B.LAW QB

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1. State the grounds upon which a contract may be discharged under the provisions of Indian ContractAct, 1872

Answer

Discharge of a Contract:

A Contract may be discharged either by an act of parties or by an operation of law which may be enumeratedas follows :

(1) Discharge by performance which may be actual performance or tender of performance. Actual

performance is said to have taken place, when each of the parties has done what he had agreed to do

under the agreement. hen the promisor offers to perform his obligation, but the promisee refuses to

accept the performance. !t amounts to attempted performance or tender :

(") Discharge by mutual agreement: #ection $" of the !ndian Contract Act, 1%&" provides if the parties to a

contract agree to substitute a new contract for it or to refund or remit or alter it, the original contract need

not to be performed. 'ovation, escission, Alteration and emission are also the same ground of this

nature.

() Discharge by impossibility of performance: *he impossibility may e+ist from its initiation. Alternatively, it

may be supervening impossibility which may take place owing to (a). unforeseen change in law (b). *hedestruction of subect matter (c). *he non-e+istence or non-occurrence of particular state of things d). the

declaration of war (#ection $).

(/) Discharge by lapse of time : A contract should be performed within a specific period as prescribed in the

0aw of 0imitation Act, 1$. !f it is not performed the party is deprived of remedy at law.

() Discharge by operation of law : !t may occur by death of the promisor, by insolvency etc.

($) Discharge by breach of contract : 2reach of contract may be actual breach of contract or anticipatory

breach of contract. hen a person repudiates a contract before the stipulated time, for its performance

has arrived, it is an anticipatory breach. !f one of the parties to a contract breaks the contract the party

inured thereby has a right of action for damages as well as he is also discharged from performing his part

of the contract (#ection $/).

(&) A promise may dispense with or remit the performance of the promise made to him or may accept any

satisfaction he thinks fit. !n the first case, the contract will be discharged by remission and in the second it

is accord and satisfaction (#ection $).

(%) hen a promisee neglects or refuses to afford the promisor reasonable facilities for the performance of

the promise, the promisor is e+cused by such neglect or refusal (#ection $&).

2.hat is the status of a !finder of goods" under the Indian Contract Act, 1872# hat are his rights#

Answer

Status of a Finder of Goods & his Rights:

A person, who finds goods belonging to another and takes them into his custody is subect to the same

responsibility as a bailee. 3e is bound to take as much care of the goods as a man of ordinary prudence would,

under similar circumstances, take of his own goods of the same bulk, 4uality and value. 3e must also take all

necessary measures to trace its owner. !f he does not, he will be guilty of wrongful conversion of the property.

*ill the owner is found out, the property in goods will vest with the finder and he can retain the goods as his own

against the whole world (e+cept the owner, of course).

A finder of goods has the following rights under the !ndian Contract Act, 1%&"

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1. Right of lien: *he finder of goods has a right of lien over the goods for his e+penses. As such he can retain

the goods against the owner until he receives compensation for trouble and e+penses incurred in

preserving the goods and finding out the owner. 2ut he has no right to sue the owner for any such

compensation (#ection 1$%).

". Right to sue for reward. *he finder can sue for any specific reward which the owner has offered for the

return of the goods. 3e may also retain the goods until he receives the reward. (#ection 1$%). Right or resale: *he finder has a right to sell the goods in the following cases:

(a) where the goods found is in danger of perishing5

(b) where the owner cannot, with reasonable diligence, be found out5

(c) where the owner is found out, but he refuses to pay the lawful charges of the finder5 and

(d) where the lawful charges of the finder, in respect of the goods found, amount to "6rd of its value.

$.%&p'ain the genera' ru'es of re'ating to !Acceptance" under the Indian Contract Act, 1872.

(enera' )u'es of Acceptance* 7ollowing are the general rules regarding acceptance under the !ndian

Contract Act, 1%&":

1. Acceptance must be absolute and un4ualified 8#ection &(!)9.

". Acceptance must be in the prescribed manner. !f the offer is not accepted in the prescribed manner, then

the offeror may reect the acceptance within a reasonable time.

. Acceptance must be communicated to the offeree. !f acceptance is communicated to the person, other

than the offeror, it will not create any legal relationship.

/. Acceptance must be given by the party to whom the offer is made.

. Acceptance must be given within the prescribed time or within a reasonable time.

$. Acceptance cannot be given before communication of an offer.

&. Acceptance must be made before the offer lapses or is withdrawn.

%. Acceptance must show intention to fulfill the promise.

. Acceptance cannot be presumed from silence.

1. ;oing of desired act amounts to acceptance.

