Continuing Guarantee

Continuing guaranty refers to a guaranty in which the guarantor will not be liable
unless a specified event occurs. This guaranty relates to a future liability of the
guarantor under successive transactions that either continue the guarantors
liability, or from time to time renews it, after it has been satisfied is called a
continuing guaranty.
A continuing guaranty may be revoked at any time by the guarantor in respect to
future transactions, unless there is a continuing consideration as to the
transactions that the guarantor does not give up.
The following is an example of a case law defining continuing guaranty:
Continuing guaranty is a kind of contract of guaranty that contemplates a future
course of dealings between the principal debtor and the creditor over an
indefinite period of time.[ Liberty Bank v. Shimokawa, 2 Haw. App. 280 (Haw. Ct.
App. 1981)]
Revocation of Continuing Guarantee
A continuing guarantee can be revoked in any of the following ways:
i. Through Notice - At any time, a continuing guarantee about future transactions
can be revoked by the surety by notice to the creditor. Following points are
important as far as revocation of continuing guarantee through notice is
concerned:
a. Time of Notice - No specific time has been provided under contract act for
giving notice in respect of revocation of continuing guarantee. Therefore, such
notice can be given at any time.
b. Manner to Give Notice - Contract law provides no specific manner for giving a
notice about revocation of continuing guarantee. Therefore, it is left for parties to
choose the manner for giving such notice.
c. Notice by Surety - It is essential that notice about revocation of continuing
guarantee should be given by surety.
d. Notice to Creditor - It is also necessary that notice about revocation of
continuing guarantee should be given to creditor.
f. Future Transactions - As far as revocation of continuing guarantee through
notice is concerned, an important point is that guarantee should be about future
transaction.
ii. Through Death - Continuing guarantee can be revoked by death of surety.
Following points are important as far as revocation of continuing guarantee
through death is concerned.
a. Future transaction - As far as revocation of continuing guarantee through
suretys death is concerned, an important point is that guarantee should be
about future transaction.
b. Nature of Guarantee-Contract - Revocation of continuing guarantee through
suretys death greatly depends upon nature of guarantee-contract. If it is
incorporated into guarantee-contract that continuing guarantee will be revoked
with the death of surety, then continuing guarantee is revoked at the suretys
death. Contrary to this, if such condition is not incorporated into the guaranteecontract, then continuing guarantee remains continued even after death of
surety.
c. Obligations f Representatives of Deceased Surety - When continuing guarantee
remains continued after death of surety, representatives of deceased surety are
under obligation to fulfill obligation of deceased surety.

Role of surety in a contract of guarantee

Section 141 of the Indian Contract Act states that when a contract of
suretyship is entered surety is entitled to benefit every security that the
creditor has against the principal debtor. Surety will be liable even though the
principals contract is void. Liability of sureties and principal debtor is coextensive. A continuing guarantee can be revoked by the surety in relation to
future transactions by notice to the creditor. Revocation can also occur with
the death of surety. It is explained under Section 130, 131 of the Act. If there
is any changes that happens to the original contract between the principal
debtor and creditor then surety is automatically discharged. The surety is
also discharged if the principal debtor is released. If one co-surety is
discharged it does not discharge/set free the other surety from his
responsibility. Surety is entitled to recover from principal debtor the sums
that he has rightfully paid under the guarantee but not entitled to sums that
he has paid wrongly.

Death of surety Section 131

According to Section 131 of the Act the death of the surety operates in the
absence of any contract to the contrary , as a revocation of a continuing
guarantee so far as regards future transactions.
In other words, a continuing guarantee is terminated by operation of law due to
death of the surety. This is based on the principle that personal action lies with
the deceased.
The general rule however is subject to the following conditions:
Section 131 itself provides that this rule shall apply in the absence of a contract
to the contrary. It means that there may be no revocation of guarantee on the
death of the surety if there is a contract to that effect. Thus , if in a contract of
guarantee there is a stipulation that upon the death of the surety either his
property or his legal heirs / representatives will continue to be responsible for
such liability. Then in such a case, the guarantee is not revoked even when the
surety dies. This is a contract to the contrary within Section 131.
Upon the death of the surety, the legal heirs / representatives of the deceased
surety would be bound and/or the estate of the deceased surety will continue to
be liable if the contract so stipulates.
The rule is subject to the other qualification that contract of continuing
guarantee is terminated so far as future transactions are concerned. The estate
of the deceased surety will be liable for transactions entered into before the
death of the surety.

Surety is discharged
A surety may be discharged:
(i) By revocation.
(ii) By the act or conduct of the creditor.
(iii) By invalidation of the contract of guarantee.
I. Discharge of surety by revocation:
(a) Revocation by notice (Sec. 130): A continuing guarantee may, at any time, be
revoked by the surety, as to future transactions, by notice to the creditor. But a
specific guarantee cannot be revoked if the creditor has given the loan.
(b) Revocation by death (Sec. 131): The death of the surety operates, in the
absence of any contract to contrary, as a revocation of continuing guarantee for
future transactions. The estate of the deceased surety will not be liable for any
transactions entered between the creditor and the principal-debtor even if the
creditor has no notice of death. In case the parties have agreed to a notice of
surety's death, then notice of death will be necessary. Under English Law also,
notice of surety's death is necessary.
(c) Discharge of surety by novation (Sec. 62): A contract of guarantee is a
species of the general contract. As such, a contract of guarantee is discharged
by novation, i.e., by substituting a new contract in place of the old one. The
original contract is discharged.
II. Discharge of surety by the act or conduct of the creditor:
1. By variation in terms of contract (Sec. 133): Any variance made without the
surety's consent, in the terms of the contract between the principal-debtor and
the creditor, discharges the surety as to transactions subsequent to the variance.
2. By release or discharge of principal-debtor (Sec. 134): A surety is discharged
by any contract between the creditor and the principal-debtor by which the
principal debtor is released or by an act or omission of the creditor, the legal
consequence of which is the discharge of the principal-debtor.
Exceptions: (i) Death: Death of the principal-debtor does not discharge the surety
from his liability.
(ii) Insolvency: Similarly, insolvency of the principal debtor does not discharge
the surety.
(iii) Omission to sue within the period of limitation: The omission of the creditor
to sue within the period of limitation does not discharge the surety.
(iv) Release of one of the co-sureties (Sec. 138): In case there are co-sureties, a
release of one of them by the creditor does not discharge the other; neither does
it free a surety so released from his responsibility to other co-sureties.
3. By compounding by the creditor with the principal debtor (Sec. 138): A
contract between the creditor and the principal debtor by which the creditor
makes a composition with, or promises to give time to or not to sue, the
principal-debtor, discharges the surety, unless such contract is made with the
consent of the surety.

