CPT LAW : EXAM REVIEWER

CHAPTE -1 :INDIAN CONTRACT ACT, 1872

1. Indian contract Act, 1872 came into force on 1st September, 1872.

2. It applies to whole of India except the state of J & K.

3. The provisions related to contracts are contained in Indian Contract Act, 1872.

4. The provisions related to sale of goods wee originally contained in Indian contract act, 1872.

5. The provision related to sale of goods are contained in the Sale of Goods Act, 1930.

6. The Sale of Goods Act came into force on 1st July, 1930.

7. Indian Partnership Act come into force on 1st October, 1932.

8. The provisions related to partnership are contained in Indian partnership Act, 1932.

9. Contract [Sec.2(h)] An agreement enforceable by law.

10. Agreement [Sec 2(e)] Every promise & every set of premises forming consideration for each other.

11. Promise, [Sec2 (b)] A proposal when accepted becomes a promise.

12. An agreement is an accepted proposal.

13. Consideration, Quid pro quo i.e., something in return.

14. Enforceability by law Agreements which creates legal obligation on the part of parties.

[Balfour Vs. Balfour]

15. Essential elements of a valid contract [Section 10] (1) All agreements are contracts if they are made by

(2) Free consent of the parties

(3) Competent to the contract for

(4) A lawful consideration & with

(5) A lawful object & are

(6) Not hereby expressly declared to be void.

(7) Intention to create legal relationship

(8) Certainty of meaning (e.g. Oil)

(9) Possibility of performance

(10) Legal formalities.

16. Types of Contracts

(1) Void Contracts ���� A contract which does not content all the essential elements.

(2) Void Contract [Sec2(j)] � A contract which ceases to be enforceable by law becomes void

when it ceases to be so enforceable. It is a contract which is valid in the beginning but later

on due to some reasons it becomes void.

(3) Void Agreement [Sec 2(g) – An agreement not enforceable by law. It is voide-ab-initio ie.,

void from the very beginning when it is made.

(4) Voidable contract [Sec 2(i)] – A contract which is enforceable by law at the option of one

party but not at the option of others. Here, only one party can go to the court of law, other

party cannot go to the court of law.

(5) Illegal Agreement – An agreement the consideration of object of which is unlawful [Sec. 23]

• All illegal agreements are void, but all void agreements are not necessarily illegal.

• Collateral transactions to an illegal agreement are void.

• Collateral transactions to a void agreement (not illegal) are not affected.

(6) Unenforceable contract – It is one which is good in substance but due to some technical

defect such as absence in writing, signing one or more parties cannot see upon it.

(7) Unilateral Contract – Obligation is pending on the part of one of the parties to the contract.

(8) Bilateral Contract – obligation is pending on the parties of both of the parties to the

contract.

(9) Executed Contract – A contract which is completed where parties to the contract have

performed their respective obligations.

(10) Executory contract – A contract which is to be performed in future.

17. Time barred debt

• Indian limitation act, 1963 – A debt is said to be time barred on expiry of 3 years

from the due date, if the amount has not been recovered and also no action has been

taken for recovery of the amount.

• A time barred debt is not recovereable.

• A written promise to pay time barred debt & signed by the premisor or his duly

authorized agent is valid.

• A person who pay time barred debt, in ignorance of Indian Limitation Act, 1963

(Indian Law), cannot recover it back.

• In case of appropriation of payment, if debtor does not mention the debt against

which payment is to be adjusted, then creditor may appropriate it to the debt first in

time, whether time barred or not.

English Law

Classifications

Simple contract Formal Contract

Contract of Record Contract under seal

Acknowledgement of

debt due to state

Recognisation

Judgement of Court

Obligation imf by court

upon one or more parties

in favour of other

18.

19. In commercial & Business Agreements, the intention of parties to create legal relationship is

presumed to exist.

CHAPTER-2 OFFER & ACCEPTANCE

1. Proposal [sec 2(a)] / offer – Where one person signifies to another his willingness to do or to abstain

from doing anything with a view to obtaining the consent of that either to such act or abstinence, he

is said to make a proposal.

2. Acceptance [Sec(b)] – Where the person to whom proposal is made signifies his assent thereto, the

proposal is said to be accepted.

