Law

Law & Legislation
Lecture- 01
Introduction to Legal
Environment of Bangladesh
Legislation
Means the act or process of law making
Legislature
The place where the law is made
Bangladesh
Law
Prepared by Parliament or Executive

order
Types of Legislation
Subordinate legislation
(eg: Contingent or
conditional legislation)
Debashis Saha, Lecturer,
Supreme legislation (eg:

Constitution)
Jahangirnagar University
What is The Law?
Definition of Law
- A system of rules, usually enforced through a set

of institution
- Rules of permissible conduct, limits on allowable
conduct
- Not the same as a moral limit or rule, but is
supposed to be reflective of morals and
ethics
- But we all know there are many things that
you can do, but should not do.
The Law

Ethics
Article- 152:
Law means any Act, ordinance, order, rule, regulation, bye-law,
notification or other legal environment, and any custom or usage, having the
force of law in Bangladesh
According to Domrdyhenes:
Law is something which man ought to obey for many reasons and
chiefly because every law is both a discovery and a gift of God, and
teaching of wise men and setting right or wrong intended and not
intended, but also common agreement of the state according which
every one in the state ought to live
According to Professor Holland:
Law is the rule of external human action enforced by the sovereign political
authority
Characteristics of Law
Objectives of Law
A rule relating to the actions of human

beings
Attempts to regulate the external actions of
human beings
Enforced by the state

According to Sir William R. Anson:

The object of law is order and the result of
order is that men are enabled to look ahead
with some sort of security as to the future.
Although human action cannot be reduced to
the uniformities of nature, men have yet
endeavoured to reproduct by law something
approaching to his uniformity
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Rule of Law
Rule of Law
Is the legal principle that law should govern a

nation, as opposed to arbitrary decision by
individual decisions
Refers to the influence and authority of law
within society, particularly as a constraint upon
behavior, including behavior of government
officials
Aristotle advocated the rule of law
The concept of equality of all persons before

law is the basis of the Rule of Law
It is more proper that law should govern than any one of the
citizens: upon the same principle, if it is advantageous to place
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the supreme power in some particular persons, they should be
appointed to be only guardians,
and
the
servants
of
the
laws.
The Rule was summarized by Dicey : Rule of

law in the United Kingdom is a core principle of
the way the country is governed
Rule 1: Abolition of autocracy: No man is above
law. Dicey said:What is law legal right and legal
obligation for me-must hold equality as such for all
citizens
Rule of Law
Types of Law
Rule 2: Punishment subject to prove: No man is

punishable or can be lawfully made to suffer in body
or goods except for a distinct breach of law
established in the ordinary legal manner before the
ordinary courts ( Dicey)
Rule 3: Origin of Constitutional Laws: the Rule of
Law is the result of statutes and judicial decisions
determining the rights of private persons. Thus the
constitutional law of the country follows from the
ordinary law of the land
Contract Law
Trust Law
(regulates the relationship

between the parties)
(applies to assets held for

investment & financial security)
Law
Constitutional
Law ( Provides a framework
for creating laws, protecting
peoples human rights and
electing political representatives)
Administrative
Law (relates to the activities

Classification of Law
Terms
National Law
Special executive
Law (president may enact
Law
International Law
(determine the conduct of the general
body of civilized state in their mutual
dealings)
Public Law
(implies the
body of rules which the states have
established in their mutual dealings
and relations)
law eg: order, rule etc.)
Supreme Law
Subordinate Law
(enacted by the subordinate
authority under the power delegated
to it by the supreme legislative
authority)
(determines and govern

the relations of citizens)
(discusses with the domestic

matters of a particular state)
Substantive Law(defines
rights or crimes) &
the outlines the procedures of
litigation
Property
Law (defines rights
and obligations related to
transfer and title of
personal and real property)
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Private Law
Public Law (determines
Procedural Law ( determines
claims for compensation

when someone or their
property is injured or
harmed by negligence,
nuisance, defamation etc)
of administrative of government)
The phrase can be traced back to the 16th century England and it was
popularized in the 19th century
bySaha,
British
jurist A.V. Dicey
Debashis
Lecturer,
9
& regulates the organization and

functioning of the state and its
relationship with the citizens
Tort Law (allows

(Bangladesh constitution is
the supreme law of the Land)
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Private Law
(discusses with the
relationship of the citizen of
one state with other)
Act
Is a law which is passed by the parliament (Article 65)
Ordinance
The law which is promulgate by the President when the

parliament stands dissolved or is not in session ( Article-93)
Order
A law which is promulgate by the president when there is

no constitution ( Laws continuance order, 10th April 1971)
Rule
A law which shall mean a rule made in exercise of a power

conferred by any enactment and shall include a regulation
made as a rule under any enactment ( Section (3) 47 Of the
General Clauses Act 1897)
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A law which shall mean a regulation made by any person or

authority empowered under any constitutional instrument and in
force in Bangladesh (Section (3) 47 Of the General Clauses Act
1897)
Regulation
Custom
Is a rule of conduct which the governed observe spontaneously

and not in pursuance of law settled by a political superior
(Marriage Ceremony)
Usage
The behavior of a particular society in respect of a particular

matter which they observe for long time spontaneously (Gaye
Holood)
Legal Systems
Civil Law
Common
Law
The judicial decision which is passed by the superior court and

is binding upon the subordinate court (Article-11 of the
constitution judgment passed by the Appleate Division and
High Court Division is precedent)
Precedent

Sources of Law
Custom
Describe as the twilight of law which resides in habitual practice and usage. (1)
antiquity (2) reasonableness (3) conformity with statutory law (4) observation as a
right (5) consistency with morality and public policy
Religion
According to jurists : every law is the gift of god and the decision of the sages
In Bangladesh the Hindus and Muslims personal affairs are regulated by their
religion e.g. marriage, dower, gift etc.
Equity
Means natural justice

In England there were three main courts : (1) The Kings Bench, (2) The
Court of common Pleas, (3) The exchequer
Precedent
Means the judge made law

When there is no legislature on particular point which arises in changing conditions,
the judges depend on their own sense of right and wrong and decide the disputes.
Such decisions become authority or guide for subsequent cases of a similar nature
and they are called precedents
It is more flexible than legislation and custom
Scientific
discussion of
the jurists
Influences and moulds the law

Influence of great writers like Glanvil, Bracton, Littleton,Coke, Chesire,
Pollock,Salmond can be seen on English, French and American Law
Legislation
Debashis
Parliament enacts
the Saha,
law Lecturer,
15
Religious
Law
13
Derives from jus civile of Roman law

The body of definite rules which are given in modern civil codes
According to Salmond : the law of the state or the land, the law of
lawyers and the law of courts
Source: France , Germany, Italy, Spain and other continental countries
of Europe and also the countries of south and central America, Japan,
Turkey etc
Derives from the law of England and of those countries which have
modeled their system on English Law
According to Salmond: The common law is the entire body of English
law, the total corpus juris angliae with three exceptions namely (1)
Statute law, (2) equity, (3) special law in its various forms
Also known as English, Anglo Saxon or Anglo American or Anglo Indian
law
Consists of those rules which have been administered by common law
courts from time immemorial
The law which determines the religious of human beings through religion
Eg: Muslim Law ( Islamic Sharia)
14
Introduction to Commercial Law

Commercial
Law
Known as business law

the body of law that applies to the rights, relations,
and conduct of persons and businesses engaged in
commerce, merchandising, trade, and sales
The body of law which governs business and
commercial transactions
Considered to be a branch of civil law and deals
both with issues of private law and public law
Includes: principal and agent, carriage by land and
sea, merchant shipping, guarantee, marine, fire, life
and accident insurance, bills of exchange and
partnership
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Role of Law in Business

The ways in which the law affects business are as
numerous as the number of laws themselves
Enron, Worldcom, Tyco (Business structure)
Employees not paid overtime (Employment law)
The McDonalds coffee spill (Torts)
Grace Inc. and A Civil Action (Environmental)
Limit of VOC content in underarm deodorant
(Product regulation)
Customer refuses to pay (Contracts)
What is Business?
A system through which a person can earn money, gain
profit or make losses by investing his capital
Types of Business
(1) Proprietorship business (licenses will be provided by the local
authorities e.g. Municipal corporation or Union Parishad)
(2) partnership business ( Partnership Act,1932)
(3) Company Business ( Company Act, 1994 or Bank Companys Act
1991)
(4) Cooperative Buisiness (Cooperative Societies Act,2001)
(5) Non-profitable Business ( Society Registration Act,1860 or NGOs
or trusts or Wakfs etc)
(6) State Owned business ( Various statutory Laws e.g. BTRC)
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Types of Law- Nature
Types of Legal Situations
Substantive Law
Transactional
Negotiation of contracts, purchases etc.
(these tend to occur in more informal settings)
Situational
Reactionary events such as claims made by someone else
against you or you against them.
(these tend to occur in more formal settings such as law suits,
criminal accusations, etc.)
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19
vs
Procedural Law
Defines rights and

duties
Explains how to
make the law work
Ex: You may not

drive greater than the
posted speed limit
Ex: To challenge a traffic

citation you must pay the
established bail amount
by the deadline and
indicate that you require a
hearing
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How the Bangladesh judiciary

functions?
Sub-ordinate Judiciary
Superior Judiciary
Appellate
Division
High Court
Division
Criminal
Jurisdiction
Civil
Jurisdiction
1.Court of District Judge
2.Court of Additional District
Judge
3.Court of Joint District Judge
4.Court of Senior Assistant
Judge
5.Court of Assistant Judge
The Court of
Session
1. Court of
Session
Judge
2. Court of
Additional
Session Judge
3. Court of
Assistant
Session Judge

Administrative
Jurisdiction
The
Magistracy
The
Judicial
Magistrate
The
Executi
ve
Magist
rate
1.Administrative Appellate
Tribunal.
2.Administrative Tribunal.
3.The Electricity court.
4.House Rent Controller.
5.The settlement Court.
6.The Land Appeal Board.
7 The Labour Court
1.Court of Chief Judicial Magistrate

2.Court of 1st Class Judicial Magistrate
3.Court of 2nd Class Judicial Magistrate
4.Court of 3rd Class Judicial Magistrate 21
Origin of the Contract Act,1872
The Third Law commission of British India formed in 1861 under the stewardship of
chairman Sir John Romilly, with initial members as Sir Edward Ryan, R. Lowe, J.M.
Macleod, Sir W. Erle (succeeded by Sir. W.M. James) and Justice Wills (succeeded by J.
Henderson), had presented the report on contract law for India as Draft Contract Law
(1866). The Draft Law was enacted as The Act 9 of 1872 on 25 April 1872 and the Indian
Contract Act, 1872 came into force with effect from 1 September 1872.
The Indian Contract Act,1872 was adopted in Bangladesh without change as a Contract Act,
1872
It has XI chapter
It was enacted mainly with a view to ensure reasonable fulfillment of expectation created
by the promises of the parties and also enforcement of obligations prescribed by an
agreement between the parties
Law of contract creates jus in personem(right against a person) and not in jus in rem(a real
right )
The Indian Contract Act consists of the following two parts:
(a) General principals of the Law of Contract
(b) Special kinds of contracts.
The general principals of the Law of Contract are contained in Sections 1 to 75 of the
Contract Act. These principles apply to all kinds of contracts irrespective of their nature.
Special contracts are contained in Sections 124 to 238 of the Contract Act. These special
contracts are Indemnity, Guarantee, Bailment, pledge and Agency.
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Debashis Saha, Lecturer, F & B, Jahangirnagar University
Lecture- 02
The Law of Contract
Debashis Saha, Lecturer, F & B,

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Definition of Contract
A contract is an exchange of promises between two or more parties to
do or refrain from doing an act which is enforceable in a court of law
Contracts as Defined by Eminent Jurists
Every agreement and promise enforceable at law is a contract.
Pollock
A Contract is an agreement between two or more persons which is
intended to be enforceable at law and is contracted by the acceptance
by one party of an offer made to him by the other party to do or
abstain from doing some act. Halsbury
A contract is an agreement creating and defining obligation between
the parties Salmond
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Other Definitions ( Sec 2)
Definition of Contract Act- 1872

An agreement enforceable by law is a contract
Sec 2 (H) Contract Act- 1872
thus to make a contract there must be
1. An agreement
2. The agreement shall be enforceable by law.
3. All agreements are not enforceable by law and
therefore, all agreements are not contracts.

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Offer(i.e. Proposal) [section 2(a)]:-When one person signifies to

another his willingness to do or to abstain from doing anything, with a
view to obtaining the assent of that other person either to such act or
abstinence, he is said to make a proposal.
Acceptance 2(b):- When the person to whom the proposal is made,
signifies his assent there to , the proposal is said to be accepted.
Promise 2(b) :- A Proposal when accepted becomes a promise. In simple
words, when an offer is accepted it becomes promise.
Promisor and promise 2(c) :- When the proposal is accepted, the person
making the proposal is called as promisor and the person accepting the
proposal is called as promisee.
Consideration 2(d):- When at the desire of the promisor, the promisee or
any other person has done or abstained from doing something or does or
abstains from doing something or promises to do or abstain from
doing something, such act or abstinence or promise is called a
consideration for the promise.
Essential Elements of Contract
Other Definitions ( Sec 2)
Price paid by the one party for the promise of the other Technical word
meaning QUID- PRO-QUO i.e. something in return.
Agreement 2(e) :- Every promise and set of promises forming the
consideration for each other. In short, agreement = offer +
acceptance.
Contract 2(h) :- An agreement enforceable by Law is a contract.
Void agreement 2(g):- An agreement not enforceable by law is void
Voidable contract 2(i):- An agreement is a voidable contract if it is
enforceable by Law at the option of one or more of the parties there to
(i.e. the aggrieved party), and it is not enforceable by Law at the
option of the other or others.
Void contract :- A contract which ceases to be enforceable by Law

becomes void when it ceases to be enforceable.
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27
Offer and Acceptance: (lawful offer + lawful

acceptance , Because the offer and acceptance must
conform to the rules laid down in the Contract Act, 1872
regarding offer and acceptance
Intention to create Legal Relationship: eg : agreement to
buy and sell goods or agreement to get marry
Lawful Consideration: must not be unlawful, immoral or
opposed to the public policy
Capacity of Parties: Section 11:- of the Contract Act , 1872
specify that every person is competent to contract provided.
Is of the age of majority according to the Law which he is
subject, and
Who is of sound mind and
Is not disqualified from contracting by any law to which he is
subject.
Offer + acceptance =
Promise
+
consideration
=
Agreement
+
enforceability By Law
Contract
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Free consent: Consent of the parties must be genuine consent means agreed upon
something in the same sense i.e. there should be consensus ad idem(agreement
of the minds). A consent is said to be free when it is not caused by
coercion, undue influence, fraud, misrepresentation or mistake.
Legality of the Object: The object of agreement should be lawful and legal. Two
persons cannot enter into an agreement to do a criminal act. Consideration or
object of an agreement is unlawful if it
is forbidden by law; or
is of such nature that, if permitted, would defeat the provisions of any law; or
is fraudulent; or
Involves or implies, injury to person or property of another; or
Court regards it as immoral, or opposed to public policy.
Example : A agrees to B to discover treasure by magic. The agreement is void because the
act in itself is impossible to be performed from the very beginning.
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Agreement in restraint to marriage ( sec 26)

Agreement in restraint of trade (Sec 27)
Agreement in restraint of proceedings (Sec 28)
Agreement having uncertain meaning (Sec 29)
Wagering agreement (Sec 30)
Writing, Registration and Legal Formalities:
The terms of the agreement should be capable of performance.

An agreements to do act, impossible in itself cannot be enforced.

Void Agreements: an agreement which is not enforceable by law is void.

Under the Contract Act. 1872 there are five categories of agreements which
are expressly declared to be void. They are:
I.
II.
III.
IV.
V.
Certainty: The agreement must not be vague. It must be possible to ascertain the
meaning of the agreement otherwise it can not be enforced
Possibility of performance:
A contract may be oral or in writing.

