Contract Act-Specific Contracts

7/31/2019 Contract Act-Specific Contracts

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By Prof. Neha Patel

(c) Prof. Neha Patel, GLS Management

Programs

Contract Act-Specific Contracts


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Contracts of Indemnity &

Guarantee

Chapter VIII (sec. 124- 147) of Indian ContractAct 1872 covers these provisions

A contract by which one party promises to save

the other from loss caused to him by the conduct

of the promisor himself, or by the conduct of any other person, is called a contract of

indemnity. (sec 124)

Promisor >> indemnifier &

Promisee >> indemnity holder

Rights of indemnity holder when sued (sec 125)

(all damages/all expenses-costs/all sums)

Rights of indemnifier (the act is silent)(c) Prof. Neha Patel, GLS Management

Programs


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Guarantee (Section 126)

A contract of guarantee is a contract to performthe promise or

Discharge the liability of a third person in case of his

default.

The person who givessurety

Who defaultsprincipal debtor

To whom it is givencreditor

It may be oral or written; express or implied Essential features

Concurrence/Primary & Secondary liability

Essentials of a Valid Contract (in case of principal

debtor being a minor, the surety is regarded as(c) Prof. Neha Patel, GLS Management

Programs


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Guarantee- Features

Nature of suretys liability (coextensive/limitation)

Kinds of guarantee (specific / continuing)

Revocation of Continuing Guarantee

(notice/death etc.) Discharge of Surety (suretys liability ends)

(revocation/creditors conduct/invalidation)


Programs


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Contract of Indemnity vs.

Contract of Guarantee

COI COG

Two parties

Liability Primary

Only 1 contract

Indemnifier not to act

on the request of

Indemnified Liability arises only in

case of Contingency

Three parties

Liability secondary

Total 3 contracts

Surety to give

guarantee upon

debtors request Debt/duty already

exists the

performance of which

has been guaranteed(c) Prof. Neha Patel, GLS Management

Programs


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Bailment

Delivery of goods by 1 person to another

For some purpose

Upon contract that

When purpose is accomplished Be returned or otherwise disposed of

According to the directions of the person delivering them

Person delivering the goods is called Bailor

Person to whom goods are delivered is calledBailee


Programs


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Essential Features of Bailment

Delivery of Moveable goods

Goods delivered for some purpose

Return of Specific goods

Must be returned to bailor or disposed offAs per the directions of the Bailor

After fulfillment of the purpose or

After expiry of bailment period


Programs


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Kinds of Bailment Classified on the basis of Benefit or Reward