It should be noted that the surety is discharged only if the contract to give time
to principal- debtor is made by the creditor with the principal-debtor. Therefore, if
a contract is made with a third party, the surety is not discharged (Sec. 136).
4. By creditor's act or omission impairing surety's eventual remedy (Sec. 139): In
case the creditor does any act which is inconsistent with the rights of the surety,
or omits to do any act which his duty to the surety requires him to do, and the
eventual remedy of the surety himself against the principal-debtor is thereby
impaired, the surety is discharged.
5. By loss of surety (Sec. 141): If the creditor loses, or without the consent of the
surety, parts with any security given at the time of contract, the surety is
discharged to the extent of the value of the security.
It should be noted that the surety will be discharged only when he parts with any
security given at the time of contract. He is not discharged when he parts with
any security given after the contract of guarantee is made.
III. Discharge of Surety by Invalidation of the Contract :
(i) By obtaining guarantee by misrepresentation (Sec. 142): Any guarantee which
has been obtained by means of misrepresentation made by the creditor, or with
his knowledge and assent, concerning a material part of the transaction, is
invalid.
(ii) By obtaining guarantee by concealment (Sec. 143): Any guarantee which the
creditor has obtained by means of keeping silence as to the material facts of
circumstances is invalid.
(iii) By the failure of the co-surety to join (Sec. 144): Where a person gives
guarantee upon a contract that the creditor shall not act upon it until the other
co-surety has joined, the guarantee is not valid if the other person does not join.
Whether Failure of Consideration between the Creditor and Principal debtor
discharged the Surety : It has already been discussed that there is, no need of
separate consideration for a contract of guarantee between the creditor and
surety. But there must be consideration between the creditor and the principal
debtor. Therefore, on the failure of such consideration, surety will be discharged
from his liability.

Define a contract of Indemnity

In the old English law, Indemnity was defined as a promise to save a person harmless from the
consequences of an act. Such a promise can be express or implied from the circumstances of the case.
This view was illustrated in the case of Adamson vs Jarvis 1872. In this case, the plaintiff, an
auctioneer, sold certain goods upon the instructions of a person. It turned out that the goods did not
belong to the person and the true owner held the autioneer liable for the goods. The auctioneer, in
turn, sued the defendant for indemnity for the loss suffered by him by acting on his instructions. It
was held that since the auctioneer acted on the instructions of the defendant, he was entitled to assume
that if, what he did was wrongful, he would be idemnified by the defendant.
This gave a very broad scope to the meaning of Indemnity and it included promise of indemnity due
to loss caused by any cause whatsoever. Thus, any type of insurance except life insurance was a
contract of Indemnity. However, Indian contract Act 1872 makes the scope narrower by defining the
contract of indemnity as follows:
Section 124 - A contract by which one party promises to save the other from loss caused to him by the
conduct of the promisor himself or by the conduct of any other person is a "contract of Indemnity".
Illustration - A contracts to indemnify B against the consequences of any proceedings which C may
take against B in respect of a certain sum of Rs 200. This is a contract of indemnity.

Key Differences Between Indemnity and Guarantee

1. In the contract of indemnity, one party makes a promise to the other that he
will compensate for any loss occurred to the other party because of the act of the
promisor or any other person. In the contract of guarantee, one party makes a

promise to the other party that he will perform the obligation or pay for the
liability, in the case of default by a third party.
2.Indemnity is defined in Section 124 of Indian Contract Act, 1872, while in
Section 126, Guarantee is defined.
3.In indemnity, there are two parties, indemnifier and indemnified but in the
contract of guarantee, there are three parties i.e. debtor, creditor, and surety.
4.The liability of the indemnifier in the contract of indemnity is primary whereas
if we talk about guarantee the liability of the surety is secondary because the
primary liability is of the debtor.
5.The purpose of the contract of indemnity is to save the other party from
suffering loss. However, in the case of a contract of guarantee, the aim is to
assure the creditor that either the contract will be performed, or liability will be
discharged.
6.In the contract of indemnity, the liability arises when the contingency occurs
while in the contract of guarantee, the liability already exists.

Define Bailment
Bailment is a kind of activity in which the property of one person temporarily goes into the
possession of another. The ownership of the property remains with the giver, while only the
possession goes to another. Several situations in day to day life such as giving a vehicle for
repair, or parking a scooter in a parking lot, giving a cloth to a tailor for stitching, are
examples of bailment. Section 148 of Indian Contract Act 1872, defines bailment as follows
-Section 148 - A bailment is the delivery of goods by one person to another for some
purpose, upon a contract that they shall, when the purpose is accomplished, be returned or
otherwise disposed of according to the directions of the person delivering them. The person
delivering the goods is called the bailor and the person to whom they are delivered is called
the bailee. Explanation - If a person is already in possession of the goods of another
contracts to hold them as a baliee, he thereby becomes the bailee and the bailor becomes
the bailor of such goods although they may not have been delivered by way of bailment.

Rights and Duties of Bailer

Rights of Bailer
1.
If bailee does not take care and destruction of goods takes place, bailer can claim
compensation.
2.
If bailee uses the goods for un-authorized purposes, bailer has the right to claim
compensation.
3.
Bailer has the right to claim return of goods.
4.
Bailer has right to claim not only delivered goods but also accruals on goods if
any.
5.
In case where bailee has mixed the goods and they are of sufferable nature, bailer
can claim cost of separation from bailee.
6.
In case where the goods are of insufferable nature, bailer has right to claim
compensation.
7.
Bailer has right to repudiate the Contract of bailment whenever he wants but, by
doing so, if bailee comes across any suffering, bailer has to compensate.
Duties of Bailer
1.
Duty to dispose faults: Bailer should disclose faults present in goods at the
time of making delivery. Faults are of two types namely ; Known faults and Un-known
faults. On the other hand bailments also are of two types namely Gratuitous bailment
and Non-Gratuitous bailment. In case of gratuitous bailment, bailer is liable to

compensate for bailee injuries arising out of known faults. In Gratuitous bailment, bailer
is not answerable to un-known faults. In case of Non-Gratuitous bailment, bailer is
answerable to both known faults and Un-known faults.
2.
Duty to contribute for expenses: Bailer should Contribute for expenses
incurred by bailee. In case of Gratuitous bailment, bailer need not contribute for
ordinary expenses and extra ordinary expenses or to the contributed by bailer. In case of
Non-Gratuitous bailment, bailer should contribute for both ordinary expenses and extra
ordinary expenses.
3.
Duty with regard to defective title: In case where bailer has delivered the
goods with defective title, the bailee may come across suffering from the side of true
owner due to bailers defective title. In such a case bailer with defective title should
compensate bailee.
4.
Duty to Indemnify: Principal of indemnity operates between bailer and bailee,
where bailer becomes implied indemnifier and bailee becomes implied indemnity
holder. So bailer has duty to indemnify bailee.
5.
Duty to take the Goods back: After fulfillment of purpose bailee returns the
goods to bailer. Then bailer should take them back. If bailer refuses to take the goods
back, bailer has to compensate bailee.
Essential Elements of a Partnership

Distinguish partnership from a hindu joint family firm

Key Differences Between Partnership Firm and Company

1.