3. Legal rules regarding offer (1) Offer must be capable of creating the legal relationship.

(2) Offer must be certain, definite and not vague.

(3) Offer may be express or implied.

(4) Offer must be distinguish from an invitation to offers.

(5) Offer may be conditional.

(6) Offer may be specific or general

(7) Offer must be made with a view to obtaining the assent of the offeree.

(8) An offer should not contain a term of non compliance which may amounts to acceptance.

(9) Offer must be communicated to the person to whom it is made.

(10) Special terms to an offer must be communicated.

4. Types of offer

Contract

Implied Express

Oral Written

Law imposed

obligation

Inferred from

conduct of parties

Tacit Contract Quid Pro

Implied by law Implied by action

(1) General offer – An offer made to the public at large. Anyone having knowledge of the offer

can accept this offer by complying with the terms of offer.

(2) Specific offer – An offer made to a specified person. This offer can be accepted only by the

person to whom it is made.

(3) Cross offers – When two persons exchange identical offer in ignorance of each others offer.

• Two cross offers cannot make a contract.

(4) Counter offer – Qualified acceptance to the offer & counter offer amounts to rejection of the

original offer.

(5) Standing / open / continuing offer – An offer which is allowed to remain open over a period

of time.

• Tender for supply of goods is an example of General offer & standing offer.

5. Examples of invitation to offer (1) Advertisement

(2) Window display of goods by shopkeeper

(3) Quotations

(4) Catalogue

(5) Price list

(6) Advertisement in a newspaper for auction sale

(7) Initial public offer (IPO) of a company

(8) Prospectus issued by an institute.

6. Rules regarding valid acceptances (1) Acceptance must be absolute and unqualified.

(2) Mere silence is not an acceptance.

(3) Acceptance must be communicated.

(4)

(5)

Mode of

Acceptance

Mode prescribed in

the proposal

No mode prescribed

in the proposal

According to mode

prescribed

According of some

usual or reasonable

mode

Time for

Acceptance

Time prescribed

with proposal

No time is

prescribed in the

proposal

• An acceptance is to offer what is a lighted match is to a train of gunpowder

[Sir William Anson]

7. Communication of offer and acceptance

• Communication of offer is complete when it comes to the knowledge of the person to whom

it is made (i.e., when the letter of offer reaches to offeree).

• Communication of Acceptance is complete

a) As against the progress – When it is put into the course of transmission to him so as

to be out of power of the acceptor to withdraw the same 9i.e, when letter of

Acceptance posted).

b) As against the acceptor – When it comes to the knowledge of the proposer. (i.e, when

letter of Acceptance reached to proposer)

8. Communication of Revocation is complete:-

a) As against the person who makes it, when it is put into the course of transmission to

the another person so as to be out of power of the person making it.

b) As against the person to whom it is made, when it reaches to him.

9. Other Important Points

• A bid at an auction sale is an implied offer to buy.

• A proposal is revoked by death or insecurity of the proposer, if the fact of insanity or

death comes to the knowledge of the accepter before acceptance.

• An agreement to agree in future is invalid.

Meaning of Terms

• Offeror – The person who makes the offer.

• Offeree – The person to whom offer is made.

• Promisor – The person who makes the promise.

• Promisee – The person to whom promise is made.

CHAPTER -3 : CONSIDERATION

1. Consideration [Sec 2(d)] – When at the desire of the promissee, the promise or any other person has

done or abstained from doing or, does or abstains from doing or promise to do or to abstain from

doing something. Such an act or abstinence or promise is called consideration for the promise.

Technical word “Quid pro quo” ie., something in return.

2. Legal rules regarding consideration 1. Consideration must move at the desire of the promisor.

2. Consideration may move from the promissee or any other person

3. Executed Consideration � Consideration which has been given

4. Executory Consideration � Consideration to be moved in future.

5. Consideration may be past, present or future.

6. Consideration should be real & not illusory.

7. Consideration need not be adequate.

8. The performance of an act what one is legally found to perform is not consideration for the

contract.

