CPT Mercantile Law Revision Notes YMKPNBH3

TALDA LEARNING CENTRE
Building Conceptions
Shop No. 70, 2nd Floor, Gulshan Tower, Jaistambh Square, Amravati
M: 9730768982 Email: amittalada@gmail.com
Website: http://taldalearningcentre.webs.com/
COMMON PROFICIENCY COURSE
MERCANTILE LAW
By
CA AMIT TALDA
11+12 Commerce/CA/CS/CMA
Your Name: Batch:
1|Page TLC 11+12/CA/CS/CMA CA AMIT TALDA: 9730768982

INDIAN CONTRACT ACT, 1872
(1st September, 1872) (Whole of India except J & K)
LAW DICTIONERY
Ab Initio From the very beginning
Bona fide In good faith
Consensus ad idem Agreement as to the same thing
De facto In fact
Malafide In bad faith
Nexus Connection
Prima Facie On the face of it
Pari passu On a equal footing
Pro rate In proportion
Quid pro qo Consideration, something in return
Modus operandi Way of operating
Prima facie On the face of it, At first sight
Sine qua non Something/someone indispensable
Ultra vires Beyond the powers or legal authority
Vice versa The other way around
Uberrimae fidei Of the utmost good faith
Pro rata In proportion
Res judicata Thing already judged upon
Revoke/Repeal/Rescind Cancel
Enacted Make/put into practice
Customs of trade Practice of doing business
Exhaustive Comprehensive/containing every aspect
Forbearance Holding back/not to do a specific thing
Void Invalid/null
Restraint Keeping someone in control or within limits
Aggrieved party Someone who has been injured, suffered a loss.
Cease Come to an end/Stop
Estoppel a doctrine that prevents a person from doing or saying
something that would contradict some earlier action or
statement that another has relied on and the
contradiction of which would hurt that other person
Quantum Meruit As much as is earned
Accused Someone charged with crime
Adjudge To decide; to pass judgment
Affirm To confirm
Seize To take someones property forcefully
Illusory Not real; having a false appearance
Rely Trust or depend on something
Compel Force
Diligence Attentiveness; care
Detain Hold someone in custody forcefully
Abolish To end
Alien A foreigner; someone born in another country who has

not become a citizen of his or her country of residence
Allege To claim; to assert; to state in a pleading what one
intends to prove at trial
Ambiguity Uncertainty of meaning
Apparent Obvious; evident
Arbitration A form of dispute resolution in which a neutral third
party renders a decision after both parties speak for
themselves at a hearing.
Assign To transfer legal rights or property to someone
Implied Consent that is expressed indirectly through behavior
and actions that make it appear that consent has been
given.
Fiduciary Involving trust, confidence, and good faith;
Covenant A contract or formal agreement; often produced in writing
and signed by all parties
Quasi Contract An obligation similar to a contract imposed by the law
when two parties have made no promises to one another
but when one party has benefited from services provided
by another in such a way that the benefited party would
be unjustly enriched if the court did not find the
existence of an obligation.
Quasi judicial Describes the actions and powers of administrative
officers and agencies that can perform some judicial
tasks, although they are not in fact judges or courts.
Promulgate to announce a statute or rule officially

SECTIONS
Sections Particulars of Section
2(a) Proposal
2(b) Promise
2(c) Promisee
2(d) Consideration
2(e) Agreement
2(f) Reciprocal promises
2(g) Void Agreement
2(h) Contract
2(i) Voidable Contract
2(j) Void Contract
3 Communication, acceptance and revocation of proposals
4 Communication when complete
5 Revocation of proposals and acceptance
6 Revocation how made
7 Acceptance must be absolute
8 Acceptance by performing conditions
9 Promises, express and implied
10 What agreements are contracts
11 Who are competent to contract
12 What is sound mind
13 Consent
14 Free consent
15 Coercion
16 Undue Influence
17 Fraud
18 Misrepresentation
19 Voidability of agreements without free consent
20 Mistake of fact
21 Mistake of Law
22 Unilateral mistake
23 Unlawful consideration and objects
24 Agreements, the consideration or object of which is unlawful in part
25 Agreements without consideration
26 Agreement in restraint of marriage
27 Agreement in restraint of trade
28 Agreement in restraint of legal proceedings
29 Agreements the meaning of which is uncertain
30 Wagering agreements
31 Contingent Contracts
68 Supply of necessaries to persons who are incompetent to contract
69 Payment by an interested person
70 Non-gratuitous acts
71 Finder of goods
72 Payment of money or delivery of goods by mistake or under coercion

Contract An Agreement enforceable by law is a contract.
AGREEMENT + ENFORCEABILITY
Promise A proposal, when accepted, becomes a promise.
Voidable Contract An Agreement which is enforceable by law at the option of one or more of
the parties thereto, but not at the option of other or others, it is a voidable
contract. Consent caused by Coercion, Undue Influence, Fraud,
Misrepresentation are Voidable Contracts.
Unenforceable A contract which is good in substance but cannot be enforced in a law

Contract court due to some technical defects, is said to be unenforceable contract.
Express Contract A contract is express when parties state its terms and conditions and show
their assent by words, oral or written.
Implied Contract When the contract is made otherwise than in words, is said to be implied.
An implied contract arises from the acts and conduct of the parties or by
their surrounding circumstances.
Illustrations: A stops a taxi or a public bus by waving his hand and takes
his seat. There is an implied contract that A will pay the prescribed fare.
Acceptance When the person to whom the proposal is made signifies hi assent thereto,
the proposal is said to be accepted. A proposal when accepted becomes a
promise.
Quasi Contract A quasi contract is not a result of agreement, express or implied. It is a

contract imposed by law on the parties and give rise to obligations similar
to that arising under a contract. Such a contract is not intentionally made
by the parties. Such a contract even does not have all the essentials of a
valid contract. Still it is a contract because the law presumes that there is
a contract between the parties. The law presumes this on the principal of
equity that a person shall not be allowed to enrich himself at the expense
of the other.
Examples:
(i) Supply of necessaries to persons who are incompetent to contract
(ii) Payment by an interested person
(iii) Finder of goods
(iv) Payment of money or delivery of goods by mistake or under coercion
(v) Obligation to pay for non gratitutous acts.
Executed Contract A contract in which all the parties to the contract have performed their
respective obligations, is known as executed contract.
Executory Contract A contract in which the parties to the contract have still to perform their
obligations, is known as executory contract.
Bilateral Contract A bilateral contract is one in which both the parties exchange a promise to
each other. One party promises to perform some act in the future in
exchange for the other partys promise to perform some act. In such a

contract, obligations on the part of both the parties are outstanding at the
time of formation of the contract.
Illustration: A enters into an agreement to sell his flat to B after

construction. B agrees to pay the consideration for the flat at the time of sale.
This is an bilateral executory contract as the performance is pending from
both the parties at the time of agreement.
Unilateral Contract It is also known as one sided contract in which one party has already
performed his obligation at or before the point of time when the contract
comes into existence and the other party remains liable to perform his
obligation after the contract comes into existence.
Offer or Proposal When one person signifies to another his willingness to do or to abstain
from doing anything, with a view to obtaining the assent of that other to
such act or abstinence, he is said to make a proposal.
Express Offer An offer made in words, written or spoken, is called as an express offer.
Implied Offer An offer made otherwise than in words, is known as an Implied offer. Such
an offer is inferred from the conduct of parties or circumstances of the
case.
Specific Offer An offer made to a specific or a particular or an ascertained person is

known as specific offer. Such an offer can be accepted by the particular or
specific person to whom it has been made and none else.
General Offer An offer made to the public at large or to the whole world, is a general offer.
Such an offer may be accepted by any person from among the public who
has the knowledge of it. It does not require any prior acceptance. The
performance of conditions of the offer will amount to acceptance. Moreover,
a general offer is of a continuing nature. Therefore, it is open for
acceptance until it is retracted or accepted by any other person.
Cross Offer When two persons make identical offers to each other, without having
knowledge of each others offer are known as cross offer. They are
independent and identical offers of the respective parties. Such offers do
not constitute a contract even though both the parties intend to do or not
to do the same thing. When one of the parties accepts the offer of the other
party, contract comes into existence.
Counter Offer When an offer is accepted on the terms and conditions other than set out
by the offerer, it is not an acceptance but a counter offer. A counter offer is,
in fact, not only a rejection of the original offer but is also a new offer by
the original offeree. Once a counter offer is made by the original offeree, he
cannot subsequently accept the original offer as soon as the counter offer is
put forth, the original offer is treated as revoked.
Standing Offer A standing offer is an offer which is open for acceptance over a period of
time.

Consent or Two or more persons are said to consent when they agree upon the same
Consensus ad idem thing in the same sense. Meeting of Minds
Coercion 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. (PHYSICAL COERCION)
(CRIMINAL ACT is involved)
Undue Influence Undue influence is a kind of moral coercion. It is an abuse of position by a

(voidable) person who is in a position to dominate the will of the other so as to
deprive the latter of free will. Thus, when a dominant party misuses his
influence to dominate the will of a weaker party, to get unfair advantage, in
a contract, the contract is said to be influenced by under influence.
(MENTAL COERCION)
Fraud (voidable) Fraud is the willful misrepresentation or concealment of material facts of an

agreement by a party to it. Such a deliberate misrepresentation is made with
an intention to deceive the other party and thereby to induce him to enter into
an agreement. Hence, to deceive means to induce a person to believe that a
fact is true, which is otherwise false.
According to Section 17, Fraud means and includes any of the following
acts committed by a party to a contract, or with his connivance, or by his
agent, with an intent to deceive another party there to or his agent, or to
induce him to enter into a contract:
a. The suggestion, as a fact, of that which is not true, by one who does
not believe it to be true.
b. The active concealment of a fact by one having knowledge or belief of
the fact;
c. A promise made without any intention of performing it;
d. Any other act fitted to deceive; and
e. Any such act or omission as the law specially declares to be
fraudulent. (INTENTIONAL MISREPRESENTATION)
Misrepresentation Any innocent or unintentional false statement or assertion of fact made by

