INDIAN CONTRACT ACT, 1872

MEANING AND DEFINITION OF CONTRACT

The term “contract” is derived from the latin phrase “Contractum” which means “drawing together. Various authors on the subject have defined the term. Thus Sir Federick Pollock contract as an “agreement and promise enforceable at law” Sir Williams Anson defines a contract as “a legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearances (abstaining from doing something) on the part of the others”Salmond defines contract as an agreement creating and defining obligations between the parties.

Statutory definition of contract

Section 2(h) defines “contract” to mean:“An agreement enforceable by law”An analysis of the aforesaid section reveals that it involves two elements, namely: (i) An agreement and (ii) Its enforceability to law.

Agreement

According to section 2(e) every promise and every set of promises farming the consideration for each other, is an agreement. This shows that in order to became agreement there should be promise or promises. The term “promise” has been defined in section 2(b) to mean “when a person to whom the proposal is made

signifies his assent there to, the proposal is said to be accepted. Thus agreement is:

(i) Offer + Acceptance(ii) Consensus ad idem - Both the parties namely

promisor and promisee must agree to the subject matter of the agreement in the same sense and at the same time.

Enforceability of agreement

The second element of contract is that it must be enforceable law in order to create legal relationship. Thus “all contracts are agreements but all agreement are not a contract”. Thus social or moral agreements does not create a legal relations. For example,A invites B over a lund but and if B does not turn up or A absents himself at the appointed time, none of them can enforce such an agreement. Likewise A and B agrees to go to market to purchase vegitable. B fails to join A. It is a social contract and therefore neither enforceable nor amounts to a “contract”.

KINDS OF CONTRACTS

The contracts may be divided into three broad categories from the following basis:Let us turn to examine them.(i) Mode of creation

(ii) Execution

(iii) Enforceability

(a) Express contract – When a contract is made either by spoken words or in writing (including letters, telegram, telex) it is termed as express contract.(b) Implied contract – When the contract is neither oral or in writing but can be inferred from the conduct of the parties it is known as implied contract.Quasi-contract – Eventhough it is not strictly speaking a contract but is based on equitable principle which mean a person shall not be allowed to return unjust benefit at the expense of others. It is an obligation created by law upon persons for the benefit of another.Executed Contract – A conduct in which the promises of both the parties have yet to be performed.Partly Executory, Partly Executed – A contract in which only one party has performed his obligation, but the other has yet to perform the obligation.Unilateral Contract – A contract in which only one party has yet to fulfill his obligation.Bilateral Contract – A contract in which both the parties have yet to perform their obligations.On the basis of Enforceability1. Valid contract – It is enforceably by law2. Voidable contract – means “an agreement which is enforceable by law at the option of one or more parties other or others” [Section 2(i)]

3. Void Contract – A contract which ceases to be enforceable by law is void contract. [Section 2(j)]4. Illegal contract – A contract which is contract to law5. Unenforceable contract – A contract which does not comply the statutory formalities such as, registration, agreement to be in writing, agreement in the prescribed form time barred debt are said to be unenforceable.

OFFER OR PROPOSAR

Definition

Section 2(a) of the Contract Act defines offer or proposal to mean:

“When one person signifies to another his willingness to do or abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”

Essentials of a proposal

The definition of “proposal” requires that the following three essential

(i) There must be willingness to do or abstain from doing something

(ii) The proposal must be made to another person known as proposee

(iii) The proposal must be made by proposal with a view to obtain assent of proposee.

Essentials of a Valid Offer:

(a) The terms of the offer must be: (i) clear

(ii) certain(iii) definite(iv) complete and(v) final

(b) The offer must be communicated to the offeree. The communication of offer may be made by (a) Express words or (b) Implied by conduct. The communication is complete only when it comes to the knowledge of the offeree.ExamplesExpress offers : A offers to sell his Sampson Colour Television 21" in Rs. 5000Implied Offer : To carry passengers at published fares in D.T.C. Bus from destination to other.(c) If an offerer makes a statement without any intention of creating a binding obligation it would not amount to an offer. It would be one intention to offer.Example An auctioneer advertised that a sale of household goods would take place at specified place, date and time. Seeing the advertisement X traveled down about 100 km to attend the sale but found the household goods were withdrawn from the X claimed compensation from the auctioneer. It was held that auctioneer was not liable because it was only invitation to offer.(d) Where two parties identical offers to each other such offers and none of them may be required to accept the same.

(e) The offer must be made with a view to obtain acceptance thereto.(f) The offer must be made with the intention of creating legal relationship. An offer of a purely social and domestic nature is not a valid offer.(g) The offer must be communicated to the offeree before it can be accepted.(h) Where no time is specified by the offerer within which the offer is to be accepted, the offer does not remain open for an indefinite period. In such a case the offer should be accepted within a reasonable time and such offer lapses after reasonable time. “What is the reasonable” time depends upon the fact and circumstances of each case.(i) An invitation to offer is not an offer.

MODES OF MAKING AN OFFER

An offer can be either:(i) Express

(ii) Implied(iii) Specific or(iv) GeneralExpress Offer means an offer made by words. (It may be written or oral). The written offer includes letters, telegram, telex messages, advertisements, etc. The oral offer may be made either in person or telephone.Example : A offers to sell his Sampson Colour Television of 29" in Rs. 5000.

Implied Offer is an offer made by conduct. It is made by positive acts or signs so that the person acting or making signs means to say or convey something. Silence of a party can not amount to offer by conduct.Example : To carry passenger by Rajasthan Transport Corporation at published fare from Delhi top Jaipur.Offer by Abstinence:An offer can also be made by a party by omission to do something. This includes such conduct or for bearence on ones part, that the other person takes it as his willingness or assent.Specific and General Offers:An offer can be made either to:(i) a definite person or a group of persons.

(ii) the public at large.An offer made either to a definite person or a group of persons is a specific offer. The specific offer can be accepted by that person to whom it has been made. Thus, if a real estate company offers to sale a land to X at a certain price, then it’s only X who can accept it. The offer made to the public at large is a general offer. A general offer may be accepted by any one by complying with the terms of the offer.

General Offer

Carlill v. Carbolic Smoke Ball Co. (1893) 1 Q.B. 256 is a leading case on general offer. In this case Carbolic Smoke Ball Co. an advertisement to pay £100 to anyone who contacts the increasing epidonic influenza or any other disease connected with it, after having used their

smoke ball as per the printed instructions. Mrs. Carlill (plaintiff)) used the smoke ball as per the direction but she nevertheless suffered from influenza. she sued from the Company for £100 was contended by the Company that (i) there was no intention to enter into legal relations (ii) It was not made to any one person in particular (iii) plaintiff has not communicated her intention to accept. The Court rejected the argument and held that (i) it was a general offer (ii) In case like this communication of acceptance is not necessary. The Court accordingly held that the Company was liable to pay £100 to Mrs. Carlill.

Communication of an offer

The communication of an offer is complete when it comes to the knowledge of the person to whom it is made e.g., when the letter containing the offer reaches the offeree.

There is a difference between an offer and invitation to an offer. An advertisement for tenders or for inviting applications for Jobs or prospectus of a company or exhibition of articles in show window by the shopkeeper are mere invitations to deal or invitations to negotiate or they are only invitations to offer and not actual offers. The person who makes invitation to offer has every right to accept the offer or to refuse it.

Standing Offer

Sometimes certain services or goods are asked through tenders. Offers will be said to have been made by

persons who have submitted the tenders. A tender may be of two kinds—

1. definite offer.2. standing offer or continuing offer.

If a tender is submitted for specific goods and for specific quantity, it is a definite offer. When such a tender is accepted a contract comes into existence.But when tender is submitted to supply certain goods for any quantity as and when required it will amount to standing offer or open offer. In such a case contract does not come into existence merely when tender is accepted, but a contract takes place only after the order is placed. Each order in such a case is acceptance and as soon the offer is accepted the contract comes into existence.In Union of India v. Maddalu Thathiah [(1964) 3, S.C.R. 744], The Supreme Court of India held that ..... the standing offer may be revoked at any time, provided that it has not been accepted in the legal sense, and acceptance in legal sense is complete as soon as a requisition for a definite quantity of goods is made. Each requisition by offeree is an individual act of acceptance which creates a separate contract.

Counter Offer

Counter offer means an offer made against the offer. A counter offer cannot constitute an acceptance of an offer. Actually it amounts to rejection of the offer, and so operates to bring it to an end.

Cross Offer

When two offers are made about the same bargain by two parties without knowing each other’s offer are called cross offers and such cross offers do not constitute acceptance of one’s offer, therefore there shall be no contract.

Offer and Invitation to Offer

Lapse or Revocation of an Offer:An offer lapses or is revoked:

(i) on expiry the date mentioned by the offerer. If no date is specified then the offer lapses after a reasonable time.

(ii) by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

(iii) by the death or insanity of the offeree before acceptance.

(iv) when rejected by the offeree.(v) when revoked by the offeror before acceptance by

the offeree.(vi) by not being accepted in the mode prescribed

mode. However, if no made is prescribed, in some usual and reasonable mode.

(vii) when the offeree does not accept the condition.(viii) by counter offer by the offeree.(ix) by subsequent illegality(x) by destruction of subject-matter.

Acceptance

Section 2(b) defines ‘acceptance’ as under:

“when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.”

Rules Regarding Acceptance

A valid acceptance must conform the following rules:1. Acceptance must be given only by the person to

whom the offer is made.2. Acceptance must be absolute and unqualified

[Section 7(1)]3. Acceptance may either be (i) oral (ii) in writing or

(iii) Implied from the conduct4. When acceptance is given by words spoken or

written or by post or telegram, it is called an express acceptance. When acceptance is given by conduct, it is called an implied. For example, tracing the lost child or to enter in a Delhi Transport Corporation (D.T.C.) bus by a passenger.