9. Consideration must not be unlawful immoral or opposed to the public policy.

10. There can be a stranger to a consideration but there cannot be a stranger to a contract.

3. Exception to a third party or stranger to a contract cannot see.

1. Trust – Beneficiary can sue

2. Family Settlement – Other family members can sue.

3. Marriage contract – Female member for her marriage expenses on partition of HUF.

4. Acknowledgement of liability 5. Assignment – Assignee can enforce upon the contract.

6. Covenant – Running with laud

4. No Consideration, no contract (An agreement without consideration is void). [Section 25]

Exceptions: 1. Agreement on account of natural love and affection. This means there is a :-

a) Written legal agreement

b) On accounts of natural love & affection

c) Parties standing in near relative

2. Compensation for past voluntary services

3. Promise to pay time barred debt:-

a) In writing

b) Signed

4. Agency

5. Completed gift

6. Charity

7. Bailment

CHAPTER – 4 : CAPACITY TO THE CONTRACT

1. Parties competent to contract

1. Major

2. Sound mind

3. Person not disqualified by law from contracting

2. Parties incompetent to contract

1. Minor

2. Unsound mind person

3. Person disqualified by law from contracting

3. Age of majority is defined u/s 3 of Indian Majority Act, 1875

4. Major – A person who has completed 18 years of age

Exceptions 1. Guardian appointed – Appointed by court

2. Superintendent appointed – 21 years

5. A person who is usually of sound mind but occasionally of unsound mind cannot make contract

when he is of unsound mind.

6. A person who is usually of unsound mind but occasionally of sound mind may make a contract when

he is of sound mind.

7. Unsound Mind Persons – Drunkard, Idiot, Lunatic

8. Persons disqualified by Law

1. Alien enemy

2. Statutory corporation

3. Municipal bodies

4. Sovereign status Ambassadors & Diplomatic couriers

5. Convict

6. Insolvent

9.

10. A contract with incompetent person is void-ab-initio.

11. Position of Minor’s Agreement 1. An agreement entered into by or with a minor is void-ab-initio

[Mohiri Bibi Vs. Dharmodas Ghose] 2. Minor can be beneficiary

3. Minor cannot become a partner but he can be admitted to the benefits of partnership with the

consent of all partner.

4. Minor can always plead minority.

5. Ratification on attaining majority is not allowed.

6. Contract by minor’s guardian is valid if it is within the scope of guardian’s authority and it is

for the benefit of minor.

7. Minor is not personally liable for necessaries supply to him but minor’s property is liable, not

only for necessary goods, but also for necessary services. [Nath Vs. Inman]

8. Minor can be an agent but cannot be held personally liable for breach of duty or negligence.

9. A minor cannot be declared insolvent because he is incapable of contracting.

CHAPTER -5 : FREE CONSENT

1. Consent [Section 13]- Agreed upon something in the some sense � consensus-ad-idem � meeting /

Identity of mind.

2. Free Consent [Section 14] – A consent is said to be free if it is not caused by

a) Coercion or

b) Undue influence or

Alien Enemy

Contracts entered

before war

Contract entered

during war

Suspended Dissolved With the permission

of Central Govt.

Without the permission

of Central Govt.

c) Fraud or

d) Misrepresentation or

e) Mistake.

3. Coercion [Sec.15]- Coercion is committing or threatening to commit a act forbidden by IPC or the

unlawful detaining or threatening to detail any property to the prejudice of any person, whatever with

intention of causing him to enter into an agreement.

• A threat to commit suicide amounts to coercion.

• A person to whom money has been paid or anything delivered must repay or return it.

4. Undue influence [Sec.16] – A contract is said to be induced by undue influence where the relation

subsisting between the parties are such that one of the parties is in a position to dominate the will of

another and uses that position of obtain an unfair advantage over the other.

• A person is in a position to dominate the will of another where he holds real or apparent

authority over the other or stands in fiduciary relation to the other.

5. Fraud [Sec.17] (Intention To Deceive)

a) the suggestion as a fact which is not true by one now does not believes it to be true

b) Active concealment of fact by one having knowledge or belief of the fact

c) A promise mode without any intention of performing it

d) Any other act fitted to deceive

e) Any such act or omission as to law specially declared to be fraudulent

Exception :-

• Mere silence is not a fraud

• Where it is the duty of person to speak

• Where silence is equivalent to speech

6. Misrepresentation – Where a person asserts something which is not true though he believe it to be

true.

• A contract induced by Coercion, undue influence, fraud or misrepresentation is voidable.