(voidable) one party to the other during the course of negotiation of a contract is
called a misrepresentation. The party making the statement honestly
believes in it to be true and is made in honest ignorance of its falsehood.
Mistake When the consent of one or both the parties to a contract is caused by
misconceptions or erroneous belief, the contract is said to be induced by
mistake. Usually, mistakes does not affect the validity of contract. However,
under some circumstances, a mistake may render a contract void for want
of genuine consent.
Consideration When, at the desire of the promisor, the promise or any other person has
done or abstains from doing or does or abstain from doing, or promises to
do or abstain from doing something, such act or abstinence or promise is
called a consideration for promise. Can be past, present or Future.
Opposed to An agreement which is against the general public, is said to be an

public policy agreement opposed to public policy. And such an agreement is unlawful
and void.
Void Agreements An agreement not enforceable by law is said to be void.
Illegal Agreements Generally speaking, an agreement which is expressly or impliedly

(void) prohibited by law is an illegal agreement. The term illegal agreement has
not been defined in the act. Collateral Agreements are VOID.
Wagering A wager is a promise to give money or moneys worth upon the
Agreement (void) determination or ascertainment of an uncertain event. Thus, it can be
safely said that a wager or wagering agreement is an agreement between
two persons in which one person agrees to pay a certain sum of money or
moneys worth to another on the happening or non-happening of some
future uncertain event. Such an agreement has been declared as void
under the act. (Section 30). Collateral Agreements are valid.
Contingent A contingent contract is a contract to do or not to do something, if some

Contracts (valid) event, collateral to such contract, does or does not happen. The contracts
of indemnity, insurance and guarantee are contingent contracts.
Performance of Means carrying out the promises made and fulfilling the mutual legal
contract obligation created by the parties under a contract within the time and
manner, if any, prescribed in the contract.
Tender When a party offers performance of his obligation to the other party, it is
called as a tender of performance.
Assignment of Assignment of contract means voluntary transfer of rights, interest,

contract benefits, title, etc in a contract of a party to a third party.
Succession of Succession to a contract is the process by which one person succeeds in

contract another persons rights, interest, benefits, obligations, etc in a contract by
operation of law.
Novation Novation means substitution of a new contract in place of an existing

contract. Thus, a Novation is the process by which a new contract is
substituted for an existing contract. Novation may take place in either of
the two forms:
(i) A new contract with new terms between the same parties;
(ii) A new contract between one of the existing parties and one new
party on same terms.
Alteration Alteration means alteration or change in one or more terms of a contract

with the consent of all the parties to contract. A valid alteration discharges
the original contract and a contract with a new terms comes into effect.
Recession of Rescission of a contract means cancellation of a contract.

contract
Remission of Remission means acceptance of a lesser performance in discharge of a
contract whole promise made.
When a party accepts lesser sum in satisfaction of a larger sum due under
the contract, it is called as Accord and Satisfaction in the English Law.
Waiver Waiver means an intentional abandonment of rights. When a party entitled

to claim performance releases the other party from his obligation to
perform, it is called as waiver. As a result of waiver the other party stands
discharged from his obligation under the contract. A waiver does not
require consideration because a promisee may dispense with the
performance of the promise made to him for any satisfaction which he
thinks fit.
Merger of Rights Merger means merger of two or more rights into one contract. when an
existing inferior right of party into a newly acquired superior right by the
same party, it is a merger of rights. In such a case, inferior right
automatically stands discharged.
Initial Impossibility Initial impossibility means the impossibility which existed at the time of
making the agreement. Such impossibility is only physical impossibility but
not a legal impossibility. Thus, the agreement to do an existing impossible
act is void.
Subsequent Subsequent impossibility is one which arises after the formation of a

Impossibility contract. Sometimes the performance of contract is possible when contract
is made but subsequently becomes impossible or unlawful, it is said to be
subsequent impossibility of performance. Such impossibility arises by
reason of some event beyond the control of the promisor. In such a case,
the contract becomes void when the act becomes impossible or unlawful.
Anticipatory Anticipatory breach of contract occurs when a party to a contract disable

Breach of Contract himself from performing or refuses to perform the contract before the time
or date of the performance is due. It is a declaration by one party to a
contract of his intention of not performing the contract prior to the date of
performance. Such a breach is also known as Constructive Breach of
Contract.
Ordinary or Normal An aggrieved party who has suffered a loss by breach of contract can claim
Damages the damages which naturally arises in usual course of things from such
breach.
Nominal Damages Sometimes, an aggrieved party suffers no real loss by breach of contract
but the court awards him nominal damages say Rs. 1000. The court allows
such nominal damages with the view to recognize that the party has proved
the case and won.
Punitive or Damages which are awarded with the sole purpose of punishing the party
Exemplary or at default.
Vindictive Damages
Injunction The term literally means an order or judgment of a court by which a party
to an action is required to do or refrain from doing a particular thing. In the
context of contracts, it is generally negative. Thus an injunction is an order
of a court prohibiting a party to a contract from doing a particular thing or
from doing what he promised not to do so.

EXAMPLES
Void Agreement (i) Agreement of trading with enemy
(ii) Agreement for stifling prosecution: influence the witness of the
case
(iii) Agreement for sale of public offices and titles
(iv) Agreement influencing with the course of justice
(v) Agreements in restraint of personal liberty
(vi) Agreements to defraud creditors
(vii) Agreements not to bid
(viii) Agreement creating monopolies
(ix) Agreements with unfair conditions
(x) Agreements in restraint of trade
(xi) Agreement in restraint of marriage
(xii) Agreement in restraint of legal proceeding
(xiii) Agreement for champerty
(xiv) Agreement with Minor/Person with unsound mind/Person
disqualified by law
(xv) Wagering Agreement
(xvi) Marriage Brokerage Contracts
(xvii) Bilateral Mistake of Fact.
(xviii) Mistake as to foreign law.
(xix) Contract to do impossible things
Void Contract 1. Destruction of subject matter after the contract is entered into but
before the performance of the contract.
Voidable Contract 1. Agreement in which consent is obtained by Coercion/Undue

Influence/Misrepresentation/Fraud.
Invitation to Offer 1. Catalogue or Price List: A catalogue or price list of goods or services
for sale is not a proposal but an invitation of proposal. Hence, no
business house is bound to sell its goods for the price stated in it.
2. Menu Card: Menu card of restaurant is an invitation to put an offer.
3. Price Tags: Price tags attached with the goods displayed in any
showcase or showroom or self service supermarket or Malls is also an
invitation to proposal. If the salesman does not accept the price, the
interest buyer cannot compel him to sell.
4. Sale advertisement: an advertisement to sell goods at fixed price is
not a proposal but an invitation to proposal.
5. Prospectus inviting public to apply for shares in a company is an
invitation to put an offer to buy shares.
6. Time table of a carrier: Railways or roadways time table is an
invitation to put an offer.
7. Notices of Tender in newspaper by government or other bodies
What is not Invitation to Offer??

1. Application form filled by the Student to the educational institute/
College is not an Invitation to Offer but it is an offer.
2. Customers pick up articles and take them to the cashiers desk to pay
is an offer.
Illegal Agreement 1. Agreement to share the proceeds of robbery/murder.
10 | P a g e TLC 11+12/CA/CS/CMA CA AMIT TALDA: 9730768982

Valid 1. Mistake as to Indian Law is valid.
Agreement/Contract 2. Contracts with Inadequate Consideration are valid.
3. Collateral Agreement to a Wagering Agreement is valid.
4. Contingent contracts are valid.
5. Contracts entered into by a lunatic person during lucid intervals.
Undue Influence 1. Father and Son

2. Doctor and Patient
3. Lawyer and Client
4. Spiritual guru and devotee
5. Teacher and Student
Exception: (No presumption of undue influence)

a. Husband and Wife
b. Elder brother and Younger brother
c. Two best friends.

LATIN MAXIMS & DOCTRINES
Consensus Ad Idem Two minds with one intention, Meeting of Minds
Quantum Meruit As much as is earned
Injunction Power to stop anyone from doing anything lawfully (order of court to
stop)
Specific Performance Demanding performance as per the terms of contract
Doctrine of Privity of Only Parties to contract can sue. Stranger to a contract cannot sue
Contract even if he has paid the consideration.
Doctrine of Frustration Due to external event, the performance has become impossible before
the due date of performance, it can be due to change in law or change
in circumstances like ban of product, destruction of subject matter,
etc.
Right in Rem a right available to a person the whole world
Right in Personam a right against a particular person or persons
Rule of Estoppel The rule of Estoppel says that when a person by written or spoken
words or by his conduct falsely represent another to believe that
certain state of things exists, he will not be allowed to deny the
existence of that state of things.
Uberrimae Fidei Contract of utmost good faith
Champterty Agreement 1. An illegal agreement in which a person with no previous interest in a
lawsuit finances it with a view to sharing the disputed property if the
suit succeeds.
Maintenance Agreement Where a person agrees to maintain a suit, in which he has no

interest, is called maintenance agreement. There is no sharing of
proceeds of suit.
Ex Nudo Pacto non An Agreement without consideration is void. No Consideration, No
Oritur Actio Contract.
Quid Pro Quo Something in return (Consideration)
Nemo dat quat non habet No one can give what he does not himself possess