+.hat tests can be app'ied in determining whether a person is an agent of another# State any fivecircumstances where under an agent is persona''y 'iab'e to a third party for the acts during the courseof agency

Determining Agency & Agent

*he test for determining whether a person is or is not an agent is whether that person has the capacity to bind

the principal and make him answerable to a third person by bringing him (the principal) into legal relations with

the third person and thus establish a privity of contract between the party and the principal. !f yes, he is agent,

otherwise not. *his relationship of agency may be created either by e+press agreement or by implication:

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%. atification must be communicated to the party who is sought to be bound by the act done by the agent.

. atification can be of the acts which the principal had the power to do.

1. atification should not put a third party to damages.

11. atification relates back to the date of the act of the agent.

./istinguish between Contract of Indemnity and Contract of (uarantee.

Answer

Contract of indemnity Contract of Guarantee

1. *here are two parties to the contract vi?.

indemnifier (promisor) and the

!ndemnified (promise).

1. *here are three parties to the vi?.

creditor, principal debtor and the surety

" 0iability of the indemnifier to the

indemnified is primary and independent.

". 0iability of the surety to the creditor is

collateral or secondary, the primary

liability being that of the principal debtor.

*here is only one contract in case of a

contract of indemnity, i.e., between the

indemnifier and the indemnified.

.!n a contract of guarantee there are

three contracts, between principal

;ebtor and Creditor5 between creditor

and the surety and between surety and

principal debtor.

/ !t is not necessary for the indemnifier to

act at the re4uest of the indemnified.

/. ! t is necessary that surety should give

the guarantee at the re4uest of the

debtor.

*he l iability of the indemnifier ar ises

only on the happening of a contingency.

. *here is usually an e+isting debt or duty,

the performance of which is guaranteed

by the surety.

$ An indemnifier cannot sue a third $.

party for loss in his own name, because

there is no privity of contract. 3e can do

so only if there is an assignment in his

favour.

$. A surety, on discharging the debt due by

the principal debtor, steps into the shoes

of the creditor. 3e can proceed against

the principal debtor in his own right

0. !An agreement made without consideration is void. !ith reference to provisions of the Indian

Contract Act, 1872 e&amine the va'idity of the statement and e&p'ain the cases in which the statement

does not app'y.

Answer

!alidity of an Agreement without consideration: *he general rule is that an agreement made without

consideration is void (#ection "). !n every valid contract consideration is very important. A contract may only

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be enforceable when an ade4uate consideration is there. 3owever, the !ndian Contract Act, 1%&" contains

certain e+ceptions to this rule. !n the following cases, the agreement though made without consideration, will

be valid and enforceable.

"# $atural %ove and Affection: A written and registered agreement based on 'atural 0ove and Affection

between the parties standing in near relation (e.g., husband and wife) to each other is enforceable even without

consideration. A contract in writing, registered on account of natural love and affection between parties standingnear relation to each other are the essential re4uirements for valid contract though it is without consideration.

(Rajlukhee Devee vs. hootnath).

# Com'ensation for 'ast voluntary services: A promise to compensate, wholly or in part, a person who

has already voluntarily done something for the promisor, is enforceable under (#ection "("). !n order that a

promise to pay for the past voluntary services is binding, the following essential factors must e+ist:

(i) the services should have been rendered voluntarily.

(ii) the services must have been rendered for the promisor.

(iii) the promisor must be in e+istence at the time when services were rendered.

(iv) the @romisor must have intended to compensate to the promisee.

(# )romise to 'ay time barred debt: here a promise in writing signed by the person making it or by hisauthori?ed agent, is made to pay a debt barred by limitation it is valid without consideration 8#ection "()9.

*# Agency: According to #ection 1% of the !ndian Contract Act, 1%&" no consideration is necessary to

create an agency.s

+# Com'leted gift: !n case of completed gifts, the rule no consideration no contract does not apply.

+planation (1) to #ection " of the Act states B'othing in this section shall affect the validity as between the

donor and donee, of any gift actually made. *hus, gifts do not re4uire any consideration.

7.%&amine the va'idity of a contract when the acceptance from the offeree is obtained under Coercion

or under 3ndue inf'uence. -oint out the distinction between Coercion and 3ndue inf'uence.

Answer

According to #ection 1 of the !ndian Contract Act, 1%&" when consent to an agreement is given due to

coercion or undue influences, such a contract is voidable at the option of the party whose consent was so

obtained. *he difference between coercion and undue influence is as under:

Coercion ,ndue -nfluence

(a) !t involves the physical force or threat.

*he aggrieved party is complete to

make the contract against its will.

!t involves moral or mental pressure.

*he aggrieved party believes that he

or she would make the contract.

(b) !t involves committing or threatening to

commit an act forbidden by !ndian

@enal Code for detaining or threateningto detain property of another person.