5. When the proposer prescribes a mode of acceptance, the acceptance must be made accordingly to such a mode.

6. Acceptance must be communicated by the acceptor.

7. The acceptance must be given before the offer is revoked or lapses by reason of offeree’s knowledge of the death or insanity of the offeror.

8. Acceptance must be given after receiving the offer. It should not precede the offer.

9. Mere silence on the part of the offeree does not amount to acceptance.

CONSIDERATION

Consideration is one of the essential elements of a contract. Generally an agreement made without consideration is void. This is however subject to certain exceptions.

Definition of consideration

Section 2(d) defines consideration to mean:

“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 something, such act or abstinence or promise is called a consideration for the promise.”

Essential Element

Consideration involves the following elements:(i) Consideration must move at the desire of the

promisor(ii) Consideration may move from the promiser or any

other person(iii) Consideration may be for:

• doing something or• abstain from doing something or • promise to do something

(iv) Consideration may be:• past• present or • future

(v) It need not be adequate.(vi) It must be real and not illusory.(vii) It must not be something which the promisor is

already legally or contractually bound to do.Exceptions to the Rule, “No Consideration, No Contract”1. Agreement made on account of natural love and affection: An agreement made without consideration is enforceable if, it is(a) in writing(b) registered under law(c) made on the account of natural love and affection(d) between parties standing in a near relation to each

other.

Example

X out of love and affection promises to give Rs. 20,000 and by putting it in writing and getting it registered.2. Agreement to compensate for past voluntary service.3. Agreement to pay a time-barred debt: When there is a agreement, made in writing and signed by the debtor or by his authorized agent, to pay wholly or in part a debt barred by the law of limitation, the agreement is valid even though it is not supported by any

consideration. A time barred debt cannot be recovered and therefore a promise to repay such debt is without consideration, hence the importance of present execution.Essential Elements of a Valid Contract : Section 101. There must be an offer and its acceptance.2. The consent of parties must be free and genuine.3. The parties must intend to create legal relationship.4. The parties must be competent to contract.5. There must be lawful consideration on both sides.6. There must be lawful object.7. The agreement not declared void or illegal.8. The terms of a contract should be clear.9. The performance must not be impossible.10. Legal formalities if any.1. Offer and acceptance. There must be two parties of an agreement, i.e., one party making offer and other party accepting it. The terms of the offer must be definite and the acceptance of the offer must be absolute and unconditional. The acceptance must also be according to the mode prescribed and must be communicated to offeror.

CASE LAW

Intention to create legal relationshipBalfour v. Balfour, (1991) 2 KB 571 the defendant and his wife were enjoying leave in England. When the defendant was due to return to Ceylone, where he was

employed, his wife was advised by reason of her health, to remain in England. The defendant agreed to send her an amount of £30 a month for the probable expenses of maintenance. He did not send the amount for some time, but differences after words arose which resulted in their seperation and allowances fell into arrears. The wife’s action to recover the arrears was dismissed.Lord Atkin explains the principle thus : (a) There are agreements between parties which do

not result in contract(b) Example : (i) when two parties agree to take a walk

together(ii) where is an offer or acceptance of hospitality

(c) these arrangements do not result in contract2. Lawful consideration. An agreement to be enforceable by law must be supported by consideration.” Consideration means an advantage or benefit moving from one party to other. It is the essence of bargain.3. Capacity of parties – Competency. Every person is competent to contract if he (a) Is of the age of majority (b) Is of sound mind (c) Is not disqualified from contracting by any law.4. Free and Genuine consent. It is essential to the creation of every contract that there must be free and genuine consent of the parties to the agreement. There is absence of free consent if the agreement is induced by coercion, undue influence, fraud, misrepresentation etc.

5. Intention to create legal relationship. When two parties enter into an agreement there intention must be to create legal relationship between them if there is not such intention on the part of the parties, there is no valid contract between them. Agreements of social or domestic nature do not contemplate legal relation as such they are not contracts.

Capacity of contract

According to section 10, an agreement becomes a contract if it is entered into between the parties who are competent to contract (a) who is of the age of majority according to the law to which he is subject, (b) is of sound mind, and (c) is not disqualified from contracting by any law to which he is subject. Thus section 11 declares the following persons to be incompetent to contract:

1. Minors.2. Persons of unsound mind, and3. Persons disqualified by any law to which they are

subject.

Minors

Under section 3 of the Indian Majority Act, 1875, a minor is the person who has completed 18 years of age. In the following two cases, he attains majority after 21 years of age:(i) where a guardian of a minor’s person or property

has been appointed under the Guardian and Wards Act, 1890, or

(ii) Where the superintendence of a minor’s property is assumed by a Court of Wards.

The rules governing minor’s agreement are based on two fundamental principles: (i) the law protects minors against their own inexperience and against the possible improper designs of those of more experience years. It has been rightly observed, in supporting of this argument, that “the law protects their (minor’s) person, preserves their rights and estates, excuses their laches (negligence or undue delay such as to disentitle a person to a certain remedy) and assists them in their pleadings; the judges are their Counselors, the jury are their servants and Law is their guardian. (ii) in pursuing the first object, the law should not cause unnecessary hardship to persons who deal with minors.Nature of Minor’s agreement—Section 11 of Indian Contract Act provides that a minor is incompetent to inter into contract. But what will be the nature of minor’s agreement, if entered into, it is not clear from the Act. Upto 1903, there was difference of opinion about the nature of minor’s agreement among Indian High Courts. Certain High Courts used to declare minor’s agreement void and others voidable. In 1903, Privy Council finally settled this controversy by declaring that combined effect of section 10 and 11 is to make minor’s agreement absolutely void.In Mohari Bibi vs. Dharmodas Ghose [(1903) 30 CAl. 539], it was held that Section 11, should be literally construed and that only a person who is of the age of majority is competent to contract. A minor’s contract is

abinitio wholly void. In the same case, the negative proposition of the section construed that “No person is competent to contract who is not of the age of majority according to the law to which he is subject, who is not of sound mind, or who is disqualified from contracting by any law to which he is subject.” In this case, a minor executed a mortgage for Rs. 20,000 and received Rs. 8,000 from the mortgagee. He sued for setting aside the mortgage. Mortgagee wanted refund of sum which he had actually paid i.e. Rs. 8,000. The Privy Council held that as the minor’s contract was absolutely void, no question of refunding money arises in the circumstances. Thus Mohari Bibi’s case decided the minor’s agreement not only void but absolutely void, it is nullity and nonexistent from the very beggining.No ratification—Because minor’s agreement is void abinitio therefore he cannot ratify contracts entered into by him during his minority. A promise by a person on attaining majority to repay money lent during minority cannot be enforced, as consideration furnished during minority is no consideration. But a, he is incapable or understanding it and of forming rational ‘judgment as to its effect upon his interests. Thus, a person of unsound mind cannot enter into a contract. A luanatic’s agreement is therefore void. But if he makes a contract when of sound mind i.e. during lucid intervals, he will be bound by it.Agreements by persons of unsound mind are void. But for necessaries supplied to a lunatic or to any member

of his family, the lunatic’s estate, if any, will be liable. There is no personal liability incurred by the lunatic.If a contract entered into by a lunatic or person of unsound mind is for his benefit, it can be enforced (for his benefit) against the other party [Jugal Kishore v. Cheddu (1903) I All. L.J. 43].(a) Alien EnemiesA person who is not an Indian citizen is an alien. An alien may be either an alien friend or an alien enemy. An alien friend or a foreigner whose sovereign or state is at peace with India, has usually contractual capacity of an Indian citizen. On the declaration of war between his country and India he becomes an alien enemy. A contract with an alien enemy becomes unenforceable on the outbreak of war.(b) Foreign Sovereigns and AmbassadorsForeign sovereigns and accredited representatives of foreign states, i.e., Ambassadors, High Commissioners, enjoy a special privilege in that they cannot be sued in Indian Courts, unless they voluntarily submit to the jurisdiction of the Indian Courts. Foreign sovereign governments can enter into contracts through agents residing in India. In such cases the agent becomes personally responsible for the performance of the contracts.(c) Corporation – The power of Corporation is limited by the Memorandum of Association. If it exceeds such power, the contract shall be ultra vires.

(d) Insolvant : A person who is adjudged as insolvant, whole of his property vests in the official Receiver and he is deprived of all his power to deal with the property.(e) Convict : A convict is incapible of entering into a contract.

Persons of Unsound Mind

It has been observed earlier that in order that a persons may are not competent to enter into a contract he must be of sound mind. Section 12 states that a person is said be unsound mind for the purpose of making a contract, if at the time when he makes it.

VOIDABLE CONTRACT

A voidable contract is one which is enforceable by law at the option of the one or more of the parties thereto, but not at the option of the other or others [Section 2(i)]. According to Anson,” A voidable contract is a contract with a flaw of which one of the parties may, if he pleases, take advantage. Such a party has a right either to repudiate or to elect to carry out the contract in spite of the defect, the other patty having no option in the matter.” thus, a voidable contract remains valid and binding until repudiated by the party having the right to do so.A contract is voidable when one of the parties to the contract has not exercised his free consent. Examples of voidable contracts are those which are induced by coercion (Sec. 15), undue influence (Sec. 16), fraud (Sec. 17), misrepresentation (Sec. 18). Mistake in all these

cases, the person whose consent was not freely given, may avoid the contract.According to Section 10 free consent is an essential element of a valid contract. According to Section 14 consent is said to be free when it is not caused by—(1) Coercion as defined in sec. 15 or(2) Undue influence as defined in sec. 16, or(3) Fraud as defined in sec. 17, or(4) Misrepresentation as defined in sec. 18, or(5) Mistake, subject to the provision of secs. 20, 21, 22

(sec. 14)Let us turn to discuss them.According to Section 10 of Indian Contract Act ‘free consent’ is an essential element to create a valid contract. According to Section 14, consent is free when it is not obtained by coercion, undue influence, fraud, misrepresentation of mistake. Where contract is caused by coercion, undue influence, fraud, misrepresentation, the agreement is voidable at the option of the injured party to the contract. When contract is entered into by mistake the agreement is void which is not enforceable by law.