A partnership is an agreement between two or more persons who come together to

carry out a business, and share profit & losses mutually. A company is an incorporated
association, also called an artificial person having separate identity, common seal and
perpetual succession.

2.

The registration of the partnership firm is not compulsory whereas to form a

company; it needs to be registered.

3.

For the creation of a partnership, there must be at least two partners. For the formation
of a company, there must be at least 2 members in case of private companies and 7 in regard
to public companies.

4.

The limit for the maximum number of partners in a partnership firm is 10 in the case
of the firm doing banking business, and 20 if the firm is engaged in trading business. On the
other hand, the maximum number of partners in case of a public company is unlimited and in
the case of a private company that limit is 50.

5.

The next major difference between them is, there is no minimum capital requirement
for starting a partnership firm. Conversely, the minimum capital requirement for a public
company is 5 lakhs and for a private company it is 1 lakh.

6.

In the event of dissolution of the partnership firm, there are no legal formalities. In
opposition to this, a company has many legal formalities for winding up.

7.

A partnership firm can be dissolved by any one of the partners. In contrast to this, the
company cannot be wound up, by any one of the members.

8.

A partnership firm is not bound to use the word limited or private limited at the end of
its name while a company has to add the word limited if it is a public company and private
limited if it is a private company.

9.

The liability of the partners is unlimited whereas the liability of the company is
limited to the extent of shares held by every member or guarantee given by them.

10.

As a company is an artificial person so that it can enter into contracts in its own name,
the members are not held liable for the acts of the company. But in the case of a partnership
firm, a partner can enter into a contract in their own name with the mutual consent of the
other partners, and they can also be sued for the acts done by the firm.

CO-OWNERSHIP
1.

PARTNERSHIP

Creation

It is generally arisen by
the
operation
of
law
or
status.
Agreement
is
not
essential for the
formation of coownership.
2.

Sharing of Profits
There
is
no
concept
community sharing of profit
loss in co-ownership.

of
or
3.

this
form
of
"business" may or
conducted.

Various kind of partners are united to

carry on any type of "business"

As one co-owner is not an

of another co-owner, he
bind another by his act.

On partner is an agent of another

partner and he can bind all persons by
this act.

Position

agent
cannot
5.

Transferring Right

A co-owner an transfer his

share, right and interest to other
person
without the consent of
the
existing co-owner.
6.

Sharing of profits is the basis object of

the formation of the partnership.

Object

Under
organization
may not be
4.

It must be created by the agreement or

contract. No contract no Partnership.
Agreement may be expressed or
implied.

A partner cannot transfer his share or

right to a stranger without the consent
of other partner.

Maximum Limit

There is no restriction
the
maximum
number
coowner
in
the
ownership
business.

for
of
co-

There is restriction for minor to become

a
regular
partner
according
to
partnership Act. 1992.

A Minor can become regular

coowner
in
the
coownership
business.

There is restriction for the maximum

number of partnership firm (i.e. not
more than 20 in ordinary business and
10 in banking business)

7.

8.

Minor

Division of Property

A
division
interest.
9.

co-owner
can
demand
of property for his own

Lien Position

A co-owner not being an agent

of
an other co-owner so he has
no
lien
on
the
coownership
property.
10.

A partner has no right to partition of

property but he can demand share of
profit out of the properties.

As one partner is an agent of another

partner, he has lien on the business
property.

Right of Dissolution

The
ownership

business of the cocannot be dissolved

The life of the partnership is affected by

the death, retirement or insolvency of

by the death
any co-owner.

or retirement of

any partner.

Partnership at will
A form of partnership that arises where no fixed term has been agreed for the
duration of the partnership or the partnership has been entered into for an
undefined term. A partnership at will may be dissolved at any time by a partner
serving notice on the other partner(s). A partnership will be a partnership at will
unless contrary intention can be proved, for this, there must be an express or
implied agreement that is inconsistent with the right which a partner would
otherwise have to determine the partnership by notice.

Rights of minors admitted the benefits of partnership firm

(i)He has a right to share the profits and the property of the firm as may be
agreed.
(ii)He has a right to have access to and inspect the books of accounts of the firm.
(iii)Right to sue for payments of his share of profit or property in case of his
severance of connection with the firm.
(iv)He has a right to elect to become a partner on attaining the age of Majority.
(v)He has a right to elect not to become a partner on attaining the age of
Majority.
Disabilities of minors admitted the benefits of partnership firm

Generally disabilities of minor in a firm are as under:

(i) He may not be a partner.
(ii) He may not sue the partner for accounts, save when serves his connection with the
firm.

Court can order dissolution of a partnership firm when:

(a) A partner becomes insane.
(b) A partner becomes permanently incapable of performing his duties as a
partner.
(c) A partner is guilty of misconduct which is likely to affect prejudicially the
business of the firm.
(d) A partner willfully and persistently commits breach of partnership agreement.
(e) A partner unauthorized transfers the whole of his interest in the firm to a third
person.
(f) The business of the firm cannot be carried on except at a loss,
(g) It is just and equitable to dissolve the firm.

Define dissolution

Dissolution of a partnership firm is the process by which the existence of a

partnership firm comes to an end. This involves the sale or disposal of assets,
settlement of liabilities and closing of books of accounts. Once the outside
liabilities of the firm are settled, the partners take away their capital investment.
If there is any surplus or deficit in this process it will be shared by the partners in
their profit sharing ratio.

Modes of dissolution

A partnership firm may be dissolved by various methods. They are:

1. Dissolution by consent.
2. Compulsory dissolution.
3. Contingent dissolution.
4. Dissolution by notice.
5. Dissolution by court order.
1. Dissolution by consent:
A partnership firm may be dissolved if all the partners' consent to the dissolution
is obtained. Even if the period is fixed, the firm may be dissolved by mutual
consent of partners before expiry of such period.
2. Compulsory dissolution:
A partnership firm may automatically be dissolved.
a. If all the partners become insolvents.
b. If the business of the firm becomes unlawful.
3. Contingent dissolution:
A partnership firm is also dissolved under the following circumstances.
a. If any partner dies.
b. If any partner becomes insolvent.
c. If the period of agreement is kept undecided.
d. If the firm does any other business not mentioned in agreement.
4. Dissolution by notice:
Any partner may serve a notice to the remaining partners in the firm to effect
dissolution of the firm
5. Dissolution by court order:
Under rules of the Partnership Act, 1932, the court may order the dissolution of
the partnership on the following grounds:
a. If a partner becomes mad.
b. Due to misconduct of a partner, which will damage the reputation of the firm?
c. If the firm is suffering from continuous losses for a long time.
d. If any partner breaks the agreement intentionally.
e. If a partner transfers his interest in the firm to others without the consent of
other partners.