Where a particular type of contract is required by law to be in writing and registered, it must
comply with necessary formalities as to writing, registration and attestation.
If legal formalities are not carried out then the contract is not enforceable by law.
Transfer of immovable property must be registered
In Bangladesh under the Registration Act, 1908 writing is required in case of lease, gift, sale
and mortgage of immovable property, negotiable instruments, memorandum and articles of
association of a company
Agreement Chart ( Legal Environment of Business, Page 59)

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Assignment 01
Agreement
All Contracts are Agreements,

but all Agreements are not
Contracts
Why?
any meeting of the minds, even without legal obligation

A meeting of minds with the understanding and acceptance
of reciprocal legal rights and duties as to particular actions
or obligations, which the parties intend to exchange
Every Promise and every set of promises, forming the
consideration for each other, is an agreement Sec, 2(e)

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32
Distinction between Contract &

Agreement
Basis
Contract
Types of Contract
Agreement
Section
Sec. 2(h)
Definition
Enforceability :
A contract is an agreement enforceable by Every promise or every set of promises

law.
forming consideration for each other is an
agreements.
Every contract is enforceable
Every promise is not enforceable.
Interrelationship
A contract includes an agreement.
Scope
Its scope is relatively wider, as it includes

The scope of a contract is limited, as it both social agreement and commercial
includes only commercial agreements.
agreements.
Validity
Only legal agreements are called contracts.
An agreement may be both legal and illegal.
Every contract contains a legal obligation.
It is not necessary for every agreement to

have legal obligation.
Legal
:
Obligation
Sec. 2(e)
An agreement does not include a contract.

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b.Implied contract:- A contract inferred by

The conduct of person or
The circumstances of the case.
By implies contract means implied by law (i.e.) the law implied a contract through parties never
intended. According to sec 9 in so for as such proposed or acceptance is made otherwise than in
words, the promise is said to be implied.
Example:
A stops a taxi by waving his hand and takes his seat. There is an implied contract that A will pay
the prescribed fare.
c.Tacit contract: - A contract is said to be tacit when it has to be inferred from the conduct of
the parties. Example obtaining cash through automatic teller machine, sale by fall hammer of an
auction sale.
d.Quasi Contracts : are contracts which are created Neither by word spoken
Nor written
Nor by the conduct of the parties.
But these are created by the law.
Example:
If Mr. A leaves his goods at Mr. Bs shop by mistake, then it is for Mr. B to return the goods or to
compensate the price. In fact, these contracts depend on the principle that nobody will be allowed
to become rich at the expenses of the other.
(e).e Contract: An e contract is one, which is entered into between two parties via the internet.
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(1) On the Basis of creation:

a. Express contract :- A contract made by word spoken or written. According to
sec 9 in so for as the proposal or acceptance of any promise is made in words, the
promise is said to be express.
Example : A says to B will you purchase my bike for Rs.20,000? B says to A Yes.
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2) On the Basis of validity:

a.Valid contract:- An agreement which satisfies all the requirements prescribed by law On the basis of creation
b. Void contract (2(j)):- a contract which ceases to be enforceable by law because void when of ceased to be
enforceable
When both parties to an agreement are:- Under a mistake of facts [20]
Consideration or object of an agreement is unlawful [23]
Agreement made without consideration [25] Agreement in restrain of marriage [26] Restraint of trade [27]
Restrain legal proceeding [28].
Agreement by wage of wager [30]
c. Voidable contract 2(i) :- an agreement which is enforceable by law at the option of one or more the parties but not
at the option of the other or others is a voidable contract.
Result of coercion, undue influence, fraud and misrepresentation.
d. Unenforceable contract: - where a contract is good in substance but because of some technical defect i.e.
absence in writing barred by imitation etc one or both the parties cannot sue upon but is described as
unenforceable contract.
Example: Writing registration or stamping.
Example: An agreement which is required to be stamped will be unenforceable if the same is not stamped
at all or is under stamped.
e.Illegal contract:- It is a contract which the law forbids to be made. All illegal agreements are void but all
void agreements or contracts are not necessary illegal. Contract that is immoral or opposed to public policy are illegal
in nature.
Unlike illegal agreements there is no punishment to the parties to a void agreement.
Illegal agreements are void from the very beginning agreements but sometimes valid contracts may subsequently
becomes void.
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3) On the Basis of execution:

a.Executed contract :- A contract in which both the parties have fulfilled their obligations under the
contract.
Example: A contracts to buy a car from B by paying cash, B instantly delivers his car.
Assignment 02
b.Executory contract:- A contract in which both the parties have still to fulfilled their obligations.
Example : D agrees to buy Vs cycle by promising to pay cash on 15th July. V agrees to deliver the cycle
on 20th July.
c.Partly executed and partly executory:- A contract in which one of the parties has fulfilled his
obligation but the other party is yet to fulfill his obligation.
Example : A sells his car to B and A has delivered the car but B is yet to pay the price. For A, it is excuted
contract whereas it is executory contract on the part of B since the price is yet to be paid.
Difference Between Void

and Voidable Contract
(4)On the basis of liability for performance:a.Bilateral contract:- A contract in which both the parties commit to perform their respective promises is
called a bilateral contract.
Example : A offers to sell his fiat car to B for Rs.1,00,000 on acceptance of As offer by B, there is a
promise by A to Sell the car and there is a promise by B to purchase the car there are two promise.
b.Unilateral contract:- A unilateral contract is a one sided contract in which only one party has to
perform his promise or obligation party has to perform his promise or obligation to do or forbear.
Example :- A wants to get his room painted. He offers Rs.500 to B for this purpose B says to A if I have
spare time on next Sunday I will paint your room. There is a promise by A to pay Rs 500 to B. If B is able
to spare time to paint As room. However there is no promise by B to Paint the house. There is only one
promise.
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Offer
Offer(i.e. Proposal) [section 2(a)]:-When one person signifies to another his
willingness to do or to abstain from doing anything, with a view to obtaining the assent
of that other person either to such act or abstinence, he is said to make a proposal.
To form an agreement, there must be at least two elements one offer and the other
acceptance. Thus offer is the foundation of any agreement.
Offer And Acceptance
When one person signifies to another his willingness
to do or to abstain from doing anything,

with a view to obtaining the assent of that other to such act or abstinence, he is said to make a
proposal.
The person who makes an offer is called Offeror or Promisor and the person to whom the
offer is made is called the Offeree or Promisee.
Example
Mr. A says to Mr. B, Will you purchase my car for Rs.1,00,000? In this case, Mr. A is making an
offer to Mr. B. Here A is the offeror and B is the offeree.
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40
10
Legal Rules As To Valid Offer
Essentials elements of an offer
1.
There must be two parties.

The offer must be communicated to the offeree.
The offer must show the willingness of offeror. Mere telling the plan is not
offer.
The offer must be made with a view to obtaining the assent of the offeree.
A statement made jokingly does not amount to an offer.
An offer may involve a positive act or abstinence by the offeree.
Mere expression of willingness does not constitute an offer.
A tells B that be desires to marry by the end of 2015, if does not constitute an
offer of marriage by A to B, A further adds will you marry me. Then it
become offer.

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offer may be made in two ways:

I.
by words, spoken or written (Express offer)
II.
by conduct (Implied Offer)
2. An offer may be made to a definite person; to some definite class of persons;

or to the world at large: a. offer may be made to a definite person is called specific offer,
b. offer may be made to all persons is called a General offer
3. Legal relationship is required: The offer must be capable of creating legal relation. A
social invitation is not create legal relation. Eg. A invited B to a dinner and B accepted the
invitation. It is a mere social invitation. And A will not be liable if he fails to provide dinner
to B.
4. The terms of the offer must be certain, definite, unambiguous and not vague:
Eg: A offered to sell to B. a hundred tons of oil. The offer is uncertain as there is nothing
to show what kind of oil is intended to be sold.
5. A mere statement of intention is not an offer: A distinction is usually made,

between an offer and a statement of intention. Price lists and catalogues and enquires for
customers are merely statements of intention. They are not regarded as offers but as
invitation to others to made offers. Eg: An advertisement in a newspaper or elsewhere may
be so worded that it amounts to an offer. But ordinary and advertisement is considered to be
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an invitation to make offers.
6. An offer must be communicated to the offeree:: The offer is completed only when
it has been communicated to the offeree. Until the offer is communicated, it cannot be
accepted. Thus, an offer accepted without its knowledge, does not confer any legal rights on
the acceptor.
Example:
As nephew has absconded from his home. He sent his servant to trace his missing nephew.
When he servant had left, A then announced that anybody who discovered the missing boy,
would be given the reward of Rs.500. The servant discovered the missing boy without
knowing the reward. When the servant came to know about the reward, he brought an action
against A to recover the same. But his action failed. It was held that the servant was not
entitled to the reward because he did not know about the offer when the discovered the
missing boy.
[Lalman Shukla v. Gauri Datt (1913) All LJ 489]
7. An offer may be conditional: the conditions must be clearly communicated to the

offeree. If a person accepts an offer without knowledge of the conditions, the offeror cannot
claim fulfillment of the conditions. But if the conditions are clearly written or expressed and
should have been known to the offeree, he cannot plead ignorance of the conditions.
8. Printed Contracts: Printed contracts often contain a large number of terms and
conditions which exclude liability under the contract. Eg. The Life Insurance Corporation,
Statutory Corporation and big companies issue printed forms of contract.
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An offer may be express or may be implied from the circumstances: An
Kinds of Offer
1. Express offer - When the offeror expressly communication the offer the offer is said to be
an express offer the express communication of the offer may be made by Spoken word or
Written word
2. Implied offer when the offer is not communicate expressly. An offer may be implied
from:- The conduct of the parties or The circumstances of the case
3. Specific:- It means an offer made in (a) a particular person or (b) a group of person: It
can be accepted only by that person to whom it is made communication of acceptance is
necessary in case of specific offer.
4. General offer: - It means on offer which is made to the public in general.
General offer can be accepted by anyone.
If offeree fulfill the term and condition which is given in offer then offer is accepted.
Communication of acceptance is not necessary is case of general offer
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11
6. Cross offer:- When two parties exchange identical offers in ignorance at the time of
each others offer the offers are called cross offer.
Two cross offer does not conclude a contract. Two offer are said to be cross offer if
Revocation of an Offer
They are made by the same parties to one another

Each offer made in ignorance of the offer made by the
The terms and conditions contained in both the offers are same.
Example : A offers by a letter to sell 100 tons of steel at Rs.1,000 per ton. On the same day,
B also writes to A offering to buy 100 tons of steel at Rs.1,000 per ton.
7. Counter offer :- when the offeree give qualified acceptance of the offer subject to
modified and variations in the terms of original offer. Counter offer amounts to rejection of
the original offer.
Legal effect of counter offer: Rejection of original offer
The original offer is lapsed
A counter offer result is a new offer.
8. Standing, open and continuous offer:- An offer is allowed to remain open for
acceptance over a period of time is known as standing, open or continually offer. Tender for
supply of goods is a kind of standing offer.
Example:
When we ask the newspaper vendor to supply the newspaper daily. In such case, we do not
repeat our offer daily and the newspaper vendor supplies the newspaper to us daily. The
offers of such types are called Standing Offer.
45
4.
5.
6.
7.
8.
By the death or insanity of the offeror: Where, the offeror dies or becomes, insane, the
offer comes to an end if the fact of his death or insanity comes to the knowledge of the
acceptor before he makes his acceptance. But if the offer is accepted in ignorance of the
fact of death or insanity of the offeror, the acceptance is valied. This will result in a valid
contract, and legal representatives of the deceased offeror shall be bound by the
contract. On the death of offeree before acceptance, the offer also comes to an end by
operation of law.
By counter offer by the offeree: Where, a counter offer is made by the offeree, and
then the original offer automatically comes to an end, as the counter offer amounts to
rejections of the original offer.
By not accepting the offer, according to the prescribed or usual mode: Where some
manner of acceptance is prescribed in the offer, the offeror can revoke the offer if it is not
accepted according to the prescribed manner.
By rejection of offer by the offeree: Where, the offeree rejects the offer, the offer
comes to an end. Once the offeree rejects the offer, he cannot revive the offer by
subsequently attempting to accept it. The rejection of offer may be express or implied.
By change in law: Sometimes, there is a change in law which makes the offer illegal
or incapable of performance. In such cases also, the offer comes to an end.

47
An offer comes to an end and in no longer open to acceptance under the following
circumstance- Sec 6.
1. By communication of notice of revocation: An offer may come to an end by
communication of notice of revocation by the offeror. It may be noted that an offer can
be revoked only before its acceptance is complete for the offeror. In other words, an
offeror can revoke his offer at any time before he becomes before bound by it. Thus, the
communication of revocation of offer should reach the offeree before the acceptance is
communicated.
2. By lapse of time: Where time is fixed for the acceptance of the offer, and it is not
acceptance within the fixed time, the offer comes to an end automatically on the expiry of
fixed time. Where no time for acceptance is prescribed, the offer has to be accepted within
reasonable time. The offer lapses if it is not accepted within that time. The term
reasonable time will depend upon the facts and circumstances of each case.
3. By failure to accept condition precedent: Where, the offer requires that some condition
must, be fulfilled before the acceptance of the offer, the offer lapses, if it is accepted
without fulfilling the condition.
46
ACCEPTANCE
Acceptance 2(b):- When the person to whom the proposal is made, signifies
his assent there to , the proposal is said to be accepted.
According to Prof. Anson: Acceptance is to offer what a lighted match is to
train of gun-powder. It produces something which cannot be recalled or
undone. But the powder may have lain till it has become damp or the man
who laid the train may remove it before the match is applied
Eg. X sold his business to Y without disclosing the fact to his customers. Z
sent an order for goods to X by name. Y received it and sent a letter of
acceptance. Held there was no contract between Y and Z because Z never
made any offer to Y.
Boulton vs Jones.

48
12
5.
Rules Regarding Acceptance

1.
2.
3.
4.
It must be an absolute and unqualified acceptance of all the terms

of the offer: Sec 7(1) If there is any variation, even on an unimportant point,
between the terms of the offer and terms of the acceptance, there is no contract. Eg. M
offered land to N at $280, N replied accepting and enclosing, $80 and promising to pay
the balance by monthly installments of $50. Held there was no contract, as there was
no unqualified acceptance. Neale vs Merrett
Conditional Acceptance: In accordance to Contract Act, an acceptance with a
variation is no acceptance; it is simply a counter proposal, which must be accepted by
the original promisor before a contract is made. Eg. X offered to sell his house for
$120. Y said, accepted for $ 100. This is not an acceptance but a counter offer or
counter proposal.
Kundan Lalv. Secretary of State
Contracts subject to condition: There are cases where an immediate binding contract
is formed although some of the parties rights and obligations may be dependent upon
the happening of a particular event. Eg. Agreement may contain term asSubject to the
purchasers solicitors approving the title
Clarification: The seeking clarification of offer neither amounts to the acceptance of
the offer nor to the making of a counter offer.
The acceptance must be expressed in some usual or reasonable manner:

Sec 7(2) thr offeree may express his acceptance by word of mouth, telephone,
telegram or by post. These are the usual methods of communicating
acceptance to the offeror.
An offer may also be accepted by conduct. If the offeree does what the offeror
wants him to do, there is acceptance of the offer by conduct. Section 8 of the Act
states that, Performance of the conditions of a proposal or the acceptance of any
consideration for reciprocal promise which may be offered with a proposal, is an
acceptance of the proposal
6.
Mental acceptance or uncommunicated assent does not result in a
contract: No contract is formed if the offeree remains silent and does
nothing to show that he has accepted the offer. Acceptance must be
communicated to the offeror or shown by conduct.
7.
The mode of acceptance: Where the promisor prescribes a particular mode
of acceptance. Eg. X offers to buy a certain quantity of coal from Y at a
certain price and asks Y to send a telegram if he accepts. Y writes a letter
accepting the offer. X may insist on a telegram from Y; but if X does not so
insist, the acceptance is good
49
8. Time of Acceptance: In the offeror prescribes a time, the acceptance must be

done within that time. If no time is prescribed the acceptance must be done
within reasonable time.
9. When acceptance is complete: Section 4 of the Contract Act lays down that
the communication of the acceptance is complete,- as against the proposer,
when it is put in a course of transmission to him, so as to be out of the power
of the acceptor and as against the acceptor, when it comes to the knowledge of
the proposer
Eg. A proposes by letter, to sell a house to B at a certain price. The communication
of the proposal is complete when B receive the letter
10. Before Offer: Acceptance must be given before offer. This is the natural
sequence. There can not be acceptance before the offer is given from any
person.
11. The acceptance must be made while the offer is in force: before the offer has
been revoked or the offer has lapsed.

