THE INDIAN CONTRACT ACT, 1872 _
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SECTIONS
PREAMBLE
PRELIMINARY
1.
Short title. Extent. Commencement. Saving.
2.
Interpretation-clause.
CHAPTER
I OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS
3.
Communication, acceptance and revocation of proposals.
4.
Communication when complete.
5.
Revocation of proposals and acceptances.
6.
Revocation how made.
7.
Acceptance must be absolute.
8.
Acceptance by performing conditions, or receiving consideration.
9.
Promises, express and implied.
CHAPTER
II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
10. What agreements are contracts.
11. Who are competent to contract.
12.
What is a sound mind for the purposes of contracting.
13.
“Consent” defined.
14. “Free consent” defined.
15.
“Coercion” defined.
16.
“Undue influence” defined.
17.
“Fraud” defined.
18.
“Misrepresentation” defined.
19.
Voidability of agreements without free consent.
19A.
Power to set aside contract induced by undue influence.
20. Agreement void where both parties are
under mistake as to matter of fact.
21.
Effect of mistakes as to law.
22.
Contract caused by mistake of one party as to matter of fact.
23.
What considerations and objects are lawful, and what not. Void agreements
24.
Agreement void, if considerations and objects unlawful in part.
25.
Agreement without consideration, void, unless it is in writing and registered,
or is a promise to compensate for something done, or is a promise to pay a debt
barred by limitation law.
26.
Agreement in restraint of marriage, void.
27.
Agreement in restraint of trade, void. Saving of agreement not to carry on
business of which good-will is sold.
28.
Agreements in restraint of legal proceeding void. Saving of contract to refer
to arbitration dispute that may arise. Saving of contract to refer questions
that have already arisen. Saving of a guarantee agreement of a bank or a
financial institution.
29.
Agreements void for uncertainty.
30. Agreements by way of wager, void.
Exception in favour of certain prizes for
horse-racing. Section 294A of the Indian Penal Code not affected.
CHAPTER
III OF CONTINGENT CONTRACTS
31.
“Contingent contract” defined.
32.
Enforcement of contracts contingent on an event happening.
33.
Enforcement of contracts contingent on an event not happening.
34.
When event on which contract is contingent to be deemed impossible, if it is
the future conduct of a living person.
35. When contracts become void which are
contingent on happening of specified event within fixed time. When contracts
may be enforced, which are contingent on specified event not happening within
fixed time.
36.
Agreement contingent on impossible events void.
CHAPTER
IV OF THE PERFORMANCE OF CONTRACTS
Contracts
which must be performed
37. Obligation of parties to contracts.
38.
Effect of refusal to accept offer of performance.
39.
Effect of refusal of party to perform promise wholly. By whom contracts must be
performed
40. Person by whom promise is to be performed.
41.
Effect of accepting performance from third person.
42.
Devolution of joint liabilities.
43. Any one of joint promisors may be
compelled to perform.
Each promisor may compel contribution. Sharing
of loss by default in contribution.
44.
Effect of release of one joint promisor.
45.
Devolution of joint rights. Time and place for performance
46. Time for performance of promise, when no
application is to be made and no time is specified.
47.
Time and place for performance of promise, where time is specified and no
application to be made.
48.
Application for performance on certain day to be at proper time and place.
49. Place for performance of promise, where no
application to be made and no place fixed for performance.
50.
Performance in manner or at time prescribed or sanctioned by promisee.
Performance of reciprocal promises
51.
Promisor not bound to perform, unless reciprocal promisee ready and willing to
perform.
52.
Order of performance of reciprocal promises.
53.
Liability of party preventing event on which the contract is to take effect.
54. Effect of default as to that promise which
should be first performed, in contract consisting of reciprocal promises.
55. Effect of failure to perform at fixed
time, in contract in which time is essential. Effect of such failure when time
is not essential. Effect of acceptance of performance at time other than that
agreed upon.
56.
Agreement to do impossible act. Contract to do an act afterwards becoming
impossible or unlawful. Compensation for loss through non-performance of act
known to be impossible or unlawful.
57. Reciprocal promise to do things legal, and
also other things illegal.
58.
Alternative promise, one branch being illegal. Appropriation of payments
59.
Application of payment where debt to be discharged is indicated.
60.
Application of payment where debt to be discharged is not indicated.
61.
Application of payment where neither party appropriates. Contracts which need
not be performed
62.
Effect of novation, rescission, and alteration of contract.
63.
Promisee may dispense with or remit performance of promise.
64.
Consequences of rescission of voidable contract.
65.
Obligation of person who has received advantage under void agreement, or
contract that becomes void.
66.
Mode of communicating or revoking rescission of voidable contract.
67.
Effect of neglect of promisee to afford promisor reasonable facilities for
performance.
CHAPTER V OF CERTAIN RELATIONS RESEMBLING
THOSE CREATED BY CONTRACT SECTIONS
68. Claim for necessaries supplied to person
incapable of contracting, or on his account.
69. Reimbursement of person paying money due
by another, in payment of which he is interested.
70.
Obligation of person enjoying benefit of non-gratuitous act.
71.
Responsibility of finder of goods.
72.
Liability of person to whom money is paid, or thing delivered, by mistake or
under coercion.
CHAPTER
VI OF THE CONSEQUENCES OF BREACH OF CONTRACT
73. Compensation for loss or damage caused by
breach of contract. Compensation for failure to discharge obligation resembling
those created by contract.
74.
Compensation for breach of contract where penalty stipulated for.
75. Party rightfully rescinding contract,
entitled to compensation.
[CHAPTER VII SALE OF GOODS.][Repealed.]. 76.
[Repealed.]. 77. [Repealed.]. 78. [Repealed.]. 79. [Repealed.]. 80.
[Repealed.]. 81. [Repealed.]. 82. [Repealed.]. 83. [Repealed.]. 84.
[Repealed.]. 85. [Repealed.]. 86. [Repealed.]. 87. [Repealed.]. 88.
[Repealed.]. 89. [Repealed.]. [DELIVERY.][Repealed.]. 90. Repealed.]. 91.
[Repealed.]. 92. [Repealed.]. 93. [Repealed.]. 94. [Repealed.] [SELLER’S
LIEN.][Repealed.]. 95. [Repealed.]. 96. [Repealed.]. 97. [Repealed.]. 98.
[Repealed.] [STOPPAGE IN TRANSIT.][Repealed.]. 99. [Repealed.]. 100.
[Repealed.]. 101. [Repealed.]. 5 SECTIONS 102.[Repealed.]. 103.[Repealed.].
104.[Repealed.]. 105.[Repealed.]. 106.[Repealed.]. [RESALE.][Repealed.]. 107.
[Repealed.]. [TITLE.][Repealed.]. 108.[Repealed.]. [WARRANTY.]Repealed.]. 109.
[Repealed.]. 110. [Repealed.]. 111. [Repealed.]. 112. [Repealed.]. 113.
[Repealed.]. 114. [Repealed.]. 115. [Repealed.]. 116. [Repealed.]. 117.
[Repealed.]. 118. [Repealed.]. [MISCELLANEOUS.][Repealed.]. 119.[Repealed.].
120.[Repealed.]. 121.[Repealed.]. 122.[Repealed.]. 123.[Repealed.].
CHAPTERVIII OF INDEMNITY AND GUARANTEE
124.
“Contract of indemnity” defined.
125. Rights
of indemnity-holder when sued.
126. “Contract of guarantee”, “surety”,
“principal debtor” and “creditor”.
127.
Consideration for guarantee.
128.
Surety‟s liability.
129.
“Continuing guarantee”.
130. Revocation of continuing guarantee.
131.
Revocation of continuing guarantee by surety‟s
death.
132.
Liability of two persons, primarily liable, not affected by arrangement between
them that one shall be surety on other‟s default.
133.
Discharge of surety by variance in terms of contract.
134. Discharge of surety by release or
discharge of principal debtor.
135. Discharge of surety when creditor
compounds with, gives time to, or agrees not to sue, principal debtor.
136. Surety not discharged when agreement made
with third person to give time to principal debtor.
137.
Creditor‟s forbearance to
sue does not discharge surety.
138.
Release of one co-surety does not discharge others.
139.
Discharge of surety of creditor‟s act or
omission impairing surety‟s eventual
remedy.
140.
Rights of surety on payment or performance.
141.
Surety‟s right to
benefit of creditor‟s securities.
142.
Guarantee obtained by misrepresentation invalid.
143.
Guarantee obtained by concealment invalid.
144.
Guarantee on contract that creditor shall not act on it until co-surety joins.
145.
Implied promise to indemnify surety.
146.
Co-sureties liable to contribute equally.
147.
Liability of co-sureties bound in different sums.
CHAPTER
IX OF BAILMENT
148.
“Bailment”, “bailor” and “bailee” defined.
149.
Delivery to bailee how made.
150.
Bailor‟s duty to
disclose faults in goods bailed.
151.
Care to be taken by bailee.
152.
Bailee when not liable for loss, etc., of thing bailed.
153.
Termination of bailment by bailee‟s act
inconsistent with conditions.
154. Liability of bailee making unauthorized
use of goods bailed.
155.
Effect of mixture, with bailor‟s consent, of
his goods with bailee‟s.
156.
Effect of mixture, without bailor‟s consent, when
the goods can be separated.
157. Effect of mixture, without bailor‟s
consent, when the goods cannot be separated.
158.
Repayment, by bailor, of necessary expenses.
159.
Restoration of goods lent gratuitously.
160.
Return of goods bailed on expiration of time or accomplishment of purpose.
161. Bailee‟s
responsibility when goods are not duly returned.
162.
Termination of gratuitous bailment by death.
163. Bailor entitled to increase or profit
from goods bailed.
164.
Bailor‟s responsibility
to bailee.
165.
Bailment by several joint owners.
166.
Bailee not responsible on re-delivery to bailor without title.
167.
Right of third person claiming goods bailed.
168.
Right of finder of goods. May sue for specific reward offered.
169.
When finder of thing commonly on sale may sell it.
170. Bailee‟s
particular lien.
171.
General lien of bankers, factors, wharfingers, attorneys and policy-brokers.
Bailments of pledges
172.
“Pledge”, “Pawnor” and “Pawnee” defined.
173. Pawnee‟s
right of retainer.
174.
Pawnee not to retain for debt or promise other than that for which goods
pledged. Presumption in case of subsequent advances.
175.
Pawnee‟s right as to
extraordinary expenses incurred.
176. Pawnee‟s
right where pawnor makes default.
177.
Defaulting pawnor‟s right to
redeem.
178.
Pledge by mercantile agent.
178A. Pledge by person in possession under voidable
contract.
179.
Pledge where pawnor has only a limited interest. Suits by bailees or bailors
against wrong-doers
180.
Suit by bailor or bailee against wrong-doer.
181.
Apportionment of relief or compensation obtained by such suits.
CHAPTER X AGENCY
Appointment and authority of agents
182.
“Agent” and “principal” defined.
183.
Who may employ agent.
184.
Who may be an agent.
185.
Consideration not necessary.
186.
Agent‟s authority may
be expressed or implied.
187.
Definitions of express and implied authority.
188.
Extent of agent‟s authority.
189.
Agent‟s authority in
an emergency. Sub-agents
190.
When agent cannot delegate.
191.
“Sub-agent” defined.
192.
Representation of principal by sub-agent properly appointed. Agent‟s
responsibility for sub-agent. Sub-agent‟s
responsibility.
193. Agent‟s
responsibility for sub-agent appointed without authority.
194.
Relation between principal and person duly appointed by agent to act in
business of agency.
195.
Agent‟s duty in naming
such person.
Ratification
196. Right of person as to acts done for him
without his authority. Effect of ratification.
197.
Ratification may be expressed or implied.
198.
Knowledge requisite for valid ratification.
199.
Effect of ratifying unauthorized act forming part of a transaction.
200.
Ratification of unauthorized act cannot injure third person.
Revocation
of authority
201. Termination of agency.
202.
Termination of agency, where agent has an interest in subject-matter.
203.
When principal may revoke agent‟s authority.
204. Revocation where authority has been
partly exercised.
205.
Compensation for revocation by principal, or renunciation by agent.
206. Notice of revocation or renunciation.
207.
Revocation and renunciation may be expressed or implied.
208.
When termination of agent‟s authority
takes effect as to agent, and as to third persons.
209.
Agent‟s duty on
termination of agency by principal‟s death or
insanity.
210.
Termination of sub-agent‟s authority.
Agent’s duty to principal
211.
Agent‟s duty in
conducting principal‟s business.
212. Skill and diligence required from agent.
213.
Agent‟s accounts.
214.
Agent‟s duty to
communicate with principal.
215.
Right of principal when agent deals, on his own account, in business of agency
without principal‟s consent.
216.
Principal‟s right to
benefit gained by agent dealing on his own account in business of agency.
217.
Agent‟s right of
retainer out of sums received on principal‟s account.
218.
Agent‟s duty to pay
sums received for principal.
219. When agent‟s
remuneration becomes due.
220. Agent not entitled to remuneration for
business misconducted.
221. Agent‟s
lien on principal‟s property.
Principal’s
duty to agent
222.
Agent to be indemnified against consequences of lawful acts.
223.
Agent to be indemnified against consequences of acts done in good faith.
224. Non-liability of employer of agent to do
a criminal act.
225.
Compensation to agent for injury caused by principal‟s
neglect.
Effect of agency on contracts with third
persons
226.
Enforcement and consequences of agent‟s contracts.
227.
Principal how far bound, when agent exceeds authority.
228.
Principal not bound when excess of agent‟s authority is
not separable.
229.
Consequences of notice given to agent.
230.
Agent cannot personally enforce, nor be bound by, contracts on behalf of
principal.
Presumption of contract to contrary.
231.
Rights of parties to a contract made by agent not disclosed.
232.
Performance of contract with agent supposed to be principal.
233.
Right of person dealing with agent personally liable.
234.
Consequence of inducing agent or principal to act on belief that principal or
agent will be held exclusively liable.
235.
Liability of pretended agent.
236. Person falsely contracting as agent not
entitled to performance.
237.
Liability of principal inducing belief that agent‟s
unauthorized acts were authorized.
238.
Effect, on agreement, of misrepresentation or fraud by agent.
CHAPTER
XI OF PARTNERSHIP
239.
[Repealed.]. 240. [Repealed.]. 241. [Repealed.]. 242. [Repealed.]. 243.
[Repealed.]. 244. [Repealed.]. 245. [Repealed.]. 246. [Repealed.]. 247.
[Repealed.]. 248. [Repealed.]. 249. [Repealed.]. 250. [Repealed.]. 251.
[Repealed.]. 252. [Repealed.]. 253. [Repealed.]. 254. [Repealed.]. 255. [Repealed.].
256. [Repealed.]. 257. [Repealed.]. 258. [Repealed.]. 259. [Repealed.]. 260.
[Repealed.]. 261. [Repealed.]. 262. [Repealed.]. 263. [Repealed.]. 264.
[Repealed.]. 265. [Repealed.]. 266. [Repealed.]. SCHEDULE—[Repealed.]
PREAMBLE—WHEREAS it is
expedient to define and amend certain parts of the law relating to contracts;
It is hereby enacted as follows:—
PRELIMINARY
1. Short title.—This
Act may be called the Indian Contract Act, 1872.
Extent, Commencement.—It extends to
the whole of India 2 [ 3 ***]; and it shall come into force on the first day of
September, 1872.
Saving—4 ***
Nothing herein contained shall affect the provisions of any Statute, Act or
Regulation not hereby expressly repealed, nor any usage or custom of trade, nor
any incident of any contract, not inconsistent with the provisions of this Act.
2. Interpretation-clause.—In
this Act the following words and expressions are used in the following senses,
unless a contrary intention appears from the context:—
(a) When one person signifies to another his
willingness to do or to abstain from doing anything, with a view to obtaining
the assent of that other to such act or abstinence, he is said to make a
proposal;
(b) When the person to whom the proposal is
made signifies his assent thereto, the proposal is said to be accepted. A
proposal, when accepted, becomes a promise;
(c)
The person making the proposal is called the “promisor”, and the person
accepting the proposal is called the “promisee”;
(d) When, at the desire of the promisor, the
promisee or any other person has done or abstained from doing, or does or
abstains from doing, or promises to do or to abstain from doing, something,
such act or abstinence or promise is called a consideration for the promise;
(e)
Every promise and every set of promises, forming the consideration for each
other, is an agreement;
(f)
Promises which form the consideration or part of the consideration for each
other are called reciprocal promises;
(g) An agreement not enforceable by law is
said to be void;
(h)
An agreement enforceable by law is a contract;
(i) An agreement which is enforceable by law
at the option of one or more of the parties thereto, but not at the option of
the other or others, is a voidable contract;
(j) A contract which ceases to be enforceable
by law becomes void when it ceases to be enforceable.
CHAPTER
I OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS
3.Communication, acceptance and revocation of proposals.—
The
communication of proposals, the acceptance of proposals, and the revocation of
proposals and acceptances, respectively, are deemed to be made by any act or
omission of the party proposing, accepting or revoking by which he intends to
communicate such proposal, acceptance or revocation, or which has the effect of
communicating it.