CASE STUDIES
Balfour vs Balfour
Where parties to contract do not intend to create binding agreement, the agreement cannot be enforced.
The case of balfour vs balfour is a well known illustration of a domestic agreement. In this case a husband
(Mr. Balfour) was working in ceylone. During the holidays, he and his wife (Mrs. Balfour) went to England
to enjoy the leave. When Mr. Balfour was to return to ceylone, his wife was advised to remain in England,
due to ill health. Mr. Balfour agreed to send a sum of $930 per month for probable expense of
maintenance. For some time he sent the amount but afterwards differences arose between them which
resulted in their separation and the allowance fell into arrears. Mrs. Balfour suit for recovery was
dismissed by Lord Atkin on the ground that parties did not intend that it will be attended by legal
consequences.
Carlill vs. Carbolic Smoke Ball Co
A General offer may be accepted by any person from among the public who has the knowledge of it. The
performance of conditions of offer will amount to acceptance.
The case of Carllil vs. Carbolic Smoke Ball Co. is an illustration of a contract arising out of a general offer.
As per the facts of the case, the company issued an advertisement in a newspaper about its product, the
smoke ball a preventive medicine against influenza. In the advertisement, the company offered to pay a
sum of $ 1,000 as compensation to anyone who contacted influenza or a cold after having used the smoke
ball according to the printed directions. The advertisement also contained that a sum of $ 1,000 had been
deposited with the Alliance bank to show the sincerity of the company. A lady, Mrs. Carllil relying on the
advertisement purchased and used the smoke balls as per directions but still contacted influenza. She
sued the company to claim the compensation of $ 1,000. Held, it was a general offer and Mrs. Carllil had
accepted it by her act, by performing the conditions for acceptance. She was therefore entitled to get the
claim.
Lalman Shukla vs. Gauri dutt
Offer must be communicated- in this case, Gauri Dutt sent his servant, Lalman to search his missing
nephew. After L had left in search of the boy, G issued hand bills announcing a reward of Rs. 5000 to
anyone who might find out the boy. L who was ignorant of such reward, he claimed the reward. Held, L
was not entitled for reaward since he was ignorant of it i.e proposal.
Mohori Bibee vs. Dharmodas Ghose
In this case, a minor (dharmodas) mortgaged his house for Rs. 20,000 and received Rs. 10,500 from the
mortgage. Subsequently, the mortgagor sued for setting aside the mortgage on the ground of his minority
at the time of execution of mortgage deed. The privy council held that according to Section 11, a minor is
incompetent to contract and therefore, minors agreement was absolutely void, not merely voidable. Hence,
mortgage was cancelled. Moreover, the morgagees request for refund of Rs. 10,500 was also turned down
on the ground that minors agreement was void from the beginning and therefore, mortgagee has not right
of restitution.
Nash vs Inman
A, a minor, purchased 11 fancy waist coats and other clothes while he was already having sufficient
clothes to wear. Held, the 11 waist coats and other clothes purchased were not necessaries and the price
was irrecoverable.
Chinnaya vs. Ramaya
A, an old lady, by a deed of gift, granted certain property to her daughter . The terms of the deed
stipulated that R will pay an annuity of Rs. 653 to As sister . On the same day, R entered into an

agreement with C to pay her the sum directed by A. the stipulated sum was however not paid and C sued
to recover it. R contended that no consideration was moved by C to him. Madras high court held, the
consideration furnished by Cs sister was enough to enforce the agreement between C and R.
Rose and Frank Co vs. J R Compton
It is a glaring example of a business deal in which the parties did not intend to create legal relations. As
per the facts of the case, an agreement was drawn between the American and English firms. The
agreement mentioned that this agreement is not entered into as a formal legal agreement and shall not be
subject to legal jurisdiction of law courts. The agreement was terminated by one of the parties and other
party brought an action for breach of contract. Held, the agreement was not a binding contract as there
was no intention to create legal relations.
Kedar Nath vs. Gorie Mohamed
In order to construct a town hall at howrah, the commissioner of Howrah Municipality started to obtain
necessary fund by public subscription. A also promised to subscribed Rs. 1000 to fund by signing his
name in the subscription book for the purpose. On the faith of the promised subscriptions, the secretary of
the town hall construction committee engaged a contractor for construction of town hall and thus,
incurred liability. A refused to pay his subscription. Held, engaging a contractor and starting the
construction work on the faith of the promise to subscribe was sufficient consideration. Hence, A was
liable to pay the amount to the extent of the liability incurred by the promise.
Damodar Murlidhar vs. Secretary of State of India
The government repaired a certain tank, which had irrigated lands belonging to the government itself and
zamindars. The government did not undertake the repairs gratuitously for the zamindars. Zamindars
enjoyed the benefit of the repaired tank. Held, zamindars were liable to contribute to the cost of repairs.
Dunlop Pneumatic Tyre Co Ltd vs. Selfridge & Co
The doctrine of privity of contract can be best illustrated by an English case Dunlop Pneumatic Tyre Co Ltd
vs Selfridge & Co. As per the facts of the case, Dunlop & Co sold some tyre to one dew & co with an
agreement that these tyres will not be sold below the list price. Dew & Co in turn sold some of the tyres to
selfridge & co with an agreement that they will observe conditions as to the Price and They also promised
that they will pay to the Dunlop & Co a sum of Rs. 500 for every tyre sold below the list price. Selfridge
sold some tyres below the list price and the Dunlop & Co brought an action to recover the damages for the
same. Held that Dunlop & Co cannot bring an action against Selfridge because there was not contract
between the two.

DIFFERENT SITUATIONS
Time Place and Manner of Performance

When No time of performance is fixed Within reasonable Time (what is reasonable time is a
by the parties question of fact which will be decided case on case
basis)
When day of performance is specified At any time during usual hours of business on that
but no time is specified and no specified day.
application is to be made
Time is fixed but no place is specified It is the duty of Promisor to apply to promisee to fix a
reasonable place for performance.
Where Time, Place and Manner is It should be performed as specified in the contract.
specified in the contract itself
Appropriation of Payments
If debtor has given specific instruction As per the specific instructions of debtor
as to which debt the payment relates
to
When Debtor does not specify as As debtor has not specified, Creditor may appropriate as
which debt the payment relates to per the implying circumstances. If there are no implying
circumstances, Creditor can appropriate the same as
per his discretion against any lawful debt actually due
and outstanding. (it can be adjusted against time barred
debt also)
Where Debtor has not specified nor In such a case, appropriation shall be made in
creditor has made any appropriation chronological manner against any lawful debt including
time barred debt. If two debts are of equal standing (i.e
same date and same amount), the payment shall be
appropriated proportionately to each such debt.
In case, Interest is also due along with Payment shall be first applied to Whole Interest due and
principle amount then against principle in a chronological manner.
Devolution of Joint Rights & Liabilities

If promise is of personal nature or involves personal skill or experience, it shall be discharged
on the death of the joint promisor.
All Joint Promisors are alive All Joint Promisors should jointly fulfill the promise
When one or more promisor is not All Joint Promisors alive along with the legal
alive representative of deceased Promisor shall fulfill the
promise.
All Joint Promisors are dead Legal Representation of all joint promisors shall jointly
fulfill the promise.
Valid Tender of Performance

If the tender of performance is given in Invalid Tender; Tender should be for the quantity agreed
installments which was not agreed for (Whole obligation) at the time of contract.
upon at the time of contract. (part
performance)
If the tender of performance is made Invalid Tender; Tender should be made in usual
before or after the usual business business hours only.
hours or on a public holiday.
If no place is specified in the contract The Tender must be made at a place fixed by Promisee.
for performance then at which place
tender of performance should be made
Minor (18 years as per Indian Majority Act)

Is minor capable to contract? No, Minors agreement is void ab Initio.
Does Rule of Estoppel apply to minor? No, Rule of Estoppel cannot be applied to a minor.
Can minor be a shareholder in a No, Minor cannot apply for allotment of shares in a
company? company. However, he can buy the shares in the name
of his guardian.
Can Minor be a partner in a firm? No, Minor cannot become a partner in a firm. However,
he can be admitted to the benefits of the firm.
Can Minor be an Agent? Yes, A minor can act as an agent but cannot appoint an
agent under him.
Can Minor be an adjudged Insolvent? No, As minor cannot create any personal liability, he
cannot be an adjudged insolvent.
Can restitution is available against No, minor is not liable to restore any benefit he has
minor? received under a void agreement. However, In cases of
fraud by minor, court have forced the minor to restore
the benefit.
Can minor give guarantee? No, Minor cannot give any guarantee in favor of other
person as he cannot take personal liability. However,
Other persons can give guarantee in favor of minor.
Is minor liable for necessaries supplied Yes, minor is liable to compensate the person who has
to him? supplied necessaries to him. However, he is liable only
to the extent of his property only. He cannot be held
liable personally.
Can minor enforce any contract if he is Yes, if he is beneficiary under an agreement, he can
a beneficiary in that contract? enforce the same.
Contingent Contracts (valid contract)

Happening of an Event Non Happening of an Event
Valid: when events happens Valid: When event become impossible

Void: event become impossible Void: Event happens or does not become impossible
Happening within fixed time Non Happening within fixed time
Valid: Happens within fixed time Valid: does not happened within fixed time or becomes
Void: Does not happen within fixed impossible
time or becomes impossible before Void: Event happens within fixed time
fixed time expires

EXCEPTIONS TO GENERAL RULES
Fraud Availability of means for discovering the truth

Consent not obtained by fraud.
Ratification by the party after knowing the fraud.
Lapse of time
Doctrine of Trust or charge

privity of Minors Marriage contract
contract Family arrangement for marriage expense, maintenance of members, etc
Assignment of contract
Conditions running with the land
Acknowledgement
No Agreement on account of Natural Love and Affection

Consideration, Promise to compensation past voluntary services
No Contract Promise to pay time barred debt
Gifts
Promise to charity or Agency
Agreements in Sale of goodwill of business -

restraint of Restraint on continuing partners
Trade Restraint on outgoing partners
Restrain in case of dissolution of the firm
Restrain by trade combinations
Restrain by Service Agreements
Restrain by Solus Agreements

Wagering Commerical Transactions
Agreements Option Dealing
Authorised lotteries
Crossword or literary competitions
Athletic Competitions
Chit Fund scheme
Horse Race
Contract of Insurance

DISTINGUISH BETWEEN
Basis Contingent Contract Wagering Agreement

Meaning A contingent contract is contract in A wagering agreement is one in
which the promisor undertakes to which one person agrees to pay
perform the contract upon the certain amount of money to the
happening or non happening of an other on happening or non
event, which is collateral to the happening of a specified event.
contract
Nature The event is collateral to the contract Event is the sole determining factor
Validity Valid contract Void agreement
Interest Parties are interested in subject The parties to wagering agreement
matter of such contracts have no other interst in the subject
matter of the agreement except the
winning or losing.
Basis Quasi Contracts Contract

Formation It is not intentionally formed by the In is intentionally formed by
parties but law imposes upon the parties.
parties.
Essentials of A quasi contract does not possess A contract possess all the
contract the essentials of a valid contract essentials of a valid contract
Obligations Obligations are thrust upon the law.Obligations are mutually created
by the parties.
Foundation It is founded upon the principle of It is founded upon general
equity. principles of laws of contract
Objective It is imposed by law for bringing It is entered into with an object to
about justice. create mutual rights and
obligations.
Point of Void Agreement Void Contract