'o such illegal act is committed or a

threat is given.

(c) !t is not necessary that there must be

some relationship between the parties.

#ome sort of relationship between

the parties is absolutely necessary.

(d) Coercion need not p roceed f rom t he

promisor nor need it be directed against

the promisor.

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(e) *he contract is voidable at the option of

the party whose consent has been

obtained by the coercion.

here consent is induced by undue

influence, the contract is either

voidable or the court may set it sale

or enforce it in a modified form.

(f) !n case of coercion where the

aggrieved party, as per #ection $/,rescinds the contract any benefit

received has to be restored back to the

other party.

*he court has the distinction to

direct the aggrieved party to returnthe benefit in whole or in part or not

to give any such directions.

8.%&p'ain the circumstances whereunder a party to a contract may be e&empted from the performance

of contract on the ground of Supervening impossibi'ity under the Indian Contract Act, 1872.

Answer

Su'ervening im'ossibility: hen performance of a promise becomes impossible or illegal by occurrence of

an une+pected, event or a change of circumstances beyond the contemplation of parties, is called superveningimpossibility. !n case of supervening impossibility the contract becomes void.

Circumstances: A party to a contract may be e+cused from the performance of his promise on the

ground o f D superven ing imposs ib i li ty > under the !nd ian Cont ract Act , 1%&" in the fol lowing

circumstances.

(a) Accidental destruction of the subect matter of the contract: !f the subect matter of the contract is

destroyed by an accident both the parties are e+cused from the performance of the contract.

(b) 'on-e+istence or non occurrence of a particular state of things: 'on-e+istence or non occurrence of a

particular state of things of the contract e+empts the parties from the performance of the contract.

(c) !ncapacity to perform a contract of personal services: !n case of contract of personal service, disability or

incapacity to perform, caused by the act of =od e.g. illness, constitutes lawful e+cuse for non-performanceof the contract.

(d) Change in law: @erformance of a contract may also become impossible due to a subse4uent change in

the law. *he law passed after the contract may prohibit performance of some act, which may be very

basis of the contract. As such the contract is discharged due to subse4uent impossibility and the parties

become free from their mutual obligations.

(e) Eutbreak of war: Contracts may be affected by war in a variety of ways, vi?., (i) by emergency legislation

controlling prices or otherwise relating to restriction of trade5 (ii) by prohibiting or restraining transaction

with alien enemy.

4.%&p'ain the provisions of 'aw re'ating to unpaid se''ers right of 'ien and distinguish it from the !rightof stoppage the goods in transit".

Answer

Right of lien of an un'aid seller

*he legal provisions regarding the right of lien of an unpaid seller has been stated from #ections /& to / of the

#ale of =oods Act, 1 which may be enumerated as follows :

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(i) According to #ection /& the unpaid seller of the goods who is in possession of them is entitled to retain

possession of them until payment or tender of the price in the following cases namely :

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

(b) where the goods have been sold on credit, but the term of credit has e+pired5 or

(c) where the buyer becomes insolvent.*he seller may e+ercise his right of lien not withstanding that he is in possession of the goods as agent or

bailee for the buyer.

(ii) #ection /% states that where an unpaid seller has made part delivery of the goods, he may e+ercise his

right of lien on the remainder, unless such part delivery has been made under such circumstances as to

show an agreement to waive the lien.

(iii) According to #ection / the unpaid seller loses his lien on goods :

(a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer

without reserving the right of disposal of the goods.

(b) when the buyer or his agent lawfully obtains possession of the goods 5(c) by waiver thereof

*he unpaid seller of the goods, having a lien thereon, does not lose his lien by reason only that he has obtained

a decree to the price of the goods

ight of lien and ight to stoppage the goods in transit5 distinction:

(i) *he essence of a right of lien is to retain possession whereas the right of stoppage in transit is right to

regain possession.

(ii) #eller should be in possession of goods under lien while in stoppage in transit (i) #eller should have

parted with the possession (ii) possession should be with the carrier and (iii) 2uyer has not ac4uired the

possession.

(iii) ight of lien can be e+ercised even when the buyer is not insolvent but it is not the case with right of

stoppage in transit.

(iv) ight of stoppage in transit begins when the right of lien ends. *hus the end of the right of lien is starting

point of the right of stoppage the goods in transit.

15.hat are the conse6uences of !destruction of goods" under the Sa'e of (oods Act, 14$5, where the

goods have been destroyed after the agreement to se'' but before the sa'e is affected.

Answer

Destruction of Goods.Conse/uences:

(i) !n accordance with the provisions of the #ale of =oods Act, 1 as contained in #ection &, a contract for

the sale of specific goods is void if at the time when the contract was made5 the goods without the

knowledge of the seller, perished or become so damaged as no longer to answer to their description in the

contract, then the contract is void ab initio. *his section is based on the rule that where both the parties to

a contract are under a mistake as to a matter of fact essential to a contract, the contract is void.

