THE INDIAN CONTRACT
ACT, 1872 [9 of 1872, dt. 25-4-1872]
whereas it is expedient to define and amend
certain parts of the law relating to contracts;
It is hereby enacted as folloes:-
PRELIMINARY
1. Short title
This Act may be called the Indian Contract
Act, 1872.
Extent and commencement- It extends to the
whole of India 1[except the state of Jammu and Kashmir]; and it shall come into
force on the first day of September, 1972.
Enactments repealed-2[***] Nothing herein
contained shall affect the provisions of any statue, Act or regulation not
hereby expressly repealed, nor any usage or custom of trade, nor any incident
of any contract, not inconsistent with the provisions of this Act.
2. Interpretation clause
In this Act the following words and
expressions are used in the following senses, unless a contrary intention
appears from the context:
(a) When one person signifies to another his
willingness to do or to abstain from doing anything, with a view to obtaining
the assent of that order to such act or abstinence, he is said to make a
proposal;
(b) When the person to whom the [proposal is
made, signifies his assent thereto, the proposal is said to be accepted. A
proposal, when accepted, becomes a promise;
(c ) The person making the proposal is called
the " promisor", and the person accepting the proposal is called
" promisee";
(d) When, at the desire of the promisor, the
promisee or any other person has done or abstained from doing, or does or
abstains from doing, or promises to do or to abstain from doing, something,
such act or abstinence or promise is called a considereation for the promise;
(e) Every promise and every set of promises,
forming the consideration for each other, is an agreement;
(f) Promises which form the consideration or
part of the consideration for each other, are called reciprocal promises;
(g) An agreement not enforceable by law is
said to be void;
(h) An agreement enforceable by law is a
contract;
(i) An agreement which is enforceable by law
at the option of one or more of the parties thereto,
but not at the option of the other or others,
is a voidable contract;
(j) A contract which ceases to be enforceable
by law becomes void when it ceases to be enforceable.
COMMENTS
Sec. 2 (a) - When there is mere silence on the
part of offeree there is no acceptance of offer.- Ramji Daya Wala v. Invest
Import AIR 19781 SC 2085. There must be an absolute and unconditionable
acceptance of offer- Badri Prasad v. State AIR 1970 SC 706. Where ourchase
receives the goods, beyond stipulated date of delivery, he shall ,make the
payment for them, the contract shall be deemed to be subsisting at the time
goods are delivered.- Jain Mills & Electrical stores v. State AIR 1991 Ori
117. A tenderer can be excluded from being considered as a tenderer in case he
fails in the supply of required documents.- G. J. Fernandez v. State of Karnataka
AIR 1990 SC 958
Sec. 2(b) - mere acceptance of owner that he
is willing to accept the acquisition provided a lump-sum compensation is
provided to him is no more than offer. Nutakki Sesharatanam v. Sub Collector
Land cquisition AIR 1992 SC 131
Unless and until the printed terms on the
ticket become part of the contract cannot be given force for otherwise it will
amount to an alteration of the terms of original contract- Special Secretary to
Govt. of rajasthan v. V. Venkatarama AIR 1984 AP 5.
Sec. 2(c ) - Wher the plaintiff supplies the
goods to defendant firm and the defendant firm admits that the same were
received by it that the presumption is that an order is placed withbthe
plaintiff by the defendant firm.- K. M. Patil v. Firm M. Rahim AIR 1981 SC 977
Sec. 2(e) - In case there is an offer on the
part of the plaintiff to be bound by the settlement of the defendant, the
plaintiff cannot resile from such an offer upon the defendant agreeing to make
such settlement unless sufficient cause is shown satisfying the court allowing
a withdrawal of the offer.- Florable Skinner v BKM Ramlila Mandal AIR 1980 P
& H 284.
Section 2(h): Definition of Contract- It was
held that there was no contract because the parties did not intend that they
should be attended by legal consequences. The parties were living together, the
wife intending to return to Ceylon, ATKIN, L. J. said
" It would be the worst possible example
to hold that agreements such as this resulted in legal obligations which could
be enforced in the courts. It would mean that when a husband made his wife a
promise to give her an allowance of f 30, or 2 a week, whatever he could afford
to give her for the maintenance of the household and children, and she promised
so as to apply it, not only could she sue him for his failure in any week to
supply the allowance, but he could sue her non-performance of the obligations,
express or implied, which she has undertaken upon her part. The small courts of
this country would have to be multiplied one hundred fold these arrangements
did result in fact in legal obligations. They are not used upon, and the reason
that they are not used upon is not because the parties are reluctant to enforce
their legal rights when the arrangement is broken, but they are not sued upon
because the parties in the inception of the arrangement never intended that
they should be sued upon. Arrangement such as these, as I say, are are outside
the realm of contracts altogether."- Balfour v. Balfour(1918-19) All E 12
860 (C A)
CHAPTER 1 OF COMMUNICATION, ACCEPTANCE AND
REVOCATION OF PROPOSALS
3. Communication, acceptance and revocation of
proposals
The communication of proposals, the acceptance
of proposals, and the revocation of proposals and acceptances, respectively,
are deemed to be made by any act or omission of the party proposing, accepting
or revoking, by which he intends to communicate such proposal, acceptance or
revocation, or which has the effect of communicating it.
COMMENTS
When the tender is submitted that is in nature
of proposal or offer and unless the highest bid of tender is accepted and
communicated to him, there cannot be a concluded contract between the parties-
Exclusive Engineer v. Mohan Prasad AIR 1990 Ori 26
4. Communication when complete
The communication of a proposal is complete
when it comes to the knowledge of the person to whom it is made.
The communication of an acceptance is
complete-
as against the proposer, when it is put in a
course of transmission to him, so as to be out of the power of the acceptor; as
against the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is
complete,-
as against the person who makes it, when it
put into a course of transmission to the person to whom it is made, so as to be
out of the power of the person who makes it; as against the person to whom it
is made, when it comes to his knowledge.
Illustrations
(a) A proposes, by
letter, to sell a house to B at a certain price. The communication of the
proposal is complete when B receives the letter.
(b) B accepts A' s proposal by a letter sent
by post. The communication of the acceptance is complete- as against A, when
the letter is posted; as against B, when the letter is received by A.
(c ) A revokes his proposal by telegram
The revocation is complete as against A when
the telegram is despatched. It is complete as
against B when B receives it.
B revokes his acceptance by telegram. B's
revocation is complete as against B when the telegram is despatched, and as
against A when it reaches him.
COMMENTS
Notice Inviting Tenders (NIT) for design,
manufacture, erection, testing and commissioning of "Aerial Ropeway
System" for Bauxite nines in Orissa. Petitioner submitting tenders letter
of acceptance issued from Delhi. Subsequent disputes, petitions filed before
Delhi High Court for reference of dispute or arbitrator. Objection was raised
as to territorial jurisdiction. Once tenders accepted and acceptance
communicated to petitioner from New Delhi, courts in Delhi have jurisdiction,
as part of cause of action arises in Delhi.- Interstate Equipment (India)
Private Ltd. v. Bharat Aluminium Company Limited 2004 III AD (Delhi) 110
Revocation of proposals and acceptances
A proposal may be revoked at any time before
the communication of its acceptance is complete as against the proposer, but
not after wards.
An acceptance may be revoked at any time
before the communication of the acceptance is completely as against the
acceptor, but not after wards.
Illustration
A proposes, by a letter sent by port, to sell
his house to B
B accepts the proposal by a letter sent by
post.
A may revoke his proposal at any time before
or at the moment when B posts his letter of acceptance, but not after wards.
B may revoke his acceptance to any time before
or at the moment when the letter communicating it reaches A, but not after
wards.
COMMENTS
A sham transaction can also be treated as
voidable at the instance of some persons, - K. C. Nayak v. Lakshmidhar Nayak
AIR 1993 Ori 1
Petitioner highest Bidder in respect of plot.
Condition that the bid may be withdrawn at any time. Also subject to
confirmation by vice-chairman. Deposit as per terms made by petitioner. Bid
rejected due to plot auctioned did not belong to DDA. Present petition filed
for allotment of alternate plot. Contention of petitioner that bid had been
confirmed by vice chairman. Only communication was to be issued. Relief of
alternate plot given in similar cases. Contention of respondent that amount
refunded back with interest through not accepted by petitioner. There was no
concluded contract due to non-communication. Petitioner cannot seek specific relief
by way of proceedings. Held, reason for cancellation of bid; real and cogent.
Respondent learnt later that it had no title to land auctioned. Auction is only
an invitation to offer claim for alternate plot not found sustainable. However,
petitioner entitled to relief of compensation due to negligence of respondent.
Directions to refund the amount deposited with interest from the date of
deposit.
6. Revocation how made
A proposal is revoked-
(1) by the communication of notice of
revocation by the proposer to the other party;
(2) by the lapse of the time prescribed in
such proposal for its acceptance, or, if no time is so prescribed, by the lapse
of a reasonable time, without communication of the acceptance;
(3) by the failure of the acceptor to fulfil a
condition precedent to acceptance; or
(4) by the death or insanity of the proposer,
if the fact of the death or insnity comes to the knowledge of the acceptor
before acceptance.
7. Acceptance must be absolute
In order to convert a proposal into a promise,
the acceptance must-
(1) be absolute and unqualified;
(2) be expressed in some usual and reasonable
manner, unless the proposal prescribes the manner in which it is to be
accepted. If the proposal prescribes a manner in which it is to be accepted,
and the acceptance is not made in such a manner, the proposer may, within a
reasonable time after the acceptance is communicated ton him, insist that his
proposal shall be accepted in the prescribed manner, and not otherwise; but; if
he fails to do so, he accepts the acceptance.
8. Acceptance by performing conditions, or
receiving consideration
Performance of the conditions of a proposal,
or the acceptance of any consideration for a reciprocal promise which may be
offered with a proposal, is an acceptance of the proposal.
COMMENTS
Contract is concluded when the petitioner
agrees purchasing the house in dispute at the enhanced price mentioned in the
brochure and thereafter applies for allotment at the said price.- Shiv Pal
Kiran v. State of U. P. AIR 1988 All 268
9. Promises, express or implied
Insofar as the proposal or acceptance of any
promise is made in words, the promise is said to be express. Insofar as such
proposal or acceptance is made otherwise than in words, the promise is said to
be implied.
COMMENTS
Conditional offer made by the defendant for
submission of bid in response of notice of inviting tender bids. No concluded
contract comes into existence. Decree of Trial Court set aside.- Binani Metals
Ltd. v. Union of India 2004 (78) DRJ 264 (DB)
CHAPTER 11
OF CONTRACTS, VOIDABLE
CONTRACTS, AND VOID AGREEMENTS
10. What agreements are contracts
All arrangements are contracts if they are
made by the free consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not hereby expressly declared
to be void.
Nothing herein contained shall effect any law
in force in 1[India], and not hereby expressely repealed, by which any contract
is required to be made in writing2 or in the presence of witnesses, or any law
relating to the registration of documents.
COMMENTS
Where there is no specification as of rates of
items in the contract, the same has to be ascertained from the evidence before
the Court.- S A Jaish & Co. v. Gujarat Electricity Board AIR
1988 SC 254.
Where some statutory provision is breached
prior to the conclusion of a contract, petition under art, 226 may be moved so
as to compel the authorities confirming the statutory requirement.- Ashok Kumar
v. State of UP AIR 1989 All 109
11. Who are competent to contract
Every person is competent to contract who is
of the age of majority according to the law to which his subject3, and who is
of sound mind and is not disqualified from contracting by any law to which he
is subject.
COMMENTS
Transfer of Property Act, 1882- Sections 6,
122, 123, 126 & 127- Hindu Minority and Guardianship Act- Section 6:
Appellant, a minor on the date of execution of the gift-deed. Legal acceptance
of property gifted. Whether a minor can be held to have legally accepted the
property gifted to him and the gift deed is irrevocable? Gift-deed executed on
24-9-1945. Cancellation by deceased mother of gift under a deed dated 28-3 1970
will be executed on 28-3-1970 will be executed bequeathing same property in
favour of daughter, respondent No.1. Suit for declaration of title and
cancellation deed and will to be declared as void filed by appellant. No
prohibition in law the ownership in property cannot be gifted without its
possession and right of enjoyment. Under gift deed donor clearly transferred
ownership and title of the property. Minor not incapable of receiving property
can accept gifts without intervention of guardian or through him. Gift
intervivos to a child cannot be revoked presumption of acceptance i. e. Minor
in custody of mother. Donor if also the guardian of child in whose favor gift
is made presumption of acceptance on his behalf without over act of acceptance
of ownership by minor acceptance confirmed if not repudiated by parents till
attaining majority. No mention by donor of non-acceptance of gift by donee in
cancellation deed is no revocation of gift.
Acceptance can be implied if gift received by
minor from parents- K. Balakrishnan v. K. Kamalam 1004 I AD (SC) 377
12. What is a sound mind for the purposes of
contracting
A person is said to be of sound mind for the
purposes of making a contract, if, at the time when he makes, he is capable of
understanding it and of forming a rational judgement as to its effect upon his
interests.
A person who is usually of sound mind, but
occasionally of sound mind, may make a contract when he is of unsound mind.
Illustrations
(a) A patient in a lunatic asylum, who is at
intervals of sound mind, may contract during those intervals.
(b) A sane man, who is delirious from fever,
or who is so drunk that he cannot understand the terms of a contract, or form a
rational judgement as to its effect on his interests, cannot contract whilst
such delirium of drunkenness lasts.
13. " Consent" defined
Two or more persons are said to consent when
they agree upon the same thing in the same sense.
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 18.
or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section
18, or
(5) mistake, subject to the provisions of
sections 20, 21, and 22.
Consent is said to be so caused when it would
not have been given but for the existence of such coercion, under influence,
fraud, misrepresentation or mistake.
15. " Coercion" defined
" Coercion" is the committing, or
threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860)
or the lawful detaining, or threatening to detain, any property, to the
prejudice of any person whatever, with the intention of causing any person to
enter into an agreement.
Explanation: it is immaterial whether the
Indian Penal Code (45 of 1860) is or is not in force in the place where the
coercion is employed.
Illustrations
A, on board an English ship on the high seas,
causes B to enter into an agrrement by an act amounting to criminal
intimidation under the Indian Penal Code (45 of 1860).
A after wards sues b for breach of contract at
Calcutta.
A has employed coercion, although his act is
not an offence by the law of England, and although the section 506 of the
Indian Penal Code (45 of 1860) was not in force at the time when or at the
place where the act was done.
1[16. "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 and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the
generality of the foregoing principle, a person is deemed to be in a position
to dominate the will of the another-
(a) Where he holds a real or apparent
authority over the other, or where he stands in a fiduciary relation to the
other; or
(b) Where he makes a contract with a person
whose mental capacity is temporarily or permanently affected by reason of age,
illness, or mental or bodily distress.
(3) Where a person who is in a position to
dominate the will of the another, enters into a contract with him, and the
transaction appears, on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that such contract was not induced by
undue influence shall lie upon the person in a position to dominate the will of
the other.
Nothing in this sub-section shall affect the
provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872).
Illustrations
(a) A, having advanced money to his son, B,
during his minority, upon B`s coming of age obtains, by misuse of parental
influence, a bond from B for a greater amount than the sum due in respect of
the advance. A employs undue influence.
(b) A, a man enfeebled by disease of age, is
induced, by B's influence over him as his medical attendant, to agree to pay B
an unreasonable sum for his professional services. B employees undue influence.
(c) A, being in debt to B, the money lender of
his village, contracts a fresh loan on terms which appear to be unconscionable.
It lies on B to prove that the contract was not induced by undue influence.
(d) A applies to a banker for a loan at a time
when there is stringency in the money market. The banker declines to make the
loan except at an unusually high rate of interest. A accept the loan on these
terms. This is a transaction in the ordinary course of business, and the
contract is not induced by undue influence.]
17. "Fraud defined
"Fraud" means and includes any of
the following acts committed by a party to a contract, or with his connivance,
or by his agent2, with intend to deceive another part thereto or 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 to be true;
(2) the active concealment of a fact by one
having knowledge or belief of the fact;
(3) a promise made without any intention of
performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law
specially declares to be fraudulent.
explanation: Mere silence as to facts likely
to affect the willingness of a person to enter into a contract is not fraud,
unless the circumstances of the case are such that, regard being had to them,
it is the duty of the person keeping silence to speak1, or unless his silence
is, in itself, equivalent to speech.
