Business Law-sample Paper With Solutions-updated

8/13/2019 Business Law-sample Paper With Solutions-updated

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Answer key Business Law

BBA 1 ST SEMESTER

Q.1 Define Contract.

Answer - A contract is an agreement that can be enforceable by law. An agreement is an offer and itsacceptance. An agreement which can be enforceable by law must have some essential elements. According toSection 10 "All agreements are contracts if they are made by the free consent of the parties competent tocontract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void"As per the above section, a contract must have the following elements.

Q.2Who are the disqualified persons to contract?

Answer -It refers to statutory disqualification imposed on certain person in respect of their capacity to contract.

1. Alien enemies. An alien is competent to contract with citizens of the Indian living in India. He can maintain as action on

a contract enter onto by him during peace him time. But if a war is declared, an alien enemy cannot enter into acontract with the Indian citizen. Contract entered into before the declaration of war are either stayed orterminated but contract into during the war are unenforceable.2. Foreign sovereigns and ambassadors.

These people are immune from the jurisdiction of local courts, unless they voluntarily submit to its jurisdiction. These persons have a right to contract but can claim the privilege of not being sued. The rulesregarding suits by or against foreign sovereigns are laid down in section 84 to 87 of Civil Procedure Code.3. Insolvent.

An insolvent cannot enter into a contract as his property vests in the official receiver or official assignee.This disqualification of an insolvent is removed after he is discharged.

4. Convict. A convict while undergoing imprisonment in incapable of entering into a contract. But this disability

comes to an end on the expiry of the sentence.5. Corporations.

A Corporation is an artificial person recognised by law. It exists only in the eyes of law. It is competentto enter into a contract only through its agent.6. Married women.

A woman is competent to enter into a contract. Marriage does not affect the contractual capacity ofwomen. She can even bind her husband in cases of pressing necessity. A married woman may sue or be sued inher own name in respect of her separate property.

7. Professional persons. Doctors and advocates are included in the class. In England barristers are prohibited by the etiquettes oftheir profession from suing for their fees.

Q .3 What is the difference between agreement and contract?

Answer Difference between contract and agreement:


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Contract 1. A Contract is defined under Sec.2 (h).

2. A Contract is an agreement enforceable at law.

3. Its scope is limited.

4. Only valid agreement are called

5. A contract is enforceable.

6. A contract arises out of an agreement. Therefore, a contract includes an agreement.

7. A contract must have all the essentials of a valid contract like consideration, capacity, free consent, etc.

Agreement 1. An agreement is defined under Sec.2 (e)

2. Every promise or set of promises forming consideration for each other is an agreement.

3. Its scope is very wide.

4. An agreement and be both legal or illegal

5. An agreement may or may not be enforceable.

6. An agreement does not arise out of a contract. Therefore, an agreement does not include a contract.

7. An agreement has only an offer and its acceptance. It need not have other essentials.

Q.4 What do you mean by sole trader?

Answer:-A sole trader is one type of business organization. Or I would say a sole trader is among the manytypes of organization that exist in a business environment. If you are a sole trader, it means that you own the

business, and any profits from the business belong to you. It's important to know that there are other types of business organizations like partnership or limited companies. A partnership is where you and another partnerown the business. (it may not necessarily be 50% each, it depends on the agreement of each partner ). Limitedcompanies on the other hand, are companies that can offer shares to raise capital. Although this is complicated,you need to understand that while sole trader can earn all the profits, it will face difficulties in raising funds forexpansion, that's the reason limited companies are formed, they can raise funds from the public.

Q.5 Define contingent contract

Answer:- If any contract performance depends upon the happening of certain event of future is called contingentcontract. An ordinary contract can become contingent contract. If its performance is made dependent upon thehappening or non happening of an uncertain event, collateral to such contract. Contingent contract is also calledconditional contract.

Essentials:Following are the essentials of the conditional contract.(i) The performance of such contract depends upon the happening or non happening of some future uncertainevent.


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(ii) The event must be uncertain,(iii) The happening or non happening of the events must be collateral.

Example:A contracts to pay B Rs. 2000 if B marries to C. This is contingent contract .

Q.6 What is meant by revocation of offer?

Answer:- Offer is an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed. Revocation refers to thecanceling or annulling of something previously done.

Revocation of offer is the withdrawal of an offer by the offeror so that it can no longer be accepted. Revocationtakes effect as soon as it is known to the offeree. An offeror may revoke an offer before it has been accepted,

but the revocation must be communicated to the offeree.

Q.7 When an agency irrevocable?

Answer:- Irrevocable agency means an agency which cannot be terminated. An agency is irrevocable in thefollowing cases:

1. Where agency is coupled with interest:

Where the agent has himself an interest in the property which forms the subject-matter of agency, the agencycannot, in the absence of an express contract, be terminated to the prejudice of such interest (Sec. 202).

2. Where the authority has been party exercised

The principal cannot revoke the authority given to his agent after the authority has been partly exercised, so faras regards such acts and obligations as arisen from acts already done in the agency (Sec. 204).

3. Where the agent has incurred personal liability

When the agent has purchased the goods on his personal liability, or where he made the payment of the good,the agency cannot be terminated.

Q.8 Explain the nature of partnership?

Answer: Partnership is a form of business in which two or more persons come together with their resources toinvest in a common business with the purpose of sharing the profits of the business.

There are some limitations of Sole proprietorship viz limited capital, no risk sharing, limited skill etc.Partnership is the solution to such problems faced by a sole proprietor. In a partnership a few persons can cometogether to start a new business with an agreement to share the profits and losses of the business.

According to Section 4 of the Indian Partnership Act 1932, "Partnership is a relation Between persons who haveagreed to share the profits of of a business carried on by all or any of them acting for all."

Thus Partnership is the starting of a relationship among its members i.e. the partners who have agreed to sharethe profits of a business to be carried on by all or by any of them acting for all. Here we are giving some of the


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basic features of a Partnership Firm. In the absence of any of these features, a business cannot be termed as aPartnership.

1. Two or more Persons

2. Agreement among Partners

3. Business

4. Agreement to share profits

5. Business is to be carried on by all or any of them acting for all

Q.9 Define and explain consideration as defined in Indian contract act, 1872?

Answer: The section 25 of the Indian Contract Act, 1872 openly declares that an agreement made withoutconsideration is void

In o th er word s the p re sen ce o f con side ra t i on i s an essen tial fo r a cont ract to be va lid.

In England too promises without consideration are not enforced, because they are gratuitous . In England the contracts are divided into two categories:

1. Contra cts unde r seal, or cont racts in the form of a deed. S uch co ntracts are valid even withoutconsideration.2. Simple contracts or parol contracts. For validit y of su ch con tracts the presence of considerationis needed. Consideration in simple words means something in return of a promise which may either be benefitgained by one party or something lost by the other. So generally there can be no doubt that for avalid contract, there must be consideration, and also free consent.

Section B

Q.1 Contract is an agreement enforceable by law. Discuss this statement by bringing out clearly theessentials of a valid contract.

Ans - Essentials of a valid contract:

1.Intention to create legal relationship: The parties entering into a contract must have an intention to create a

legal relationship. The there is no intention to create a legal relationship, that agreement cannot be treated as avalid contract. Generally there is no intention to create a legal relationship in social and domestic agreements.Invitation for lunch does not create a legal relationship. Certain agreements and obligation between father anddaughter, mother and son and husband and wife does not create a legal relationship. An agreement wherein it isclearly mentioned that "This agreement is not intended to create formal or legal agreement and shall not besubject to legal jurisdiction in the law of courts." cannot be treated as a contract and not valid.Lawful Object: The objective of the agreement must be lawful. Any act prohibited by law will not be valid andsuch agreements cannot be treated as a valid contract. A rents out his house for the business of prostitution orfor making bomb, the acts performing there are unlawful. Hence such agreement cannot be treated as a validcontract. Therefore the consideration as well as the object of the agreement should be lawful.


