Mercantile Law Points to Remember
Pace2race Institute
Important Sections
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Partnership Act, 1932
Sections
Section 4
Section 12(c)
Section 12(d)
Section 30
The Sale of Goods Act, 1930
Sections
Definitions
Section 2(1) Buyer
Section 2(2) Delivery
Section 2(6) Future Goods
Section 2(7) Goods
Section 2(8) Insolvent
Section 2(9) Mercantile Agent
Section 2(10) Price
Section 2(11) Property
Section 2(13) Seller
Section 4(1) Contract of sale
Section 4(3) Sale
Section 4(3) An agreement to sell
Section 6
Existing Goods
Section 9
Ascertainment of Price
Section 12(3) Condition and Warranty
Section 16
Caveat Emptor
The Indian Contract Act, 1872
Sections
Definitions
Section 2(a) Proposal/Offer
Section 2(b) Promise/Acceptance
Section 2(d) Consideration
Section 2(e) Agreement
Section 2(h) Contract
Section 2(i) Voidable Contract
Section 2(j) Void Contract
Section 7
Valid Acceptance
Section 10
Valid Contract
Section 11
Person competent to Contract
Section 13
Free Consent
Section 15
Coercion
Section 16
Undue Influence
Section 17
Fraud
Section 24
Consideration unlawful in part
Section 31
Contingent Contract
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Definitions
Partnership
Right to be consulted
Right of access to books
Rights and Liabilities of minor partner
Section 58
Section 69
Important dates
Process of registration
Consequences of non-registration
Particulars
Indian Contract Act, 1872
- Formed on
- came into force on
Any contract made before 1st September 1872
Sales of Goods Act, 1930
- came into force on
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Dates
-
25th April 1872
1st Sept 1872
1st July 1930
Not governed by the Indian Contract Act, 1872
Mercantile Law Points to Remember
Pace2race Institute
earlier was a part of Indian Contract Act, 1872
Partnership Act, 1932 came into force on
Chapter VII of Indian Contract Act, 1872
1st Oct 1932
Important Case Laws
Case Name
Decision
Intention to create legal relationships (Page 1)
Carlill v. Carbolic Smoke Ball Co.
General Offer (Page 4)
Lalman Shukla v. Gauri Dat
General Offer (Page 2)
Bhagwandas v. Girdharilal
Acceptance must be communicated to the offeror
Entores Ltd. v. Miles Far East Corporation
Communication of Acceptance (Page 4)
Chinnayya v. Ramayya
Consideration (Page 5)
Kadarnath v. Gorie Mohammad
Charity (Page 4)
Mohiri Bibi v. Dharmodas Ghose
Agreement with minor (Refer Book)
Khwaja Mohd. Khan v. Hussani Begum
Contract by guardian (Page 6)
Cox v. Hickman
True test of partnership is agency and not the sharing
of profits
Different language terms
Sections
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Salomon v. Salomon
Balfour v. Balfour
A company is a separate legal entity distinct from its
members
Definitions
Where there is a right there is a remedy
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Ubi jus, ibi remedium
Ignorantia juris not excusat Ignorance of law is no excuse
Jus in rem
Right against or in respect of a thing
Right against or in respect of a person
Rights in personam
Right against or in respect of a specific person.
Quid pro quo
Something in return
Consensus-ad-idem
Agree upon the same thing in the same sense
Error in Consensus
Mistake
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Jus in personam
Quicquid Solvitur, solvitur
Whatever is paid, is paid according to the intention or manner of the
secundum modum solventis party paying
Quantum Meruit
As much as is earned or according to the quantity of work done
Caveat Emptor
Let the buyer beware
Nemo dat quod non habet
No one can give what he has not got
Uberrimae Fidei
Utmost good faith
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Mercantile Law Points to Remember
Pace2race Institute
Law of contract is neither the whole law of agreements nor the whole law of obligations.
Particulars
Provision related to Minor
According to Section 3 of the Indian Majority Act, 1875
Yes
No
Yes
No
Agreements
- Intention to create legal obligations e.g., business agreements
- No intention to create legal obligations e.g., social agreements
Obligation
- Arise out of agreements
- Do not arise out of contract
Can be considered as
contract
Completion age
On completion of 21 years
Where minors property has passed under the superintendence of the
court of wards
On completion of 21 years
In other cases
On completion of 18 years
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Where a guardian of a minors person or property is appointed under
the Guardian and Wards Act, 1890
The Indian Contract Act, 1872
Provisions related to Indian Contract Act 1872
Whole of India except State of Jammu & Kashmir
Contract may appear to be completed at once but
its effects may continue.