Distinction
Definition An agreement not enforceable by law A Contract which ceases to be
is said to be Void enforceable by law becomes void
when it ceases to be enforceable.
Time when It is void from the beginning It becomes void subsequently due
becomes Void to change in law or change in
circumstances.
Restitution Generally, no restitution is granted. Restitution may be granted when
However, the court may on equitable the contract is discovered to be
grounds grant restitution in case of void or becomes void.
fraud or misrepresentation by
minors.
Basis Assignment Succession

Meaning Assignment means transfer of rights, Succession is the process by which
interest, title, etc of a person under a one person succeeds rights,
contract to a third party. interests, benefits and obligations
to another person.
Means Assignment takes place by the acts Succession takes place by
of parties operation of law
Rights and Assignment generally involve Succession generally involves
Obligations transfer of rights only. succeeding both rights and
obligations.
Persons Assignment can be made to any Only successors succeeds who are
person natural or artificial persons. natural persons
Scope Assignment does not include Succession includes assignment
succession
Governing law Assignment is governed by the law Succession is governed by
governing the benefit or interest to succession law.
be assigned

INDIAN PARTNERSHIP ACT, 1932
Whole of India except J & K 1st Day of October 1932
Prior to this act, the law of partnership was dealt with in chapter XI of Indian Contract Act, 1872.
Essential of Partnership
At least 2 persons There must be at least two persons to form a partnership. All of them
must be competent to contract. If at any time the number of partners in a
firm gets reduced to one (whether by death or insolvency) the firm is
dissolved automatically.
Maximum Number The partnership act does not prescribe the maximum number of
of partners partners in a firm.
However, SECTION 11 OF COMPANIES ACT states that partners in a firm
carrying on banking business must not exceed 10 and in a firm
carrying on any other business for gain must not exceed 20.
If the number exceeds this limit, it will become illegal
partnership/Association unless it is registered under the companies
act.
Valid Agreement Where there is no agreement, there cannot be a partnership because the
relation of partnership arises from a contract and not from status.
Therefore, the members of HUF carrying on a family business as such are
not partners in such business. Partnership even does not arise from
operation of law or from inheritance. Partnership Agreement can be oral
or written.
Lawful Business A partnership can be formed for the purpose of carrying on business and
business alone. Where there is no business, there exists no partnership.
The term business includes every trade, occupation and profession. The
business must be lawful. A partnership would be void if its business is
unlawful.
Sharing of Profits Sharing of profits of the partnership business among the partners is a
must but sharing of losses of all the partners is not essential. Thus, if any
partner does not get a share of profits in the firm, he is not a partner. But
if nothing is expressly agreed upon by the partners, it is implied that the
profit and losses will be shared equally.
Mutual Agency To constitute a partnership, there must be a relation of mutual agency

(TRUE TEST OF between the partners. Section 4 states that the partnership business must
PARTNERSHIP) be carried on by all or any of them acting for all. Therefore, every partner
can carry on business on behalf of all the partners and can, by his
actions, bind all the partners of the firm.
Partnership Deed The document which contains the terms of contract of partnership is
called as deed of partnership.
It must be elaborate, clear and unambiguous about every aspect of the
contract of partnership business.
It must clearly lay down rights and duties of partners.
However, the deed must not contain any provisions in contravention of
Indian partnership act. Moreover, the terms must not be unlawful.
The deed must be signed by all the partners and duly stamped as
required by Indian stamp act.
If the firm is a registered one, every deed and alteration modification in
the deed must be registered with registrar of firms.
Who can be a As per Section 11 of INDIAN CONTRACT ACT, every person is competent to
partner contract except the following:
1. A minor cannot be a partner in a partnership firm. But he can be
admitted to the benefits of the firm.
2. A person of unsound mind cannot become a partner in a firm.
3. an alien enemy cannot form a partnership with any Indian citizen.
Eligibility of other persons:

1. A married women can become a partner in a firm. A married women
can even be a partner of her husband. Her husband and his property will
not be liable for any liability arising out of such partnership.
2. Artificial persons like a company are competent to contract and hence

they can become a partner in a partnership firm.
3. A firm is not a person. It is not a separate entity from its partners.

Therefore, two or more firms cannot enter into a contract of a partnership
4. Two or more HUF represented by their kartas can also enter into
partnership if the number of adult members of all the joint families does
not exceed 10 or 20 as the case may be.
Basis Partnership Co-ownership

Creation Partnership arises from a contract Co-ownership arises from status or
from a contract.
Business Business is necessary for the Co-ownership can exist even without a
existence of partnership. business.
Objective Partnership is formed with an Its objective is to share property in
objective to earn and share profits of joint ownership.
a business.
Mutual agency Partners are mutual agents. Co-owners are not mutual agents.
Nature of There is a common interest of There may or may not be such common
interest partners in the business and interest in the property of co-
property of the firm. ownership. A co-owner has only a
limited interest in the property.
Sale or transfer A partner cannot sale or transfer his A co-owner can sale or transfer his
of interest interest in firm without consent of all interest in the property without the
the partners. consent of others
Partition and A partner can sue his co partners for A co-owner can sue for partition of the
dissolution dissolution and accounts of the firm property.
cannot demand partition of property.
Lien on A partner has lien on the property of A co-owner does not have such lien.
property the firm for expenses incurred by
him on behalf of the firm.
Name of parties The parties in partnership are The parties in co-ownership are known
known as partners as co-owners or joint owners.
Limit on There is a limit on maximum There is no limit on number of co-

members member. It is 10 in case of banking owners.
business and 20 in case of any other
business.
Basis Partnership Joint stock company

Meaning A partnership is a relation between A joint stock company is an artificial
person who have agreed to share person created by law having perpetual
profits of a business carried on by all succession and a common seal
or any of them acting for all.
Creation It is created by a contract between It is created by following a procedure
two or more persons laid down by the law
Registration Registration of partnership firm is Registration of a joint stock company is
not compulsory compulsory
Separate Partnership firm has not separate A company has a separate legal
existence legal existence existence apart from the members
forming it.
Limit on There is a limit on maximum There is no limit on maximum number
membership member. It is 10 in case of banking of members in a public company. In
business and 20 in case of any other case of a private company the
business maximum number is 50.
Liability Liability of partners is unlimited. Liability of every member of a company
Their personal estate is liable for the is limited to the extent of face value of
debts of the firm shares held by him or guarantee given
by him
Transfer A partner cannot transfer his share
of A member of a company can transfer
shares without the consent of all the his shares without consent of all the
partners members.
Rights on The property of the firm is joint The property of the company is the
property property of all the partners. All the property of the company. Therefore, all
partners can divide the property the members of the company cannot
among them. divide it among themselves.
Management A partnership is managed by all or A company is managed by a board of
any one of the partner on behalf of directors elected by the members of the
all company
Perpetual A partnership has no perpetual A company has perpetual succession.
succession succession. A partnership is Death or insolvency of a member does
automatically dissolved on death or not affect the existence of the company
insolvency of any partner subject to
a contract to contrary.
Mutual agents Every partner is an agent of another The members of a company are not
partner. They are mutual agents mutual agents. A member cannot bind
by his acts the other members of the
company
Dissolution Partnership can be dissolved by A company can be dissolved by
partners at any moment following a legal process
Statutory A partnership has only a few A company has many statutory
obligations statutory obligations obligations regarding formation,
management, meetings, capital,
accounts, audit, etc

Registration of A firm can be registered with the registrar of firms.
a Firm Registrar of firms is appointed by State Government.
(Section 59) The registration of a firm is not compulsory. Under the partnership act, it is
optional for the partners. (Sec 58)
The registration of a firm may be affected at any time, before or after its
formation.
The firm name shall not contain any of the following words: Crown,
emperor, empress, empire, imperial, king, queen, or words expressing or
implying sanction, approval or patronage of government, except when the
government signifies its consent to the use of the words as part of the firm
name by order in writing.
However, following words are permissible (i) Associates, (ii) Management
consultants, (iii) Brothers, etc
The following details are to be given in application for registration of firm: (i)
Firm Name (ii) Principal place of business (iii) any other place of business
(iv) date when partners joined the firm (v) name and place of each partner of
firm (vi) duration of the firm
The following details are not to be given in the application: (i) Capital
contribution of each partner, (ii) Bank accounts of the firm (iii) Goodwill of
the firm, (iv) PAN number of the firm, (v) details of the auditor of the firm.
Noting of Event/Change in Application to be made by

Alterations in Firm Name All the partner or their agents
registrations Principal Place of business All the partner or their agents
Other place of business All the partner or their agents
Name & Address of Partners Any one partner or his agent
Change in the constitution of firm
Any one partner or his agent or
like admission, retirement, etc person specially authorized in this
behalf
Decision of minor to continue in Minor or his authorised Agent
the firm or not on attaining
majority
Rectification of mistake by All the partner or their agents
registrar
Effects on non No Suit by a partner against the firm.
registration No Suit by one partner against any other partner of the firm.
No suit by firm against third party. (above Rs. 100)
No suit by a partner of unregistered partner against third party.
However, third party can sue against the partners as well as firm
Exceptions to A partner of unregistered firm can sue for dissolution of the firm.
above A partner can sue for accounts of the dissolved firm.
A partner can sue for realizing the property of a dissolved firm.
An official assignee or receiver or court can realize the property of an
insolvent partner.
Rights of firm or partner in a firm having no place of business in India are
not affected.
A third party can always sue against unregistered firm and partners in the

firm.
A firm or any partner of the firm can sue for damages for misconduct
against a partner.
TYPES OF PARTNERS
Active Partner AP is actively engaged in the conduct of business in a usual way and acts as
an agent of the firm.
AP becomes partner by agreement and is known to all third parties.
As he acts as an agent, he binds himself and all his co-partners by his acts
done in usual course of business.
His liability is unlimited towards third party for debts of firm.
When an AP retires or is expelled, he should give a public notice of the
same, in order to limit his liability after retirement or expulsion.
Sleeping or SP becomes partner by agreement and contributes capital but does not take
Dormant part in the conduct of the business.
Partner His existence as a partner is not known to public as he does not participate
in the business.
SP cannot bind other partners by mutual agency.
However, his liability is unlimited towards third party towards debts of the
firm.
As his existence is not known to public, he need not give public notice of his
retirement or expulsion.
But if his existence as partner is known to some persons dealing with the
firm, notice of his retirement must be given at least to them.
Nominal NP lends his name to the firm, he neither invests money in the firm nor
Partner does he shares the profits of the firm.
But, he is liable like an actual partner of the firm to third parties for all the
debts of the firm because of the mutual agency.
Partner in A partner who only shares the profits of the firm but not the losses of the
profits only firm is called partner in profits only.
However, he is liable to third party for all the debts of the firm.
Sub Partner A sub partner is a partner of a partner.