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2.Agreement not expressly declared void: Section 24 to 30 specify certain types of agreement which have

been expressly declared void. For example Restraint of marriage which has been expressly declared void underSection 26. If John promises to pay $50 to Mary if she does not marry throughout her life and Mary promise notto marry at all. But this agreement cannot be treated as a valid contract owing to the fact that, under section 26restraint of marriage expressly declared void. Some of the agreements which have been expressly declared voidare agreement in restraint of legal proceedings, agreement in restraint of trade, agreement in restraint of

marriage and agreement by way of wager.

3.Proper offer and it s acceptance: To create a valid contract, there must be two or more parties. One whomakes the offer and the other who accepts the offer. One person cannot make an offer and accept it. There must

be at least two persons. Also the offer must be clear and properly communicated to the other party. Similarlyacceptance must be communicated to the other party and the proper and unconditional acceptance must becommunicated to the offerer. Proper offer and proper acceptance should be there to treat the agreement as acontract which is enforceable by law.

4. Free Consent: According to section 14, consent is said to be free when it is not caused by (I) coercion, (ii)

undue influence (iii) fraud, (iv) misrepresentation, or (v) mistake. If the contract made by any of the above fourreason, at the option of the aggrieved party it could be treated as a void contract. If the agreement induced bymutual mistake the agreement would stand void or canceled. An agreement can be treated as a valid contractwhen the consent of the parties are free and not under any undue influence, fear or pressure etc. The consent ofthe parties must be genuine and free consent.5. Capacity of parties to contract: Parties entering into an agreement must be competent and capable ofentering into a contract. If "A" agrees to sell a Government property to B and B agrees to by that property, itcould not treated as a valid agreement as A is not authorized or owner of the property. If any of the party is notcompetent or capable of entering into the agreement, that agreement cannot be treated as a valid contract.According to Section 11 of the Act which says that every person is competent to contract who is of the age ofmajority according to the law to which he is subject and who is of sound mind, and is not disqualified fromcontracting by any law to which he is subject. So it is clear that the party must be of sound mind and of age toenter into a valid agreement which can be treated as a valid contract.

6. Certainty of meaning: Wording of the agreement must be clear and not uncertain or vague. Suppose Johnagrees to sell 500 tons of oil to Mathew. But, what kind of oil is not mentioned clearly. So on the ground ofuncertainty, this agreement stands void. If the meaning of the agreement can be made certain by thecircumstances, it could be treated as a valid contract. For example, if John and Mathew are sole trader ofcoconut oil, the meaning of the agreement can be made certain by the circumstance and in that case, theagreement can be treated as a valid contract. According to Section 29 of the Contract Act says that Agreements,the meaning of which is not certain or capable of being made certain, are void.

7. Possibility of performance: As per section 56, if the act is impossible of performance, physically or legally,the agreement cannot be enforced by law. There must be possibility of performance of the agreement.Impossible agreements like one claims to run at a speed of 1000km/hour or Jump to a height of 100feet etc.Would not create a valid agreement. All such acts which are impossible of performance would not create a validcontract and cannot be treated as a valid contract. In essence, there must be possibility of performance must bethere to create a valid contract.

8. Lawful consideration: An agreement must be supported by a consideration of something in return. That is,the agreement must be supported by some type of service or goods in return of money or goods. However, it is


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not necessary the price should be always in terms of money. It could be a service or other goods. Suppose Xagrees to buy books from Y for $50. Here the consideration of X is books and the consideration of Y is $50. Itcan be a promise to act (doing something) or forbearance (not doing something). The consideration may be

present, future or can be past. But the consideration must be real. For example If John agrees to sell his car of $50000 to Peter for $20000. This is a valid contract if John agrees to sell his car not under any influence or force.It can be valid only the consideration of John is free. An agreement is valid only when the acts are legal. Illegalworks like killing another for money, or immoral works or illegal acts are cannot be treated as a valid

agreement. So, illegal works will not come under the contract act.

9. Legal formalities: The contract act does not insist that the agreement must be in writing, it could be oral.But, in some cases the law strictly insists that the agreement must be in writing like agreement to sellimmovable property must be in writing and should be registered under the Transfer of Property Act, 1882.These agreements are valid only when they fulfill the formalities like writing, registration, signing by the boththe parties are completed. If these legal formalities are not completed, it cannot be treated as a valid contract.

Q.2 Competency of the people doing the agreement. (What do you understand by competency tocontract? What protections are offered to minor?

Ans - An agreement becomes a contract if it is entered into between the parties who are competent to contract.Every person is competent to contract (1) who is of the age of majority according to the law to which he issubject; (2) who is of sound mind; and (3) who is not disqualified from contracting by any law to which he issubject.

Let us examine specifically who are competent to contract and who are not.Contracts by Minor Rules relating to a Minor s contract According to section 3 of the Indian Majority Act 1875 a minor domiciled in India is one who has to completehis eighteen years of age. But in cases where a guardian of the minors person or property (or both) is appointedor where a minors property is taken over by a Court of Wards, the minority continues up to the completion ofhis age of twenty one years. Age of majority is to be determined by the law to which the minor is subject. Aminor is not competent to contract.Minor s contact is absolutely void: In Mohori Bibee v Dhurmodas Ghose (1903-30 Cal. 539) Privy Councilhad held that minors contract is void ab initio and not merely voidable. A minors agreement being absolutelyvoid, neither he nor the other party acquires any right or incurs any liability under the agreement. So a minor isneither liable to perform that he has promised too under an agreement nor is he liable to repay money that hehas received under it. The principle behind this ruling is, a minor is incapable of judging what is good for him.Even if a minor has received any benefit, he cannot be asked to compensate or pay for it. A minor is incapableof giving promise imposing a legal obligation upon him..Specific performance of a minor s contract : As a minors contract is absolutely void, there can be no specific

performance of such a contract Even a minor cannot enforce specific performance as there is no mutuality.However, when such a contract is entered into by a guardian on behalf of a minor, for minors benefit it can bespecifically enforced by or against the minor.Ratification of a minors contract: Ratification means consen ting to a past contact entered into during minorityat a future date on attaining majority. It relates back to the date of the making of the contract. Since a minorscontract is void, there can be no question of ratifying it as the consideration given during the minority is held to

be no consideration at all. It cannot be made valid by a subsequent ratification. A fresh contract can be enteredinto by a minor on attaining majority with a fresh considerationFalse representation by a minor-Estoppel: A minor cannot be stopped by a false representation as there can

be no estoppels against a statute. A minor who falsely represents himself to be a major and thereby induces


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another person to enter into a contract with him, can plead minority as a defense. The infant is not stopped fromsetting up infancy.A minor cannot be sued on the ground that he falsely represented that he is of full age thereby induced other

persons to enter into a contract because to allow an injured person to sue a minor person, would be giving him aindirect means of enforcing a void contract.However, it has been held by Andhra Pradesh High Court that equity requires a minor who seeks to avoid acontract which he induced the opposite party to enter into with him by a fraudulent misrepresentation as to hisage to return the considerations which he received under it and this equitable principle is also fond statutorilyembodied in section 39 and 41 of the Specific Relief Act. Therefore, the Court should not grant the relief to theminor without at the same time imposing conditions that he should return what he received under the contract.