Meaning and Definition of Coercion

Section 15 of Indian Contract Act defines coercion. According to this section “Coercion is the committing or threatening to commit any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person,

whatever with the intention of causing any person to enter into an agreement.”The explanation to the section explains that it is immaterial whether the Indian Penal Code is or is not inforce in the place where coercion is employed.Thus the consent is said to be caused by coercion when it is caused by pressure by applying following ways:(a) By committing or threatening to commit any act

forbidden by Indian Panel Code.(b) By detaining unlawfully or threatening to detain

any property.

Essentials of Coercion

On analysing this definition of coercion under Section 15, the following elements can be deducted:(1) Committing any act forbidden by Indian Penal

Code.(2) Threatening to commit any act forbidden by

Indian Penal Code.(3) Unlawfully detaining any property to the prejudice

of any person whatever.(4) Unlawfully threatening to detain any property to

the prejudice of any person whatever.(5) To commit above acts, with the intention of causing

any person to enter into an agreement.The Act should be fobidden by Indian Penal CodeSection 15 requires that the act should be forbidden by Indian Penal Code.

2. UNDUE INFLUENCE

DefinitionSection 16(1) defines “undue influence” as under:A contract is said to be induced by influence, where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.(2) a person is said to be able to dominate the will of another;(a) When 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 another, enters into a contract with him, and the transaction appears on the face of it or on evidence adduced to be unconscionable, the buden 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.The principle of undue influence has requires:(i) Relation between the parties are such that one of

the parties is in a position to dominate the will of the other;

(ii) The dominent party was uses that position to obtain unfair advantage over the other; and

(iii) Infact unfair advantage has been obtained.The relationships which raise a presumption of undue influence, are as follows:(a) Where he holds a real or apparent authority over

the other;(b) Where he stands in a fiduciary relationship; and(c) 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.

Real and apparent authority may arise due to inequity of the status of the parties as police officer and culprit, income tax officer and a tax payer.Fiduciary relationship exists where one party reposes blind faith or utmost faith on the other i.e., Religious guru and disciple, teacher and taught, doctor and patient, father and son.

FRAUD

International misrepresentation of facts is known as “fraud”.Fraud has become the accepted term to describe how to steal money using information and a smile instead of a weapon. Committing fraud requires lying, abuse of trust and a cover up.According to section 17:“Fraud” means and includes any of the following acts

(1) committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another thereto or his agent, or to include him into the contract:-(i) The suggestion, as a, fact, of that which is not true,

by one who does not believe, it to be true;(ii) The active concealment of a fact by one having

knowledge or belief of the fact;(iii) A promise made without any intention of

performing it;(iv) Any other act intended to deceive;(v) Any such act or omissions the law specially

declares to be fraudlent.Can silence be fraudulent?The Explanation to section 17 provides that mere silence as to fact likely to effect the willingness of the person to enter into a contract is not fraud, unless (i) the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his (ii) silence is, in itself, equivalent to speech.Active concealment [S. 17(2)]In active concealment a party takes positive steps to prevent the information to reach the other party and this is a fraud.Passive concealment means mere silence as to material facts. Mere silence, excepting a few cases, does not amount to fraud. Concealment by mere silence is no fraud.

False impression is ordinarily conveyed on deliberate misstatement of facts. But it may also be done by concealment of material fact.When silence is fraud.Silence may become deceptive to certain cases;1. Duty to speaks Contract Uberima Fides:-When person-keeping silence is under duty to speak, which arises when one contracting party reposes trust and confidence in other. In the absence of any such relationship there is no duty to speak and mere silence, even if it amounts to misrepresentation, will be no fraud.For Eg:- Haji Ahmad Yarkhan vs Abdul Gani Khan.2. Where Silence is deceptive:-Silence is sometimes itself equivalent to speech. A person who keeps silent, knowing that his silence is going to be deceptive, is no less guilty to fraud.For Example:- a buyer asked the seller whether the horse is sound, and the seller remains silent. This is fraud if the horse is unsound.3. Change of circumstances:-Sometimes a representation is true when made, but on account of a change of circumstances, becomes false when it is actually acted upon by the party. In such cases it is the duty of the person who made the representation to communicate the change of circumstances.For eg:- Change of Director before and after the signing of the contract.

4. Half Truth:-Even when a person is under no duty to disclose the fact, he may become guilty of fraud by non-disclosure if he voluntarily discloses something and then stops half the way. A person may keep silence, but if he speaks he has to speak the whole truth.Distinction between fraud and misrepresentation1. Fraud is intentional wrong, whereas misrepresentation may be quiet innocent.2. Fraud in addition to rendering the contract voidable, is a cause for action in tort for damages. Simple misrepresentation is not a tort but under Section 25 of the contract act “a person who rightfully rescinds a contract is entitled to ant damage which he has sustained through the non-fulfillment of contract”.3. A person complaining of misrepresentation can be met with a defense, but accepting fraud by silence, it does not lie in the mouth of the person committing fraud to say that his victim was too easily deceived or had the means of discovering the truth.4. MisrepresentationSection 18 of the Indian Contract Act defines misrepresentation.Misrepresentation means and includes (i) 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.(ii) Any breach of duty which, with any intent to deceive, gains an advantage to the person committing it

or any one claiming under him, by misleading another to his prejudice or to the prejudice of any one claiming under him.(iii) Causing, however innocently, a party to an agreement to make a mistake as to substance of the thing which is the subject of the agreement.Essential elements of misrepresentation—The misrepresentation consists the following things:(1) Positive statement—If a person makes an absolute and explicit statement of fact without any reasonable basis, which is not true, but he believes it to be true, it is misrepresentation. In Darry vs. Peek [(1889), 14 A.E. 337], a company was authorised by an act of parliament to run trams by steam powers but when permitted by board of trade. The company applied for the permission of the board and it was thought that the permission of the board was mere formality, permission will be received in all cases. On the basis of this belief, the company issued prospectus and represented that company was authority to run trams by steam power. On the basis of this representation plaintiff purchased some shares, later on board of trade refused permission for the use of steam power, the plaintiff contented that directors made an untrue statement, therefore they committed fraud. But the House of Lords held that directors were not guilty of fraud, because after being authorised by the Act they honestly believed that they would receive permission of the board, no doubt the representation in the prospectus was not based on

reasonable grounds, therefore, they are guilty for misrepresentation and not or fraud.(2) Breach of duty—If a person commits a breach of duty on account of which he gains something, while the other party loses, it will be misrepresentation if it has not been done with the intention to deceive someone.(3) Causing mistake about subject-matter—If on account of misrepresentation of a fact though not fraudulent, the other party commits a mistake about something which is essential to the contract, it will be treated as misrepresentation.Similarly misrepresentation may arise by supressing or nondisclosure of material facts. Case of concealment of facts may fall under Sub-sec. 2, when it amounts to breach of duty. It may fall under Sub-sec. 3 when it leads to other party to commit mistake about the subject-matter of the contract.(4) Misrepresentation of material facts—Misrepresentation should be of facts material to the contract.Misrepresentation will entitle the injured party to the following rights:1. Right to rescission—Injured party, if he so likes, may repudiate the contract, but he will lose this right in the following circumstances:(A) Where he had the means to discover truth by such

ordinary deligence as a prudent man would do in similar circumstances;

(B) Where the party entered into contract in ignorance of the misrepresentation;

(C) Where after the knowledge of misrepresentation injured party affirmed the contract; and

(D) Where the interest of the third party has intervened before the exercise of the right of rescission of the contract by the party entitled to do so.

2. Right to claim damages—In the following circumstances the injured party may claim damages:(A) Where misrepresentation was embodied in the

contract as a condition or a warranty, damages can be claimed for breach of condition or warranty; and

(B) Promoters of company shall be liable for damages to the injured party if the prospectus contains any misrepresentation.

5. MISTAKE

Meaning of Mistake [Section 20]The Contract Act does not define the term “mistake”. However it is an errorneous belief concerning something.

Types of Mistake

The mistake can be of two types: (i) Mistake of Law and (ii) Mistake of Fact

I. Mistake of Indian Law

Every one is deemed to be conversant with the law of his country and hence the maxim “ignorance of law is no excuse”. Mistake of law, does not give right to the parties to avoid the contract. Section 21 provides that “a contract is not voidable because it was caused by a mistake as to any law in force in India.” In other words, the contract is not voidable because everyone is supposed to know the law of his country. Accordingly, no relief can be granted on the ground of mistake of law of the country.

II. Mistake of Fact

Mistake of Fact can be two types:(1) Bilateral Mistake(2) Unilateral Mistake

Bilateral Mistake

“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”.The following three conditions must be satisfied before declaring a contract void under this section:(i) Both the parties must be under a mistake i.e., the

mistake must be mutual. Both the parties should understand each other so as to nullifyconsent.

(ii) Mistake must relate to some fact and not to judgement or opinion etc. An erroneous opinion as to the value of the thing, which forms the subject matter of the agreement, is not to be deemed a

mistake as to a matter of fact (Explanation to Section 20).