(ii) !n a similar way #ection % provides that an agreement to sell specific goods becomes void if subse4uently

the goods, without any fault on the par of the seller or buyer, perish or become so damaged as no longer

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to answer to their description in agreement before the risk passes to the buyer. *his rule is also based on

the ground of impossibility of performance as stated above.

!t may, however, be noted that section & F % apply only to specific goods and not to unascertained goods.

!f the agreement is to sell a certain 4uantity of unascertained goods, the perishing of even the whole

4uantity of such goods in the possession of the seller will not relieve him of his obligation to deliver the

goods.

11.hat do you understand by !Caveat%mptor" under the sa'e of (oods Act, 14$5# hat are the

e&ceptions to this ru'e#

Answer

DCaveat emptor> means Blet the buyer beware, i.e. in sale of goods the seller is under no duty to reveal

unflattering truths about the goods sold. *herefore, when a person buys some goods, he must e+amine them

thoroughly. !f the goods turn out to be defective or do not suit his purpose, or if he depends upon his skill and

udgment and makes a bad selection, he cannot blame any body e+cepting himself.

*he rule is enunciated in the opening words of section 1$ of the #ale of =oods Act, 1 which runs thus:B#ubect to the provisions of this Act and of any other law for the time being in force, there is no implied

warranty or condition as to the 4uali ty or fitness for any particular purpose of goods supplied under a contract of

sale

*he rule of caveat emptor does not apply in the following cases:

1. !itness for buyer"s purpose: here the buyer, e+pressly or by implication, makes know to the seller the

particular purpose for which he re4uires the goods and relies on the seller>s skill or udgment and the

goods are of a description which it is in the course of the seller>s business to supply, the seller must supply

the goods which shall be fit for the buyer>s purpose. (#ection1$(1).

". #ale under a patent or trade name : !n the case of a contract for the sale of a specified article under its

patent or other trade name, there is no implied condition that the goods shall be reasonably fit for any

particular purpose (#ection 1$(1).

. Merchantable $uality: here goods are bought by description from a seller who deals in goods of that

description (whether he is in the manufacturer or producer or not), there is an implied condition that the

goods shall be of merchantable 4uality. 2ut if the buyer has e+amined the goods, there is no implied

condition as regards defects which such e+amination ought to have revealed. (#ection 1$(").

/. %sage of trade: An implied warranty or condition as to 4ualify or fitness for a particular purpose may be

anne+ed by the usage of trade. (#ection 1$().

&. Consent by fraud: here the consent of the buyer, in a contract of sale, is obtained by the seller by fraud

or where the seller knowingly conceals a defect which could not be discovered on a reasonable

e+amination, the doctrine of caveat emptor does not apply.

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12.In what ways does a !Sa'e" differ from !ire-urchase"#

Answer

Distinction between 0Sale1 and 02ire )urchase1

1. !n case of hire purchase, the agreement is that the hirer regularly pays the various installments agreed

between the parties. !n #ale the payment-may be made cash -down or through installments.". *he subect matter of the hire, on payment of the last installment, shall become the property of the hirer, if

such installments are not paid, the article will remain the property of the hire-vendor (seller) and the hire

vendor will be entitled to regain possession thereof. !n #ale, the property in goods is transferred to the

buyer immediately on signing the contract.

. A hire purchase agreement is both a bailment and an option to buy. !n case of #ale it is not so.

/. !n case of hire purchase the hirer cannot sell the article to a third party. !n #ale the purchaser can do so.

*his is based on the concept of ownership.

1$.hat are the imp'ied conditions in a contract of Sa'e by samp'e under the Sa'e of (oods Act, 14$5#

State a'so the imp'ied warranties operatives under the said Act.

Answer

*he-following are implied conditions in a contract of sale by sample in accordance with #ection 1& of the #ale

of =oods Act, 15

(a) that the bulk shall correspond with the sample in 4uality5

(b) that the buyer shall have a reasonable opportunity of comparing the bulk with the sample.

(c) that the goods shall be free from any defect, rendering them unmerchantable, which would not be

apparent on a reasonable e+amination of the sample 8#ection 1&(")9.

-m'lied 3arrants:

1. 'arranty of $uiet possession #ection *(b)+, !n a contract of sale, unless there is a contrary intention,

there is an implied warranty that the buyer shall have and enoy 4uiet possession of the goods. !f the buyer

is in any way distributed in the enoyment of the goods in conse4uence of the seller>s defective title to sell,

he can claim damages from the seller.