Rights and Liabilities of Seller

(i) Production of documents - On buyers request for examination, seller is bound
to produce to buyer all documents of title, which related to immoveable property
and which are in sellers possession or power.
(ii) Disclose to the buyer material defect - The is bound to disclose to the buyer
any material defect in the property or in the sellers title thereto of which the
seller is and the buyer is not, aware and which the buyer could not with ordinary
care discover.
(iii) Answer to Questions - Seller is bound to answer to best of his information all
relevant questions, which buyer puts to him in respect to immoveable property
or title to immoveable property.
(iv) Rent and Profits - The seller is entitled to the rents and profits of the property
till the ownership thereof passes to the buyer.
(v) Care of Immoveable Property and Documents - Between date of contract of
sale and delivery of immoveable property, seller is bound to take as much care of
the property and all documents of title as an owner of ordinary prudence would
take care of such property and documents.
(vi) Delivery of Possession of Immoveable Property - Seller is bound to give
possession of immoveable property to buyer or some other person according to
directions of buyer.
(vii) To give Possession - The seller is bound to give on being so required the
buyer or such person as he directs, such possession of the property as its nature
admits.
(viii) To pay all public charges - The seller is bound to pay all public charges and
rent accrued due in respect of the property upto date of the sale, the interests on
all encumbrances on such property due on such date, and except where the
property is sold subject to encumbrances, to discharge all encumbrances on the
property then existing.
(ix) To deliver documents - The seller is bound, where the whole of the purchase
money has been paid to the seller to deliver to the buyer all documents of title
relating to the property which are in sellers possession or power.
(x) Subsistence of Interest - Seller is deemed to contract with buyer that interest,
which seller professes to transfer to buyer, subsists and that he has power to
transfer such interest. And when sale is made by a person in a fiduciary
character, he is deemed to contract with buyer that seller has done no act
whereby immoveable property is encumbered or whereby he is hindered from
transferring it.
(ix) Payment of Purchase money - When ownership of immoveable property has
been passed to buyer before payment of whole of purchase-money, seller is
entitled to a charge upon that property, which is in hands of buyer.
Rights and Liabilities of Buyer
(i) Right to get benefit of improvement - The buyer is entitled where the ownership of the property has passed to
him, to the benefit of any improvement in or increase in value of the property and to the rents and profits thereof.
(ii) To disclose any fact about property - The buyer is bound to disclose to the seller any fact as to the nature or
extent of the sellers interest in the property of which the buyer is aware but of which he has reason to believe
that the seller is not aware and which materially increase the value of such interest.
(iii) Payment or tendering of purchase-money - Buyer is bound to pay or tender purchase-money to seller or
some other person according to directions of seller at time and place of completing sale.
(iv) Bearing of Loss - When ownership of immoveable property has been passed to buyer, he is bound to bear
any loss, which arises from destruction, injury or decrease in value of the property when such destruction, injury
or decrease is not caused by seller.
(v) Entitlement to improvement and increase in value of immoveable property - When ownership of immoveable
property has been passed to buyer, he is entitled to benefit of any improvement in the property or increase in
value of the property.

(vi) Entitlement of Rents and Profits - When ownership of immoveable property has been passed to buyer, he is
entitled to rents and profits of the property.
(vii) Entitlement to charge on immoveable property - Buyer is entitled to charge on immoveable property to extent
of sellers interest in the property, to charge for amount of any purchase-money, which is properly paid by buyer
in anticipation of delivery, and to charge for interest on such amount. Such charge is against seller and all
persons, who claim under seller. Here condition is that buyer should not have improperly declined to accept
delivery of the property.

Rights Against The Goods

a) Where the property in the goods has passed to the buyer.
i.
Right of Lien -- 'Lien is the right to retain possession of goods until certain charges in respect
thereof are paid. An unpaid seller who is in possession of the goods is entitled to retain them
until payment of the price, where -a) The goods have been sold without any stipulation s to credit;
b) The goods have been sold on credit, but the term of credit has expired or
c) The buyer becomes insolvent.
Where the goods have been sold on credit, the right of lien shall remain suspended over the period of
credit and shall revive on the expiry of that period. The right of lien is linked with possession of the goods
and not with the title. It is not affected even if the seller has transferred the documents of title till he remains in
possession of the goods. However, if the buyer has further transferred the documents of title to a bona fide
purchaser the seller's lien is defeated.

ii.

Right of Stoppage in transit --The right of stoppage of goods in transit, arises to an unpaid
seller after he has parted with the possession of the goods. The seller has the right to resume
possession of the goods while they are in the course of transit and to retain them until
payment or tender of the price. The right of stoppage in transit is available to an unpaid seller,
when the buyer becomes insolvent and the goods are in transit. The buyer is said to be
'insolvent' when he has ceased to pay his debts in the ordinary course of business, or cannot
pay his debts as they becomes due whether he has committed an act of insolvency or not.
iii.
Right of Resale -- The rights of lien and stoppage in transit, would not have been of much
value if he seller had no right to resell the goods, because the seller cannot continue to hold
the goods indefinitely. Section 54 provides an unpaid seller with a limited right to resell the
goods.
An unpaid seller may resell the goods -1. When the goods are of perishable nature, without giving any notice to the buyer, of the
resale.
2. In case of other goods, when after giving a notice to the buyer of his intention to resell the
goods, the buyer does not pay the price within a reasonable time; and
3. Where the seller has expressly reserved the right of resale in the contract. No notice to the
buyer is required in that case.