A sub partner is not directly connected with the firm and does not have
mutual agency with any partner of the firm.
He does neither enjoy any right against the firm nor does he carry any
duties for the business of firm.
Partner of A person held liable as a partner by Estoppel when:

Estoppel a. He by spoken or written words or by conduct represents himself to be a
partner in a firm; or he knowingly permits himself to be represented as a
partner in a firm; and
b. Any other person having faith on such representation given credit to the
firm;
A partner by Estoppel becomes liable jointly and severally only to the person
who have given the credit to the firm on the faith of its representation.
At the same time he is not liable to the partners of the firm.
A retiring person also becomes a partner by Estoppel if he does not give a
public notice of his retirement and the continuing partner use his name as

a partner.
However, Rule of Estoppel does not apply in the case of Death or Insolvency
of a partner.
MINOR AS PARTNER IN BENEFITS
Rights of a minor To share profits
To share property of the firm
To inspect the books of the firm
To copy account of the firm
To Sue partner for profits and property
To decide to become or not to become a partner of the firm on attaining
majority.
Liability of a minor Minor is not personally liable for acts done.

Liability of a minor is limited his share in the profits and property of the
firm.
It is the liability of the minor to give public notice of his decision to
become or not to become a partner on attaining majority. if he fails to give
such a notice, he shall be liable as full fledged partner in the firm.
Position on Options available:

attaining majority a. To become partner in the firm or
b. Not to become partner in the firm.
Time Available:
He may give notice at any time within:
- 6 months of his attaining majority or
- of his obtaining knowledge that he had been admitted to the benefits
of partnership, whichever is later.
Consequences of failure to give notice:

In case, he fails to give a notice, he shall become partner in the firm on the
expiry of the said 6 months and will be liable as an active partner.
RELATIONS BETWEEN PARTNERS

Rights of Partners Right to take part in business
Right to be CONSULTED
Right to access the books
Right to remuneration if authorised by partnership deed.
Right to share profits
Right in emergency
Right to be indemnified
Right to retire
Right of outgoing partner to carry on competing business
Right to dissolve the firm
Duties of Partners To be just and faithful

To render true account
To carry on business to the greatest common advantage
To give full information
To indemnify for fraud
To attend DILIGENTLY
Duty to share losses
To account for private profits
To act within authority
To be liable for the acts of the firm.
IMPLIED AUTHORITY OF PARTNERS

Scope of implied If any partner does any act within the scope of his implied authority, he
authority will bind firm with his acts. However, the scope of implied authority is
subject to following conditions:
1. The act must be done in the capacity of partner
2. Act must relate to the normal business of the firm
3. Act must be done in the USUAL WAY
4. The act must be done in the name of the firm
Acts within implied 1. To buy goods of the kind dealt/used in the business of the firm.
authority 2. To sell the goods of the firm
3. To buy things necessary (incidentally or consequently) for carrying on
the business of the firm.
4. To accept payments of the debts due to the firm and issue receipt for
the same.
5. To employ servant for the business of the firm.
6. To acknowledge the sustaining debts.
7. To borrow money on credit of the firm.
8. To pledge goods for borrowing money on behalf of the firm.
9. To create equitable mortgage by depositing title deed of the property
against the money borrowed.
10. To settle accounts with person dealing with the firm.
11. To render account to the creditor of the firm.
12. To defend an action brought against the firm and to engage the
lawyer for the purpose.
Restriction on Statutory restrictions. In the absence of any usage or custom or trade

implied authority to the contrary, the implied authority of a partner does not empower him
to do the following acts:
i. To submit a dispute relating to the business of the firm to
arbitration.
ii. To open a bank account on behalf of the firm in his own name.
iii. To compromise or relinquish any claim or portion of a claim by
the firm.
iv. To withdraw a suit or proceeding field on behalf of the firm.
v. To admit any liability or proceeding against the firm.
vi. To acquire immovable property on behalf of the firm.
vii. To transfer immovable property belonging to the firm.
viii. To enter into partnership on behalf of the firm.
These statutory restriction are effective against the whole world
weather a particular person contracting with the firm knows about them
or not. Therefore, the firm will not be liable to any third parties for any of
the above acts of a partner.
A partner can bind any of these acts only when he is expressly
authorised to do the acts or the usage or custom or trade allows him to
do the act.

2. Restriction by contract. Partner may by contract between all the
partners restrict the implied authority of any partner. Therefore any
restriction imposed on implied authority of a partner by a contract
between all the partners will be effective provided the third party with
whom the partner deals knows of such restriction. (Sec. 20)
Liability Of A Firm In 1. Liability for extension and restriction of partners implied authority -
Certain Cases Any restriction imposed on the implied authority of any partner will have
no effect against third party unless the party with whom the partner is
dealing has notice of such restriction or the party does not know or
believe that he is dealing with a partner in a firm.
2. Liability of acts done in an emergency- When a partner does some act

beyond his authority in an emergency the firm is liable for such act
subjected to the following conditions:
(i) The act must have been done to protect the firm from loss threatened
by the emergency.
(ii) The partner must act as a prudent person would act under similar
circumstances in his own case (Sec. 21)
3. Liability for act done in the name of the firm- The firm is liable for the
same.
4. Liability for representations by a partner- if representations are made

within the authority and in the normal course of business, then firm will
be bound by it.
5. Liability for the notice to a partner- Notice to a partner operates as

notice to the firm provided the following conditions are satisfied:
i. When the notice is given to a partner who habitually acts in the
business of the firm, i.e. to an active or working partner.
ii. The notice must of any matter relating to the affair of the firm.
iii. There must not be any fraud committed on the firm with the
consent of that partner. If the fraud is committed regarding that
matter of the notice, it is not deemed to be a notice to the firm.
6. Liability for wrongful act of a partner- The firm is liable for the
wrongful acts or omission of the partner subject to the following
conditions:
i. When the wrongful acts are done while acting in ordinary course
of business of the firm or with the authority of his co-partners.
ii. Such acts cause loss or injury to any other party or any penalties
is incurred.
7. Liability of misapplication of money- The firm is liable to make good

the loss caused to a third party due to misapplication of his money or
property by a partner in the following cases:
i. Where the partner acting within his apparent authority receives
money or property from third parties and misapplies it.
ii. Where firms in the course of its business receive money or
property from a third party, and the money or property is
misapplied by any of the partners while it is in the custody of the
firm.
RECONSTITUTION OF A FIRM
The reconstitution of the firm takes place in any of the following ways:
i. By introduction of a partner. (Sec. 31)
ii. By retirement of a partner. (Sec. 22)
iii. By expulsion of a partner. (Sec. 33)
iv. By insolvency of a partner. (Sec. 34)
v. By death of a partner. (Sec. 35)
vi. By transfer of partners interest. (Sec. 29)
Admission of a Partner 1. Generally, Liability of a new partner commences from the date of his
admission.
2. Generally, New partner cannot be held liable for the acts of the firm
done before the date of admission. (No Mutual Agency)
3. However, he can agree to be liable for the pre-existing debts of the

firm. However, he shall be liable only to the other partners of the firm.
Third party cannot bind the new partner of the firm.
4. New partner becomes liable to firm as well as creditor of the firm if:
a. New firm agrees to take over the liability of the old firm.
b. Creditors agree to discharge the liability of old firm and agree to
accept the new firm as their debtor. (NOVATION)
Retirement of a Modes of Retirement:

partner With a consent of ALL the other partners.
In accordance with an express agreement by the partner,
Where the partnership is at will, by giving the notice in writing to
ALL THE OTHER PARTNERS of his intention to retire.
1. As between the partners, the retirement becomes effective from the

date mentioned in the notice.
2. In case no date is mentioned, from the date of communication of

notice. But the date of retirement cannot be prior to the date of notice.
3. As to the third parties, the retirement is effective from the date of

public notice.
4. Retiring partner is liable to third party for acts done by firm after
retirement but before public notice of retirement is given.
5. Public notice may be given by retiring partner or any other partner of

reconstituted firm.
Rights of Retiring Partner:

i) To carry on Competing Business and Advertise such business.
ii) To share profit (in capital ratio) or Interest (6%p.a.) on unpaid capital.
However, he cannot do the following act:

a. He cannot use firm name.

b. He cannot represent himself as carrying on business of firm;
c. He cannot solicit the customers of the firm
Expulsion of a partner Following conditions must be satisfied:

a. Expulsion must be as per the terms of contract;
b. power must be exercised by any majority of partners;
c. it must be in good faith.
If above mentioned conditions are not fulfilled, the expulsion will be

termed as Irregular expulsion. Then expulsed partner shall have
following remedies:
He can claim reinstatement as a partner in the firm.
Alternatively, he can claim for refund of his share in the capital.
He can carry on any competing business with that of the firm
subject to a contract to the contrary.
Insolvency of partner 1. A partner, who is adjudicating as an insolvent, ceases to be a partner

in the firm from the date of order.
2. if the firm carries on the business, the estate of the insolvent partner
is not liable for any act of the firm done after the date of the order of
adjudication.
3. No public notice is required to be given on insolvency of a partner
4. In case the firm is not dissolved, the share of property and profit of
the insolvent partner will vests in the official Assignee or Receiver.
Death of a partner 1. A firm is dissolved by the death of a partner in the absence of any
contract to the contrary.
2. The estate of deceased partner is liable for any act done by firm
before his death.
3. But he will not be liable for goods ordered before his death but
actually received after his death and Any money borrowed by partners
after his death.
4. No public notice is required on the death of the partner.
Transfer of Partners 1. Any partner cannot transfer his share in the partnership to any third
Interest partner without consent of all other partners.
2. A partner may transfer his interest in firm by Sale, Mortgage or by

creating a charge on such interest.
3. Transferee will NOT be entitled to following rights:

To interfere in the conduct of the business of the firm.
To require accounts of the firm.
To inspect the books of the firm.
To challenge the accounts of profit agreed to by the partner

PUBLIC NOTICE:
When public notice is to be given?
A public notice is required to be given in following cases:
1. On retirement of a partner by retiring partner or any other partner.
2. On expulsion of a partner by expelled partner or any other partner.
3. On dissolution of firm by any partner
4. On election to become or not to become a partner in a registered firm on attaining majority
by the person who was admitted as a minor to the benefits of partnership by minor
himself or his agent.
When notice is not required?