50
General Rules as to Communication of

Acceptance
1. In case of acceptance by post
Where the acceptance is given by post, the communication of acceptance is complete as against the
proposer when the letter of acceptance is posted. Thus, mere posting of letter of acceptance is
sufficient to conclude a contract. However, the letter must be properly addressed and stamped.
2. Delayed or no delivery of letter

Where the letter of acceptance is posted by the acceptor but it never reaches the offeror, or it is
delayed in transit, it will not affect the validity of acceptance. The offeror is bound by the
acceptance.
3. Acceptance by telephones telex or tax

If the communication of an acceptance is made by telephone, tele-printer, telex, fax machines, etc,
it completes when the acceptance is received by the offeror. The contract is concluded as soon as
the offeror receives not hears the acceptance.
4. The place of Contract

In case of acceptance by the post, the place where the letter is posted is the place of contract.
Where the acceptance is given by instantaneous means of communication (telephone, fax, teleprinter, telex etc.), the contract is made at the place where the acceptance is received,

51

52
13
Assignment 3
5. The time of Contract
In case of acceptance by post, the time of posting the letter of acceptance to the
time of contract. But in case of acceptance by instantaneous means of
communication, the time of contract is the time when the offeror gets the
communication, the time of contract is the time when offeror gets the
communication of acceptance.
6. Communication of acceptance in case of an agent.
Where the offer has been made through an agent, the communication of
acceptance is completed when the acceptance is given either to the agent or to the
principal. In such a case, if the agent fails to convey the acceptance received from
offeree, still the principal is bound by the acceptance.
7. Acceptance on loudspeakers
Acceptance given on loudspeaker is not a valid a acceptance.
Distinguish between
Offer and Acceptance


53
54
Consideration
Consideration is a quid pro quo i,e something in return it may be
I. some benefit right, interest, loss or profit that may accrue to one party or,
II. some forbearance, detriment, loss or responsibility suffered on undertaken by
the other party [currie V mussa]
According to Sir Frederick Pollock, consideration is the price for which the promise of
the other is bought and the promise thus given for value is enforceable.
Definition [Sec 2(d)]:- when at the desire of the Promisor, the promise or any other
person.
a) has done or abstained from doing , or [Past consideration]
b) does or abstains from doing, or [Present consideration]
c) promises to do or abstain from doing something [Future consideration ]such act
or abstinence or promise is called a consideration for the promise.
Example
Consideration

55
P aggress to sell his car to Q for Rs.50,000 Here Qs Promise to pay Rs50,000 is the consideration for Ps
promise and Ps promise to sell the car is the consideration for Qs promise to pay Rs.50,000.
A promises his debtor B not to file a suit against him for one year on As agreeing to pay him Rs.10,000 more.
Here the abstinence of A is the consideration for Bs Promise to pay.
56
14
4. Consideration should be real and not illusory. Illusory consideration renders

the transaction void consideration is not valid if it is.
(i) Physically impossible
(ii) Legally not permissible
(iii) Uncertain
(iv) illusory (fulfillment of a pre existing obligation)
1. Consideration must move at the desire of the promisor.

D constructed a market at the instance of District collector. Occupants of shops promised to pay D
a commission on articles sold through their shops. Held, there was no consideration because
money was not spent by Plaintiff at the request of the Defendants, but at instance of a third person
viz. the Collector and, thus the contract was void.
Durga Prasad v. Baldeo

2. Consideration may move from the promisee or any other person who is not a
party to the contract. [Chinnayas Vs Ramayya]
A owed Rs.20,000 to B. A persuaded C to sign a Pro Note in favour of B. C promised B that he
would pay the amount. On faith of promise by C, B credited the amount to As account. Held, the
discharge of As account was consideration for Cs promise.
National Bank of Upper India v. Bansidhar

3. Consideration may be past, present, Future:
57
Past Consideration: When the consideration of one party was given before the
date of the promise, it is said to be past. Suppose that X does not work for Y in
the month of Jan. In Feb Y promise to pay him some money. The consideration
of X is past consideration.
Present Consideration: Consideration which moves simultaneously with the
promise is called Present Consideration. B buys an article from a shop and
pays the price immediately. The consideration moving from B is present
consideration
Future Consideration: When the consideration is to move at a future date, it
is called Future Consideration. A promise may support a promise. Thus a
promise to pay money at a future date for goods to be delivered at a future
date is valid contract.

The performance of an act what one is legally bound to perform is not

consideration for the contract means something other than the promisors
existing obligation
A contract not supported by consideration is void .
58
Eceptions to the Rule No

consideration . No contract
Types of Consideration
fact that the consideration is inadequate. The law simply requires that contract should
be supported by consideration. So long as consideration exists and it is of some value,
courts are not required to consider its adequacy.
Example:
A agreed to sell a watch worth Rs.500 for Rs.20, As consent to the agreement was freely
given. The consideration, though inadequate. Will not affect the validity of the contract.
However, the inadequacy of the consideration can be considered in order to know whether
the consent of the promisor was free or not . [Section 25 Explanation II]
7.
Under English law, Past consideration is no consideration.

Present consideration :- cash sale
Future or executory consideration:- A Promises to B to deliver him 100 bags of sugar at a
future date . B promise to pay first on delivery.
F & B, Jahangirnagar University
5. Must be legal:Consideration must not be unlawful, immoral or opposed to public policy.

6. consideration need not be adequate. A contract is not void merely became of the
59
Consideration is essential for the validity of a contract. A promise without consideration is a

gift, one made for a consideration is a bargain - Salmond and Windfield, Law of Contracts
1. Written and registered agreements arising out of love and affection:- [25 (1)]
Expressed in writing and registered under law for the time being in force for
registration of document
Natural love and affection
Between parties standing in a near relation to each other
Example:- An elder brother, on account of natural love and affection, promised to pay
the debts of his younger brother. Agreement was put to writing and registered. Held, agreement
was valid.
2. Promise to compensate [25(2)]
Promise to compensate wholly or in part
Who has already voluntarily done something for the promisor
Something which the promisor was legally compellable to do.
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15
Example:- A finds Bs purse and give to him. B Promise to give A Rs.500. This is a
valid contract.
3) Promise to pay a time barred debt. [Sec 25(3)]
A debt barred by limitation con not recovered. Hence, a promise to pay a such a
debt is without any consideration.
Can be enforced only when in writing and sighed by Debtor or his authorized
agent.
Example : A owes B Rs.10,000 but the debt is barred by Limitation Act. A signs a written
promise to pay B Rs.8,000 on account of debt. This is a valid contract.
Assignment 4
4) Completed gift- gift do not require any consideration. Nothing in this section shall affect
the validity as between the donor and the donee, of any gift actually made Section 25
5) Agency (185) According to the Indian contract Act. No consideration is necessary to
create an agency.
6) Bailment (148)- consideration is not necessary to effect a valid bailment of goods. It is
Called Gratuitous Bailment.
Remission (63)- Promisee may dispense with or remit performance of promise.- Every
promisee may dispense with or remit, wholly or in part, the the performance of the promise
made to him, or may extend the time for such performance,1* or may accept instead of it any
satisfaction which he thinks fit.
4) Charity- If a person promises to contribute to charity and on this faith the promises
undertakes a liability to the extent not exceeding the promised subscription, the contract
shall be valid.
61
No Consideration
No Contract??

62
Void Agreement
Void and Voidable

Agreements

63
Section 2(g)- Void agreement is an agreement which is not enforceable by Law void ab
inito.
Ex. A promised to marry else except Mr. B, and in default pay her a sum of Rs.1,00,000. A married
someone else and B sued A for recovery of the sum. Held, the contract was in restraint of
marriage, and as such void.
Agreement by or with persons incompetent to contract [10, 11]
Agreement entered into through a mutual mistake [20]
Object or consideration unlawful [23]
Consideration or object partially, unlawful [24]
Without consideration [25]
Restraint of marriage [26]
Restraint of trade [27]
Legal proceeding [28]
Consideration identified [29]
Wagering agreement [30]
Impossible agreement [56]
Agreement contingent on impossible event[36]
An agreement to enter into an agreement in the future.
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16
Agreement in restraint of marriage void(26).-Every agreement in restraint of the

marriage of any person, other than a minor, is void.
Ex. A promised to marry else except Mr. B, and in default pay her a sum of Rs.1,00,000. A
married someone else and B sued A for recovery of the sum. Held, the contract was in
restraint of marriage, and as such void.
Agreement in restraint of trade void(27).-Every agreement by which any one is
restrained from exercising a lawful profession, trade or business of any kind, is to that
extent void.
Ex. : In Patna, 29 out of 30 manufacturers of combs agreed with R to supply combs only
to him and not to anyone else. Under the agreements R was free to reject the goods if he
found no market for them. Held, the agreement amounted to restraint of trade and void.
Agreements in restraint of legal proceedings(28) void.- Every agreement,(a) by which any party thereto is restricted absolutely from enforcing his rights under or
in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or
which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto
from aby liability, under or in respect of any contract on the expiry of a specified period
so as to restrict any party from enforcing his rights, is void to that extent
Ex. 1: A clause in a contract that any dispute arising between the parties shall be subject
to jurisdiction of a court at a particular place only, is valid.
65
*A contingent contract is a contract, to do or not to do something. If

some event, collateral to such contract does or does not happen
Reciprocal promise to do things legal, and also other things illegal(57).Where persons reciprocally promise, firstly, to do certain things which
are legal, and, secondly, under specified circumstances to do certain other
things which are illegal, the first set of promises is a contract, but the
second is a void agreement.
Ex: A and B agree that A shall sell B a house for 10,000 rupees, but that,
if B uses it as a gambling house, he shall pay A 50,000 rupees for it. The
first set of reciprocal promises, namely, to sell the house and to pay
10,000 rupees for it, is a contract. The second set is for an unlawful
object, namely, that B may use the house as a gambling house, and is a
void agreement.
Agreements void for uncertainty(29).-Agreements, the meaning of which is not

certain, or capable of being made certain, are void.
Ex: A says to B I shall sell my house; will you buy? A says, Yes, I shall buy.
Due to uncertainty of price, the agreement is void and unenforceable. There is
binding contract.
Agreements by way of wager void(30).-Agreements by way of wager are void ;
and no suit shall be brought for recovering anything alleged to be won on any
wager, or entrusted to any person to abide the result of any game or other
uncertain event on which any wager is
made.
Ex: X promise to pay Rs. 1000 to Y if it is rained on a particular day, and Y
promise to pay Rs.1000 to X if it did not.
Agreement to do impossible act(56). An agreement to do an act impossible in
itself is void.
Ex: A agrees with B to discover treasure by magic. The agreement is void
Agreement *contingent on impossible events void(36).-Contingent agreements to
do or not to do anything, if an impossible event happens, are void, whether the
impossibility of the event is known or not to the parties to the agreement at the
time when it is made.
Ex: A promise to pay B Rs.1,00,000 if a certain, ship does not return within a
year.
66
67
Rules Regarding Enforcement of Contingent Contracts:

(1) Contracts contingent upon the happening of a future uncertain event,
cannot be enforced by law unless and until that event has happened. And
if, the event becomes impossible such contract become void (Section 32)
Ex: A makes a contract with B to buy Bs horse if A survives C. This
contract cannot be enforced by law unless and until C dies in As life-time
(2) Contracts contingent upon the non-happening of an uncertain future
event can be enforced when the happening of that event becomes
impossible, and not before. (Section 33).
Ex: A agrees to pay B a sum of money if a certain ship does not return.
The ship is sunk. The contract can be enforced when the ship sinks.
(3) If a contract is contingent upon as to how a person will act at an
unspecified time, the event shall be considered to become impossible when
such person does anything. which renders it impossible that he should so
act within any definite time, or otherwise than under further
contingencies. (Section 34).
Ex: A agrees to pay B a sum of money if B marries C. C marries D. The
marriage of B to C must now be considered impossible, although it is
possible that D may die and C may afterwards marry B.
68
17
4) Contracts contingent upon the happening of a specified uncertain event

within a fixed time become void if, at the expiration of the time fixed, such event
has not happened or if, before the time fixed, such event becomes impossible
(Section 35 para I).
Ex: A promises to pay B a sum of money if a certain ship returns within a year.
The contract may be enforced if the ship returns within the year, and becomes
void if the ship is burnt within the year.
(5) Contracts contingent upon the non-happening of a specified event within a
fixed time may be enforced by law when the time fixed has expired and such
event has not happened, or, before the time fixed expired, if it becomes certain
that such event will not happen (Section 35 para II).
Ex:A promises to pay B a sum of money if a certain ship does not return within
a year. The contract may be enforced if the ship does not return within the year,
or is burnt within the year.
(6) Contingent agreements to do or not to do anything, if an impossible event
happens, are void, whether the impossibility of the event is known or not to the
parties to the agreement at the time when it is made.
Ex: A agrees to pay B Rs. 1,000 if two parallel straight lines should enclose a
space. The agreement is void.
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Section 2 (i): An agreement which is enforceable by law at the option of one

or more of the parties- thereto, but not at the option of the other or others, is a
voidable contract
Example: X coerces Y into entering into a contract for the sale of Ys house
to X. This contract can be avoided by Y. X can not enforce the contract. But Y
if he desires, can enforce it against X.
Illegal Agreement:
Agreement which is prohibited by law is illegal agreement.
Example Agreement to commit crime.
Effects of illegal agreement:

It is always void.
Any collateral transaction to illegal agreement is also void.
No action is allowed on illegal agreement.
70
Void Agreement vs Voidable

Agreement

Voidable Agreement
Void vs Illegal Agreement
71

72
18
Capacity
Section 11: Every person is competent to contract who is of age of
majority according to the Law to which he is subject, who is of sound
mind and not is disqualified from contracting by any Law to which he is
subject
Age of majority:- According to section 3 of Majority Act-1875 every
person domiciled attains majority on the completion of 18 years of age
Capacity Of Parties
From Section 11 it follows that a person is in capable of entering into

contracts under the following circumstances:
If he has not attained the age of majority according to the law
If he is not of sound mind
If he is disqualified from contracting by any law which he is subject
73

74
Minority
According to the Majority Act,1875, a minor is one who has not completed
his or her 18th year of age
Exception:21 years in the following cases
Where a guardian of a minors person or property is appointed by a court of
Law
Where minors property has passed under the superintendence of the court of
words
Ex: Dharmodas Ghose who was a minor representing himself to be a major

executed a mortgage deed of hi s property for Rs. 20,000 and received Rs.
8,000 in cash. He became a major a few months later and filed a suit for the
declaration that the mortgage executed by him during his minority was void
and should be cancelled. It was held that mortgage by a minor was void and
Mohori Bibi was not entitled to the repayment of money.
75

76
19
The Law regarding Minors

Agreement:(Copy,51)
The Law regarding Minors Agreement:
Minors agreement is void
Ex. Mr. D, a minor, mortgaged his house for Rs.20000 to a money lender,
but the mortgagee, i.e. the money lender, paid him a sum of Rs.8000.
Subsequently, the minor sued for setting aside the mortgage. Held that the
contract was void, as Mr. D was minor and therefore he is not liable to pay
anything to the lender.
1. Contract with a Minor is Absolutely Void: A minor is incompetent to contract
and a contract by a minor is void 'ab initio'. All those contracts to which a person
incompetent to contract is a party are void, as against him, but be can derive
benefit under them.
2. No Ratification :Ratification mean s the act of confirming or approving. An
agreement by a minor cannot be ratified by him on attaining the age of majority .
Thus consideration given during minority is no consideration.
77
6. Liability for Necessaries: A minor is liable for necessaries supplied or

necessary services rendered to him or his minor dependents. Necessaries are
defmed in Sec. 2 of the Sale of Goods Act, 1893 (English Act) as.
"Goods suitable to the condition in life of such an infant or minor or other person
and to the actual requirements at the time of sale and delivery". Expenses on
minor 's educations, on funeral ceremonies of the wife, husband, children of the
minor come within the scope of the word necessaries.
7. Position of Minor 's Parents: A contract with a minor does not give the
creditor any rights against the minor 's parents, even though the contract is for the
supply of necessaries to the minor.
8. Partnership: A minor cannot be a partner in a partnership firm, but he can be
admitted to the benefits of partnership as per Sec. 30 of the Partnership Act.
9. Liability for Torts: Tort means a kind of Civil wrong. A minor is liable. in
torts. But a minor cannot be made liable for a breach of contract by framing the
action on tort.
10. Minor as Agent: A minor can act as an agent. He binds the principal by his
acts without incurring any personal liability.