4. Communication when complete.—
The
communication of a proposal is complete when it comes to the knowledge of the
person to whom it is made. The communication of an acceptance is complete,— as
against the proposer, when it is put in a course of transmission to him, so as
to be out of the power of the acceptor; as against the acceptor, when it comes
to the knowledge of the proposer. The communication of a revocation is
complete,— as against the person who makes it, when it is put into a course of
transmission to the person to whom it is made, so as to be out of the power of
the person who makes it; as against the person to whom it is made, when it
comes to his knowledge.
Illustrations
(a)
A proposes, by letter, to sell a house to B at a certain price. The
communication of the proposal is complete when B receives the letter.
(b) B accepts A‟s
proposal by a letter sent by post. The communication of the acceptance is
complete, as against A when the letter is posted; as against B, when the letter
is received by A.
(c) A revokes his proposal by telegram. The
revocation is complete as against A when the telegram is despatched. It is
complete as against B when B receives it. B revokes his acceptance by telegram.
B‟s revocation is
complete as against B when the telegram is despatched, and as against A when it
reaches him.
5. Revocation of proposals and acceptances.—
A
proposal may be revoked at any time before the communication of its acceptance
is complete as against the proposer, but not afterwards. An acceptance may be
revoked at any time before the communication of the acceptance is complete as against
the acceptor, but not afterwards.
Illustration
A
proposes, by a letter sent by post, to sell his house to B. B accepts the
proposal by a letter sent by post. A may revoke his proposal at any time before
or at the moment when B posts his letter of acceptance, but not afterwards. B
may revoke his acceptance at any time before or at the moment when the letter
communicating it reaches A, but not afterwards.
Uttar
Pradesh Amendment of section 5 of Act (9 of 1872).—In section 5 of
Indian contract Act, 1872, hereinafter in this Chapter referred to as the
principal Act, at the end of the first paragraph, the following explanation
shall inserted, namely:-- “Explanation—Where an invitation to a proposal
contains a condition that any proposal made in response to such invitation
shall be kept open for a specified time and a proposal is thereupon made
accepting such condition, such proposal may not be revoked within such time.”
6. Revocation how made.—A proposal is revoked—
(1)
by the communication of notice of revocation by the proposer to the other
party;
(2)
by the lapse of the time prescribed in such proposal for its acceptance, or, if
no time is so prescribed, by the lapse of a reasonable time, without
communication of the acceptance;
(3)
by the failure of the acceptor to fulfil a condition precedent to acceptance;
or
(4)
by the death or insanity of the proposer, if the fact of his death or insanity
comes to the knowledge of the acceptor before acceptance.
7. Acceptance must be absolute.—In order to convert a proposal
into a promise, the acceptance must—
(1) be absolute and unqualified;
(2)
be expressed in some usual and reasonable manner, unless the proposal
prescribes the manner in which it is to be accepted. If the proposal prescribes
a manner in which it is to be accepted, and the acceptance is not made in such
manner, the proposer may, within a reasonable time after the acceptance is
communicated to him, insist that his proposal shall be accepted in the
prescribed manner, and not otherwise; but if he fails to do so, he accepts the
acceptance.
8. Acceptance by performing
conditions, or receiving consideration.—
Performance
of the conditions of a proposal, or the acceptance of any consideration for a
reciprocal promise which may be offered with a proposal, is an acceptance of
the proposal.
9. Promises, express and
implied.—
In
so far as the proposal or acceptance of any promise is made in words, the
promise is said to be express. In so far as such proposal or acceptance is made
otherwise than in words, the promise is said to be implied.
CHAPTER
II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
10. What agreements are contracts.—
All
agreements are contracts if they are made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful object, and
are not hereby expressly declared to be void. Nothing herein contained shall
affect any law in force in 1 [India] and not hereby expressly repealed by which
any contract is required to be made in writing2 or in the presence of
witnesses, or any law relating to the registration of documents.
11. Who are competent to contract.—
Every
person is competent to contract who is of the age of majority according to the
law to which he is subject3 , and who is of sound mind, and is not disqualified
from contracting by any law to which he is subject.
12. What is a sound mind for the purposes of contracting.—
A
person is said to be of sound mind for the purpose of making a contract, if, at
the time when he makes it, he is capable of understanding it and of forming a
rational judgment as to its effect upon his interests. A person who is usually
of unsound mind, but occasionally of sound mind, may make a contract when he is
of sound mind. A person who is usually of sound mind, but occasionally of
unsound mind, may not make a contract when he is of unsound mind.
Illustrations
(a)
A patient in a lunatic asylum, who is at intervals of sound mind, may contract
during those intervals. (b) A sane man, who is delirious from fever or who is
so drunk that he cannot understand the terms of a contract, or form a rational
judgment as to its effect on his interests, cannot contract whilst such
delirium or drunkenness lasts.
13. “Consent” .—
Two
or more persons are said to consent when they agree upon the same thing in the
same sense.
14. “Free consent”
.—
Consent
is said to be free when it is not caused by—
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16,
or
(3) fraud, as defined in section 17, or
(4)
misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of
sections 20, 21 and 22. Consent is said to be so caused when it would not have
been given but for the existence of such coercion, undue influence, fraud, misrepresentation
or mistake.
15. “Coercion”
Coercion”
is the committing, or threatening to commit, any act forbidden by the Indian
Penal Code (45 of 1860)or the unlawful detaining, or threatening to detain, any
property, to the prejudice of any person whatever, with the intention of
causing any person to enter into an agreement.
Explanation.—It is
immaterial whether the Indian Penal Code (45 of 1860) is or is not in force in
the place where the coercion is employed.
Illustration
A, on board an English ship on the high seas,
causes B to enter into an agreement by an act amounting to criminal
intimidation under the Indian Penal Code (45 of 1860). A afterwards sues B for
breach of contract at Calcutta. A has employed coercion, although his act is not
an offence by the law of England, and although section 506 of the Indian Penal
Code (45 of 1860) was not in force at the time when or place where the act was
done.
16.“Undue influence”.—
(1)
A contract is said to be induced by “undue influence” where the relations
subsisting between the parties are such that one of the parties is in a
position to dominate the will of the other and uses that position to obtain an
unfair advantage over the other.
(2) In particular and without prejudice to the
generality of the foregoing principle, a person is deemed to be in a position
to dominate the will of another—
(a) where he holds a real or apparent
authority over the other, or where he stands in a fiduciary relation to the
other; or
(b) where he makes a contract with a person
whose mental capacity is temporarily or permanently affected by reason of age,
illness, or mental or bodily distress.
(3) Where a person who is in a position to
dominate the will of another, enters into a contract with him, and the transaction
appears, on the face of it or on the evidence adduced, to be unconscionable,
the burden of proving that such contract was not induced by undue influence
shall lie upon the person in a position to dominate the will of the other.
Nothing
in this sub-section shall affect the provisions of section 111 of the Indian
Evidence Act, 1872 (1 of 1872).
Illustrations
(a) A having advanced money to his son, B,
during his minority, upon B‟s coming of age
obtains, by misuse of parental influence, a bond from B for a greater amount
than the sum due in respect of the advance. A employs undue influence.
(b) A, a man enfeebled by disease or age, is
induced, by B‟s influence over
him as his medical attendant, to agree to pay B an unreasonable sum for his
professional services. B employs undue influence.
(c) A, being in debt to B, the money-lender of
his village, contracts a fresh loan on terms which appear to be unconscionable.
It lies on B to prove that the contract was not induced by undue influence.
(d)
A applies to a banker for a loan at a time when there is stringency in the
money market. The banker declines to make the loan except at an unusually high
rate of interest. A accepts the loan on these terms. This is a transaction in
the ordinary course of business, and the contract is not induced by undue
influence.]
17. “Fraud”
Fraud”
means and includes any of the following acts committed by a party to a
contract, or with his connivance, or by his agent2 , with intent to deceive
another party thereto of his agent, or to induce him to enter into the
contract:—
(1) the suggestion, as a fact, of that which
is not true, by one who does not believe it to be true;
(2)
the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of
performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law
specially declares to be fraudulent.
Explanation.—Mere silence as to facts likely
to affect the willingness of a person to enter into a contract is not fraud,
unless the circumstances of the case are such that, regard being had to them,
it is the duty of the person keeping silence to speak3 , or unless his silence
is, in itself, equivalent to speech.
Illustrations
(a)
A sells, by auction, to B, a horse which A knows to be unsound. A says nothing
to B about the horse‟s unsoundness.
This is not fraud in A.
(b) B is A‟s
daughter and has just come of age. Here, the relation between the parties would
make it A‟s duty to tell B
if the horse is unsound.
(c) B says to A—“If you do not deny it, I
shall assume that the horse is sound.” A says nothing. Here, A‟s
silence is equivalent to speech.
(d)
A and B, being traders, enter upon a contract. A has private information of a
change in prices which would affect B‟s willingness to
proceed with the contract. A is not bound to inform B.
18. “Misrepresentation”.—
“Misrepresentation”
means and includes—
(1) the positive assertion, in a manner not
warranted by the information of the person making it, of that which is not
true, though he believes it to be true;
(2) any breach of duty which, without an
intent to deceive, gains an advantage to the person committing it, or any one
claiming under him; by misleading another to his prejudice, or to the prejudice
of any one claiming under him;
(3) causing, however innocently, a party to an
agreement, to make a mistake as to the substance of the thing which is the
subject of the agreement.
19. Voidability of agreements without free consent.—
When
consent to an agreement is caused by coercion,1 *** fraud or misrepresentation,
the agreement is a contract voidable at the option of the party whose consent
was so caused. A party to a contract whose consent was caused by fraud or
misrepresentation, may, if he thinks fit, insist that the contract shall be
performed, and that he shall be put in the position in which he would have been
if the representations made had been true.
Exception.—If such consent
was caused by misrepresentation or by silence, fraudulent within the meaning of
section 17, the contract, nevertheless, is not voidable, if the party whose
consent was so caused had the means of discovering the truth with ordinary
diligence.
Explanation.—A
fraud or misrepresentation which did not cause the consent to a contract of the
party on whom such fraud was practised, or to whom such misrepresentation was
made, does not render a contract voidable.
Illustrations
(a)
A, intending to deceive B, falsely represents that five hundred maunds of
indigo are made annually at A‟s factory, and
thereby induces B to buy the factory. The contract is voidable at the option of
B.
(b)
A, by a misrepresentation, leads B erroneously to believe that, five hundred
maunds of indigo are made annually at A‟s factory. B
examines the accounts of the factory, which show that only four hundred maunds
of indigo have been made. After this B buys the factory. The contract is not
voidable on account of A‟s
misrepresentation.
(c)
A fraudulently informs B that A‟s estate is free
from in cumbrance. B thereupon buys the estate. The estate is subject to a
mortgage. B may either avoid the contract, or may insist on its being carried
out and the mortgage debt redeemed.
(d) B, having discovered a vein of ore on the
estate of A, adopts means to conceal, and does conceal, the existence of the
ore from A. Through A‟s ignorance B is
enabled to buy the estate at an under-value. The contract is voidable at the
option of A.
(e)
A is entitled to succeed to an estate at the death of B; B dies: C, having
received intelligence of B‟s death,
prevents the intelligence reaching A, and thus induces A to sell him his
interest in the estate. The sale is voidable at the option of A
19A. Power to set aside contract induced by undue influence.—
When
consent to an agreement is caused by undue influence, the agreement is a
contract voidable at the option of the party whose consent was so caused.
Any
such contract may be set aside either absolutely or, if the party who was
entitled to avoid it has received any benefit thereunder, upon such terms and
conditions as to the Court may seem just.
Illustrations
(a) A‟s son has forged
B‟s name to a
promissory note. B under threat of prosecuting A‟s
son, obtains a bond from A for the amount of the forged note. If B sues on this
bond, the Court may set the bond aside.
(b)
A, a money-lender, advances Rs. 100 to B, an agriculturist, and, by undue
influence, induces B to execute a bond for Rs. 200 with interest at 6 per cent.
per month. The Court may set the bond aside, ordering B to repay the Rs. 100
with such interest as may seem just.]
20.Agreement void where both
parties are under mistake as to matter of fact.—Where both the
parties to an agreement are under a mistake as to a matter of fact essential to
the agreement, the agreement is void.
Explanation.—An erroneous opinion as to the
value of the thing which forms the subject-matter of the agreement, is not to
be deemed a mistake as to a matter of fact.
Illustrations
(a) A agrees to sell to B a specific cargo of
goods supposed to be on its way from England to Bombay. It turns out that,
before the day of the bargain, the ship conveying the cargo had been cast away
and the goods lost. Neither party was aware of the these facts. The agreement
is void.
(b)
A agrees to buy from B a certain horse. It turns out that the horse was dead at
the time of the bargain, though neither party was aware of the fact. The
agreement is void.
(c) A, being entitled to an estate for the
life of B, agrees to sell it to C. B was dead at the time of the agreement, but
both parties were ignorant of the fact. The agreement is void.
21. Effect of mistakes as to law.—
A
contract is not voidable because it was caused by a mistake as to any law in
force in 1 [India]; but a mistake as to a law not in force in 1 [India] has the
same effect as a mistake of fact.
Illustration
A and B make a contract grounded on the
erroneous belief that a particular debt is barred by the Indian Law of
Limitation: the contract is not voidable.
22. Contract caused by mistake of one party as to matter of fact.—
A
contract is not voidable merely because it was caused by one of the parties to
it being under a mistake as to a matter of fact.
23. What considerations and objects are lawful, and what not.—
The
consideration or object of an agreement is lawful, unless—
it is forbidden by law4 ;
or is of such a
nature that if permitted, it would defeat the provisions of any law;
or is fraudulent
;
or involves or
implies injury to the person or property of another;
or the Court
regards it as immoral,
or opposed to
public policy.
In each of these
cases, the consideration or object of an agreement is said to be unlawful.
Every agreement of which the object or consideration is unlawful is void.
Illustrations
(a) A agrees to
sell his house to B for 10,000 rupees. Here B‟s
promise to pay the sum of 10,000 rupees is the consideration for A‟s
promise to sell the house, and A‟s promise to
sell the house is the consideration for B‟s promise to pay
the 10,000 rupees. These are lawful considerations.
(b) A promises to pay B 1,000 rupees at the
end of six months, if C, who owes that sum to B, fails to pay it. B promises to
grant time to C accordingly. Here, the promise of each party is the
consideration for the promise of the other party, and they are lawful
considerations.
(c) A promises, for a certain sum paid to him
by B, to make good to B the value of his ship if it is wrecked on a certain
voyage. Here, A‟s promise is the
consideration for B‟s payment and B‟s
payment is the consideration for A‟s promise and
these are lawful considerations.
(d) A promises to maintain B‟s
child, and B promises to pay A 1,000 rupees yearly for the purpose. Here, the
promise of each party is the consideration for the promise of the other party.
They are lawful considerations.
(e) A, B and C enter into an agreement for the
division among them of gains acquired or to be acquired, by them by fraud. The
agreement is void, as its object is unlawful.
Void agreements
24.Agreements void, if considerations and objects unlawful in part.—
If any part of a
single consideration for one or more objects, or any one or any part of any one
of several considerations for a single object, is unlawful, the agreement is
void.
Illustration
A promises to superintend, on behalf of B, a
legal manufacture of indigo, and an illegal traffic in other articles. B
promises to pay to A a salary of 10,000 rupees a year. The agreement is void,
the object of A‟s promise, and
the consideration for B‟s promise, being
in part unlawful.
25. Agreement without consideration, void, unless it is in
writing and registered,or is a promise to compensate for something done or is a
promise to pay a debt barred by limitation law.—
An agreement
made without consideration is void, unless—
(1) it is
expressed in writing and registered under the law for the time being in force
for the registration of 1 [documents], and is made on account of natural love
and affection between parties standing in a near relation to each other ; or
unless
(2) it is a
promise to compensate, wholly or in part, a person who has already voluntarily
done something for the promisor, or something which the promisor was legally
compellable to do; or unless;
(3) it is a
promise, made in writing and signed by the person to be charged therewith, or
by his agent generally or specially authorized in that behalf, to pay wholly or
in part a debt of which the creditor might have enforced payment but for the
law for the limitation of suits. In any of these cases, such an agreement is a
contract.
Explanation 1.—Nothing in
this section shall affect the validity, as between the donor and donee, of any
gift actually made.
Explanation 2.—An agreement
to which the consent of the promisor is freely given is not void merely because
the consideration is inadequate; but the inadequacy of the consideration may be
taken into account by the Court in determining the question whether the consent
of the promisor was freely given.
Illustrations
(a) A promises, for no consideration, to give
to B Rs. 1,000. This is a void agreement.
(b) A, for natural love and affection,
promises to give his son, B, Rs. 1,000. A puts his promise to B into writing
and registers it. This is a contract.
(c) A finds B‟s
purse and gives it to him. B promises to give A Rs. 50. This is a contract.