". 'arranty of freedom from encumbrances #ection *(c)+, *he buyer is entitled to a further warranty that

the goods are not subect to any charge or encumbrance in favour of a third party. !f his possession is in

any way disturbed by reason of the e+istence of any charge or encumbrances on the goods in favour of

any third party, he shall have a right to claim damages for breach of this warranty.

. 'arranty as to $uality or fitness by usage of trade #ection -()+. An implied warranty as to 4uality or

fitness for a particular purpose may be anne+ed by the usage of trade,

/. 'arranty to disclose dangerous nature of goods,here a person sells goods, knowing that the goods are

inherently dangerous or they are likely to be dangerous to the buyer and that the buyer is ignorant of the

danger, he must warn the buyer of the probable danger, otherwise he will be liable in damages.

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1+. -oint out the differences between conditions and warranties under the Sa'e of (oods Act, 14$5.

Answer

Condition and 3arranty

S#

$o#

4asis of

distinction

Condition 3arranty

1. 'ature A condition is a stipulation which

is essential to the main purpose of

the contract.

A arranty is a st ipulat ion which

is collateral to the main purpose of

the contract.

". ights *he aggrieved party can repudiate

the contract of sale in case there

is a breach of a condition

*he agg ri eved par ty can c la im

damages only in case of breach of

a warranty.

. Eption A breach of condition may be

treated as a breach of a warranty.

*hi s wou ld happen where t he

aggrieved party is contended withdamages only

A breach of a warranty, con not be

treated as a breach of a condition.

1.State brief'y the essentia' e'ement of a contract of sa'e under the Sa'e of (oods Act, 14$5. %&amine

whether there shou'd be an agreement between the parties in order to constitute a sa'e under the said

Act.

Answer

ssentials of Contract of Sale

*he following elements must co-e+ist so as to constitute a contract of sale of goods under the #ale of =oods

Act, 1.

(i) *here must be at least two parties

(ii) *he subect matter of the contract must necessarily be goods

(iii) A price in money (not in kind) should be paid or promised.

(iv) A transfer of property in goods from seller to the buyer must take place.

(v) A contract of sale must be absolute or conditional 8section /(")9.

(vi) All other essential elements of a valid contract must be present in the contract of sale.

*he #upreme Court has held in the case of B#tare of Madras /s. 0annon Dunkerley and Co. 12R (3&3) #(&44)5that according to the law in order to constitute a sale, it is necessary that there should be an agreement

between the parties for the purpose of transferring title of goods which of course presupposes capacity to

contract, that it must be supported by money consideration that as a result of transaction the property in the

goods must actually pass etc.

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(iv) ight of stoppage in transit begins when the right of lien ends. *hus the end of the right of lien is starting

point of the right of stoppage the goods in transit.

14. hat do you understand by !Caveat%mptor" under the sa'e of (oods Act, 14$5# hat are the

e&ceptions to this ru'e#Answer

DCaveat emptor> means Blet the buyer beware, i.e. in sale of goods the seller is under no duty to reveal

unflattering truths about the goods sold. *herefore, when a person buys some goods, he must e+amine them

thoroughly. !f the goods turn out to be defective or do not suit his purpose, or if he depends upon his skill and

udgment and makes a bad selection, he cannot blame any body e+cepting himself.

*he rule is enunciated in the opening words of section 1$ of the #ale of =oods Act, 1 which runs thus:

B#ubect to the provisions of this Act and of any other law for the time being in force, there is no implied

warranty or condition as to the 4uali ty or fitness for any particular purpose of goods supplied under a contract of

sale

*he rule of caveat emptor does not apply in the following cases:1. !itness for buyer"s purpose: here the buyer, e+pressly or by implication, makes know to the seller the

particular purpose for which he re4uires the goods and relies on the seller>s skill or udgment and the

goods are of a description which it is in the course of the seller>s business to supply, the seller must supply

the goods which shall be fit for the buyer>s purpose. (#ection1$(1).

". #ale under a patent or trade name : !n the case of a contract for the sale of a specified article under its

patent or other trade name, there is no implied condition that the goods shall be reasonably fit for any

particular purpose (#ection 1$(1).

. Merchantable $uality: here goods are bought by description from a seller who deals in goods of that

description (whether he is in the manufacturer or producer or not), there is an implied condition that the

goods shall be of merchantable 4uality. 2ut if the buyer has e+amined the goods, there is no impliedcondition as regards defects which such e+amination ought to have revealed. (#ection 1$(").

/. %sage of trade: An implied warranty or condition as to 4ualify or fitness for a particular purpose may be

anne+ed by the usage of trade. (#ection 1$().