Q. 3 Explain the circumstances under which the title is transferred from seller to buyer?

Answer:-Unless a different intention appears "(1) where there is a contract to sell unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to thecontract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller the

property in the goods thereupon passes to the buyer. Such assent may be expressed or implied and may be giveneither before or after the appropriation is made. (2) Where in pursuance of a contract to sell, the seller deliversthe goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose oftransmission to or holding for the buyer, he is presumed to have unconditionally appropriated the goods to thecontract, except in the cases provided for in the next rule and in section 20. This presumption is applicablealthough by the terms of the contract, the buyer is to pay the price before receiving delivery of the goods, andthe goods are marked with the words collect on delivery or their equivalents." 59

(a )Title passes upon appropriation of contract.

Where the goods are unascertained, the title, as has been already noted, cannot pass. Upon ascertainment title passes according to the intention of the parties. Where pursuant to this contract to sell goods at presentunascertained, certain goods in a deliverable state are set aside or designated or in any way appropriated to thecontract, it is presumed, rebuttally, that the intention of the parties is to pass title upon such appropriation,subject to the other rules as to deliverable shape, goods to be put on cars by seller, etc.

(b) Delivery to carrier or other bailee by seller.

If the seller pursuant to the contract delivers goods to a carrier for transportation to the buyer, the delivery is presumed to be an appropriation and title passes then, if it has not passed before. The goods are while in transitthe property of the buyer and not of the seller. We shall hereafter notice that if the seller undertakes, as a part ofhis contract, to make the delivery, title remains in him until such delivery is complete. That, however, meansthat the seller undertakes to pay the expense of the delivery and assumes the burden of its success. In theordinary cases where the goods are at the seller's place of business, the seller assumes the task of putting thegoods in the possession of a carrier, and such carrier is the agent of the buyer, and the risk of loss is upon the

buyer and title has passed.61

Even though goods are appropriated to the contract, still so long as there remains something to be done by theseller to put them in a deliverable shape, title has not passed. In cases of shipment made by the seller, title isusually held not to pass until delivery to the carrier though necessarily before that time the goods had to besegregated; this is because where a number of things were to be done by the seller in the process ofappropriating unascertained goods, it is presumed the intention of the parties was to defer transition of title untilthe last act.
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(c) Goods shipped "C. O. D."

Where goods are shipped "Collect on Delivery," this has no effect upon the passing of title. If by the rulesdiscussed where goods are not so shipped title would pass, it will still pass notwithstanding such provision thatthe carrier must collect before delivery.63 Thus the carrier might be the buyer's agent to transport the goods andthe seller's agent to maintain the lien for the price and collect the charges.

Sec. 60. Rules For Ascertaining The Intention Of The Parties

FIFTH RULE. Unless a different intention appears "if a contract to sell requires the seller to deliver the goodsto the buyer, or at a particular place, or to pay the freight or cost of transportation to the buyer, or to a particular

place, the property does not pass

Delivery to carrier is ordinarily delivery to buyer and if it was understood from the express terms of the contractor from the circumstances that the seller was to deliver to the carrier, the seller would be under the obligation soto do and having done so, title would thereupon pass. But if the seller takes upon himself the more onerouscontract of seeing that the goods reach a certain place, as where he undertakes to pay the freight, title does not

pass in such case until the carriage to such place is complete.

In this connection the initials "f. o. b." standing for the words "free on board," are often used, and are ofimportance in determining the intention.

Sec. 61. Reservation, Upon Shipment, Of Title In Selle

The seller by the form of his contract with the carrier may reserve title in him notwithstanding delivery to suchcarrier.

If the shipper has the bill of lading made out to himself or his agent, this effect retention of title in himself. A

bill of lading is the evidence of title and by its form may indicate that though the seller made delivery to thecarrier, yet he did not by that act finally appropriate the goods to the contract, but intended until a future time toreserve title in himself. This is sometimes referred to as the retention of the jus disponendi. One mode ofretaining title by means of the bill of lading is to send the bill to some third person, usually a banker, with draftattached, which must be accepted, or, if a sight draft, paid, before the bill of lading can be secured. This reservestitle even though the bill of lading names the buyer as consignee.67

65. Uniform Sales Act, Rule 19, and SEC. 15.

66. Deutzel v. Island Park Ass'n, 229 Pa. 403.

Bills of lading are made out in two forms: the "straight" bill and the "order" bill. The first form is a bill made tosome certain person. The second form is one made to the order of a certain person, or to a certain person or hisorder. As has been seen in the discussion of Documents of Title, straight bills of lading are made non-negotiable; order bills are made negotiable, and where such distinction prevails the carrier is not protected indelivering the goods where an "order" form was used except upon presentment of the bill of lading properlyendorsed; otherwise it is. To insure a valid retention of title, the shipper should therefore use the order form of

bill of lading, unless he makes himself the consignee. See the subject of Documents of Title, supra, in thisvolume.

Sec. 62. Risk of Loss
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Unless there is an agreement to the contrary risk of loss attends the title.68

The risk of loss is usually upon the owner. The parties might indeed agree otherwise, but that is seldom done.This statement of risk does not include cases of loss on account of negligence of a seller or buyer having

possession and not title. If title has passed while goods are in possession of the seller or his agent in that behalf,the seller would then be a bailee of the goods and liable as such to use due care for their safety. Assuming thereis no question of negligence, it is almost always true that risk follows the title. Indeed the important reason inmany cases for raising the question of transition of title is to decide upon whom the loss must fall.

If, then, a specific article has been bought and title has really passed, the loss is on the buyer regardless of thefact that he may never have had possession. Thus, if pursuant to a contract of sale goods are shipped to A undersuch circumstances that title passed upon delivery to the carrier, the loss as between buyer and seller, is uponthe buyer, but if by shipment "f. o. b." destination, or by retention of title by bill of lading, title is still in theshipper, then loss is upon him as between him and the buyer. In these cases, whether there is any recourseagainst the carrier is a different question and would depend on the nature of the cause of loss and the contractwith the carrier.

Cases have made exceptions to this rule in the cases in which title is reserved solely for purposes of security, possession and ownership for all other purposes being vested in the buyer. There are two classes of cases within

this exception. There is also an exception where delivery has been delayed by the fault of either part. Risk isupon the party in fault.

(1) Cases of conditional sales in which buyer is given possession but seller retains contract for purposes ofsecurity.

In this case the risk of loss is on the buyer.

Example 26. A sells books to B, delivering B the books under a contract whereby A is to have title until the lastinstallment is paid. The risk is on B. He must pay although the goods are destroyed before the lastinstallment.69

(2) Cases in which title is reserved during transit for purposes of security where except for such reservationtitle would have passed.

Q.5 Explain the classification of contracts?

Answer :- Contracts on the basis of creation :

a) Express contract: Express contract is one which is made by words spoken or written. Example No. 1 :X says to Y, will you buy a car for Rs. 100000? Y says to X, I am ready to buy you car for Rs. 100000.

It is an express contract made rally. Example No. 2: X writes a letter to Y, I offer to sell my car for Rs.100000 to you. Y send a letter to Y, I am ready to buy you car for Rs. 100000. It is an express contractmade in writing.

b) Implied contract: An implied contract is one which is made otherwise than by works spoken orwritten. It is inferred from the conduct of a person or the circumstance of the particular case. Example :X, a coolie in uniform picks up the bag of Y to carry it from railway platform to the ------ without beingused by Y to do so and Y allow it. In this case there is an implied offer by the coolie and an implied
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acceptance by the passenger. Now, there is an implied contract between the coolie and the passenger is bound to pay for the services of the coolie.

c) Quasi or constructive contract : It is a contract in which there is no intention either side to make acontract, but the law imposes contract. In such a contract eights and obligations arise not by anyagreement between the practice but by operation of law. e.g where certain books are delivered to a

wrong address the addresses is under an obligation to either pay for them or return them.