(d) A supports B‟s
infant son. B promises to pay A‟s expenses in so
doing. This is a contract.
(e) A owes B Rs. 1,000, but the debt is barred
by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of
the debt. This is a contract.
(f) A agrees to
sell a horse worth Rs. 1,000 for Rs. 10. A‟s consent to the
agreement was freely given. The agreement is a contract notwithstanding the
inadequacy of the consideration.
(g) A agrees to sell a horse worth Rs. 1,000
for Rs. 10. A denies that his consent to the agreement was freely given. The
inadequacy of the consideration is a fact which the Court should take into
account in considering whether or not A‟s consent was
freely given.
26. Agreement in restraint of
marriage, void.—
Every agreement
in restraint of the marriage of any person, other than a minor, is void.
27. Agreement in restraint of
trade, void.—
Every agreement
by which any one is restrained from exercising a lawful profession, trade or
business of any kind, is to that extent void.
Exception
1.—Saving of agreement not to carry on business of which good-will is
sold.—One who sells the good-will of a business may agree with the buyer to
refrain from carrying on a similar business, within specified local limits, so
long as the buyer, or any person deriving title to the good-will from him,
carries on a like business therein, provided that such limits appear to the
Court reasonable, regard being had to the nature of the business.
28.Agreements in restraint of
legal proceedings, void.—
[Every agreement,—
(a) by which any
party thereto is restricted absolutely from enforcing his rights under or in
respect of any contract, by the usual legal proceedings in the ordinary
tribunals, or which limits the time within which he may thus enforce his
rights; or
(b) which
extinguishes the rights of any party thereto, or discharges any party thereto,
from any liability, under or in respect of any contract on the expiry of a
specified period so as to restrict any party from enforcing his rights, is void
to the extent.]
Exception 1.—Saving of contract to refer to
arbitration dispute that may arise.—This section shall not render illegal a
contract, by which two or more persons agree that any dispute which may arise
between them in respect of any subject or class of subjects shall be referred
to arbitration, and that only the amount awarded in such arbitration shall be
recoverable in respect of the dispute so referred. 3 *****
Exception
2.—Saving
of contract to refer questions that have already arisen.—Nor shall this section
render illegal any contract in writing, by which two or more persons agree to
refer to arbitration any question between them which has already arisen, or
affect any provision of any law in force for the time being as to references to
arbitration.
[Exception
3.—Saving
of a guarantee agreement of a bank or a financial institution.—This section
shall not render illegal a contract in writing by which any bank or financial
institution stipulate a term in a guarantee or any agreement making a provision
for guarantee for extinguishment of the rights or discharge of any party
thereto from any liability under or in respect of such guarantee or agreement on
the expiry of a specified period which is not less than one year from the date
of occurring or non-occurring of a specified event for extinguishment or
discharge of such party from the said liability.
Explanation.—(i) In Exception 3, the
expression “bank” means—
(a) a “banking company” as defined in clause
(c) of section 5 of the Banking Regulation Act, 1949(10 of 1949);
(b) “a
corresponding new bank” as defined in clause (da) of section 5 of the Banking
Regulation Act, 1949(10 of 1949);
(c) “State Bank of India” constituted under
section 3 of the State Bank of India Act, 1955 (23 of 1955);
(d) “a subsidiary bank” as defined in clause
(k) of section 2 of the State Bank of India (Subsidiary Banks) Act, 1959(38 of
1959);
(e) “a Regional Rural Bank” established under
section 3 of the Regional Rural Banks Act, 1976(21 of 1976);
(f) “a Co-operative Bank” as defined in clause
(cci) of section 5 of the Banking Regulation Act, 1949(10 of 1949);
(g) “a
multi-State co-operative bank” as defined in clause (cciiia) of section 5 of
the Banking Regulation Act, 1949(10 of 1949); and (ii) In Exception 3, the
expression “a financial institution” means any public financial institution
within the meaning of section 4A of the Companies Act, 1956(1 of 1956).]
29. Agreements void for uncertainty.—
Agreements, the
meaning of which is not certain, or capable of being made certain, are void.
Illustrations
(a) A agrees to sell to B “a hundred tons of
oil”. There is nothing whatever to show what kind of oil was intended. The agreement
is void for uncertainty.
(b) A agrees to sell to B one hundred tons of
oil of a specified description, known as an article of commerce. There is no
uncertainty here to make the agreement void.
(c) A, who is a
dealer in cocoanut-oil only, agrees to sell to B “one hundred tons of oil”. The
nature of A‟s trade affords
an indication of the meaning of the words, and A has entered into a contract
for the sale of one hundred tons of cocoanut-oil.
(d) A agrees to
sell to B “all the grain in my granary at Ramnagar”. There is no uncertainty
here to make the agreement void.
(e) A agrees to sell B “one thousand maunds of
rice at a price to be fixed by C”. As the price is capable of being made
certain, there is no uncertainty here to make the agreement void.
(f) A agrees to sell to B “my white horse for
rupees five hundred or rupees one thousand”. There is nothing to show which of
the two prices was to be given. The agreement is void.
30. Agreements by way of wager void.—
Agreements by
way of wager are void; and no suit shall be brought for recovering anything
alleged to be won on any wager, or entrusted to any person to abide the result
of any game or other uncertain event on which any wager is made.
Exception in
favour of certain prizes for horse-racing.—This section shall not be deemed to
render unlawful a subscription or contribution, or agreement to subscribe or
contribute, made or entered into for or toward any plate, prize or sum of
money, of the value or amount of five hundred rupees or upwards, to be awarded
to the winner or winners of any horse-race.
Section 294A of
the Indian Penal Code not affected.—Nothing in this section shall be deemed to
legalize any transaction connected with horse-racing, to which the provisions
of section 294A of the Indian Penal Code (45 of 1860) apply.
CHAPTER III OF CONTINGENT CONTRACTS
31. “Contingent contract”
defined.—
A “contingent
contract is a contract to do or not to do something, if some event, collateral
to such contract, does or does not happen.
Illustration
A contracts to
pay B Rs. 10,000 if B‟s house is
burnt. This is a contingent contract.
32. Enforcement of contracts contingent on an event happening.—
Contingent
contracts to do or not to do anything if an uncertain future event happens
cannot be enforced by law unless and until that event has happened. If the
event becomes impossible, such contracts become void. Illustrations
(a) A makes a contract with B to buy B‟s
horse if A survives C. This contract cannot be enforced by law unless and until
C dies in A‟s lifetime.
(b) A makes a contract with B to sell a horse
to B at a specified price, if C, to whom the horse has been offered, refuses to
buy him. The contract cannot be enforced by law unless and until C refuses to
buy the horse.
(c) A contracts to pay B a sum of money when B
marries C. C dies without being married to B. The contract becomes void.
33. Enforcement of contracts contingent on an event not happening.—
Contingent
contracts to do or not to do anything if an uncertain future event does not
happen can be enforced when the happening of that event becomes impossible, and
not before.
Illustration
A agrees to pay
B a sum of money if a certain ship does not return. The ship is sunk. The
contract can be enforced when the ship sinks.
34.When event on which
contract is contingent to be deemed impossible, if it is the future conduct of
a living person.—
If the future
event on which a contract is contingent is the way in which a person will act
at an unspecified time, the event shall be considered to become impossible when
such person does anything which renders it impossible that he should so act
within any definite time, or otherwise than under further contingencies.
Illustration
A agrees to pay B a sum of money if B marries
C. C marries D. The marriage of B to C must now be considered impossible,
although it is possible that D may die and that C may afterwards marry B.
35.When contracts become void which are contingent on happening of
specified event within fixed time.—
Contingent
contracts to do or not to do anything if a specified uncertain event happens
within a fixed time become void if, at the expiration of the time fixed, such
event has not happened, or if, before the time fixed, such event becomes
impossible.
When contracts
may be enforced, which are contingent on specified event not happening within
fixed time.—Contingent contracts to do or not to do anything, if a specified
uncertain event does not happen within a fixed time may be enforced by law when
the time fixed has expired and such event has not happened or, before the time
fixed has expired, if it becomes certain that such event will not happen.
Illustrations
(a) A promises
to pay B a sum of money if a certain ship returns within a year. The contract
may be enforced if the ship returns within the year, and becomes void if the
ship is burnt within the year.
(b) A promises to pay B a sum of money if a
certain ship does not return within a year. The contract may be enforced if the
ship does not return within the year, or is burnt within the year.
36. Agreement contingent on impossible events void.—
Contingent
agreements to do or not to do anything, if an impossible event happens, are
void, whether the impossibility of the event is known or not to the parties to
the agreement at the time when it is made.
Illustrations
(a) A agrees to pay B 1,000 rupees if two
straight lines should enclose a space. The agreement is void.
(b) A agrees to
pay B 1,000 rupees if B will marry A‟s daughter C. C
was dead at the time of the agreement. The agreement is void.
CHAPTER
IV OF THE PERFORMANCE OF CONTRACTS
Contracts which must be performed
37. Obligation of parties to contracts.—
The parties to a
contract must either perform, or offer to perform, their respective promises,
unless such performance is dispensed with or excused under the provisions of
this Act, or of any other law. Promises bind the representatives of the
promisors in case of the death of such promisors before performance, unless a
contrary intention appears from the contract.
Illustrations
(a) A promises to deliver goods to B on a
certain day on payment of Rs. 1,000. A dies before that day. A‟s
representatives are bound to deliver the goods to B, and B is bound to pay the
Rs. 1,000 to A‟s
representatives.
(b) A promises to paint a picture for B by a
certain day, at a certain price. A dies before the day. The contract cannot be
enforced either by A‟s
representatives or by B.
38. Effect of refusal to
accept offer of performance.—
Where a promisor
has made an offer of performance to the promisee, and the offer has not been
accepted, the promisor is not responsible for non-performance, nor does he
thereby lose his rights under the contract. Every such offer must fulfil the
following conditions:—
(1) it must be unconditional;
(2) it must be made at a proper time and
place, and under such circumstances that the person to whom it is made may have
a reasonable opportunity of ascertaining that the person by whom it is made is
able and willing there and then to do the whole of what he is bound by his
promise to do;
(3) if the offer is an offer to deliver
anything to the promisee, the promisee must have a reasonable opportunity of
seeing that the thing offered is the thing which the promisor is bound by his
promise to deliver. An offer to one of several joint promisees has the same
legal consequences as an offer to all of them.
Illustration
A contracts to deliver to B at his warehouse,
on the 1st March, 1873, 100 bales of cotton of a particular quality. In order
to make an offer of a performance with the effect stated in this section, A
must bring the cotton to B‟s warehouse, on
the appointed day, under such circumstances that B may have areasonable
opportunity of satisfying himself that the thing offered is cotton of the
quality contracted for, and that there are 100 bales.
39. Effect of refusal of party to perform promise wholly.—When a party
to a contract has refused to perform, or disabled himself from performing, his
promise in its entirety, the promisee may put an end to the contract, unless he
has signified, by words or conduct, his acquiescence in its continuance.
Illustrations
(a) A, a singer, enters into a contract with
B, the manager of a theatre, to sing at his theatre two nights in every week
during the next two months, and B engages to pay her 100 rupees for each night‟s
performance. On the sixth night A wilfully absents herself from the theatre. B
is at liberty to put an end to the contract.
(b) A, a singer, enters into a contract with
B, the manager of a theatre, to sing at his theatre two night‟s
in every week during the next two months, and B engages to pay her at the rate
of 100 rupees for each night. On the sixth night, A wilfully absents herself.
With the assent of B, A sings on the seventh night. B has signified his
acquiescence in the continuance of the contract, and cannot now put an end to
it, but is entitled to compensation for the damage sustained by him through A‟s
failure to sing on the sixth night. By whom contracts must be performed
40.Person by whom promise is to be performed.—
If it appears
from the nature of the case that it was the intention of the parties to any
contract that any promise contained in it should be performed by the promisor
himself, such promise must be performed by the promisor. In other cases, the
promisor or his representatives may employ a competent person to perform it.
Illustrations
(a) A promises to pay B a sum of money. A may
perform this promise, either by personally paying the money to B or by causing
it to be paid to B by another ; and, if A dies before the time appointed for
payment, his representatives must perform the promise, or employ some proper
person to do so.
(b) A promises
to paint a picture for B. A must perform this promise personally.
41. Effect of accepting performance from third person.—When a
promisee accepts performance of the promise from a third person, he cannot
afterwards enforce it against the promisor.
42. Devolution of joint liabilities.—When two or
more persons have made a joint promise, then, unless a contrary intention
appears by the contract, all such persons, during their joint lives, and, after
the death of any of them, his representative jointly with the survivor or
survivors, and, after the death of the last survivor, the representatives of
all jointly, must fulfil the promise.
43.Any one of joint promisors may be compelled to perform.—When two or
more persons make a joint promise, the promisee may, in the absence of express
agreement to the contrary, compel any 1 [one or more] of such joint promisors
to perform the whole of the promise.
Each promisor may compel contribution.—Each of
two or more joint promisors may compel every other joint promisor to contribute
equally with himself to the performance of the promise, unless a contrary
intention appears from the contract.
Sharing of loss
by default in contribution.—If any one of two or more joint promisors makes
default in such contribution, the remaining joint promisors must bear the loss
arising from such default in equal shares.
Explanation.—Nothing in this
section shall prevent a surety from recovering from his principal, payments
made by the surety on behalf of the principal, or entitle the principal to
recover anything from the surety on account of payments made by the principal.
Illustrations
(a) A, B and C
jointly promise to pay D 3,000 rupees. D may compel either A or B or C to pay
him 3,000 rupees.
(b) A, B and C jointly promise to pay D the
sum of 3,000 rupees. C is compelled to pay the whole. A is insolvent, but his
assets are sufficient to pay one-half of his debts. C is entitled to receive
500 rupees from A‟s estate, and
1,250 rupees from B.
(c) A, B and C
are under a joint promise to pay D 3,000 rupees. C is unable to pay anything,
and A is compelled to pay the whole. A is entitled to receive 1,500 rupees from
B.
(d) A, B and C
are under a joint promise to pay D 3,000 rupees, A and B being only sureties
for C. C fails to pay. A and B are compelled to pay the whole sum. They are
entitled to recover it from C.
44.Effect of release of one joint promisor.—Where two or
more persons have made a joint promise, a release of one of such joint
promisors by the promisee does not discharge the other joint promisor or joint
promisors; neither does it free the joint promisors so released from
responsibility to the other joint promisor or joint promisors.
45. Devolution of joint rights.—When a person
has made a promise to two or more persons jointly, then, unless a contrary
intention appears from the contract, the right to claim performance rests, as
between him and them, with them during their joint lives, and, after the death
of any of them, with the representative of such deceased person jointly with
the survivor or survivors, and, after the death of the last survivor, with the
representatives of all jointly.
Illustration
A, in
consideration of 5,000 rupees, lent to him by B and C, promises B and C jointly
to repay them that sum with interest on a day specified. B dies. The right to
claim performance rests with B‟s representative
jointly with C during C‟s life, and
after the death of C with the representatives of B and C jointly.
TIME AND PLACE
FOR PERFORMANCE
46. Time for performance of promise, when no application is to be
made and no time is specified.—
Where, by the
contract, a promisor is to perform his promise without application by the
promisee, and no time for performance is specified, the engagement must be
performed within a reasonable time.
Explanation.—The question
“what is a reasonable time” is, in each particular case, a question of fact.
47.Time and place for performance of promise, where time is specified
and no application to be made.—
When a promise
is to be performed on a certain day, and the promisor has undertaken to perform
it without application by the promisee, the promisor may perform it at any time
during the usual hours of business on such day and at the place at which the
promise ought to be performed.
Illustration
A promises to deliver goods at B‟s
warehouse on the first January. On that day A brings the goods to B‟s
warehouse, but after the usual hour for closing it, and they are not received.
A has not performed his promise.
48. Application for performance on certain day to be at proper time
and place.—
When a promise
is to be performed on a certain day, and the promisor has not undertaken to
perform it without application by the promisee, it is the duty of the promisee
to apply for performance at a proper place and within the usual hours of business.
Explanation.—The question
“what is a proper time and place” is, in each particular case, a question of
fact.
49. Place for performance of promise, where no application to be
made and no place fixed for performance.—When a promise is to be performed
without application by the promisee, and no place is fixed for the performance
of it, it is the duty of the promisor to apply to the promisee to appoint a
reasonable place for the performance of the promise, and to perform it at such
place.
Illustration
A undertakes to
deliver a thousand maunds of jute to B on a fixed day. A must apply to B to
appoint a reasonable place for the purpose of receiving it, and must deliver it
to him at such place.
50. Performance in manner or
at time prescribed or sanctioned by promisee.—
The performance
of any promise may be made in any manner, or at any time which the promisee
prescribes or sanctions.
Illustrations
(a) B owes A 2,000 rupees. A desires B to pay
the amount to A‟s account with
C, a banker. B, who also banks with C, orders the amount to be transferred from
his account to A‟s credit, and
this is done by C. Afterwards, and before A knows of the transfer, C fails.