7. Mistake

Mistake

Mistake of fact Mistake of Law

Indian Law Foreign Law

One party under

mistake

Both parties under

mistake

Mutual Mistake

of Fact Valid

Unilateral Bilateral

Valid Same as Mistake of

fact

Some Other Important Points 1. Moral pressure is involved in case of undue influence

2. Ignorance of law is of no excuse.

3. A contract is not voidable if fraud or misrepresentation does not induce the other party to enter into

contract.

4. A party cannot complain of fraudulent silence if he has the means of discovering the truth with

ordinary.

5. Coercion must be exercised against promisor or any other person.

6. An attempt to deceive is not fraud unless the other party is actually deceived.

CHAPTER – 6 : LAWFUL CONSIDERATION OR OBJECT

1. Section 23 – Consideration or object is unlawful if it is :-

a) Forbidden by law or

b) Of such nature that if permitted, defeat the provision of any law or

c) Fraudulent

d) Involves injury to a person or property of another

e) Immoral or opposed to the public policy.

CHAPTER – 7 : VOID AGREEMENTS

1. Void Agreements

• Agreement without consideration

• Agreement with incompetent parties

• Uncertain Agreement

• Agreement made under mutual mistake of fact

• Agreement with unlawful consideration or object

• Illegal agreements

• Agreement to do an impossible act

• Wagering agreements

• Collateral transactions to a wagering agreement are valid.

• Speculative transactions are generally valid.

2. Agreements opposed to the public policy

• Trading with Alien enemy

• Champerty & maintenance

• Stifling prosecution

• Interference with the course of justice

• Marriage brokerage contracts

• Interest against obligation

• Sale of public office

• Agreement for creation of monopolies

• Agreement in restraint of trade

• Agreement in restraint of marriage

• Agreement in restraint of legal proceeding

3. Consideration unlawful in part

4. Wagering Agreement – It is an agreement involving payment of a sum of money upon the

determination of uncertain event.

5. Other Important points

• Compromise of public offence is illegal

• Maintenance - Promotion of litigation in which one has no interest.

• Champerity – It is a bargain whereby one party agrees to assist another in recovering

property, with a view to sharing the profits of litigation.

• All agreements on account of champerity and maintenance are neither void nor valid. Some

of them may be void, some of them are valid.

• An agreement which provides for a reference to arbitration instead of court of law is valid

even if it is in restraint of legal preceding.

CHAPTER – 8 : PERFORMANCE OF CONTRACT

1. Where contracts involves the exercise of personal skill and diligence, it must be performed by the

promisor himself.

2. In case of death of promisor, the liability of legal representative is limited to the value of the property

they inherited from the deceased.

3. Of all of the joint promisors dies, their legal representation are bound to perform the promise jointly

4. Succession – Both burden & benefits are transferred.

5. Assignment – Only benefits are transferred, not the liabilities there upon.

6. Reciprocal Promises [Sec 2(f)- When a contract consists a two promises, one being consideration

for the other such promise are called reciprocal promises.

7.

8.

Consideration

unlawful in part

Contract is

inseparable

Contract is

separable

Legal Part Illegal Part Contract is

altogether void

Valid Void

Time essential Late performance Contract becomes voidable

at the option of promisee

Time is not

essential

Late performance Contract cannot be avoided

promisee is only entitled to

compensation

But within

reasonable time

9.

10.

11.

12. If debt to be discharged is not indicated by the Debtor, then creditor may apply it in discharge of debt

in order of time, whether time barred or not.

13. Novation – Old contract is cancelled & new contract is formed.

14. Recession – Old contract is cancelled, no new contract is formed.

15. Alteration – Changing in the terms of original contract parties must remain same.

16. Remission – To remit or waive off the performance by promise.

17. In case of voidable contract, if aggrieved party rescind the contract, it must return the benefit

received there under.

18. Void Contract / Agreement - Either restore back the advantage received or pay compensation for it.

19. Discharge of contract by

• Actual or attempted performance

• Mutual agreement – Novation, Alternation, Remission, Recession.

• Impossibility of performance.