Contracts on the basis of execution:

a) Executed contract: It is a contract where both the parties to the contract have fulfilled their respectiveobligations under the contract. Example: X offer to sell his car to Y for Rs. 1 lakh, Y accepts X offer. Xdelivers the car to y and Y pays Rs. 1 lakh to X. it is an executed contract.

b) Executory contract: It is a contract where both the parties to the contract have still to perform their

respective obligations. Example: X offers to sell his car to y for Rs. 1 lakh. Y accepts X offer. It the carhas not yet been delivered by X and the price has not yet been paid by Y, it is an Executory contract.

c) Partly executed and partly executory contract: It is a contract where one of the parties to thecontract has fulfilled his obligation and the other party has still to perform his obligation. E.g X offersto sell his car to y for Rs. 1 lakh on a credit of 1 month. Y accepts X offer. X sells the car to Y. here thecontract is executed as to X and Executory as to Y.

Contracts on the basis of enforceability:

a) Valid contract: A contract which satisfies all the conditions prescribed by law is a valid contract. E.g.X offers to marry y. y accepts X offer. This is a valid contract.

b) Void Contract: the term void contract is described as under section 2(j) of I.CA, 1872, A contractwhich cases to be enforceable by law becomes void when it ceases to be enforceable. In other words, avoid contract is a contract which is valid when entered into but which subsequently became void due toimpossibility of performance, change of law or some other reason. E.g. X offers to marry Y, Y acceptsX offer. Later on Y dies this contract was valid at the time of its formation but became void at the death

of Y.

c) Void Agreement: According to Section 2(g), an agreement not enforceable by law is said to be void.Such agreements are void- ab- initio which means that they are unenforceable right from the time theyare made. E.g. in agreement with a minor or a person of unsound mind is void ab-initio because a minoor a person of unsound mind is incompetent to contract.

d) Voidable contract: According to section 2(i) of the Indian contract act, 1872, arrangement which isenforceable by law at the option of one or more of the parties thereon but not at the option of the other or


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other, is a voidable contract. In other words, A voidable contract is one which can be set aside oravoided at the option of the aggrieved party. Until the contract is set aside by the aggrieved party, itremains a valid contract. For e.g. a contract is treated as voidable at the option of the party whoseconsent has been obtained under influence or fraud or misinterpretation. E.g. X threatens to kill Y, if thedoes not sell his house for Rs. 1 lakh to X. Y sells his house to X and receives payment. Here, Y consenthas been obtained by coercion and hence this contract is void able at the option of Y the aggrieved party.

If Y decides to avoid the contract he will have to return Rs. 1 lakh which he had received from X. If Ydoes not exercise his option to repudiate the contract within a reasonable time and in the meantime Z

purchases that house from X for 1 lakh in good faith. Y can not repudiate the contract.

e) Illegal Agreement: An illegal agreement is one the object of which is unlawful. Such an agreementcannot be enforced bylaw. Thus, illegal agreements are always void ab- initio (i.e. void from the very

beginning)e.g. X agrees to y Rs. 1 lakh Y kills Z. Y kill and claims Rs. 1 lakh. Y cannot recover from X because the agreement between X and Y is illegal and also its object is unlawful.

f) Unenforceable contract: It is contract which is actually valid but cannot be enforced because of sometechnical defect (such as not in writing, under stamped). Such contracts can be enforced if the technicaldefect involved is removed.

Q.4 What is crossing? State its kind. What is not negotiable crossing?A crossed cheque is a cheque that can only be deposited directly into an account with a bank and cannot beimmediately cashed by a bank over the counter. The format and wording varies from country to country, butgenerally two parallel lines and/or the words 'Account Payee' or similar may be placed either vertically acrossthe cheque or in the top left hand corner. By using crossed cheques, cheque writers can effectively protect thecheques they write from being stolen and cashed.

Cheques can be of two types:-

1. Open or an uncrossed cheque2. Crossed cheque

Open cheque

An open cheque is a cheque which is not crossed on the left corner and payable at the counter of thedrawee bank on presentation of the cheque.

Crossed chequeA crossed cheque is a cheque which is payable only through a collecting banker and not directly at the counterof the bank. Crossing ensures security to the holder of the cheque as only the collecting banker credits the

proceeds to the account of the payee of the cheque.

When two parallel transverse lines, with or without any words, are drawn generally, on the left hand top cornerof the cheque. A crossed cheque does not affect the negotiability of the instrument.

Types of crossing:
http://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Transactional_accounthttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Transversehttp://en.wikipedia.org/wiki/Transversehttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Transactional_accounthttp://en.wikipedia.org/wiki/Cheque


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the goods is yet to pass from the seller to the buyer, such loss has to be borne by the seller even thoughthe goods are in the possession of the buyer.

Q.6 Explain the terms Agency , Agent and Principal . How is agency created and terminated?

Agency is a special type of contract. Under ordinary contracts, the parties to the contract act entirely bythemselves. When instead another person is engaged to do the acts under the contract, it is called agency.Section 182 of the Contract Act defines the terms Agent and Principal as follows:

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 represented, is called Principal. The contract which creates therelationship of Principal and Agent is called an agency.

Creation of agency:

Contract of agency is like any other contract with the difference that there is no need of consideration incontract of agency. A contract of agency comes into existence in any of the following ways.

1. Agency by express Agreement: The contract of agency may be made orally or in writing. In most of the business dealings the agency is created by a word of mouth. If this form was not recognized by law, the tradeand industry could hardly go on. Agency is also created by a contract in writing. Agency is normally preferredin the dealings of immovable property. The common form of an agreement in writing is power of Attorneywhereby, authority is given to the power of attorney holder, either generally or specifically, to act on behalf ofthe Principal. A general power of attorney authorizes the Agent to do all things on behalf of the Principal i.e. toact generally in the business of the Principal. A specific power of attorney empowers the Agent to do or performa single transaction e.g. selling of house or borrowing money on a mortgage etc. 2. Agency by impliedAgreement: Implied agency may arise by conduct or situation of the parties of the circumstances of the case.Such an agency may take any of the following forms: a) Agency by estoppel: Such an agency is based on the

principle of estoppel. The rule of estoppel can be stated thus: Where a person, by his words or conduct, haswillfully led another to believe that certain set of circumstances or facts exist, and that other person has acted onthat belief, he is estopped from denying the truth of such statements. In other words, estoppel arises when one is

precluded from denying the truth of anything which he has represented as a fact, although it is not a fact. b)Agency by holding out: Such agency is based on the principle of holding out which is a part of the principle ofestoppel. The only distinction is that in this case some affirmative conduct by the Principal is necessary. Forexample, a dealer in iron usually sent his employee to buy on credit and paid for it afterwards. On one occasion,he sent the employee with cash, who bought the iron on credit and pocketed the money. It was held that the ironmerchant was liable to pay for the iron, as the previous dealings justified the seller in assuming that the Agenthad authority t o buy on credit. The employers conduct in holding out his employee to be his agent estops himfrom denying the existence of authority of the employee. However, if the Agent is held out as having only a

limited authority to do acts, the Principal is not bound by an act outside the authority. c) Agency by necessity:In certain circumstances, the law authorizes a person to act as agent for another without any regard to theconsent of the Principal. A wife deserted by her husband and forced to live separate from him, can pledge herhusbands credit to buy all the necessaries of life according to the position of the husband even against the wishof the husband and the husband can be held liable for the same. In other cases where in order to save the

property of another, one has to act before the instructions of the owner can be received, he is, by necessity,authorized to act as Agent and the consent of the owner as Principal is assumed in law. An Agent exceeding hisauthority, bona fide, in an emergency or the carrier of the goods acting as bailee and doing anything to protector preserve the goods in an emergency, although there is no express authority, are the examples of impliedagency by necessity. 3. Agency by ratification: Ratification means the subsequent adoption and acceptance ofan act originally done without instructions or authority. Thus, where an Agent exceeds his authority (except