(iii) The fact must be essential to the agreement i.e., the fact must be such which goes to the very root of the agreement. On the basis of judicial decisions, the mistakes which may be covered under this condition may broadly be put into the following heads:

(a) Mistake as to the existence of the subject matter of the agreement. If at the time of the agreement and unknown to parties, the subject matter of the agreement has ceased to exist, or if it has never been in existence, then the agreement is void (Bell Vs Lever Bros.).

(b) Mistake as to the identity of the subject matter. Where both parties are working under a mistake as to the identity of the subject matter i.e., one party had one thing in mind and the other party had another, the agreement is void for want of consensus-ad-idem.

(c) Mistake as to the title of the subject matter.(d) Mistake as to the quantity of the subject matter.

If both the parties are working under a mistake as to the quantity of the subject matter, the agreement is void.

(e) Mistake as to the quality of the subject matter. If there is a mutual mistake of both the parties as to the quality of the subject matter i.e., if the subject matter is something essentially different,

from what the parties believed it to be, the agreement is void.

(f) Mistake as to the price of subject matter. If there is mutual mistake as to the price of the subject matter, the agreement is void.

Bilateral Mistake as to the Possibility of performance

The agreement is void when there is a bilateral mistake as to the possibility of performance. In other words, where the parties to an agreement believe that the contract is capable of performance, while in fact it is not so, the agreement is treated as void. The impossibility may be either physical or legal.

Legal Impossibility

A contract is void if it provides that something shall be done which cannot, as a matter of law, be done.Thus, Mistake of fact (Bilateral Fact) may relate to:Subject Matter: Mistake of fact regarding subject-matter may relate to:

1. Mistake as to the existence o subject matter2. Mistake as to the quantity of subject matter3. Mistake as to the quantity of subject matter4. Mistake as to the identity of subject matter5. Mistake as to the title of subject matter6. Mistake as to the price of subject matter

Possibility of performance: Mistake of fact may also relate to physical, or legal, impossibility of performance.

Unilateral Mistake

The term ‘Unilateral Mistake’ means where only one of the party to the agreement is under a mistake. Such a contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to matter of fact. (Section 22)

Effect of Mistake

The effects of mistake are as follows:

(a) Bilateral Mistake as to essential fact The agreement is void

(b) Unilateral Mistake(i) as to the identity of the person contracted with.

The agreement is void.(ii) as to the nature of contract. The agreement is void.(iii) as to other matter The agreement is not

void.(c) Obligation of aggrieved party He must restore

any benefit received by him under the contract to the other party from whom the benefit has been received. (Section 64)

(d) Obligation of other party The person to whom money has been paid or anything delivered by mistake must repay or return it. (Section 72)

VOID CONTRACT

Section 10 of Indian Contract Act provides that all agreements are contract, if they are made by free consent of parties competent to contract, for a lawful consideration and with lawful object and are not expressly declared void.There are certain agreements which have been declared void by the Act. These agreement are as follows:(1) Agreements made by incompetent partiesAccording to Section 11 of the Contract Act “Every person is competent to contract who is of the age of the majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject. Thus, following three kinds of persons are incompetent to enter into a contract. A minor, a person of unsound mind and a person disqualified from contracting by any law in force.(2) Agreement made under common and mutual mistake of factAccording to Section 20 of the Act, “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.” It is a common mistake and in such circumstances an agreement is void. Similarly in mutual mistake, where there is absence of consent, i.e., where there is no consensus ad idem, e.g., mistake as to identity of person, mistake as to identity of subject-matter and mistake as to nature of transaction are void.

(3) Agreement, the consideration or object of which is unlawfulSection 23 of Act provides that the consideration or object is unlawful if—• It is forbidden by law; or• It is of such nature, if permitted, it would defeat the

provisions of law, or• It is fraudulent; or• It involves injury to the persons 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 the consideration or object or which is unlawful is void.(4) Agreement the consideration or object of which is unlawful in partAccording to Section 24 of the Act, “Agreement of which consideration or object is unlawful in part, is void subject to the following rules:(i) If the legal part of the agreement cannot be

separated from the illegal part then—(a) If there are several objects, but a single

consideration the agreement is void, if any one of the objects is unlawful.

(b) If there is a single object but several considerations the agreement is void, if any one of the consideration is unlawful.

According to Section 57 of the Act—(ii) Where there is a reciprocal promise to do some

things legal and other things illegal and the legal part can be separated from the illegal part, the legal part is a contract and illegal part is void agreement.

(iii) Where in an alternative promise, one branch of which is legal and the other illegal, the legal branch can be enforced.

(5) Agreement made without considerationSection 25 of the Indian Contract Act declares that an agreement made without consideration is void. There are three exceptions to this general rule. They are as follow:(i) Agreement made for natural love and affection.

For such agreement, it is further necessary that it should be in writing and registered.

(ii) If it is a promise to compensate past voluntary services.

(iii) Agreement to pay time-barred debt. For such agreement also it is necessary that the promise should have been made in writing and signed by promiser.

(6) Agreement in restraint of marriageAccording to Section 26 every agreement in restraint of marriage of any person other than a minor is void. To restrict the freedom of marriage would be against the public policy and therefore void. In India no distinction

is void, where as in England agreement for partial restriction is not void.(7) Agreement in restraint of tradeAccording to Section 27 of the Indian Contract Act, an agreement by which any one is restrained from exercising lawful trade or business of any kind is to that extent void. As per this section, any restriction, whether partial/general or qualified/unqualified, is void.Sale of goodwill: As per the exception to Section 27 of the Contract Act, the seller of goodwill of a business may agree with the buyer to refrain from carrying on a similar business so long as the buyer or his agent carries on a similar business within specified local limits and the restrictions are reasonable.Partners agreement: As per the provisions of the Partnership Act:A partner may agree not to carry on any business other than that of the firm so long as he is a partner;Service agreements: An agreement of service by which a person binds himself during the period of service not to take any service with any one else or not to compete with the business of the employer is void even though it is in restraint of trade.Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.(8) Agreement in restraint of legal proceedingAgreement which tends to pervent the course of justice is void because of illegality of object. Justification of

court cannot be retricted by an agreement. It is not the policy of law to restrict a person from enjoying the right of resorting to a court of law for relief. According to Section 28 “Every agreement by which any party thereto is restricted absolutely from enforcing his rights under of in respect of any contract by the usual legal proceedings in the ordinary tribunals of which limits the time within which be may thus enforce his rights is void to that extent.”They are two exceptions to this rule—namely,(i) Agreement to refer a future dispute to Arbitration,

(ii) Agreement to refer a present dispute to Arbitration.

(9) Agreement the meaning of which is uncertainAccording to Section 29 “Agreement, the meaning of which is not certain of capable of being made certain, is void.”(10) Agreement by way of wagerAgreements by way of wager are void.Meaning of Wagering Agreement—Section 30 of Indian Contract Act deals with the wagering agreements. According to this section “Agreements by way of wager are void, and no suit shall be brought for recovering anything alleged to be won on any wager of entrusted to any person to abide by the result of any game or other uncertain events on which any wager is made.”In Gheru Lal vs. Mahadeo [(1959) 2 S.C.A. 342], Justice Subba Rao said, “Sir William Anson’s definition of ‘wager’ as a promise to give money of money’s worth

upon the determination of ascertainment of an uncertain event, brings out the concept of wager declared void by Section 30 of Indian Contract Act.

Essential of wager

(1) Uncertain event;(2) Multual chance of gain or loss;(3) Neither party to have control over the events;(4) No other interest in the event;(5) The gain of one party must be the loss of other;(6) Promise must have been made with an intention to gamble.(11) Agreement to do an impossible Act(For details please see next question.)

Example

A agrees with B that if there is rain or a certain day, A will pay B Rs. 50 and if there is no rain B will pay A Rs. 50. The agreement is of a wagering nature.

ELEMENTS OF WAGERING AGREEMENTS

(a) Uncertain events—The performance of agreement must depend upon uncertain events. Anson has pointed out, “An event may be uncertain, not only because it is a future event, but because it is not yet ascertained at any rate to the knowledge of the parties.” Cheshire and Fiffot have also pointed out in the same way. Thus event, on which a wagering agreement is made, may be uncertain on account of any of these two reasons—(i) The event has not happed so far; and

(ii) If has already happened, the parties are ignorent of the result.

(b) Equal chance for gain or loss—Another element of wagering agreement is that both the parties must have equal chance of winning or losing. If one party is to gain in all circumstances, then it will not be a wagering agreement. The gain of one party should be the loss of other party i.e., there should be mutuality.

QUASI CONTRACTS

Basis(1) Quasi Contract Rests Upon Equitable “Doctrine Of Unjust Enrichment” which declares that a person will not be allowed to enrich himself unjustly at the expence of another. Duty and not A Promise or Agreement Isthe Basis of such Contracts.What is a Quasi ContractUnder certain special circumstances although the parties have never entered into a Contract such obligations imposed by Law are reffified to as Quasi Contracts.Under the English Law and certain relations resembling those created by Contract under the English Law such a Contract Resembles with a Contract so far as Result or Effect is concerned but it has little or no affinity with a Contract in respect of Mode or Creation.A Quasi Contract Rests upon equitable “Doctrine of Unjust Enrichment”

4. Responsibility of finder of goods (Sec. 71). A person who finds goods belonging to another and takes them into his custody, is subject to the same responsibility as a bailee. 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, quality and value as the goods bailed.It is the duty of the finder of lost goods to trace the true owner. He must take all necessary measures in this regard. If he does not take these measures, he will be guilty of criminal misappropriation of the property.But till the true owner is found out, the property in goods will vest in the finder and he can retain it as his own against the whole world (except the true owner, of course).The finder can sell the goods—(a) where the owner, with reasonable diligence, cannot

be found out;(b) where the owner is found out, but he refuses to pay

the lawful charges of the finder;(c) where the thing is in danger of perishing; and(d) where the lawful charges of the finder, in respect of

the thing found, amount to two-thirds of its value.5. Liability of person to whom money is paid or thing delivered by mistake or under coercion (Sec. 72). A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or

return it. In India mistake includes mistake of fact as well as mistake of law.