Illustrations
A sells, by auction, to B, a horse
which A knows to be unsound. A says nothing to B about the horse's unsoundness.
This is not fraud in A.
(b) B is A's daughter and has just come of
age. Here the relation between the parties would make it A's duty to tell B if
the horse is unsound.
(c) B says to A- "if you do not deny it,
I shall assume that the horse is sound". A says nothing. Here, A's silence
is equivalent to speech.
(d) A and B, being traders, enter upon a
contract. A has private information of a change in prices which would affect
B's willingness to proceed with the contract. A is not bound to inform B.
COMMENT
Inference cannot be drawn of fraud from the
mere fact of the plaintiff being a lady, old and illiterate.- Hajra Bai v.
Jadav Bai AIR 1986 MP 106
18. "Misrepresentation" defined
(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
intend to deceive, gains an advantage to the person committing it, or any one
claiming under him; by misleading another to his prejudice, or to the prejudice
of any one claiming under him;
(3) causing, however innocently, a party to an
agreement, to make a mistake as to the substance of the thing which is the subject
of the agreement.
19. Voidability of agreements without fee
consent
When consent to an agreement is caused by
coercion, 2[***] fraud or misrepresentation, the agreement is a contract
voidable at the option of the party whose consent was so caused.
A part to a contract, whose consent was caused
by fraud or misrepresentation, may, if he thinks fit, insist that the contract
shall be performed, and he shall be put on the position in which would have
been if the representations made had been true.
Exception: If such consent was caused by the
misrepresentation or by silence, fraudulent within the meaning of section 17,,
the contract, neverthless, is not voidable, if the party whose consent was so
caused had the means of discovering the truth with the ordinary filigence.
Explanation: A fraud or misrepresentation
which did not cause the consent to a contract of the party on whom such fraud
was practised, or to whom such misrepresentation was made, does not render a
contract voidable.
(a) A, intending to deceive B, falsely
represents that five hundred maunds of indigo are made annually at A's factory,
and there by induces B to buy the factory. The contract is voidable at the
option of B.
(b) A by a misrepresentation, leads B
erroneously to believe that five hundred maunds of indigo are made annually at
A's factory. B examines the accounts of the factory, which show that only four
hundred maunds of indigo have been made. After this B buys the factory. The
contract is not voidable on account of A's misrepresentation.
(c ) A fraudulently informs B that A's estate
is free from encumbrance. B there upon buys the estate. The estate is subject
to a mortgage. B may either avoid the contract, or may insist on its being
carried out and the mortgage-debt redeemed.
(d) B, having discovered a vein of ore on the
estate of A, adopts means to conceal, and does conceal, the existence of the
ore from A. Though A's ignorance B is enabled to buy the estate at an
undervalue. The contract is voidable at the option of A.
(e) A is entitled to succeed to an estate at
the death of B; dies; C, having received intelligence of B's death, prevents
the intelligence reaching A, and thus induces A to sell him his interest in the
estate. The sale is voidable at the option of A.
COMMENTS
Misrepresentation would not ipso be a ground
to avoid the contract unless the securing of the court is through deception.-
Dhagwani Bai v. LIC India AIR 1984 MP 126
1[19A. Power to set aside contract induced by
undue influence
When consent to an agreement is caused by an
undue influence, the agreement is a contract voidable at the option of the
party whose consent was so caused.
Any such contract may be set aside either
absolutely, or, if the party who was entitled to avoid it has received any
benefit thereunder, upon such terms and conditions as to the court may seem
just.
Illustrations
(a) A's son has forged B's name to promissory
note. B under threat of persecuting A's son, obtains a bond from A for the
amount of the forged note. If B sues on this bond, the Court may set aside the
bond aside.
(b) A, a money lender, advances Rs. 100 to B,
an agriculturist, and, by undue influence induces B to execute a bond for
Rs.200 with interest at 6 per cent per month. The court may set the bond aside,
ordering B to repay Rs. 100 with such interest as may seem just.]
20. Agreement void where both parties are
under mistake as to matter of fact
Where both the parties to an agreement are
under a mistake as to a matter of fact essential to the agreement, the
agreement is void.
Explanation: An erroneous opinion as to the
value of the things which forms the subject- matter of the agreement, is not to
be deemed a mistake as to a matter of fact.
Illustrations
(a) A agrees to sell to B a specific cargo of
goods supposed to be on its way from England to Bombay. It turns out that,
before the day of the bargain, the ship conveying the cargo had been cast away
and the goods lost. Neither party was aware of the facts. The agreement is
void.
(b) A agrees to buy from B a certain horse. It
turns out that the horse was dead at the time of the bargain, though neither
party was aware of the fact. The agreement is void.
(c) a, being entitled to an estate of the life
of B, agrees to sell it to C. B was dead at the time of the agreement, but both
parties were ignorant of the fact. The agreement is void.
COMMENT
The mistake does not have any effect upon
assent unless the mistake is of both the parties and as to the existence of
same quality which makes the thing without the quality essentially different
from the thing it was believed to be.- ITC Ltd. v. George Joseph Fernandez AIR
1989 SC 839
21. Effect of mistakes as to law
A contract is not voidable because it was
caused by a mistake as to any law in force in 1[India];
but a mistake as to a law not in force in
1[India] has the same effect as a mistake of fact. 2[***]
Illustration
A and B make contract grounded on the
erroneous belief that a particular debt is barred by the Indian Law of
Limitation; the contract is not voidable.
3[***]
22. Contract caused by mistake of one party as
to matter of fact
A contract is not voidable merely because it
was caused by one of the parties to it being under a mistake as to a matter of
fact.
23. What considerations and objects are lawful
and what not
The consideration or object of an agreement is
lawful, unless-
it is forbidden by law;4 or
is of such a nature that, if permitted, it
would defeat the provisions of any law; or is fraudulent; or
involves or implies injury to the person or
property of another; or the Court regards it as immoral, or opposed to public
policy.
In each of these cases, the consideration or
object of an agreement is said to be unlawful. Every agreement of which the
object or consideration is lawful is void.
(a) A agrees to sell his house to B for 10,000
rupees. Here, B's promise to pay the sum of 10,000 rupees is the consideration
for A's promise to sell the house and A's promise to sell the house is the
consideration for B's promise to pay the 10,000 rupees. These are lawful
considerations.
(b) A promises to pay 10,000 rupees at the end
of six months, if C, who owes that sum to , fails to pay it. B promises to
grant time to C accordingly. Here, the promise of each party is the
consideration for the promise of the other party, and they are lawful
considerations.
(c) A promises, for a certain sum paid to him
by B, to make good to B the vale of his ship if it is wrecked on a certain
voyage. Here, A's promise is the consideration for B's payment is the
consideration for A's promise, and these are lawful considerations.
(d) A promises to maintain B's child, and B
promises to pay A 1,000 rupees yearly for the purpose. Here, the promise of
each party is the consideration for the promise of the other party. They are
lawful considerations.
(e) A, B and C enter into an agreement for the
division among them of gains acquired, or to be acquired, by them by fraud. The
agreement is void, as its object is unlawful.
(f) promises to obtain for B an employment in
the public service and B promises to pay 1,000 rupees to A. The agreement is
void, as the consideration for its lawful.
(g) a, being agent for a landed proprietor,
agrees for money, without the knowledge of his principal, to obtain for B a
lease of land belonging to his principal. The agreement between A and B is
void, as it implies a fraud by concealment, by A, on his principal.
(h) A promises B to drop a prosecution which
he has instituted against B for robbery, and B promises to restore the value of
the things taken. The agreement is void, as its object is unlawful.
(i) A's estate is sold for arrears of revenue
under the provisions of an Act of the Legislature, by which the defaulter is
prohebitted from purchasing the estate. B, upon an understanding with A,
becomes the purchase, and agrees to convey the estate to A upon
receiving from him the price which B has paid.
The agreement is void, as it renders the transaction, in effect, a purchase by
the defaulter, and would so defeat the object of the law.
(j) A, who is B's mukhtar, promise to exercise
his influence, as such, with B infaour of C, and C promises to pay 1,000 rupees
to A. The agreement is void, because it is immoral.
(k) A agrees to let her daughter to hire to B
for concubinage. The agreement is void, because it is immoral, though the
letting may not be punishable under the Indian Penal Code (45 of 1860).
COMMENTS
Mere possibility that the law would be
transgressed is no ground to treat the agreement as opposed to public policy.
To treat it as such it must be ex facie ikllegal or capable of being performed
only by unlawful means.- M. George v. M. Checho 1987 (1) KLT 392
The court would not entertain the suit where
the person realizes the amount pursuant to void agreement.- Sundra Gownder v.
Bala Chandra AIR 1991 Ker. 324
Where the land is transferred in the name of
the father as consideration for giving his married daughter, though there is no
divorce to another person such giving is for immoral purpose and against the
public policy.- Kamala Bai v. Arjun Singh AIR 1991 MP 275
One entering a contract with proper object
cannot enforce his rights thereunder.- ITC Ltd. v. G.J.Fernandez AIR 1989 SC
839
Legality of object consideration- The court
was of the opinion that the rule must be discharged. It said: " It is
settled law, that any person who contributes to the performance of and use for
that (immoral) purpose, cannot recover the proceeds of the things supplied. If,
to create that in capacity, it was ever considered necessary that the price
should be bargained or expected to be paid out of the fruits of the illegal act
that proposition has been overeruled by the cases and has now ceased to be law.
the rule which is applicable to the matter is ex turpi causa non oritur actio
and no cause of no action can arise."
It held that the jury were entitled to infer,
as they did, that the broughum was hired for the purpose of enabling the prostitute
defendant to pursue her calling, and that the plaintiff's knew it. It was
further observed that " it need not be part of the bargain that the
subject of the contract should be used unlawfully, but that is enough if it is
handed over for the [purpose that the borrower shall so apply it."
"If, therefore, this article was
furnished to the defendant for the purpose of enabling her to make a display
fovouable to immoral purpose, the plaintiff's can derive no cause of action
from the bargain."- Pearce v. Delhi Development Authority 2004 VI AD
(Delhi), 253; 108(03) DLT 392
MRTP Act, 1969, Sections 2, 4(1), 12B, 12B(1),
14, 33, 36A, 36A(1), 36B, 36D, 37 (1)- Jurisdiction of commission to entertain
the respondent's claim for compensation- Applicability of 'effect doctrine' -
Appellant carried on its business of manufacturing printing machines in Germany
was incorporated under German Law and has its registered office in Germany.
Printing machine sold to the respondent no. 1by the appellant. Unfair Trade
Practices enquiry applications filed by respondent No.1 against appellant and
respondent No.2 Appellant challenged the jurisdiction of the Commission on the
ground that parties had agreed that the applicable law in the event of any
dispute would be German Law and the Appellant neither provided any service nor
carried on any trade or trade practice in India for the purpose of the Act and
even the machine in question had been sold to the respondent No.1 outside
India. Remedies available under the Act are additional to the usual remedies
available under the Contract Act to the parties. Jurisdictional clause in the
contract would not apply to proceedings before the Commission. Objection to
jurisdiction can neither be taken by way of demurrer6 or raised as an issue in
the proceeding. Second objection to the jurisdiction of the Commission to be
determined on evidence. Commission would have to enquire into the question
whether the respondent No.2 was in fact involved in the capacity of the
appellant's agent as alleged by the respondent No.1 cannot be determined
without taking evidence. If so, the appellant may be said to carry on business
in India thus giving the Commission the necessary jurisdiction to determine the
respondent No.1's complaint. Appellant contented that the sale was completed in
Germany and the appellant was required to deliver he machine at Bombay Port
C.I.F. and that the property in the machine had passed from the appellant to
the respondent No. ! before the goods were imported by the respondent No. 1.
Contention of appellant pertains to the defence of the appellant on merits.
Commission erred in law when it held that would have jurisdiction because the
effect of the unfair trade practice would be in India. Merely because the
effect of an unfair trade practice is felt in India, this would not clothe the
Commission with jurisdiction unless the 'effect' is itself an 'unfair' trade
practice' within India. Commission directed to deal with the second aspect of
the preliminary objection on evidence- Man Roland Druckimachinen AG v.
Multicolour Offset Ltd 2004 V AD (S.C.) 614
24. Agreements void, if
considerations and objects unlawful in part
If any part of a single consideration for one
or more objects, or any one part of any one of several considerations for a
single object, is unlawful, the agreement is void.
Illustration
A promises to superintend, on behalf of B, a
legal manufacture of indigo, and an illegal traffic in another articles. B
promises to pay to A a salary 10,000 rupees a year. The agreement is void, the
object of A's promise, and the consideration for B's promise, being in part
unlawful.
COMMENT
In case of pre-existing civil liability, the
dropping of criminal proceedings need not necessarily be a consideration for
the agreement to satisfy that liability.- Union Carbide Corporation v. Union of
India AIR 1992 SC 248
25. Agreement void, if made without
consideration
Agreement without consideration, void, unless
it is in writing and registered or is a promise to compensate for something
done or is a promise to pay a debt barred by a limitation law.
An agreement made without consideration is
void-
(1) it is expressed in
writing and registered under the law for the time being in force for the
registration of 1[documents], and is made on account of natural love and
affection between parties standing in a near relation to each other; or unless
(2) it is a promise to compensate, wholly or
in part, a person who has already voluntarily don something for the promisor,
or something which the promisor was legally completable to do; or unless
(3) it is a promise, made in writing and
signed by the person to be charged therewith, or by his agent generally or
specially authorised in that behalf, to pay wholly or in a part of debt of
which the creditor might have enforced payment but for the law for the
limitation of suits.
In any of these cases, such an agreement is a
contract.
Explanation 1: Nothing in this section shall
affect the validity, as between the donor and donee, of any gift actaully made.
Explanation 2: An agreement to which the
consent of the promisor is freely given is not void merely because the
consideration may be taken into an account by the Court in determining the
question whether the consent of the promisor was freelt given.
Illustrations
(a) A promises, for no consideration, to give
to B Rs.1,000. this is a void agreement.
(b) A, for natural love and affection,
promises to give his son, B, Rs. 1,000. A puts his promise to B into writing
and registers it. This is a contract.
(c) A finds 's purse and gives it to him. B
promises to give A Rs.50. This is a contract.
(d) A supports B's infant son. B promises to
pay A's expenses in so doing. This is a contract.
(e) A owes B Rs. 1,000, but the debt is barred
by the Limitation Act. A signs written promise to pay B Rs. 500 on account of
the debt. This is a contract.
(f) A agrees to sell a horse worth Rs.1,000
for Rs. 10. A' s consent to the agreement was freely given. The agreement is a
contract notwithstanding the inadequacy of the consideration.
(g) A agrees to sell horse of worth Rs. 1,000
for Rs. 10. A denies that his consent to the agreement was freely given. The
inadequacy of the consideration is a fact which the court should take into
account into considering whether or not A's consent was freely given.
COMMENT
The balance sheet of the firm signed by a
partner stating that firm is liable to pay cretain amount, amounts to promise-
Suresh Chandra & Co. v. Vadnere Chemical Works AIR 1991 Bom.44
26. Agreement in restraint of marriage, void
Every agreement in restraint of the marriage
of any person, other than a minor, is void.
27. Agreement is restraint of trade, void
Every agreement by which anyone is restrained
from exercising a lawful profession, trade or business of any kind, is to that
extend void.
Exception 1: Saving of agreement not to carry
on business of which goodwill is sold- One who sells the goodwill of a business
may agree with the buyer to refrain the from carrying on a similar business,
within specified local limits, so long as the buyer, or any person delivering
title to the goodwill from him, carries on a like business therein, provided
that such limits appear to the court reasonable, regard being had to the nature
of the business. 1[***]
COMMENTS
Application for vocation of interim order by
the Respondent. Partnership deed contented that clause signed by the husband
cannot bind the wife or relative. If order opertaes against wife, there would
be restraint of trade as contemplated under section27 of Contract Act. It was
held that existence of a situation where inhibition against a contract imposing
restraint of trade could be attracted in cases of business rivalry other than
employment agreements. Further held contract neither unconscionable nor
excessively harsh or unreasonable. Application dismissed.- Jitender Singh
Chhbra v. Rajeev Taneja 2005 III AD (Delhi) 27
29. Agreements restraint of legal proceedings,
void
2[every agreement,-
(a) by which any part 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 part thereto from any liability, under or inspect 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.]