A person buys a bun containing a stone and
subsequently breaks one of his teeth. He has a right
to recover damages from the seller. [Chaproniere
v. Mason (1905)]
Information received from unauthorized person
Ineffective.
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The Indian Contract Act applies to
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Unit 1 Nature of Contracts
Topics
Description
Contract creates rights in personam
Right against or in respect of a specific person.
Parties intention to create legal relations is a
usually presumed in
In commercial and business agreements
Contract
Agreement + Enforceability of Law
Agreement
Offer + Acceptance (or) accepted proposal
Contract
- Created by situation
- By conduct of the parties
- Created by law
Void contract
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Implied contracts
Tacit
Implied/created by law
a. Cannot be void-ab-initio
b. Becomes void subsequent to its formation.
Mercantile Law Points to Remember
Pace2race Institute
a. Performance outstanding from both the parties
b. Contract with 4uthoriz consideration
Executory Contract
a. Performance outstanding from the parties
b. Contract with executed consideration
Unilateral Contract
Contract with executed consideration
An agreement the object or consideration of
which is unlawful
Illegal agreement
Collateral agreement in case of illegal
agreements
Becomes void
Essential elements of a valid offer
1. Willingness
2. Expression
3. Get consent of other
Farine v. Fickar (property will)
The agreement is not void on the ground of its being
vague. [Foley v. Classique Coaches Ltd. (1934)]
Handerson v. Stevenson (ticket)
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An offer is different from a mere declaration of
intention
An agreement contains a machinery or a
reference for ascertaining vague terms
Communication of special terms/standard form
contracts
A statement of price
Acceptance of an offer
- If the proposal does not prescribe the
manner in which it is to be accepted
- If the proposal prescribes the manner in
which it is to be accepted
Acceptance is to offer what a lighted match is
to a train of gunpowder Anson
Acceptance cannot precede an offer.
Bilateral Contract
Not an offer
Accepted in some usual and reasonable manner
Must be accepted in the prescribed manner
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It produces something which cannot be recalled or
undone.
e.g., shares allotted to a person who has not applied
for earlier.
Unit 2 Consideration
Topics
Description
An agreement made without consideration
Nudum pactum (a nude contract) and is void.
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Mercantile Law Points to Remember
Pace2race Institute
Consideration may be
In India Past, Present or Future
In England No past consideration
Fulfillment of consideration
In India From promise or from any other person
In England Only from promisee
Unit 3 Other Essential Elements of a Valid Contract
Topics
Description
Whether a party to a contract is of sound mind or
not
a. Question of fact and is decided by court.
b. Presumption is always in favor of sanity
A good consideration for a subsequent express
provisions in favor of person who rendered services
Minors parents/guardian
are/is not liable for the contract entered into by
him, even though the contract is for the supply of
necessaries to the minor. But if minor is acting as
an agent, they are liable under the contract.
[Sindha v. Abraham (1895)]
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Duress in English Law
Services rendered at the desire of the minor
expressed during minority and continued at the
same request after majority
Equivalent to coercion, but does not involve threat
with regard to goods or property of the other party
Fiduciary relationship is not assumed
Landlord and Tenant, Creditor and Debtor,
Husband and Wife
Misrepresentation
Misstatement of facts which is material to the
contract
Treated as misrepresentation
Mistake of law of the country
Valid
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Wrong statement to third party with an intention
to communicate it to plaintiff
Mistake of law of foreign country, Bilateral Mistake Void
Valid except mistake as to the i) identity of the
person contracted for and, ii) nature of contract
Uncertainty of meaning may be as to
Existence, Quantity, Quality, Price or Title
Wagering agreement
Event may be past or future
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Unilateral Mistake
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Mercantile Law Points to Remember
Pace2race Institute
Unit 4 Performance of Contracts
Topics
Description
Partners, HUF members, Co-shares, Mortgagees
Joint promises when a person makes a promise
in their favor
Time is not essential
Clauses for contingencies, penalty and fine
Voidable and if accepted, compensation for
delay can be claimed only when intention of
the same is given before
Effect of failure of performance of a contract where
- Time is essential
Not Voidable, can claim compensation
Does not mean time is fixed
No excuse for no performance
Impossibility of performance which is caused due to
reason beyond the control of the parties
Parties are discharged to perform
Supervening Impossibility
Doctrine of Frustration or Post contractual
impossibility
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Impossibility of performance due to reason in
control of the parties
Appropriation of payments when manner is
- Informed by the debtor
- Not informed by the debtor
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Appropriation of payments when neither party has
intention to appropriate in any manner
- Debts are of different dates
Debts are of same dates
As per Debtors intention
Appropriate to the debt first in time
Discharge of debt in order of time
including time barred debt
Payment shall be applied in discharge
of all debts of that particular date
proportionately
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Original contract is not required to be performed in the following cases:
Novation
Rescission
Alteration
Remission
1. Old contract is 1. Old contract is
Some changes in the
Acceptance of a
cancelled and
cancelled and thus need original contract i.e.,
lesser
2. New contract is
not to be performed
original contract will fulfillment of
made
2. No new contract is
remain and has to be promise made.