Rights Against The buyer

Right of with holding Delivery -- Where the property in the goods has not passed to the buyer, the unpaid seller
has the right to withhold delivery of the goods, which is similar to and co-extensive with his rights of lien and
stoppage in transit which he would have had if the property had passed. Rights Against the Buyer Personally

(Seller's Remedies Against buyer for Breach of Contract)--Besides, the above rights against the
goods, an unpaid seller has certain rights against the buyer personally. The seller enjoys the following
rights in personam (also known as remedies for breach of contract).
1. Suit for Price -- When the property in the goods has passed to the buyer, and the buyer
wrongfully neglects or refuses to pay the price, the seller is entitled to sue him for the price.
Where under a contract of sale the price is payable on a certain day irrespective of delivery or
passing of property, and the buyer refuses or neglects to pay on that day, the seller may sue
him for the price.
2. Suit for Damages for Non-Acceptance -- Where the buyer wrongfully neglects or refuses to
pay for the goods, the seller may sue him for damages for non-acceptance.
3. Suit for Damages for Repudiation of contract before date of delivery Where the buyer
repudiates the contract before the date of delivery, the seller may adopt any of the following
two courses of action, viz.- a) The seller may treat the contact as rescinded and sue the buyer
for damages. This is also known as 'damages for anticipatory breach'. The damages will be
assessed according to the prices prevailing on the date of breach.
b) The seller may treat the contract as subsisting and wait till the date of delivery. The contract

4.

remains open at the risk and for the benefit of both the parties. If the buyer subsequently
chooses to perform there shall be no damages; otherwise he shall be liable to damages
assessed according to the prices on the day stipulated for delivery.
Suit for Interest --The seller may recover interest or special damages whereby law interest
or special damages may be recoverable.

Special Features of a Contract of Guarantee

A contract of guarantee is a species of general contract and as such all the
essentials of a valid contract must be present. However, it has the following
special features:
1. Surety's obligation is dependent on principal-debtor's default: There
must be a conditional promise to pay on the default of the principal debtor. If the
promise is not conditional on default, it will not be a contract of guarantee but of
indemnity.
2. Separate consideration for guarantee not necessary: For a contract of
guarantee, like any other contract, consideration is necessary. But Sec. 127
provides that anything done or any promise made, for the benefit of the
principal-debtor, may be a sufficient consideration to the surety for giving the
guarantee. Thus, there is no need for a separate consideration between the
Principal debtor and the surety consideration received by the Principal debtor is
sufficient for the surety.
3. Principal debtor need not be competent to contract: Although the
creditor and the surety must be capable of entering into contract, yet, the
principal-debtor need not be competent to contract. In such a case, the principaldebtor is not liable but the surety is liable as the principal- debtor. [Kashiba v.
Shripat],
4. There must be existing debt or promise whose performance is
guaranteed: For a contract of guarantee, there must be an existing debt or a
promise whose performance is guaranteed. In case there is no such debt or
promise, there cannot be a valid guarantee. Actually speaking, the debt or
promise is the basis of guarantee, i.e., it is the consideration received by the
debtor. Hence, if there is no consideration, there is no contract of guarantee.
However, the debt may even be void. In that case, the surety himself will be
liable to pay the debt.
Whether a contract of guarantee is a contract of Uberrimae Fidei, i.e., good faith.
Strictly speaking, a contract of guarantee is not a contract of uberrimae fidei,
i.e., a contract of good faith requiring full disclosure of material facts likely to
affect the willingness of the guarantor. However, there should not be any
misrepresentation or active concealment of material facts by the creditor.

Rights against Principal Debtor

1.Right to give Notice: When ever creditor comes to surety, for the purpose of
seeking payment, surety can give a notice to principal debtor to settle the debt.
2.Rights of Sub-rogation: Sub rogation is a process where rights will get
shifted from one person to the other. If surety makes payment to creditor, surety
gets all rights of creditor by sub-rogation and from then onwards surety can
behave like a creditor.
3.Right of Indemnity: Principal of indemnity operates between principal debtor
and surety where principal debtor becomes implied indemnifier and surety
becomes implied indemnity holder. Therefore, surety can make principal debtor
answerable for all sufferings.
4.Right to get Securities: In case where surety makes payment to creditor,
surety has right to get the securities given by principal debtor to creditor.

5.Right to ask for Relief: From the date of guarantee, besides creditor, surety
also can bring pressure on principal debtor in connection with settlement of debt.

Rights against Co-Sureties

1.Right to ask for Contribution: Surety can ask his co-sureties to contribute
the amount when principal debtor comes across default. If they have given
guarantee for equal amounts, they have to contribute equally. In case where
guarantee is given for in equal amounts, the mode of contribution differs from
England law to Indian law. As per England law contribution is to be made in the
ratio of guarantee amounts. But as per Indian law the deficit amount is to be
distributed to all sureties equally and every surety will contribute share of deficit
or guarantee amount which ever is less.
2.Right to claim Share in Securities: When co-Sureties make payment to
creditor, they get securities from creditors procession. Then every surety can
claim his share in those securities.

Bailee's lien
Where the bailee has, in accordance with the purpose of the bailment, rendered any service involving
the exercise of labor or skill in respect of the goods bailed he has in the absence of a contract to the
contrary, a right to retain such goods until he receives due remuneration for the services he has
rendered in respect of them.
Illustrations - (a) A delivers a rough diamond to B, a jeweller, to be cut and polished, which is
accordingly done. B is entitled to retain the stone till he is paid for the service he has rendered.
(b) A gives cloth to B, a tailor, to make into a coat, B promises A to deliver the coat as soon as it is
finished, and to give a three months' credit for the price, B is not entitled to retain the coat until he is
paid.

Rights of Bailee
1.
Bailee has right to claim compensation for injuries arising out of faults present in
goods, If it is gratuitous bailment, bailee can make bailer answerable with regard to
known faults only. But not to un-known faults. In case of Non-gratuitous bailment bailee
can make bailer answerable to known as well as un-known faults.
2.
Bailee has right to claim contribution for expenses. If it is Gratuitous bailment,
bailee can claim only extraordinary expenses. But in case of Non-Gratuitous bailment,
bailee can claim both ordinary and ordinary expenses.
3.
In case where bailer has given goods with defective title and bailee, therefore,
comes across suffering, then such bailee has right to get compensated by defective titled
bailer.
4.
Bailee has right of indemnity, for making involvement in bailment Contract,
bailer can make bailee answerable.
5.
Bailee has right of lien. It is only particular lien. That means he can exercise right
of lien against those goods only on which amount is due.
6.
Bailee can return the goods to any one of the joint owners.
7.
In times of need Bailee has right to approach Court of law.
Duties of Bailee
1.
Bailee should take reasonable care on goods.
2.
Bailee should not use the goods for an unauthorized purpose.
3.
Bailee should not setup adverse title.
4.
Bailee should return the goods after fulfillment of purpose.

5.
Bailee should return not only delivered goods, but also additions.
6.
Bailee should not mix up the goods with his own goods or others goods. If bailee
has mixed the goods and the goods are of sufferable nature, bailee has to face the cost of
separation. If the goods are of insufferable nature, bailee has to compensate bailer.