&. Consent by fraud: here the consent of the buyer, in a contract of sale, is obtained by the seller by fraud

or where the seller knowingly conceals a defect which could not be discovered on a reasonable

e+amination, the doctrine of caveat emptor does not apply.

25. hat do you understand by the term !unpaid se''er" under the Sa'e of (oods Act, 14$5# hen can

an unpaid se''er e&ercise the right of stoppage of goods in transit#

Answer

,n'aid Seller

According to #ection / of the #ale of =oods Act, 1 the seller of goods is deemed to be an D

when-

(a) the whole of the price has not been paid or tendered.

(b) a bill of e+change or other negotiable instrument has been received as conditional payment, and it has

been dishonoured.

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Right of sto''age of goods in transit

hen the unpaid seller has parted with the goods to a carrier and the buyer has become insolvent, he can

e+ercise this right by asking the carrier to return the goods back, or not to deliver the goods to the buyer.

3owever, the right of stoppage in transit is e+ercised only when the following conditions are fulfilled:

(a) *he seller must be unpaid.(b) *he seller must have parted with the possession of goods.

(c) *he goods must be in the course of transit.

(d) *he buyer must have become insolvent.

(e) *he right is subect to provisions of the Act.

21. -oint out the differences between conditions and warranties under the Sa'e of (oods Act, 14$5.

Answer

Condition and 3arrantyS#

$o#

4asis of

distinction

Condition 3arranty

/. 'ature A condition is a stipulation which

is essential to the main purpose of

the contract.

A arranty is a st ipulat ion which

is collateral to the main purpose of

the contract.

. ights *he aggrieved party can repudiate

the contract of sale in case there

is a breach of a condition

*he agg ri eved par ty can c la im

damages only in case of breach of

a warranty.

$. Eption A breach of condition may be

treated as a breach of a warranty.

*hi s wou ld happen where t he

aggrieved party is contended with

damages only

A breach of a warranty, con not be

treated as a breach of a condition.

22. State brief'y the essentia' e'ement of a contract of sa'e under the Sa'e of (oods Act, 14$5. %&amine

whether there shou'd be an agreement between the parties in order to constitute a sa'e under the said

Act.

Answer

ssentials of Contract of Sale

*he following elements must co-e+ist so as to constitute a contract of sale of goods under the #ale of =oods

Act, 1.

(i) *here must be at least two parties

(ii) *he subect matter of the contract must necessarily be goods

(iii) A price in money (not in kind) should be paid or promised.

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(iv) A transfer of property in goods from seller to the buyer must take place.

(v) A contract of sale must be absolute or conditional 8section /(")9.

(vi) All other essential elements of a valid contract must be present in the contract of sale.

*he #upreme Court has held in the case of B#tare of Madras /s. 0annon Dunkerley and Co. 12R (3&3) #

(&44)5that according to the law in order to constitute a sale, it is necessary that there should be an agreementbetween the parties for the purpose of transferring title of goods which of course presupposes capacity to

contract, that it must be supported by money consideration that as a result of transaction the property in the

goods must actually pass etc.

2$. /istinguish between a Condit ion and a arranty in a contract of sa'e. hen sha'' a breach of

condition be treated as breach of warranty under the provisions of the Sa'e of (oods Act, 14$5 #

%&p'ain.

1nswer

Difference between Condition and 3arranty

(i) A condition is a stipulation essential to the main purpose of the contract whereas a warranty is a

stipulation collateral to the main purpose of the contract.

(ii) 2reach of condition gives rise to a right to treat the contract as repudiated whereas in case of breach of

warranty, the aggrieved party can claim damage only.

(iii) 2reach of condition may be treated as breach of warranty whereas a breach of warranty cannot be treated

as breach of condition.

According to #ection 1 of the #ale of =oods Act, 1 a breach of condition may be treated as breach of

warranty in following circumstances:

(i) here a contract of sale is subect to any condition to be fulfilled by the seller, the buyer may waive the

condition,

(ii) here the buyer elects to treat the breach of condition as breach of a warranty.

(iii) here the contract of sale is non-severable and the buyer has accepted the whole goods or any part

thereof.

(iv) here the fulfillment of any condition or warranty is e+cused by law by reason of impossibility or

otherwise.

2+. hether a minor may be admitted in the business of a partnership firm# %&p'ain the rights of a

minor in the partnership firm.

Answer

7inor as a 'artner :

A minor is incompetent to do the contract and such contract is void-ab-initio (Mohiribibi vs. Dharam Das

0hose). *herefore, a minor cannot be admitted in the business of the partnership firm because the partnership

is formed on a contract. *hough a minor cannot be a partner in a firm, he can nevertheless be admitted to the

benefits of partnership under section of the @artnership Act, 1". 3e may be validly have a share in the

profit of the firm but this can be done with the consent of all the partners of the firm.