made
performed
Any amount received under
voidable contract or, void agreement, or contract
becomes void afterwards
Communication of rescission
Communication of revocation of rescission
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Waiver
Parties to
the
contract
agree to
no longer
be bound
by the
contract.
If benefit should be refunded on termination
of the contract
If security Not to be refunded
In the same manner as communication of offer
In the same manner as communication of
revocation of offer
Mercantile Law Points to Remember
Pace2race Institute
Unit 5 Breach of Contract
Topics
Description
Actual breach of contract may be
At the time when performance is due, or,
During the performance of the contract
Can be claimed as a matter of right
Penalty
Disproportionate
Liquidated damages
Fair and genuine pre-estimate of probable loss
Suit for specific performance
Where damages cannot be claimed or where third
party acquires the same in good faith
Special damages
Unit 6 Contingent and Quasi Contracts
Description
Quasi contracts
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Topics
Finder of goods can sale the goods on the
following conditions
Constructive Contracts
1. Goods are of perishable nature
2. Owner cannot be found out with reasonable
diligence
3. Owner found, but refuses to pay lawful charges of
finder
4. Lawful charges of finder is 2/3rd of value of thing
found
The Sale of Goods Act, 1930
Topics
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Unit 1 Formation of the Contract of Sale
Description
Cannot be said as specific goods
Contingent Goods
Acquisition by seller depends on contingency happen
or not
In case of non procurement of continent goods
Parties are discharged to perform the contract
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If source of supply is identified
In case of non procurement of future goods
Parties are not discharged to perform the contract
Constructive Delivery also known as
Delivery by attornment
At the time of constructive delivery
Goods may be in possession of buyer, seller or third
party
Document of title to goods
Proof of possession / Control of goods
Share Certificate
Cannot be transferred by mere endorsement on the
back of the certificate and the delivery of the
certificate
Barter
Not a sale
Hire Purchase
Condition that after certain payments, property in
the goods will pass to the buyer
Goods perished in case of agreement to sell
Seller will bear the loss
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Mercantile Law Points to Remember
Pace2race Institute
Unit 2 Conditions and Warranties
Topics
Description
Condition once waive off
Cannot insist afterwards
When contract is non severable
If buyer has accepted the goods or part thereof, then
condition is treated as warranty
An implied condition/ warranty may be negated
or waived by
(1)Express agreement b/w the parties (or) (2) in the
course of dealing (or), (3) custom or usage of trade
Commercially saleable under the description by
which they are known in the market at their full
value.
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Merchantability
a.Buyer has not seen; relies only on description given
by seller
b. Buyer has seen the goods but relies on seller and
deviation from the goods from the description is not
apparent.