There has been a good payment by B.
(b) A and B are
mutually indebted. A and B settle an account by setting off one item against
another, and B pays A the balance found to be due from him upon such
settlement. This amounts to a payment by A and B, respectively, of the sums
which they owed to each other.
(c) A owes B
2,000 rupees. B accepts some of A‟s goods in
reduction of the debt. The delivery of goods operates as a part payment.
(d) A desires B, who owes him Rs. 100, to send
him a note for Rs. 100 by post. The debt is discharged as soon as B puts into
the post a letter containing the note duly addressed to A. Performance of
reciprocal promises
51. Promisor not bound to perform, unless reciprocal promisee ready
and willing to perform.—
When a contract
consists of reciprocal promises to be simultaneously performed, no promisor
need perform his promise unless the promisee is ready and willing to perform
his reciprocal promise.
Illustrations
(a) A and B contract that A shall deliver
goods to B to be paid for by B on delivery. A need not deliver the goods,
unless B is ready and willing to pay for the goods on delivery. B need not pay
for the goods, unless A is ready and willing to deliver them on payment.
(b) A and B contract that A shall deliver
goods to B at a price to be paid by instalments, the first instalment to be
paid on delivery. A need not deliver, unless B is ready and willing to pay the
first instalment on delivery. B need not pay the first instalment, unless A is
ready and willing to deliver the goods on payment of the first instalment.
52.Order of performance of reciprocal promises.—Where the
order in which reciprocal promises are to be performed is expressly fixed by
the contract, they shall be performed in that order; and where the order is not
expressly fixed by the contract, they shall be performed in that order which
the nature of the transaction requires.
Illustrations
(a) A and B
contract that A shall build a house for B at a fixed price. A‟s
promise to build the house must be performed before B‟s
promise to pay for it.
(b) A and B contract that A shall make over
his stock-in-trade to B at a fixed price, and B promises to give security for
the payment of the money. A‟s promise need
not be performed until the security is given, for the nature of the transaction
requires that A should have security before he delivers up his stock.
53. Liability of party preventing event on which the contract is to
take effect.—When
a contract contains reciprocal promises, and one party to the contract prevents
the other from performing his promise, the contract becomes voidable at the
option of the party so prevented; and he is entitled to compensation 1 from the
other party for any loss which he may sustain in consequence of the
nonperformance of the contract.
Illustration
A and B contract
that B shall execute certain work for A for a thousand rupees. B is ready and
willing to execute the work accordingly, but A prevents him from doing so. The
contract is voidable at the option of B; and, if he elects to rescind it, he is
entitled to recover from A compensation for any loss which he has incurred by
its non-performance.
54. Effect of default as to that promise which should be first
performed, in contract consisting of reciprocal promises.—
When a contract
consists of reciprocal promises, such that one of them cannot be performed, or
that its performance cannot be claimed till the other has been performed, and
the promisor of the promise last mentioned fails to perform it, such promisor
cannot claim the performance of the reciprocal promise, and must make
compensation to the other party to the contract for any loss which such other
party may sustain by the non-performance of the contract.
Illustrations
(a) A hires B‟s
ship to take in and convey, from Calcutta to the Mauritius, a cargo to be
provided by A, B receiving a certain freight for its conveyance. A does not
provide any cargo for the ship. A cannot claim the performance of B‟s
promise, and must make compensation to B for the loss which B sustains by the
non-performance of the contract.
(b) A contracts
with B to execute certain builder‟s work for a
fixed price, B supplying the scaffolding and timber necessary for the work. B
refuses to furnish any scaffolding or timber, and the work cannot be executed.
A need not execute the work, and B is bound to make compensation to A for any
loss caused to him by the non-performance of the contract.
(c) A contracts with B to deliver to him, at a
specified price, certain merchandise on board a ship which cannot arrive for a
month, and B engages to pay for the merchandise within a week from the date of
the contract. B does not pay within the week. A‟s
promise to deliver need not be performed, and B must make compensation.
(d) A promises B to sell him one hundred bales
of merchandise, to be delivered next day, and B promises A to pay for them
within a month. A does not deliver according to his promise. B‟s
promise to pay need not be performed, and A must make compensation.
55. Effect of failure to perform at fixed time, in contract in which
time is essential.—
When a party to
a contract promises to do a certain thing at or before a specified time, or certain
things at or before specified times, and fails to do any such thing at or
before the specified time, the contract, or so much of it as has not been
performed, becomes voidable at the option of the promisee, if the intention of
the parties was that time should be of the essence of the contract.
Effect of such
failure when time is not essential.—If it was not the intention of the parties
that time should be of the essence of the contract, the contract does not
become voidable by the failure to do such thing at or before the specified
time; but the promisee is entitled to compensation from the promisor for any
loss occasioned to him by such failure.
Effect of
acceptance of performance at time other than that agreed upon.—If, in case of a
contract voidable on account of the promisor‟s
failure to perform his promise at the time agreed, the promisee accepts
performance of such promise at any time other than that agreed, the promisee
cannot claim compensation for any loss occasioned by the non-performance of the
promise at the time agreed, unless, at the time of such acceptance, he gives
notice to the promisor of his intention to do so.
STATE AMENDMENT
Uttar Pradesh Amendment of section 55.—In section 55 of the Principal Act, in
the third paragraph, for the words “unless at the time of such acceptance he
gives notice to the promiser of his intention to do so”, the words “where at
the time of such acceptance he has waived his right to do so” shall be
substituted.”
56. Agreement to do impossible act.—
An agreement to
do an act impossible in itself is void. Contract to do an act afterwards
becoming impossible or unlawful.—A contract to do an act which, after the
contract is made, becomes impossible, or, by reason of some event which the
promisor could not prevent, unlawful, becomes void when the act becomes
impossible or unlawful.
1 Compensation
for loss through non-performance of act known to be impossible or unlawful.—
Where one person has promised to do something which he knew, or, with
reasonable diligence, might have known, and which the promisee did not know, to
be impossible or unlawful, such promisor must make compensation to such
promisee for any loss which such promisee sustains through the nonperformance
of the promise.
Illustrations
(a) A agrees with B to discover treasure by
magic. The agreement is void.
(b) A and B contract to marry each other.
Before the time fixed for the marriage, A goes mad. The contract becomes void.
(c) A contracts
to marry B, being already married to C, and being forbidden by the law to which
he is subject to practise polygamy, A must make compensation to B for the loss
caused to her by the non-performance of his promise.
(d) A contracts to take in cargo for B at a
foreign port. A‟s Government
afterwards declares war against the country in which the port is situated. The
contract becomes void when war is declared.
(e) A contracts to act at a theatre for six
months in consideration of a sum paid in advance by B. On several occasions A
is too ill to act. The contract to act on those occasions becomes void.
57.Reciprocal promise to do things legal, and also other things
illegal.—Where
persons reciprocally promise, firstly, to do certain things which are legal,
and, secondly, under specified circumstances, to do certain other things which
are illegal, the first set of promises is a contract, but the second is a void
agreement.
Illustration
A and B agree that A shall sell B a house for
10,000 rupees, but that, if B uses it as a gambling house, he shall pay A
50,000 rupees for it. The first set of reciprocal promises, namely, to sell the
house and to pay 10,000 rupees for it, is a contract. The second set is for an
unlawful object, namely, that B may use the house as a gambling house, and is a
void agreement.
58. Alternative promise, one branch being illegal.—In the case of
an alternative promise, one branch of which is legal and the other illegal, the
legal branch alone can be enforced. Illustration A and B agree that A shall pay
B 1,000 rupees, for which B shall afterwards deliver to A either rice or smuggled
opium. This is a valid contract to deliver rice, and a void agreement as to the
opium.
Appropriation
of payments
59.Application of payment
where debt to be discharged is indicated.—Where a debtor, owing several
distinct debts to one person, makes a payment to him, either with express
intimation, or under circumstances implying, that the payment is to be applied
to the discharge of some particular debt, the payment, if accepted, must be
applied accordingly.
Illustrations
(a) A owes B, among other debts, 1,000 rupees
upon a promissory note which falls due on the first June. He owes B no other
debt of that amount. On the first June, A pays to B 1,000 rupees. The payment
is to be applied to the discharge of the promissory note.
(b) A owes to B, among other debts, the sum of
567 rupees. B writes to A and demands payment of this sum. A sends to B 567
rupees. This payment is to be applied to the discharge of the debt of which B
had demanded payment.
60. Application of payment where debt to be
discharged is not indicated.—Where the debtor has omitted to intimate and there
are no other circumstances indicating to which debt the payment is to be
applied, the creditor may apply it at his discretion to any lawful debt
actually due and payable to him from the debtor, whether its recovery is or is
not barred by the law in force for the time being as to the limitation of
suits.
61. Application of payment
where neither party appropriates.—Where
neither party makes any appropriation, the payment shall be applied in discharge
of the debts in order of time, whether they are or are not barred by the law in
force for the time being as to the limitation of suits. If the debts are of
equal standing, the payment shall be applied in discharge of each
proportionably.
Contracts
which need not be performed
62. Effect of novation, rescission, and alteration of
contract.—If the parties to a contract agree to substitute a new
contract for it, or to rescind or alter it, the original contract, need not be
performed.
Illustrations
(a) A owes money to B under a contract. It is
agreed between A, B and C that B shall thenceforth accept C as his debtor,
instead of A. The old debt of A to B is at an end, and a new debt from C to B
has been contracted.
(b) A owes B 10,000 rupees. A enters into an
arrangement with B and gives B a mortgage of his (A‟s)
estate for 5,000 rupees in place of the debt of 10,000 rupees. This is a new
contract and extinguishes the old.
(c) A owes B 1,000 rupees under a contract. B owes C 1,000 rupees B
orders A to credit C with 1,000 rupees in his books, but C does not assent to
the arrangement. B still owes C 1,000 rupees, and no new contract has been
entered into.
63. Promisee may
dispense with or remit performance of promisee.—Every promisee may dispense
with or remit, wholly or in part, the performance of the promisee made to him,
or may extend the time for such performance1 ,or may accept instead of it any
satisfaction which he thinks fit.
Illustrations
(a) A promises to paint a picture for B. B
afterwards forbids him to do so. A is no longer bound to perform the promise.
(b) A owes B 5,000 rupees. A pays to B, and B
accepts, in satisfaction of the whole debt, 2,000 rupees paid at the time and
place at which the 5,000 rupees were payable. The whole debt is discharged.
(c) A owes B
5,000 rupees. C pays to B 1,000 rupees, and B accepts them, in satisfaction of
his claim on A. This payment is a discharge of the whole claim2 .
(d) A owes B,
under. a contract, a sum of money, the amount of which has not been ascertained.
A, without ascertaining the amount, gives to B, and B, in satisfaction thereof,
accepts, the sum of 2,000 rupees. This is a discharge of the whole debt,
whatever may be its amount.
(e) A owes B 2,000 rupees, and is also
indebted to other creditors. A makes an arrangement with his creditors,
including B, to pay them a 3 [composition] of eight annas in the rupee upon
their respective demands. Payment to B of 1,000 rupees is a discharge of B‟s
demand.
64. Consequences of
rescission of voidable contract.—When
a person at whose option a contract is voidable rescinds it, the other party
thereto need not perform any promise therein contained in which he is promisor.
The party rescinding a voidable contract shall, if he have received any benefit
thereunder from another party to such contract, restore such benefit, so far as
may be, to the person from whom it was received.
65. Obligation of person who has received advantage under void
agreement, or contract that becomes void.—When an agreement is discovered to
be void, or when a contract becomes void, any person who has received any
advantage under such agreement or contract is bound to restore it, or to make
compensation for it to the person from whom he received it.
Illustrations (a) A pays B 1,000 rupees in
consideration of B‟s promising to
marry C, A‟s daughter. C is
dead at the time of the promise. The agreement is void, but B must repay A the
1,000 rupees.
(b) A contracts
with B to deliver to him 250 maunds of rice before the first of May. A delivers
130 maunds only before that day, and none after. B retains the 130 maunds after
the first of May. He is bound to pay A for them.
(c) A, a singer,
contracts with B, the manager of a theatre, to sing at his theatre for two
nights in every week during the next two months, and B engages to pay her a
hundred rupees for each night‟s performance.
On the sixth night, A wilfully absents herself from the theatre, and B, in
consequence, rescinds the contract. B must pay A for the five nights on which
she had sung.
(d) A contracts to sing for B at a concert for
1,000 rupees, which are paid in advance. A is too ill to sing. A is not bound
to make compensation to B for the loss of the profits which B would have made
if A had been able to sing, but must refund to B the 1,000 rupees paid in
advance.
66. Mode of communicating or
revoking rescission of voidable contract.—The rescission of a voidable
contract may be communicated or revoked in the same manner, and subject to the
same rules, as apply to the communication or revocation of a proposal1 .
67. Effect of neglect of promisee to afford promisor
reasonable facilities for performance.—If any promisee neglects or refuses to
afford the promisor reasonable facilities for the performance of his promise,
the promisor is excused by such neglect or refusal as to any non-performance
caused thereby.
Illustration
A contracts with B to repair B‟s
house. B neglects or refuses to point out to A the places in which his house
requires repair. A is excused for the non-performance of the contract if it is
caused by such neglector refusal.
CHAPTER
V OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT
68. Claim for necessaries
supplied to person incapable of contracting, or on his account.—If a person,
incapable of entering into a contract, or any one whom he is legally bound to
support, is supplied by another person with necessaries suited to his condition
in life, the person who has furnished such supplies is entitled to be
reimbursed from the property of such incapable person.
Illustrations
(a) A supplies B, a lunatic, with necessaries
suitable to his condition in life. A is entitled to be reimbursed from B‟s
property.
(b) A supplies
the wife and children of B, a lunatic, with necessaries suitable to their
condition in life. A is entitled to be reimbursed from B‟s
property.
69.Reimbursement of person paying money due by another, in payment of
which he is interested.—A
person who is interested in the payment of money which another is bound by law
to pay, and who therefore pays it, is entitled to be reimbursed by the other.
Illustration
B holds land in
Bengal, on a lease granted by A, the zamindar. The revenue payable by A to the
Government being in arrear, his land is advertised for sale by the Government.
Under the revenue law, the consequence of such sale will be the annulment of B‟s
lease. B, to prevent the sale and the consequent annulment of his own lease,
pays to the Government the sum due from A. A is bound to make good to B the
amount so paid.
70.Obligation of person enjoying benefit of non-gratuitous act.—Where a person
lawfully does anything for another person, or delivers anything to him, not
intending to do so gratuitously, and such other person enjoys the benefit
thereof, the latter is bound to make compensation to the former in respect of,
or to restore, the thing so done or delivered1 .
Illustrations
(a) A, a
tradesman, leaves goods at B‟s house by
mistake. B treats the goods as his own. He is bound to pay A for them.
(b) A saves B‟s
property from fire. A is not entitled to compensation from B, if the
circumstances show that he intended to act gratuitously.
71.Responsibility of finder of goods.—A person who
finds goods belonging to another, and takes them into his custody, is subject
to the same responsibility as a bailee2 .
72. Liability of person to whom money is paid, or thing delivered,
by mistake or under coercion.—A
person to whom money has been paid, or anything delivered, by mistake or under
coercion, must repay or return it.
Illustrations
(a)A and B
jointly owe 100 rupees to C, A alone pays the amount to C, and B, not knowing
this fact, pays 100 rupees over again to C. C is bound to repay the amount to
B.
(b)A railway company refuses to deliver up
certain goods to the consignee, except upon the payment of an illegal charge
for carriage. The consignee pays the sum charged in order to obtain the goods.
He is entitled to recover so much of the charge as was illegally excessive.
CHAPTER
VI OF THE CONSEQUENCES OF BREACH OF CONTRACT
73.Compensation for loss or damage caused by breach of contract.—When a contract
has been broken, the party who suffers by such breach is entitled to receive,
from the party who has broken the contract, compensation for any loss or damage
caused to him thereby, which naturally arose in the usual course of things from
such breach, or which the parties knew, when they made the contract, to be
likely to result from the breach of it.
Such
compensation is not to be given for any remote and indirect loss or damage
sustained by reason of the breach.
Compensation for
failure to discharge obligation resembling those created by contract.—When an
obligation resembling those created by contract has been incurred and has not
been discharged, any person injured by the failure to discharge it is entitled
to receive the same compensation from the party in default, as if such person
had contracted to discharge it and had broken his contract.
Explanation.—In estimating
the loss or damage arising from a breach of contract, the means which existed
of remedying the inconvenience caused by the non-performance of the contract
must be taken into account.
Illustrations
(a)A contracts to sell and deliver 50 maunds
of saltpetre to B, at a certain price to be paid on delivery. A breaks his
promise. B is entitled to receive from A, by way of compensation, the sum, if
any, by which the contract price falls short of the price for which B might
have obtained 50 maunds of saltpetre of like quality at the time when the
saltpetre ought to have been delivered.