Breach of contractThe breach of contract means failure of a party to perform his obligation. When one party commits a breach, the aggrieved party becomes entitled to rescind the contract. It therefore, operates as a mode of discharging a contract.

Actual Breach

Actual breach of contract means failure of party to perform his contractual obligation on the due date of the performance, or during the performance he is said to have committed a breach up the contract. Sometimes a party performs his obligation, but not strictly according to the contract, it is also an actual breach of contract.

Examples

1. A promise to supply B 200 Soni Television on Aug 9th 2008. A does not supply the television on 9th Aug. Here A failed to perform on the due date. He is guilty of breach of contract and B is the aggrieved party.

Effects of Actual Breach

When a party commits breach of contract, the aggrieved party can rescind the contract and sue for the damages.

Example

In the first example above B can avoid the contract and claim from A, damages by him because of non delivery of 200 T.V. However, if a supplies the T.V. on 10th of Aug. instead of 9th of Aug. B cannot refuse to accept the same but he can claim for compensation from A, if he has suffered any loss because of this late delivery.

Anticipatory Breach

When a party to a contract has refuse to perform or disabled himself from performing his promise in its entirety, the promise may put an end to the contract, unless he has signified by words or conduct his acquiescence in its continuance.It may be happen in two ways

Express breach

Where a party to the contract communicates to the other party before the due date of performance about his intention not to perform it.

Implied breach

Where a party, by his own voluntary acts disables himself from performing a contract.

Example

A agrees to marry B but before the due date of marriage she marries C. This is an anticipatory breach brought by the party.

1. By the promisor himself. In the case of a contract involving personal skill, taste of credited, a contract to paint a picture, a contract of agency or service; the

promisor must himself perform the contract. Section 40 state thus, “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 should be performed by the promisor himself, such promise must be performed by the promisor”.Illustration. A promises to paint a picture for B, A must perform this promise personally [illustration (b) sec. 40]2. By the promiser or his agent. In the case of a contract of impersonal nature; e.g., a contract of sale of goods or a contract to lend a sum of money; the promisor himself or his agent may perform the contract [section 40 clause (2)]3. By the legal representatives. In case of the death of the promisor before performance, the liability of performance falls on his legal representatives, unless a contrary intention appears from the contract [section 37 clause (2)]. In the case of contracts not involving personal considerations, the legal representatives are bound to perform the contract. But their liability is limited to the estate of the deceased that has come to their hands, in case of breach of contract. They are not personally liable.Illustrations (to sec. 37)(a) A promise 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.4. Performance by a third person. Section 41 lies down that if promisee accepts performance of the promise

comes from a third person; he cannot afterwards enforce it against the promisor. Thus where a promisee accepted lesser amount from a third party in full satisfaction of his claim, it was held that he couldn’t enforce the promise against the promisor (Lala Kapurchand vs. Mir Nawab Azamjah). Notice that under this section performance of the promise by a stranger, once accepted by the promesee, discharges the promisor, although the latter has neither authorized nor ratified the act of the third party.

Performance of joins promises

Joint promises may take any of the following shapes:(i) Where several joint promisors make a promise

with a sin promesee, e.g., A, B and C jointly promise to pay Rs. 3,000 to D, or

(ii) Where a single promisor makes a promise with several joint promises, e.g., promises promises to pay Rs. 3,000 to Q and R jointly or

(iii) Where several joint promisers make a promises with several joint promises, e.g., A, B and C jointly promises to pay Rs. 3000 to P, Q and R jointly.

We have earlier seen as to “who can demand performance”, and “by whom contracts must be performance when there is a agreement between a single promiser and single promisee. We now attempt to answer the aforesaid questions in the case of joint promisers.Who can demand performance of joint promises?

REMEDIES FOR THE BREACH OF CONTRACT

When a contract is broken the injured party has one or more of the following remedies(1) Rescission of the contract(2) suit for damages(3) suit upon quantum meruit(4) suit for the specific performance of the contract(5) suit for injunction(1) Rescission of the contractWhen a contract is broken by one party the other party may sue to treat the contract as rescinded and refuse further performance of the contract. In such case he is absolved of all his obligations under the contract.The court may grant recession:(a) where the contract is voidable by the plaintiff.Time and place for performance of promise, where time is specified and no application to be madeWhen 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 on 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.

Application for performance on certain day to be at proper time and placeWhen 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.Place for the performance of promise, where no application to be made and no place fixed for performanceWhen 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 undertakes 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.Performance, in manner or at time prescribed or sanctioned by promiseeThe performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions.

(b) where the contract is unlawful for cause not apparent on its face and the defendent is more to blame than the plaintiff.The court may however refuse to rescind the contract:(a) where the plaintiff has expressly or impliedly ratified the contract.(b) where owing to the change of circumstances the parties cannot be restored to their original position.(c) where the third parties have during the subsistence of the contract acquired right in good faith for value.(d) where only a part of the contract is sought to be rescinded and such part is not severable from the rest of the contract.(2) Suit for damages:Damages are monetary compensation allowed to the injured party by the court for the loss or injury suffered by him by breach of a contract. The object of awarding damages for the breach of contract is to put the injured party in the same position so far as money can do it, as if he had not been injured. This is called the doctrine of restitution.Damages can be provided in the following ways:(1) Damages arising naturally-ordinary damages.When a contract has been broken, the injured party can recover from the other party such

4. Audit

Is assured that the Board of Directors and its committees are adequately and currently informed

through reports and other methods of the conditions of the Association.Is assured that published reports properly reflect operating results and the financial condition of the Association.Ascertains that management has established appropriate policies to define and identify conflicts of interest throughout the Association, and is diligently overseeing the enforcement of those policies.Approves independent auditors.Reviews compliance with relevant material laws affecting the Association.5. Additional Responsibilities for Specific Directors• Secretary.• Treasurer.• Chair, Chapter Cabinet.• Chair-Elect, Chapter Cabinet.• Chair, Division Cabinet.• Chair-Elect, Division Cabinet.Quantum MeruitThis term means as much as earned. A right to sue on a quantum meruit arises where a contract partly performed by one party has become discharged by breach of the contract by other party. The right is founded not on the original contract which is discharged or is void but on an implied promise by the other party to pay what has been done.Specific Performance

In certain cases of breach of contract damages are not an adequate remedy. The court may direct the party in breach to carry our his promise according to the terms of the contract.Some of the cases in which specific performance of a contract may, in the discretion of the court, be enforced are as follows:(a) when the act agreed to be done is such that

compensation in money for its non-performance is not a adequate relief.

(b) where there exist no standard for ascertaining the actual damage caused by non performance of the act agreed to be done.

(c) when it is possible that the compensation in money cannot be got for the non-performance of the act agreed to be done.

Specific performance will not be granted where(a) damage are an adequate remedy(b) the contract is not certain(c) the contract is in its nature revocable(d) the contract is made by trustees in breach of their trust(e) the contract is of a personal nature(f) the contract is made by company in excess of its power as laid down in memorandum of association(g) the court cannot supervise its carrying outInjunction

Where a party is in breach of negative term of a contract the court may by issuing order, restrain him from doing what he promised not to do. Such an order of court is known as injunction.The grant of injunction by the court is normally discretionary but there seems no reason why the court should refuse the grant of an injunction to restrain the breach of contract.(a) whereby a promisor undertakes not to do

something e.g. not to carry on a certain trade.(b) which is negative in substance though not in form.

National Fertilizers Ltd. and Anr. v. P.K. Khanna 668National Union of Commercial Employees v. M.R. Mehar 158Neeta Kaplish v. Presiding Officer, Labour Court 642Newspapers Ltd. v. State Industrial Tribunal, Uttar Pradesh 271Northbrook Jute Company v. Their Workmen296North-eastern Railway Employees’ Union v. Registrar of Trade Union 112Oswal Agro Furane Ltd. v. Workers Union 547People’s Union for Democratic Rights v. Union of India

50Philips Workers’ Union v. Registrar, Trade Unions 116Physical Research Laboratory v. K.J. Sharma177Prafulla Mohan Das v. Steel Authority of India301Punjab & Sind Bank v. Sakattar Singh 638

Punjab Diary Development Corpn. Ltd. v. Kala Singh640

Punjab National Bank v. Their Employees 389R.M. Yellatti v. The Asst. Executive Engineer 518Rajasthan SRTC v. Zakir Hussain 337Rajasthan State Road Transport Corporation v. Krishna Kant & Others 702,732Ram Avtar Sharma & Anr. v. State of Haryana & Anr.

353Ram Lakhan v. Presiding Officer 574Ratan Kumar Dey v. Union of India 120Regional Manager, State Bank of India v. Rakesh Kumar Tiwari 557, 689Remington Rand of India Ltd. v. The Workmen367Rohtak & Hissar Electric Supply Co. v. State of U.P.