79
Example: X, a minor borrows Rs. 4,000 from Y and executes a promissory note. After
attaining majority, he executes another promissory note in the settlement of the first
note. The second promissory note is void for want of consideration.
3. Minor can be a Promisee or a Beneficiary: Incapacity of a minor to enter into a
contract means incapacity to bind himself by a contract. There is nothing which debars
him from becoming a beneficiary.
4. No Estoppel against a Minor: Estoppel is a rule of evidence by which a person is not
allowed to go back upon his earlier representations.
A minor is not estopped from pleading his infancy for avoiding a contract. This,
however, does not mean that a minor can cheat men with impunity. If a minor has
obtained any property by cheating, he can be forced to return it.
In Stocks v. Wilson, a minor who overstated his age and took delivery of a motor car
after executing a promissory note in favour of the trader, was not estopped from
pleading minority, but the Court ordered restitution on equitable ground. A minor can
be forced to return a car he had bought on credit by overstating his age if it can be
traced. But if the car cannot be traced ,
can the trader request the Court to pass a decree against the minor for the price of the
car? The answer is not positive. The dictum is "restitution stops when repayment
begins".
5. Specific Performance: A minor's contract being absolutely void, there can be no
question of the specific performance of such a contract.
78
Persons of unsound mind
Sound mind
Section 12: A person is said to be sound mind for the purpose of making a contract if, at
time when he makes it, he is capable of understanding it and forming a rational judgment as
to its effect upon his interests.
A person who is usually of unsound mind, but occasionally of sound mind may make a
contract when he is of sound mind.
A person who is usually of sound mind, but occasionally of unsound mind may make a
contract when he is of sound mind.
A person who is usually of sound mind, but occasionally of unsound mind, may not make a
contract when he is of unsound mind
Ex: A patient in lunatic asylum, who is at intervals of sound mind may make a contract
during these intervals
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20
An idiot : An idiot is a person who is congenital (by birth) unsound mind.

His incapacity is permanent and therefore he can never understand
contract and make a rational judgment as to its effects upon his interest.
Consequently, the agreement of an idiot is absolutely void ab initio. He is
not personally liable even for the payment of necessaries of life supplied
to him.
Delirious persons : A person delirious from fever is also not capable of
understanding the nature and implications of an agreement. Therefore, he
cannot enter into a contract so long as delirium lasts.
Hypnotized persons :Hypnotism produces temporary incapacity till a
person is under the effect of artificial induced sleep.
Mental decay :There may be mental decay or senile mind the to old age
or poor health. When such person is not capable of understanding the
contract and its effect upon his interest, he cannot enter into contract.
Lunatic: is not permanently of unsound mined. He can enter into contract
during lucid intervals i.e., during period when he is of sound mind.
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Convict cant enter into a contract while he is undergoing imprisonment.

But he can enter into a contract with permission of central government
while undergoing imprisonment. After the imprisonment is over, be
becomes capable of entering into contract. Thus the incapacity is only
during the period of sentence.
Insolvent
When any person is declared as an insolvent, his property vests in
receiver and therefore, he cant enter into contract relating to his
property. Again he becomes capable to enter into contract when he is
discharged by court.
Foreign sovereigns, diplomatic staff and representative of foreign staff
can enter into valid contract. However, a suit cannot be filed against
them, in the Indian counts without the prior sanction of the central
Government.

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Persons of Disqualified by Law

Body corporate or company or corporation
Contractual capacity of company is determined by object clause of its
memorandum of association. Any act done in excess of power given is ultra
virus and hence void.
Alien enemy
An alien is a person who is a foreigner to the land. He may be either an
alien friend or an alien enemy. If the sovereign or state of the alien is at
peace with the country of his stay, he is an alien friend. An if a war is
declared between the two countries he is termed as an alien enemy.
During the war, contract can be entered into with alien enemy with the
permission of central government.
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Free Consent
According to section 13: Two persons are said to have consented when
they agree upon same thing in the same sense.
In English law, this is called consensus ad idem
According to section 14."Free consent" defined.-Consent is said to be free
when it is not caused by(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of sections 20, 21 and 22.
Ex: X have two car one Maruti car and one Honda city car. Y does not know that X has
two cars Y offers to buy car at Rs.50,000. Here, there is no identity of mind in respect
of the subject matter. Hence there is no consent at all and the agreement is void ab
inito
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21
Coercion
Effect of Coercion
According to section 15 "Coercion" defined.-"Coercion" is the committing, or

threatening to commit, any act forbidden by the Penal Code, or the unlawful
detaining, or threatening to detain, any property, to the prejudice of any person
whatever, with the intention of causing any person to enter into an agreement. (45
of 1860.)
Explanation-It is immaterial whether the Penal Code is or is not in force in the
place where the coercion is employed. (45 of 1860.)
Ex: One state defines coercion as a crime when a person compels or induces a
person to engage in conduct which the latter has a legal right to abstain from
engaging in, or to abstain from engaging in conduct in which he has a legal right to
engage, by means of instilling in him a fear that, if the demand is not complied with,
the actor or another will cause physical injury to a person or cause damage to
property.
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Undue influence [Section 16]

According to section 16(1):"Undue influence" defined.-(1) A contract is
said to be induced by " undue influence where the relations subsisting
between the parties are such that one of the parties is in a position to
dominate the will of the other and uses that position to obtain an unfair
advantage over the other.
According to section 16(2) provides that undue influencemay be
presumed to exist in the following area
In particular and without prejudice to the generality of the foregoing
principle, a person is deemed to be in a position to dominate the will of
another(a) where he holds a real or apparent authority over the other or
where he stands in a fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental
capacity is temporarily or permanently affected by reason of age, illness,
or mental or bodily distress.
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According to section 19:Voidability of agreements without free consent.When consent to an agreement is caused by coercion, the agreement is a
contract voidable at the option of the party whose consent was so caused.
Effect of threat to file a suit:- A threat to file a suit (whether civil or
court) does not amount to coercion unless the suit is on false charge.
Threat to file a suit on false charge is an act forbidden by the IPC and
thus will amount to an act of coercion.
Effect of Threat to commit suicide:- Threat to commit suicide
amounted to coercion and the release deed was example discussed in
class. Therefore voidable.
Detaining property under mortgage: Detention of property by a
mortgage until the payment of loan does not amount to coercion.
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Ex: A having advanced money to his son, B, during his minority, upon B's
coming of age obtains, by misuse of parental influence, a bond from B for
a greater amount than the sum due in respect of the advance. A employs
undue influence.
Effect of Undue Influence:

Section 19A of the act, provides the effects of undue influence. Here it is
said that, when consent to an agreement is caused by undue influence, the
agreement is a contract at the option of the party whose consent was so
caused. Such contract may be set aside either absolutely or, if the party
who was entitled to avoid it has received any benefit thereunder, upon
such terms and conditions as to the Court may seem just

88
22
Assignment 2
Fraud
According to section 17."Fraud" defined.-"Fraud" means and includes any
of the following acts committed by a party to a contract, or with his connivance,
or by his agent, with intent to deceive another party thereto of his agent, or to
induce him to enter into the contract:(1) the suggestion, as a fact, of that which is not true, by one who does not
believe it to be true ;
(2) the active concealment of a fact by one having knowledge or belief of the
fact ;
(3) a promise made without any intention of performing it
(4) any other act fitted to deceive ;
(5) any such act or omission as the law specially declares to be fraudulent.
Distinction between Undue

Influence and Coercion
Ex: A sells, by auction, to B, a horse which A knows to be unsound. A says

nothing to B about the horse's unsoundness. This is not fraud in A.
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Effect of Fraud:
Voidability of agreements without free consent.-When consent to an
agreement is caused by fraud, the agreement is a contract voidable at the
option of the party whose consent was so caused.
A party to a contract whose consent was caused by fraud, may, if he thinks
fit, insist that the contract shall be performed, and that he shall be put in
the position in which he would have been if the representations made had
been true.
Explanation.-A fraud which did not cause the consent to a contract of the
party on whom such fraud was practiced, or to whom such
misrepresentation was made, does not render a contract voidable.

91

90
Misrepresentation
According to section 18."Misrepresentation" defined.-"Misrepresentation"
means and includes(1) the positive assertion, in a manner not warranted by the information of
the person making it, of that which is not true, though he believes it to be
true
(2) any breach, of duty which, without an intent to deceive, gains an
advantage to the person committing it, or any one claiming under him, by
misleading another to his prejudice or to the prejudice of any one
claiming under him;
(3) causing, however innocently, a party to an agreement to make a
mistake as to the substance of the thing which is the subject of the
agreement.
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23
Assignment 2
Effect of Fraud:
Voidability of agreements without free consent.-When consent to an
agreement is caused by misrepresentation, the agreement is a contract
voidable at the option of the party whose consent was so caused.
A party to a contract whose consent was caused by misrepresentation,
may, if he thinks fit, insist that the contract shall be performed, and that he
shall be put in the position in which he would have been if the
representations made had been true.

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Mistake
Distinction between Fraud &

Misrepresentation

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Classification of Mistake
According to section 20: Agreement void where both parties are under
mistake as to matter of fact.Where both the parties to an agreement are
under a mistake as to a matter of fact essential to the agreement, the
agreement is void.
Explanation.-An erroneous opinion as to the value of the thing which
forms the subject-matter of the agreement is not to be deemed a mistake as
to a matter of fact.
Ex: A agrees to sell to B a specific cargo of goods supposed to be on its
way from England to Bombay. It turns out that, before the day of the
bargain, the ship conveying the cargo had been cast away and the goods
lost. Neither party was aware of the facts. The agreement is void.

95

96
24
MISTAKE
It means an erroneous belief about some facts. A mistake can either be (a) mistake
of law and (b) mistake of fact.
Mistake of Law
A mistake of law does not mean mistake in provisions of any law but it means
there is mistake in understanding the provision of any law by the party to contract.
A mistake of law can be further classified either as mistake of Bangladesh law or
mistake of foreign law.
a) Mistake of Bangladesh Law: Everyone is supposed to know the law of land.
In the latin maxim, it is said that 'Ignoranlia juris non excusa Ignorance of law
is no excuse. Therefore, if there is a mistake of Bangladesh law, the contract is
not void or voidable.
Example
A, a widow, was entitled to certain occupancy rights on the land of B. She
remarried and believing that she has lost her occupancy rights by reason of her
second marriage, agreed to take the land on lease from B. on an increased rent.
Both A and B honestly believed that A had lost her occupancy rights. The contract
for higher rent is valid and not voidable although they made the contract in
ignorance of law.
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Mistake as to quantity
If both the parties are under a mistake as to the quantity of the subject matter of the
agreement, the agreement is void. Such a mistake may even be caused by the
negligence of a third party but the agreement would be void.
Example: A agreed to buy 100 sewing thread reels from B. Both believed that each
reel contains 500 metres of thread but, in
fact, the length of thread was only 300 metres. Held, the agreement was void as there
was a bilateral mistake as to
quantity of subject-matter.
Mistake as to price
If both the parties are working under a mistake as to the price, the agreement is void.
Example: A agreed with B to let out his house for a monthly rent of 520. However, in
the lease deed was written as 350.
Held, the agreement was void.
Mistake as to possibility of performance
Example: A agrees to sell 100 units of a particular product. Later, it is discovered
that there was a ban on sale of the product
even at the time of making the contract. The contract is void.
b) Unilateral Mistake A unilateral mistake means one party is at mistake. A contract
Debashis
Saha,
Lecturer,
F & B, as to the nature of the
99
is neither void nor voidable
except
that
it is mistake
contract or a mistake with regard
to the identity of the person.
b) Mistake of Foreign Law Everyone can be supposed to know the law of the
foreign country. A mistake of foreign law is treated, as if it were a mistake of
facts, because person cannot be expected to know the law of the other country.
Mistake of Fact
A mistake of facts can be classified either as a bilateral mistake or a unilateral
mistake.
a) Bilateral Mistake It means both the parties are at mistake related to the
essential part of agreement. If an agreement is entered into on the ground of
bilateral mistake, the agreement is void. An erroneous opinion, as to the value
of the thing which fom1s the subject-matter of agreement, is not deemed to be
a mistake as to the matter of fact.
Example:
A buys a painting from B at a price of 20,000. Both A and B believed it to be the
work of a known artist by B did not make any representation or warranty about it.
Later A comes to know that it was a new one and worth only 1000. A is bound by
the contract.
a) The bilateral mistake can be further classified as:

98
According to section 21: Effect of mistakes as to law.-A contract is

not voidable because it was caused by a mistake as to any law in force in
Bangladesh; but a mistake as to a law not in force in Bangladesh has the
same effect as a mistake of fact.
Ex: A and B make a contract grounded on the erroneous belief that a
particular debt is barred by the Law of Limitation: the contract is not
voidable.
According to section 22: Contract caused by mistake of one party
as to matter of fact.A contract is not voidable merely because it was caused by one of the
parties to it being under a mistake as to a matter of fact.
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25
PERFORMANCE OF
CONTRACTS
OFFER TO PERFORM OR
TENDER OF PERFORMANCE
A contract creates obligations. Performance of a Contract means the

carrying out of these obligations. Section 37 requires that the parties to a
contract must either perform or offer to perform their respective promises,
unless such performance is dispensed with or excused under the
provisions of the Contract Act, or of any other law.
According to Section 38. It may happen that the promisor offers

performance of his obligation under the contract at the proper time and
place but the promisee refuses to accept the performance. This is called as
Tender or attempted performance. According to Section 38, if a valid
tender is made and is not accepted by the promisee, the promisor shall not
be responsible for non-performance nor shall he lose his rights under
the contract. A tender or offer of performance to be valid must satisfy the
following conditions:
(1) it must be unconditional;
Ex: X offers to Y the principal amount of the loan. This is not a valid
tender since the whole amount of principal and interest is not offered.
Ex: A promises to deliver goods to B on a certain day on payment of Rs.

1,000. A dies before that day. A's representatives are bound to deliver the
goods to B, and B is bound to pay the Rs. 1,000 to A's representatives.

101
(2) it must be made at a proper time and place, and under such
circumstances that the person to whom it is made may have a reasonable
opportunity of ascertaining that the person by whom it is made is able and
willing there and then to do the whole of what he is bound by his promise to
do
Ex: X offers by post to pay Y the amount he owes. This is not a valid tender,
as X is not able there and then to pay.
(3) if the offer is an offer to deliver anything to the promisee, the promisee
must have a reasonable opportunity of seeing that the thing offered is the
thing which the promisor is bound by his promise to deliver.
Ex: A contracts to deliver B at his warehouse, on 1st March 1989, 100 bales
of cotton of a particular quality. A must bring the cotton to Bs warehouse on
the appointed day, under such circumstances that B may have a reasonable
opportunity of satisfying himself that the thing offered is cotton of the quality
contracted for, and that there are 100 bales.
(4) An offer to one of several joint promisees has the same legal
consequences as an offer to all of them
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102
Consequence of Refusal of
Tender
According to section 38: Where a promisor has made an offer of
performance to the promisee, and the offer has not been accepted, the
promisor is not responsible for nonperformance, nor does he thereby lose his
rights under the contract.
Effect of Refusal of Party to perform Promise

According to section 39: When a party to a contract has refused to perform,
or disabled himself from performing, his promise in its entirety, the promisee
may put an end to the contract, unless he has signified, by words or conduct,
his acquiescence in its continuance.
Ex: A, a singer, enters into a contract with B, the manager of a theatre, to sing
at his theatre two nights in every week during the next two months, and B
engages to pay her 100 rupees for each night's performance. On the sixth night
A wilfully absents herself from the theatre. B is at liberty to put an end to the
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contract.
26
WHO MUST PERFORM?

1. Promisor himself (Section 40). If it appears that it was the intention
of the parties that the promise should be performed by the promisor
himself, such promise must be performed by the promisor.
Ex: A promises to paint a picture for B. A must perform this promise
personally.
2. Agent (Section 40).. In cases other than the one specified in (1) above,
the promisor may employ a competent person to perform it.
Ex: A promises to pay to B a sum of money. A may perform this promise
either personally paying the money to B or causing it to be paid to B by
another.
3. Third Party (Section 41): When a promisee accepts performance of the
promise from a third person, he cannot afterwards enforce it against the
promisor.
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Devolution of joint rights &

liabilities
Performance of promise on joint liability:
According to section 42, When two or more persons have made a joint
promise, then, unless a contrary intention appears by the contract, all
such persons, during their joint lives, and, after the death of any of them,
his representative jointly with the survivor or survivors, and, after the
death of the last survivor, the representatives of all jointly, must fulfil the
promise
Ex: A, B and C jointly promise to pay D Rs. 3,000. D may, compel either A
or B or C or any two of them to pay him Rs. 3,000
Performance of promise of joint promise:
According to section 43(1), When two or; more persons make a joint
promise, the promisee may, in the absence of express agreement to the
contrary, compel any one or more of such joint promisors,to perform the
107
whole of the promise. Debashis Saha, Lecturer, F & B,
3. Legal Representative. In case of death of the promisor, the Legal

representative must perform the promise unless a contrary intention
appears from the contract.
Ex: A promises to deliver goods to B on a certain day on payment of Rs.
1,000. A dies before that day. As legal representatives are bound to
deliver the goods to B and B is bound to pay Rs. 1,000 to As
representatives.
4. Where, however, a contract involves personal skill or is founded on
normal considerations, it comes to an end with the death of the promisor.