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under emergency), the acts of the Agent are not binding on the Principal. The Principal, however, mayafterwards confirm and adopt the contract so made and this is known as ratification. Section 196 of the ContractAct provides for ratification and states that where acts are done by one person on behalf of another, but withouthis knowledge or authority, he may elect to ratify or to disown such acts. If he ratifies them, the same effectswill follow as if they had been performed by his authority.

Termination of agency

An agency may be terminated either by 1) act of the parties, or 2) operation of law.

By act of the parties:1. By agreement: An agency, like any other contract, can be terminated at any time by a mutual agreement

between the Principal and the Agent.2. Revocation by the Principal: The Principal is empowered to revoke the authority of theAgent at any time.

The agency stands terminated from the time such revocation is affected. Revocation can be express or implied.

a. In the case of a continuous agency, it can be terminated by revocation only for the future. It cannot berevoked in relation to the acts already done by the Agent. In other words, revocation cannot be withretrospective effect. Reasonable notice should be given to the Agent and also the third parties before revocation.

b. An agency, which is created for a fixed period, can be terminated by revocation even before the expiry of that period. However, the Principal is bound to pay compensation to the Agent, even if the authority is revoked aftergiving notice.

3. Renunciation by the Agent: It is the termination of the agency at the instance of the Agent, when he nolonger wishes to continue working as Agent. The Agent has to give a reasonable notice to the Principal of hisintention to renounce the agency; otherwise he is liable to compensate the Principal for any loss due torenunciation without notice. Further, if the agency is for a fixed period and the Agent renounces it withoutsufficient cause before the expiry of the period, he shall have to compensate the Principal for the resulting loss,if any.

By operation of law:

An agency comes to end automatically by operation of law in the following conditions:

1. Completion of business of agency: If the purpose for which the agency is created is served and achieved, theagency stands terminated, e.g. where an advocate is appointed to appear in a suit, his authority comes to endwhen the adjudication is complete and the judgment is delivered

2. Expiry of time: When the agency is created for a specified period of time, the agency comes to end with that period, even though the business or reason for which the agency was created continues.

3. Death of the Principal or the Agent: An agency is terminated automatically on the death of the Principal orthe Agent. In the event of the death of the Principal, the Agent must take all reasonable care to protect theinterests of the deceased Principal, which were entrusted to him.

4. Insanity of the Principal or the Agent: If the Principal or the Agent becomes of unsound mind, the agency isterminated automatically. Here also, in the case of insanity of the Principal, the duty of the Agent is the same asin the event of death of the Principal.

5. Insolvency of the Principal: When the Principal becomes insolvent, the agency is terminated. However, thetermination of agency on the insolvency of the Agent is at the discretion of the Principal.


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6. Destruction of the subject matter: Where the agency is created with reference to a particular property orsubject matter, it stands terminated automatically with the destruction of that property. When the Agent isappointed for the sale of a house, the agency is terminated when the house is destroyed by fire.

7. Dissolution of a Company: It is like the death of the Principal or the agent. When Principal or the Agent is anartificial person created only in the eyes of law (such as incorporated companies), the agency is terminated withthe dissolution of that company.

8. Becoming an alien enemy: If the Principal or the Agent is a citizen of another country and the war breaks between India and that country, the contract of agency is automatically terminated, as the continuance of thesame is unlawful.

Q.8 Analyze and explain the concept of free consent of parties. State its essentials and the impact on theformation of contract. Answer: Parties to the contract must give consent. Consent must be free. Free consent is one of the essentialelements of a valid contract.According to section 13 of the Act two or more persons are said to consent when they agree upon thesame thing in the same, sense. The whole agreement must be consented to in the same sense.When both parties agree upon the same thing in the same sense, they are said to be ad-idem. Where boththe parties are not ad -idem or when the minds of both parties are directed to different objects, there isno consent. Some instances when consent is not free:1) Where a person endorses a bill of exchange which, he was told was signing as a guarantee.2) Where a document is read over, but it is different from the one pretended to be read over, signature thereonwould be of no force.In one Blenkarn taking advantage of similarity of his name with Blenkiron & Co ordered goods from Lindsay &Co by writing his signature to look like Blenkiron. M/s Lindsay & Co mistook his order for that of Blenkiron.Blenkiron was a respectable firm. Lindsay & Co delivered the goods to Blenkarn. Blenkarn in turn sold thegoods to Cundy and did not pay Lindsay & Co filed a suit against Cundy. It was held due to a mistake caused

by Blenkarn, there was no real agreement between Blenkarn and Lindsay & Co. Cundy, therefore did not getany title to the goods as Blenkarn acquired no property in the goods.Free Consent When?Parties consenting to the same thing in the same sense are not sufficient. Consent must be free. Section 14 of theAct proceeds to define free consent as under: Consent is said to be free when it is not caused by (1) coercion (2) undue influence, (3) fraud, (4)misrepresentation, or (5) mistake.Consent is said to be so caused when it would not have been given but for the existence of such coercion undueinfluence, fraud, misrepresentation or mistake.When there is no consent there is no contract at all. When there is consent but not free consent, the contractis void at the option of the party whose consent was not free.If consent is given under the first four circumstances, then the contract is void at the option of the party whoseconsent was so caused.Undue Influence (Section 16)- When a person in a position to dominate the will of other uses this position toobtain an unfair advantage over another in a contract.Fraud (Section 17) - Every act, promise, omission intended to deceive forms fraud.A consent induced by false representation may not be free within the meaning of section 14, but it cannevertheless be real; and ordinarily the effect of fraud or misrepresentation is to render a transaction void onlyand most void.When consent is caused by mistake of both the parties, then the agreement is void. It will, therefore, beobserved that consent under the first four circumstances, i.e. under coercion, undue influence, fraud andmisrepresentation makes the contract void, while consent under mistake of both the parties makes the agreementvoid.


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Coercion:Coercion is committing, or threatening to commit, any act forbidden by the Indian Penal Code, or the lawfuldetaining, or threatening to detain to detain any property, to the prejudice of any person whatever, with theintention of causing any person to enter into an agreement.It is immaterial whether the Indian Penal Code is or is not in force in the place where the coercion is employed(Sec 15).Illustration:A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting tocriminal intimidation under the Indian Penal Code. A afterwards sues B for breach of contract at Calcutta. A hasemployed coercion although his act is not an offence by the Law of England and although section 506 of theIndian Penal Code was not in force at the time when or at the place where the act was done.When can coercion be established? EssentialsFor an act to be forbidden by the Indian Penal Code, there must not be merely a threat, but the act should besuch as to be punishable under the Indian Penal Code.In Amiraju v. Seshama ( 1918 41 Mad. 38) an interesting question on the point arose. A husband held out thethreat of suicide to wife and son if they refused to execute a release in his favor. The wife and son executed arelease in consequences of that threat. It was held that release was obtained by coercion. Coercion impliescommitting or threatening to commit some act which is contrary to law.