Exception 1: Saving of contract to refer to
arbitration dispute that may arise: his section shall not render illegal a
contract, by which two or more persons agree that any dispute which may arise
between them in respect of any subject or class of subjects shall be referred
to arbitration, and that only the amount awarded in such arbitration shall be
recoverable in respect of the dispute so referred. 1[* * ]
Exception 2: Saving of contract to refer
questions that have already arisen: Nor shall this section render illegal any
contract in writing, by which two or more persons agree to refer to arbitration
any question between them which has already arisen, or affect any provision of
any law in force for the time being as to references to arbitration2.
COMMENT
Where there is an agreement between the
parties to have their dispute settled in a particular forum, any other forum
while it has also territorial jurisdiction is precluded from entertaining a
suit.- Patel Roadways Pvt.Ltd. v. Republic Forge Co. AIR 1985 AP 387
C.P.C., Sections 20 and 115: Whether High
Court was correct holding that the Civil Court at Barnala had jurisdiction to
try the suit filed by the respondent No. 1. Material purchased by the plaintiff
No.2 booked with New Monga Transport Co.,defendant No.1 for transportation to
Barnala. Destruction of whole of the materials due to file, claim lodged
against plaintiff No. 1. Plaintiff No.1, United India Insurance o. Ltd. settled
the claim for a sum of Rs. 4,63,516/- on the basis of the surveyor's report.
Amount paid to plaintiff No.2. who executed a letter of subrogation-cum-special
power of attorney in favor of plaintiff No.1 who filed suit claiming
compensation from defendant No.1. Consignment note stating that court at
Udaipur alone to have jurisdiction. Defendant No.1 pleaded that court at
Barnala had no jurisdiction to deal with suit and that court at Udaipur alone
had jurisdiction to try suit and was open to parties to choose any one of two
competent courts to decide dispute. Once parties bound themselves by an
agreement, it is not open for them to choose a different jurisdiction. It is
not a case where chosen court did not have jurisdiction. High Court was not
justified in upsetting order of appellate court. Intention of the parties can
be culled out from use of the expressions "only", "alone", "exclusive"
and the like with reference to a particular court. Intention to exclude a
court's jurisdiction should be reflected in clear, unambiguous, explicit and
specific terms. First appellate court justified in holding that it was only
court at Udaipur which had jurisdiction to true the suit. Appeal, therefore,
allowed.- New Moga Transport Company )Through its proprietor Krishanlal
Jhanwar) v. United India Insurance Co.Ltd. 2004 V AD (S.C) 477
MRTP Act, 1969, Sections 2, 4(1), 12B, 12B(1),
14, 33, 36A, 36A(1), 36B, 36D, 37(1)- Jurisdiction of Commission to entertain
the respondents's claim for compensation- Applicability of 'effect doctrine'-
Appellant carried on its business of manufacturing printing machines in Germany
was incorporated under German Law and has its office in Germany. Printing
machine sold to the respondent No. 1 by the appellant. Unfair Trade Practices
enquiry applications filed by respondent No.1 against appellant and respondent
No.2. Appellant challenged the jurisdiction of the Commission on the ground that
parties had agreed that the applicable law in the event of the any dispute
would be German Law and the appellant neither provided any service nor carried
on any trade or trade practice in India for the purpose of the
Act and even the machine in question had been
sold to the respondent No.1 outside India. Remedies available under the Act are
additional to the usual remedies available under the Contract Act to the
parties. Jurisdiction clause in the contract would not apply to proceedings
before the Commission. Objection to jurisdiction can neither be taken by way of
demurrer or raised as an issue in the proceeding. Second objection to the
jurisdiction of the Commission to be determined on evidence. Commission would
have to enquire into the question whether the respondent No.2. was in fact
involved in the capacity of the appellant's agent as alleged by the respondent
No.1 cannot be determined without taking evidence. If so, the appellant may be
said to carry on business in India thus giving the Commission the necessary
jurisdiction to determine the respondent No.1's complaint. Appellant contented
that the sale was completed in Germany and the appellant was required to
deliver the machine in Bomaby Port C.I.F. and that the properly in the machine
had passed from the appellant to the respondent No. before the goods are
imported by the respondent No.1. Contention of appellant pertains to the
defence of the appellant on merits. Commission erred in law when it held that
it would have jurisdiction because the effect of the unfair trade practice
would be in India. Merely the effect of an unfair trade practice is felt in
India, this would not clothe the commission with jurisdiction unless the
'effect' is itself an 'unfair trade practice' within India. Commission directed
to deal with the second aspect of the preliminary objection on evidence- Man
Roland Druckimachinen AG v. Multicolour Offset Ltd 2004 V AD (S.C.) 614
29. Agreements void for uncertainty
Agreements, the meaning of which is not
certain, or capable of being made certain, are void.
Illustrations
(a) A agrees to sell B " a hundred tons
of oil". There is nothing whatever to show what kind of oil was intended.
The agreement is void for uncertainity.
(b) A agrees to sell B 100 tons of oil of a
specified description, known as an article of commerce. There is no
uncertainity here to make the agreement void.
(c ) A, who is dealer in coconut oil only,
agrees to sell B "100 tins of oil". The nature of A's trade affords
an indication of the meaning of the words, and A has entered into a contract
for the sale of one hundred tons of coconut oil.
(d) A, agrees to sell B " all the grain
in my granary at Ramnagar". There is no uncertainity here to make the
agreement void.
(e) A agrees to sell to B "1000 maunds of
rice at a price to be fixed by C". As the price capable of being made
certain, there is no uncertainity here to make the agreement void.
(f) A agrees to sell to B " my white
horse for rupees five hundred or rupees one thousand". There is nothing to
show which of the two prices was to be given. The agreement is void.
30. Agreements by way of wager, void
Agreements by way of wager are void; and no
suit shall be brought for recovering anything alleged to be won on any wager,
or entrusted to a person to abide the result of any game or other uncertain
event on which any wager is made.
Exception in favor of certain prizes for
horse-raising: This section shall not be deemed to render unlawful a
subscription or contribution, or agreement to subscribe or contribute, made or
entered into for or toward any plate, prize or sum of money, of the value or
amount of five hundred rupees or upwards, to be rewarded to the winner or
winners of any horse-race.
Section 294A of the Indian Penal Code not
affected : Nothing in this section shall be deemed to legalize any transaction
connected with horse-racing, to which the provisions of section 294A of the
Indian Penal Code (45 of 1860) apply.
CHAPTER 111
OF CONTINGENT CONTRACTS
31. "Contingent contract" defined
A "contingent contract" is a
contract to do or not to do some thing, if some event, collateral to such
contract, does or does not happen.
Illustration
A contracts to pay to B Rs. 10,000 if B's
house is burnt. This is a contingent contract.
32. Enforcement of contracts contingent on an
event happening
Contingent contract to do or not to do
anything if an uncertain future event happens cannot be enforced by law unless
and until that event has happened.
If the event becomes impossible, such
contracts become void.
Illustrations
(a) a makes a contract with B to buy B's horse
if A survives C. This contract cannot be enforced by the law unless and until C
dies in A's lifetime.
(b) A makes a contract with b to sell a horse
to B at a specified price, if C, to whom the horse has been offered, refuses to
buy him. The contract cannot be enforced by law unless and until C refuses to
buy the horse.
(c) A contracts to pay b a sum of money when B
marries C. C dies without being married to B. The contract becomes void.
33. Enforcement of contracts contingent on an
event not happening
Contingent contracts to do or not to do
anything if an uncertain future event does not happen can be enforced when the
happening of that event becomes impossible, and not before.
Illustration
A agrees to pay B a sum of money if a certain
ship does not return. The ship is sunk. The contract can be enforced when the
ship sinks.
34. When event on which contract is contingent
to be deemed impossible, if it is the future conduct of a living person
If the future event on which a contract is
contingent is the way in which a person will act at an unspecified time, the
event shall be considered to become impossible when such person does anything
which renders it impossible that he should so act within any definite time, or
otherwise than under further contingencies.
Illustrations
A agrees to pay B a sum of money if B marries
C. C marries D. The marriage of B to c must now be considered impossible,
although it is possible that D may die and that C may after wards marry B.
35. When contracts become void, which are
contingent on happening of specified event within fixed time, become void. if,
at the expiration of the time fixed, such event has not happened, or if, before
the time fixed, such event becomes impossible.
When contracts may be enforced, which are
contingent on specified event not happening within fixed time : Contingent
contract to do or not to do anything, if a specified uncertain event does not
happen within a fixed time, may be enforced by law when the time fixed has
expired and such event has not happened, or before the time fixed has expired,
if it become certain that such event will not happen.
Illustrations
(a) A promises to pay B a sum of money if a
certain ship returns within a year. The contract may be enforced if the ship
returns within the year; and becomes void if the ship is burnt within the year.
(b) A promises to pay B a sum of money if a
certain ship does not return within a year. The contract may be enforced if the
ship does not return within a year, or is burnt within the year.
36. Agreements contingent on impossible
events, void
Contingent agreements to do or not to do
anything, if an impossible event happens, are void, whether the impossibility
of the event is known or not to the parties to the agreement at the time when
it is made.
Illustration
(a) A agrees to pay B 1,000 rupees if two
straight lines should enclose a space. The agreement is void.
(b) A agrees to pay B 1,000 rupees if B will
marry A's daughter C. C was dead at the time of the agreement. The agreement is
void.
CHAPTER IV OF THE PERFORMANCE OF CONTRACTS
WHICH MUST BE PERFORMED
37. Obligations of parties to contracts
The parties to a contract must either perform,
or offer to perform, their respective promises, unless such performance is
dispensed with or excused under the provisions of this Act, or of any other
law.
Promises bind the
representatives of the promisors in case of the death such promisors before the
performance, unless a contrary intention appears from the contract.
Illustrations
(a) A promises to deliver goods to B on a
certain day on payment of Rs. 1,000. A dies before that day. A's
representatives are bound ton deliver the goods to B, and b is bound to pay Rs.
1,000 to A's representatives.
(b) A promises to paint a picture for B by a
certain day, at a certain price. A dies before the day. The contract cannot be
enforced either by A's representatives or by B.
38. Effect of refusal to accept offer of
performance
where a promisor has made an offer of
performance to the promisee, and the offer has not been accepted, the promisor
is not responsible for non-performance; nor does he thereby lose his rights
under the contract.
Every such offer must fullfil the following
conditions-
(1) it must be unconditional ;
(2) it must be made at a proper time and
place, and under such circumstances that the person to whom it is made may have
a reasonable opportunity of ascertaining that the person by whom it is made is
able and willing there and then to do the whole of what he is bound by his
promise to do;
(3) if the offer is an offer to deliver
anything to the promisee, the promisee must have a reasonable opportunity of
seeing that the thing offered is the thing which the promisor is bound by his
promise to deliver.
An offer to one of several joint promisees has
the same legal consequences as an offer to all of them.
Illustration
A contracts to deliver to B at his warehouse,
on the first March, 1873, 100 bales of cotton of a particular quality. In order
to make an offer of performance with the effect stated in this section, A must
bring the cotton to B's warehouse, on the appointed day, under such
circumstances that B may have a reasonable opportunity of satisfying himself
that the thing offered is cotton of the quality contracted for, and that there
are 100 bales.
39. Effect of refusal of
party to perform promise wholly When a party to a contract has refused to
perform, or disabled himself from performing his promise in its entirely, the
promisee may put an end to the contract, unless he has signified, by words or
conduct, his acquiescence in its continuance.
Illustrations
(a) A, a signer, enters into a contract with
B, the manager of a theatre, to sing at his theatre twi nights in every week
during next two months, and B engages to pay her 100 rupees for each night's
performance. On the sixth night A wilfully absents herself from the theatre. B
is at liberty to put an end to the contract..
(b) A, a signer, enters into a contract with
B, the manager of a theatre, to sing at his theatre two nights in every week
during next two months, and B engages to pay her at the rate of 100 rupees for
each night. On the sixth night A wilfully absents herself. With the assent of
B, A signs on the seventh night. B has signified his acquiescence in the
continuance of the contract, and cannot now put an end to it, but it is
entitled to compensation for the damages sustained by him through A's failure
to sing on the sixth night.
BY WHOM CONTRACTS MUST BE PERFORMED
40. Person by whom promise is to be performed
If it appears from the nature of the case that
it was the intention of the parties to any contract that any promise contained
in it should be performed by the promisor himself, such promise must be performed
by the promisor. In other cases, the promisor or his representatives may employ
a competent person to perform it.
Illustrations
(a) A promises to pay b a sum of money. A may
perform this promise, either by personally paying the money to B, or by causing
it to be paid to B by another; and if, if A dies before the time appointed for
payment, his representatives must perform the promise, or employ some proper
person to do so.
(b) A promises to paint a picture of B. A must
perform this promise personally.
41. Effect of accepting performance from third
person
When a promisee accept performance of the
promise from a third person, he cannot afterwards enforce it against the
promisor.
42. Devolution of joint liabilities
When two or more persons have made a joint
promise, then, unless a contrary intention appears by the contract, all such
persons, during their joint lives, and after the death of any of them, his
representative jointly with the survivor or survivors, and after the death of
the last survivor, the representatives of all jointly, must fulfill the
promise.
43. Any one of joint promisors may be
compelled to perform
When two or more persons make a joint promise,
the promise may, in the absence of express agreement to the contrary, compel
any one or more of such joint promisors to perform the whole promise.
Each promisor may compel contribution: Each of
tow 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 loss by default in contribution: If
any one of two or more joint promisors makes default in such contribution, the
remaining joint promisors must bear the loss arising from such default in equal
shares.
Explanation : Nothing in this section shall
prevent a surety from recovering from his principal, payments made by the
surety on behalf of the principal, or entitle the principal to recover anything
from the surety on account of payments made by be principal.
Illustrations
(a) A, B and C jointly promise to pay D 3,000
rupees, D may compel either A or B or C to pay him 3,000 rupees.
(b) A, B and C jointly promise to pay D the
sum of 3,000 rupees. C is compelled to pay the whole. A is involvent, but his
assets are sufficient to pay one-half of his debts, C is entitled to receive
500 rupees from A's estate, and 2,500 rupees from B.
(c) A, B and C are under a joint promise to
pay D 3,000 rupees. C is unable to pay anything and A is compelled to pay the
whole. a is entitled to receive 1,500 rupees from B.
(d) A, B and C are under a joint promise to
pay D 3,000 rupees. A and B being only sureties for C. C fails to pay. A and B
are compelled to pay the whole sum. They are entitled to recover it from C.
44. Effect of release of one joint promisor
Where two or more persons have made a joint
promise, a release of one of such joint promisors by the promisee does nt
discharge the other joint promisor or joint promisors, neither does it free the
joint promisors or released from responsibility to the other joint promisor or
joint promisors.
45. Devolution of joint rights
When a person has made a promise to two or
more persons jointly, then, unless 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 one of them, with
the representative of such deceased person jointly with the survivor or
survivors, and, after the death of the last survivor, with the representatives
of all jointly.
Illustration
A, in consideration of 5,000 rupees, lent to
him by B and C, promises B and C jointly to repay them last sum with interest
on a day specified. B dies. The right to claim performance rests with B's
representative jointly with C's life; and, after the death of C, with the representatives
of B and C jointly.
TIME AND PLACE FOR PERFORMANCE
46. Time for performance of promise, where no
application is to be made and no time is specified
Where, by the contract, a promisor is to
perform his promise without application by the promisee, and no time for
performance is specified, the engagement must be performed within a reasonable
time.
Explanation : The question " what is
reasonable time" is, in each particular case, a question of fact.
47. Time and place for performance of promise,
where time is specified and no application to be made
When a promise is to be performed on a certain
day, and the promisor has undertaken to perform it without the application by
the promisee, the promisor may perform it at any time during the usual hours of
business om such day and at the place at which the promise ought to be
performed.