703Rohtas Industries Ltd. v. Rohtas Industries Staff Union

136S.G. Chemicals & Dyes Trading Employees Union v. S.G. Chemicals &

Dyes Trading Ltd. 44, 541S.K. Maini v. M/s Carona Sahu Company Limited 233S.K. Verma v. Mahesh Chandra 218Santosh Gupta v. State Bank of Patiala 465Scooters India Ltd. v. M. Mohammad Yaqub 719Secretary, Indian Tea Association v. Ajit Kumar Barat

361

Secretary, State of Karnataka and Others v. Umadevi and Others 88Shahdara (Delhi-Saharanpur Light Railway Company Ltd. v. Shahdara—Saharanpur Railway Workers’ Union 709Shri Rameshwar Manjhi (Deceased) v. Management of Sangramgarh Colliery 287Shukla Manseta Industries Pvt. Ltd. v. The Workmen

372Sirsilk Ltd. v. Government of Andhra Pradesh364Sonepat Co-operation Sugar Mills Ltd. v. Ajit Singh

262State Bank of India v. N. Sundara Money 462State Bank of India v. Workmen of State Bank of India

434State of Bombay v. K.P. Krishnan 346State of Gujarat v. Pritamsingh Narsin Parmar197State of Haryana v. Om Prakash 496State of M.P. & Ors. v. Arjunlal Rajak 497State of Madhya Pradesh v. Onkar Prasad Patel742State of Madras v. C.P. Sarathy 342State of U.P. v. Brijpal Singh 609State of U.P. v. Jai Bir Singh 191Sub-divisional Inspector of Post, Vaikam v. Theyyam Joseph 175Sur Enamal and Stamping Works v. The Workmen

493

Surendra Kumar Verma v. Central Government Industrial Tribunal—Cum—

Labour Court, New Delhi 468Surendranagar District Panchayat v. Jethabhai Pitamberbhai 486T.T. Devasthanam v. Commissioner of Labour105T.K. Rangrajan v. Government of Tamil Nadu422Tamil Nadu Electricity Board Accounts And Executive Staff Union v.

Tamil Nadu Electricity Board 111Tata Workers Union v. State of Jharkhand 132Telco Convoy Drivers Mazdoor Sangh v. State of Bihar

357The Haryana Sate Agriculture Marketing Board v. Subhash Chand & Anr. 482The Haryana state Agricultural Marketing v. Subhash Chand & Anr. 694The Management of Bhurkunda Collery of M/s Central Coalfields Ltd. 525The Statesman Ltd. v. Their Workmen 404The Workmen of Bhurkunda Colliery of M/s Central Coalfields Ltd. v. U.P. State Bridge Corpn. Ltd. v. U.P. Rajya Setu Nigam S. Karamchari Sangh 407, 521U.P. State Electricity Board v. Shankar Jain 705U.P. State Textile Corporation Ltd. v. P.C. Chaturvedi and Ors. 663

Union of India v. Kankuben (Dead) by LRS and Others615

Uptron India Ltd. v. Shammi Bhan 472, 728

Essential of valid Tender

1. It must be unconditional2. It must be made at proper time and place3. It must be of the whole obligation4. If the tender relates to delivery of goods reasonable

opportunities to the promissor for inspection5. It must be made by a person who is willing to

perform6. It must be made to the proper person7. If there are joint promises an offer to anyone of them

is.8. Tender of money must be left teder eg. currency not.

Discharge of Contract

A contract may be discharged by –1. Performance2. Mutual consent3. Subsequent impossibility4. Lapse of time5. Operation of law6. Breach of contract

1. Discharge of Contract by Performance or Tender

The most usual mode of discharge of a contract is by performances of contract. Performance may be (i) Actual or (ii) Attempted.Actual Performance : When the party to a contract fulfils his obligation on within the time schedule and prescribed manner it would be actual performance.Attempt Performance : The tender or offer or performance has the same effect as performance. If a promisor tenders performance of his promise but the other party refuses to accept it, the promisor stands discharged of his obligations.

Discharge of Contract by Mutual Consent

If the parties to a contract agree to substitute a new contract for it, or to rescind it or alter it, the original contract is discharged.A contract may terminate by mutual consent in any of the six ways –• Novation -

It means substitution of a new contract for the original one. The new contract may be substituted either between the same parties or between different parties.

• Rescission -It means cancellation of all or some terms of the contract. When parties mutually decide to cancel all or some of the terms of the contract, the obligation of the parties there-under terminates.

• Alteration -

If the parties mutually are to change certain terms of the contract, it has the effect of terminating the original contract. There is however no change in the parties.

• Remission -It is the acceptance of a lesser sum than what was contracted for or a lesser fulfillment of the promise made.

• Waiver -It means relinquishment or abandonment of a right. Where a party waives his rights under the contract, the other party is relieved of his obligations.

• MergerA contract is said to have been discharged by way of merger when an inferior right possessed by a person coincides with a superior right of the same person.

Discharge of Contract by Impossibility of Performance

A contract may be discharged because of impossibility of performance. There are two types of impossibility –

(i) impossibility may be inherent in the contract(ii) Impossibility may emerge later by change of

certain circumstances material to the contract.“Subsequent or Supervening Impossibility”When a contract originates as one capable of performance but later due to change of circumstances its performance becomes impossible, it is known to have become void by subsequent or supervening impossibility.

Circumstances of Supervening Impossibility:-(a) Destruction of Subject matter of contract –

Where the subject matter of the contract is destroyed for no fault of the promisor, the contract because void by impossibility of performance.

(b) By death or disablement of parties –Where the performance of the contract must be executed personally by the promisor, then his death or physical disability to perform shall render the contract void and thus exonerate him from the obligation.

(c) Subsequent illegality –Where by subsequent legislation, the performance of a contract is forbidden by law, the parties are absolved from the liability to perform it.

(d) Declaration of war –If a war is declared between two countries subsequent to the making of a contract, the parties would be exonerated from its performance.

Discharge of Contract by Operation of Law

A contract can be discharged by operation of law on the following cases –• By death

If death happens to any of the parties to a contract, then the contract stands discharged only if the work done was of a personal nature.

• By insolvency

When a party to a contract becomes insolvent he is exonerated from all obligations as per a contract and the contract stands discharged. This happens only when the party produces an insolvency certificate from an insolvency court.

• By mergerWhen a contract merges with another contract of similar repercussions, but with bigger scope, then the original contract stands discharged.

• By unauthorized alteration of terms of contractIf one party to a contract alters some terms of a contract without the knowledge of the other party, or a term which is illegal in the eyes of law, then the contract stands discharged.

Discharge of Contract by Breach

Breach of Contract is one party’s failure without a legal excuse to live up to any of its promises under a contract.The performance is not excused by:

• Tender• Mutual Consent• Impossibility• Operation of Law

There are two types of Breach of Contract –• Anticipatory Breach• Actual Breach

Anticipatory Breach of Contracts (Breach by repudiation)

When a party repudiates the contract before the time fixed for performance has arrived or when a party by his own act disables himself from performing the contract.The sufferer may decide to:• Sue at once• May decide to treat it as operative and wait till due

date of performanceActual Breach of ContractsIt occurs by failure to perform as promised or making it impossible to the other party to perform.It may take place in three ways:• Failure to perform at due date• Failure during performance• Making it impossible for the other party to perform

Remedies to Breach of Contract

A remedy is the courses of action which are available to an aggrieved party for the enforcement of a right under a contract.The various remedies available are:• Rescission of contract• Suit for damages• Suit for specific performance• Suit for Injunction• Suit for Quantum Meruit

Suit for Damages

The suit for damages may be:

• Ordinary/General or compensatory damages• Special Damages• Exemplary, Punitive or Vindictive damages• Nominal damages• Liquidated Damages

UNIT SALE OF GOODS ACT

Structure

DEFINITION

Sections 4(1) of the Sale of Goods Act define a contract of sale of goods as “a contract whereby the seller transfers or agree to transfers the property in goods to the buyer for a price.”An analysis of the aforesaid definition reveals the following essential.Essential Elements of Contract of Sale:

Parties to the Contract of Sale

There be must be two distinct parties to a contract of sale, namely,(i) buyer and

(ii) sellerA buyer is defined under section 2(1) to mean a persons who buys or agree to buy goods. Likewise a seller is defined under section 2(13) to mean a person who sells or agree to sell the goods.

SUBJECT-MATTER OF CONTRACT OF SALE

To form the subject-matter of a contract of sale is “goods” Section 1(7) defines ‘goods’ mean every kind of movable property other than actionable claim and money: It includes stocks and shares, growing crops grass and things attached to our forming part of the land which are agreed to be served before sale or under

the contract of sale. It also includes Trade marks, copyrights, goodwill, electricity, water, gas are all goods.From the above it is evident that actionable claims and money are not goods.The definition of the terms ‘goods’ provides that it includes stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be served from the land before sale. Growing crops and grass are included in the definition of the terms goods because they are to be served from land. Trees which are agreed to be served before sale or under the contract of sale are goods [Badri Prasad v. State of M.P., A.I.R. (1970) S.C. 706].

Classification of goods

The goods which form the subject of a contract of sale may be either existing goods, or future goods or contingent goods.I. Existing goods. These are the goods which are owned or possessed by the seller at the time of the sale. Only existing goods can be the subject of a sale. The existing goods may be –(1) Specific goods. These are goods which are identified and agreed upon at the time of contract of sale is made [Sec. 2(14)]. For example, a specified T.V., V.C.R. dog or horse. Goods are, however, not specific merely because the source of supply is identified, e.g., “100 quintals from 500 quintals on wagon.

(2) Ascertained goods. Though commonly used as similar in meaning to specific goods, these are the goods which become ascertained subsequent to the formation of a contract of sale.(b) Transfer of property of goodsTo constitute a contract of sale the seller must transfer or agree to transfer the property in the goods to buyer. ‘Property’ here mean ‘ownership’. Thus, a mere transfer of possession of the goods cannot be said to be sale.Add C (Two transparences)What is Actionable claim‘Actionable claims’ means claims, which a person can enforce by bringing a legal action or filing a suit.‘Money’ means current money.