c. Packing of goods as per description
Sale by description
Unit 3 Transfer of ownership and delivery of Goods
Topics
Description
Performance of contract of sale of goods by seller 1.Transfer of property in the goods
in three stages
2.Transfer of possession of the goods
3.Passing of risk
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It is essential to know the time at which property 1.Risk follows ownership
passes to the buyer
2.Action against third parties
3.Insolvency of buyer and seller
4.Suit for price by seller only when property passes to
the buyer
Sale by a person in possession of goods under
- voidable contract Yes
- void contract No
Sale by person obtaining possession before the
property in the goods has vested in him can give
better title to bonafide purchaser
Person selling the goods is
Buyer Yes
Hire purchaser (not exercised the option to
purchase) No
The goods must be delivered at that place during
business hours on a working day
Borne by the buyer
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Non owner can transfer better title to bonafide
purchaser of goods
Where place is specified
All expenses of and incidental to obtaining of
delivery
Rejection of goods
Does not mean cancellation of contract
Delivery of goods to the carrier for transmission to Is prima facie deemed to be delivery to the buyer
the buyer
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Mercantile Law Points to Remember
Pace2race Institute
Unit 4 Unpaid Seller
Topics
Description
Conditions of waiver of right of lien
1. Expressly written in the agreement
2. Seller has already given assent for
subsequent sale
3. Accept bills receivable
4. Increase the credit limit
Amount not received for part delivery
Can exercise the right of lien till the amount
received for whole goods
On exercising of right of lien or stoppage in transit Contract is rescinded in case of Agreement to sell
Contract is not rescinded in case of Sale
Cases where
Both buyer and seller refuses to take delivery of
goods
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Transit does not come to an end where
Liability of carrier
Loss is borne
by
Carrier does not deliver the goods to the buyer
Yes
Buyer
Carrier does not deliver the goods to the seller on
exercising of right of stoppage in transit
Yes
Seller
Carrier delivers the goods to the buyer despite of
exercising of right of stoppage in transit by seller
Yes
Seller
Notice is given
Notice is not
given
Claim from buyer
Cannot claim
Not bound to give
Bound to give
On re-sale of durable goods
Loss on re sale
Profit on re sale
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Partnership Act, 1932
Unit 1 General Nature of Partnership
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Topics
Description
Company can be a partner in a partnership firm
If authorized by its Memorandum of Association
Partnership Firm
Cannot be a partner in a partnership firm
As per section 11 of the Companies Act, 1956
Maximum no. of partners in a firm
Banking business 10
Other then banking business 20
If number of partners exceed the maximum no.
It becomes illegal association
Partnership
does not come from law
True test of partnership / Cardinal principle of
partnership
Mutual Agency (Principal and Agent relationship)
CASE: Cox v. Hickman
True test of partnership is agency and not the
sharing of profits
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Mercantile Law Points to Remember
Pace2race Institute
Prima Facie evidence of partnership
Sharing of profits of the business
Prima Facie evidence can be rebutted by
Proving that there is no mutual agency
Types of partnership
1. Fixed Term Partnership
2. Specific/Particular Partnership
3. Partnership at will
Types of Partners
- Active or
Ostensible Partner
Nominal Partner
Features:
- Partner by an agreement, actively participates in
business
Partner by an agreement, does not actively
participate in business, share profits/losses, liable
to third parties
Sleeping or
Dormant Partner
For some fixed term
For completion of some project
As per the intention of the partners
Neither invest nor takes part in business, lends his
name, liable to third parties
Share profits only, liable to third parties for all
acts of profits only
Share other partners share of profits, no rights
and debts
Admitted as a partner in an existing firm
Leaves a firm and rest of the partners continue
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Partner in Profits only
Sub Partner
Incoming Partner
Outgoing Partner
Partner by Holding Out
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Refer Book
New partnership can be formed by Minor
No
Minor can inspect and copy accounts of the firm
But not books
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Unit 2 Relations of Partners
Topics
Description
Right to be consulted
In case of change in the nature, place or sale of
business
Partnership is a contract of
Uberrimae Fidei
A partner cannot assign to any outsider
A partner can assign to any outsider
His rights and interest in the firm
Share of profits and assets in the firm
Private property used for partnership business
Does not become partnership property unless
partner shows an intention to make it so.
A firm is said to be reconstituted on:
Addition/Separation of partners, Change in the
nature of the business, continuation of business after
expiry of fixed term
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Mercantile Law Points to Remember
Pace2race Institute
Unit 3 Registration and Dissolution of a Firm
Topics
Description
Object of the firm
- unlawful
- becomes unlawful afterwards
- One of the object becomes unlawful
- It is void-ab-initio, question of dissolution does
not arise
- Compulsory dissolution
- Compulsory dissolution for unlawful object only
In respect of filing of suit for dissolution of firm
A court may dissolve the firm in case of
misconduct of a partner
Misconduct includes gambling, fraudulent breach
by a partner, persistent refusal or neglect to attend
business by a partner, taking away of books by a
partner
1.Minor will be deemed to be a partner of the firm
2.Retiring partner is responsible for acts done after
retirement
3.Dissolution will not be affected
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Consequences of not giving public notice
Partners right cannot be changed
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