(b)A hires B‟s
ship to go to Bombay, and there take on board, on the first of January, a
cargo, which A is to provide, and to bring it to Calcutta, the freight to be
paid when earned. B‟s ship does not
go to Bombay, but A has opportunities of procuring suitable conveyance for the
cargo upon terms as advantageous as those on which he had chartered the ship. A
avails himself of those opportunities, but is put to trouble and expense in
doing so. A is entitled to receive compensation from B in respect of such
trouble and expense.
(c)A contracts to buy of B, at a stated price,
50 maunds of rice, no time being fixed for delivery. A afterwards informs B
that he will not accept the rice if tendered to him. B is entitled to receive
from A, by way of compensation, the amount, if any, by which the contract price
exceeds that which B can obtain for the rice at the time when A informs B that
he will not accept it.
(d) A contracts to buy B‟s
ship for 60,000 rupees, but breaks his promise. A must pay to B, by way of
compensation, the excess, if any, of the contract price over the price which B
can obtain for the ship at the time of the breach of promise.
(e) A, the owner of a boat, contracts with B
to take a cargo of jute to Mirzapur, for sale at that place, starting on a
specified day. The boat, owing to some avoidable cause, does not start at the
time appointed, whereby the arrival of the cargo at Mirzapur is delayed beyond
the time when it would have arrived if the boat had sailed according to the
contract. After that date, and before the arrival of the cargo, the price of
jute falls. The measure of the compensation payable to B by A is the difference
between the price which B could have obtained for the cargo at Mirzapur at the
time when it would have arrived if forwarded in due course, and its market
price at the time when it actually arrived.
74. Compensation for breach of contract where penalty stipulated
for.—
[When a contract
has been broken, if a sum is named in the contract as the amount to be paid in
case of such breach, or if the contract contains any other stipulation by way
of penalty, the party complaining of the breach is entitled, whether or not
actual damage or loss is proved to have been caused thereby, to receive from
the party who has broken the contract reasonable compensation not exceeding the
amount so named or, as the case may be, the penalty stipulated for.
Explanation.—A stipulation
for increased interest from the date of default may be a stipulation by way of
penalty.]
Exception.—When any person enters into any
bail-bond, recognizance or other instrument of the same nature, or, under the
provisions of any law, or under the orders of the 2 [Central Government] or of
any 3 [State Government], gives any bond for the performance of any public duty
or act in which the public are interested, he shall be liable, upon breach of
the condition of any such instrument, to pay the whole sum mentioned therein.
Explanation.—A person who enters into a
contract with Government does not necessarily thereby undertake any public
duty, or promise to do an act in which the public are interested.
Illustrations
(a)A contracts with B to pay B Rs. 1,000, if
he fails to pay B Rs. 500 on a given day. A fails to pay B Rs. 500 on that day.
B is entitled to recover from A such compensation, not exceeding Rs. 1,000, as
the Court considers reasonable.
(b)A contracts with B that, if Apractises as a
surgeon within Calcutta, he will pay B Rs. 5,000. A practises as a surgeon in
Calcutta. B is entitled to such compensation; not exceeding Rs. 5,000, as the
Court considers reasonable.
(c)A gives a
recognizance binding him in a penalty of Rs. 500 to appear in Court on a
certain day. He forfeits his recognizance. He is liable to pay the whole
penalty.
1 [(d)A gives B
a bond for the repayment of Rs. 1,000 with interest at 12 per cent. at the end
of six months, with a stipulation that, in case of default, interest shall be
payable at the rate of 75 per cent. from the date of default. This is a
stipulation by way of penalty, and B is only entitled to recover from A such
compensation as the Court considers reasonable.
(e) A, who owes money to B a money-lender,
undertakes to repay him by delivering to him 10 maunds of grain on a certain
date, and stipulates that, in the event of his not delivering the stipulated
amount by the stipulated date, he shall be liable to deliver 20 maunds. This is
a stipulation by way of penalty, and B is only entitled to reasonable
compensation in case of breach.
75.Party rightfully rescinding contract, entitled to compensation.—
A person who
rightfully rescinds a contract is entitled to compensation for any damage which
he has sustained through the non-fulfilment of the contract.
Illustration
A, a singer, contracts with B, the manager of
a theatre, to sing at his theatre for two nights in every week during the next
two months, and B engages to pay her 100 rupees for each night‟s
performance. On the sixth night, A wilfully absents herself from the theatre,
and B, in consequence, rescinds the contract. B is entitled to claim
compensation for the damage which he has sustained through the non-fulfilment
of the contract.
[CHAPTER VII.—SALES OF GOODS.]
Rep.by the
Indian Sale of Goods Act, 1930 (3 of 1930), s. 65.
76.[„Goods’ of defined.] Rep. by s. 65,ibid.
77.[„Sale
defined.] Rep. by s. 65,ibid. 78.[Sale how effected.] Rep. by s. 65,ibid
79.[Transferofownershipofthingsold,whichhasyettobeascertained,madeorfinished.]Rep.bys.
65, ibid.
80. [Completion
of sale of goods which the seller is to put into state in which buyer is to
take them.] Rep. by s. 65,ibid.
81. [Completion
of sale of goods, when seller has to do anything thereto in order to as certain
price.] Rep. by s. 65,ibid.
82. [Completion of sale, when goods are
uncertained at date of contract.] Rep. by s. 65,ibid. 83. [Ascertainment of
goods by subsequent appropriation.] Rep. by s. 65,ibid.
84. [Ascertainment of goods by seller’s
selection.] Rep. by s. 65,ibid.
85. [Transfer of
ownership of moveable property, when sold together with immoveable.] Rep. by s.
65, ibid.
86. [Buyer to
bear loss after good have become his property.] Rep. by s. 65,ibid.
87. [Transfer of
ownership of goods agreed to be sold while non existent.] Rep. by s. 65,ibid.
88. [Contract to
sell and deliver, at a future day, goods not in seller’s possession at date of
contract.] Rep. by s. 65,ibid.
89.
[Determination of price not fixed by contract.] Rep. by s. 65,ibid.
[DELIVERY.]Rep. by s. 65, ibid.
90. [Delivery
how made.] Rep. by s. 65,ibid.
91. [Effect of
delivery to wharfinger or carrier.] Rep. by s. 65,ibid.
92. [Effect of
part-delivery.] Rep. by s. 65,ibid.
93. [Seller not
bound to deliver until buyer applies for delivery.] Rep. by s. 65,ibid.
94.[Place of delivery.] Rep.by the Indian Sale
of Goods Act, 1930 (3 of 1930), s.65. [SELLER’S LIEN.]Rep. by s. 65, ibid.
95.[Seller’s
lien.]Rep. by s. 65,ibid.
96. [Lien where
payment to be made at a future day, but no time fixed for delivery.] Rep. by s.
65, ibid.
97. [Seller’s
lien where payment to be made at future day, and buyer allows goods to remain
in seller’s possession.] Rep. by s. 65,ibid.
98. [Seller’s
lien against subsequent buyer.] Rep. by s. 65,ibid. [STOPPAGE IN TRANSIT.] Rep.
by s. 65, ibid. 99. [Power of seller to stop in transit.] Rep. by s. 65,ibid.
100.[When goods are to be deemed in transit.]
Rep. by s. 65,ibid.
101.
[Continuance of right of stoppage.] Rep. by s. 65,ibid.
102. [Cessation of right on assignment, by
buyer, of document showing title.] Rep. by s. 65,ibid.
103. [How seller
may stop where instrument of title assigned to secure specific advance.] Rep.
by s. 65, ibid.
104. [Stoppage how effected.] Rep. by s.
65,ibid.
105. [Notice of
seller’s claim.] Rep. by s. 65, ibid.
106.[Right of
seller on stoppage.] Rep. by s. 65,ibid. [RESALE.] Rep. by s. 65, ibid.
107.[Resale on
buyer’s failure to perform.] Rep. by s. 65,ibid. [TITLE.] Rep. by s. 65, ibid.
108. [Title
conveyed by seller of goods to buyer.] Rep. by s. 65,ibid. [WARRANTY.] Rep. by
s. 65, ibid.
109.[Seller’s
responsibility for badness of title.] Rep. by s. 65,ibid.
110. [Establishment of implied warranty of
goodness or quality.] Rep. by s. 65,ibid.
111. [Warranty
of soundness implied on sale of provisions.] Rep. by s. 65,ibid.
112. [Warranty of bulk implied on sale of
goods by sample.] Rep. by s. 65,ibid.
113.[Warranty
implied where goods are sold as being of a certain denomination.] Rep. by s.
65,ibid.
114. [Warranty
where goods ordered for a specified purpose.] Rep. by s. 65,ibid.
115.[Warranty on
sale of article of well known ascertained kind.] Rep. by s. 65,ibid.
116. [Seller when not responsible for latent
defects.] Rep. by s. 65,ibid.
117. [Buyer’s right
on breach of warranty.] Rep. by s. 65,ibid.
118. [Right of
buyer on breach of warranty in respect of goods not ascertained.] Rep. by s.
65,ibid. [MISCELLANEOUS.] Rep. by s. 65, ibid.
119. [When buyer
may refused to accept, if goods not ordered are sent with goods ordered.]Rep.
by s. 65, ibid.
120. [Effect of
wrongful refusal to accept.] Rep. by s. 65,ibid.
121. [Right of
seller as to rescission, on failure of buyer to pay price at time fixed.]
Rep.by the Indian Sale of Goods Act, 1930 (3 of 1930), s.65.
122. [Sale and transfer of lots sold by
auction.] Rep. by s. 65,ibid.
123. [Effect of
use, by seller, of pretended biddings to raise price.] Rep. by s. 65,ibid.
CHAPTER
VIII OF INDEMNITY AND GUARANTEE
124.“Contract of indemnity”
—A contract by
which one party promises to save the other from loss caused to him by the
contract of the promisor himself, or by the conduct of any other person, is
called a “contract of indemnity”.
Illustration
A contracts to
indemnify B against the consequences of any proceedings which C may take
against B in respect of a certain sum of 200 rupees. This is a contract of
indemnity.
125.Rights of indemnity-holder when sued.—The promisee
in a contract of indemnity, acting within the scope of his authority, is entitled
to recover from the promisor—
(1) all damages which he may be compelled to
pay in any suit in respect of any matter to which the promise to indemnify
applies;
(2) all costs which he may be compelled to pay
in any such suit if, in bringing or defending it, he did not contravene the
orders of the promisor, and acted as it would have been prudent for him to act
in the absence of any contract of indemnity, or if the promisor authorized him
to bring or defend the suit;
(3) all sums
which he may have paid under the terms of any compromise of any such suit, if
the compromise was not contrary to the orders of the promisor, and was one
which it would have been prudent for the promisee to make in the absence of any
contract of indemnity, or if the promisor authorized him to compromise the
suit.
126. “Contract of guarantee”, “surety”, “principal debtor” and
“creditor”.—
A “contract of
guarantee” is a contract to perform the promise, or discharge the liability, of
a third person in case of his default. The person who gives the guarantee is
called the “surety”; the person in respect of whose default the guarantee is
given is called the “principal debtor”, and the person to whom the guarantee is
given is called the “creditor”. A guarantee may be either oral or written.
127. Consideration for guarantee.—
Anything done,
or any promise made, for the benefit of the principal debtor, may be a
sufficient consideration to the surety for giving the guarantee.
Illustrations
(a) B requests A to sell and deliver to him
goods on credit. A agrees to do so, provided C will guarantee the payment of
the price of the goods. C promises to guarantee the payment in consideration of
A‟s promise to
deliver the goods. This is a sufficient consideration for C‟s
promise.
(b) A sells and
delivers goods to B. C afterwards requests A to forbear to sue B for the debt
for a year, and promises that, if he does so, C will pay for them in default of
payment by B. A agrees to forbear as requested. This is a sufficient
consideration for C‟s promise.
(c) A sells and delivers goods to B. C
afterwards, without consideration, agrees to pay for them in default of B. The
agreement is void.
128. Surety’s liability.—
The liability of
the surety is co- extensive with that of the principal debtor, unless it is
otherwise provided by the contract.
Illustration
A guarantees to B the payment of a bill of
exchange by C, the acceptor. The bill is dishonoured by C. A is liable, not
only for the amount of the bill, but also for any interest and charges which
may have become due on it.
129. “Continuing guarantee”.—
A guarantee
which extends to a series of transactions, is called a “continuing guarantee”.
Illustrations
(a) A, in consideration that B will employ C
in collecting the rent of B‟s zamindari,
promises B to be responsible, to the amount of 5,000 rupees, for the due
collection and payment by C of those rents. This is a continuing guarantee.
(b) A guarantees
payment to B, a tea-dealer, to the amount of £100, for any tea he may from time
to time supply to C. B supplies C with tea to above the value of £100, and C
pays B for it. Afterwards, B supplies C with tea to the value of £200. C fails
to pay. The guarantee given by A was a continuing guarantee, and he is
accordingly liable to B to the extent of £100.
(c) A guarantees payment to B of the price of
five sacks of flour to be delivered by B to C and to be paid for in a month. B
delivers five sacks to C. C pays for them. Afterwards B delivers four sacks to
C, which C does riot pay for. The guarantee given by A was not a continuing
guarantee, and accordingly he is not liable for the price of the four sacks.
130.Revocation of continuing guarantee.—
A continuing guarantee
may at any time be revoked by the surety, as to future transactions, by notice
to the creditor.
Illustrations
(a) A, in consideration of B‟s
discounting, at A‟s request, bills
of exchange for C, guarantees to B, for twelve months, the due payment of all
such bills to the extent of 5,000 rupees. B discounts bills for C to the extent
of 2,000 rupees. Afterwards, at the end of three months, A revokes the
guarantee. This revocation discharges A from all liability to B for any
subsequent discount. But A is liable to B for the 2,000 rupees, on default of
C.
(b) A guarantees
to B, to the extent of 10,000 rupees, that C shall pay all the bills that B
shall draw upon him. B draws upon C. C accepts the bill. A gives notice of
revocation. C dishonours the bill at maturity. A is liable upon his guarantee.
131.Revocation of continuing guarantee by surety’s death.—
The death of the
surety operates, in the absence of any contract to the contrary, as a
revocation of a continuing guarantee, so far as regards future transactions.
132. Liability of two persons, primarily liable, not affected by
arrangement between them that one shall be surety on other’s default.—
Where two
persons contract with a third person to undertake a certain liability, and also
contract with each other that one of them shall be liable only on the default
of the other, the third person not being a party to such contract, the
liability of each of such two persons to the third person under the first
contract is not affected by the existence of the second contract, although such
third person may have been aware of its existence. Illustration A and B make a
joint and several promissory note to C. A makes it, in fact, as surety for B,
and C knows this at the time when the note is made. The fact that A, to the
knowledge of C, made the note as surety for B, is no answer to a suit by C
against A upon the note.
133.Discharge of surety by variance in terms of contract.—
Any variance,
made without the surety‟s consent, in
the terms of the contract between the principal 1 [debtor] and the creditor,
discharges the surety as to transactions subsequent to the variance.
Illustrations
(a) A becomes
surety to C for B‟s conduct as a
manager in C‟s bank.
Afterwards, B and C contract, without A‟s consent, that
B‟s salary shall
be raised, and that he shall become liable for one-fourth of the losses on
overdrafts. B allows a customer to overdraw, and the bank loses a sum of money.
A is discharged from his suretyship by the variance made without his consent,
and is not liable to make good this loss.
(b) A guarantees
C against the misconduct of B in an office to which B is appointed by C, and of
which the duties are defined by an Act of the Legislature. By a subsequent Act,
the nature of the office is materially altered. Afterwards, B misconducts
himself. A is discharged by the change from future liability under his
guarantee, though the misconduct of B is in respect of a duty not affected by
the later Act.
(c) C agrees to
appoint B as his clerk to sell goods at a yearly salary, upon A‟s
becoming surety to C for B‟s duly
accounting for moneys received by him as such clerk. Afterwards, without A‟s
knowledge or consent, C and B agree that B should be paid by a commission on
the goods sold by him and not by a fixed salary. A is not liable for subsequent
misconduct of B.
(d) A gives to C
a continuing guarantee to the extent of 3,000 rupees for any oil supplied by C
to B on credit. Afterwards B becomes embarrassed, and, without the knowledge of
A, B and C contract that C shall continue to supply B with oil for ready money,
and that the payments shall be applied to the then, existing debts between B
and C. A is not liable on his guarantee for any goods supplied after: this new
arrangement.
(e) C contracts
to lend B 5,000 rupees on the 1st March. A guarantees repayment. C pays the
5,000 rupees to B on the 1st January. A is discharged from his liability, as
the contract has been varied, inasmuch as C might sue B for the money before
the 1st of March.
134.Discharge of surety by release or discharge of principal
debtor.—
The surety is
discharged by any contract between the creditor and the principal debtor, by
which the principal debtor is released, or by any act or omission of the
creditor, the legal consequence of which is the discharge of the principal
debtor.
Illustrations
(a) A gives a guarantee to C for goods to be
supplied by C to B. C supplies goods to B, and afterwards B becomes embarrassed
and contracts with his creditors (including C) to assign to them his property
in consideration of their releasing him from their demands. Here B is released
from his debt by the contract with C, and A is discharged from his suretyship.