106
Performance of promise equally on joint promise:

According to section 43(2), Each promisor may compel contribution.
Each of two or more joint promisors may compel every other joint
promisor to contribute equally with himself to the performance of the
promise, unless a contrary intention appears from the contract.
Sharing of loss for non-performance of promise:
According to section 43(3), If any one of two or more joint promisors
makes default in such contribution, the remaining joint promisors must
bear the loss arising from such default in equal shares.
Effect of release of liability:
According to section 44,Where two or more persons have made a joint
promise, a release of one of such joint promisors by the promisee does not
discharge the other joint promisor or joint promisors ; neither does it free
the joint promisors so released from responsibility to the other joint
promisor or joint promisors.

108
27
RECIPROCAL PROMISE
Any promises death upon joint promise
According to section 45, When a person has made a promise to two or
more persons jointly, then, unless a contrary intention appears from the
contract, the right to claim performance rests, as between him and them,
with them during their joint lives, and, after the death of any of them, with
the representative of such deceased person. Jointly with the survivor or
survivors, and, after the death of the last survivor, with the representatives
of all jointly
Ex: A in consideration of Rs. 5,000 lent to him by B and C, promises B
and C jointly to repay them that sum with interest on a day specified. B
dies. The right to claim performance rests with Bs representative jointly
with C during Cs life, and after Cs death with the representatives of B,
and C jointly.
109
2) Reciprocal and Independent. In such cases, each party must perform

his promise without waiting for the performance or readiness to perform
on the part of the other.
Ex: X promises Y to deliver him goods on 10th July and Y in turn
promises to pay the price on 6th July. Ys paying the price is independent
of Xs delivering the goods and even if Y does not pay the price on 6th
July, X must deliver the goods, on 10th July. He can of course, sue Y for
compensation.
3. Reciprocal and Concurrent: According to Section 51, when a
contract consists of reciprocal promises to be simultaneously performed,
no promisor need perform his promise unless the promisee is ready and
willing to perform his reciprocal promise.
Ex: A and B contract that A shall deliver goods to B to be paid by
installments, the first installment to be paid on delivery. A need not
deliver, unless B is ready and willing to pay for the goods on delivery.
And B need not pay for the goods unless A is ready and willing to deliver
them on payment.
Reciprocal promise means a promise in return for a promise. Thus, where a

contract consists of promise by one party (to do or not to do something in
future) in consideration of a similar promise by other party, it will be called a
case of reciprocal promises.
According to section 2(f), Promises, which form the consideration or part, of
the. consideration for each other are called reciprocal promises
Classification:
1. Reciprocal and Dependent. In such a case the performance of one party
depends upon the prior performance of the other party. Thus, if the
promisor who must perform, fails to perform it, he cannot claim the
performance of the reciprocal promise.
Ex: A promises B to sell him 100 bales of merchandise, to be delivered next day
and B promises A to pay for them within a month. A does not deliver according
to his promise. Bs promise to pay need not be performed, and A must make
compensation.
110
111
Rules
1. Liability for performance of reciprocal promise at a time: Sec(51)When
a contract consists of reciprocal promises to be simultaneously performed, no
promisor need perform his promise unless the promisee is ready and willing
to perform his reciprocal promise.
Ex: A and B contract that A shall deliver goods to B to be paid for by B on
delivery. A need not deliver the goods, unless B is ready and willing to pay for
the goods on delivery. B need not pay for the goods, unless A is ready and
willing to deliver them on payment.
2. Order of performance of reciprocal promises: Sec(52), Where the order in
which reciprocal promises are to be performed is expressly fixed by the
contract, they shall be performed in that order; and, where the order is not
expressly fixed by the contract, they shall be performed in that order which
the nature of the transaction requires.
Ex: A and B contract that A shall build a house for B at a fixed price. A's
promise to build the house Must be performed before B's promise to pay for it.
112
28
3) Effect of preventing performance:

Sec(53),When a contract contains reciprocal promises, and one party to
the contract prevents the other from performing his promise, the contract
becomes voidable at the option of the party so prevented; and he is
entitled to compensation from the other party for any loss which he may
sustain in consequence of the non-performance of the contract.
Ex: A and B contract that B shall execute certain work for A for a
thousand rupees. B is ready and willing to execute the work accordingly,
but A prevents him from doing so. The contract is voidable at the option of
B ; and, if he elects to rescind it, he is entitled to recover from A
compensation for any loss which he has incurred by its non-performance.
4) Effect of non-performance of the first party: Sec 54,When a contract

consists of reciprocal promises, such that one of them cannot be
performed, or that its performance cannot be claimed till the other has
been performed, and the promisor of the promise last mentioned fails to
perform it, such promisor cannot claim the performance of the reciprocal
promise, and must make compensation to the other party to the contract
for any loss which such other party may sustain by the non performance of
the contract.
Ex: hires B's ship to take in and convey, from Calcutta to the Mauritius, a
cargo to be provided by A, B receiving a certain freight for its
conveyance. A does not provide any cargo for the ship. A cannot claim the
performance of B's promise, and must make compensation to B for the
loss which B sustains by the non-performance of the contract.


113
114
Contracts which need not be

performed
5) Promise to perform impossible act: Sec (56), An agreement to do an
act impossible in itself is void. unlawful. A contract to do an act which,
after the contract is made, becomes impossible, or, by reason of some
event which the Promisor could not prevent, unlawful, becomes void when
the act becomes impossible or unlawful.
Ex: A agrees with B to discover treasure by magic. The agreement is void

115
1.
Sec 62:If the parties to a contract agree to substitute a new contract

for it, or to rescind or alter it, the original contract need not be
performed.
Ex: A owes money to B under a contract. It is agreed between A, B and C
that B shall thenceforth accept C as his debtor, instead of A. The old debt
of A to B is at an end, and a new debt from C to B has been contracted.
2) Sec 63:Every promisee may dispense with or remit, wholly or in
part, the performance of the promise made to him
Ex: A promises to paint a picture for B. B afterwards forbids him to do so.
A is no longer bound to perform the promise.
3) Sec 64:When a person at whose option a contract is voidable
rescinds it, the other party thereto need not perform any promise
therein contained in which he is promisor.
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29
ASSIGNMENT OF
CONTRACTS
4) Sec 67:If any promisee neglects or refuses to afford the promisor
reasonable facilities for the performance of his promise, the promisor
is excused by such neglect or refusal as to any non-performance
caused thereby.
Ex: A contracts with B to repair B's house. B neglects or refuses to point
out to A the places in which his house requires repair. A is excused for the
nonperformance of the contract if it is caused by such neglector refusal.

117
1. The obligations or liabilities under a contract cannot be assigned.

Thus, if A owes B 1,000 rupees, he cannot transfer his obligation to pay to
C and compel B to collect his money from C. But, if the promisee agrees
to such assignment, he will be bound by it. In such a case, a new contract
is substituted for an old one. This is called novation. Thus, in the above
example, if B agrees to accept payment from C, the assignment will be
valid and A shall stand discharged on his obligation to pay.
2. Rights and benefits under a contract may be assigned.
Ex: A owes B Rs. 1,000, B may assign his right to C. But, even a right or
benefit under a contract cannot be assigned if it involves personal skill,
ability, credit or other personal qualifications. For example, a contract to
marry cannot be assigned.
3. The rights of a party under a contract may amount to actionable
claim or chose-in-action. An actionable claim is a claim to any debt
(except a secured debt) or to any beneficial interest ....whether such claim
or beneficial interest be existent, accruing, conditional or contingent
Section 3 of the Transfer of Property Act.
Examples of actionable claims area money debt; the interest of a buyer
in goods in a contract for forward delivery
119
When a party to a contract transfers his right, title and interest in the contract
to another person or other persons, he is said to assign the contract.
Assignment of a contract can take place by operation of law or by an act of
the parties.
1. Assignment by operation of law. The instances of assignment by
operation of law are the assignment of interest by insolvency or death of
the party to the contract. In the case of insolvency, the Official Receiver
or Assignee acquires the interest in the contract and in the case of death,
the legal representative.
2. Assignment by act of parties. In this case, the parties themselves make
the assignment. The rules regarding assignment of contracts are
summarized below:
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APPROPRIATION OF
PAYMENT
When a debtor owes several debts in respect of which the payment must be made (to the
same creditor), the question may arise as to which of the debts, the payment is to be
appropriated. In Bangladesh, the rules regarding appropriation of payments are
contained in Sections 59 to 61 which in fact have adopted with certain modifications
the rules laid down in Claytons case. The provisions of these sections are summarised
below:
Rule No. 1. Appropriation by Debtor. Where a debtor owing several distinct debts to
one person, makes a payment to him, with express intimation that the payment is to be
applied to the discharge of some particular debt, the payment, if accepted, must be
applied to that debt. (Section 59).
Where, however, no express intimation is given but the payment is made under
circumstances implying that it should be appropriated to a particular debt, the
payment, if accepted, must be applied to that debt (Section 59).
Ex: A owes B, among other debts, Rs. 1,000 upon a promissory note which falls due on
the 1st June. He owes B no other debt of that amount. On the 1st June A pays B Rs.
1,000. the payment is to be applied to the discharge of the promissory note.
120
30
Rule No. 2. Appropriation by Creditor. Where the debtor does not

intimate and there are no circumstances indicating to which debt the
payment is to be applied, the creditor may apply it at his discretion to any
lawful debt actually due and payable to him from the debtor. The amount,
in such a case can be applied even to a debt which has become time
barred. However, it can not be applied to a disputed debt (Section 60).
Ex: A obtains two loans of Rs. 20,000 and Rs. 10,000 respectively. Loan
of Rs. 20,000 is guaranteed by B. A sends the bank Rs. 5,000 but does not
intimate as to how it is to be appropriatedtowards the loans. The bank
appropriates the whole of Rs. 5,000 to the loan of Rs. 10,000 (the loan not
guaranteed). The appropriation is valid and cannot be questioned either
by A or B.
Rule No. 3. Where neither party appropriates. Where neither party makes
any appropriation the payment is to be applied in discharge of the debts in
order of time, including time-barred debts. If the debts are of equal
standing, the payment is to be applied proportionately (Section 61).
Ex: A trustee deposits Rs. 10,000 being trust money with a bank and
subsequently deposits Rs. 50,000 of his own in the same account.
Thereafter, he withdraws Rs. 10,000 from the bank and misappropriates
it. The said withdrawal will not be appropriated against the Trust amount
of Rs. 10,000 but only against his own deposit, though this was made later
than the first deposit, thus leaving the Trust fund intact.


121
122
Rules
QUASI CONTRACTS
Quasi Contracts are so-called because the obligations associated with
such transactions could neither be referred as tortious nor contractual,

but are still recognised as enforceable, like contracts, in Courts.
According to Dr. Jenks, Quasi-contract is a situation in which law
imposes upon one person, on grounds of natural justice, an obligation
similar to that which arises from a true contract, although no contract,
express or implied, has in fact been entered into by them.
Ex: X Supplies goods to his customer Y who receives and consumes them.
Y is bound to pay the price. Ys acceptance of the goods constitutes an
implied promise to pay. This kind of contract is called a tacit contract. In
this very illustration, if the goods are delivered by a servant of X to Z,
mistaking Z for Y, then Z will be bound to pay compensation to X for their
value. This is Quasi-Contract.
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(1) Claim for Necessaries Supplied to a person incapable of

Contracting or on his account. If a person, incapable of entering
into a contract, or any one whom he is legally bound to support is
supplied by another person with necessaries suited to his condition in
life, the person who furnished such supplies is entitled to be
reimbursed from the property of such incapable person (Sec. 68).
Ex: A supplies B, a lunatic, with necessaries suitable to his condition in
life. A is entitled to be reimbursed from Bs property.
2) Reimbursement of person paying money due by another in payment
of which he is interested. A person who is interested in the payment
of money which another is bound by law to pay, and who, therefore,
pays it, is entitled to be reimbursed by the other. (Section 69)
Eg: B holds land in Bengal, on a lease granted by A, the Zamindar. The revenue
payable by A to the Government being in arrear, his land is advertised for sale by
the Government. Under the Revenue Law, the consequence of such sale will be the
annulment of Bs lease. B, to prevent the sale and the consequent annulment of his
own lease, pays the Government, the sum due from A. A is bound to make good to
B the amount so paid..
124
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(3) Obligation of a person enjoying benefits of non-gratuitous act. Where a

person lawfully does anything for another person, or delivers anything to him,
not intending to do so gratuitously, and such other person enjoys the benefit
thereof, the latter is bound to make compensation to the former in respect of,
or to restore the thing so done or delivered [Section 70].
Ex: A, a tradesman, leaves goods at Bs house by mistake. B treats the goods
his own. He is bound to pay for them.
(4) Responsibility of Finder of Goods. Ordinarily speaking, a person is not
bound to take care of goods belonging to another, left on a road or other
public place by accident or inadvertence, but if he
takes them into his custody, an agreement is implied by law. Although, there is
in fact no agreement between the owner and the finder of the. goods, the finder
is for certain purposes, deemed in law to be a
bailee and must take as much care of the goods as a man of ordinary prudence
would take of similar goods of his own. This obligation is imposed on the basis
of a quasi-contract. Section 71, which deals with this subject, says:
A person who finds goods belonging to another and takes them into his
custody, is subject to the same responsibility as a bailee.24
125
Termination of contract

126
Mode of discharge of contract
Discharge of a contract means termination of contractual relation between

the parties to a contract in other words a contract is discharged when the
rights and obligations created by it are extinguished (i.e. comes to an end).

(5) Liability of person to whom money is paid, or thing delivered by

mistake or under coercion(Section 72). A person to whom money has been
paid, or anything delivered by mistake or under coercion, must repay or
return it.
Ex: A and B jointly owe Rs. 1,000 to C. A alone pays the amount to C and
B not knowing this fact, pays Rs. 1,000 over again to C. C is bound to
repay the amount to B.
127
Discharge by performance
fulfillment of obligations by a party to the contract within the time and in
the manner prescribed in the contract.
Actual performance no party remains liable under the contract. Both
the parties performed.
Attempted performance or tender.:- Promisor offers to perform his
obligation under the contract but the promise refuses to accept the
performance. It is called as attempted performance or tender of
performance
But the contract is not discharged.

128
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Discharge by mutual agreement

a) Novation [Sec 62] Novation means substitution of a new contract in the
place of the original contract new contract entered into in consideration
of discharge of the old contract. The new contract may be.
Between the same parties (by change in the terms and condition)
Between different parties (the term and condition remains same or
changed)
Following conditions are satisfied :All the parties must consent to novation
The novation must take place before the breach of original contract.
The new contract must be valid and enforceable.
Example:
A owes B Rs.50,000. A enters into an agreements with B and gives B
a mortgage of his estate for Rs.40,000 in place of the debt of
Rs.50,000. (Between same parties)

(a)
(b)
(c)
(d)
party or all the parties to a contract.

Ex: X promises Y to sell and deliver 100 bales of cotton on 1st oct his go
down and Y promises to pay for goods on 1st Nov. X does not supply the
goods. Y may rescind the contract.
(c)Alteration [62] :- Alteration means a change in one or more of the
terms of a contracts with mutual consent of parties the parties of new
contracts remains the same.
Ex:- X Promises to sell and delivers 100 bales of cotton on 1st oct. and Y
promises to pay for goods on 1st Nov. Afterwards X and Y mutually decide
that the goods shall be delivered in five equal installments at is godown .
Here original contract has been discharged and a new contract has come
into effect.
(d)Remission [63]:- Remission means accepting a lesser consideration
than agreed in the contract. No consideration is necessary for remission.
Remission takes place when a Promisee-
129
dispense with (wholly or part) the performance of a promise made to him.