No public notice is required to be given in the following cases:
a. On death of the partner.
b. On the insolvency of the partner.
c. On admission of the partner.
DISSOLUTION OF FIRM
Without the 1. Dissolution by Agreement:

order of court Unless otherwise agreed, a firm can be dissolved with the consent of ALL THE
PARTNERS.
However, partners may provide in the agreement that firm can be dissolved by
majority of partners.
2. Compulsory Dissolution:
a. When All the partners or All partners except one are adjudged as insolvent.
b. When the business of firm becomes unlawful.
3. Dissolution by happening of contingencies:

a. Expiry of Fixed Term
b. Completion of adventure for which it was formed.
c. Death of a partner;
d. Insolvency of a partner when there are only 2 partners;
e. Dissolution by Notice
Dissolution by 1. Insanity:
order of Court a. Such a suit can be filed by any other partner or by the next friend of the
partner of unsound mind.
b. It should be noted that insanity of a partner does not automatically

dissolve the firm. It can be dissolved by the order of the court only.
2. Permanent Incapacity:
a. Such suit may be filed only by any other partner.

b. Incapacity of a partner must be permanent. It may be physical or mental.
c. but incapacity of a dormant partner cannot be the ground for order of
dissolution of the firm.
3. Misconduct:
a. Such suit may be filed by a partner other than the guilty partner.
b. Misconduct need not be directly connected with the business of the firm.
c.Following acts have been held to be misconduct of a partner.
Guilty for breach of trust by a partner.
Gambling or speculation by a partner.
Persistent neglect or refusal by a partner to participate in the conduct of
the business of the firm
Embezzlement of funds of client received on behalf of the firm
Theft of firms accounts book.
4. Persistent Breach of Agreement:
A willful or persistent breach of agreement must be related to any of the

following:
(i) Management of the affairs of the firm
(ii) The conduct of the business of the firm
5. Perpetual Losses:
When the business of the firm cannot be carried on except at a loss the court
may dissolve the firm on an application by any partner.
6. Any Other just and Equitable Reason:

When any partner makes an application for dissolution of the firm on any
other ground and court thinks it just and equitable that the firm should be
dissolved.
Rights of 1. Right to claim refund of Goodwill on premature dissolution.

partners on 2. Right to use the firm name if he has purchased the goodwill of the firm.
3. Following rights in case of fraud or misrepresentation:
dissolution
a. Right of lien on surplus assets
b. Right to be indemnified
4. Right to enforce winding up
Liabilities of 1. All the partners continue to be liable to the third parties for any act done
partners by any of them after dissolution but before public notice of dissolution is
given.
2. After the dissolution of a firm, the authority of each partner to bind the
firm as well as mutual rights and obligations of the partners continue, so far
as may be necessary for the following two purpose only:
(i) For the winding up of the affairs of the firm
(ii) For completing the unfinished transactions at the time of dissolution.
Settlement of 1. Losses including deficiency of capital, shall be paid in the following

Accounts sequence:
(i) First, out of profits
(ii) Next, out of capital
(iii) Lastly, if necessary, by the partners individually in their profit sharing
ratio.
2. The assets of the firm shall be applied in the following manner and order:
(i) In paying the debts of the firm to third parties;
(ii) In paying to each partner ratably what is due to him from the firm for
advances as distinguished from capital;
(iii) In paying to each partner ratably what is due to him on account of
capital; and
(iv) The residue if any shall be divided among the partners in their profit
sharing ratio.
3. Loss arising due to insolvency of a partner is to be beared in Capital Ratio

as per Garner Vs Murray. It was held that the solvent partners should bear
the loss of deficiency of capital of insolvent partner in the ratio of their agreed
capital.
4. Goodwill is the asset of the firm. It can be sold either individually or along
with the other assets of the firm.
5. Property of firm should be firm applied to pay off the firm liabilities and
then partners personal liabilities.
6. Partners personal property shall first be applied to pay off Partners

personal liabilities and then the surplus can be applied to pay off firms
liabilities.
Mode of Public a. In case of registered firm, the public notice must be given as under:
Notice (i) Notice to the registrar of firms
(ii) By publication of notice in the official gazette; and
(iii) By publication of notice in at least one vernacular newspaper. Such
newspaper must be circulated in the district where the firm to which
notice relates has its place or principal place of business.
b. In any other case, that is in case of unregistered firm, public notice must
be given in the following manner:
(i) By publication of notice in the official gazette; and
(ii) By publication of notice in at least one vernacular newspaper. Such
newspaper must be circulated in the district where the firm to which
notice relates has its place or principal place of business.

SALE OF GOODS ACT, 1930
1st July 1930 Whole of India Except J & K Not Exhaustive
Distinction between Sale and Agreement to sell
Basis of Sale Agreement to sell
distinction
1. Nature It is an executed contract. It is an Executory contract.
2. Transfer In sale, the ownership of the Transfer of ownership takes place at a

of goods is transferred immediately. future time or on fulfillment of
ownership conditions of agreement to sell.
3. Conveyan A sale implies a contract plus In agreement to sell, there is no
ce of conveyance of property. conveyance of property. It gives buyer
property Therefore, a buyer gets a right in the rights against the seller only.
rem. He can enjoy the goods
against the whole world.
4. Type of Only the existing and specific In case of agreement to sell, the goods
goods goods can be the subject matter are usually the future or contingent.
of sale. Sometimes, it is unascertained
existing goods.
5. Risk of In sale, risk passes with the In this case, the seller is to bear the
loss ownership. Hence, if goods ate risk of loss even though the goods are
destroyed, the buyer is to bear in possession of the buyer.
the loss even though the goods
are with the seller.
6. Rights of In sale, if seller is an unpaid In case of agreement to sell if the
seller seller, he can sue the buyer for buyer makes the breach of contract
price. If goods are in his the seller can sue the buyer for
possession he can also exercise damages even though the goods are in
his rights against the goods, i.e. his possession.
(a) lien (b) stoppage of goods in
transit and (c) resell the goods.
7. Rights of In a sale, if the seller makes a In an agreement to sell, the buyer can
buyer breach of contract, the buyer can sue the seller for damages on breach
sue for damages. If the seller of contract.
resells the goods, the buyer can
even sue the third party for
recovery.
8. Insolvency In case a sale, if the buyer In agreement to sell, the seller is not
of the becomes insolvent, the official bound to deliver the goods unless the
buyer assignee/receiver can claim the full price of the goods is paid to him
goods because the buyer is the because the ownership of the goods is
owner of goods. The seller is still with the seller.
entitled to ratable dividend for
the price only.
9. Insolvency If the seller becomes insolvent If the seller becomes insolvent after
of the after sale, the buyer can claim agreement to sale, the buyer can claim
seller the goods from official assignee/ ratable dividend for the price of the
receiver. It is because ownership goods if he has already paid.
of the goods is with the buyer.

Distinction between Sale and Hire-purchase agreement
Basis of distinction Sale Hire-purchase Agreement
1. Transfer of In sale, the ownership of the In hire purchase agreements,
ownership goods is transferred the ownership of goods passes to
immediately. the hirer when he pays all the
installments of hire
2. Number of There is only one contract of There are two contract within
contracts sale. this agreement:
(i) the contract of bailment for
hire, and
(ii) agreement to sale subject to
the payment of installments
3. Position of In sale, the possession of The possession of goods must
goods goods may remains with the pass on to the hirer.
seller.
4. Position of The buyer is in the position of The hirer is in the position of
parties an owner of goods. bailee.
5. Termination of A seller or buyers cannot A hirer has an option to
contract terminate the contract. If terminate the contract of hirer at
anyone dose so, he is liable to any time. But in such a case,
pay damages. the owner can retain the
installments paid and claim the
arrears of installments dues.
6. Treatment of In sale, the payment made in Payments of installments is
installments installments is treated as treated as hire charges for the
payment towards the price of use of goods until all the
goods. installments are paid and option
to buy is exercised by the hirer.
7. Right to regain In sale, once possession of the The owner can regain the
the possession goods transferred to the possession of goods if the hirer
buyer, it cannot be regained makes a default in payment of
by the seller. installments or dose something
against the term of the
agreements
8. Transfer of In sale, the buyer can transfer The hirer cannot transfer the
title to third the good title to the goods to a good title to the goods held on
parties third party. hire to any third parties without
the consent of the hirer.
9. Written The sale may be by word of The hire-purchase contract must
contracts mouth or by a written be in writing and signed by all
contract. the parties
10. Regulati This is regulated by the Sale This is regulated by the Hire-
ng act of goods Act, 1930. purchase Act, 1972.
SALE VS. BAILMENT: A sale and bailment is different on the following grounds:
(i) Ownership: In sale, goods is transferred to the buyer whereas no change in ownership takes
place in bailment. There is only a transfer of possession of goods from bailor to a bailee.
(ii) Use of Goods: a buyer may use the goods he like but a bailee can use goods only if the terms
of bailment allow and in accordance with the terms of bailment.

(iii) Return of Goods: In sale, goods are not to be returned to the seller by the buyer. But in case
of bailment, bailee is bound to return the goods to the bailor or dispose of according to his
directions when the purpose of bailment is accompolised.
(iv) Price: A price is paid in money as consideration for a sale but a bailment may be without any
consideration i.e gratitutous bailment.
When condition to be treated as warranty?