Time is not

essential

Late performance Contract becomes voidable

at the option of promisee

Reasonable time

expired

Time is

essential

Late

performance

Promisee

Accepts

No compensation

without notice

Impossibility of

Performance

Supervening

Impossibility

Initial Impossibility

Known to

parties

Unknown to

parties

Contract becomes

void

Valid Void

Known to

promisor only

Compensatory

• Lapse of time eg. Time barred debt.

• Operation of law such as death or insolvency.

• Actual or anticipatory Breach.

20. Where the performance of promise by one party depends upon the prior performance of promise by

the other party, such promises are mutual & dependent.

CHAPTER – 9 : BREACH OF CONTRACT

Actual Breach – Breach of contract on the due date of performance or during the performance.

Anticipatory Breach – Breach of contract before time of performance has arrived ie., before due date of

performance.

Damages in case of Breach:-

1. Ordinary Damages – Compensation for any loss or damage which arise naturally in the normal

course of event of Breach.

2. Special Damages – It cannot be recovered as a matter of right. These can be recovered only if the

notice of special circumstances is given.

3. Vindictive Damages – For Breach of promise to marry or Exemplary Damages for wrongful

Dishonour by banker of his customer cheque.

4. Nominal Damages – Where plaintiff proved that there is breach of contract but he has not suffered

any real damage.

• These may be a single rupee or even 10 paise. These are awarded to maintain the right to

decree in the court.

5. Remote Damage – Indirect loss from breach of contract. Remote Damages are not recoverable.

6. Damages for deterioration coursed due to delay Deterioration – Not only implies physical

damages to goods but also loss of special opportunity for sale damages can be recovered from carrier

even without notice.

7. Calculation of Damage

• Breach by buyer ���� Damage = Contract Price – Market price in date of Breach.

• Breach by seller ���� Damage = Market price on date of Breach – Contract price

8. Remedies for Breach of Contract

• Right to rescind the contract

• Right to claim damages

• Right to continue the contract

• Suit upon Quantum merit (as much as is earned or according to the quality of work done)

• Suit for specific performance

• Suit for injunction

• Injunction order is issued by the court when a party do what he promised not to do.

Other points :-

• A contract is not frustrated by commercial impossibility

• In case of anticipatory breach, the aggrieved party may treat the contract (a) As discharged and bring an immediate action for damages

(b) As operative and wait till the time of performance arrives.

• A party entitled to rescind the contract, loses the remedy where (a) He has ratified the contract

(b) The third party acquired the right in good faith

(c) Contract is not separable and recession is sought of one part only.

CHAPTER – 10 : CONTINGENT & QUASI CONTRACT

• Contingent contract [Sec 31] – It is a contract to do or not to do something, if some event collateral

to such contract, does or does not happens.

• Contract of Insurance is a contingent contract.

• When the contingent event is the part of contract, the contract is conditional one, & where it is

collateral to the contract, it is a contingent contract.

•

•

Contract

Contingent

An Event happens Happening of an

event become

impossible

Valid

Void

An Event

“Happening”

Contract

Contingent

An event happens Happening of an

event become

impossible

An event not

“Happening”

• The basis of “quasi contractual relations” is the prevention of unjust enrichment at the expense of

others.

•

•

•

•

QUASI CONTRACT

• Right in rem – Right against the entire world.

• Right in personam – Right against a particular personam.

• Quasi contractual right is a right in personam.

• Quasi contracts are implied by law.

Types of quasi contracts

Contract Contingent Future conduct of

living person

Void due to impossibilities

of an event due to conduct of

such person

Contract Contingent

An event

“happening”

An event happens

within time

Within Fixed Time

An event does not

happens within time

Happening of an

event becomes

impossible within

time

Valid

Void

Void

Contract Contingent

An event “not

happening”

An event happens

within time

Within Fixed Time

An event does not

happens within time

Happening of an

event becomes

impossible within

time

Void

Void

Valid

Contract Contingent Happening of

Impossible an event Void

• Claim for necessaries supplied to an incompetent person, supplier can recover the price from the

property of such personam.

• Right to recover money paid for another.

• Obligation of a person enjoying the benefit of non gratuitous act.

• Responsibility of finder of goods � same as bailee.

• A person to whom money has been paid or anything delivered under coercion or by mistake must

repay or return it.