Delegatus non potest delegare

A person to whom something has been delegated cannot delegate further, i.e.
one to whom powers and duties have been entrusted cannot entrust them to
another. The rule applies particularly when the delegate possesses some special
skill in the performance of the duties delegated, or when personal trust is
involved. The rule does not apply if there is express or implied authority to
delegate. Trustees, for example, have always been entitled to employ agents
when this was necessary (for example, they can employ solicitors to do legal
work). Since 1925, a trustee may delegate any business of the trust to an agent
provided that he does so in good faith. Further, since 1971, any trustee may
delegate, for a period not exceeding one year, any trusts, powers, or discretions
he has; this delegation may be repeated.

General Lien
A general lien is a more versatile lien and, when used properly, can put an unpaid Operator in a very
strong negotiating position vis--vis a debtor. A well drafted general lien clause in a service contract
might even allow an Operator to secure non-debt related liabilities and debts owed to other group
companies. A general lien seeks to allow a lien to be exercised over Goods in respect of any unpaid
debts. Accordingly, pursuant to a general lien, a shipping line may face the prospect of having Goods
withheld from delivery in order to satisfy a demand for payment of a debt that is far in excess of the
value of the Goods being withheld. The shipping line then must pay the full debt in order for the
Goods to be released.

Suit by bailors and bailees against wrong doers

Section 180 of the Indian Contract Act, 1872 states that if a third person wrongfully deprives
the bailee of the use or possession of the goods bailed, or does them any injury, the bailee is
entitled to use such remedies as the owner might have used in the like case if no bailment
had been made; and either the bailor or the bailee may bring a suit against a third person for
such deprivation or injury.

Del Credere Agent

A del credere is an agent who guarantees the solvency of third parties with whom the agent
contracts on behalf of the principal. As a token for the guaranty given, the agent receives an
additional commission for sales. The promise of such an agent is almost universally held not to be
within the statute of frauds. Such an agent assumes the position of a surety who is liable to his
principal if the vendee make default. Such agents are commonly referred to in English law. They
are also known as del credere factor.

Difference between an agent and servant

Agent
1. An agent has an authority to create contractual relationship between the
principal and a third party.

2. An agent is not subject to the direct control or supervision of the principal. As

such, he has greater discretion in his actions. A principal has the right to direct
what the agent has to do but the master has also the right to say how it is to be
done.
3. An agent is paid commission on the basis of work done.
4. A principal is liable for only those acts which are within the scope of the
authority given to the agent.
5. An agent may work for a number of principals at the same time.
Servant
1. A servant has no such
2. A servant acts under the direct control and supervision of his master, and is
bound to carry out all reasonable orders given to him in the course of his work.
3. A servant is paid by way of salary or wages.
4. A master is liable for the wrongs of his servants committed in the course of
employment.
5. A servant usually serves only one master.

Creation of Agency

A person who has capacity to contract can enter into contract either by himself or though some other
person. If he adopts the first method there is no question of agency. If he adopts the second method,
then there is agency. The person who represents another in his dealing with third parties is called
agent and that person who is so represented by agent is called principal. The following are different
modes of creation of agency.
1.
Agency by Express agreement.
2.
Agency by Operation of law.
3.
Agency by Ratification.
4.
Agency by Implied authority.
Agency by Express agreement: Number of agency contract come into force under this method. It
may be Oral or documentary or through power of attorney.
Agency by operation of law: At times contract of agency comes into operation by virtue of law. For
example: According to partnership act, every partner is agent of the firm as well as other parties. It is
implied agency. On account of such implied agency only a partner can bind over firm as well as other
partners, to his activities. In the same way according to companies act promoters are regarded as
agents to the company.
Agency by Ratification: Ratification means subsequent adoption of an activity. Soon after
ratification principal agent relations will come into operation. The person who has done the activity
will become agent and the person who has given ratification will become principal.
Ratification can be express or implied. In case where adoption of activity is made by means of
expression, it is called express ratification. For example: Without A`s direction, B has purchased
goods for the sake of A. There after A has given his support (adoption) to B`s activity, it is called
Ratification. Now A is Principal and B is agent.
The ratification where there is no expression is called implied ratification. For example: Mr. Q has P`s
money with him. Without P`s direction Q has lent that money to R. There after R has paid interest
directly to P. Without any debate P has taken that amount from R. It implies that P has given his
support to Q`s activity. It is implied ratification.
Agency by implied authority: This type of agency comes into force by virtue of relationship
between parties or by conduct of parties. For example: A and B are brothers, A has got settled in
foreign country without any request from A, B has handed over A`s agricultural land on these basis to
a farmer and B is collecting and remitting the amount of rent to A. Here automatically A becomes
principal and B becomes his agent.
Agency by implied authority is of three types as shown below;
Agency by Necessity
Agency by Estoppel
Agency by Holding out.

By Necessity: At times it may become necessary to a person to act as agent to the other. For example:
A has handed over 100 quintals of butter for transportation, to a road transport company. Actually it
is bailment contract, assume that in the transit all vehicles has got stopped where it takes one week for
further movement. So the transport company authorities have sold away the butter in those nearby
villages. Here agency by necessity can be seen.
By Estoppel: In presence of A , B says to C that he (B) is A`s agent though it is not so actually. A has
not restricted B from making such statement. Here agency by Estoppel can be seen
By Holding out: B is A`s servant and A has made B accustomed to bring good on credit from C. On
one occasion A has given amount to B to bring goods from C on cash basis. B has misappropriated that
amount and has brought goods on credit as usually, Here is agency by holding out and therefore A is
liable to pay amount to C.

Termination of Agency Contract

Termination of agency may take place in two ways either by the operation of law or by
the act of parties.
Termination of agency by the operation of law. The following are the situations
where the agency is terminated by the operation of law.
Expiry of time: At times contract of agency may get formed for a particular
period. In such a case after expiry of that agreed period, termination of agency takes
place.
Fulfillment of object: At times the contract of agency may be found for a
particular objective or to do a particular venture. In such a case termination of agency
takes place after completion of that venture.
Death or lunacy of either party: Whenever principal or agent come across
death or lunacy, agency contract gets terminated.
Insolvency of Principal: Principal should have capacity to contract. When
principal becomes insolvent, He foregoes capacity to contract and termination of agency
takes place. But the act is silent with regard to insolvency of agent. As minor also can act
as agent, it can be conformed that insolvent person may act as agent.
Destruction of subject matter: When subject matter of contract gets
destructed, agency contract comes to an end.
Principal Alien Enemy: When principal is alien and war breaks out
between the countries, then principal becomes alien enemy and agency contract gets
terminated.
Liquidation of company: On account of legal entity company may act either
as principal or agent. Whatever the status may be, if company enters into liquidation,
termination of agency takes place.
Termination of Sub-agency: When ever man agency gets terminated on
account of any reason, sub-agency also goes off.
Termination of agency by the act of Parties. The following are the situations
where the agency is terminated by the act of parties.
Termination of agency by the Principal: Principal can terminate the
contract of agency by giving notice to agent. By doing so if agent comes across any
suffering. Principal has to compensate the agent.