Extends the time for performance due by the promisors
Accept a lesser sum instead of sum due under the contract
Accept any other consideration that agreed in the contract
(e) Waiver:- means the abandonment of a right. A party to a contract may

waive his rights under the contract. Intentional relinquishment of a right
under the contract.
(f) Merger :- conversion of an inferior right into a superior right is called as
merger. (Inferior right end)
Discharge by operation of law
a) Death :- involving the personal skill or ability, knowledge of the deceased
party one discharged automatically. In other contract the rights and
liability passed to legal represent. Example : A promises to perform a
dance in Bs theatre. A dies. The contract comes to an end.
b) Insolvency:- when a person is declared insolvent. He is discharged from
his liability up to the date of insolvency.
Example: A contracts to sell 100 bags of sugar to B. Due to heavy loss by a
major fire which leaves nothing to sell, A applies for insolvency and is
131
adjudged insolvent. Contract is discharged.
(b)Rescission [62]:- Rescission means cancellation of the contract by any

130
c)
By unauthorized material alteration without the approval of other

party comes to an end nature of contract substance or legal effect.
Example : A agrees upon a Promissory Note to pay Rs.5,000 to B. B the
amount as Rs.50,000. A is liable to pay only Rs.5,000.
d) Merger: When an inferior right accruing to a party in a contract
mergers into a superior right accruing to the same party, then the
contract conferring inferior right is discharged.
Example: A took a land on lease from B. Subsequently, A purchases that
land. A becomes owner of the land and ownership rights being superior to
rights of a lessee, the earlier contract of lease stands terminated.
e) Rights and liabilities vest in the same person: Where the rights and
liabilities under a Contract vest in the same person, the contract is
discharged.
Example: A Bill of Exchange which was accepted by A, reaches As hands
after being negotiated and endorsed through 4 other parties. The contract
is discharged.
132
33
Discharge by Lapse of time

Where a party fails to take action against the other party within the time prescribe
under the limitation Act, 1963. All his rights to come end. Recover a debt 3 Years
recover an immovable property 12 years
Ex.:- On 1st July 20X1 X sold goods to Y to Rs 1,00,000 and Y had made no
payment till August 20X4. state the legal position on 1st Aug 20X4
Discharge by Breach of contract
Failure of a party to perform his part of contract
a) Anticipatory Breach of contract :- Anticipatory breach of contract occurs when
the party declares his intention of not performing the contract before the
performance is due .
I. Express repudiation: - 5 agrees to supply B 100 tunes of specified category of iron
on 15.01.2006 on 31.12.2005. 5 express his unwillingness to supply the iron to B.
II. Party disables himself: - Implied by conduct.
Ex.:- 5 agrees to sell his fiat car to B on 15.01.2006 on 31.12.05 5 sells his fiat car to T.
b) Actual Breach of contract :- If party fails or neglects or refuses to perform his
obligation on the due date of performance or during performance. It is called as
actual breach.
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Discharge by Impossibility performance

(a) Effect of Initial Impossibility
(b) Effect of supervening. Impossibility
(a) Initial Impossibility at the time of making contract Y
(b)
Both parties know put life into deed body void . Y

Both dont know void.
One know compensate to other party
Effect of super vanity Impossibility:Where an act becomes impossible after the contract is made void
Becomes unlawful, beyond the control of promisor void
Promisor alone knows about the Impossibility compensate loss.
When an agreement is discovered to be void or where a contract
becomes void

134
Breach of contract
A breach of contract occurs if any party refuses or fails to perform his
part of the contract or by his act makes it impossible to perform his
obligation under the contract. Incase of breach of contract, the aggrieved
party is relieved from performing his obligation and gets a right to
proceed against the party at fault. A contract terminates by breach of
contract. Breach of contract may arise in two ways:
I. Anticipatory Breach of Contract:
It occurs when a party repudiates it before the time fixed for performance
has arrived or when a party by his own act disables himself from
performing the contract.
Ex: A, a singer, enters into a contract with B, the manager of a theatre to
sing at his theater two nights in every week during the next two months
and B engages to pay her 100 Taka for each nights performance. On the
sixth night A willfully absents himself from the theatre. B is at library to
put an end to the contract.Debashis Saha, Lecturer, F & B,
135
II. Actual Breach Contract :

The actual breach may take place:
a) at the time when performance is due,
Ex: A seller offers to execute a deed of sale only on payment by the buyer
of a sum higher than is payable under the contract for sale, the vendor
shall be liable for the breach
b) during the performance of the contract
Example: A contracted within a railway company to supply it certain
quantity of railway chairs at a certain price. The delivery was to be made
in installments. After a few installments had been supplied, the railway
company asked A to deliver no more. Held a could use breach of contract
136
34
2) Damages
REMEDIES FOR BREACH OF

CONTRACT
1. Rescission of the Contract
When a breach of Contract is committed by one party, the other party may
sue to treat the contract as rescinded. In such a case, the aggrieved party
is freed from all his obligations under the contract.
Ex: A promises B to supply 100 bags of rice on a certain date and B
promises to pay the price on receipt of the goods. A does not deliver the
goods on the appointed day, B need not pay the price.
Party rightfully rescinding contract entitled to compensation (Section
75). A person who rightfully rescinds the contract is entitled to
compensation for any damage which he has sustained through the nonfulfilment of the contract.

137
Ex: A, a builder, contracts to erect and finish a house by the first of January, in
order that B may give possession of it at that time to C, to whom B has
contracted to let it. A is informed of the contract between B and C. A builds the
house so badly that, before the first of January, it falls down and has to be
rebuilt by B, who, in consequence, loses the rent which he was to have received
from C, and is obliged to make compensation to C for the breach of his
contract. A must make compensation to B for the cost of rebuilding the house,
for the rent lost, and for the compensation made to C.
C. Vindictive Damages. Vindictive damages are awarded with a view to punish
the defendant, and not solely with the idea of awarding compensation to the
plaintiff. These have been awarded (a) for a breach of promise to marry; (b) for
wrongful dishonour of a cheque by a banker possessing adequate funds of the
customer. The measure of damages in case of (a) is dependent upon the severity
of the shock to the sentiments of the promisee. In case of (b) the rule is smaller
the amount of the cheque dishonoured, larger will be the amount of damages
awarded.
D. Nominal Damages. Nominal damages are awarded in cases of breach of
contract where there is only a technical violation of the legal right, but no
substantial loss is caused thereby. The damages granted in such cases are
called nominal because they are very small, for example, a rupee or a shilling.
139
Damages, generally speaking, are of four kinds:

A. Ordinary Damages (Sec. 73). Ordinary damages are those which
naturally arose in the usual course of things from such breach. The
measure of ordinary damages is the difference between the contract
price and the market price at the date of the breach. If the seller
retains the goods after the breach, he cannot recover from the buyer
any further loss if the market falls, nor be liable to have the damages
reduced if the market rises.
Ex: A contracts to deliver 100 bags of rice at Rs. 100 a bag on a future
date. On the due date he refuses to deliver. The price on that day is Rs.
110 per bag. The measure of damages is the difference between the
market price on the date of the breach and the contract price, viz., Rs.
1,000.
B. Special Damages (Sec. 73). Special damages are claimed in case of
loss of profit, etc. When there are certain special or extraordinary
circumstances present and their existence is communicated to the
promisor, the non-performance of the promise entitles the promisee to not
only claim the ordinary damages but also damages that may result
therefrom.
138
3. Specific Performance
Where damages are not an adequate remedy, the court may direct the
party in breach to carry out his promise according to the terms of the
contract. This is called specific performance of the contract. Some of the
instances where Court may direct specific performance are: a contract for
the sale of a particular house or some rate article or any other thing for
which monetary compensation is not enough because the injured party
will not be able to get an exact substitute in the market.
Specific performance will not be granted where:
(a) Monetary compensation is an adequate relief.
(b) The contract is of a personal nature, e.g., a contract to marry.
(c) Where it is not possible for the Court to supervise the performance of
the contract, e.g., a
building contract.
(d) The contract is made by a company beyond its objects as laid down in
its Memorandum of Association.
140
35
Compensation for Breach of Contract where the Penalty

is stipulated for
4. Injunction
Injunction means an order of the Court. Where a party is in breach of a
negative term of contract (i.e. where he does something which he promised
not to do), the Court may, by issuing an order, prohibit him from doing so.
Examples : G agreed to buy the whole of the electric energy required for his
house from a certain company. He was, therefore, restrained by an
injunction from buying electricity from any other person.
5. Quantum Meruit
The phrase Quantum Meruit means as much as is merited (earned). The
normal rule of law is that unless a party has performed his promise in its
entirely, it cannot claim performance from the other. To this rule, however,
there are certain exceptions on the basis of Quantum Meruit. A right to sue
on a quantum meruit arises where a contract, partly performed by one
party, has become discharged by the breach of the other party.
Ex:A B 10000 to marry c (As daughter) C death of the time of
performance of contract B must repay A Rs 1000
141
The compensation for breach of contract falls into two broad categories namely
liquidated damage and penalty.
Liquidated damage is a genuine pre-estimate of compensation for damages for
certain anticipated breach of contract. This estimate is agreed to between parties
to avoid at a later date detailed calculations and the necessity to convince outside
parties.
Penalty on the other hand is an extravagant amount stipulated and is clearly
unconscionable and has no comparison to the loss suffered by the parties.
In terms of Section 74 of the Act where a contract has been broken, if a sum is
named in the contract as the amount to be paid in case of such breach, or if the
contract contains any other stipulation by way of penalty, the party complaining of
the breach, can claim whether or not actual damages or loss is proved to have
been caused thereby, from the other party, a
reasonable compensation not exceeding the amount so named, or as the case may
be the penalty stipulated for.
Any stipulation for payment of increased interest is a stipulation for payment of
penalty which has to be paid.
142
Contract of Indemnity
Contract of Indemnity
&
Guarantee
143
In terms of Section 124 of the Act, a contract by which one party

promises to save the other from loss caused to him by the conduct of the
promisor himself or the conduct of any person is called a contract of
indemnity.
There are two parties in this form of contract.
The party who promises to indemnify/save the other party from loss
is known as indemnifier,
The party who is promised to be saved against the loss is known as
indemnified.
Example: A may contract to indemnify B against the consequences of any
proceedings which C may take against B in respect of a sum of ` 5000/advanced by C to B. In consequence, when B who is called upon to pay
the sum of money to C fails to do so, C would be able to recover the
amount from A as provided in Section 124
144
36
Essential elements of a contract of indemnity Contract

All the essentials of a valid contract must also be present in the contract of
indemnity
Example:- X asks Y to beat Z and promises to indemnify Y against the
consequences. Y beats Z and is fined Rs.1,000. Y cannot claim this amount from X
because the object of the agreement was unlawful.
Loss to one party
A person can indemnify another person only if such other person incurs some loss
or it has become certain that he will incur some loss.
Indemnity by the promisor
The purpose of contract of indemnity is to protect the indemnity holder from any
loss that may be caused to the indemnity holder.
Reason for loss
The contract of indemnity must specify that indemnity holder shall be protected
from the loss caused due to
Action of the promisor himself; or
Action of any other person; or
Any act, event or accident which is not in the control of the parties
145
RIGHTS OF INDEMNITY
HOLDER
Right to recover damages
The indemnity holder has the right to recover all the damages which he is
compelled to pay in any suit in respect of any matter covered by the
contract of indemnity.
Right to recover costs
The indemnity holder has the right to recover all the costs which he is
compelled to pay in bringing or defending such suit.
Condition:
(a) The indemnifier authorised him to bring or defend the suit; or
(b) The indemnity holder did not contravene the orders of the indemnifier;
and The indemnity holder acted as it would have been prudent for him to
act in the absence of any contract of indemnity.
146
Contract of Guarantee
Right to recover sums paid
The indemnity holder has the right to recover all the sums which he has
paid under the terms of a compromise of such suit.
(a) The indemnifier authorised him to compromise the suit; or
(b) The indemnifier holder did not contravene the orders of the
indemnifier; and the indemnity holder acted as it would have been prudent
for him to act in the absence of any contract of indemnity.
A contract of guarantee is a contract to perform the promise made or

discharge liability incurred by a third person in case of his default (Section
126).
There are three parties in a contract of guarantee.
Surety- person who gives the guarantee,
Principal debtor- person in respect of whose default the guarantee is
given,
Creditor- person to whom the guarantee is given.
Any guarantee given may be oral or written.
For examples, (1) where A obtains housing loan from LIC Housing and if
B promises to pay LIC Housing in the event of A failing to repay, it is a
contract of guarantee.


147
148
37
ESSENTIALS AND LEGAL RULES FOR A

VALID CONTRACT OF GUARANTEE
Must have all the essentials of a valid contract
All the essentials of a valid contract must be present in the contract of guarantee.
Primary liability of some person
The principal debtor must be primarily liable. However, even if the principal
debtor is incompetent to contract the guarantee is valid.
The debt must be legally enforceable.
The debt must not be a time barred debt.
The contract must be conditional
The liability of surety is secondary and conditional.
The liability of surety arises only if the principal debtor makes a default.

149

150
RIGHTS OF SURETY
No misrepresentation
The creditor should disclose all the facts which are likely to affect the suretys
liability.
There must not be any concealment of facts.
Form of contract
A contract of guarantee may be either oral or written.
Joining of other co-sureties
The guarantee by a surety is not valid if
A condition is imposed by a surety that some other person must also join as a cosurety; but Such other person does not join as a co-surety.

151
I. Rights against principal debtor

Right of indemnity
There is an implied promise by the principal debtor to indemnity the
surety.
The surety is entitled to claim from the principal debtor all the sums
which he has rightfully paid.
The surety cannot recover such sums, which the he has paid
wrongfully.
Right of subrogation
On payment of a debt, the surety shall be entitled to all the rights which
the creditor could claim against the principal debtor.
II. Rights against the creditor
Right of subrogation
The surety can claim all the securities which the creditor had at the
time of giving of guarantee
152
38
It is immaterial as to whether the surety had knowledge of such

securities or not.
If the securities are returned by the creditor to the principal debtor the
surety is discharged to the extent of value of the securities so returned.
Right of set off
Any amount recoverable by the principal debtor may be claimed as
deduction.
Any amount recoverable by the surety may be claimed as deduction.
Rights to share reduction
If the principal debtor becomes insolvent, the surety may claim
proportionate reduction in his liability.
III. Rights against co-sureties
Rights to contribution
General Rule
All the co-sureties shall contribute equally
Right to share benefit of securities
If one co-surety receives any security, all the other co-sureties are entitled
to share the benefit of such security.
153
DISCHARGE OF SURETY
FROM LIABILITY
Notice of revocation by surety

Specific guarantee
A specific guarantee can be revoked only if liability of principal debtor has not
arisen.
Continuing guarantee
A continuing guarantee can be revoked only in respect of future transactions.
Death of surety
In case of death of surety, a continuing guarantee is automatically revoked in
respect of future transactions.
155
Assignment
DISTINCTION BETWEEN INDEMNITY
AND GUARANTEE

154
Variance in terms
If
Any variation is made subsequent to formation of contact of guarantee;
and
Such variation is made without the consent of surety;
Then
The surety shall be released for such transactions as take place after
such variation.
Release or discharge of principal debtor
If
The creditor makes a fresh contract with the principal debtor whereby the
principal debtor is relieved from his liability; or
The creditor does any act or omission resulting in discharge of the
principal debtor;
Then
The surety is discharged.
156
39
BAILMENT AND PLEDGE

Composition with principal debtor
The surety is discharged if the creditor makes a composition with the
principal debtor without obtaining the consent of surety.
Giving extension of time to principal debtor
The surety is discharged if the creditor extends the time for repayment of
the debt by the principal debtor without obtaining the consent of the
surety.
Loss of security by a creditor
The surety is discharged to the extent of security lost by the creditor.

157
The characteristics of bailment

158
Different forms of Bailment
(a) Bailment is based upon a contract. Sometimes it could be implied by

law as it happens in the case of finder of lost goods.
(b) Bailment is only for moveable goods and never for immovable
goods or money.
(c) In bailment possession of goods changes. Change of possession can
happen by physical delivery or by any action which has the effect of
placing the goods in the possession of bailee.
(d) In bailment bailor continues to be the owner of goods as there is no
change of ownership.
(e) Bailee is obliged to return the goods physically to the bailor. The
bailee cannot deliver some other goods, even not those of higher value.

Bailment etymologically means handing over or change of possession.

As per Section 148 of the Act, bailment is an act whereby goods are
delivered by one person to another for some purpose, on a contract, that
the goods shall, when the purpose is accomplished, be returned or
otherwise disposed of according to the directions of the person delivering
them.
The person who delivers the goods is the bailor and the person to whom
the goods are delivered is the bailee.
For example where X delivers his car for repair to Y, X is the bailor
and Y is the bailee.
159
(1) Delivery of goods by one person to another to be held for the

bailors use.
(2) Goods given to a friend for his own use without any charge
(3) Hiring of goods.
(4) Delivering goods to a creditor to serve as security for a loan.
(5) Delivering goods for repair with or without remuneration.
(6) Delivering goods for carriage.