Effect of perishing of goods

Goods may perish either:(i) before making of a contract, or

(ii) after agreement to sell but before saleLet us turn to discuss them.(a) When goods perish before making of contract of sale.Section 7 declares a contract of sale of specific goods to be void provided(i) the goods without the knowledge of seller have,

(ii) at the time when the contract was made perished or so damaged as no longer to answer to their description in the contract.

Illustration

A agrees to sell to B horse X. Later it was found that the horse was dead at the time of agreement. This contract would be void.4. PricePrice being the consideration is the essential element in the contract of sale. If a transfer of goods is made without price, it will not be treated as contract of sale. Section 2(10) of Sale of Goods Act defines the Price to mean “money consideration for a sale of goods.”5. Include both a ‘Sale’ and ‘An Agreement to Sell.’:The phrase ‘contract of sale’ include both a ‘sale’ and an ‘agreement to sell.Under section 4(3) where under a contract of sale the property in the goods is immediately transferred at the time of making the contract from the seller to the buyer, the contract is called a ‘sale’. It refers to an ‘absolute sale’, viz., and outright sale on a counter in a shop.Agreement to sell: Where under a contract of sale the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called “an agreement to sell”.

Distinction between Sale and Agreement of Sale

Sale Agreement of Sale

1. Agreement + Conveyance of property 1. No Conveyance - Conveyance takes place at a future date

2. Property in the goods passes to the 2. Since the property does not pass to the buyer and so as a rule,

the risk also passes buyer, risk also does not pass to the buyer to the buyer3. Sale is executed contract 3. Executory contract4. Seller can sue the buyer for the price 4. Aggrieved parts can sue for damages only of goods & not for price5. Subsequent loss or destruction of the 5. Liability remains with the seller goods is the liability of buyer6. Sale immediates on ownership6. Owner may dispose

of goods buyer can only sue for damage

7. It seller becomes insolvent buyer can 7. Buyer can only claim rate able dividend claim the goods

Distinction between a Sale & a Hire Purchase Agreement

1. Ownership of transferred from the seller 1. Ownership is transferred from the seller to to the buyer as soon as the Contract is the Hire Purchaser only when a certain agreed entered into. number of instalment is void.2. Position of buyer is that of owner. 2. Position of hire purchaser is that of bailee.3. Buyer cant terminate the Contract & as 3. Hire purchaser can terminate at any stage such is bound to pay the price of the goods. & cant be forced to pay further instalments.4. If the payment is made by the buyer in 4. The instalment paid by the hire purchaser instalments,

the amount payable by the are regarded as hire charges & not as payment buyer to seller is reduced, for the payment towards the price of goods till optiont to made by the buyer towards the price of purchase the goods is exercised. goods.

6. No Formalities to be observedThe Sale of Goods Act does not prescribe a particular form to make contract of sale valid. Further there is no requirements of either payment or delivery at the time of making the contract of sale. Moreover, a contract of sale may be either oral or in writing or partly oral and partly in writing or may be even implied from the conduct of the parties.

Doctrine of Caveat Emptor

Caveat Emptor is a fundament principle of law of sale of goods. It means, “let the buyer be aware”. It is based on the presumption that the buyer is relying is relying on his skill and judgment at the time of purchase. It is the duty of the buyer not of seller while purchasing goods to know his requirements and to see whether the goods he buys are suitable for the purpose for which he wants them.Exceptions:The doctrine of Caveat emptor does not apply in the following cases:

4. Fraud

Where the seller commits a fraud and the buyer believes it to be true.

2. Goods purchased by description.Where the goods are purchased by description by buyer to seller who deals in such goods and they are not of merchantable quality.3. Misrepresentation by sellerWhere the seller makes misrepresentation regarding the goods and buyer believes it to be true.5. Goods bought by sampleWhere the goods are bought by sample. If the bulk does not correspond with the sample, or if the buyer is not provided with the opportunity to complete the bulk with the sample of if there is any hidden task.6. Goods bought by sample and descriptionWhere the goods are bought by sample as well as by description and the bulk of the goods does not correspond both with the sample and with the description the buyer is entitled to reject the goods.7. Good by stating the purposeWhere the buyer expressly or implied makes known to the seller the particular purpose for which the goods are required and relies upon the skill and judgment of the seller.1. Custom or usage in tradeWhere there is a custom or usage an implied condition or warranty as to quality or fitness of goods is presumed and any deviation would make the seller liable.Rights of an unpaid seller

Who is an unpaid seller section 45 a seller is deemed to be an unpaid seller, when:(i) under the whole of the price has not been paid or

tendered;(ii) a bill of exchange or other negotiable instrument

has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument, or otherwise.

Who is sellerSeller includes any person who is in a position of a seller e.g., (i) Agent of the seller

(ii) Consigner(iii) Agent who has himself paid or is directly

responsible.Rights of an unpaid sellerAn unpaid seller has rights:(i) against the goods

(ii) against the buyer personally (Sections 55 and 56).I. Rights of Unpaid Seller Against the goodsThe unpaid seller has the following rights against the goods1. Right of lien an unpaid seller who is in possession good is entitled to retain possession of then until payment of the price in the following three cases, namely:

(a) where the goods have been sold without any stipulation as to credit.

(b) where the goods have been sold on credit, but the term of credit has expired;

(c) where the buyer becomes insolvent (Sec. 47).When lien is lostThe unpaid seller of goods loses his lien in following cases(a) when he delivers the goods to a carrier or other

bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods;

(b) when the buyer or his agent lawfully obtains possession of the goods;

(c) when the seller has waived the right of lien. (Section 49)

3. Right of Re-saleThe unpaid seller can re-sell the goods in the following cases:(a) Where the goods are of a perishable nature.(b) Where the unpaid seller has exercised his right of

lien or stoppage in transit, and given notice to the buyer of his intention to re-sell the goods and where the buyer has not within a reasonable time paid or tendered the price.

(c) Where the seller a right of re-sale is reserved in contract if makes default. (Section 54)

II. Rights against the buyer personally1. Suit for price (Sec. 55)

(a) the seller may sue him for the price of the goods where the buyer wrongfully neglects or refuses to pay for the goods which has passed to him. [Sec. 55(1)].(b) the seller may sue him for the price although the property in the goods has not passed and the goods have not been appropriated to the contract where property has not passed irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price.2. Suit for damages for non-acceptance. Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance (Sec. 56).3. Suit for damages. Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery (Sec. 57).4. Suit for specific performance. The buyer may sue the seller for specific performance of the contract to sell. (Sec. 58)5. Suit for breach of warranty. Where there is a breach of warranty by the seller he may—(a) set up against the seller the breach of warranty in

diminution or extinction of the price; or(b) sue the seller for damages for breach of warranty

(Sec. 59).6. Repudiation of contract before due date. Where the seller repudiates the contract before the date of delivery, the buyer may either treat the contract as (a)

subsisting and wait till the date of delivery; or (b) rescinded and sue for damages for the breach (Sec. 60).

CONDITIONS AND WARRANTIES

ConditionIt is a stipulation essential to the main purpose of the contract. It forms the basis of the contract of sale. If there is a breach of the condition the aggrieved party get a right to repudiate the contract itself. [Section 12(3)]

Distinction between conditions and warranty

Condition Warranty

1. Difference as to value It is a stipulation which is essential to the 1. It is a stipulation which is collateral to the main purpose of the contract of sale main purpose of the contract of sale2. Difference as to breach On breach of conditions the aggrieved 2. On breach of warranty the aggrieved party party and repudiate the contract of sale. can only claim damages.3. Difference as to treatmentBreach of condition may be treated as Breach of warranty cannot be treated as breach breach of warranty of warranty.

Waiver of condition

Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may opt for the

following (a) waive the condition (b) elect to treat the breach of the condition a breach of warranty. Once the buyer decides to waive the condition, later he cannot insist on it fulfillment. The above acts are voluntary and depend upon the will of the buyer [Section 13(1)]

Acceptance of goods by buyer

It a contract of sale is not servable and the buyer has accepted the goods or part there of, the breach of any condition can be treated as a breach of warranty, unless otherwise provided. [Section 13(2)]

Express and implied condition and warranties

In a contract of sale of goods, condition and warranties may be either express or implied.

Expression conditions and warranties

It refers to those conditions or warranties which are expressly provided in the contract by the parties at the time of contract.

Implied conditions1. Condition as to title of goodsIn a contract of sale unless different intention may appear there is an implied condition on the part of the seller (a) in the case of a sale, he has a right to sale the goods and (b) in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass [Section 14(a)]2. Sale of goods by description

Where there is contract for the sale of goods by description, there is an implied condition that the goods must corresponds with the description.3. Sale of sample and descriptionWhere the sale is both by sample and description, it is not sufficient that the goods should correspond with the sample if goods do not correspond with description. (Section 15)4. Condition as to quality or fitnessWhere the buyer either expressly or by implication states the purpose for which he requires the goods the condition as to quality or fitness is implied where (a) buyer relies on the sellers skill or judgement as to fitness of the goods of any particular purpose (b) the goods sold are such as the seller deals in the ordinary course of his business.5. Sale by sampleIn a contract or sale by sample there is an implied condition that : (i) the bulk shall corresponds with the sample in quality (ii) the buyer shall have a reasonable opportunity of comparing the bulk with the sample and (iii) the goods shall be free from any defect.6. Conditions as to wholesomenessThis is another exception to the rule of Caveat emptor. In case of eatables and provisions, in addition to the implied conditions as to merchantability there is an other implied condition that the goods shall be wholesome and fit for human consumption.