Illustration
A promises to deliver goods at B's warehouse
on first January. On that day A brings the goods to B's warehouse, but after
the usual hour of closing it, and they are not received. A has not performed
his promise.
48. Application for
performance on certain day to be at proper time and place
When a promise is to be performed on a certain
day, and the promisor has not undertaken to perform it without application by
the promisee, it is the duty of the promisee to apply for the performance at a
proper place and within the usual hours of business
Explanation : The question "what is
proper time and place" is, in each particular case, a question of fact.
49. Place for the performance of promise,
where no application to be made and no place fixed for performance
When a promise is to be
performed without application by the promisee, and no place is fixed for the
performance of it, it is the duty of the promisor to apply to the promisee to
appoint a reasonable place for the performance of the promise, and to perform
it at such a place.
Illustration
A undertake to deliver a
thousand maunds of jute to B on a fixed day. A must apply to B to appoint a reasonable
place for the purpose of receiving it, and must deliver it to him at such
place.
50. Performance in manner
or at time prescribed or sanctioned by promisee
The performance of any
promise may be made in any manner, or at any time which the promisee prescribe
or sanctions.
Illustrations
(a) B owes A 2,000
rupees. A desires B to pay the amount to A's account with C, a banker. B, who
also banks with c, orders to be transferred from his account to A's credit and
this is done by C. After wards, and before A knows of the the transfer, fails.
There has been a good payment by B.
(b) A and B are mutually
indebted. A and B settled an account by setting off one item against another,
and B pays the balance found to be due from him upon such settlement. This
amounts to a payment by A and B, respectively, if the sums which they owed to
each other.
(c ) A owes B 2,000
rupees. B accepts some of A's goods in deduction of the debt. The delivery of
the gods operates as a part payment.
(d) A desires B, who owes
him Rs.100, to send him a note for Rs. 100 by post. the debt is discharged as
soon as B puts into the post a letter containing the note duly addressed to A.
PERFORMANCE OF RECIPROCAL
PROMISES
51. Promisor not bound to
perform, unless reciprocal promisee and ready willing to perform
When a contract consists
of reciprocal promises to be simultaneously performed, no promisor need perform
his promise unless thye promisee is ready and willing to perform his reciprocal
promise.
Illustrations
(a) A and B contract that
A shall deliver goods to B to be paid for by B on delivery.
A need not deliver the
goods, unless B is ready and willing to pay for the goods on delivery.
B need not pay for the
gods, unless A is ready and willing to deliver them on payment.
(b) A and B contract that
A shall goods to B at a price to be paid by installments, the installment to be
paid on delivery.
A need not deliver,
unless B is ready and willing to pay the first installment on delivery.
B need not pay the first installment, unless A
is ready and willing to deliver the goods on payment of the first installment.
52. Order of performance
of reciprocal promises
Where the order in which
the 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 transaction requires.
Illustrations
(a) A and B contract that
A shall build a house for Bat a fixed price. A's promise to build the house
must be performed before B's promise to pay for it.
(b) A and B contract that
A shall make over his stock-in-trade to B a fixed price, and b promises to give
security for the payment of the money. A's promsie need not to be performed
until the security is given, for the nature of the transaction rrequires that A
should have security before he delivers up his stock.
53. Liability of party
preventing event on which contract is to take effect
When a contract contains
reciprocal promises, and one party to the contract prevents the other
performing his promise, the contract becomes voidable at they option of the
party so prevented; and he is entitled to compensation1 from the other party
for any loss which he may sustain in consequence of the non-performance of the
contract.
Illustration
A and B contract that B
shall execute some work for A 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, if he elects to rescind it, he is entitled
to recover from A compensation for any loss which he has incurred by its
non-performance.
54. effect of default as
to the promise which should be performed, in contract consisting or reciprocal
promises
When a contract consists
of reciprocal promises, such that one of them cannot be performed, or that its
performance cannot be claimed till the other has been performed, and the
promisor of the promise last mentioned fails to perform it, such promisor
cannot claim the performance of the reciprocal promise, and must make
compensation to the other party to the contract for any loss which such other
party may sustain by the non-performance of the contract.
Illustrations
(a) A hires B's ship to
take in and convey, from Calcutta to 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 take
compensation to B for the loss which B sustains by the non-performance of the
contract.
(b) A contracts with B to
execute certain builder's work for a fixed price, B supplying the scaffolding
and timber necessary for the work. B refuses to furnish any scaffolding or
timber, and the work cannot be executed. A need not execute the work, and B is
bound to make compensation to A for any loss caused to him by non-performance
of the contract.
(c ) A contracts with B
to deliver to him, at a specified price, certain merchandise on board a ship
which cannot arrive for a month, and B engages to pay for the merchandise
within a week from the date of the contract. B does not pay within the week.
A's promise to deliver need not
be performed, and N must
make compensation.
(d) A promises B to sell
him one hundred bales of merchandise, to be delivered next day, and B promises
A to pay for them within a month. A does not deliver according to his promise.
B's promises to pay need not be performed, and A must make compensation.
55. Effect of failure to
perform at fixed time, in contract in which time is essential
When a party to a
contract promises to do a certain thing at or before a specified time, or
certain things at or before specified times, and fails to do any such thing at
or before the specified time, the contract, or so much of it has not been
performed, becomes voidable at the option of the promisee, if the intention of
the parties was that time should be of the essence of the contract.
Effect of such failure
when time not essential : If it was not the intention of the parties that time
should be of the essence of thecontract, the contract does not become voidable
by the failure to do such thing at or before the specified time; but the
promisee is entitled to compensation from the promisor for any loss occasioned
to him bu such failure.
Effect of acceptance of
performance at time other that that agreed upon : If, in case of a contract
voidable on account of the promisor's failure to perform his promise at the
time agreed, the promisee accepts performance of such promise at any time other
that that agreed, the promisee cannot claim compensation of any loss
occassioned by the non-performance of the promise at the time agreed, unless,
at the time of such acceptance, he gives notice to the promisor of his
iintention to do so1.
56. Agreement to do
impossible act
An agreement to do an act
impossible in itself is void.
Contract to do act after
wards becoming impossible or unlawful : A contract to do an act which, after
the contract is made, become impossible, or, by reason of some event which the
promisor could not prevent, unlawful, becomes void when the act becomes
impossible or unlawful2.
Compensation for loss
through non-performance of act known to be impossible or unlawful : Where one
person has promised to be something which he knew, or, with reasonable
diligence, might have known, and which the promisee did not know to be
impossible or unlawful, such promisor must make compensation to such promisee
for any loss which such promisee sustains through the non-performance of the
promise.
(a) A agrees with B to
discover treasure by magic. the agreement is void.
(b) A and B contract to
marry each other. Before the time fixed for the marriage, A goes mad. The
contract becomes void.
(c ) A contracts to marry
B, being already married to C, and being forbidden by the law to which he is
subject to practice polygamy. A must make compensation to B for the loss caused
to her by the non-performance of his promise.
(d) A contracts to take
in cargo for B at a foreign port. A's Government after wards declares war
against the country in
which the port is situated. the contract becomes void when war is declared.
(e) A contracts to act at
a theatre for six months in a consideration of a sum paid in advance by B. On
several occasions A is too ill to act. the contract to act on those occasions
becomes void.
57. Reciprocal promises
to do things legal, and also other things illegal
Where persons
reciprocally promise, firstly, to do certain things which are legal, and,
secondly, under specified circumstance, to do certain other things which are
illegal, the first set of promise is a contract, but the second is a void
agreement.
Illustration
A and B agree that A
shall sell B a house for 10,000 rupees, but that, if B uses it as a gambling
house, he shall pay A 50,000 rupees for it.
The first set of
reciprocal promises. namely, to sell the house and to pay 10,000 rupees for it,
is a contract.
The second set is for an
unlawful object, namely, that B may use the house as a gambling house, and is
void agreement.
58. Alternative promise,
one branch being illegal
In the case of an
alternative promise, one branch of which is legal and the other illegal, the
legal branch alone can be enforced.
Illustration
A and B agree that shall
pay B 1,000 rupees, for which B shall after wards deliver to A either rice or
smuggled opium.
This is a valid contract
to deliver rice, and a void agreement as to the opium .
APPROPRIATION OF PAYMENTS
59. Application of
payment where debt to be discharged is indicated
Where a debtor, owing
several distinct debts to one person, makes a payment to him, either with
express intimation, or under circumstance implying that the payment is to be
applied to the discharge of some particular debt, the payment, if accepted,
must be applied accordingly.
Illustrations
(a) A owes B, among other
debts, 1,000 rupees upon a promissory note, which falls due on the first June.
He owes B no other debt of the amount. On the first June, A pays to B 1,000
rupees. The payment is to be applied to the discharge of the promissory note.
(b) A owes to B, among
other debts, the sum of 567 rupees. B writes to A and demands payment
of this sum. A sends to B 567 rupees. This
payment is to be applied to the discharge of the debt of which B had demanded
payment.
60. Application of
payment where debt to be discharged is not indicated
here the debtor has
omitted to intimate, and there are no other circumstances indicating to which
debt the payment is to be applied, the creditor may apply it at his discretion
to anu lawful debt actually due and payable to him from the debtor, whether its
recovery is or is not barred by the law in force for the time being as to the
limitation of suits.
61. Application of
payment where neither party appropriates
Where neither party makes
any appropriation, the payment shall be applied in discharge of the debts in
order of time, whether they are or are not barred by the law in force for the
time being as to the limitations of suits. if the debts are of equal standing,
the payment shall be applied in discharge of each proportion ably.
CONTRACTS WHICH NEED NOT
BE PERFORMED
62. Effect of novation,
rescission and alteration of contract
If the parties to a
contract agree to substitute a new contract for it, or to rescind or alter it,
the original contract need not be performed.
Illustrations
(a) A owes money to B
under a contract. It is agreed between A, B and C that B shall thenceforth
accepts C as his debtor, instead of A. The old debt of A to B is at an end, and
a new debt from C to B has been contracted.
(b) A owes B 10,000
rupees. A enters into an agreement with B, and gives B a mortgage of his (A's)
estate for 5,000 rupees in place of the debt of 10,000 rupees. B orders A to
credit C with 1,000 rupees in his books, but C does not assent to the
arrangement. B still owes C 1,000 rupees, and no new contract has been entered
into.
63. Promisee may dispense
with or remit performance of promise
Every promisee may
dispense with or remit. wholly or in part, the performance of the promise made
to him, or may extend the time for such performance, or may accept instead of
it any satisfaction which he thinks fit.
Illustrations
(a) A promises to paint a
picture for B. B after wards forbids him to do so. A is no longer bound to perform
the promise.
(b) A owes B 5,000
rupees. A pays to B, and B accepts, in satisfaction of the whole debt, 2,000
rupees paid at the time and place at which the 5,000 rupees were payable. The
whole debt is discharged.
(c ) A owes B 5,000
rupees, C pays to B 1,000 rupees, and B accepts them, in satisfaction of his
claim on A. This payment is a discharge of the whole claim2.
(d) A owes B, under ac
contract, a sum of money, the amount of which has not been ascertained. A,
without ascertaining the amount, gives to B, and B, in satisfaction thereof
accepts, the sum of 2,000 rupees. This is a discharge of the whole debt,
whatever may be its amount.
(e) A owes B 2,000
rupees, and is also indebted to other creditors. A makes an arrangement with
his creditors including B, to pay them a 3[composition] of eight annas in the
rupee upon their respective demands. payments to B of 1,000 rupees is a
discharge of B's demand.
64. Consequences of
rescission of a voidable contract
When a person at whose
option a contract is voidable rescinds it, the other party thereto need to
perform any promise therein contained in which he is promisor. The party
rescinding a voidable contracat shall, if he has received any benefit there
under from another party to such contract, restore such benefit, so far as may
be, to the person from whom it was received4.
65. Obligation of the
person who has received advantage under void agreement or contract that becomes
void
When an agreement is
discovered to be void, or when a contract becomes void, any person who has
received any advantage under such agreement or contract is bound to restore it,
or to make compensation for it, to the person from whom he received it.
Illustrations
(a) A pays B 1,000
rupees, in consideration of B's promising to marry C, A's daughter. C is dead
at the time of promise. The agreement is void, but B must repay A the 1,000
rupees.
(b) A contracts with B to
deliver to him 250 maunds of rice before the forst of May. A delivers 130
maunds only before that day, and none after. B retains the 130 maunds after the
first day of May. He is bound to pay A for them.
(c ) a, a signer,
contracts with B, the manager of a theatre, to sing at his theatre for two
nights in every week during the next two moths, and B engages to pay her
hundred rupees for each night's performance. On the sixth night, A wilfully
absents herself from the theatre, and B, in consequence, rescinds the contract.
B must pay A for the five nights on which she had sung.
(d) A contracts to sing
for b at a concert for 1,000 rupees, which are paid in advance. A is too ill to
sing. A is not bound to make compensation to B for the loss of profit which B
would have made if A had been able to sing, but must refund to B the 1,000
rupees paid in advance.
66. Mode of communicating
or revoking rescission of voidable contract
The rescission of a
voidable contract may be communicated or revoked in the same manner, and
subject to the same rules, as apply to the communication or revocation of the
proposal1.
67. Effect of neglect of
promisee to afford promisor reasonable facilities for performance
If any promisee neglects
or refuses to afford the promisor reasonable facilities for the performance of
his promise, the promisor is excused by such neglect or refusal as to any
non-performance caused thereby.
Illustration
A contracts with B to
repair B's house.
B neglects or refuses to
point out to A the places in which his house requires repair.
A is excused for the
non-performance of the contract, if it is caused by such neglect or refusal.
CHAPTER V OF CERTAIN
RELATIONS RESEMBLING THOSE CREATED BY CONTRACT
68. Claim for necessaries
supplied to person incapable of contracting, or on his account
If a person, incapable of
entering into a contract, or anyone whom he is legally bound to support, is
supplied by another person with necessaries suited to his condition in life,
the person who has furnished such supplies is entitled to be reimbursed from
the property of such incapable person2.
(a) A supplies B, a
lunatic, with necessaries suitable to his condition in life. A is entitled to
be reimbursed from B's property.
(b) A supplies the wife
and and children of B, a lunatic, with necessaries suitable to their condition
in life. A is entitled to be reimbursed by the other.
69. Reimbursement of
person paying money due by another, in payment of which hr is interested
A person who is
interested in the payment of the money which another is bound bu law to pay, and
who therefore pays it, is entitled to be reimbursed by the other.
Illustration
B holds land in Bengal,
on a lease granted by A, the zamindar. The revenue payable by A to the
government being in arrears, his land is advertised for sale by the government.
Under the revenue law, the consequence of such sale will be the annulment of
B's lease. B to prevent the sale and the consequent annulment of his one lease,
pays to the government the sum due from A. A is bound to make good to B the
amount so paid.
70. Obligation of person
enjoying benefit of non-gratuitous act
Where a person lawfully
does anything for another person, or delivers anything to him, not intending to
do so gratuitously, and such another person enjoys the benefit thereof, the
latter is bound to make compensation to the former in respect of, or to
restore, the thing so done or delivered1.
Illustrations
(a) A, tradesman, leaves
goods at B's house by mistake. B treats the goods as his own. He is bound to
pay A for them.
(b) A saves B's property
from fire. A is not entitled to compensation from B, if circumstances show that
he intended to act gratuitously.
71. Responsibility of
finder of goods
A person who finds goods
belonging to another, and takes them into his custody, is subject to the same
responsibility as a bailee1.
72. Liability of person
yo whom money is paid, or thing delivered by mistake or under coercion
A person to whom money
has been paid, or anything delivered, by mistake or under coercion, must repay
or return it.
Illustrations
(a) A and B jointly owe
100 rupees to C. A alone pays the amount to C, and B, not knowing of this fact,
pays 100 rupees over again to C. C is bound to repay the amount to B.
(b) A railway company
refuses to deliver up certain goods to the consignee, except upon the payment
of an illegal charge for carriage. the consignee pays the sum charged in order
to obtain the goods. He is entitled to recover so much of the charge as was
illegally excessive.