Termination of agency by the Agent: Agent also can terminate the agency
contract by giving notice to principal but by doing so if principal comes across any
suffering, agent has to compensate.
Termination of agency by both the parties to the contract: By means of
mutual understanding between principal and agent, the contract of agency may come to
an end.

Irrevocable agency
When an agency cannot be terminated or put an end to, it is said to be an
irrevocable agency in following cases:
1. Where the agency is coupled with interest. Where an agent has an interest in
the subject matter of the contract entered into by him with a third party, his
authority is coupled with the interest. He has, in such case, the right to sue or be
sued, but only to the extent of his interest. (sec 202)
2. Where the agent has incurred a personal liability. When an agent incurs
personal liability, the agency becomes irrevocable. The principal cannot, in such
case, withdraw leaving the agent exposed to the risk or liability he has already
incurred.
3. Where the agent has partly exercised the authority: The principal cannot
revoke the authority given to his agent after the authority has been partly
exercised; so far as regards such acts and obligations as arise from the acts
already done in agency.(Sec. 204)

Partnership at will
Section 7 says where no provision is made by contract between the partners for the duration of their
partnership or for the determination of their partnership, the partnership is Partnership at Will.
The survival of such partnership depends on the willingness of the partners. It can be dissolved at any
time by any of the partners by giving a notice to the other partners. The partnership at will dissolves
from the date of notice of termination. If a partnership constituted for a particular time period is still
carried on after the expiry of the time, it will be presumed that the limitation is no longer applicable.
For example, if two people decide to sell coconut water at two ends on a particular street without
having any contract or without specifying when will the partnership come to an end, it is a partnership
at will. It will exist only as long as both the parties want the partnership to last.
But if the partnership deed provides of termination only by mutual agreement, a mere notice to the
other partners will not dissolve the partnership firm. Also, a partnership at will dissolves immediately
upon the death or insanity of a partner.

Particular Partnership
Section 8 states that a person may become a partner with another person in particular adventures or
undertakings. Such a partnership ends on the completion of the task. A partner cannot retire from
such a partnership half way through the project for which partnership was entered into without the
other partners.
When two people enter into a partnership for a particular construction project, this is particular
partnership. A person can still carry on his usual business or work while he in a particular partnership;
he is not required to give up his other professional pursuits. For example, partnership between two
advocates or doctors for a particular case does not take away their freedom to attend to their other
cases. Two auditors engaged in a particular audit might be regarded as partners in that audit.
It does not matter whether the business is of temporary or permanent nature. A single venture can
amount to carrying on of business. In the case of K Jaggaiah vs. Kokumanu [AIR 1984 AP 149], three
people got together and managed a contract for road maintenance. It was a partnership for building
roads. The activity of the partnership arose from a single contract but was spread over a particular
period and various aspects. The employment of workers, supervision, getting sanctions and approvals
was just a part carrying on of business under Section 4.

Sleeping or Dormant Partner

Holding out
(1) Any one who by words spoken or written or by conduct represents himself or
knowingly permits himself to be represented, to be a partner in a firm, is liable as
a partner in that firm to any one who has on the faith of any such representation
given credit to the firm, whether the person representing himself or represented
to be a partner does or does not know that the representation has reached the
person so giving credit.
(2) Where after a partners death the business is continued in the old firm name,
the continued use of that name or of the deceased partners name as a part
thereof shall not of itself make his legal representative or his estate liable for any
act of the firm done after his death.
(3) When a person is represented (held out) as a partner and he does not deny
this even after becoming aware of it, he becomes liable to third parties who lend
money or grant credit to the firm on the basis of such representation.
Suppose Shipra tells Sohan in the presence of Mohan that Mohan is a partner in
the firm 'Shipra Enterprises'. Mohan is not a partner and does not deny Shipra's
statement.
Sohan grants a loan of Rs 50,000 to Shipra Enterprises on the impression that
Mohan is a partner. Later on the firm is unable to repay the loan. Mohan becomes
liable to Sohan and here Mohan is a partner by holding out.

RIGHTS OF THE PARTNERS

1. Right of Profit :All the partners are entitled to share the profits of the firm equally.
2. Right of Opinion :Every partner has right to express his opinion relating to business activities. But
the nature of business can not be changed by a single partner.
3. Right of Inspection :Every partner has right to check the accounts of the business.
4. Right of Management :Every partner has a right to take part in the management of the business of the

firm.
5. Right of Salary :A partner has a right to demand salary for performing his duties in the
management of a business.
6. Right to Exercise Power :To protect the firm from loss, every partner has a right to use his powers.
7. Right of Retirement :Every partner has a right to retire from the firm serving notice.
8. Right of Existence :A partner cannot be expelled by any other partner from the business. Every
partner has a right to live in the business.
9. Right of Admission :No new partner can be admitted without the consent of all the present partners
in business.
10. Right of Interest :If a partner has provided extra capital than his share, he can also receive interest
on it.

LIABILITIES OF PARTNERS
1. Loss Liability :In case of loss each partner will equally contribute the loss. If there is no
agreement.
2. Liability of All Actions :All the partners of the firm are jointly responsible for all the actions done by the
firm.
3. Liability of New Partner :A new partner is liable for all the acts of the firm done after he becomes a
partner.
4. Liability of Insolvent Partner :The property of insolvent partner is not liable for any obligations of the firm after
the date on which the order of insolvent is issued by the Court.
5. Liability of Deceased Partner :If a partner dies and the firm suffers losses the property of the deceased can not
be held liable for any payment.
6. Liability of Retired Partner :A retired partner will not be responsible for any act of the firm after the date of
retirement.
7. Liability of Fraud :If any partner commits fraud the other partners will also be equally liable.

Main Features of partnership firm

1. More Persons:
As against proprietorship, there should be at least two persons subject to a maximum of ten persons
for banking business and twenty for non-banking business to form a partnership firm.
2. Profit and Loss Sharing:

There is an agreement among the partners to share the profits earned and losses incurred in
partnership business.
3. Contractual Relationship:
Partnership is formed by an agreement-oral or written-among the partners.
4. Existence of Lawful Business:
Partnership is formed to carry on some lawful business and share its profits or losses. If the purpose is
to carry some charitable works, for example, it is not regarded as partnership.
5. Utmost Good Faith and Honesty:
A partnership business solely rests on utmost good faith and trust among the partners.
6. Unlimited Liability:
Like proprietorship, each partner has unlimited liability in the firm. This means that if the assets of the
partnership firm fall short to meet the firms obligations, the partners private assets will also be used
for the purpose.
7. Restrictions on Transfer of Share:
No partner can transfer his share to any outside person without seeking the consent of all other
partners.
8. Principal-Agent Relationship:
The partnership firm may be carried on by all partners or any of them acting for all. While dealing
with firms transactions, each partner is entitled to represent the firm and other partners. In this way, a
partner is an agent of the firm and of the other partners.