Generally in a contract of sale, there is an implied warranty that (1) the buyer shall enjoy quiet possession of the goods (2) the goods are free from any charge or encumbrance in favour of any third party. This is subject to an intention otherwise provided.When breach of conditions can be treated as breach of Warranty(i) By waiver –Buyer may treat the breach of condition as a breach of warranty and may ask only for the payment of damages.(ii) Compulsory treatment of a condition as a warranty – When a contract cannot be separated and the buyer accepts, the goods, the breach of any condition to be fulfilled by the seller shall be treated as a breach of warranty only.(iii) Where buyer waves the conditions.

PERFORMANCE OF CONTRACT OF SALE

Under section 31 of the Sale of Goods Act “it is the duty of the seller is deliver the goods and of the buyer to accept and pay them in accordance within the terms and contract of sale.” Thus, for performance of contract of sale requires:(a) The seller to deliver the gods(b) The buyer:

(i) accept the delivery of goods(ii) make payment of price to the seller

(iii) the (i) and (ii) above and (a) above must be in accordance with the contract of sale.

Let us turn to discuss them.1. Delivery of goods: Section 2(2) defines “delivery of goods to mean voluntary transfer of goods from one person to another. Thus the essence of delivery is that transfer of possession must be voluntary.

Modes of deliveryDelivery of goods may take place in following ways:1. Actual delivery – It refers to the physical transfer or delivery of goods by the seller or his authorised agent to the buyer or his authorised agent. For instance, where seller of horse personally hands over the same to the buyer, there would be actual delivery. (Section 33)2. Symbolic delivery : Here possession of goods are not handed over physically but the means of getting possession is delivered. Example: handing over railway receipt, or bill of lading or key of godown where goods are stored.3. Constructive delivery : Under section 36(3) where a bailee who is in possession of goods at the time of sale acknowledges to the buyer that he holds the good on his behalf, it is known as constructive deliver. This may take place in any one of the following ways:(i) Where the seller holds the goods on behalf of the

buyer and the buyer agrees to it.(ii) Where the buyer is in possession of goods and the

seller agrees that the buyer holds the goods as owner

(iii) Where the third person e.g. where housing or godown owner in possession goods acknowledge to the buyer that he holds on his behalf.

Rules as to delivery of goods1. Mode of delivery : Under section 33 delivery should have the effect of putting the goods in possession of the buyer or his authorised agent. The delivery of goods may be:(i) actual

(ii) symbolic(iii) constructive2. Delivery and payment : Concurrent conditions The delivery of goods and payment of price are concurrent condition unless provided otherwise in the agreement. (Section 32)3. Buyer to apply for delivery : Eventhough it is a duty of seller to deliver the goods but the seller of goods is not bound to deliver them unless the buyer applies for the delivery. (Section 35)4. Time of delivery(i) Where contract of sale uses the term such as

“without loss of time”, forthwith—delivery should be made immediately

(ii) Where no time for sending them is fixed – delivery must be made within reasonable time. [Section 36(2) & (4)]

5. Place of delivery

(a) where it is specified in the contract – it should be delivered at that place during business hours on working days.

(b) where there is no mention of a specific place in the agreement –

(i) At a place which existed at the time of sale(ii) At a place existed at the time of agreement to

sale(iii) in case of fututure goods – to be delivered at the

place where they are manufactured or produced.

6. Expenses of deliveryAll expenses of putting the goods in deliverable state must be paid by the buyer unless the contract of sale provide otherwise. [Section 36(5)]7. Delivery of goods if in possession of third party At the time of sale would not be considered as delivery unless the third party acknowledges to the buyer that he holds the goods on his behalf.8. Effect of part delivery – When the delivery of part of goods are not made with the intention to deliver the rest of them the property of whole of the goods is deemed to pass to the buyer.9. Delivery to carrier or wharfinger – Where the goods are delivered to a carrier or wharfinger under a contract of sale it would be deemed to have been delivered to the buyer.

10. Delivery of wrong quantity or different quality : The delivery of the goods in the following manner would amount to defective delivery –(a) quantity less or more than those specified in the

contract of sale(b) goods mixed with goods or different descriptionIn the aforesaid situation the buyer may either:(i) reject the whole or

(ii) accept the whole(iii) accept the quality or quality as per the contract and reject the other goods.11. Liabilities of Buyer for neglecting or refunding to take deliveryWhere the seller is ready to deliver the goods and asks the buyer to take delivery but the buyer neglects or fails to take delivery within a reasonable the buyer shall become liable for loss caused to seller.12. Instalment delivery – The general rule is that the buyer of goods is not bound to accept the goods in instalment unless the contract of sale provide otherwise.

Suits for breach of contract

(i) where the property in the goods has passed to the buyer, the seller may sue him for price.(ii) where price is payable on certain day regardless of delivery – the seller may sue(iii) where buyer wrongfully neglects or refuses to accept the goods.

(iv) where the seller wrongfully neglects or refuses to deliver the goods(v) where there is a breach of .............

TRANSFER OF PROPERTY IN GOODS

Meaning of transfer of property in goodsThe expression “transfer of property in goods” means transfer of ownership of goods, and not the possession of goods.

Significance of transfer of ownership of goods

Transfer of property or ownership of goods from seller it buyer is important for the following reasons:(a) Risk involved : One of the most important effects, is that on transfer the risk prima facie passes with property. The net effect of the same is that when goods are (i) distroyed or (ii) damaged or (iii) lost in transitit is owner who will bear the risk.(b) Action against third party : It should be taken by owner and not by person who has the possession, in case any loss or damage is caused by the action of third party.(c) Action in case of insolvency of the seller or the buyer. When the official Receiver or Assigner take the possession of goods from seller or buyer? The answer depends on whether the ownership of goods has passed from the seller to the buyer.

Rules relating to Transfer of Property in goods

Section 18 to 25 lay down the rules for determining when the property in goods passes from the seller to the buyer.I. Specific or ascertained goods : When the property passes at the time of contract, the property in goods passes from seller to the buyer at the time of contract when there is:(i) unconditional contract

(ii) for the sale of specific goods(iii) in a deliverable state (Section 20)Specific goods : Section 2(14) defines it to mean goods identified and agreed upon at a time a contract of sale is made.Deliverable state under section 2(3) Goods are said to be in a deliverable state when they are in such a state that the buyer would under the contract be bound to take delivery of them.(b) When the good are not in a deliverable state – Property passes when it is in deliverable state and seller gives notice thereof to the buyer. (Section 21)(c) When price of goods is to ascertained by weighing etc. – Property in goods does not pass till weighing, measuring, testing etc. is done for ascertaining the price and notice is sent by seller to the buyer. (Section 22)

Unascertain on Future goods

When the contract is for unascertained or goods, no property therein is transferred to the buyer, unless and until the goods are ascertained. [Section 18].

But in the case of unascertained or future goods by description, property passes to the buyer when the following conditions are fulfilled:(a) when goods of that description are in a deliverable

state(b) it is unconditionally appropriated to the contract

by seller with the assent of the buyer or buyer with the assent of seller

(c) such assent may be given (i) expressly or impliedly, (ii) either before or after appropriation.

Sale on approval or on Sale or return basis (Section 24)

When goods are delivered “on approval” or “on sale or return”, or on other similar term the property passes to the buyer when the following conditions are fulfilled:(a) when he signifies his approval or acceptance to the

seller, or(b) does any other act adopting the transaction, or(c) it does not signify his approval or acceptance but,

(i) retains the goods without giving notice of rejection

(ii) on expiry of time fixed for the return of goods(iii) on expiration of reasonable time if no time is

fixed.

TRANSFER OF TITLE BY NON-OWNERS

One of the fund amental principles relating to transfer of title is that Neno dat quod non habet “no one can

transfer a better title than what he himself has”. This principle finds expression in the Latin maxim “Nemo dat quod non habet” which means ‘no man can give that which he has not’. This is, however, subject to following exceptions:Exception to the rule – But there are certain exceptions to this general rule. They are following:(1) Mercantile agent – If a mercantile agent is in possession of goods with the consent of the real owner and such agent sells the goods in ordinary course of business, the buyer will get good title if he acts in goodfaith. The following condition must fulfilled in case of sale by mercantile agents:

1. Seller must be mercantile agent. A mercantile agent is one, who in the customary course of his business, has, as such agent, authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods [Sec. 2. cl. 9].

2. He should be in possession of goods or documents of title with the consent of owner.

3. Sale should be made in ordinary course of business.4. The buyer must act in good faith.

(2) Sale by Joint owner – If a purchaser purchases goods from the joint owner, he will get good title if:(a) The joint owner has the sole possession of the

goods.(b) The purchaser buys the goods in goodfaith.

(c) The buyer has not at the time of the contract of sale any notice that the seller has not authority to sell.

(3) Sale by person in possession of goods under voidable contract – When the seller of goods has obtained possession thereof under a contract voidable under Section 19 or 19A of Indian Contract Act, but the contract has not been rescinded at the time of the sale the buyer acquires a good title, if:(a) The buyer purchases the goods in goodfaith.(b) The buyer has no notice of the seller’s defect of

title.(4) Sale by seller in possession after sale – Where a person, having sold goods, continues or is in possession of the goods the delivery or transfer by that person will give a good title, if:(a) The new buyer acts in goodfaith.(b) The new buyer does not have notice or prior sale.(5) Sale by buyer in possession of goods – Where a person, having bought or agreed to buy goods obtains, with the consent of the seller, possession of the goods, the delivery or transfer by that person to any person will be valid, if:(a) The person receiving goods acts in goodfaith.(b) The person receiving goods had no notice of the

sellers lien.(6) Sale by unpaid seller – If an unpaid seller re-sells the goods in his possession, the buyer shall get a good title to the goods. [Sec. 54(3)]

(7) Estoppel – If the owner of the goods by his conduct acts so as to cause the buyer to believe that seller was the true owner of the goods and induces him to buy goods in that belief, he will be estopped afterwards from denying the fact of want of authority of the seller.