Rights of the minor in the firm :

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(i) a minor has a right to his agreed share of the profits and of the firm.

(ii) he can have access to, inspect and copy the accounts of the firm.

(iii) he can sue the partners for accounts or for payments of his share but only, when severing his connection

with the firm, and not otherwise. *he amount of share shall be determined by a valuation made in

accordance with the rules upon a dissolution.

(iv) on attaining maority he may within $ months elect to become a partner or not to become a partner. !f he

elects to become a partner, then he is entitled to the share to which he was entitled as a minor. !f he does

not, then his share is not liable for any acts of the firm after the date of the public notice served to that

effect.

2. hat is the procedure of registration of a partnership firm under the Indian -artnership Act, 14$2 #

hat are the conse6uences of nonregistration#

Answer

Registration of a )artnershi' & Conse/uences of $on.Registration

)rocedure: (#ection % F !ndian @artnership Act, 1")

*he registration of a firm may be effected at any time by filing an application in the form of a statement, giving

the necessary information, with the egistrar of 7irms of the area. *he application shall be accompanied by the

prescribed fee. !t shall also state:

(a) the name of the firm5

(b) the place or principal place of business of the firm5

(c) the names of other places where the firm carries on business5

(d) the date when each partner oined the firm

(e) the names in full and permanent address of the partners5

(t) the duration of the firm.*he statement shall be signed by all the partners or by their agents specially authori?ed in this behalf #ection

%(i). !t shall also be verified by them in the prescribed manner (#ection %("). hen the egistrar is satisfied

that the above provisions have been duly complied with, he shall record an entry of the statement in the

egister of 7irms and file the statement (#ection ). 3e shall then issue under his hand a certificate of

registration.

6he non7registration of the firm does not affect the following,

1. *he right of a firm or partners of a firm having no place of business in !ndia.

". *he right to file any suit or claim of set off e+ceeding s. 1 in value.

. *he right of a partner to sue for the dissolution of the firm, or for the accounts of the dissolved firm, or for

share of the property of the dissolved firm. *his disability of a partner to sue disappears with thedissolution of the firm.

/. *he powers of an Efficial eceiver, Assignee, or Court to reali?e the property of an insolvent partner of an

unregistered firm.

. *he right of a third party to proceed against an unregistered firm or any of its partners.

$. *he right of an unregistered firm to enforce a right arising otherwise than out of a contract (#ection $()

and (/).

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20. hen does disso'ution of a partnership firm ta9e p'ace under the provisions of the Indian

-artnership Act, 14$2# %&p'ain.

Answer

Dissolution of Firm:*he ;issolution of 7irm means the discontinuation of the ural relation e+isting betweenall the partners of the 7irm. 2ut when only one of the partners retires or becomes in capacitated from acting as

a partner due to death, insolvency or insanity, the partnership, i.e., the relationship between such a partner and

other is dissolved, but the rest may decide to continue. !n such cases, there is in practice, no dissolution of the

firm. *he particular partner goes out, but the remaining partners carry on the business of the 7irm. !n the case

of dissolution of the firm, on the other hand, the whole firm is dissolved. *he partnership terminates as between

each and every partner of the firm.

;issolution of a 7irm may take place (#ection - //)

(a) as a result of any agreement between all the partners (i.e., dissolution by agreement)5

(b) by the adudication of all the partners, or of all the partners but one, as insolvent (i.e., compulsory

dissolution)5(c) by the business of the 7irm becoming unlawful (i.e., compulsory dissolution)5

(d) subect to agreement between the parties, on the happening of certain contingencies, such as: (i)

effluence of time5 (ii) completion of the venture for which it was entered into5 (iii) death of a partner5 (iv)

insolvency of a partner. !n case of death, it is to be noted that the partners may make a contrary

agreement only if their number e+ceeds two. !f there are only two partners the only result of either>s death

will necessarily be the dissolution of the firm. *his was made clear by the #upreme Court in

Commissioner of 2ncome7ta8 vs. 0.#. Mills.

(e) by a partner giving notice of his intention to dissolve the firm, in case of partnership at will and the firm

being dissolved as from the date mentioned in the notice, or if no date is mentioned, as from the date of

the communication of the notice5 and

(f) by intervention of court in case of: (i) a partner becoming the unsound mind5 (ii) permanent incapacity of a

partner to perform his duties as such5 (iii) Gisconduct of a partner affecting the business5 (iv) willful or

persistent branches of agreement by a partner5 (v) transfer or sale of the whole interest of a partner5 (vi)

improbability of the business being carried on save at a loss5 (vii) the court being satisfied on other

e4uitable grounds that the firm should be dissolved.