CHAPTER -1 :INDIAN PARTNERSHIP ACT, 1932

1. Partnership [Sec 4] - It is the relation between persons who have agreed to share the profits of a

business carried on by all or any one of them acting for all.

2. Essential elements of partnership

• Two or more persons

• Agreement

• Business

• Sharing of profits

• Mutual agency.

3. Maximum no. of partners has not been defined under partnership Act. It has been defined under

Companies Act. For Ordinary business � (20), for Banking Business � (10). If no. of partners

exceed this maximum limit, it becomes an illegal Association.

4. The persons who entered into partnership are individually called partners & collectively called firm

and the name under which they carry on from business is called firm name.

5. Written agreement between partners is called partnership deed.

6. Mutual Agency – Business must be carried on by all partners or any one of them acting for all.

Every partner is the principal as well as agent of each other as well as firm.

7. Sharing of profits is not the true test of partnership.

8. Mutual agency, which is the cardinal principal of partnership law, is the true test of partnership.

9. Sharing of profits is the prima facie evidence of partnership.

10. Mutual agency is the conclusive evidence of partnership.

11. A partnership firm cannot become a partner in another firm because it has no separate legal entity.

12. The member of a registered company can become a partner in a firm because company is having a

separate legal entity from its member.

13. Types of Partners 1) Active partners – Who actively participates in conduct of partnership business. Public notice

at the time of retirement.

2) Sleeping or Dormant partners – Do not take part in conduct of partnership business. No

public notice at the time of retirement.

3) Nominal partner – A person who lend his name to the firm without having any real interest.

4) Sub partner – Partnership between partner and stranger.

5) Partner in profits only – No sharing in losses

6) Partner by holding out or partner by estoppel – on whose representation as partner, third

party has given credit to the firm.

14. Partnership arises by agreement whereas Co-ownership may arise by agreement or operation of law

15. Minor’s position in partnership

• A minor cannot become a partner in a firm, but he can be admitted to the benefits of

partnership with the consent of all partners

• He can access, copy & inspect the accounts of the firm and not books of the firm.

•

16. Minor has right to sue partners for accounts for payment of his share but only when severing his

connection with the firm.

CHAPTER -2 : RELATION OF PARTNERS

1. Right of partners

• Right to take part in conduct of the business.

• Right to be consulted.

• Right to have access to inspect & copy books of the firm.

• Right to share profits equally but if no agreement other wise.

• Interest on capital – not allowed if there is agreement otherwise, it shall be paid only out of

profits.

• Interest of advances @ 6% p.a. if no agreement otherwise.

• Right to be indemnified for ordinary expenses and expenses incurred in emergency.

• No remuneration unless there is an agreement otherwise.

• Right to stop admission of a new partner.

• Right to retire with the consent of all partners, if partnership is at will, by notice of retirement

to other partners.

• Right not to be expelled by any majority of partners.

• Right of outgoing partners to carry on competing business.

• Right of retiring partner or legal representative of deceased partner to share of profits or

Interest @6% p.a. at his option.

On attaining majority or obtaining

knowledge of the fact that he is a partner

in a firm

No public notice is

regd. If he want to

continue as partner

Public notice not

given

Public notice given

Deemed to be partner

Within 6 months

Public notice

Elect to become partner or not

Not to become a

partner

Liability

Retrospectively

His share is not liable after

the date of public notice

• Right to dissolve the firm with the consent of all partners.

• In case of Partnership at Will, by giving notice in writing to other partners of his

intention to do so.

2. Partnership at will – No duration and no particular venture is fixed.

3. Particular partnership – For particular adventure or particular time period ( Duration)

4. Duties of partners –

• Duty to carry on business to the greatest common advantage.

• Duty to accounts for profits earned from any transaction or business connection of the firm or

from use of firm’s property or firm’s name.

• Duty not to carry on competing business as to that of partnership firm. If carries on, must

account for and pay all the profits to the firm but firm will not be liable for any loss under

competing business.

• Duty to be just & faithful to each other.

• Duty to render true accounts.

• Duty to indemnify the firm for loss or damage due to his fraud or willful neglect.

• Duty to attend his duties diligently

• Duty not to claim remuneration.

• Duty to contribute equally to the loss of firm, unless otherwise agreed.