A buyer may treat breach of condition as breach of warranty in following cases:
(i) Voluntary Waiver: Once a buyer waives any condition, he cannot afterwards insist on its
fulfillment. Waiver may be express or implied.
(ii) Voluntary election: A buyer also has an option to elect the breach of a condition as breach of
warranty. If the buyer elects this option, he can claim only damages and loses his right to treat
the contract as repudiated.
(iii) Compulsory treatment by acceptance of goods: where the contract is not severable and the
buyer has accepted whole or any part of the goods, the breach of any condition of such contract
can only be treated as breach of warranty. The buyer has no option to repudiate the contract but
can claim damages unless there is term of the contract to that effect.
Distinction between condition and warranty:

Distinction Condition Warranty
Nature A condition is stipulation which A warranty is a stipulation which is
is essential to the main purpose collateral to the main purpose of the
of the contract. contract
Significance It is essential to the very It is not so essential that a failure to
purpose of the contract that its perform it cannot be considered as failure
non performance may be to perform the contract
considered as failure to perform
the contract.
Consequence of The aggrieved party may treat The aggrieved party cannot repudiate the
breach the contract as repudiated contract but can claim damages
Treatment A breach of condition may be A breach of warranty cannot be treated as
treated as breach of warranty breach of condition

GOODS [Section 2(7)]
Goods means every kind of movable property
other than actionable claims (Rights that can be claimed through court) and money (Currency of
money); and
includes stock and shares, growing crops, Grass and things attached to or forming part of the
land which are agreed to be severed before sale or under the contract of sale.
However, various courts have held the following are also covered under the definition of goods:
(i) Metal and Stone
(ii) Interest of Partner in a partnership firm is goods.
(iii) Emblements such as vegetables, fruits, etc are included in the term goods.
(iv) Shares before allotment are also goods.
(v) Foreign Currency
(vi) Goodwill, copyright, patents are goods
(vii) water, gas and electricity are goods.
Existing Goods Goods owned and possessed by the seller at the time of contract of sale
are called as existing goods.
Existing goods can be further classified as:

1. Specific Goods: Goods identified and agreed upon at the time of
contract of sale.
Example: A customer went to the showroom of 2 wheeler and pointed out

to a Red Colored Yamaha Fazer bike and said I want to buy this bike.
Here the subject matter of contract is specific goods.
2. Ascertained Goods: Goods are identified in a lot of goods and

agreed upon at the time of contract of sale; exact goods are known after
the contract of sale.
Example: A customer went to the showroom of 2 wheeler and point out to

a lot of 4 Red colored Yamaha Fazer bike and said I want to buy a red
colored Yahama Fazer Bike. Here the subject matter of contract is
ascertained goods.
3. Unascertained Goods: These are not identified and agreed upon at

the time of contract of sale. These goods are bought by description of
goods which may be a brand name, quality, grade, etc.
Future Goods These goods are not in existence at the time of contract of sale. Only an
agreement to sell can be made in respect of future goods. Property in the
goods is transferred at a future date as per the conditions mentioned in
the agreement to sell.
Contingent Goods Contingent goods are the goods, the acquisition of which depends upon
the happening or non happening of a contingency i.e contingent event.
Existing goods vs Distinction:
Future Goods (i) existing goods exists at the time of contract of sale where as the future
goods do not.
(ii) existing goods are owned or possessed by the seller at the time of sale
but future goods neither exists nor owned or possessed by the seller.
(iii) there can be Sale or Agreement to Sell of Existing goods but no sale
can take place for future goods.
Future goods vs Distinction:

Contingent goods (i) Acquisition or production of future goods does not depend upon any
contingency where the acquisition of contingent goods depends upon
happening or non happening of a contingency.
(ii) Non Acquisition or non production of future goods does not discharge
the contract by impossibility where the non acquisition of contingent
goods discharges the contract by impossibility of performance.

IMPLIED 1. Condition as to Title:
CONDITIONS (i) in case of sale, he has a right to sell the goods; and
(if implied (ii) in case of agreement to sell, he will have a right to sell the goods at the
time when the property is to pass.
condition is
breached, buyer 2. Condition as to description of goods:
has a right to Where there is a contract for sale of goods by description, there is an
reject the goods) implied condition that the goods shall correspond with the description.
The description may include physical characteristics, class or grade, trade

marks, brand name label, model, mode of packing, etc of the goods.
For example, Basmati rice, Colgate, ponds, Maruti 800 Model, etc
are the description of goods.
3. Condition as to Sample:
(i) the bulk shall correspond with the sample in quality.
(ii) the buyer shall have a reasonable opportunity of comparing the bulk
with the sample.
(iii) the goods shall be free from any defect, rendering them
unmerchantable, which would not be apparent on reasonable examination
of the sample.
If the defect is patent not latent, i.e visible and can be discovered on
inspection, the seller cannot be held liable for the same.
4. Condition as to sample as well as description:

Where the goods are sold by sample as well as description, the implied
condition is that the goods must correspond with both. If not, the buyer
can reject the goods.
5. Condition as to quality or fitness:

When Seller shall be liable:
(i) The buyer expressly or by implication make known to the seller the
particular purpose for which the goods are required.
(ii) The buyer relies on the sellers skill and judgment.
(iii) The seller deals in the goods in his usual course of business.
But where the goods can be used only for a particular purpose, the buyer
need not expressly disclose the purpose. The seller is bound by the
implied condition as to quality and fitness as he is deemed to have made
known the seller the purpose by implication.
When buyer shall be liable:

(i) Where the goods sold is a specified article under its patent or other
trademark. This exception is applicable only when the buyer does not rely
on the sellers skill and judgment.
(ii) Where the product is used only for a particular purpose but buyer fails
to disclose his abnormal circumstances.

(iii) Where the goods can be used for more than one purpose and buyer
fails to make known to the seller the purpose of his buying, the seller is
not liable.
6. Conditions as to merchantable quality:

The expression Merchantable quality of goods means the goods fit in
terms of their quality and condition for the purpose for which they are
bought by prudent person, or the goods which are marketable at their full
value.
It should be noted that implied condition of merchantable quality applied

in following cases:
(i) Where the goods are bought by description.
(ii) Where the goods are bought from a person who deals in the goods of
that description whether he is a manufacturer or producer or not.
(iii) Whether or not the buyer relies on the skill and judgment of the seller.
(iv) Whether or not the goods are sold under a patent or trademark.
IMPLIED 1. Warranty as quit possession of goods No disturbance from any third

WARRANTIES party
(if implied
2. Warranty as to freedom from charge or encumbrance shall be free
warranties are not
from charge or encumbrance of any third party
fulfilled, buyer
can claim 3. Warranty to disclose dangerous nature of goods seller must warn the
damages only) buyer of any dangerous nature of goods at the time of sale.
Doctrine of The doctrine of caveat emptor lays down that ordinarily every buyer
Caveat Emptor must take care of his own interest while buying the goods. If he fails to
do so, he cannot blame the seller because the seller is not bound to
(Section 16) Let
supply goods of a particular quality suitable for the buyers purpose.
the Buyer be It is the buyers duty to select goods suitable for his needs or purpose.
aware
Exceptions: (when seller shall be responsible)
1. when purpose of buying is made known to the seller:
(i) The buyer makes known to the seller the particular purpose for which
the goods are required.
(ii) The buyer relies on the sellers skill and judgment.
(iii) The goods are of a description dealt in by the seller, whether he is the
manufacturer or producer or not.
2. When the goods are bought by description: (found unmerchantable)

(i) The goods are bought by description.
(ii) The goods are bought from a seller who deals in the goods of that
description, whether he is the manufacturer or producer or not.
(iii) The defect, if any, in the goods is latent but not patent or visible.
3. When goods have latent defect:

where the goods sold have latent defect which cannot be revealed by
simple examination, the seller is bound to compensate the buyer for the
damages caused by such defect.
4. When contract is induced by Fraud: Active Concealment of facts.

TRANSFER OF PROPERTY
SPECIFIC GOODS:
When there is an unconditional contract for When the contract is made
sale of specific goods in a deliverable state
When there is a contract for sale of specific When the goods are put into a deliverable state
goods not in a deliverable state at the time of and the buyer has notice thereof.
contract
Where there is a contract for sale of specific When the seller has done that act to ascertain
goods in a deliverable state but the seller has the price and the buyer has notice thereof.
to do some act to ascertain the price
UNASCERTAINED OR FUTURE GOODS:
Ownership of unascertained goods is transferred to the buyer when the following two conditions
are fulfilled:
a. The goods must have been ascertained.
b. The goods must have been unconditionally appropriated by the seller or the buyer with the
consent of the other.
Rules of Valid Appropriation of Goods:

i) Appropriation means an act involving the selection of goods with the intention of using the
goods in performance of contract.
ii) The consent of the seller or the buyer as to appropriation may be express or implied and may
be given before or after the appropriation is made.
iii) when the seller deliver the goods to buyer or to a carrier or a bailee for the purpose of
transmission to the buyer and seller does not reserve the right of disposal, he is deemed to have
unconditionally appropriated the goods to the contract.
GOODS SENT ON APPROVAL BASIS OR SALE OR RETURN BASIS:

When the buyer signifies his approval or When the approval or acceptance is
acceptance communicated to the seller
When the buyer does some act adopting the When the act of adoption is done
goods
When the buyer fails to return the goods On the expiry of time fixed or where no time is
fixed, on the expiry of reasonable time.

SALE BY NON OWNERS Nemo dat quod non habet
Sale by Mercantile i) Agent must be in possession of goods or document of title to goods
Agent with the consent of the owner.
ii) The agent must have sold the goods in the ordinary course of business
as a mercantile agent.
iii) The buyer must have acted in good faith.
iv) The buyer must have no knowledge that the seller has no authority to
sell.
Sale by one of the i) The joint owner must be in the sole possession of goods with the
Joint Owner consent of the other joint owners.
ii) The buyer must have bought the goods in good faith.
iii) The buyer must have no knowledge that the seller has no authority to
sell.
Sale by a person in i) The seller by in possession of goods under a voidable contract on the
possession under a ground of coercion, undue influence, fraud, misrepresentation.
voidable contract ii) The goods must have been sold before the contract is rescinded by the
aggrieved party.
iii) The buyer must have bought the goods in good faith.
iv) The buyer must have no knowledge about the previous sale.
Sale by seller in i) The Seller must be in possession of goods or document of title to goods
possession of goods in capacity as seller and not in any other capacity such as bailee.
AFTER Sale ii) The buyer must have bought the goods in good faith.
iii) The buyer must have no knowledge about the previous sale.
Sale by a buyer in i) The buyer must in possession of goods or document of title to goods,
possession BEFORE with the consent of original seller and must have bought or agreed to
transfer of Ownership buy the goods.
ii) The new buyer must have bought the goods in good faith.
iii) The new buyer must have no knowledge about any lien or other right
of original seller in respect of such goods.
Sale by Unpaid Seller An unpaid seller must have exercised his right of lien or stoppage in
transit.
Sale by Finder of i) Owner cannot be found with reasonable diligence;
goods ii) the owner, if found refuses to pay the lawful charges to finder;
iii) The goods are in danger of perishing;
Sale by a Pawnee i) The pawnor must have made a default in payment of debt.
ii) The pawnee must have given a reasonable notice to the pawnor.
Sale by Official The right is obtained through order of court.
Receiver
Sale by Owner by The owner of goods by his statement or conduct must have lead the
Estoppel buyer to believe that the seller has the authority to sell.