27. ho is a ho'der in due course of a :egotiab'e Instrument# In what respects does he differ from a

ho'der#

Answer

2older -n Due Course:!t means any person who, for consideration became its possessor before the amountmentioned in it became payable. !n the case of an instrument payable to order, Hholder in due courseH means

any person who became the payee or endorsee of the instrument before the amount mentioned in it became

payable. !n both the cases, he must receive the instrument without having sufficient cause to believe that any

defect e+isted in the title of the person from whom he derived his title. !n other words, holder in due course

means a holder who takes the instrument bona fide for value before it is overdue, and without any notice of

defects in the title of the person, who transferred it to him. *hus a person who claims to be Hholder in due

courseH is re4uired to prove that:

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"# on 'aying a valuable consideration@ he became either the 'ossessor of the instrument if 'ayable to

order;

# 2e had come into the 'ossession of the instrument before the amount due thereunder became

actually 'ayable; and

(# 2e had come to 'ossess the instrument without having sufficient cause to believe that any defect

eisted in the title of transferorBs from whom derived his title#

Distinction between 2older & 2older in Due Course:

"# A holder may become the.'ossessor or 'ayee of an instrument even without consideration@ whereas

a holder in due course is one who ac/uires 'ossession for consideration#

# A holder in due course as against a holder@ must become the 'ossessor 'ayee of the instrument

before the amount thereon become 'ayable#

(# A holder in due course as against a holder@ must have become the 'ayee of the instrument in good

faith i#e#@ without having sufficient cause to believe that any detect eisted in.the transferorBs title#

28. %&p'ain c'ear'y the meaning of the term -romissory :ote as provided in the :egotiab'e InstrumentsAct, 1881. In what way does a -romissory :ote differ from a ;i' ' of %&change#

Answer

7eaning of 'romissory note & distinction with bill of echange:

A promissory note is an instrument in writing (not being a bank note or a currency note) containing an

unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of a

certain person, or the bearer of the instrument.

D-S-$C-$:

"# here are two 'arties in a )romissory $ote ma?er and the 'ayee# -n a bill there are three 'arties .

the drawer@ the drawee and the 'ayee#

# )romissory $ote contains an unconditional 'romise to 'ay# A 4ill of change contains an

unconditional older to 'ay#

(# 7a?er of a note is the debtor and he himself underta?es to 'ay# he drawer of a bill is the creditor

who directs the drawee 8his debtor9 to 'ay#

*# 7a?er of a note corres'onds in general to the acce'tor of a bill# 4ut the ma?er of the note cannot

underta?e to 'ay conditionally whereas the acce'tor may acce't the bill conditionally because he

is not the originator of the bill#

+# he liability of a ma?er of a note is 'rimary and absolute@ whereas the liability of the drawer of abill is secondary and conditional 8Section (> and (9;

5# A note cannot be made 'ayable to the ma?er himself@ whereas in a bill the drawer and the 'ayee

may be one and the same 'erson#

# A note re/uires no acce'tance and it is signed by the 'erson who is liable to 'ay# A bill 'ayable

after sight or after a certain 'eriod must be acce'ted by the drawee before it is 'resented for

'ayment#

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Answer

Crossing of Che/ues:

eaning*Crossing of che4ue means putting on the che4ue two parallel transverse lines with or without the

words (F Co.) written between the lines. *herefore, crossing is a direction to the drawee banker to pay the

amount of money on the crossed che4ue generally to a banker or a particular banker so that the party who

obtains the payment of the che4ue can be easily traced.

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(# 3hat is the rule of evidence with regard to entries in the Register of firms6Answer*he !ndian @artnership Act, 1" provides that registration of firms may be effected at any time by filing anapplication in the form of a statement, giving the necessary information, with the egistrar of 7irms of the area.#ection & of the Act empowers the #tate =overnment to appoint egistrar of 7irms for the purposes of the@artnership Act and defines the areas within which they shall e+ercise their powers and perform their duties.

Application for registration of a firm shall be accompanied by the prescribed fee. !t shall state:(a) the name of the firm(b) place or principal place of business of the firm5(c) names of other places where the firm carries on business5(d) date when each partner oined the firm5(e) names in full and permanent addresses of the partners5(f) duration of the firm.*he application shall be signed by all the partners or by their agents specially authori?ed in this behalf. !t shall also becertified by them in the prescribed manner.hen the egistrar is satisfied that the above provisions have been complied, he shall record an entry in theegistrar of 7irms and issue a certification of registration. egistration takes effect from the date on which theegistrar makes entries in the egister of 7irms.

Any statement, notice or intimation recorded with the egistrar by any person shall be a conclusive proof against himof any fact therein stated. *he third parties can, however, challenge the fact of statement and prove that it is falseand is based on mis-representation or fraud