CHAPTER VI OF THE
CONSEQUENCES OF BREACH OF CONTRACT
73. Compensation of loss
or damage caused by breach of contract
When a contract has been
broken, the party who suffers by such breach is entitled to receive, from the
party who has broken the contract, compensation for any loss or damage caused
to him thereby, which naturally arose in the usual course of things from such
breach, or which the parties knew, when they made the contract, to be likely to
result from the breach of it.
Such compensation is not
to be given for any remote and indirect loss or damage sustained by reason of
the breach.
Compensation for failure
to discharge obligation resembling those created by contract : When an
obligation resembling those created by contract has been incurred and has not
been discharged, any person injured by the failure to discharge it is entitled
to receive the same compensation from the party in default, as if such person
had contracted to discharge it h ad had broken his contract.
Explanation : In
estimating the loss or damage arising from a breach of contract, the means
which exited of remedying the inconvenience caused by non-performance of the
contract must be taken into account.
Illustrations
(a) A contracts to sell
and deliver 50 maunds of saltpetre to B, at a certain price to be paid on
delivery. A breaks his promise. B is entitled to receive from A, by way of
compensation, the sum, if any, by which the contract price falls short of the
price for which B might have obtained 50 maunds of saltpetre of like quality at
the time when the saltpetre out to have been delivered.
(b) A hires B's ship to
go to Bombay, and there takes on board on the first of January, a cargo, which
A is to provide, and to bring it to Calcutta, the freight to be paid when
earned. B's ship does not go to Bombay, bur A has opportunities for procuring
suitable conveyance for the cargo upon terms as advantageous as those on which
he had chartered the ship. A avails himself of those opportunities, but is paid
to trouble and expense in doing so. A is entitled to receive compensation from
B in respect of such trouble and expense.
(c ) A contracts to bu of
B, at a stated price, 50 maunds of rice, no time being fixed for delivery. A
after wards informs B that he will not accept the rice if tendered to him. B is
entitled to receive from A, by way of compensation, the amount, if any, by whi
cOMPENSATION OF LAch the contract price exceeds that which B can obtain for the
rice at the time when A informs B that he will not accept it.
(d) A contracts to buy
B's ship for 60,000 rupees, but breaks the promise. A must pay to B, by way of
compensation, the excess, if any, of the contract price over the price which C
can obtain for the ship at the time of the breach of promise.
(e) A, the owner of a
boat, contracts with B, to take a cargo of jute to Mirzapur, for sale at that
place, starting on a specified day. The boat, owing to some unavoidable cause,
does not start at the time appointed , whereby the arrival of the cargo at
Mirzapur is delayed beyond the time when it would have arrived if the boat had
sailed according to the contract. After the date, and before the arrival of the
cargo, the price of jute falls. The measure of the compensation payable to B by
A is the difference between the price which B could have obtained for the cargo
at Mirzapur at the time when it would have arrived if forwarded in due course,
and its market price at the time when it actually arrived.
(f) A contracts to repair
B's house in a certain manner, and receives payment in advance. A repairs the
house, but not according to contract. B is entitled to recover from A the cost
of making the repairs conforming to the contract.
(g) A contracts to let
his ship to B for a year, from first of January, for a certain price. Freights
rise, and, on the first of January, the hire obtainable for the ship is higher
than the contract
price. A breaks his promise. He must pay to B,
by way of compensation, a sum equal to the difference between the contract
price and the price for which B could hire a similar ship for a year on and
from the first of January.
(h) A contracts to supply
B with a certain quantity of iron with a fixed price, being a higher price than
that for which A could and deliver the iron. B wrongfully refuses to receive
the iron. B must pay to A, by way of compensation, the difference between the
contract price of the iron and the sum for which A could have obtained and
delivered it.
(i) A delivers to B, a
common carrier, a machine, to be conveyed, without delay, to A's mill.informing
B that his mill is stopped for want of the machine. B unreasonably delays the
delivery of the machine and A, in consequence, loses a profitable contract with
the Government. A is entitled to receive from B, by way of compensation, the
average amount of profit which would have been made by the working of the mill
during the time that delivery of it was delayed, but not the loss sustained
through the loss of he Government contrcat.
(j) A, having contracted
with B to supply B with 1,000 tons of iron at 100 rupees a ton, to be delivered
at a stated time, contracts with C for the purchase of 1,000 tons of iron at 80
rupees a ton, telling C that he does so for the purpose of performing his
contract with B. C fails to perform his contract with A, who cannot procedure
other iron, and B, in consequence, rescinds the contract. C must pay to A
20,000 rupees, being the profit which A would have made by the performance of
his contract with B.
(k) A contracts with B to
make and deliver to B, by a fixed day, for a specified price, a certain piece
of machinery. A does not deliver the piece machinery at the time specified,
and, in consequence of this, B is obliged to procure another at a higher price
than that which he was to have paid to A, and is prevented from performing a
contract which B had made with a hired person at the time of his contract with
A( but which had not been then communicated to A), and is compelled to make
compensation for breach of that contract. A must pay to B, by way of
compensation , the difference between the contract price of the piece of
machinery and the sum paid by B for another, but not the sum paid by B to the
third person by way of compensation.
(l) 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. 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 of the house, for the rent lost,
and for the compensation made to C.
(m) A sells certain merchandise
to B, warranting it to be of a particular quality, and B, in reliance upon this
warranty, sells it to C with a similar warranty. The goods prove to be not
according to the warranty, and B becomes liable to pay c a sum of money by way
of compensation. B is entitled to be reimbursed this sum by A.
(n) A contracts to pay a
sum of money to B on day to B on a day specified. A does not pay the money on
that day; B, in consequence of not receiving the money om that day, is unable
to pay his debts, and is totally ruined. A is not liable to pay, make good to B
anything except the principal sum he contracted to pay, together with interest
up to the day of payment.
(o) A contracts to
deliver 50 maunds of saltpetre to B on the first of january, at a certain price.
B, after wards, before the first of January, contracts to sell the saltpetre to
C at a price higher than the market price of the first January. A breaks his
promise. In estimating the compensation payable by A to B, the market price of
the first of January, and not the profit which would have arisen to B from the
sale to C, is to be taken into account.
(p) A contracts to sell
and deliver 500 bales of cotton to B on a fixed day. A knows nothing of B's
mode of conducting his business. A breaks his promise, and B, having no cotton,
is obliged to close his mill. A is not responsible to B for the loss caused to
B by closing of the mill.
(q) A contracts to sell
and deliver to B, on the first day of January, certain cloth which B intends to
manufacture into caps of a particular kind, for which there is no demand,
except at that season.. The cloth is not delivered till after the appointed
time, and too late to be used that year in making caps. B is entitled to
receive from A, by way of compensation, the difference between the contract
piece of the cloth and its market price at the time of delivery, but not the
profits which he expected to obtain by making caps, nor the expenses which he
has been put to in making preparation for the manufacture.
® A, a ship owner,
contracts with B to convey him from Calcutta to Sydney in A's ship, sailing on
the first of January, and B pays to A, by way of deposit, one-half of his
passage-money. The ship does not sail on the first of January, and B, after
being in consequence, detained in Calcutta for some time, and thereby put to
some expense, proceeds to Sydney in another vessel, and, in consequence,
arriving too late in Sydney, loses a sum of money. A is liable to
repay to B his deposit,
with interest, and the expense to which he is put by his detention in Calcutta,
and the excess, if any, of the passage-money paid for the second ship over that
agreed upon the for the first, but not the sum of money which B lost by
arriving in Sydney too late.
74. Compensation for
breach of contract where penalty stipulated for
1[When a contract has
been contract has been broken, if sum is named in the contracts the amount to
be paid in case of such breach, or if the contract contains any other
stipulation by way of penalty, the party complaining of the breach is entitled,
whether or not actual damage or loss is proved to have been caused thereby, to
receive from the party who has broken the contract reasonable compensation not
exceeding the amount so named or as the case may be,, the penalty stipulated
for.
Explanation : A
stipulation for increased interest from the date of default may be a
stipulation by way of penalty.]
Exception : When any
person enters into any bail bond, recognizance or other instrument of the same
nature, or, under the provisions of any law, or under the orders of the Central
Government or of any State Government, gives any bond for the performance of
any public duty or act in which the public are interested, he shall be liable,
upon breach of the condition of any such instrument, to pay the whole sum
mentioned therein.
Explanation : A person
who enters into a contract with the government does not necessarily thereby
undertake any public duty, or promise to do an act in which the public are
interested.
Illustrations
(a) A contracts with B to
pay B Rs. 1,000, if he fails to pay B Rs.500 on a given day. A fails to pay B
Rs. 500 on that day. B is entitled to recover from A such compensation, not
exceeding Rs. 1,000, as the court considers reasonable.
(b) A contracts with B
that, if A practices as a surgeon within Calcutta, he will pay B Rs. 5,000. A
practices as a surgeon in Calcutta. B is entitled to such compensation; not
exceeding Rs. 5,000, as the court considers reasonable.
(c ) A gives recognizance
binding him in a penalty of Rs. 500 to appear in court on a certain day. He
forfeits his recognisance. He is liable to pay the whole penalty.
2[(d) A gives B a bond
for the payment of Rs. 1,000 with interest at 12 per cent at the end of six
months, with a stipulation that, in case of default, interest shall be payable
at the rate of 75 per cent from the date of default. This is stipulation by way
of penalty, and B is only entitled to recover from A such compensation as the
court considers reasonable.
(e) A, who owes money to
B, a money-lender, undertakes to repay him by delivering to him 10 maunds of
grain on a certain date, and stipulates that, in the event of his not
delivering the stipulated amount by the stipulated date, shall be liable to to
deliver 20 maunds. This is a stipulation by way of penalty, and B is only
entitled to reasonable compensation in case of breach.
(f) A undertakes to repay
B a loan of Rs. 1,000 by five equal monthly installments, with a stipulation
that, in default, of payment of any installment, the whole shall become due.
This stipulation is not by way of penalty, and the contract may be enforced
according to its terms.
(g) A borrows Rs. 100
from B and gives him a bond for Rs. 200 payable by five yearly installments of
Rs.40, with a stipulation that, in default of payment of any installment, the
whole shall become due. This is a stipulation by way of penalty.]
75. Party rightfully
rescinding contract, entitled to compensation
A person who rightfully
rescinds a contract is entitled to compensation for any damage which he has
sustained through the non-fulfillment of the contract.
Illustration
A a singer contracts with
B, a manager of a theatre, to sing at his theatre for two nights in every week
during the next two months, and B engages to pay her 100 rupees for each
night's performance. In the sixth night, A willfully absents herself from the
theatre, and b, in consequence, rescinds the contract. B is entitled to claim
compensation for the damage which he has sustained through the non-fulfillment
of the contract.
CHAPTER VII SECTIONS 76 -
123 [ Sale of Goods] Rep. by the Sale of Goods Act, 1930 (3 of 1930) s. 65.
CHAPTER VIII OF INDEMNITY
AND GUARANTEE
124. " Contract of
indemnity" defined
A contract by which one
party promises to save the other from loss caused to him by the conduct of the
promisor himself, or by the conduct of any other person, is called a "
contract of indemnity".
Illustration
A contracts to indemnify
B against the consequences of any proceedings which C may take against B in
respect of a certain sum of 200 rupees. This is a contrcat of indemnity.
125. Rights of
Indemnity-holder when sued
The promisee in a
contract of indemnity, acting within the scope of his authority, is entitled to
recover from the promisor- (1) all damages which he may be compelled to pay in
any suit in respect of any matter to which the promise to indemnify applies;
(2) all costs which he
may be compelled to pay in any such suit if, in bringing or defending it, he
did not contravene the orders of the promisor, and acted as it would have been
prudent for him to act in the absence of any contract of indemnity, or if the
promisor authorised him to bring or
defend the suit;
(3) all sums which he may
paid under the terms of any compromise of any such suit, if the compromise was
not contrary to the orders of the promisor, and was one which it would have
been prudent for the promisee to make in the absence of any contract of
indemnity, or if the promisor authorused him to compromise the suit.
126. "Contract of
guarantee", "surety", "principal debtor" and
"creditor"
A " contract of
guarantee" is a contract to perform the promise, or discharge the
liability, of a third person in case of his default. The person who gives the
guarantee is called "surety"; the person in respect of whose default
the guarantee is given is called the "principal debtor", and the
person to whom the guarantee is given is called the " creditor". A guarantee
may be either oral or written.
127. Consideration for
guarantee
Anything done, or any
promise made, for the benefit of the principal debtor, may be a sufficient
consideration to the surety for giving the guarantee.
Illustrations
(a) B requests A to sell
and deliver to him goods on credit. A agrees to do so, provided C will
guarantee the payment of the price of the goods. C promises to guarantee the
payment in consideration of A's promise to deliver the goods. This is a
sufficient consideration for C's promise.
(b) A sells and delivers
goods to B. C after wards requests to forbear to sue B for the debt for a year,
and promises that, if he does so, C will pay for them in default of payment by
B. A agrees to forbear as requested. This is a sufficient consideration for C's
promise.
(c ) A sells and delivers
goods to B. A after wards, without consideration, agrees to pay for them in
default of B. The agreement is void.
128. Surety's liability
The liability of the
surety is co-extensive with that of principal debtor, unless it is otherwise
provided by the contract.
Illustration
A guarantees to B the
payment of a bill of exchange by C, the acceptor. The bill is dishonored by C.
A is liable not only for the amount of the bills but also for any interest and
charges which may have become due on it.
129. Continuing guarantee
A guarantee which extends
to a series of transaction, is called, a " continuing guarantee".
Illustrations
(a) A, in consideration
that B will employ C in collecting the rents of B's zamindari, promises B to be
responsible, to the amount of 5,000 rupees, for the due collection and payment
by C of those rents. This is continuing guarantee.
(b) A guarantees payment
to B, a tea-dealer, to the amount of $ 100, for any tea he may from time to
time supply to C. B supplies C with tea to above the value of $ 100, and C pays
B for it. After wards, B supplies C with tea to the value of $ 200. C fails to
pay. The guarantee given by A was a continuing guarantee, and he is accordingly
liable to B to the extend of $ 100.
(c ) A guarantees payment
to B of the price of five sacks of flour to be delivered by B to and to be paid
for in a month. B delivers five sacks to C. C pays for them. After wards B
delivers four sacks to C, which C does not pay for. The guarantee given by A
was not a continuing guarantee, and accordingly he is not liable for the price
of the four sacks.
130. Revocation of
continuing guarantee
A continuing guarantee
may at any time be revoked by the surety, as to future transactions, by notice
to the creditor.
Illustrations
(a) a, in consideration
of B's discounting, at, A's request, bills of exchange for C, guarantees to B,
for twelve months, the due payment of all such bills to the extent of 5,000
rupees. B discounts bills for C to the extent of 2,000 rupees. After wards, at
the end of three months, A revokes the guarantee. This revocation discharges A
from all liabilty to B for any subsequent diScount. But is liable to B for the
2,000 rupees, on default of C.
(b) A guarantees to B, to
the extend of 10,000 rupees, that C shall pay all the bills that B shall draw
upon him. B draws upon C. C accepts the bill. A gives notice of revocation. C
dishonors the bill at maturity, A is liable upon his guarantee.
131. Revocation
continuing guarantee by surety's death
The death of the surety
operates, in the absence of any contract to the contrary, as a revocation of a
continuing guarantee, so far as regards future transactions.
132. Liability of two
persons, primarily liable, not affected by arrangement between them that one
shall be surety on other's default
Where two persons
contract with a third person to undertake a certain liability, and also
contract with each other that one of them shall be liable only on the default
of the other, the third person not being a party to such contract, the
liability of each of such two persons to the third person under the first
contract is not affected by the existence of the second contract, although such
third person may have been aware of its existence.
Illustration
A and B make a joint and
several promissory note to C. A makes it, in fact, as surety for B, and C knows
this at the time when the note is made. The fact that A, to the knowledge of C,
made the note as surety for B, is no answer to a suit by C against A upon the
note.
133. Discharge of surety
by variance in terms of contract
Any variance, made
without the surety's consent, in the terms of the contract between the
principal 1[debtor] and the creditor, discharges the surety as to transactions
susequent to the variance.
Illustrations
(a) A becomes surety to C
for B's conduct as manager in C's bank. After wards, B and C contract, without
A's consent, that b's salary shall be raised, and that he shall become liable
for one-fourth of the losses on overdrafts. B allows a customer to over-draw,
and the bank loses a sum of money. A is discharged from his surety ship by the
variance made without his consent, and is not liable to make good this loss.