5. Acts beyond Implied authority of partner

• Submission of dispute for arbitration

• Compromise or relinquish of any claim

• Withdraw a suit filled on behalf of firm.

• Admit any liability in a suit against the firm.

• Acquire an immovable property on behalf of the firm.

• Transfer immovable property belonging to the firm.

• Opening a bank account on behalf of firm in his own name.

• Enter into partnership on behalf of the firm.

6. If any money received on behalf of the firm is misapplied by any partner, then all the partners as well

as firm are liable to third parties.

7. A partner can be expelled from the firm provided:-

a) Power of expulsion existed is a contract between part.

b) Power has been exercised by a big majority of partners &

c) Power has been exercised in good faith which means:-

i. Expulsion must be in the interest of partnership.

ii. Notice is served to the partner.

iii. Opportunity of being heard is given.

8. If the partner is otherwise expelled, the expelled is null & void.

CHAPTER – 3 : REGISTRATION & DISSOLUTION OF FIRM

• Registration of firm is not compulsory, it is optional.

• If a firm is not registered, it would attract following disabilities:- (a) No suit against third party by firm

(b) No set off of more than Rs. 100 by firm or its partner

(c) No action against firm by partner

• Registration of partnership is complete when registrar of firms file the statement & records an entry

in the register of firm.

• Non registration of firm does not affect the right of third parties against the firm or its partners.

• Dissolution by Agreement (a) Insolvency of all partners.

(b) Business becoming unlawful.

(c) Notice of Dissolution by partner where partnership is at will.

• Subject to agreement between partners, on happing of following :- a) Efflux of time

b) Completion of venture

c) Death of a partner

d) Insolvency of a partner

Dissolution by court

• Partner becoming of unsound mind.

• Permanent incapacity of a partner

• Misconduct of a partner affecting business.

• Willful or persistent breaches of agreement by a partner

• Transfer or sale of whole interest by a partner

• Improbability of business being carried on save at loss

• On other equitable ground as court satisfies

Consequences of Dissolution

• Partners continue to liable until public notice is given.

• A partner can find the firm for acts done after dissolution of firm which are related to winding up or

to complete unfinished transactions.

• Partners are liable to repay to new partner reasonable amount of premium.

THE SALE OF GOODS ACT, 1930

1. Buyer means a person who buys or agrees to buy goods.

2. Seller means a person who sells or agrees to sell goods.

3. Goods means every kind of movable property other than actionable claim & money & includes stock

& shares , growing crops , grass or things attached to or forming part of land which are agreed to be

served before or under the contract of sale.

4. Existing goods – Goods existing at the time of contract of sale i.e. those owned and possessed by

seller.

5. Future goods – Goods to be manufactured or produced or acquired after making the contract of sale

( Agreement to sell ).

6. Specific goods - Goods identified and agreed upon at the time of contract of sale.

7. Unascertained / Generic Goods – Goods Defined only by description, & not identified and agreed

upon.

8. Ascertained goods – Goods identified as per agreement after contract of sale is made.

9. Goods in deliverable state – When they are in such a condition that buyer is bound to take delivery

of them under the contract.

10. Delivery – Voluntary transfer of possession by one person to another.

11. Actual Delivery – Physical delivery of goods from seller to buyer.

12. Symbolic Delivery – Delivery is taken e.g. Key of a warehouse.

13. Constructive Delivery – Without change in custody of thing.

14. Document of a title to goods – B/L, Dock warrant, warehouse keeper’s, Certificates, Wharfinger

certificate, Railway receipt, multimodal transport document.

15. Mercantile Agent – Who is having in customary course of business an authority

(a) To sell the goods or

(b) To consign the goods for purpose of sale or

(c) To buy goods or

(d) To raise money on security of the goods.

16. Property – Means general property, not special property.

17. Insolvent – Who ceased to pay his debts in the ordinary course of business or cannot pay his debts

when they become insolvent.

18. Contract of Sale is a contract whereby seller transfers or agrees to transfer property in goods to the

buyer for a price.

19. Price is the monetary consideration for sale of goods.

20. Border - when goods are exchanged for goods.

21. Sale – When goods are exchanged for goods & price.

22. (a) In case of sale, ownership & risk is transferred to the buyer.

(b) But in case of agreement to sell, it is not transferred.