160
40
Duties of Bailor
(i) the bailor must disclose all defects/faults in the goods bailed. If the bailor
does not disclose, he would be responsible for any loss or damage suffered by
the bailee while keeping the goods in his custody. The bailor is particularly
responsible for defects in goods hired to bailee whether bailor was aware of
such defects or not.
(ii) where the bailment is gratuitous, the bailor must reimburse the bailee for any
expenditure incurred in keeping the goods.
(iii) the bailor should reimburse any expense which the bailee may incur by way
of loss in the process of returning the goods or complying with other directions
for returning the goods.
(iv) the bailor must compensate the bailee for the loss or damage suffered by the
bailee that is in excess of the benefit received, where he had lent the goods
gratuitously and decides to terminate the bailment before the expiry of the period
of bailment.
(v) the bailor is bound to accept the goods after the purpose is accomplished. If
bailor fails, he is responsible for any loss or damage to ht e goods and has to
reimburse for expenses incurred by the bailee for keeping the goods safely.
161
(1) Bailor has a right to enforce the duties of the bailee such as (a) right to claim damages for loss caused to the goods by the negligence
of bailee;
(b) right to claim compensation for loss caused by an unauthorized use of
the goods
bailed;
(c) right to claim damages arising out of mixing the goods of the bailor
with his own
goods.
(2) Bailor has a right to terminate the contract if the bailee does anything
which is
inconsistent with the conditions of bailment. For example A lets on hire
his horse to B
162
Duties of a Bailee
Rights of bailee
(i) Bailee has no right to make unauthorized use of goods bailed

(ii) Bailee has no right to mix the goods bailed with his own goods without
the consent of the bailor.
(iii) Bailee has to return the goods on expiration of period of bailment
(iv) Bailee has a duty to return any extra profit accruing from goods bailed.
Where A bails his cow to B and if the cow gives birth to a calf, B must
return both the cow and the calf to A
(v) Bailee has duty not to do anything inconsistent with the condition of
bailment.

Rights of Bailor
163
(i) to claim compensation for any loss arising from non-dislosure of known
defects in the goods
(ii) to claim indemnification for any loss or damage as a result of defective title.
(iii) to deliver back the goods to joint bailors according to the agreement or
directions
(iv) to deliver the goods back to the bailor whether or not the bailor has the
right to the goods
(v) to exercise his right of lien. This right of lien is a right to retain the goods
and is exercisable where charges due in respect of goods retained have not
been paid. The right of lien is a particular lien for the reason that the bailee
can retain only these goods for which the bailee has to receive his
fees/remuneration.
(vi) to take action against third parties if that party wrongfully denies the bailee
of his right to use the goods Suit by bailor & bail
164
41
TERMINATION OF BAILMENT
Assignment
DISTINCTION BETWEEN BAILEES
PARTICULAR AND GENERAL LIEN

165

166
FINDER OF GOODS
PLEDGE
Finder of lost goods [Sec 71]

A person, who finds goods belonging to another and takes them into his
custody, is subject to the same responsibility as a Bailee.
Implied Agreement
There is an agreement, implied by law between finder and owner of goods.
Duties of Finder
A finder of lost goods is treated as Bailee of goods found. His duties are
(a)
To take initiative to find the real owner of the goods,
(b)
To take reasonable care of the goods found,
(c)
Not to put the goods found for his personal use, and
(d)
Not to mix the goods found with his own goods.
Pledge
The bailment of goods as security for payment of a debt or performance of
promise is called pledge.
Pawnor
The bailor in case of a pledge is called as pawnor.
Pawnee
The bailee in case of pledge is called as pawnee.


167
168
42
ESSENTIALS A VALID CONTRACT OF PLEDGE

Contract
There must be a contract
The contract may be expressed or implied.

Goods
Pledge can be made of goods only.
Delivery
There must be delivery of goods by one person to another person.
Purpose of delivery
The goods must be delivered for some purpose.
The purpose must be to deliver the goods as security for (a)

payment of a debt; or (b) performance of a promise.
Return of goods
The delivery of goods must be conditional
The condition shall be that the goods shall be

returned (either in original form or in altered form); or
Disposed of according
to the directions of the pawnor when the169
purpose is accomplished. Jahangirnagar University
iv. Rights in case of default by Pawnor [Sec.176]

(a) Suit: Pawnee may institute a suit against Pawnor when there is a default in
payment of debt or performance of promise at the stipulated time.
(b) Retention / Sale of goods: Pawnee may (a) retain the goods pledged as
collateral security, or (b) sell the goods pledged by giving a reasonable
notice to the Pawnor.
(c) Surplus / Deficit on Sale : When there is a surplus on sale, Pawnee shall
pay the excess to the Pawnor. In case of deficit, Pawnor shall be liable for
the balance amount.
(d) No Notice: Where the Pawnee does not give a reasonable notice to the
Pawnor, the sale is valid, but Pawnee is liable to pay damages to Pawnor.
v. Right against true owner of goods [Sec.178A]
(a)
(b)
Where the Pawnor has acquired possession of pledged goods, under a

voidable contract u/s 19 or 19A but contract has not been rescinded at the
time of pledge, the Pawnee acquires a good title to the goods, against the
true owner.
The title of Pawnee is good only where (a) he had no notice of the
Pawnors defect in title and (b) he acts in good faith.
171
RIGHTS OF PAWNEE
i. Right of Retainer [Sec.173]
Pawnee may retain the goods pledged for
(a)
payment of the debt or the performance of promise,
(b)
any interest due on the debt; and
(c)
all necessary expenses incurred by him with respect to possession or for
preservation of goods pledged.
ii. Retainer for subsequent advances [Sec.174]
(a)
Where the Pawnee lends money to the Pawnor subsequently, after the
date of pledge, it shall be presumed that the he has a right of retainer over the
goods already pledged in respect of the subsequent lending also.
(b) This presumption can be made invalid only by an expenses provision to that
effect.
iii. Reimbursement of Expenses [Sec.175]
Where the Pawnee incurs extraordinary expenses to preserve the goods pledged
with him, he is entitled to receive such amount from the Pawnor.
170
DUTIES OF A PAWNOR
Pay the debt
The pawnor is liable to pay the debt or perform his promise as the case may be.
Pay deficit on sale
If the pawnee sells the goods due to default by the pawnor, the pawnor must pay
the deficit.
Pay extra ordinary expenses
The pawnor is liable to pay to the pawnee any extraordinary expenses incurred
by the pawnee for preservation of goods.
Disclose faults in goods
(a) The pawnor is liable to disclose all the faults which are material for use of
the goods; or
(b) may put the pawnee to extraordinary risks.
Indemnify the pawnee
If loss is caused to the pawnee due to defect in pawnors title to the goods, the
pawnor must indemnify the pawnee.
172
43
DUTIES OF PAWNEE
Not to use the goods
The pawnee has no right to use the goods
However, he may use the goods, if he has been so authorised by the

pawnor.
Return the goods
The pawnee must return the goods if the pawnor pays the debt or performs his
promise.
Take reasonable care
The pawnee must take such care of goods pledged as a man of ordinary
prudence would take care of his own goods.
Not to mix goods
The pawnee must not mix his own goods with the goods pledged.
Return increase in goods
The pawnee must return to the pawnor any accretion to the goods pledged with
173
him.
RIGHTS OF A PAWNOR
Redeem the goods pledged
Meaning of redemption
Right to recover back the goods by making payment of the debt or performance of
promise.
Time for redemption
Where time of redemption is fixed, the pawnor may exercise redemption
(a)
within the time so fixed; or
(b)
even after expiry of time so fixed, provided
the pawnee has not sold the good; and
the pawnee pays the pawnee all expenses arising on account of his
default.
174
AGENCY
Enforce pawnees duties
The pawnor has the right to enforce the duties of pawnee, if the pawnee
fails to fulfill his duties.
Receive increase in goods
The pawnor has the right to recover from pawnee any increase in goods
pledged.
Right to receive notice of sale
In case of default by the pawnor to pay the debt or perform his promise,
the pawnee has the right to sell the goods, after giving a reasonable notice
to the pawnor. If the pawnee fails to give notice, the pawnor has the right
to recover the loss incurred by him.
Agent is defined as a person

employed to do any act for another or to
represent another in dealings with third
persons. The third person for whom the
act is done or is so represented is called
Principal. (Section 182)


175
176
44
ESSENTIALS OF
RELATIONSHIP OF AGENCY
Agreement between principal & agent
Intention of agent to act on behalf of the
principal
Anyone can be an agent
Anyone can employ an agent

177
3. Agency of holding out

Such an agency comes into existence when a person by his affirmative or positive
conduct leads third persons to believe that person doing some act on his behalf is
doing with authority.
4. Agency by necessity Conditions
(i) There was an actual and definite necessity for acting on behalf of the principal.
(ii) The agent was not in a position to communicate with the principal.
(iii) The act was done for the purpose of protecting the interest of his principal.
(iv) The agent has exercised such reasonable care as a man of ordinary prudence
would have exercised in his own case.
(v) The act was done bonafide.
5. Agency by operation of law
Agency by operation of law arises where the law treats one person as an agent of
another.
179
1. Express agreement
A person may employ another person as his agent by entering into an express
agreement with him.
The agreement may be either oral or written.
2. Implied agreement
Agency by estoppel
If
a person makes a representation (by his words or conduct) to a third person that a
certain person is his agent; and
the third party believing such representation to be true, enters into a contract with the
pretended agent.
Then
the person making the representation is prevented from denying the truth of agency.
He may be held liable as a principal by such third party.
178
6. Agency by ratification
Meaning
If
a person (viz., pretended agent) acts on behalf of another
person (viz, the principal)
the pretended agent acts without the knowledge or consent of
the principal; and
Afterwards, the principal accepts such act.
Then
Agency by ratification comes into existence.
180
45
SUB-AGENT & SUBSTITUTED

AGENT/CO-AGENT
SUB-AGENT
A sub agent is a person employed & acting

under the control of the agent in the business
of the agency (Sec 191)
A substituted agent is a person named by the
agent, on an express or implied authority
from the principal, to act for the principal (Sec
194)
181
Duties
SUBSTITUTE
AGENT
1. He works under the
principal
2. There is a contract
between him & the
principal
3. Agent is in no way
responsible for the acts
of the substituted agent

182
Rights
1. To conduct the business in accordance with the directions given by the principal
2. To work with reasonable diligence, care and skill.
3. To render proper accounts to the principal on demand.
4. To communicate with his principal in case of difficulty and seek his instructions.
5. Not to deal on his own account unless all the material facts have been disclosed to the
principal and consent of the principal has been obtained.
6. Not to make any secret profit out of the agency business other than the agreed
remuneration
7. To remit to the principal all the sums received in the principals accounts in
accordance with the terms and conditions of contract of agency.
8. Not to delegate authority or appoint sub agent.
9. To protect and preserve the interest on behalf of the principals representative in case
of his death or insolvency of the principal.
10. Not to use information obtained in the course of the agency against the principal.
1. He works under the agent

2. There is no contact between
the agent & the principal
3. Agent is wholly & solely
responsible for the acts of
the sub-agent
183
i) Right of lien on principals property: An agent is entitled to retain the goods,

properties and books for any remuneration, commission etc due to him. The possession
of such property should be however al wful.
(ii) Right of indemnification for lawful acts: The principal is bound to indemnify the
agent against all consequences of lawful acts done in exercise of his authority.
(iii) Right of indemnification against acts done in good faith: Where the agent acts in
good faith on the instruction of principal, agent is entitled for indemnification of any loss
or damage from the principal.
(iv) Right of retention: The agent can retain, out of the sums received from the
principal, such amounts towards reimbursement of expenditure, remuneration and
advances paid by him on account towards the business and render accounts only for the
balance.
(v) Right of remuneration: The agent in the normal course is entitled for remuneration
as per the contract. In the absence of any agreed amount of remuneration, he is entitled
for usual remuneration which is customary in the business. However he is not entitled for
184
any remuneration for acts done
through
misconduct/negligence
46
A. By the acts of parties

By agreement
The principal and the agent may mutually agree to terminate the agency,
at anytime.
By revocation
When the agency is coupled with interest, the principal cannot revoke
the agency to the prejudice of such interest.
The principal can revoke the authority at anytime before, the authority
has been exercised so as to bind the principal.
The principal cannot revoke the authority given to his agent after the
authority has been partly exercised.
When agency if for fixed
period,
principal
Debashis
Saha,the
Lecturer,
F & B, must make
185
University
compensation to the agentJahangirnagar
for premature
revocation of agency without
sufficient cause.
By the agent renouncing the business of agency

Renunciation may be expressed or implied from the conduct of the
agent.
When agency is for fixed period, the agent must make compensation to
the principal for premature renunciation of agency without sufficient
cause.
B. By operation of law
1. Completion of business of agency
2. Death or insanity of the principal or agent
3. Where the principal or the agent, being a company is dissolved
4. Destruction of subject matter of agency
5. Principal becoming insolvent
6. Expiration of period where agency was for a fixed period.
186
DEFINATION
According to Section 4(1) of The Sales of
Goods Act,1930.
contract of sales of goods is a contract
whereby the seller transfer or agrees to
transfer the property in goods to the buyer
for a price
Contract of Sale is a generic term ,which
includes both sales and an agreement to sell
The Sales of Goods Act,1930.

187
188
47
ESSENTIAL ELEMENTS OF THE

ACT
BUYER AND
SELLER
ESSENTIAL
ELETMENTS
OF VALID
CONTRACT
PRICE
A.BUYER AND SELLER

BUYER
means a person who buys or agrees to buy
good.[Section 2(1)]
SELLER
means a person who sells or agrees to sell the
good.[Section 2(13)]
GOODS
A person cannot be a buyer as well as a seller

as a person cannot buy his own goods
TRANSFER OF
PROPERTY
189
B. GOODS
190
Cont.
ACTIONABLE CLAIM:- It means which can be
enforced through the courts of Law, e.g. debt due.
GOODS means every type of movable

property other than actionable claim n
money but it can include stock and
shares,crops,lands etc.
MONEY:- means the legal tender i.e. the

currency of the country but not old coins coins.
191
192
48
C. TRANSFER OF PROPERTY
PROPERTY means the general property
in goods, and not merely a special
property.
General property in goods means
ownership of the goods
Special property on the goods means
possession of the goods
Cont.
Thus, there may be either a transfer of
ownership of goods or an agreement to
transfer the of the goods. The ownership
may transfer either immediately on
completion of sale or something in future in
agreement to sell.
193
194
E. ESSENTIAL ELEMENTS OF
VALID CONTRACT
d. price
For every sale or purchase their must be a price of the
goods.
PRICE means the MONEY CONSIDERATION for the
sale of goods.
When there is no consideration,it amounts to gift and
not sale
ii. However , the consideration may be partly in money
and partly in goods because the law does not
prohibited as such.
Essential elements of a valid contract as

specified under Section 10 of Contract
Act,1872 must also be present.
i.
195
a) Offer and Acceptance

b) Delivery and Payment
c) Express or Implied
196
49
Distinction between sale and agreement

to sell
CONTRACT OF SALE
S.No
BASIS
SALE
AGREEMENT TO SELL
1.
Transfer of
ownership
Transfer of ownership of
goods takes place
immediately.
Transfer of ownership of
goods takes place in future
times.
2.
Executed or
Executory
It is an executed contract.
It is an executory contract
because something remains
to happen.
3.
Conveyance of
Property
Buyer gets the right to

enjoy the goods against
whole of the world. It
creates jus in rem(Right
against property)
Buyer does not get such

right to enjoy the goods. It
only creates jus in personam
(Right against person)
Under Section 4(3) the Contract of Sale Includes:1) SALE:- Sale means where the ownership in goods
is transferred.
2) AGREEMENT TO SELL :-Agreement to sell
includes where the transfer of ownership in goods
is to take place at a future time or subject to the
fulfillment of some condition.
197
Cont.
4.
Transfer of Risk
Transfer of risk* of loss of

goods takes place
immediately as the
ownership is been
transferred. As a result in
case of destruction of
goods, the loss shall be
beared by the buyer.
198
GOODS
Transfer of risk of loss
of goods does not
takes place because
the ownership is not
transferred. As a
result, in case of
destruction of goods
the loss shall be borne
by the seller.
U/s 2(7) GOODS MEANS

GOODS means every type of movable
property other than actionable claim n money
but it can include stock and shares,crops,lands
etc.
(Risk*-Risk follows
ownership)
ACTIONABLE CLAIM:- It means which can be enforced

through the courts of Law, e.g. debt due.
MONEY:- means the legal tender i.e. the currency of the
country but not old coins
IMMOVABLE PROPERTY
199
200
50
TYPES OF GOODS
1.Existing goods
EXISTING GOODS
means the goods ,which are either owned or
possessed by the seller at the time of contract of
sale.
Existing goods are of 3 types:
a) Specific goods
b) Ascertained goods
c) Unascertained goods
201
2.Future goods
202
3.Contingent goods
FUTURE GOODS
means goods to be manufactured or produced or
acquired by the seller after the making of the
contract of sale. There is an agreement to sell
only.
For Example:-X will sell the goods to Y all the
crops to be grown at Haryana in his farm.
203
CONTINGENT GOODS
means those goods,acquition of which by the
seller depends upon a contingency, which may
or may not happen.
For example:-X agrees to sell to y all the crops
to be grown at Zs farm in Haryana during the
year 2007 season for sum of 1 lakh rupees,if Z
sells the crops.
204
51
Essentials of valid contract of sale
There must be two parties, one seller and other buyer