(b) A contracts
with B to grow a crop of indigo on A‟s land and to
deliver it to B at a fixed rate, and C guarantees A‟s
performance of this contract. B diverts a stream of water which is necessary
for the irrigation of A‟s land and
thereby prevents him from raising the indigo. C is no longer liable on his
guarantee.
(c) A contracts
with B for a fixed price to build a house for B within a stipulated time, B
supplying the necessary timber. C guarantees A‟s
performance of the contract. B omits to supply the timber. C is discharged from
his suretyship.
135. Discharge of surety when creditor compounds with, gives
time to, or agrees not to sue, principal debtor.—A contract
between the creditor and the principal debtor, by which the creditor makes a
composition with, or promises to give time to, or not to sue, the principal
debtor, discharges the surety, unless the surety assents to such contract.
136. Surety not discharged when agreement made with third person to
give time to principal debtor.—
Where a contract
to give time to the principal debtor is made by the creditor with a third
person, and not with the principal debtor, the surety is not discharged.
Illustration C, the holder of an overdue bill of exchange drawn by A as surety
for B, and accepted by B, contracts with M to give time to B. A is not
discharged.
137. Creditor’s forbearance to sue does not discharge surety.—
Mere forbearance
on the part of the creditor to sue the principal debtor or to enforce any other
remedy against him does not, in the absence of any provision in the guarantee
to the contrary, discharge the surety.
Illustration
B owes to C a
debt guaranteed by A. The debt becomes payable. C does not sue B for a year
after the debt has become payable. A is not discharged from his suretyship.
138.Release of one co-surety does not discharge others.—
Where there are
co-sureties, a release by the creditor of one of them does not discharge the
others; neither does it free the surety so released from his responsibility to
the other sureties .
139. Discharge of surety by creditor’s act or omission impairing
surety’s eventual remedy.—
If the creditor
does any act which is inconsistent with the rights of the surety, or omits to
do any act which his duty to the surety requires him to do, and the eventual
remedy of the surety himself against the principal debtor is thereby impaired,
the surety is discharged.
Illustrations
(a) B contracts to build a ship for C for a
given sum, to be paid by instalments as the work reaches certain stages. A
becomes surety to C for B‟s due
performance of the contract. C, without the knowledge of A, prepays to B the
last two instalments. A is discharged by this prepayment.
(b) C lends money to B on the security of a
joint and several promissory note made in C‟s
favour by B, and by A as surety for B, together with a bill of sale of B‟s
furniture, which gives power to C to sell the furniture, and apply the proceeds
in discharge of the note. Subsequently, C sells the furniture, but, owing to
his misconduct and wilful negligence, only a small price is realized. A is
discharged from liability on the note.
(c) A puts M as apprentice to B, and gives a
guarantee to B for M‟s fidelity. B
promises on his part that he will, at least once a month, see M make up the
cash. B omits to see this done as promised, and M embezzles. A is not liable to
B on his guarantee.
140.Rights of surety on payment or performance.—
Where a
guaranteed debt has become due, or default of the principal debtor to perform a
guaranteed duty has taken place, the surety upon payment or performance of all
that he is liable for, is invested with all the rights which the creditor had
against the principal debtor.
141.Surety’s right to benefit
of creditor’s securities.—
A surety is
entitled to the benefit of every security which the creditor has against the
principal debtor at the time when the contract of suretyship is entered into,
whether the surety knows of the existence of such security or not; and if the
creditor loses, or, without the consent of the surety, parts with such
security, the surety is discharged to the extent of the value of the security.
Illustrations
(a)C, advances
to B, his tenant, 2,000 rupees on the guarantee of A. C has also a further
security for the 2,000 rupees by a mortgage of B‟s
furniture. C cancels the mortgage. B becomes insolvent and C sues A on his
guarantee. A is discharged from liability to the amount of the value of the
furniture.
(b)C, a
creditor, whose advance to B is secured by a decree, receives also a guarantee
for that advance from A. C afterwards takes B‟s
goods in execution under the decree, and then, without the knowledge of A,
withdraws the execution. A is discharged.
(c)A, as surety for B, makes a bond jointly
with B to C, to secure a loan from C to B. Afterwards, C obtains from B a
further security for the same debt. Subsequently, C gives up the further
security. A is not discharged.
142. Guarantee obtained by misrepresentation invalid.—
Any guarantee
which has been obtained by means of misrepresentation made by the creditor, or
with his knowledge and assent, concerning a material part of the transaction,
is invalid.
143. Guarantee obtained by
concealment invalid.—
Any guarantee
which the creditor has obtained by means of keeping silence as to material
circumstances, is invalid.
Illustrations
(a)A engages B
as clerk to collect money for him. B fails to account for some of his receipts,
and A in consequence calls upon him to furnish security for his duly
accounting. C gives his guarantee for B‟s duly accounting.
A does not acquaint C with B‟s previous
conduct. B afterwards makes default. The guarantee is invalid.
(b)A guarantees
to C payment for iron to be supplied by him to B to the amount of 2,000 tons. B
and C have privately agreed that B should pay five rupees per ton beyond the
market price, such excess to be applied in liquidation of an old debt. This
agreement is concealed from A. A is not liable as a surety.
144. Guarantee on contract that creditor shall not act on it until
co-surety joins.—
Where a person
gives a guarantee upon a contract that the creditor shall not act upon it until
another person has joined in it as co-surety, the guarantee is not valid if
that other person does not join.
145.Implied promise to indemnify surety.—
In every
contract of guarantee there is an implied promise by the principal debtor to
indemnify the surety, and the surety is entitled to recover from the principal
debtor whatever sum he has rightfully paid under the guarantee, but, no sums
which he has paid wrongfully.
Illustrations
(a)B is indebted to C, and A is surety for the
debt. C demands payment from A, and on his refusal sues him for the amount. A
defends the suit, having reasonable grounds for doing so, but is compelled to
pay the amount of the debt with costs. He can recover from B the amount paid by
him for costs, as well as the principal debt.
(b)C lends B a sum of money, and A, at the
request of B, accepts a bill of exchange drawn by B upon A to secure the
amount. C, the holder of the bill, demands payment of it from A, and, on A‟s
refusal to pay, sues him upon the bill. A, not having reasonable grounds for so
doing, defends the suit, and has to pay the amount of the bill and costs. He
can recover from B the amount of the bill, but not the sum paid for costs, as
there was no real ground for defending the action.
(c)A guarantees
to C, to the extent of 2,000 rupees, payment for rice to be supplied by C to B.
C supplies to B rice to a less amount than 2,000 rupees, but obtains from A
payment of the sum of 2,000 rupees in respect of the rice supplied. A cannot
recover from B more than the price of the rice actually supplied.
146. Co-sureties liable to contribute equally.—
Where two or
more persons are co-sureties for the same debt or duty, either jointly or
severally, and whether under the same or different contracts, and whether with
or without the knowledge of each other, the co-sureties, in the absence of any
contract to the contrary, are liable, as between themselves, to pay each an
equal share of the whole debt, or of that part of it which remains unpaid by
the principal debtor .
Illustrations
(a)A, B and C
are sureties to D for the sum of 3,000 rupees lent to E. E makes default in
payment. A, B and C are liable, as between themselves, to pay 1,000 rupees
each.
(b)A, B and C
are sureties to D for the sum of 1,000 rupees lent to E, and there is a
contract between A, B and C that A is to be responsible to the extent of
one-quarter, B to the extent of one- quarter, and C to the extent of one-half.
E makes default in payment. As between the sureties, A is liable to pay 250
rupees, B 250 rupees, and C 500 rupees.
147.Liability of co-sureties bound in different sums.—
Co-sureties who
are bound in different sums are liable to pay equally as far as the limits of
their respective obligations permit.
Illustrations
(a)A, B and C,
as sureties for D, enter into three several bonds, each in a different penalty,
namely, A in the penalty of each 10,000 rupees, B in that of 20,000 rupees, C
in that of 40,000 rupees, conditioned for D‟s
duly accounting to E. D makes default to the extent of 30,000 rupees. A, B and
C are each liable to pay 10,000 rupees.
(b)A, B and C,
as sureties for D, enter into three several bonds, each in a different penalty,
namely, A in the penalty of 10,000 rupees, B in that of 20,000 rupees, C in
that of 40,000 rupees, conditioned for D‟s duly
accounting to E. D makes default to the extent of 40,000 rupees. A is liable to
pay 10,000 rupees, and B and C 15,000 rupees each.
(c)A, B and C, as sureties for D, enter into
three several bonds, each in a different penalty, namely, A in the penalty of
10,000 rupees, B in that of 20,000 rupees, C in that of 40,000 rupees,
conditioned for D‟s duly
accounting to E. D makes default to the extent of 70,000 rupees. A, B and C
have to pay each the full penalty of his bond.
CHAPTER
IX OF BAILMENT
148.“Bailment”“bailor” and
“bailee”
—A “bailment” is
the delivery of goods by one person to another for some purpose, upon a
contract that they shall, when the purpose is accomplished, be returned or
otherwise disposed of according to the directions of the person delivering
them.
The person
delivering the goods is called the “bailor”. The person to whom they are
delivered is called, the “bailee”.
Explanation.—If a person already in possession
of the goods of another contracts to hold them as a bailee, he thereby becomes
the bailee, and the owner becomes the bailor of such goods, although they may
not have been delivered by way of bailment.
149. Delivery to bailee how made.—
The delivery to
the bailee may be made by doing anything which has the effect of putting the
goods in the possession of the intended bailee or of any person authorized to
hold them on his behalf.
150.Bailor’s duty to disclose faults in goods bailed.—
The bailor is
bound to disclose to the bailee faults in the goods bailed, of which the bailor
is aware, and which materially interfere with the use of them, or expose the
bailee to extraordinary risks; and if he does not make such disclosure, he is
responsible for damage arising to the bailee directly from such faults. If the
goods are bailed for hire, the bailor is responsible for such damage, whether
he was or was not aware of the existence of such faults in the goods bailed.
Illustrations
(a)A lends a horse, which he knows to be
vicious, to B. He does not disclose the fact that the horse is vicious. The
horse runs away. B is thrown and injured. A is responsible to B for damage
sustained.
(b)A hires a
carriage of B. The carriage is unsafe, though B is not aware of it, and A is
injured. B is responsible to A for the injury.
151. Care to be taken by
bailee.—
In all cases of
bailment the bailee is bound to take as much care of the goods bailed to him as
a man of ordinary prudence would, under similar circumstances, take of his own
goods of the same bulk, quality and value as the goods bailed
152.Bailee when not liable
for loss, etc., of thing bailed.—
The bailee, in
the absence of any special contract, is not responsible for the loss,
destruction or deterioration of the thing bailed, if he has taken the amount of
care of it described in section 151.
153. Termination of bailment by bailee’s act inconsistent with
conditions.—
A contract of
bailment is avoidable at the option of the bailor, if the bailee does any act
with regard to the goods bailed, inconsistent with the conditions of the bailment.
Illustration A lets to B, for hire, a horse for his own riding. B drives the
horse in his carriage. This is, at the „option of A, a termination of the
bailment.
154. Liability of bailee
making unauthorized use of goods bailed.—
If the bailee
makes any use of the goods bailed which is not according to the conditions of
the bailment, he is liable to make compensation to the bailor for any damage
arising to the goods from or during such use of them.
Illustrations
(a)A lends a horse to B for his own riding
only. B allows C, a member of his family, to ride the horse. C rides with care,
but the horse accidentally falls and is injured. B is liable to make
compensation to A for the injury done to the horse.
(b)A hires a
horse in Calcutta from B expressly to march to Benares. A rides with due care,
but marches to Cuttack instead. The horse accidentally falls and is injured. A
is liable to make compensation to B for the injury to the horse.
155. Effect of mixture, with bailor’s consent, of his goods with
bailee’s.—
If the bailee,
with the consent of the bailor, mixes the goods of the bailor with his own
goods, the bailor and the bailee shall have an interest, in proportion to their
respective shares, in the mixture thus produced.
156.Effect of mixture without
bailor’s consent, when the goods can be separated.—
If the bailee,
without the consent of the bailor, mixes the goods of the bailor with his own
goods, and the goods can be separated or divided, the property in the goods
remains in the parties respectively; but the bailee is bound to bear the
expense of separation or division, and any damage arising from the mixture.
Illustration
A bails 100
bales of cotton marked with a particular mark to B. B, without A‟s
consent, mixes the 100 bales with other bales of his own, bearing a different
mark: A is entitled to have his 100 bales returned, and B is bound to bear all
the expense incurred in the separation of the bales, and any other incidental
damage.
157. Effect of mixture, without bailor’s consent, when the goods
cannot be separated.—
If the bailee,
without the consent of the bailor, mixes the goods of the bailor with his own
goods, in such a manner that it is impossible to separate the goods bailed from
the other goods, and deliver them back, the bailor is entitled to be
compensated by the bailee for the loss of the goods.
Illustration
A bails a barrel of Cape flour worth Rs. 45 to
B. B, without A‟s consent, mixes
the flour with country flour of his own, worth only Rs. 25 a barrel. B must
compensate A for the loss of his flour.
158. Repayment, by bailor, of necessary expenses.—
Where, by the
conditions of the bailment, the goods are to be kept or to be carried, or to
have work done upon them by the bailee for the bailor, and the bailee is to
receive no remuneration, the bailor shall repay to the bailee the necessary
expenses incurred by him for the purpose of the bailment.
159.Restoration of goods lent gratuitously.—
The lender of a
thing for use may at any time require its return, if the loan was gratuitous,
even though he lent it for a specified time or purpose. But if, on the faith of
such loan made for a specified time or purpose, the borrower has acted in such
a manner that the return of the thing lent before the time agreed upon would
cause him loss exceeding the benefit actually derived by him from the loan, the
lender must, if he compels the return, indemnify the borrower for the amount in
which the loss so occasioned exceeds the benefit so derived.
160.Return of goods bailed, on expiration of time or accomplishment
of purpose.—
It is the duty
of the bailee to return, or deliver according to the bailor‟s
directions, the goods bailed, without demand, as soon as the time for which
they were bailed has expired, or the purpose for which they were bailed has been
accomplished.
161. Bailee’s responsibility when goods are not duly returned.—
If, by the
default of the bailee, the goods are not returned, delivered or tendered at the
proper time, he is responsible to the bailor for any loss, destruction or
deterioration of the goods from that time.
162. Termination of gratuitous bailment by death.—
A gratuitous
bailment is terminated by the death either of the bailor or of the bailee.
163. Bailor entitled to increase or profit from goods bailed.—
In the absence
of any contract to the contrary, the bailee is bound to deliver to the bailor,
or according to his directions, any increase or profit which may have accrued
from the goods bailed.
Illustration
A leaves a cow in the custody of B to be taken
care of. The cow has a calf. B is bound to deliver the calf as well as the cow
to A.
164. Bailor’s responsibility to bailee.—
The bailor is
responsible to the bailee for any loss which the bailee may sustain by reason
that the bailor was not entitled to make the bailment, or to receive back the
goods, or to give directions respecting them.
165.Bailment by several joint owners.—
If several joint
owners of goods bail them, the bailee may deliver them back to, or according to
the directions of, one joint owner without the consent of all in the absence of
any agreement to the contrary.
166.Bailee not responsible on re-delivery to bailor without title.—If the bailor
has no title to the goods, and the bailee, in good faith, delivers them back
to, or according to the directions of, the bailor, the bailee is not
responsible to the owner in respect of such delivery1 .
167.Right of third person claiming goods bailed.—If a person,
other than the bailor, claims goods bailed he may apply to the Court to stop
the delivery of the goods to the bailor, and to decide the title to the goods.
168.Right of finder of goods, may sue for specific reward offered.—The finder of
goods has no right to sue the owner for compensation for trouble and expense
voluntarily incurred by him to preserve the goods and to find out the owner;
but he may retain the goods against the owner until he receives such
compensation; and, where the owner has offered a specific reward for the return
of goods lost, the finder may sue for such reward, and may retain the goods
until he receives it.
169.When finder of thing
commonly on sale may sell it.—When
a thing which is commonly the subject of sale is lost, if the owner cannot with
reasonable diligence be found, or if he refuses, upon demand, to pay the lawful
charges of the finder, the finder may sell it—
(1) when the
thing is in danger of perishing or of losing the greater part of its value, or,
(2) when the
lawful charges of the finder, in respect of the thing found, amount to
two-thirds of its value.
170. Bailee’s particular lien.—Where the bailee has, in
accordance with the purpose of the bailment, rendered any service involving the
exercise of labour or skill in respect of the goods bailed, he has, in the
absence of a contract to the contrary, a right to retain such goods until he
receives due remuneration for the services he has rendered in respect of them.
Illustrations
(a) A delivers a rough diamond to B, a
jeweller, to be cut and polished, which is accordingly done. B is entitled to
retain the stone till he is paid for the services he has rendered.