Q.9 Define indemnity. Distinguish between a contract of indemnity and a contract of guarantee.Answer:- Indemnity and guarantee are two important ways to safeguard ones interests when entering into acontract. There are many similarities between the two concepts though they differ a lot also. This article willhighlight the differences between Indemnity and guarantee to enable readers to choose one of the twodepending upon circumstances and requirements.

Indemnity When you agree to an indemnity agreement, you agree to assume all responsibility and liability for any injuriesor damages to someone else. Whenever there is an indemnity contract and one party suffers any losses, the otherhas the liability to indemnify for the consequences. The common phrases that are included in indemnitycontracts say that the person agrees to indemnify and hold harmless or to defend, indemnify and hold harmless.If there is a clause or obligation to defend, you should also get a clause included requiring the person who is

being indemnified to tender the defense to you. At least you should get the clause of right to control defense. Inthe absence of these provisions, the party that you are indemnifying can cost you dearly by raking up hugeattorney fees and other sundry expenses. But if you are controlling the defense, you can have a say in theselection of attorney thereby minimizing litigation costs.In general indemnity agreement covers damages, loss, costs, expenses and fees of attorneys. If there is nomention of attorney fees, the court may not require the person promising to indemnify to pay attorney fees.Guarantee In sharp contrast to an indemnity, a guarantee is a promise to answer for debt, default or other financial liabilityof another. You promise to pay for any damages or default in the event of the principal person refusing to do soor when he cannot do so. If you are a guarantor, once you have paid the principal obligation, your obligation is

terminated. Guarantee clause is not the main agreement and is generally collateral to some other obligation ordebt. You are held accountable or liable for this debt or obligation after you have fulfilled your obligation as aguarantor. It is therefore prudent to study all clauses or underlying contract before signing any guaranteecontract.

Difference between Indemnity and Guarantee 1. A guarantee is a promise to someone that a third party will meet its obligation to them. If they do not payyou, I will pay yo u . 2. An indemnity is a promise to be responsible for another persons loss and to agree to compensate them forany loss or damage on mutually agreed terms. For example, one agrees to pay the difference of repairs if theyexceed a certain limit.


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In this kind of bailment goods lent to a friend graits to be used by him.When the goods are delivered to the bailee for hire.When goods are delivered to another person by way of security of money borrowed.When goods are delivered be carried or something to be done about these for reward payable to the bailee.Parties of the contract of bailment:There are two parties in the contract of bailment.(a) Bilor:The person who parties in the contract of bailment.(b) Bailee:The person to whom the goods are derived is called bailee.Essentials of contract of bailment:Following are essential of contract of bailment.(I) Contract:It is basic essential for bailment.(II) Moveable property: Property must be moveable in contract of bailment.(III) Delivery of goods:The delivery of goods should be made for some purpose under a contract.(IV) Change of possession:In bailment possession is changed from one person to another person.(V) Specific purpose:The goods are delivered for some specific purpose to another person.(VI) Ownership is not changed:The ownership is not change. It remain to bailor.(VII) Parties of contract:There are two parties to the contract of bailment bailor and bailer.(VIII) Returnable:The goods must be returned to the owner of property are disposed according to the direction of bailor.Duties or responsibilities:Following are the duties or responsibilities of bailee.(I) Care of goods:Bailee is bound to take as much as care as the man take care of his own good.(II) Act according to the contract:Bailee is bound to act according to the contract of bailment.(III) Not deny the title:Bailee cannot deny the title of the goods delivered to him.(IV) Return the goods:It is the duty of bailee to return or deliver the goods to bailor or according to his directions.(V) Return at proper time:Bailee should return the goods at proper time.(VI) Return of profit:Baliee should return the increase or profit to bailee.(VII) Proper use of goods:He should use the goods according to the contract of bailment.Rights of bailee:

Following are the rights of bailee.(I) Recovery of loss:A bailee is entitled to recover damages if he suffers any loss.(II) Recovery of compensation:A bailee is entitled to receive compensation from the bailor for any loss resulting from the defect of bailor title.(III) Recovery of expenses:


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Bailee is entitled to recover all expenses for any purpose of the bailment.(IV) Rights to retain:Bailee has right to retain the goods until debtor claim is paid.(V) Right against third person:He has right to receive the amount of indemnity from bailor for a ny loss which may sustain by reason that the

bailor was not entitled to make the bailment.(VI) Right against third person:If a third person wrongfully deprives the bailee of the use or possession of the good bailed. He can file suitagainst such person.(VII) Right of remuneration:He is entitled to lawful charge for providing services.Conclusion:To conclusion it can be said that, the person to whom the goods are delivered under the contract ofbailment is called bailee. He is bound to act accordingly the direction of bailee. Bailor and bailee haveright and duties under the contract act.

Q. 3 Explain the rights of an unpaid seller.?An unpaid seller has two-fold rights, viz.,;

I. Rights of unpaid seller against the goods, and II. Rights of unpaid seller against the buyer personally.

1. Rights of Unpaid Seller against the Goods. An unpaid seller has the following rights against the goods notwithstanding the fact that the property in the goodshas passed to the buyer: 1. Right of lien; 2. Right of stoppage of goods in transit; 3. Right of resale [Sec. 46 (1)]. 1. Right of lien (Sec. 47) Lien is the right to retain possession of goods and refuse to deliver them to the buyer until the price due in

respect of them is paid or tendered. An unpaid seller in possession of goods sold is entitled to exercise his lienon the goods in the following cases:

a) Where the goods have been sold without any stipulation as to credit; b) Where the goods have been sold on credit, but the term of credit has expired: c) Where the buyer becomes insolvent, even though the period of credit may not have yet expired.

In the case of buyers insolvency the lien exists even though goods had been sold on credit and the period ofcredit has not yet expired. When he goods are sold on credit the presumption is that the buyer shall keep hiscredit good. If, therefore, before payment the buyer becomes insolvent, the seller is entitled to exercise this rightand hold the goods as security for the price.

The effect of buyers insolvency is that all stipulations as to credit are put to an end and the seller has a right to say,

I will not deliver the goods until I see that I shall get my price paid (Griffiths vs Perry2

)

The unpaid sellers lien is a possessory lien, i.e., the lien can be exercised as long as the seller remains in possessionof the goods. He may exercise his right of lien notwithstanding that he is in possession of the goods as agent or

bailee for the buyer [Sec. 47(2)]. Transfer of property in the goods or transfer of documents of title to the goodsdoes not affect the exercise of this right, provided the goods remain in the actual possession of the seller. In factwhen property has passed to the buyer then only retaining of goods is called technically lien. Where the property ingoods has not passed to the buyer and the title is still with the seller then it is, strictly speaking, anomalous to say thatthe seller has a lien against his own g oods. The sellers lien when property has not passed to the buyer is termed as aright of withholding delivery. Accordingly, Section 46(2) provides:


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The term insolvent here does not mean a person who has been adjudged insolvent under the Insolvency Law. InSale of Goods Act a person is said to be insolvent who has ceased to pay his debts in the ordinary course of

business, or cannot pay his debts as they become due, whether he has committed an act of insolvency or not [Sec.2(8)].

But if the buyer has transferred the documents of title to a bonafide purchaser, the sellers lien is defeated (Sec. 53).

Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies,

a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transit where the property has passed to the buyer.