(b) A guarantees C
against the misconduct of B in an office to which B is appointed by C, and of
which the duties are defined by an Act of the legislature. By a subsequent Act,
the nature of the office is materially altered. After wards, B misconduct
himself. a is discharged by the change from future liability under his guarantee,
though the misconduct of B is in respect of a duty not affected by the later
Act.
(c ) C agrees to appoint
b as his clerk to sell goods at a yearly salary, upon A's becoming surety to C
for B's duly accounting for moneys received by him as such clerk. After wards,
without A's knowledge or consent, C and B agree that b should be paid by a
commission on the goods sold by him and not by a fixed salary. A is not liable
for subsequent misconduct of B.
(d) A gives to C a
continuing guarantee to the extent of 3,000 rupees for any oil supplied by C to
B on credit. After wards becomes embarrassed, and, without the knowledge of A,
B and C contract that C shall continue to supply B with oil for ready money,
and that the payments shall be applied to the then existing debts between B and
C. is not liable on his guarantee for any goods supplied after this new
arrangement.
(e) C contracts to lend B
5,000 rupees on the 1st March. a guarantees repayment. C pays the 5,000 rupees
to B on the 1st January, A is discharged from his liability, as the contract
has been varied, inasmuch as C might sue B for the money before the first of
March.
134. Discharge of surety
by release or discharge of principal debtor
The surety is discharged
by any contract between the creditor and the principal debtor, by which the
principal debtor is released, or by any act or omission of the creditor, the
legal consequence of which is the discharge of the principal debtor.
Illustrations
(a) A gives a guarantee
to C for goods to be supplied by C to B. C supplies goods to B, and after
wards B becomes
embarrassed and contracts with his creditors (including C) to assign to them
his property in consideration of their releasing him from their demands. Here B
is released from his debt by the contracts with C, and A is discharged from his
surety ship.
(b) A contracts with B to
grow a crop of indigo on A's land to deliver to B at a fixed rate, and C
guarantees A's performance of this contract. B diverts a stream of water which
is necessary for the irrigation of A's land, and thereby prevents him from raising
the indigo. C is no longer liable on his guarantee.
(c ) a contracts with B
for a fixed price to build a house for B within a stipulated time. B B
supplying the necessary timber. guarantees A's performance of the contract. B
omits to suply the timber. C is discharged from his surety ship.
136. Discharge of surety
when creditor compounds with, gives time to, or agrees, not to sue, principal
debtor
A contract between the
creditor and the principal debtor, or which the creditor makes a compositon
with, or promises to give time to, or not to sue, the principal debtor,
discharges the surety, unless the surety assents to such contract.
136. Surety not
discharged when agreement made with third person to give time to principal
debtor
Where a contract to give
time to the principal debtor is made by the creditor with a third person, and
not with the principal debtor, the surety is not discharged.
Illustration
C, the holder of an over
due bill of exchange drawn by A as surety for b, and accepted by B, contracts
with M to give to B. A is not discharged.
137. Creditors,
forbearance to sue does not discharge surety
Mere forbearance on the
part of the creditors to sue the principal debtor or to enforce any other
remedy against him does not, in the absence of any provision in the guarantee
to the contrary, discharge the surety.
Illustration
B owes to C a debt
guaranteed by A. he debt becomes payable. C does not sue B for a year after the
debt has become payable. A is not discharged from his surety ship.
138. Release of one
co-surety does not discharge others
Where there are
co-sureties, a release by the creditor of one of them does not discharge the
others; neither does it free the surety so released from his responsibility to
the other sureties.1
139. Discharge of surety
by creditor's act or omission impairing surety's eventual remedy
If the creditor does any
act which is in consistent with the rights of the surety, or omits to do so any
act which his duty to the surety requires him to do, and the eventual remedy of
the surety himself against the principal debtor is thereby impaired, the surety
is discharged.
Illustrations
(a) B contracts to build
a ship for C for a given sum, to be paid by installments as the work reaches
certain stages. A becomes surety to C for B's due performance of the contract.
C, without the knowledge of A, prepares to B the last two installments. A is
discharged by the prepayment.
(b) C lends money to B on
the security of a joint and several promissory note made in C's favor by B, and
by A as surety for B, together with a bill of sale of B's furniture, which
gives power to C to sell the furniture, and apply the proceeds in discharge of
the note. Subsequently, C sells the furniture, but, owning to has misconduct
and willful negligence, only a small price is realised. A is discharged from
liability on the note.
(c ) A puts M as
apprentice to B, and gives a guarantee to B for M's fidelty. B promises to his
part that he will at least once a month, see that M make up the cash. B omits
to see this done as promised, and M embezzles. A is not liable to be on his
guarantee.
140. Rights of surety on
payment of performance
Where a guaranteed debt
has become due,, or default of the principal debtor to perform a guaranteed
duty has taken place, the surety, upon payment or performance of all that he is
liable for, is invested with all the rights which the creditor had against the
principal debtor.
141. Surety's right to
benefit of creditor's securities
A surety is entitled to
the benefit of every security which the creditor has against the principal
debtor at the time when the contract of surety ship is entered into, whether
the surety knows of the existence of such security or not; and, if the creditor
loses, or, without the consent of the surety, parts with such security, the
surety is discharged with to the extent of the value of the security.
Illustrations
(a) C advances to B, his
tenant, 2,000 rupees on the guarantee of a. C has also a further security for
the 2,000 rupees by a mortgage of B,s furniture. C, cancels the mortgage. B
becomes insolvent and C sues A on his guarantee. A is discharged from liability
to the amount of the value of the furniture.
(b) C, a creditor, whose
advance to B is secured by a decree, receives also a guarantee for that advance
from A. C after wards takes B's goods in execution under the decree, and then,
without the knowledge of A, withdraws the execution. A is discharged.
(c ) A, as surety for B,
makes a bond jointly with B to C, to secure a loan from C to B. After wards, C
obtains from B a further security for the same debt. subsequently, C gives up
the further security. A is not discharged.
143. Guarantee obtained
by misrepresentation, invalid
Any guarantee which has
been obtained by means of representation made by the creditor, or with his
knowledge and assent, concerning a material part of the transaction, is
invalid.
Illustrations
(a) A engages B as clerk
to collect money for him. B fails to account for some of his receipts and A in
consequence calls upon him to furnish security for his duly accounting. C gives
his guarantee for B's duly accounting. A does not acquaint C with B's previous
conduct. B after wards makes default. The guarantee is invalid.
(b) A guarantees to C
payment for iron to be supplied by him to B to the amount of 2,000 tons. B and
have privately agreed that B should pay five rupees per ton beyond the market
price, such excess to be supplied in liquidation of an old debt. This agreement
is concealed from A. A is not liable as a surety.
144. Guarantee on
contract that creditor shall not act on it until co-surety joins
Where a person gives a
guarantee upon a contract that the creditor shall not act upon it until another
person has joined in it as surety, the guarantee is not valid that other person
does not join.
145. Implied promise to
indemnify surety
In every contract of
guarantee there is an implied promise by the principal debtor to indemnify the
surety, and the surety is entitled to recover from the principal debtor
whatever sum he has rightfully paid under the guarantee, but no sum which he
has paid wrongfully.
Illustrations
(a) B is indebted to C,
and A is surety for the debt. C demands payment from A, and on his refusal sues
him for the amount. A defends the suit, having reasonable grounds for doing so,
but he is compelled to pay the amount of the debt with costs. He can recover
from B the amount paid by him for costs, as well as the principal debt.
(b) C lends B a sum of
money, and A, at the request of B, accepts a bill of exchange drawn by B upon A
to secure the amount. C, the holder of the bill, demands payment of it from A,
and, A's refusal to pay, sues him upon the bill. A, not having reasonable
grounds for so doing, defends the suit, and has to pay the amount of the bill
and costs. He can recover from B the amount of the bill, but not the sum paid
for the costs, as there was no real ground for defending the action.
(c ) A guarantees to C,
to the extent of 2,000 rupees, payment for rice to be sullpied by C to B. C
supplies to B rice to a less amount than 2,000 ruopees, but obtains from A
payment for the sum of 2,000 rupees in respect of the rice supplied. A cannot
recover from B more than the price of the rice actually supplied.
146. Co-sureties liable
to contribute equally
Where two or more persons
are co-sureties for the same debt or duty, either jointly or severally, and
whether under the same or different contracts, and whether with or without the
knowledge of each other, the co-sureties, in the absence of any contract yo the
contrary, are liable, as between themselves, to pay each an equal share of the
whole debt, or of that part of it which remains unpaid by the principal
debtor1.
Illustrations
(a) A, B and C are
sureties to D for the sum of 3,000 rupees lend to E. E makes default in
payment. A, B and C are liable, as between themselves, to pay 1,000 rupees
each.
(b) A, B and C are
sureties to D for the sum of 1,000 rupees lent to e, and there is a contract
between A, B and C that is to be responsible to the extent of one-quarter, B to
the extent of
one-quarter, And C to the
extent of one-half. E makes default in payment. As between the sureties, A is
liable to pay 250 rupees, B 250 rupees and C 500 rupees.
147. Liability of
co-sureties bound in different sums
Co-sureties who are bound
in different sums are liable to pay equally as far as the limits of their
respective obligations permit.
Illustrations
(a) A, B and C, as
sureties for D, enter into three several bonds each in different penalty,
namely, A in the penalty of 10,000 rupees, B in that of 20,000 rupees, C in
that of 40,000 rupees, conditioned for D's duly accounting to E. makes default
to the extent of 30,000 rupees. A, B and C are each liable to pay 10,000
rupees.
(b) A, B, and C, as
sureties for D, enter into three several bonds each in a different penalty,
namely, A in the penalty of 10,000 rupees, B in that of 20,000 rupees, C in
that of 40,000 rupees, conditioned for D's duly accounting to E. D makes
default to the extent of 40,000 rupees. A is liable to pay 10,000 rupees, and b
and C 15,000 rupees each.
)c ) A, B and C, as
sureties for D, enter into three several bonds, each in a different penalty,
namely, A in the penalty of 10,000 rupees, in that of 20,000 rupees, C in that
of 40,000 rupees, conditioned for D's duly accounting to E. D makes default to
the extent of 70,000 rupees. A, and C have to pay each the full penalty of his
bond.
CHAPTER IX
OF BAILMENT
148.
"Bailment", "bailor" and " bailee defined
A "bailment" is
the delivery of goods by one person to another for some purpose, upon a
contract that they shall, when the purpose is accomplished, be returned or
otherwise disposed of according to the directions of the person delivering
them. he person delivering the goods is called the "bailor" The
person to whom they are delivered is called the "bailee"/
Explanation : If a person
already in possession of the goods of another contract to hold them as a
bailee, he thereby becomes the bailee, and the owner becomes the bailor of such
goods, although they may not have been delivered by way of bailment.
149. Delivery to bailee
how made
The delivery to the
bailee may be made by doing anything which has the effect of putting the goods
in the possession of the intended bailee or of any person authorised to hold
them on his behalf.
150. Bailor's duty to
diclose faults in goods bailed
The bailor is bound to
disclose to the bailee faults in the goods bailed, of which the bailor is
aware, and which the materially interfere with the use of them, or expose the
bailee to
extraordinary risk; and
if he does not make such disclosure, he is responsible for damage arising to
the bailee directly from such faults.
If such goods are bailed
for hire, the bailor is responsible for such damage, whether he was or was not
aware of the existence of such faults in the goods bailed.
Illustrations
(a) A lends a horse,
which he knows to be vicious, to B. He does not disclose the fact that the
horse is vicious. the horse runs away. B is thrown and injured, A is
responsible to B for damage sustained.
(b) A hires a carriage of
B. The carriage is unsafe, though B is not aware of it, and A is injured. B is
responsible to A for the injury.
1[151. Care to be taken
by bailee
In all cases of bailment
the bailee is bound to take as much care of the goods bailed to him as a man of
ordinary prudence would, under similar circumstances, take of his own goods of
the same bulk, quantity and value of the goods bailed2.
1[152. Bailee when not
liable for loss, etc, of thing bailed
The bailee, in the
absence of any special contract, is not responsible for the loss, destruction or
deterioration of the thing bailed, if he has taken the amount of care of it
described in section 151.
153. Termination of
bailment by bailee's act inconsistent with conditions
A contract of bailment is
voidable at the option of the bailor, if the bailee does any act with regard to
the goods bailed, inconsistent with the conditions of the bailment.
Illustration
A lets to B, for hire, a
horse of his own riding. B drives the gorse in his carriage. This is, at the
option of A, a termination of the bailment.
154. Liability of bailee
making unauthorised use of goods balied
If the bailee makes any
use of the goods bailed which is not according to the conditions of the
bailment, he is liable to make compensation to the bailor for any damage
arising to the goods from during such use of them.
Illustrations
(a) A lends a horse to B
for his own riding only. B allows C, member of his family, to ride the horse. C
rides with care, but the horse accidentally falls and is injured. B is liable
to make compensation to A the injury done to the horse.
(b) A hires a horse in
Calcutta from B expressly to march to Banaras. A rides with due care but
marches to Cuttack
instead. the horse accidentally falls and is injured. A is liable to make
compensation to B for the injury to the horse.
155. Effect of mixture,
with bailor's consent, of his goods with bailee's
If the bailee, with the
consent of the bailor, mixes the goods of the bailor with his own goods, the
bailor and the bailee shall have an interest, in proportion to their respective
shares, in the mixture thus produced.
156. Effect of mixture,
without bailor's consent, when the goods can be separated
If the bailee, without
the consent of the bailor, mixes the goods of the bailor with his own goods and
the goods cane be separated or divided, the property in the goods remains in
the partis respectively; but the bailee is bound to bear the expense of
separation or division, and any damage arising from the mixture.
Illustration
A bails 100 bales of
cotton marked with a particular mark to B. B, without A's consent, mixes 100
bales with other bales of his own, bearing a different mark; A is entitled to
have his 100 bales returned, and B is bound to bear all the expenses incurred
in the separation of the bales, and any other incidental damage.
157. Effect of mixture,
without bailors consent, when the good cannot be separated
If the bailee, without
the consent of the bailor, mixes the goods f the bailor with his own goods, in
such am manner that it is impossible to separate the goods bailed from the
other goods and deliver them back, the bailor is entitled to be compensated by the
bailee for the loss of the goods.
Illustration
A bails a barrel of Cape
flour worth Rs.45 to B. B, without A's consent, mixes the flour with country
flour of his own, worth Rs. 25 a barrel. B must compensate A for the loss of
his flour.
158. Repayment, by
bailor, of necessary expenses
Where, by the conditions
of the bailment, the goods are to be kept or to be carried, or to have work
done upon them by the bailee for the bailor, and the bailee is to receive no
remuneration, the bailors shall repay to the bailee the necessary expenses
incurred by him for the purpose of the bailment.
159. Restoration of goods
lent gratuitously
The lender of a thing for
use may at any time require its return, if the loan was gratuitous, even though
he lent it for a specified time or purpose. But if, on the face of such loan
made for a specified time for purpose, the borrower has acted in such a manner
that the return of the thing lent before the time agreed upon would cause him
loss exceeding the benfit actually derived by him from they loan, the lender
must, if he compels the return, indemnify the borrower for the amount in which
the loss so occasioned exceeds the benefit so derived.
160. Return of goods
bailed on expiration of time or acccomplishment of purpose
It is the duty of the
bailee to return. or deliver according to the bailor's directions, the goods
bailed, witjout demand, as soon as the time for which they were bailed, has
expired, or the purpose for which they were bailed has been accomplished.
1[161. Bailee's
responsibility when goods are not duly returned
If, by the fault of the
bailee, the goods are not returned, deliver or tendered at the proper time, he
is responsible to the bailor for any loss, destruction or deterioration of the
goods from that time2.
162. termination of
gratuitous bailment by death
A gratuitous bailment is
terminated by the death either of the bailor or of the bailee.
163. Bailor entitled to
increase or profit from goods bailed
In the absence of any
contract to the contrary, the bailee is bound to deliver to the bailor, or
according to his directions, any increase or profit which may have accrued from
the goods bailed.