DELIVERY OF GOODS:
Definition Section 2(2) Delivery means Voluntary transfer of possession from one person to
another.
Types of deliver i) Actual Delivery: Delivery is said to be actual where the goods are
physically handed over to the buyer or his authorised agent.
ii) Symbolic Delivery: Delivery is said to be symbolic where some

symbol of the real possession or control over goods is handed over to
the buyer.
iii) Constructive Delivery: Delivery is said to be constructive where a

person who is in possession of the goods, acknowledges to hold the
goods on behalf of the buyer.
Rules as to Delivery i) Payment and Delivery are concurrent conditions: The seller must be
ready and willing to give the possession of goods to the buyer and the
buyer must be ready and willing to pay the price.
ii) Effect of Part Delivery: A delivery of part of goods with an intention of

giving the delivery of the whole amounts to the delivery of whole.
However, a delivery of a part goods with an intention of separating it
from the whole lot does not amount to delivery of the whole goods.
iii) Buyer to Apply for delivery: Its the duty of buyer to apply for the
delivery of the goods to the seller.
iv) Place of Delivery:
if mentioned in contract: then Agreed Place
if not mentioned in contract of Sale: At the place at the which goods

are at the time of sale.
If not mentioned in Agreement to sell of existing goods: At the place

at which the goods are at the time of agreement to sell.
If not mentioned in Agreement to sell of Future goods: At the place

at which goods are manufactured or produced.
v) Time of Delivery: if mentioned, then within the time agreed. If not

mentioned, then within reasonable time.
vi) Short Delivery: Buyer has two options: Buyer may accept the goods
so delivered or he may reject the goods.
vi) Excess Delivery: Buyer has three option: Buyer may accept the
whole goods so delivered, or buyer may reject the whole goods, or
Buyer may accept the contracted goods and may reject only the excess.
vii) Mixed Delivery: Buyer may reject the whole goods or may accept the
goods in accordance with the contract and may reject the rest.

viii) Delivery by Installments: Unless otherwise agreed, the buyer of
goods in not bound to accept the delivery of goods by installments.
Whether the buyer can repudiate the whole contract or not depends on
terms of contract and circumstances of each case:
a. The goods are to be delivered in installments;
b. The installments are to be separately paid for;
c. The seller makes no delivery or defective delivery in respect of one or
more installments, or buyer neglects or refuses to take delivery of or
pay for one or more installments.
ix) Delivery to Carrier or wharfinger: the seller must fulfill two

conditions:
a. To make a reasonable contract with the carrier or wharfinger.
b. To give notice to the buyer to enable to insure the goods involving
sea transit.
Rights of buyer i) Right to have delivery of the goods in accordance with the terms of
contract.
(ii) Right to treat the delivery of goods and payment of price as
concurrent condition of sale, unless otherwise stated.
(iii) Right to return the goods sent on approval.
(iv) Right to exercise ownership of goods.
(v) Right to reject the goods if the goods are in smaller or larger
quantity than the ordered quantity or goods mixed with other quality of
goods.
(vi) Right to reject the goods if delivered in installments.
(vii) Right to treat the breach of conditions as a breach of warranty.
(viii) Right to examine the goods before accepting delivery.
(ix) Rights in case of breach of contract by seller.

a. suit for damages for non delivery.
b. suit for specific performance
c. suit for breach of warranty.
d. suit for repudiation of contract before due date
e. suit for refund of the price paid in advance
f. suit for interest.
Duties of buyer (i) Duty to accept goods and take delivery.

(ii) Duty to make payment
(iii) Duty to apply for delivery of goods
(iv)Duty to intimate the seller when he reject the goods.

UNPAID SELLER
An unpaid seller is a seller whose price is unpaid either wholly or partly.
The rights of an unpaid seller can be classified under two categories:
a. Right against the goods and
b. Right against the buyer personally.
AGAINST THE GOODS
RIGHT OF LIEN RIGHT OF STOPPAGE IN TRANSIT RIGHT OF RESALE
Right to Retain the Right to regain the Goods must be of
possession possession perishable nature
Seller must be in the Goods must be in transit Notice of intention to sell is
possession of goods given, but buyer does not
pay the price due.
Seller must not have Goods must in the Seller may have expressly
expressly or impliedly possession of a carrier reserved the right of resale
waived the right of lien
Goods must not be sold on If buyer is deemed to be If notice of resale is given,
credit or cash. insolvent, then also right of then any loss arising
stoppage in transit can be thereon can be claimed
used. from buyer.
If goods are sold on credit, If notice of resale is not
then the period of credit given, then any loss arising
must have expired thereon cannot be claimed
from original buyer.
AUCTION SALE
Auction sale is a public sale, where goods are offered to be taken by the highest bidder from
among the public.
Rules of Auction:
1. Completion of sale: In auction sale, the sale is complete when the auctioneer announces its
completion by the fall of the hammer. Thus, the sale is complete at the fall of hammer.
2. Passing of property: In an unconditional sale by auction of specific goods in a deliverable

state, the property in the goods passes to the buyer by the fall of the hammer.
3. Sellers Right to bid:

In sale by auction, a right to bid may be reserved expressly by or on behalf of the seller.
Where such right is expressly so reserved, the seller or any one person on his behalf may bid
at the auction. No seller can bid at the auction unless he has expressly reserved his right.
The one person who is notified to make bids on sellers behalf is a puffer. He is also known
as White Bonnet, by Bidder or Decoy Duck.
The notified one puffer can make bid on behalf of the seller.
But the employment of secret or unnotified puffer or more than one puffer will have no right
to bid. If they bid, it will amount to fraud and the sale would be voidable at the option of the
buyer.

4. Reserve price or upset price:
The sale by auction may be notified to be subject to a reserve price or upset price.
The auctioneer is not authorized to sell below a notified reserve price.
In case, auctioneer by mistake knocks down a lot for less than the reserve price, the buyer
has no remedy against the auctioneer.
It is immaterial whether the bidder knows the actual reserve priced or not.
5. Retracting the bid: A bidder may retract his bid at any time before the completion of sale. Any
condition in an auction sale which forbids the bidder to retract his bid is void.
It should be noted that every bid is only an offer. It may, therefore, be retracted at any time
before his acceptance by the fall of hammer.
6. Security: Sometimes, the conditions of sale by auction requires the deposit of security amount
by the bidders. In such a case, every bidder is bound to deposit the security before he makes a
bid in the auction. If the bidder retracts his bid before completion of bid, he is entitled to refund
of the security. If the highest bidder withdraws his bid after the fall of the hammer, the security
deposit may be forfeited.
7. Conditional or Unconditional: Auction sale could be conditional or unconditional. If the

auction sale is conditional, the sale is not complete until the condition is satisfied. For instance,
where auction sale is subject to the approval of some authority, the sale is complete only after
approval by such authority.
In case of unconditional sale, the sale is complete with the fall of hammer.


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TALDA LEARNING CENTRE

COMMON PROFICIENCY COURSE

Your Name: Batch:

1|Page TLC 11+12/CA/CS/CMA CA AMIT TALDA: 9730768982

2|Page TLC 11+12/CA/CS/CMA CA AMIT TALDA: 9730768982

3|Page TLC 11+12/CA/CS/CMA CA AMIT TALDA: 9730768982

4|Page TLC 11+12/CA/CS/CMA CA AMIT TALDA: 9730768982

Promise A proposal, when accepted, becomes a promise.

Unenforceable A contract which is good in substance but cannot be enforced in a law

Quasi Contract A quasi contract is not a result of agreement, express or implied. It is a

5|Page TLC 11+12/CA/CS/CMA CA AMIT TALDA: 9730768982

Illustration: A enters into an agreement to sell his flat to B after

Specific Offer An offer made to a specific or a particular or an ascertained person is

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Coercion Coercion is the committing, or threatening to commit, any act forbidden by

Undue Influence Undue influence is a kind of moral coercion. It is an abuse of position by a

Fraud (voidable) Fraud is the willful misrepresentation or concealment of material facts of an

Misrepresentation Any innocent or unintentional false statement or assertion of fact made by

Opposed to An agreement which is against the general public, is said to be an

Illegal Agreements Generally speaking, an agreement which is expressly or impliedly

Contingent A contingent contract is a contract to do or not to do something, if some

Assignment of Assignment of contract means voluntary transfer of rights, interest,

Succession of Succession to a contract is the process by which one person succeeds in

Novation Novation means substitution of a new contract in place of an existing

Alteration Alteration means alteration or change in one or more terms of a contract

Recession of Rescission of a contract means cancellation of a contract.

Waiver Waiver means an intentional abandonment of rights. When a party entitled

Subsequent Subsequent impossibility is one which arises after the formation of a

Anticipatory Anticipatory breach of contract occurs when a party to a contract disable

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Voidable Contract 1. Agreement in which consent is obtained by Coercion/Undue

What is not Invitation to Offer??

Illegal Agreement 1. Agreement to share the proceeds of robbery/murder.

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Undue Influence 1. Father and Son

Exception: (No presumption of undue influence)

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Maintenance Agreement Where a person agrees to maintain a suit, in which he has no

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Carlill vs. Carbolic Smoke Ball Co

Lalman Shukla vs. Gauri dutt

Mohori Bibee vs. Dharmodas Ghose

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Rose and Frank Co vs. J R Compton

Kedar Nath vs. Gorie Mohamed

Damodar Murlidhar vs. Secretary of State of India

Dunlop Pneumatic Tyre Co Ltd vs. Selfridge & Co

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Time Place and Manner of Performance

Devolution of Joint Rights & Liabilities

Valid Tender of Performance

Minor (18 years as per Indian Majority Act)

Contingent Contracts (valid contract)

Valid: when events happens Valid: When event become impossible

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Fraud Availability of means for discovering the truth

Doctrine of Trust or charge

No Agreement on account of Natural Love and Affection

Agreements in Sale of goodwill of business -

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