Gratuitous

No remuneration to any of the parties

For exclusive benefit of Bailor or Bailee

Example

Loan of book to a friend

Deposit of goods for safe custody

Non-Gratuitous

Goods given for reward- Remuneration or Consideration

Example

Car Let out on Hire

Tailoring for charges

Pawn or Pledge

Delivered as security for money borrowed


Programs


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Bailment, Sale & License

Sale Ownership is Transferred

License

One party is permitted to place goods in premises

belonging to other person

Goods are not delivered to the Licenser

Bailment

Ownership is not Transferred Goods are delivered to the Bailee


Programs


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Duties of Bailee

To take reasonable care of goods delivered tohim

Not to make unauthorized use of goods

Not to mix bailed goods with own goods To return the goods

To return accretions/increase to goods

Not to set up any adverse title


Programs


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Duties of Bailor

Disclose Faults/ Defects in goods

Repay necessary expenses in case of gratuitous

bail

Repay extra-ordinary expenses in Non-Gratuitous

bail

Indemnify bailee

Receive Back the goods


Programs


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Rights of Bailee

Enforcement of bailors duties

Deliver goods to one of the several joint Bailors

Deliver goods in good faith to bailor without title

Lien Particular Lien unless otherwise stated


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Rights of Bailor

Enforcement of Bailees duties

Terminate bailment if goods used wrongly

Demand return of goods at any time in case of

Gratuitous bailment


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Pledge or Pawn

Bailment of goods as Security for payment of adebt or

Performance of a promise

Bailor in this case is called Pawner

Bailee is called Pawnee


Programs


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Agency

AgentA person employed to do any act of another or

To represent another in dealings with third person

Principal

The person for whom such acts are undertaken

Agency

Contract creating Agent Principal retationship


Programs


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Rules of Agency

I can assign the rights to do those acts which Ihave the right to do on my own

Exceptions

Some acts are supposed to be done personally & cant be

carried out by agents Act of marriage

The acts of agent for all legal purposes are acts

of the principal


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Who may employ an Agent

Any person competent to contract

Minor/ Lunatics can not appoint an agent


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Who may be an Agent

Any person can become an agent

Minors & Lunatics can also be appointed as

agents

But in these cases complete liability is of the

Principal

No Consideration is necessary to create

Agency


Programs


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Creation of Agency

Any person who is of the age of majority and isofsound mind may employ an agent.(section183)

Between the principal and the third persons,any

person may become an agent. But noperson who

is a minor and of unsound mind can become anagent.(184)

No consideration is necessary to create

anagency.(185)

It is not essential that a contract of agency

beentered in to. It is sufficient if a person acts

onbehalf of another and is accepted by the latter(c) Prof. Neha Patel, GLS Management

Programs


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Agency Creation

By Express Agreement X a shop owner appoints Y to manage his shop by

executing Power of Attorney

By Implied Agreement

Inferred from the circumstances of the case

Includes


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Implied Agency

By Estoppel Person by words or conduct induces 3rd party to

believe certain person is his agent

X tells to Y in presence of Z that X is Zs agent & Z

does not Contradict

By Holding out

A person by his past affirmative & positive conduct

leads 3rd person to believe person doing some act

on his behalf is doing with authority X allows Y his servant to buy goods on credit from Z


Programs


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Implied Agency

By NecessityActual & definite necessity for acting on behalf of

principal

Impossible to obtain consent of the principal

By ratification

A without authority buys goods for B

B sells those goods to C on his own account

Bs conduct implies a ratification of purchase made

for him by A

By Operation of Law

Law treats one person as the agent of another

Partnership- All partners are agents of each other(c) Prof. Neha Patel, GLS Management

Programs


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Other Agency Terms

Sub AgentA person employed by & acting under the control of

original agent on agency business

Substituted Agent

Agent names or appoints a substituted agent at the

request of Principal

& the original agent altogether drops out of the

scene


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Types of Mercantile Agents

Factor

Commission agent

Del credere Agent

BrokerAuctioneer


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Duties of Agent

Follow principals directions or customs

Carry out work with reasonable skill & diligence

Render accounts to principal

Communicate in case of difficulty Not to deal on his own account

Not to make any profit out of agency except

remunneration

On termination of agency due to death or insanityof principal

To Protect & preserve the interests entrusted with

him

No to delegate authority(c) Prof. Neha Patel, GLS Management

Programs


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Rights of Agent

Receive Remuneration

Retain sum received on account of principal

Particular Lein- To retain goods

Indemnified against consequences of lawful acts& acts done in goods faith

Compensation for injuries sustained due to

principals neglect or lack of skills

Stoppage of goods in transit


Programs


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Rights of Principal

Right to repudiate the Transaction

To claim any resulted benefit from Agency

Right to Recover Damages

To Resist Agents claim for Indemnity


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Duties of Principal

To indemnify against consequences of all lawfulacts of agent

To indemnify the agent against consequences of

acts done in good-faith

To pay compensation against agentsinjury

To pay the agent the commission orother

remuneration agreed.


Programs


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Termination of Agency

According to section 201, an agency isterminated by:

By an agreement between the parties, or

By the principal revoking his authority; or

By the agent renouncing the business of agency; or

By the business of agency being completed; or

By either the principal or the agent dying or

becoming of unsound mind; or

By the principal being adjudicatedan insolventunder the provisions of any Act for the time being in

forcefor relief of insolvent debtors.


Programs


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Termination of Agency


Programs

Termination of

Agency

By Act of Parties

Agreement

Revocation

by the

Principal

Renunciation

by the Agent

By Operation of Law

Completion of Business ofAgency

Expiry of Time

Death of Principal or

AgentInsanity of Principal or

AgentInsolvency of Principal

Destruction of SubjectPrincipal or agent become Alien

Enemy

Dissolution of Company


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Programs

Thank You!!

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Contract Act-Specific Contracts