Illustration
A leaves a cow in the
custody of B to be taken care of. the cow has a calf. B is bound to deliver the
calf as well as the cow to .
164. Bailor's
responsibility to bailee
The bailor is responsible
to the bailee for any loss which the bailee may sustain by reason that the
bailor was not entitled to make the bailment, or to receive back the goods, or
to give directions, respecting them.
165. Bailment by several
joint owners
f several joint owners of
goods bail them, the bailee may deliver them back to, or according to the
directions of, one joint owner without the consent of all, in the absence of
any agreement to the contrary.
166. Bailee not
responsible on redelivery to bailor without title
If the bailor has no
title of the goods, and the bailee, in good faith, delivers them back to, or
according to the directions of, the bailor, the bailee is not responsible to
the owner in respect of such delivery1.
167. Right of third
person claiming goods bailed
If a person, other than
the bailor, claims goods bailed he may apply to the court to stop the delivery
of the goods to the bailor, and to decide the title to the goods.
168. Right of finder of goods; may sue for
specified reward offered
The finder of goods has
no right to sue the owner for compensation for trouble and expense voluntarily
incurred by him to preserve the goods and to find out the owner; but he may
retain the goods against the owner until he receives such compensation; and,
where the owner has offered a specific reward for the return of goods lost, the
finder may sue for such reward, and may retain the goods until he receives it.
169. When finder of thing
commonly on sale may sell it
When a thing commonly the
subject of sale is lost, if the owner cannot with reasonable diligence be found
, or if he refuses, upon demand, to pay the lawful charges of the g\finder, the
finder may sell it-
(1) when the thing is in
danger of perishing or of losing the greater part of its valur, or
(2) when the lawful
charges of the finder in resoect of the thing found amound to tw--third of its
value.
170. Bailee's particular
lien
Where the baillee has, in
accordance with the purpose of the bailment, rendered in any service involving
the exercise of labour or skill in respect of the goods bailed, he has, in the
absence of a contract to the contrary, a right to certain such goods until he
receives due remuneration for the services he has rendered in respect of them.
Illustrations
(a) A delivers a rough
diamond to B, a jeweller, to be cut and polished, which is accordingly done. B
is entitled to retain the stone till he is paid for the services he has
rendered.
(b) A gives cloth to B, a
tailor, to make into a coat. B promises to deliver thye coat as soon as it is
furnished, and to give a three months' credit for the price. B is not entitled
to retain the coat until he is paid.
171. General lien of bankers,
factors, wharfingers, attorneys and policy brokers
Bankers, factors,
wharfingers, attorneys of a High Court and policy brokers may, in the absence
of a contract to the contrary, retain, as a security for a general balance of
account, any goods bailed to them; but no other persons have a right to retain,
as the security for such balance, goods bailed to them, unless there is an
express contract to that effect1. (As to lien of an agent, see s. 221 infra. As
to lien of a Railway Administration, see the Indian Railways Act 1890 (9 of
1890).
BAILMENT OF PLEDGES
172. " pledge",
"pawnor", and pawnee" defined
The bailment of goods as
security for payment of a debt or performance of a promise is called
"pledge". The bailor is in this case called the pawnor". The
bailee is called "pawnee".
173. Pawnee's right of retainer
The pawnee may retained
the goods pledged, not only for repayment of a debt or the performance of the
promise, but for the interest, of the debt, and all necessary expenses incurred
by him in respect of the possession or for the preservation of the goods
pledged.
174. Pawnee not to retain
for debt or promise other than that for which goods pledged - Presumption in
case of subsequent advances
The pawnee shall not, in
the absence of a contract to that effect, retain the goods pledged for any debt
or promise of other than the debts or promise for which they are pledged; but
such contract, in the absence of anything to the contrary, shall be presumed in
regard to subsequent advances made by the pawnee.
175. Pawnee's right as to
extraordinary expenses incurred
The pawnee is entitled to
receive from the pawnor extraordinary expenses incurred by him for the
preservation of the goods pledged.
176. pawnee's right where
pawnor makes default
If the pawnor makes
default in payment of the debt, or performance, at the stipulated time of the
promise, in respect of which the goods were pledged, the pawnee may bring a
suit against the pawnor upon the debt or promise, and retain the goods pledged
as a collateral security; or may sell the thing pledged on giving the pawnor
reasonable notice of the sale.
If the proceeds of such
sale are less than amount due in respect of the debt or promise, the pawnor is
still liable to pay the balance. If the proceeds of the sale are greater than
the amount so due, the pawnee shall pay over the surplus to the pawnor.
177. Defaulting pawnor's
right to redeem
If a time is stipulated
for the payment of the debt, of performance of the promise, for which the
pledge is made, and the pawnor makes default in payment of the debt or
performance of the promise at the stipulated time, he may redeem the goods
pledged at any subsequent time before the actaul sale of them; but he must, on
that case, pay, in addition, any expenses which have arisen from his default.
1[178. Pledge by
mercantile agent (Se4cs.178 and 178A substituted by Act 4 of 1930.)
here a mercantile agent
is, with the consent of the owner, in possession of goods or the documents of
title of goods, any pledge made by him, when acting in the ordinary course of
business of a mercantile agent, shall be as valid as if he were expressly
authorized by the owner of the goods to make the same; provided that the pawnee
acts in good faith and has not at the time of the pledge notice that the pawnor
has no authority to pledge.
Explanation : In this
section, the expression " nercantile agent" and documents of
title" shall have the meanings assigned to them in the Indian Sale of
Goods Act, 1930 (3 of 1930
178A. Pledge by person in possession under
voidable contract
When the b pawnor has
obtained possession of the goods pledged by him under a contract voidable under
section 19 or section 19A, but the contract has not been rescinded at the time
of the pledge, the pawnee acquires a good title to the goods, provided he acts
in good faith and without notice of the pawnor's defect of title.]
179. Pledge where pawnor
has only a limited interest
Where a person pledge
goods in which he has only a limited interest, the pledge is valid to the
extent of that interest.
SUITS BY BAILEES OR
BAILORS AGAINST WRONG-DOERS
180. Suit by bailor or
bailee against wrong-doer
If a third person
wrongfully deprives the bailee of the use of possession of the goods bailed, or
does tghem any injury, the bailee is entitled to use such remedies as the owner
might have used in the like case if no bailment had been made; and either the
bailor or the bailee may bring a suit against a third person for such
deprivation or injury.
181. Appointment of
relief or compensation obtained by such suits
Whatever is obtained by
way of relief of compensation in any such suit shall, as between the bailor and
the bailee, be dealt with according to their respective interests.
CHAPTER X
AGENCY APPOINTMENT AND
AUTHORITY OF AGENTS
182. " Agent"
and "principal" defined
An agent is a person
employed to do any act for another, or to represent another in dealings with
third persons. the person for whom such act is done, or who is so represented ,
is called the "principal"
183. Who may employ agent
Any person who is of the
age of majority according to the law to which he is sunject, and who is of
sound mind , may employ an agent.
184. Who may be an agent
As between the principal
and third persons any person may become an agent, but no person who is not of
the age of majority and sound mind can become an agent, so as to be responsible
to his principal according to the provisions in that behalf herein contained.
185. Consideration not necessary
No consideration is
necessary to create an agency.
186. Agent's authority
may be express or implied
The authority of an agent
may be express or implied.1 ( See, however, the Registration Act 1908 (16 of
1908), s. 33 see also be Code of Civil Procedure 1908 (5 of 1908).
187. Definitions of
express and implied authority
An authority is said to
be express when it is given by words, spoken or written. An authority is said
to be implied when it is to be inferred from the circumstances of the case; and
things spoken or written, or the ordinary course of dealing, may be accounted
sircumstances of the case.
Illustration
A owns a shop in
Serampur, living himself in Calcutta, and visiting the shop occasionally. The
shop is managed by , and he is in the habit of ordering goods from C in the
name of A for the purposes of the shop, and of paying for them out A's funds
with A's knowledge. B has an implied authority from A to order goods from C in
the name of A for the purposes of the shop.
188. Extent of agent's
authority
An agent having an
authority to do an act has authority to do every lawful thing which is
necessary in order to do such act.
An agent having an
authority to carry on a business has authority to do every lawful thing necessary
for the purpose, or usually done in the course, of conducting such business.
Illustrations
(a) A is employed by B,
residing in London, to recover at Bombay a debt due to B. A may adopt any legal
process necessary for the purpose of recovering the debt, and may give a valid
discharge for the same.
(b) A constitutes B his
agent to carry on his business of a shipbuilder. may purchase timber and other
materials, and hire workmen, for the purposes of carrying on the business.
189. Agent's authority in
an emergency
An agent has authority,
in an emergency, to do all such acts for the purpose of protecting his
principal from loss and would be done by a person or ordinary prudence, in his
own case, under similar circumstances.
Illustrations
(a) An agent for sale may
have goods repaired if it be necessary.
(b) A consigns provisions
to be at Calcutta, with directions to send them immediately to C, at Cuttack. B
may sell the provisions at Calcutta, if they will not bear the journey to
Cuttack without spoiling.
SUB-AGENTS 190. When
agent cannot delegate
An agent cannot lawfully
employ another to perform acts which he has expressly or impliedely undertaken
to perform personalyy, unless by the ordinary custom of trade a sub-agent may,
or from the nature of agency, a sub-agent must, be employed.
191. "
Sub-agent" defined
A "sub-agent"
is a person employed by, and acting under the control of, the original agent in
the business of the agency.
192. Representation of
principal by sub-agent properly appointed
Where a sub-agent is
properly appointed, the principal is, so far as regards third persons,
represented by the sub-agent, and is bound by and responsible for his acts as
if he were an agent originally appointed by the principal.
Agent's responsibility
for sub-agents : The agent is responsible for the principal for the acts of the
sub-agent.
Sub-agent's
responsibility : The sub-agent is responsible for his acts to the agent, but
not to the principal, except in case of fraud or willful wrong.
193. Agent's responsibility
for sub-agent appointed without authority
Where an agent, without
having authority to do so, has appointed a person to act as a sub-agent, the
agent stands towards such person in the relation of a principal to an agent,
and is responsible for his acts both to the principal and to third persons the
principal is not represented by or responsible for the acts of the person so
employed, nor is that person responsible to the principal.
194. Relation between
principal and person duly appointed by agent to act in business of agency
When an agent, holding an
express or implied authority to name another person to act for the principal in
the business of the agency, has named another person accordingly, such person
is not a sub-agent, but an agent of the principal for such part of the business
of the agency as is entrusted to him.
Illustrations
( A directs B, his
solicitor, to sell his estate by auction, and to employ an auctioneer for the
purpose. B names , an auctioneer, to conduct the sale. C is not a sub-agent,
but is A's agent for the conduct of the sale.
(b) A authorizes B, a
merchant in Calcutta, to recover the moneys due to A from C & Co. B
instructs D, a solicitor, to take legal proceedings against C & Co. for the
recovery of the money. D is not a sub-agent, but is a solicitor for A.
195. Agent's duty in
naming such person
In selecting such agent
for his principal, an agent is bound to exercise the same amount of discretion
as a man of ordinary prudence would exercise in his own case; and, if he does
this, he is not responsible to the principal for the acts or negligence of the
agent so selected.
Illustrations
(a) A instructs B, a
merchant, to buy a ship for him. B employs a ship-surveyor of good reputation
to choose a ship for A. The surveyor makes the choice negligently and the ship
turns out to be unseaworthy and is lost. B is not, but the surveyor is,
responsible to A.
(b) A consigns goods to
B, a merchant, for sale. B, in due course, employes an auctioneer in good
credit to sell the goods of A, ans allows the auctioneer to receive the
proceeds of the sale. The auctioneer after wards becomes insolvent without
having accounted for the proseeds, B is not responsible to A for the proceeds.
RATIFICATION
196. right of person as
to acts done for him without his authority - effect of ratification
Where acts are done by
one person on behalf of another, but without his knowledge or authority, he may
elect to ratify or to disown such acts. If he ratifies them, the same effect
will allows will follow as if they had been performed by his authority.
197. Ratification may be
expressed or implied
Ratification may be
expressed or may be implied in the conduct of the person on whose behalf the
acts are done.
Illustrations
(a) A, without authority,
buys goods, for B. After wards B sells them to C on his own account; B's
conduct implies a ratification of the purchase made for him by A.
(b) A, without B's
authority, lends B's money to C. After wards B accepts interests on the money
from C. B's conduct implies a ratification of the loan.
198. Knowledge of
requisite for valid ratification
No valid ratification any
authorized act done on his behalf ratifies the whole of the transactions of
which such act formed a part.
200. ratification of
unauthorized act cannot injure third person
An act done by one person
on behalf of another, without such other person's authority, which, If
done with authority would
have the effect of subjecting a third person to damages, or of terminating any
right of interest of a third person, cannot, by ratification, be made to have
such effect.
Illustrations
(a) A, not being
authorized thereto by B, demands on behalf of B, from C, who is in possession
of it. This demand cannot be ratified by B, so as to make C liable for damages
for his refusal to deliver.
(b) A holds a lease from
B, terminable on three months' notice. C, an unauthorized person, gives notice
of termination to A. the notice cannot be ratified by B, so as to be binding on
A.
REVOCATION OF AUTHORITY
201. Termination of
agency
An agency is terminated
by the principal revoking his authority; or by the agent renouncing the
business of the agency; or by the business of the agency being completed; or by
either the principal or agent or becoming of sound mind; or by the principal
being adjudicated an insolvent under the provisions of any Act for the time
being in force for the relief of insolvent debtors.
202. Termination of
agency, where agent has an interest in subject-matter
Where the agent has
himself an interest in the property which forms the subject matter of the
agency, the agency cannot, in the absence of an express contract, be terminated
to the prejudice of such interest.
Illustrations
(a) A gives authority to
B to sell a's land, and to pay himself, out of the proceeds, the debts due to
him from A. A cannot revoke this authority, nor can it be terminated by his
insanity or death.
(b) A consigns 1,000
bales of cotton to B, who has made advances to him on such cotton, and desire B
to sell the cotton, and to repay himself out of the price the amount of his own
advances. A cannot revoke this authority, nor is it terminated by his insanity
or death.
203. When principal may
revoke agent's authority
The principal may, save
as is otherwise provided by the last preceding section, revoke the authority
given to his agent at any time before the authority has been exercised so as to
bind the principal.
204. Revocation where
authority has been partly exercised
The principal cannot
revoke the authority given to his agent after the authority has been partly
exercised so far as regards such acts and obligations as arise from acts
already done in the agency.
Illustrations
(a) A authorizes B to buy
1,000 bales of cotton on account of A, and to pay for it out of A's money
remaining in B's hands. B buys 1,000 bales of cotton in his own name, so as to
make himself personally liable for the price. A cannot revoke B's authority so
far as regards payment for the cotton.
(b) A authorizes B to buy
1,000 bales of cotton on account of A, and to pay for it out of A's money
remaining in B's hands. B buys 1,000 bales of cotton in A's name, and so as not
to render himself personally liable for the price. A can revoke B's authority
to pay for the cotton.
205.Compensation for
revocation by principal, or renunciation by agent
where there is an express or implied contract
that the agency should be continued for any period of time, the principal must
make compensation to the agent, or the agent to the principal, as the case may
be, for any previous revocation or renunciation of the agency without
sufficient cause.
206. Notice for revocation r renunciation
Reasonable notice must be
given of such revocation or renunciation; otherwise the damage thereby
resulting to the principal or the agent, as the case may be, must be made good
to the one by the other.
207. Revocation and renunciation may be
expressed or implied
Revocation or
renunciation may be expressed or may be implied in the conduct of the principal
or agent respectively.
Illustration
A empowers B to let A's house. After wards A
lets it himself. This is an implied revocation B's authority.
208. When termination of agent's authority
takes effect as to agent, and as to third persons
The termination of the
authority of an agent does not, so far as regards the agent, take effect before
it becomes knows to him, or, so far as regards third persons, before it becomes
known to them.
Illustrations
(a) A directs B to sell goods for him, and
agrees to give b five per cent commission on the price fetched by the goods. A
after wards, by letter, revokes B's authority. B after the letter is sent, but
before he receives it, sells the goods for 100 rupees. The sale is binding on
A, and B is entitled to five rupees as his commission.
