not necessary, it may arsie from the conduct of the
parties
KT Abdul v Century wood industries – in this case two brothers inherited
a property did not divide and sold it and invested the sum in a business.
It was held that it is partnership even w/o agreement because they
intended to share profit and there was a business.
b. Buisness – it includes every trade, occupation and refers to any activity
which if successful will result in profit. Joint operation for gaining profit,
society for charitable purpose are not partnership
c. Sharing of profit – cox v hickman – Benjamin smith and Josiah timmis
smith carried on buisnes as iron speicalists and corn vendors under the
name of B smith and son, they were obligated to pay a lot of money to
the creditors as they had taken loan earlier. So, a meeting took place,
amongst whom were cox and Wheatcroft. An arrangement deed was
executed by more than six-sevenths in number and value of the
creditors. The trust were identified and the rent was fixed at 21 years.
They were to carry on business under the anme of “The Stanton Iron
Company”. The deed likewise contrained a conditions which kept them
from suing the smiths for existing obligations. Cox never went about as
trustee, and Wheatcroft surrendered following a motnh and a half after
which no trustee was appointed. The issue was whether or not the
defendants (creditors) including cox and Wheatcroft are liable to
hickman? It was held by the House of Lords that there exists no
partnership and hence cox is not liable. Lord cranworth stated that –
“participation in profits is not the decisive test of a partnership.” The
court also said that the deed was just to pay the creditors out of the
existing profits and the profits that the business would earn in future.
Thus, this relationship is not enough to constitute a principle – agency
relationship.
d. Mutual Agency – Partners stand in position of principal and agent
e. Sec 6 – it helps in determining pf the question as to whether group[ of
person is a partnership firm or not and whether or not a person is a
partner or not which is dependent on the real relation between the
parties.
Mere sharing of profit or loss return arising from a property shall not
make the perosns holding joint or common interest in the property by
itself aprtners.
 Mere sharing of profit of a business does not by itself make a person
partner. Eg – the lender of money receiving share in profit, widow or
child of deceasedpartner, servant or agent determining renumeration
and the seller of goodwill receiving share
This list is not exhaustive and real relation has to be seen
Joint ownership is not a business and therefore the joint owners of a
property who just share profit or loss arising out of property do not
become aprtners.
Govind niar v naga – two persons purchased a tea shop – incurred
expenses to make it better and then leased it out. It was hld that
nothing more is done by the parties than utilizing a common property
and a return out of it.
Batley v Consolidated bank – a money lender enabled the contractor to
do buinsess with railways. It was agreed that the moneylender shall
receive 10% profit. There was no intention to show a relitonship of
partnership. They were held to be not partner.
Duration of firm – where no provision is laid by the partner under a
contract for the duration of their partnership then the partnership
would be as long as the members are willing to continue to act as a firm
f.
3. Duties of partners:
a. Good faith (sec 9) – secure maximum profit – should not make secret
pforit – fiduciary relationship towards each other.
Bently v craven – a partner was allowed by the firm to purchase goods.
He supplied it from the stock without disclosing. He charged higher
prices, made profit. The co-partner sued him to recover that profit
which he made. The action was allowed
b. Not to compete (16(b))
c. Duty to indemnity (10)
d. Duty to make full disclosure and render accounts (9)
e. Due dillginece (12b and 13f)
Willfull neglect is different form error of judement – partner shall nto be
liable if there is an error of judgement
Cragg v ford – plaintiff and defendant where partners - wehre
partnership was about to dissolve – defendant managing partner for
disscolution – plaintiff advised him to sell goods immediately –
defendant decide to sell at the end of association. When oods were sold
prices went down drastically. It was held that there was no willfull
neglect – owing to circumstances of cases he could not have anticipated
sudden fall in prices
f. 16 – the property of the firm should be sued by the partners
 g. Duties to account for personal profits
4. Rights
a. Right to take part in business: this is subject to agreement – it must be
exercised to promote business not to harm
Suresh kumar v amrit kumar – in this case injuction was allowed when
the act was harming reputation
b. Access to books (12D) – here books refer to accounts, inlflow outflow
and other appers of the firm
c. Right to express opinions (12C) –
i. Ordinary matters : in this case majority prevails
ii. Matters of fundamental nature: in this case consrnt of all is
required. Eg – change in business and induction of new partners.
d. Right to profit (13B) – according to agreement bound to contribute
equally in loss as well
5. Relation of parties with third parties: jointly and severly liable to third parties:
they can be individually sue or sued together.
Acts done after partner ceases to be a partner – not liable except in holding
out.
Holding out (28): it provides rules relating to when someone represents firm as
partner and frim receives credit on such representaition. The person is liable as
a partner.
AR Porter v Incel – in this case defendant gace credit to a firm – represented
himself as partner and used his influence to persuade third partis to give a
premises and credit to a firm. He was held liable as a partner.
6. Dissolution of partnership firm:
a. By agreement/ consent (40)
b. Compulsory dissolution of partnership firm (41)
i. When aprtners have become insolvent
ii. When the business becomes unlawful
c. Dissolution by court (44): Courts can dissolve in the following
circumstances:
i. Insanity
ii. Permanent incapacity mental or physical
iii. Misconduct – it should be of such a nature it affects reputation
of the business
Snow b Myford – in this case a partner was in adultery
relationship and other partners went to court. The court refused
to dissolve
Essel v Haywood - Breach of trsut as a ground for dissolution
 7. Registration (58) : upon application to the registrar with full aprtiuclars firm can
be registered. Registration is not compulsory and there is no plenty for
regsitrtion but sec 69 limits the ability of unregistered firm to sue third party.

 Limited Libaility Partnership

1. LLP is a form of partnership where laibiilty of a partner is limited and any aprty
should not be held liable for the acts of another
2. In this case registration is mandatory
3. Partners by agreement can define their liability If not the act applies
4. It has a stauts of body corporate under the act as a separate legal entity from
its partners and also has a perpetual seuccession
5. Incorporation
6. Effects:
a. It aquires ability to sue or be sued
b. It aquired ability to aquire property
7. Binding up and dissolution (64)
a. Where LLP decides so
b. Where number of partner is decreased
c. Where unable to apy debt
d. Default in filign statement of accoudn or any other ground.