This right of lien can be exercised only for the non-payment of the price and not for any other charges, i.e.,maintenance or custody charges, which the seller may have to incur for storing the goods in exercise of his lien forthe price. This right of lien extends to the whole of the goods in his possession even though part payment for thosegoods has already been made. In other words the buyer is not entitled to claim delivery of a portion of the goods on

payment of a proportionate price. Further, where an unpaid seller has made part delivery of the goods, he mayexercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as toshow an agreement to waive the lien (Sec. 48). Also, the lien can be exercised even though the seller has obtained adecree for the price of the goods [Sec. 49(2)].

When lien is lost? As already observed, lien depends on physical possession of goods. Once the possession is lost,the lien is also lost. Section 49 accordingly provides that the unpaid seller of goods loses his lien thereon in thefollowing cases:

a) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyerwithout reserving the right of disposal of the goods; or

b) When the buyer or his agent lawfully obtains possession of the goods; or (c) When the seller expressly or impliedly waives his right of lien. An implied waiver takes place when theseller grants fresh term of credit or allows the buyer to accept a bill of exchange payable at a future date orassents to a sub-sale which the buyer may have made.

It may be noted that right of lien, if once lost, will not revive if the buyer redelivers the goods to the seller forany particular purpose. Thus, where a refrigerator after being sold was delivered to the buyer and since it wasnot functioning properly, the buyer delivered back the same to the seller for repairs, it was held that the sellercould not exercise his lien over the refrigerator ( Eduljee vs John Bros.). 2. Right of Stoppage of Goods in Transit: Meaning of Right of Stoppage of Goods in Transit: The right of stoppage in transit means the right of stoppingthe goods while they are in transit, to regain possession and to retain them till the full price is paid. Lord Cairns LJ incase of Schotsmans v. Lances and Yorks Rly. Had made the following observation in this regard:

The essential feature of stoppage in transit is that the goods should be in the possession of a middleman or someother person intervening between the vendor who has parted with and the purchaser who has not received them.

Conditions under which Right of Stoppage in Transit can be Exercised [Section 50]: The unpaid seller can exercise theright of stoppage in transit only if the following conditions are fulfilled:

(i) The seller must have parted with the possession of goods, i.e., the goods must not be in the possession of seller. (ii) The goods must be in the course of transit. (iii) The buyer must have become insolvent.

Note: The buyer is said to be insolvent when he has ceased to pay his debts in ordinary course of business, or cannot pay his debts as they become due, whether he has committed an act of insolvency or not.

Note: The sellers right of stoppage in transit is based on the principl e that one mans goods shall not be applied tothe payment of other mans debt. [Lord Reading in Booth Steamship Co Ltd. V. Cargo Fleet Iran Co.]


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Duration of Transit [Section 51(1)]: Goods are deemed to be in course of transit from the time when they aredelivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent in that

behalf takes delivery of them from such carrier or other bailee.

Note: The carrier must hold the goods in the capacity of an independent person and not in the capacity of an agentfor the seller or buyer. If the carrier holds the goods as an agent for the seller, there is no question of exercising theright of stoppage in transit because the seller can exercise his right of lien. If the carrier holds the goods as an agentfor the buyer, the seller cannot exercise the right of stoppage in transit because the delivery to the carrier amounts

to delivery to buyer..

3. Right of Resale The right of resale is a very valuable right given to an unpaid seller. In the absence of this right, the unpaid sellersother rights against the goods, namely, lien and stoppage in transit, would not have been of much use becausethese rights only entitle the unpaid seller to retain the goods until paid by the buyer. If the buyer continues toremain in default, then should the seller be expected to retain the goods indefinitely, especially when the goods are

perishable? Obviously, this cannot be the intention of the law. Section 54, therefore, gives to the unpaid seller alimited right to resell the goods in the following cases:

(a) Where the goods are of a perishable nature; or(b) Where such a right is expressly reserved in the contract in case the buyer should make a default;

Q.4 Write a note on:(A) Auction sales

Auction sales are events whereby personal or commercial property and merchandise are sold at the highest priceto bidders who place monetary offers on the items. Auction sales can take many forms from selling wholesalemerchandise on an online auction site to holding an auction at a particular location to sell off unwanted

belongings or settle debts. Some auction sales are conducted remotely by unseen bidders via the computer ortelephone while other auctions sales are live and bidders place their bids in person in a fast-paced fashion.Auction sales generally use similar formats, in that property is presented as available for viewing and purchase

to others. The property can be anything from personal or household belongings to vehicles, real estate and promised goods or services. Many times, auctions are good ways for buyers to find bargains on the items theymost want and make purchases that are far below current market value.

(B)Registration of partnershipThe law relating to a partnership firm is contained in the Indian Partnership Act, 1932.Under Section 58 of the Act, a firm may be registered at any time ( not merely at the time of its formation butsubsequently also ) by filing an application with the Registrar of Firms of the area in which any place of

business of the firm is situated or proposed to be situated.Application shall contain:-

name of the firm place or principal place of business names of any other places where the firm carries on business. date on which each partner joined the firm name in full and permanent address of partners. duration of the firm

Application shall be signed and verified by all the partners or their duly authorized agents.

Application shall be accompanied by prescribed fee as well as the following documents: Prescribed Registration Form for Incorporation of a Company. (Form No.

1 and Specimen of Affidavit )
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Certified true copy of the Partnership deed entered into. ownership proof of the principal place of business

Name of the firm should not contain any words which may express or imply the approval or patronage of thegovernment except where the government has given its written consent for the use of such words as part of thefirms name.

Under Section 59 of the Act, when the Registrar of Firms is satisfied that the provisions of section 58 have beenduly complied with, he shall record an entry of the statement in the Register of Firms and issue a Certificate ofRegistration.

penalty for furnishing false particulars (Section 70) - Any person who signs any statement, amending statement,notice or intimation under this Chapter containing any particular which he knows to be false or does not believeto be true or containing particulars which he knows to be incomplete or does not believe to be complete, shall

be punishable with imprisonment which may extend to three months, or with a fine or with both.

Any alterations, subsequent to Registration shall be notified to the registrar:-

o Change in firm name and principal place of business (Section 60) shall require sending of a newapplication form along with the prescribed fee, duly signed and verified by all the partners.

o Change relating to opening and closing of branches. (Section 61)When a registered firm discontinues business at any place or begins to carry on business at any

place, such place not being its principal place of business, any partner or agent of the firm maysend intimation thereof to the Registrar.

o Change in the name and permanent address of any partner (Section 62)When any partner in a registered firm alters his name or permanent address, an intimation of thealteration may be sent by any partner or agent of the firm to the Registrar.

o Change in the constitution of the firm and its dissolution [Section 63(1)]when change occurs in the constitution of the firm, any of the new, continuing or the outgoing

partner, while when a registered firm is dissolved , any person who was a partner immediately before the dissolution or the agent of any such partner or person specially authorized on his

behalf, may give notice of such a change to the Registrar, specifying the date thereof.

o Under Section 63(2), when a minor who has been admitted to the benefits of partnership in afirm attains majority and elects to become or not to become a partner, he or his agent speciallyauthorized in this behalf, may give notice to the Registrar that he has or has not become a

partner.

o Accordingly, the various forms prescribed under the Indian Partnership Act, 1932, for thealterations in the registered partnership firm are:-

a. Form No. II :- For change of principle place of business & change in the name of the firm.

b. Form No. III :- For change of the other then principle place of business.

c. Form No. IV :- For change of name of the partners & permanent address of the partners.

d. Form No. V :- For change of constitution of forms & addition or retirement of partner.

e. Form No.VI :- For dissolution of the firm

f. Form No. VII :- For minor partner attains the age of majority.
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Partnership Act, 1932 does not provide for compulsory registration of firms. It is optional for partners to set thefirm registered and there are no penalties for non-registration. However, Section 69 of the Act which deals withthe effects of non-registration denies certain rights to an unregistered firm. Under the Act :-

o A partner of an unregistered firm cannot file a suit in any court against the firm or other partnersfor the enforcement of any right arising from a contract or right conferred by the Partnership Actunless the firm is registered and the person suing is or has been shown in the Register of Firms asa partner in the firm.

o No suits to enforce a right arising from a contract shall be instituted in any Court by or on behalfof a firm against any third party unless the firm is registered and the persons suing are or have

been shown in the Register of Firms as partners in the firm.

o An unregistered firm or any of its partners cannot claim a set off (i.e. mutual adjustment of debtsowned by the disputant parties to one another) or other proceedings in a dispute with a third

party.Hence, every firm finds it advisable to get itself registered sooner or later.