23. Bailment is the deliver of goods from one person to another for some specific purpose, on a

condition that, when the purpose in accomplished the goods shall be retire or disposed of f according

to the direction of the person delivery them.

24. In case of Bailment, only possession is transferred not the ownership.

25. Unless otherwise agreed, stipulation as to payment of price is not essence of contract. But stipulation

as to delivery of goods is regarded as an essence of contract.

26. Condition essential to the main purpose of contract breach of which give right to repudiate the

contract & to claim damage.

27. Warranty – Collateral to the main purpose of contract. The breach of which give rise to right to

claim damages but not a right to reject the goods & treat the contract as repudiated.

• Breach of conditions may treated as breach of warranty but breach of warranty cannot be

treated as breach of condition.

28. Implied conditions (a) Condition as to title

(b) Sale by sample as well as description

(c) No implied condition as to quality or fitness

(d) Condition as to wholesomeness.

29. Implied warranties (a) Implied Warranties was to undisturbed possession.

(b) As to non existence of encumbrances

(c) Disclosure of dangerous nature of goods

(d) As to quality or fitness by usage of trade

30. Caveat emptor – Let the buyer beware

Exemption :-

(1) Buyer make known to the seller the purpose of purchase & relies upon seller’s skill &

judgement.

(2) Goods purchased under patent name or brand name

(3) Sale by description

(4) Sale by sample

(5) Sale by sample as well as description

(6) When quality or fitness is not defined by usage of trade

(7) Fraud or misrepresented by seller.

31. Appropriation of goods - Selection of goods for the purpose of using thus in the performance of

contract and with the mutual consent of seller and buyer.

32. In case of unascertained goods, property is passed to the buyer when the goods are ascertained and

they are unconditionally appropriated to the contract.

33. In case of cash sales, property passes only when the case is paid for.

34. “Nemo dat quod non label” – no one can give what he has not got”

35. Exception to sale by non owner (1) Sale by Mercantile Agent

(2) Sale by one of joint promiser

(3) Sale by person in possession under voidable contract provided contract has not been

rescinded until sale

(4) Sale by unpaid seller

(5) Sale by official receiver as

(6) Sale by finder of goods

(7) Effect of estoppels

(8) Sale by one who already sold the goods but continuous in possession thereof.

36. Unpaid Seller (1) When whole price has not been paid or tendered & seller has immediate right of action for

the price

(2) A bill of exchange or other negotiable instrument was given for payment but the same has

been dishonoured, unless this payment is absolute & not a conditional are.

37. Right of lieu is a right to retain possession while right of stoppage of in transit is a right to regain

possession.

38. Right of stoppage in transit can be exercised only. When buyer is insolvent.

39. Unpaid seller’s right

Against Goods Against Buyers

(1) Right of lieu

(2) Right of stoppage in transit

(3) Right of Resale

(1) Suit for price

(2) Suit for damages for non acceptance

(3) Suit for damages for bread

(4) Suit for interest

• Right of stoppage in transit starts where right of lieu ends.

• Auction Sale – It is mode of selling property by inviting bids publicly & property is sold to

the highest bidder.

• An auctioneer is an agent governed by law of agency

• If seller makes use of pretended bidding to raise the price, the sale is voidable at the option of

buyer.

• Contract of sale and Bailment are species of general contract.

• Sale may be absolute conditional or contingent.

• Finder of goods can sell the goods if the owner of goods cannot be found with Reasonable

due diligence.

• Unless otherwise agreed, the expenses of delivery shall be from by seller.

• Unless otherwise provided, buyer shall apply for delivery.

• It time is not fixed for delivery, it must be delivered by the seller within reasonable time.

• Money does not include old coins & foreign currency.

• In an auction sale of bidders make an agreement, refraining from bidding against each other,

such an agreement in valid.

• Where goods are put for sale in lots in a sale of goods by auction, each lot prima facie

deemed to be separate contract of sale.

• Any seller of goods by auction may bid if he reserves his right to bid by notice to the public.

• Right to lieu can be exercised for price only.

• The sale of goods Act, 1930 deals with the movable goods only.

• A contract of sale may be a sale or agreement to sell.

• Document showing title to goods in different from document of title to goods.

• In a hire purchase agreement the hirer has an option to buy the goods.