(b) A, at Madras, by letter directs B to sell
for him some cotton lying in a warehouse in Bombay, and after wards, by letter,
revokes, his authority to sell, and directs B to sent the cotton to Madras. B,
after receiving the second letter, enters into a contract with C, who knows of
the first letter, but not of the second, for the sale to him of the cotton. C
pays B the money, with which B absconds. C's payment is good as against A.
(c ) A directs B, his agent, to pay certain
money to C. A dies, and D takes out probate to his will. B, after A's death,
but before hearing of it, pays the money to C. The payment is good as against
D, the executor.
209. Agent's duty on
termination of agency by principal's death or insanity
When an agency is
terminated by the principal dying or becoming of unsound mind, the agent is
bound to take, on behalf of the representatives of his late principal, all
reasonable steps for the protection and reservation of the interests entrusted
to him.
210. Termination of sub-agent's authority
The termination of the
authority of an agent causes the termination ( subject to the rules herein
contained regarding the termination of an agent's authority) of the authority
of all sub-agents appointed by him.
AGENTS DUTY TO PRINCIPAL
211. agent's duty in
conducting principal's business
Agent's duty is bound to
conduct the business of his principal according to the directions given by the
princpal, or, in the absence of any such directions, according to the custom
which prevails in doing business of the same kind at the place where the agent
conducts such business. When the agent acts otherwise, if any loss be
sustained, he must make it good to his principal, and, if any profit accrues,
he must account for it.
Illustrations
(a) A, an agent engaged
in carrying on for B a business, in which it is the custom to invest from time
to time, at interest, the moneys which may be in hand, omits to make such
investment. A must make good to B the interest usually obtained by such
investments.
(b) B, a broker in whose
business it is not the custom to sell on credit, sells goods of A on credit to
C, whose credit at the time was very high. C, before payment, becomes
onsolvent. B must make good the loss to A.
211. Skill and diligence
required from agent
An agent is bound to
conduct the business of the agency with as much skill as is generally possessed
by person engaged in similar business, unless the principal has notice of his
want of skill. The agent is always bound to act with reasonable diligence, and
to use such skill as he possess; and to make compensation to his principal in respect
of the direct consequences of his own neglect, want of skill, or misconduct, bu
not in respect of loss or damage which are indirectly or remotely caused by
such neglect, want of skill, or misconduct.
Illustrations
(a) A, a merchant in
Calcutta, has an agent, B, in London, to whom a sum of money is paid on A's
account, with orders to remit. B retains the money for a considerable time. A,
in consequence of not receiving the money, becomes insolvent. B is liable for
the money and interest from the day on which it out to have been paid,
according to the usual rate, and for any further direct loss - as, e.g., by
variation of rate of exchange - but not further.
(b) A, an agent for the
sale of the goods, having authority to sell on credit, sells to B in credit,
without making the proper and usual enquiries as to the solvency of B. B, at
the time of such sale, is insolvent. A must make compensation to his principal
in respect of any loss thereby sustained.
(c ) A, an
insurance-broker employed by B to effect an insurance on a ship, omits to see
that the
usual clauses are
inserted in the policy. The ship is after wards lost. In consequence of the
omission of the clause nothing can be recovered from the underwriters. A is
bound to make good the loss to B.
(d) A, merchant in
England, directs B, his agent at Bombay, who accepts agency, to send him 100
bales of cotton by a certain ship. B, having it in his power to send the
cotton, omits to do so. The ship arrives safely in England. Soon after her
arrival the price of cotton rises. B is bound to make good to A the profit
which he might have made by the 100 bales of cotton at the time the ship
arrived, but not any profit he might have made by the subsequent rise.
213. Agent's accounts
An agent is bound to
render proper accounts to his principal on demand.
214. Agent's duty to
communicate with principal
It is the duty of an
agent, in cases of difficulty, to use all reasonable diligence in communicating
with his principal, and in seeking to obtain his instructions.
215. Right of principal
when agent deals, on his own accounts, in business of agency without
principal's consent
If an agent deals on his
own account in the business of the agency, without first obtaining the consent
of his principal and acquainting him with all material circumstances which have
come to his own knowledge on the subject, the principal may repudiate the
transaction, if the case shows either that any material fact has been
dishonestly concealed from him by the agent, or that the dealings of the agent
have been disadvantageous to him.
Illustrations
(a( A directs B to sell
A's estate. B buys the estate for himself in the name of . A, on discovering
that B has bought the estate for himself, may repudiate the sale, if he can
show that has dishonestly concealed any material fact, or that the seal has
been disadvantageous to him.
(b) A directs B to sell
A's state. B, on looking over the estate before selling it, finds a mine on the
estate which is unknown to A. B informs A that he wishes to buy the estate for
himself, but conceals the discovery of the mine. A allows B to buy, in
ignorance of the existence of the mine. A, on discovering that B knew of the
mine at the time he bought the estate, may either repudiate or adopt the sale
at his option.
216. Principal's right to
benefit gained by agent dealing on his own account in business of agency
If an agent, without the
knowledge of his principal, deals in the business of the agency of his own
account instead of an account to his principal, the principal is entitled to
claim from the agent any benefit which may have resulted to him from the
transaction.
Illustration
A directs B, his agent,
to buy a certain house for him. B tells A it cannot be bought, and buys the
house for himself. n A may, on discovering that B has bought the house, compel
him to sell it to A at the price he gave for it.
217. Agent's right or
retainer out of sums received on principal's account
An agent may retain, out
of any sums received on account of the principal in the business of the agency,
all moneys due to himself in respect of advances made or expenses properly
incurred by him in conducting such business, and also such remuneration as may
be payable to him for acting as agent.
218. Agent's duty to pay
sums received for principal
Subject to such
deductions, the agent is bound to pay to his principal all sums received on his
account.
219. When agent's
remuneration becomes due
In the absence of any
special contract, payment for the performance of any act is not due to the
agent until the completion of such act; but an agent may detain moneys received
by him on account of goods sold, although the whole of the goods consigned to
him for sale may not have been sold, or although the sale may not be actually
complete.
220. Agent not entitled
to remuneration for business misconducted
An agent who is guilty of
misconduct in the business of the agency, is not entitled to any remuneration
in respect of that part of the business which he has misconducted.
Illustrations
(a) A employs B to
recover 1,00,000 rupees from C, and to lay it out on good security. B recovers
the 1,00,000 rupees and lays out 90,000 rupees on good security, but lays out
10,000 rupees on security which he out to have known to be bad, whereby A loses
2,000 rupees. B is entitled to remuneration for recovering the 1,00,000 rupees
and for investing the 90,000 rupees. He is not entitled to any remuneration for
investing the 10,000 rupees, and he must make good the 2,000 rupees to B.
(b) A employs B to
recover 1,000 rupees from C. Though B's misconduct the money is not recovered.
B is entitled to no remuneration for his services and must make good the loss.
221. Agents lien on principal's
property
In the absence of any
contract to the contrary, an agent is entitled to retain goods, papers, and
other property, whether movable or immovable, of the principal received by him,
until the amount due to himself for commission, disbursement and services in
respect of the same has been paid or accounted for to him.
PRINCIPAL'S DUTY TO AGENT
222. Agent to be
indemnified against consequences of lawful acts
The employer of an agent
is bound to indemnify him against the consequences of all lawful acts done by
such agent in exercise of the authority conferred upon him.
Illustrations
(a) B, at Singapore under
instructions from A of Calcutta, contracts with C to deliver certain goods to
him. A does not send the goods to B, and C sues B for breach of contract. B
informs A of the suit, and A authorities him to defend the suit. B defends the
suit, and is compelled to pay damages and costs, and incurs expenses. A is
liable to B for such damages, costs and expenses.
(b) B, a broker at
Calcutta, by the orders of A, a merchant there, contracts with C for the
purchase 10 caskes of oil for A. After wards A reuses to receive the oil, and C
sues B. B informs A, who repudiates the contract altogether. B defends, but
unsuccessfully , and has to pay damages and costs and incurs expenses. A is
liable to B for such damages, costs and expenses.
223. Agent to be
indemnified against consequences of acts done in good faith
Where on one person
employs another to do act, and the agent does the act in good faith, the
employer is liable to indemnify the agent against the consequences of that act,
though it may cause an injury to the rights third persons.
Illustrations
(a) A, A, a decree-holder
and entitled to execution of B's goods, requires the officer of the court to
seize the goods, and is issued by C, the true owner of the goods. A is liable
to indemnify the officer for the sum which he is compelled to pay to C, in
consequence of obeying A'a discretions
(b) B, at the request of
A, sells the goods in possession of A, but which A had no right to disopose of.
B does not know this, and hands over the proceeds of the sale to A. After wards
C, the true owner of the goods, sues B and B recovers the value of the goods
and costs. A is liable to indemnify B for what he has been compelled to pay to
C for B's own expenses.
224. Non-liability of
employer of agent to do a criminal act
Where one person employs
one another to do an act which is criminal, the employer is not liable to the
agent, either upon an express or an implied promise, to indemnify him against
the consequences of that Act1. ( see s. 24, supra.)
Illustrations
(a) A employs B to beat
C, and agrees to indemnify him against all consequences of the act. B thereupon
beats C, and has to pay damages to C for so doing. A is not liable to indemnify
B for those damages.
(b) B, the proprietor, of
a newspaper, publishes, at a's request, a libel upon C in the paper, and A
agrees to indemnify B against the consequences of the publication, and all
costs and damages of any action in respect thereof. B is sued by C and has to
pay damages, and also incurs expenses. A is not liable to B upon the indemnity.
225. Compensation to
agent for injury caused by principal's neglect
The principal must take
compensation to his agent in respect of injury ( Cf. the Fatal accidents Act,
1855.) caused to such agent by the principal's neglect or want of skill.
Illustration
A employs B as a
bricklayer in building a house, and puts up the the scaffolding himself. The
scaffolding is unskillfully put up, and B is in consequences hurt. A must make
compensation to B.
EFFECT OF AGENCY ON
CONTRACTS WITH THIRD PERSONS
226. Enforcement and
consequences of agent's contracts
Contracts entered into
through an agent, and obligations arising from acts done by an agent, may be
enforced in the same manner, and will have the same legal consequences, as if
the contracts had been entered into and the acts done by the principal in
person.
Illustrations A buys
goods from B, knowing that he is an agent for their sale, but not knowing who
is the principal. B's principal is the person entitled to claim from A the price
of the goods, and A cannot, in suit by the principal, set-off against that
claim a debt due to himself from B.
(b) A, being B's agent;
with authority to receive money on his behalf, receives from C, a sum of money
due to B. C is discharged of his obligation to pay the sum in question to B.
227. Principal how far
bound, when agent exceeds authority
When an agent does more
than he is authorized to do, and when the part of what he does, which is within
his authority, can be separated from the part which is beyond his authority, so
much only of what he does as is within his authority is binding as between him
and his principal.
Illustration
A, being owner of a ship
and cargo, authorizes B to procure an insurance for 4,000 rupes on the ship. B
procures a policy for 4,000 rupees on the ship and another for the like sum on
the cargo. A is bound to pay the premium for the policy on the ship, but not
premium for the policy on the cargo.
228. Principal not bound
when excess of agent's authority is not separable
Where an agent does more
than he is authorized to do, and what he does beyond the scope of his authority
cannot be separated from what is within it, the principal is not bound to
recognize the transaction.
Illustration
A authorizes B to buy 500
sheep for him. B buys 500 sheep and 200 lambs for a sum of 6,000 rupees. A may
repudiate the whole transaction.
229. Consequences of
notice given to agent
Any notice given or
information obtained by the agent, provided it be given or obtained in the
course of the business transacted by him for the principal, shall, as between
the principal and third parties, have the same legal consequences as if it had
been given toor obtained by the principal.
Illustrations
(a) A is employed by B to
buy from C certain goods, of which C is the apparent owner, and buys them
accordingly. In the course of the treaty for the sale. A learns that the goods
really belonged to D, but B is ignorant of that fact. B is not entitled to
set-off a debt owing to him frm C against the price of goods.
(b) A is employed by B to
buy from C goods of which C is the apparent owner. A was, before he was so
employed, a servant of C, and then learnt that the goods really belonged to D,
but B is ignorant of that fact. In spite of the knowledge of his agent, B may
set-off against the price of the goods a debt owing to him from C.
230. Agent cannot
personally enforce, nor be bound by, contracts on behalf of principal
In the absence of any
contract to that effect, an agent cannot personally enforce contracts entered
into by him on behalf of his principal, nor he is personally bound by them.
Presumption of contract
to the contrary : Such a contract shall be persumed to exit in the following
cases -
(1) Where the contract is
made by an agent for they sale or purchase of goods for a merchant resident
abroad;
(2) Where agent does not
disclose the name of his principal; and
(3) Where the principal,
though disclosed, cannot be sued.
231. Rights of parties to
a contract made by agent not disclosed
If an agent makes a
contract with a person who neither knows nor has reason to suspect, that he is
an agent, his principal may require the performance of the contract; but the
other contracting party has, as against the principal, the same right as he would
have had as gainst the agent if the agent had been the principal.
If the principal
discloses himself before the contract is completed, the other contracting party
may refuse ti fullfill the contract, if he can show that, if he had known who
was the principal in the contract, or if he had known that the agent was not a
principal, he would not have entered into the contract. 232. Performance of
contract with agent supposed to be principal
Where one man makes a
contract with another, neither knowing nor having reasonable ground to suspect
that the other is an agent, the principal, if he requires the performance of
the contract, can only obtain such performance subject to the rights and
obligations subsisting between the agent and other party to the contract.
Illustration
A, who owes 500 rupees to
B, sells 1,000 rupees worth of rice to B. A is acting as agent for C in the
transaction, but B has no knowledge nor reasonable ground of suspicion that
such in the case. C cannot compel B to take the rice without allowing him to
set-off A's debt.
233. Right of person
dealing with agent personally liable
In case where the agent
is personally liable, a person dealing with him may hold either him or his
principal, or both of them, liable.
Illustration
A enters into a contract
with B to sell 100 bales of cotton, and after wards discovers that B was acting
as agent for C. A may sue either B or C, or both, for the piece of the cotton.
234. Consequence of
inducing agent or principal to action belief that principal or agent will be
held exclusively liable
When a person who has
made a contract with an agent induces the agent to act upon the belief that the
principal only will be held liable, or induces the principal to act upon the
belief that the agent only will be held liable, he cannot after wards hold
liable that agent or principal respectively.
235. Liability of
pretended agent
A person untruly
representing himself to be the authorized agent of another, and thereby
including a third person to deal with him as such agent, is liable, if his
alleged employer does not ratify his acts, to make compensation to other in
respect of any loss or damage which he has incurred by so dealing.
236. Person falsely
contracting as agent, not entitled to performance
A person with whom a
contract has been entered into the character of agent, is not entitled to
require the performance of it he was in reality acting, not as agent, but on
his own account.
237. Liability of
principal inducing belief that agent's unauthorized acts were authorized
When an agent has,
without authority, done acts or incurred obligations to third persons on behalf
of his principal, the principal is bound by such acts or obligations, if he has
by his words or conduct induced such third persons to believe that such acts
and obligations were within the scope of the agent's authority.
Illustrations
(a) A consigns goods to B
for sale, and gives him instructions not to sell under a fixed price. C, being
ignorant of B's instructions, enters into a contract with B to buy the goods at
a price lower than the reserved price. A is bound by the contract.
(b) A entrusts B with
negotiable instruments endorsed in blank. B sells them to C in violation of
private orders from A. The sale is good.
238. effect, on
agreement, of misrepresentation or fraud by agent
Misrepresentations made,
or fraud committed, by agent acting in the course of their business for their
principals, have the same effect on agreements made by such agents as if such
misrepresentations of fraud had been made, or committed by the principals; but
misrepresentations made, or fraud committed, by agents, in matters which do not
fall within their authority, do not affect their principals.
Illustrations
(a) A, being B's agent
for the sale of goods, induces C to buy them by a misrepresentation, which he
was not authorized by B to make. The contract is voidable, as between B and C,
at the option of C.
(b) A, the caption of B's
ship, signs bills of lading without having received on board the goods
mentioned therein. The bills of lading are void as between B and the pretended
consignor.
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