Seller and buyer must be different.
Part owner can sell goods to another part owner.
Partners are not regarded as separate persons for the purpose of sale of the
partnership property. They are the joint owners of the goods and as such they
cannot be both sellers and buyers [State of Gujarat v. Ramanlal S & W.
(1965)]. But, a partner may buy goods from the firm or sell goods to the firm.
There must be movable goods as subject matter of contract.
There must be a transfer of property in goods. It means general property.
(i.e. ownership)
There must be price involved. Price means money consideration for sale of
goods.
Exchange of goods for goods is barter.
If Exchange is for partly goods and partly for money it is sale.
All essential elements of valid contract must be observed.
The contract of sale can be entered into, expressly or impliedly.
Conditions & Warranties (Sec. 11-17)

Sec. 12(2) defines a condition as, a stipulation
essential to the main purpose of the contract, the
breach of which gives rise to a right to treat the
contract as repudiated (denied),
Sec 12(3) defines a warranty as, stipulation
collateral to the main purpose of the contract, the
breach of which gives rise to claim for damages
but not to a right to reject the goods and treat the
contract as repudiated .
205
Conditions & Warranties (Sec. 11-17)

The effect of a breach of a condition is to give the
aggrieved party a right to treat the contract
repudiated, i.e., if price has been paid, the buyer can
claim the refund of price plus damages for breach
In case of breach of warranty, only damages can be
claimed, i.e., the buyer must accept the goods and
claim damages for the breach of warranty
Whether a stipulation in a contract of sale is a
condition or a warranty depends in each case on
the construction of the contract
A stipulation may be a condition though called a
warranty in a contract [sec. 12(4)]
Condition & Warranty Distinguished

1. As to value:
A condition is a stipulation which is essential to the main
purpose of the contract, whereas a warranty is a stipulation
which is collateral to the main purpose of the contract.
2. As to breach:
The breach of a condition gives the aggrieved party the right
to repudiate the contract and also to claim damages.
3. As to treatment:
A breach of condition may be treated as a breach of
warranty. But a breach of warranty cannot be treated as a
breach of condition.
52
When breach of Condition is to be treated as breach

of Warranty
Section 13 deals with cases where a breach of condition is to

be treated as a breach of warranty, as a consequence of which
the buyer loses his right to rescind the contract and has to be
content with a claim for damages only.
These cases are as follows:
1. Voluntary waiver by buyer:
When breach of Condition is to be treated as breach of

Warranty
Illustration:
A agrees to supply B 10 bags of first quality sugar @ Rs. 1625
per bag but supplies only second quality sugar, the price of
which is Rs. 1500 per bag. There is a breach of condition and
the buyer can reject the goods. But if the buyer so elects, he
may treat it as a breach of warranty, accept the second quality
sugar and claim damages @ Rs. 125 per bag.
Although on a breach of condition by the seller, the buyer has a right

to treat the contract as repudiated and reject the goods, but he is not
bound to do so
He may instead elect to waive the condition, i.e., to treat the breach of
condition as a breach of warranty and accept the goods and sue the
seller for damages for breach of warranty
Express & Implied Conditions & Warranties

Express condition or warranty:
These may be of any kind that the parties may choose to
agree upon, eg, it may be agreed that delivery of goods
shall be made or taken on or before a certain date.
Similarly, in a contract of sale of a car, express warranty as
to its soundness may be incorporated
Implied conditions and warranties:

They are deemed to be incorporated by law in every
contract of sale of goods unless the terms of the contract
show a contrary intention
212
53
Definition:
Section 13 of the Negotiable Instrument Act, 1881, defines a negotiable
instrument as: A negotiable instrument means a promissory note, bill of exchange
or cheque payable either to order or to bearer.
Meaning :
Negotiable means transferable. Instrument means document. Negotiable
instrument, therefore, means a transferable document. The law relating to
negotiable instruments is contained in the Negotiable Instruments Act, 1881
Explanation:
The Act narrows down the meaning of instrument. It regulates only

three types of instruments, viz., Promissory Notes, Bills of Exchange and
Cheques.
A negotiable instrument is one which entitles the holder to the receipt of
money. It gives him the right to transfer the same by mere delivery or endorsement
thereon. The negotiability of the instrument continues till its maturity.
Characteristics\Features of Negotiable Instrument

Property (does not exactly give possession of the instrument, but right to property)
Good Title to the Instrument (gets the instrument free from all defects of any
previous holder.)
Rights of Holder in Due Course (not affected by certain defences which

might be available against previous holder, for example, fraud, criminal, smugglers, to which he is not a party)
Writing & Signature (it must be written and signed by all the parties according to the
rules )
Payment (A negotiable instrument may be made payable to two or more payees)

Payable by legal Tender Money (The liabilities of the parties of negotiable
instruments are fixed in terms of legal tender money only.)
Promissory Notes (Section 4)

Promissory Notes (Section 4)
Definition:
Section 4 defines a promissory notes as under: A promissory note is an instrument in writing
(not being a bank-note or a currency-note), containing an unconditional undertaking, signed by
the maker, to pay a certain sum of money only to, or to the order of a certain person, or to the
bearer of the instrument.
Essentials Characteristics of a Promissory Note

All kinds of negotiable instruments, including a promissory note, must be in writing
The instrument must contain an express or unconditional promise to pay
Unconditional
The promissory note must be signed by the maker, otherwise, it is incomplete and of no effect with free
consent
Both the drawer and the payee must be indicated or designated with certainty on the face of the promissory
note
Specific Sum
Promise to pay must be money only
Stamping
54
Bills of Exchange (Section 5)

Definition:
4 Types of Promissory Notes
Promissory notes payable on demand;

Promissory notes payable after date;
Joint promissory notes
Joint and several promissory notes
Section 5 defines a bill of exchange as an instrument in

writing containing an unconditional order, signed by
the maker, directing a certain person, to pay a certain
sum of money only to, or to the order of a certain
person, or to the bearer of the instrument.
Essentials\Characteristics of Bill of Exchange
Writing
Parties
Drawee and Acceptor
Order to Pay
An Unconditional Order to Pay
Signed by Drawer
Cheques (Section 6)
5 Types of Bills of Exchange
Definition:
Bill of exchange payable on demand

Bill of exchange payable after date
Inland bill of exchange
Foreign bill of exchange
The negotiable instrument act of 1881 defines cheque as, A cheque is a bill of
exchange, drawn on a specified banker and not expressed to be payable otherwise
than on demand.
Types of Cheque
Accommodation bill of exchange

Bearer cheque: Those which are uncrossed are popularly known as bearer or
open cheques
Crossed Cheques
55
Partnership Act, 1932
ESSENTIAL features of a cheque: A cheque is a Bill of exchange

It contains an unconditional order to pay a certain sum of money only
A drawee is always a bank
Introduction
It must be signed by the drawer

The order must be to pay money only
A cheque involves three parties viz., drawer, drawee and payee
A cheque is always payable on demand and it cannot be made payable
after a fixed period of time
Acceptance of the cheque by the bank is not required
Types of Partnership
Essentials of a Partnership
1. It is an association of two or more persons
2. It must be result of an agreement
3. The agreement must be to share profits of the
business
4. The agreement must be to carry on some
business
5. The business must be carried on by all or by any
of them acting for all
1.
2.
Partnership at will (Sec7)

Where no provision is made by contract between the
partners for the duration of their partnership, or for the
determination of their partnership, the partnership is
partnership at will.
Particular Partnership (Sec 8)
A person may become a partner with another person in
particular adventure or undertaking.
56
Formation of Partnership and Registration of Partnership

Formation of Partnership
(i) All essential of a valid contract must be present in
a partnership as it is based on an agreement.
(ii) Sec 30 of the Act provides that minor may be
admitted to the benefits of partnership.
(iii) No consideration is required to create partnership
(iv) The partnership agreement may be express

(oral or written) or implied.
(v) An alien friend can enter into partnership, an
alien enemy cannot.
(vi) A person of unsound mind is incompetent to
be a partner in a partnership firm.
(vii) A company, incorporated can enter into a
contract of partnership.
Registration of Firm [Ss 58]

Registration of Firms is Optional
Application for Registration - Section 58 lays down
the procedure for registration of partnership firms. A
partnership firm may be registered at any time by
post, or delivering to the Registrar of Firms of the
area in which any place of business of the firm is
situated or proposed to be situated, a statement in the
prescribed form and accompanied by the
prescribed fee.
The Act does not provide for compulsory registration of

firms. It is optional and there is no penalty for
nonregistration.
57
Partnership Deed or Agreement or Articles of

Partnership
A Partnership can be Formed Either by Oral or
Written Agreement. In France and Italy, the law
requires all partnership agreements to be in writing. But
in England, USA and India, written agreement is not
compulsory. The partnership deed is required to be
stamped according to the provisions of the Stamp Act,
1899.
The Partnership Deed contains clauses on

the following
(i) Name of the firm
(ii) Names and addresses of the Partners
(iii) The date when each partner joined the firm
(iv) The duration of the firm
(v) Nature of partnership business
(vi) The town and place where the business will be
carried on etc.
Relations of Partners to One Another

Rights of Partners
When an alteration is made in the name of the firm
or in the location of its principal place of business or
about closing or opening of branches, Sec 60
requires that information be sent to the Registrar
of the Firm.
Sec63 Election by the
minor
(i) To take part in the conduct of the firms business

[s.12(a)].
(ii) To express his opinion on any matter, but in case of
difference of opinion regarding
ordinary
matters of the business, he is bound by the
majority decision [s.12(c)].
(iii) To have access to and inspect and copy any of the
books of the firm [s.12 (d)].
(iv) To share equally in the profits [s.13 (b)].
Sec70 Penalty for False Particulars 3months

imprisonment and/or fine
58
(v) To do, in an emergency, all such acts as are reasonably

necessary to protect the firm from loss.
(vi) To be indemnified by the firm in respect of liabilities
incurred by him in the ordinary course of
business[S.13(e)].
(vii) To claim interest @ 6% per annum on any amount
advanced by him beyond the amount of capital he agreed to
subscribe. [S13(c)]
(viii) To continue in the partnership, i.e. not to be expelled.
A partner may, however, be expelled if a power to expel is
conferred upon the partners and power is exercised bona
fide by a majority of partners[S.33(i)]
(vi) If restrained by an agreement with other partners, a

partner has a duty not to carry on any business other than
that of the firm while he is a partner. [S11(2)]
(vii) If a partner carries on any business competing with that
of the firm he shall account for and pay to the firm all
profits [S 16(a)]
Duties of Partners (Sec 9)

(i)
To carry on firms business to the greatest

common advantage
(ii)
To be just & faithful to each other
(iii) To render true accounts and full information of
all things affecting the firm
(iv) To indemnify firm for the loss caused to it by his
fraud in the conduct of firms business (S 10)
(v)
To attend diligently to his duties in the conduct
of firms business without remuneration.
(ix) Unless otherwise agreed, he is to contribute

equally to the losses of the
firm.
(x) To indemnify the firm for any loss caused by
his willful neglect in the business of the firm. (S 13)
(viii) Not to assign his share in the partnership. If a partner

assigns his share, the partnership may be dissolved.
59
Dissolution of Firm and Dissolution of

Partnership
(A) Dissolution of Partnership
(i)
(ii)
(iii)
(iv)
(v)
By Expiry of Term
By Completion of adventure
By Death of a partner
By Insolvency of a partner
By Retirement of a partner
Dissolution by Court (S.44).
If a Partner has become of unsound mind

Permanent Incapacity of a partner
Misconduct of a partner affecting firms business
Willful & persistent disregard of partnership
agreement by a partner
Transfer of share or shares by a partner (Sale,
Mortgage or Charge)
The Business can not be carried out save at a loss
Just & Equitable
(B) Dissolution of Firm

(i) By Mutual Consent (Sec 40)
(ii) By Agreement (Sec 40)
(iii) By Insolvency of all the partners or all the
Partners but one but one
(Sec 41)
(iv) By Business becoming illegal
(Sec 41)
(v) Partners becoming alien enemies
(Sec 41)
(vi) By notice of dissolution of partnership at will (Sec
43)
The Insolvency Act-1997

The Insolvency Act-1997
When can a person be declared insolvent?
Two conditions must be satisfied before a person can be adjudicated insolvent:
(i) he must be a debtor, i.e., he must owe money to others and his assets must be
insufficient to meet all claim upon them;
(ii) the debtor has committed an act of insolvency.

240
60
Act of Insolvency
An act of insolvency is some act of the debtor which shows that he
is financially embarrassed.
Only those acts which are listed as such by the act are considered to
be acts of insolvency.
Each of the following acts committed by the debtor is an act of
insolvency:
(1). If he makes a transfer of all or substantially all his property to
a third person for the benefit of his creditors generally.
(2). If he makes a transfer of his property or any part thereof, with
the intend to defraud or to delay his creditors.
241
The rules regarding notice are stated below:

(a) The notice must be given according to the
prescribed form and prescribed manner
(b) It must specify the amount due.
(c) It must specify the period for its
compliance, i.e., not less than 01 month.
(d) It must specify the consequences of noncompliance ( the practice of obeying rules).
(3). If he makes a transfer of his property or any part thereof it would under this
act or any other enactment for the time being in force, be void as a fraudulent
preference if he were adjudged as insolvent.
(4). If, with intent to defeat or delay his creditorsi) he departs from or remain out of Bangladesh
ii) he departs from his dwelling house or usual place of business or otherwise
absent himself
iii) he secluded (to keep oneself away from contract with other people) himself
so as to deprive his creditors of the means of communicating with him.
(5). If any of his property has been sold or attached for a period of not less than
21 days in execution of the decree of any court for the payment of money.
(6). If he petitions to be adjudged an insolvent
(7). If he gives notice to any of his creditors that he has suspended, or that he is
about to suspend, payment of his debt.
(8). If he is imprisoned in execution of the decree of any court for the payment of
money.
(9). If a creditor has served an insolvency notice in respect of any decree or
order for payment of money, and if the debtor has not paid the money within the
period specified in notice. Debashis Saha, Lecturer, F & B,
242
243
What is the order of adjudication?

The order of court by which a person is
declared to be insolvent is called the Order of
adjudication.
Before the court can pass an order of
adjudication there must be a petition presented
to it either by a creditor or by the debtor. The
petitioning creditor or debtor must fulfill
244
certain conditions.
61

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Law

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Law & Legislation

Means the act or process of law making

The place where the law is made

Prepared by Parliament or Executive

Supreme legislation (eg:

What is The Law?

- A system of rules, usually enforced through a set

Debashis Saha, Lecturer,

According to Professor Holland:

A rule relating to the actions of human

Debashis Saha, Lecturer,

According to Sir William R. Anson:

Debashis Saha, Lecturer,

Is the legal principle that law should govern a

The concept of equality of all persons before

The Rule was summarized by Dicey : Rule of

Rule 2: Punishment subject to prove: No man is

(regulates the relationship

(applies to assets held for

Debashis Saha, Lecturer,

law eg: order, rule etc.)

(determines and govern

(discusses with the domestic

Public Law (determines

Procedural Law ( determines

claims for compensation

& regulates the organization and

Tort Law (allows

Debashis Saha, Lecturer,

Is a law which is passed by the parliament (Article 65)

The law which is promulgate by the President when the

A law which is promulgate by the president when there is

A law which shall mean a rule made in exercise of a power

A law which shall mean a regulation made by any person or

Is a rule of conduct which the governed observe spontaneously

The behavior of a particular society in respect of a particular

The judicial decision which is passed by the superior court and

Debashis Saha, Lecturer,

Means natural justice

Means the judge made law

Influences and moulds the law

Derives from jus civile of Roman law

Introduction to Commercial Law

Known as business law

Role of Law in Business

Debashis Saha, Lecturer,

Types of Law- Nature

Types of Legal Situations

Defines rights and

Ex: You may not

Ex: To challenge a traffic

How the Bangladesh judiciary

Debashis Saha, Lecturer,

1.Court of Chief Judicial Magistrate

Origin of the Contract Act,1872

Debashis Saha, Lecturer, F & B, Jahangirnagar University

Debashis Saha, Lecturer, F & B,

Other Definitions ( Sec 2)

Definition of Contract Act- 1872

Debashis Saha, Lecturer, F & B,

Offer(i.e. Proposal) [section 2(a)]:-When one person signifies to

Essential Elements of Contract

Other Definitions ( Sec 2)

Void contract :- A contract which ceases to be enforceable by Law