(b) A gives,
cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as
soon as it is finished, and to give a three months‟
credit for the price. B is not entitled to retain the coat until he is paid.
171.General lien of bankers, factors, wharfingers, attorneys and
policy-brokers.—Bankers,
factors, wharfingers, attorneys of a High Court and policy-brokers may, in the
absence of a contract to the contrary, retain as a security for a general
balance of account, any goods bailed to them; but no other persons have a right
to retain, as a security for such balance, goods bailed to them, unless there
is an express contract to that effect1 .
Bailments
of Pledges
172.“Pledge”“pawnor”,and
“pawnee”.—The
bailment of goods as security for payment of a debt or performance of a promise
is called “pledge”. The bailor is in this case called the “pawnor”. The bailee
is called the “pawnee”.
173.Pawnee’s right of
retainer.—The
pawnee may retain the goods pledged, not only for payment of the debt or the
performance of the promise, but for the interest of the debt, and all necessary
expenses incurred by him in respect of the possession or for the preservation
of the goods pledged.
174.Pawnee not to retain for debt or promise other than that for
which goods pledged. Presumption in case of subsequent advances.—
The pawnee shall
not, in the absence of a contract to that effect, retain the goods pledged for
any debt or promise other than the debt or promise for which they are pledged;
but such contract, in the absence of anything to the contrary, shall be
presumed in regard to subsequent advances made by the pawnee.
175. Pawnee’s right as to extraordinary
expenses incurred.—
Thepawnee is
entitled to receive from the pawnor extraordinary expenses incurred by him for
the preservation of the goods pledged.
176. Pawnee’s right where pawnor makes default.—
If the pawnor
makes default in payment of the debt, or performance, at the stipulated time of
the promise, in respect of which the goods were pledged, the pawnee may bring a
suit against the pawnor upon the debt or promise, and retain the goods pledged
as a collateral security; or he may sell the thing pledged, on giving the
pawnor reasonable notice of the sale. If the proceeds of such sale are less
than the amount due in respect of the debt or promise, the pawnor is still
liable to pay the balance. If the proceeds of the sale are greater than the amount
so due, the pawnee shall pay over the surplus to the pawnor.
177. Defaulting pawner’s right to redeem.—
If a time is
stipulated for the payment of the debt, or performance of the promise, for
which the pledge is made, and the pawnor makes default in payment of the debt
or performance of the promise at the stipulated time, he may redeem the goods
pledged at any subsequent time before the actual sale of them2 ; but he must,
in that case, pay, in addition, any expenses which have arisen from his
default.
178. Pledge by mercantile agent.—Where a
mercantile agent is, with the consent of the owner, in possession of goods or
the document of title to goods, any pledge made by him, when acting in the
ordinary course of business of a mercantile agent, shall be as valid as if he
were expressly authorised by the owner of the goods to make the same; provided
that the pawnee acts in good faith and has not at the time of the pledge notice
that the pawnor has not authority to pledge.
Explanation.—In this section, the expressions
“mercantile agent” and “documents of title” shall have the meanings assigned to
them in the Indian Sale of Goods Act, 1930 (3 of 1930). 178A. Pledge by person
in possession under voidable contract.—
When the pawnor
has obtained possession of the goods pledged by him under a contract voidable
under section 19 or section 19A, but the contract has not been rescinded at the
time of the pledge, the pawnee acquires a good title to the goods, provided he
acts in good faith and without notice of the pawnor‟s
defect of title.]
179. Pledge where pawnor has only a limited interest.—Where a person
pledges goods in which he has only a limited interest, the pledge is valid to
the extent of that interest. Suits by bailees or bailors against wrong-doers
180.Suit by bailor or bailee against wrong-doer.—If a third
person wrongfully deprives the bailee of the use or possession of the goods
bailed, or does them any injury, the bailee is entitled to use such remedies as
the owner might have used in the like case if no bailment had been made; and
either the bailor or the bailee may bring a suit against a third person for
such deprivation or injury.
181. Apportionment of relief or compensation obtained by such suits.—Whatever is
obtained by way of relief or compensation in any such suit shall, as between
the bailor and the bailee, be dealt with according to their respective
interests.
CHAPTER X AGENCY
Appointment
and authority of agents
182.“Agent” and “principal”
—An “agent” is a
person employed to do any act for another, or to represent another in dealings
with third persons. The person for whom such act is done, or who is so
represented, is called the “principal”.
183. Who may employ agent.—Any person who is of the age of
majority according to the law to which he is subject, and who is of sound mind,
may employ an agent.
184. Who may be an agent.—As between the principal and
third persons, any person may become an agent, but no person who is not of the
age of majority and of sound mind can become an agent, so as to be responsible
to his principal according to the provisions in that behalf herein contained.
185. Consideration not necessary.—No
consideration is necessary to create an agency.
186. Agent’s authority may be expressed or implied.—The authority
of an agent may be expressed or implied1 .
187. Definitions of express and implied authority.—An authority
is said to be express when it is given by words spoken or written. An authority
is said to be implied when it is to be inferred from the circumstances of the
case; and things spoken or written, or the ordinary course of dealing, may be
accounted circumstances of the case.
Illustration
A owns a shop in Serampore, living himself in
Calcutta, and visiting the shop occasionally. The shop is managed by B, and he
is in the habit of ordering goods from C in the name of A for the purposes of
the shop, and of paying for them out of A‟s funds with A‟s
knowledge. B has an implied authority from A to order goods from C in the name
of A for the purposes of the shop.
188. Extent of agent’s authority.—An agent,
having an authority to do an act, has authority to do every lawful thing which
is necessary in order to do such act. An agent having an authority to carry on
a business, has authority to do every lawful thing necessary for the purpose,
or usually done in the course, of conducting such business.
Illustrations
(a) A is employed by B, residing in London, to
recover at Bombay a debt due to B. A may adopt any legal process necessary for
the purpose of recovering the debt, and may give a valid discharge for the
same.
(b) A constitutes B his agent to carry on his
business of a ship-builder. B may purchase timber and other materials, and hire
workmen, for the purpose of carrying on the business.
189.Agent’s authority in an emergency.—An agent has
authority, in an emergency, to do all such acts for the purpose of protecting
his principal from loss as would be done by a person of ordinary prudence, in
his own case, under similar circumstances.
Illustrations
(a) An agent for
sale may have goods repaired if it be necessary.
(b) A consigns provisions to B at Calcutta,
with directions to send them immediately to C, at Cuttack. B may sell the
provisions at Calcutta, if they will not bear the journey to Cuttack without
spoiling.
Sub-Agents
190. When agent cannot delegate.—An agent cannot
lawfully employ another to perform acts which he has expressly or impliedly
undertaken to perform personally, unless by the ordinary custom of trade a
sub-agent may, or, from the nature of the agency, a sub-agent must, be
employed.
191. “Sub-agent” defined.—A “sub-agent” is a person
employed by, and acting under the control of, the original agent in the
business of the agency.
192. Representation of principal by sub-agent properly appointed.—Where a
sub-agent is properly appointed, the principal is, so far as regards third
persons, represented by the sub-agent, and is bound by and responsible for his
acts, as if he were an agent originally appointed by the principal.
Agent’s responsibility for sub-agent.—The
agent is responsible to the principal for the acts of the sub-agent.
Sub-agent’s
responsibility.—The sub-agent is responsible for his acts to the agent, but not
tothe principal, except in cases of fraud or wilful wrong.
193. Agent’s responsibility for sub-agent appointed without
authority.—Where
an agent, without having authority to do so, has appointed a person to act as a
sub-agent, the agent stands towards such person in the relation of a principal
to an agent, and is responsible for his acts both to the principal and to third
persons; the principal is not represented, by or responsible for the acts of
the person so employed, nor is that person responsible to the principal.
194.Relation between
principal and person duly appointed by agent to act in business of agency.—Where an
agent, holding an express or implied authority to name another person to act
for the principal in the business of the agency, has named another person
accordingly, such person is not a sub-agent, but an agent of the principal for
such part of the business of the agency as is entrusted to him.
Illustrations
(a)A directs B,
his solicitor, to sell his estate by auction, and to employ an auctioneer for
the purpose. B names C, an auctioneer, to conduct the sale. C is not a
sub-agent, but is A‟s agent for the
conduct of the sale.
(b)A authorizes B, a merchant in Calcutta, to
recover the moneys due to A from C & Co. B instructs D, a solicitor, to
take legal proceedings against C & Co. for the recovery of the money. D is
not a sub-agent, but is solicitor for A.
195. Agent’s duty in naming such person.—In selecting
such agent for his principal, an agent is bound to exercise the same amount of
discretion as a man of ordinary prudence would exercise in his own case; and,
if he does this, he is not responsible to the principal for the acts or
negligence of the agent so selected.
Illustrations
(a)A instructs
B, a merchant, to buy a ship for him. B employs a ship-surveyor of good
reputation to choose a ship for A. The surveyor makes the choice negligently
and the ship turns out to be unseaworthy and is lost. B is not, but the
surveyor is, responsible to A.
(b)A consigns
goods to B, a merchant, for sale. B, in due course, employs an auctioneer in
good credit to sell the goods of A, and allows the auctioneer to receive the
proceeds of the sale. The auctioneer afterwards becomes insolvent without having
accounted for the proceeds. B is not responsible to A for the proceeds.
Ratification
196. Right of person as to acts done for him without his authority.
Effect of ratification.— Where acts are done
by one person on behalf of another, but without his knowledge or authority, he
may elect to ratify or to disown such acts. If he ratify them, the same effects
will follow as if they had been performed by his authority.
197.Ratification may be expressed or implied.—Ratification
may be expressed or may be implied in the conduct of the person on whose behalf
the acts are done.
Illustrations
(a)A, without authority, buys goods for B.
Afterwards B sells them to C on his own account; B‟s
conduct implies a ratification of the purchase made for him by A.
(b)A, without B‟s
authority, lends B‟s money to C.
Afterwards B accepts interest on the money from C. B‟s
conduct implies a ratification of the loan.
198.Knowledge requisite for valid ratification.—No valid
ratification can be made by a person whose knowledge of the facts of the case
is materially defective.
199.Effect of ratifying unauthorized act forming part of a
transaction.—A
person ratifying any unauthorized act done on his behalf ratifies the whole of
the transaction of which such act formed a part.
200.Ratification of
unauthorized act cannot injure third person.—An act done by
one person on behalf of another, without such other person‟s
authority, which, if done with authority, would have the effect of subjecting a
third person to damages, or of terminating any right or interest of a third
person, cannot, by ratification, be made to have such effect.
Illustrations
(a)A, not being authorized thereto by B,
demands, on behalf of B, the delivery of a chattel, the property of B, from C,
who is in possession of it. This demand cannot be ratified by B, so as to make
C liable for damages for his refusal to deliver.
(b)A holds a
lease from B, terminable on three months‟ notice. C, an
unauthorized person, gives notice of termination to A. The notice cannot be
ratified by B, so as to be binding on A.
Revocation
of Authority
201. Termination of agency.—An agency is terminated by the
principal revoking his authority; or by the agent renouncing the business of
the agency; or by the business of the agency being completed; or by either the
principal or agent dying or becoming of unsound mind; or by the principal being
adjudicated an insolvent under the provisions of any Act for the time being in
force for the relief of insolvent debtors.
202.Termination of agency, where agent has an interest in
subject-matter.—Where
the agent has himself an interest in the property which forms the
subject-matter of the agency, the agency cannot, in the absence of an express
contract, be terminated to the prejudice of such interest.
Illustrations
(a)
A
gives authority to B to sell A‟s land, and to
pay himself, out of the proceeds, the debts due to him from A. A cannot revoke
this authority, nor can it be terminated by his insanity or death.
(b)
A
consigns 1,000 bales of cotton to B, who has made advances to him on such
cotton, and desires B to sell the cotton, and to repay himself out of the
price, the amount of his own advances. A cannot revoke this authority, nor is
it terminated by his insanity or death.
203.When principal may revoke
agent’s authority.—The
principal may, save as is otherwise provided by the last preceding section,
revoke the authority given to his agent at any time before the authority has
been exercised so as to bind the principal.
204.Revocation where authority has been partly exercised.—The principal
cannot revoke the authority given to his agent after the authority has been
partly exercised, so far as regards such acts and obligations as arise from
acts already done in the agency.
Illustrations
(a)A authorizes B to buy 1,000 bales of cotton
on account of A, and to pay for it out of A‟s
moneys remaining in B‟s hands. B buys
1,000 bales of cotton in his own name, so as to make himself personally liable
for the price. A cannot revoke B‟s authority so
far as regards payment for the cotton.
(b) A authorizes B to buy 1,000 bales of
cotton on account of A, and to pay for it out of A‟s
moneys remaining in B‟s hands. B buys
1,000 bales of cotton in A‟s name, and so
as not to render himself personally liable for the price. A can revoke B‟s
authority to pay for the cotton.
205.Compensation for revocation by principal, or renunciation by
agent.—Where
there is an express or implied contract that the agency should be continued for
any period of time, the principal must make compensation to the agent, or the
agent to the principal, as the case may be, for any previous revocation or
renunciation of the agency without sufficient cause.
206. Notice of revocation or
renunciation.—Reasonable
notice must be given of such revocation or renunciation, otherwise the damage
thereby resulting to the principal or the agent, as the case may be, must be
made good to the one by the other.
207.Revocation and
renunciation may be expressed or implied.—Revocation and renunciation may be
expressed or may be implied in the conduct of the principal or agent
respectively. Illustration A empowers B to let A‟s
house. Afterwards A lets it himself. This is an implied revocation of B‟s
authority.
208.When termination of agent’s authority takes effect as to agent,
and as to third persons.—
The termination of the authority of an agent does not, so far as regards the
agent, take effect before it becomes known to him, or, so far as regards third
persons, before it becomes known to them.
Illustrations
(a) A directs B to sell goods for him, and
agrees to give B five per cent. commission on the price fetched by the goods. A
afterwards, by letter, revoke B‟s authority. B,
after the letter is sent, but before he receives it, sells the goods for 100
rupees. The sale is binding on A, and B is entitled to five rupees as his
commission.
(b) A, at Madras, by letter, directs B to sell
for him some cotton lying in a warehouse in Bombay, and afterwards, by letter,
revokes his authority to sell, and directs B to send the cotton to Madras. B,
after receiving the second letter, enters into a contract with C, who knows of
the first letter, but not of the second, for the sale to him of the cotton. C
pays B the money, with which B absconds. C‟s payment is
good as against A.
(c) A directs B, his agent, to pay certain
money to C. A dies, and D takes out probate to his will. B, after A‟s
death, but before hearing of it, pays the money to C. The payment is good as
against D, the executor.
209.Agent’s duty on termination of agency by principal’s death or
insanity.—When
an agency is terminated by the principal dying or becoming of unsound mind, the
agent is bound to take, on behalf of the representatives of his late principal,
all reasonable steps for the protection and preservation of the interests
entrusted to him.
210. Termination of sub-agent’s authority.—The
termination of the authority of an agent causes the termination (subject to the
rules herein contained regarding the termination of an agent‟s
authority) of the authority of all sub-agents appointed by him.
Agent’s
duty to principal
211.Agent’s duty in conducting principal’s business.—An agent is
bound to conduct the business of his principal according to the directions
given by the principal, or, in the absence of any such directions, according to
the custom which prevails in doing business of the same kind at the place where
the agent conducts such business. When the agent acts otherwise, if any loss be
sustained, he must make it good to his principal, and if any profit accrues, he
must account for it.
Illustrations
(a) A, an agent engaged in carrying on for B a
business, in which it is the custom to invest from time to time, at interest,
the moneys which may be in hand, omits to make such investment. A must make
good to B the interest usually obtained by such investments.
(b) B, a broker,
in whose business it is not the custom to sell on credit, sells goods of A on
credit to C, whose credit at the time was very high. C, before payment, becomes
insolvent. B must make good the loss to A.
212. Skill and diligence required from agent.—An agent is
bound to conduct the business of the agency with as much skill as is generally
possessed by persons engaged in similar business, unless the principal has
notice of his want of skill.
The agent is always bound to act with
reasonable diligence, and to use such skill as he possesses; and to make
compensation to his principal in respect of the direct consequences of his own
neglect, want of skill, or misconduct, but not in respect of loss or damage
which are indirectly or remotely caused by such neglect, want of skill, or
misconduct.
Illustrations
(a)A, a merchant in Calcutta, has an agent, B,
in London, to whom a sum of money is paid on A‟s
account, with orders to remit. B retains the money for a considerable time. A,
in consequence of not receiving the money, becomes insolvent. B is liable for
the money and interest from the day on which it ought to have been paid,
according to the usual rate, and for any further direct loss-as, e.g., by
variation of rate of exchange-but not further.
(b)A, an agent
for the sale of goods, having authority to sell on credit, sells to B on
credit, without making the proper and usual enquiries as to the solvency of B.
B, at the time of such sale, is insolvent. A must make compensation to his
principal in respect of any loss thereby sustained.