However, non-registration of a Partnership firm shall not affect:-

o The rights of third parties to sue the firm and/or its partners.

o The firms or partners in the firms which have no place of business in the territories to which thisAct extends, or whose places of business in the said territories are situated in areas to which theact does not apply.

o any suit or claim or set-off not exceeding one hundred rupees in value which, in the Presidency-towns, is not of a kind specified in Section 19 of the Presidency Small Cause Courts Act, 1882(15 of 1882), or outside the Presidency- towns, is not of a kind specified in the Second Scheduleto the Provincial small Cause Courts Act, 1887 (9 of 1887), to any proceeding in execution orother proceeding incidental to or arising from any such suit or claim.

o the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolvedfirm, or any right or power to realize the property of a dissolved firm.

o the powers of an official assignee, receiver or Court under the Presidency-towns Insolvency Act,1909 (3 of 1909), or the Provincial Insolvency Act, 1920 (5 of 1920), to realize the property ofan insolvent partner.

Rectification of mistakes (Section 64 of the Act)

o The Registrar shall have power at all times to rectify any mistake in order to bring the entry inthe Register of Firms relating to any firm into conformity with the documents relating to thatfirm filed under this Act.

o On application made by all the parties who have signed any document relating to a firm filedunder this Act, the Registrar may rectify any mistake in such document or in the record or notethereof made in the Register of Firms.

Inspection of Register and filed documents (Section 66 of the Act:) The Register of Firms shall be open toinspection by any person on payment of such fee as may be prescribed.


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o All statements, notices and intimations filed under this Act shall be open to inspection, subject tosuch conditions and on payment of such fee as may be prescribed.

Grant of copies (Section 67 of the Act) The Registrar shall on application furnish to any person, an payment of such fee as may be prescribed, a copy,certified under his hand, of any entry or portion thereof in the Register of Firms.

( C) Quasi Contract

A quasi-contract (or implied-in-law contract ) is a fictional contract created by courts for equitable,not contractual, purposes. A quasi-contract is not an actual contract, but is a legal substitute for formed toimpose equity between two parties. The concept of a quasi contract is that of a contract that should have beenformed, even though in actuality it was not. It is used when a court finds it appropriate to create an obligationupon a non-contracting party to avoid injustice and to ensure fairness . It is invoked in circumstances of unjustenrichment ,[4] and is connected with the concept of restitution.

Generally the existence of an actual or implied-in-fact contract is required for the defendant to be liable forservices rendered, and a person who provides a service uninvited is an intermeddler who is not entitled tocompensation. "Would-be plaintiffs cannot deliver unordered goods or services and demand payment for the

benefit....A corollary is that one who does have an enforceable contract is bound by the contract's terms: subjectto a few controversial exceptions, she cannot sue for restitution of the value of benefits conferred..." However,in many jurisdictions under certain circumstances plaintiffs may be entitled to restitution under quasi-contract(as in the example of Oklahoma below).

Quasi-contracts are defined to be "the lawful and purely voluntary acts of a man, from which there results anyobligation whatever to a third person, and sometime a reciprocal obligation between the parties."

(D) When the condition is to be treated as a warranty:

Answer:- (1) In England or Ireland

(a)Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the

condition, or may elect to treat the breach of such condition as a breach of warranty, and not as a ground fortreating -the contract as repudiated:

(b)Whether a stipulation in a contract of sale is a condition, the breach of which may give rise to a right to treatthe contract as repudiated, or a warranty, the breach of which may give rise to a claim for damages but not to aright to reject the goods and treat the contract as repudiated, depends "in each case on the construction of thecontract. A stipulation may be a condition, though called a warranty in the contract:

(c)Where a contract of sale is not severable, and the buyer has accepted the goods, or part thereof, or where thecontract is for specific goods, the property in which has passed to the buyer, the breach of any condition to befulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goodsand treating the contract as repudiated, unless there be a term of the contract, express or implied, to that effect.

(2)In Scotland, failure by the seller to perform any material part of a contract of sale is a breach of contract,which entitles the buyer either within a reasonable time after delivery to reject the goods and treat the contractas repudiated, or to retain the goods and treat the failure to perform such material part as a breach which maygive rise to a claim for compensation or damages.

(3)Nothing in this section shall affect the case of any condition or warranty, fulfilment of which is excused bylaw by reason of impossibility or otherwise.

(E) Performance of the Contract of Sale

It is the duty of the seller and buyer that the contract is performed. The duty of the sellers is to deliver the goods
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and that of the buyer to accept the goods and pay for them in accordance with the contract of sale.

Unless otherwise agreed, payment of the price and the delivery of the goods and concurrent conditions, i.e.,they both take place at the same time as in a cash sale over a shop counter.,

Delivery (Sections 33-39)

Delivery is the voluntary transfer of possession from one person to another. Delivery may be actual,constructive or symbolic. Actual or physical delivery takes place where the goods are handed over by the sellerto the buyer or his agent authorised to take possession of the goods. Constructive delivery takes place when the

person in possession of the goods acknowledges that he holds the goods on behalf of and at the disposal of the buyer. For example, where the seller, after having sold the goods,may hold them as bailee for the buyer, thereis constructive delivery. Symbolic delivery is made by indicating or giving a symbol. Here the goodsthemselves are not delivered. but the "means of obtaining possession" of goods is delivered, e.g, by deliveringthe key of the warehouse where the goods are stored, bill of lading which will entitle the holder to receive thegoods on the arrival of the ship.

Rules as to delivery

The following rules apply regarding delivery of goods:

(a) Delivery should have the effect of putting the buyer in possession.(b) The seller must deliver the goods according to the contract.(c) The seller is to deliver the goods when the buyer applies for delivery; it is the

duty of the buyer to claim delivery.(d) Where the goods at the time of the sale are in the possession of a third

person, there will be delivery only when that person acknowledges to the buyer that he holds the goods on his. behalf. .

(e) The seller should tender delivery so that the buyer ca~ take the goods. It is no duty of the seller to sendor carry the goods to the buyer unless the contract so provides. But the goods must be in a deliverablestate at the time of delivery or tender of delivery. If by the contract the seller is bound to send the

goods to the buyer, but no time is fixed, the seller is bound to send them within a reas9nable time.(f) The place of delivery is usually stated in the contract. Where it is so stated, the goods must be delivered

at the specified place during working hours on a working day. Where no place is mentioned, the goodsare to be delivered at a place at which they happen to be at the time of the contract. of sale and if notthen in existence they are to be delivered at the price they are produced.

(g) The seller has to bear the cost of delivery u~less the contract otherwise provides. Whi