(c)A, an insurance-broker employed by B to
effect an insurance on a ship, omits to see that the usual clauses are inserted
in the policy. The ship is after wards lost. In consequence of the omission of
the clauses nothing can be recovered from the underwriters. A is bound to make
good the loss to B.
(d)A, a merchant in England, directs B, his
agent at Bombay, who accepts the agency, to send him 100 bales of cotton by a
certain ship. B, having it in his power to send the cotton, omits to do so. The
ship arrives safely in England. Soon after her arrival the price of cotton
rises. B is bound to make good to A the profit which he might have made by the
100 bales of cotton at the time the ship arrived, but not any profit he might
have made by the subsequent rise.
213.Agent’s accounts.—An
agent is bound to render proper accounts to his principal on demand.
214.Agent’s duty to communicate with principal.—It is the duty
of an agent, in cases of difficulty, to use all reasonable diligence in
communicating with his principal, and in seeking to obtain his instructions.
215.Right of principal when
agent deals, on his own account, in business of agency without principal’s
consent.—If
an agent deals on his own account in the business of the agency, without first
obtaining the consent of his principal and acquainting him with all material
circumstances which have come to his own knowledge on the subject, the
principal may repudiate the transaction, if the case shows, either that any
material fact has been dishonestly concealed from him by the agent, or that the
dealings of the agent have been disadvantageous to him.
Illustrations
(a)A directs B
to sell A‟s estate. B buys
the estate for himself in the name of C. A, on discovering that B has bought
the estate for himself, may repudiate the sale, if he can show that B has
dishonestly concealed any material fact, or that the sale has been disadvantageous
to him.
(b)A directs B
to sell A‟s estate B, on
looking over the estate before selling it, finds a mine on the estate which is
unknown to A. B informs A that he wishes to buy the estate for himself, but
conceals the discovery of the mine. A allows B to buy, in ignorance of the
existence of the mine. A, on discovering that B knew of the mine at the time he
bought the estate, may either repudiate or adopt the sale at his option.
216. Principal’s right to benefit gained by agent dealing on his own
account in business of agency.—If
an agent, without the knowledge of his principal, deals in the business of the
agency on his own account instead of on account of his principal, the principal
is entitled to claim from the agent any benefit which may have resulted to him
from the transaction.
Illustration
A directs B, his
agent, to buy a certain house for him. B tells A it cannot be bought, and buys
the house for himself. A may, on discovering that B has bought the house,
compel him to sell it to A at the price he gave for it.
217.Agent’s right of retainer
out of sums received on principal’s account.—An agent may
retain, out of any sums received on account of the principal in the business of
the agency, all moneys due to himself in respect of advances made or expenses
properly incurred by him in conducting such business, and also such
remuneration as may be payable to him for acting as agent.
218. Agent’s duty to pay sums received for principal.—Subject to
such deductions, the agent is bound to pay to his principal all sums received
on his account.
219.When agent’s remuneration becomes due.—In the absence
of any special contract, payment for the performance of any act is not due to
the agent until the completion of such act; but an agent may detain moneys
received by him on account of goods sold, although the whole of the goods
consigned to him for sale may not have been sold, or although the sale may not
be actually complete.
220.Agent not entitled to
remuneration for business misconducted.—An agent who is guilty of
misconduct in the business of the agency, is not entitled to any remuneration
in respect of that part of the business which he has misconducted.
Illustrations
(a) A employs B
to recover, 1,00,000 rupees from C, and to lay it out on good security. B
recovers the 1,00,000 rupees; and lays out 90,000 rupees on good security, but
lays out 10,000 rupees on security which he ought to have known to be bad,
whereby A loses 2,000 rupees. B is entitled to remuneration for recovering the
1,00,000 rupees and for investing the 90,000 rupees. He is not entitled to any
remuneration for investing the 10,000 rupees, and he must make good the 2,000
rupees to B.
(b)A employs B
to recover 1,000 rupees from C. Through B‟s misconduct the
money is not recovered. B is entitled to no remuneration for his services, and
must make good the loss.
221. Agent’s lien on principal’s property.—In the absence
of any contract to the contrary, an agent is entitled to retain goods, papers
and other property, whether movable or immovable of the principal received by
him, until the amount due to himself for commission, disbursements and services
in respect of the same has been paid or accounted for to him.
Principal’s
duty to agent
222.Agent to be indemnified against consequences of lawful acts.—The employer of
an agent is bound to indemnify him against the consequences of all lawful acts
done by such agent in exercise of the authority conferred upon him.
Illustrations
(a)B, at Singapur, under instructions from A
of Calcutta, contracts with C to deliver certain goods to him. A does not send
the goods to B, and C sues B for breach of contract. B informs A of the suit,
and A authorizes him to defend the suit. B defends the suit, and is compelled
to pay damages and costs, and incurs expenses. A is liable to B for such
damages, costs and expenses. (b)B, a broker at Calcutta, by the orders of A, a
merchant there, contracts with C for the purchase of 10 casks of oil for A.
Afterwards A refuses to receive the oil, and C sues B. B informs A, who
repudiates the contract altogether. B defends, but unsuccessfully, and has to
pay damages and costs and incurs expenses. A is liable to B for such damages,
costs and expenses.
223.Agent to be indemnified
against consequences of acts done in good faith.—Where one person
employs another to do an act, and the agent does the act in good faith, the
employer is liable to indemnify the agent against the consequences of that act,
though it cause an injury to the rights of third persons.
Illustrations
(a)A, a decree-holder and entitled to
execution of B‟s goods,
requires the officer of the Court to seize certain goods, representing them to
be the goods of B. The officer seizes the goods, and is sued by C, the true
owner of the goods. A is liable to indemnify the officer for the sum which he
is compelled to pay to C, in consequence of obeying A‟s
directions.
(b)B, at the
request of A, sells goods in the possession of A, but which A had no right to
dispose of, B does not know this, and hands over the proceeds of the sale to A.
Afterwards C, the true owner of the goods, sues B and recovers the value of the
goods and costs. A is liable to indemnify B for what he has been compelled to
pay to C, and for B‟s own expenses.
224.Non-liability of employer
of agent to do a criminal act.—Where
one person employs another to do an act which is criminal, the employer is not
liable to the agent, either upon an express or an implied promise, to indemnify
him against the consequences of that Act1
Illustrations
(a) A employs B to beat C, and agrees to
indemnify him against all consequences of the act. B thereupon beats C, and has
to pay damages to C for so doing. A is not liable to indemnify B for those
damages.
(b)B, the proprietor of a newspaper,
publishes, at A‟s request, a
libel upon C in the paper, and A agrees to indemnify B against the consequences
of the publication, and all costs and damages of any action in respect thereof.
B is sued by C and has to pay damages, and also incurs expenses. A is not
liable to B upon the indemnity.
225.Compensation to agent for injury caused by principal’s neglect.—The principal
must make compensation to his agent in respect of injury2 caused to such agent
by the principal‟s neglect or
want of skill.
Illustration
A employs B as a
bricklayer in building a house, and puts up the scaffolding himself. The
scaffolding is unskilfully put up, and B is in consequence hurt. A must make
compensation to B.
Effect of agency on contracts with third persons
226. Enforcement and consequences of agent’s contracts.—Contracts
entered into through an agent, and obligations arising from acts done by an
agent, may be enforced in the same manner, and will have the same legal
consequences, as if the contracts had been entered into and the acts done by
the principal in person.
Illustrations
(a)A buys goods
from B, knowing that he is an agent for their sale, but not knowing who is the
principal. B‟s principal is
the person entitled to claim from A the price of the goods, and A cannot, in a
suit by the principal, set-off against that claim a debt due to himself from B.
(b)A, being B‟s
agent, with authority to receive money on his behalf, receives from C a sum of
money due to B. C is discharged of his obligation to pay the sum in question to
B.
227. Principal how far bound, when agent exceeds authority.—When
an agent does more than he is authorized to do, and when the part of what he
does, which is within his authority, can be separated from the part which is
beyond his authority, so much only of what he does as is within his authority
is binding as between him and his principal.
Illustration
A, being owner
of a ship and cargo, authorizes B to procure an insurance for 4,000 rupees on
the ship. B procures a policy for 4,000 rupees on the ship, and another for the
like sum on the cargo. A is bound to pay the premium for the policy on the
ship, but not the premium for the policy on the cargo.
228.Principal not bound when
excess of agent’s authority is not separable.—Where an agent
does more than he is authorized to do, and what he does beyond the scope of his
authority cannot be separated from what is within it, the principal is not
bound to recognize the transaction.
Illustration
A authorizes B to buy 500 sheep for him. B
buys 500 sheep and 200 lambs for one sum of 6,000 rupees. A may repudiate the
whole transaction.
229.Consequences of notice given to agent.—Any notice
given to or information obtained by the agent, provided it be given or obtained
in the course of the business transacted by him for the principal, shall, as
between the principal and third parties, have the same legal consequences as if
it had been given to or obtained by the principal.
Illustrations
(a)A is employed by B to buy from C certain
goods, of which C is the apparent owner, and buys them accordingly. In the
course of the treaty for the sale, A learns that the goods really belonged to
D, but B is ignorant of that fact. B is not entitled to set-off a debt owing to
him from C against the price of the goods.
(b)A is employed by B to buy from C goods of
which C is the apparent owner. A was, before he was so employed, a servant of
C, and then learnt that the goods really belonged to D, but B is ignorant of
that fact. In spite of the knowledge of his agent, B may set-off against the
price of the goods a debt owing to him from C.
230.Agent cannot personally enforce, nor be bound by,
contracts on behalf of principal.—In the absence of any contract
to that effect, an agent cannot personally enforce contracts entered into by
him on behalf of his principal, nor is he personally bound by them.
Presumption of contract to contrary—Such a
contract shall be presumed to exist in the following cases:—
(1) where the contract is made by an agent for
the sale or purchase of goods for a merchant resident abroad;
(2) where the
agent does not disclose the name of his principal;
(3) where the principal, though disclosed,
cannot be sued.
231.Rights of parties to a contract made by agent not disclosed.—If an agent makes
a contract with a person who neither knows, nor has reason to suspect, that he
is an agent, his principal may require the performance of the contract; but the
other contracting party has, as against the principal, the same rights as he
would have had as against the agent if the agent had been principal.
If the principal
discloses himself before the contract is completed, the other contracting party
may refuse to fulfil the contract, if he can show that, if he had known who was
the principal in the contract, or if he had known that the agent was not a
principal, he would not have entered into the contract.
232. Performance of contract with agent supposed to be principal.—Where one man
makes a contract with another, neither knowing nor having reasonable ground to
suspect that the other is an agent, the principal, if he requires the
performance of the contract, can only obtain such performance subject to the
rights and obligations subsisting between the agent and the other party to the
contract.
Illustration
A, who owes 500
rupees to B, sells 1,000 rupees worth of rice to B. A is acting as agent for C
in the transaction, but B has no knowledge nor reasonable ground of suspicion that
such is the case. C cannot compel B to take the rice without allowing him to
set-off A‟s debt.
233.Right of person dealing with agent personally liable.—In
cases where the agent is personally liable, a person dealing with him may hold
either him or his principal, or both of them, liable.
Illustration
A enters into a
contract with B to sell him 100 bales of cotton, and afterwards discovers that
B was acting as agent for C. A may sue either B or C, or both, for the price of
the cotton.
234. Consequence of inducing agent or principal to act on belief
that principal or agent will be held exclusively liable.—When a person
who has made a contract with an agent induces the agent to act upon the belief
that the principal only will be held liable, or induces the principal to act
upon the belief that the agent only will be held liable, he cannot afterwards
hold liable the agent or principal respectively.
235. Liability of pretended agent.—A person
untruly representing himself to be the authorized agent of another, and thereby
inducing a third person to deal with him as such agent, is liable, if his
alleged employer does not ratify his acts, to make compensation to the other in
respect of any loss or damage which he has incurred by so dealing.
236.Person falsely contracting as agent not entitled to performance.—A person with
whom a contract has been entered into in the character of agent, is not
entitled to require the performance of it, if he was in reality acting, not as
agent, but on his own account.
237.Liability of principal inducing belief that agent’s unauthorized
acts were authorized.—
When an agent has, without authority, done acts or incurred obligations to
third persons on behalf of his principal, the principal is bound by such acts
or obligations, if he has by his words or conduct induced such third persons to
believe that such acts and obligations were within the scope of the agent‟s
authority.
Illustrations
(a) A consigns
goods to B for sale, and gives him instructions not to sell under a fixed price.
C, being ignorant of B‟s instructions,
enters into a contract with B to buy the goods at a price lower than the
reserved price. A is bound by the contract.
(b) A entrusts B
with negotiable instruments endorsed in blank. B sells them to C in violation
of private orders from A. The sale is good.
238. Effect, on agreement, of
misrepresentation of fraud, by agent.—Misrepresentation made, or frauds
committed, by agents acting in the course of their business for their
principals, have the same effect on agreements made by such agents as if such
misrepresentations or frauds had been made or committed by the principals; but
misrepresentations made, or frauds committed, by agents, in matters which do
not fall within their authority, do not affect their principals.
Illustrations
(a) A, being B‟s
agent for the sale of goods, induces C to buy them by a misrepresentation,
which he was not authorized by B to make. The contract is voidable, as between
B and C, at the option of C.
(b) A, the
captain of B‟s ship, signs
bills of lading without having received on board the goods mentioned therein.
The bills of lading are void as between B and the pretended cosignor.
CHAPTER XI.—[OF PARTNERSHIP.]
Rep. by the
Indian Partnership Act, 1932 (9 of 1932), s. 73 and the Second Schedule.
239.
[„Partnership‟ defined.] Rep.
by s. 73 and the Second Schedule, ibid.
240. [Lender not
a partner by advancing money for share of profits.] Rep. by s. 73 and the
Second Schedule, ibid.
241. [Property
left in business by retiring partner, or decreased partner’s preventative.]
Rep. by s. 73 and the Second Schedule, ibid.
242. [Servant or
agent remunerated by share of profits, not a partner.] Rep. by s. 73 and the
Second Schedule, ibid.
243. [Widow or
child of deceased partner receiving annuity out of profits, not a partner.]
Rep. by s. 73 and the Second Schedule, ibid.
244. [Person
receiving portion of profits for sale of good-will, no a partner.] Rep. by s.
73 and the Second Schedule, ibid.
245.
[Responsibility of person leading another to believe him a partner.] Rep. by s.
73 and the Second Schedule, ibid.
246. [Liability
of person permitting him self to be represented as a partner.] Rep. by s. 73
and the Second Schedule, ibid.
247. [Minor
partner not personally liable, but his share is.] Rep. by s. 73 and the Second
Schedule, ibid.
248. [Liability
of minor partner on attaining majority.] Rep. by s. 73 and the Second Schedule,
ibid
249. [Partner’s
liability for debts of partnership.] Rep. bys. 73 and the Second Schedule,
ibid.
250. [Partner’s
liability to third person for neglect or fraud of co-partner.] Rep. by s. 73
and the Second Schedule, ibid.
251. [Partner’s power to bind co-partners.]
Rep. by s. 73 and the Second Schedule, ibid.
252. [Annulment of contract defining partner’s
rights and obligations.] Rep. by s. 73 and the Second Schedule, ibid.
253. [Rules determining partner’s mutual
relations, where no contract to contrary.] Rep. by s. 73 and the Second
Schedule, ibid.
254. [When Court may dissolve partnership.]
Rep. by s. 73 and the Second Schedule, ibid.
255.
[Dissolution of partnership by prohibition of business.] Rep. by s. 73 and the
Second Schedule, ibid.
256. [Rights and
obligations of partners in partnership continued after expiry of term for which
it was entered into.] Rep. by s. 73 and the Second Schedule, ibid.
257. [General
duties of partners.] Rep. by s. 73 and the Second Schedule, ibid 258. [Account,
to firm, of benefit derived from transaction affecting partnership.]Rep. by s.
73 and the Second Schedule, ibid.
259.
[Obligations, to firm, of partner carrying on business.] Rep. by s. 73 and the
Second Schedule, ibid. 53
260. [Revocation
of continuing guarantee by charge by change in firm.] Rep. by the Indian
Partnership Act, 1932 (9 of 1932), s. 73 and the Second Schedule.
261.
[Non-liability of deceased partner’s estate for subsequent obligations.] Rep.
by s. 73 and the Second Schedule, ibid.
262. [Payment of
partnership debts, and of separate debts.] Rep. by s. 73and the Second
Schedule, ibid.
263. [Continuance,
of partners rights and obligations after dissolution.] Rep. by s. 73and the
Second Schedule, ibid.
264. [Notice of
dissolution.] Rep. by s. 73and the Second Schedule, ibid.
265. [Right of partners to apply for
winding-up after termination of partnership.] Rep. by s. 73 and the Second
Schedule, ibid.
266.
[Limited-liability partnerships, incorporate partnerships, and joint-stock
companies.] Rep. by s. 73and the Second Schedule, ibid.
SCHEDULE.—[Enactments
repealed.] Rep. by the Repealing and Amending Act, 1914 (10 of 1914), s. 3 and
the Second Schedule
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