Partnership - A partnership is a form of business organization in which owners have unlimited personal
liability for the actions of the business, though this problem can be mitigated through the use of a limited
liability partnership. The owners of a partnership have invested their own funds and time in the business, and
share proportionally in any profits earned by it. There may also be limited partners in the business, who
contribute funds but do not take part in day-to-day operations. A limited partner is only liable for the amount of
funds he or she invested in the business; once those funds are paid out, the limited partner has no additional
liability in relation to the activities of the partnership. There should be a partnership agreement, which details
the mechanics of how to make decisions, how to add new partners and pay off those who wish to leave, how to
wind up the business, and so forth. However, it is not necessary to have a written partnership agreement. An oral
one may be sufficient to prove the existence of a partnership.

Duties of Partners
(a) Every partner is bound to diligently carry on the business of the firm to the greatest common
advantage. Unless the agreement provides, there is no salary.
(b) Every partner must be just and faithful to the other partners.
(c) A partner is bound to keep and render true, proper, and correct accounts of the partnership and
must permit other partners to inspect and copy such accounts.
(d) Every partner is bound to indemnify the firm for any loss caused by his willful neglect or fraud in
the conduct of the business.
(e) A partner must not carry on competing business, nor use the property of the firm for his private
purposes. In both cases, he must hand over to the firm any profit or gain made by him but he must
himself suffer any loss that might have occurred.
(f) Every partner is bound to share the losses equally with the others.
(g) A partner is bound to act within the scope of his authority.
(h) No partner can assign or transfer his partnership interest to any other person so as to make him a
partner in the business.

Disadvantage of non registration of a firm

1. It cannot enforce its claims against a third party in a court of law.
2. It cannot claim adjustment for any sum exceeding Rs. 100. Suppose an
unregistered firm owes Rs. 1200 to A and A owes Rs. 1000 to the firm the firm
cannot enforce adjustment of Rs. 1000 in a court of law.
3. It cannot file a legal suit against any of its partners.
4. Partners of an unregistered firm cannot file any suit to enforce a right against
the firm.

5. A partner of an unregistered firm cannot file a suit against other partners. Nonregistration of a firm, however, does not affect the following rights:
(i) The right of a partner to sue for the dissolution of the firm or for the accounts
of a dissolved firm or to enforce any right or power to realise the property of a
dissolved firm.
(ii) The power of an Official Assignee or Receiver to realise the property of an
insolvent partner.
(iii) The rights of the firm, or its partners, having no place of business.
(iv) Any suit or set off in which the claim does not exceed rupees one hundred.
(v) The right of a third party to sue the unregistered firm or its partners.

Unpaid seller and its rights - Section 45 lays down that a seller is unpaid :
(1) When the whole of the price has not been paid or tendered.
(2) When a negotiable instrument or a bill of exchange has been received as conditional payment and the
condition in which it was received has not been fulfilled by reason of the dishonor of the instrument or
otherwise. The seller remains as unpaid seller as long as any portion of the price, however small, remain unpaid.
Where the whole of price has been tendered, and the seller refused to accept such a tender, seller ceases to be an
unpaid seller. In such a case the seller loses all high right against the goods.
If there is a period of credit then the seller is not unpaid until the price become due. Against if there is a
condition attached to payment it must be fulfilled.
The unpaid sellers right can be exercised by an agent of the seller to whom the bill of leading has been
endorsed, or a consignor or an agent who has himself paid, or is directly responsible for the price.
Rights of an unpaid seller
The sale of Goods Act has expressly given two kinds of right to an unpaid seller of goods, namely :
(1) Against the goods
(a) When property in the goods has passed
(i) Right of lines
(ii) Right of stoppage of goods in transit
(iii) Right of re-sale
(b) When property in the goods has not passed
(i)Right of withholding delivery.
(2) Against the buyer personally
(i) Right to use for price
(ii) Right to sue for damages
(iii)Right to sue for interest.

Buyer's Remedies Against Seller For Breach of Contract

A buyer also has certain remedies against the seller who commits a breach. These are:
1. Suit for Damages for Non-Delivery- When the seller wrongfully neglects or refuses to deliver the
goods to the buyer, the buyer may sue the seller for damages for non-delivery. This is in addition to
the buyer's right to recover the price, if already paid, in case of non-delivery.
2. Suit for price- Where the buyer has paid the price and the goods are not delivered to him, he can
recover the amount paid.
3. Suit for specific performance- When the goods are specific or ascertained, a buyer may sue the
seller for specific performance of the contract and compel him to deliver the same goods. The court
orders for specific performance only when the goods are specific or ascertained and an order for
damages would not be an adequate remedy. Specific performance is generally allowed where the
goods are of special significance or value e.g. a rare paining, a unique piece of jewellery, etc.
4. Suit for Breach of Warranty- Where there is a breach of warranty by the seller, or where the
buyer elects or is compelled to treat the breach of condition as breach of warranty, the buyer cannot
reject the goods. The buyer may, (a) set up the breach of warranty in extinction or diminution of the
price payable by him, or (b) sue the seller for damages for breach of warranty.
5. Suit for Damages for Repudiation of contract before Due date-Where the seller repudiates the
contract before the date of delivery, the buyer may adopt any of the following two courses of action -A. He may treat the contract as rescinded and sue the seller for damages. This is also known as
'damages for anticipatory breach'. The damages will be assessed according to the prices
prevailing on the date of breach.

B. He may treat the contract as subsisting and wait till the date of delivery. The contract remains
open at the risk and for the benefit of both the parties. If the seller subsequently chooses to
perform there shall be no damages otherwise he shall be liable to damages assessed according
to the prices on the day stipulated for delivery.
6. Suit for interest- The buyer may recover such interest or special damages, as may be recoverable
bylaw. He may also recover the money paid where the consideration for the payment of it has failed.
In the absence of a contract to the contrary, the court may award interest, to the buyer, in a suit by him
for the refund of the price in a case of a breach on the part of the seller, at such rate as it thinks fit on
the amount of the price from the date on which the payment was made.
Goods Goods means every kind of movable property other than actionable claims and 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. [section 2(7)].
Essentials for Transfer of Property -- The two essentials requirements for transfer of property in the
goods are:
1. Goods must be ascertained: Unless the goods are ascertained, they (or the property therein)
cannot pass from the seller to the buyer. Thus, where there is a contract for the sale of
unascertained goods, no property in the goods is transferred to the buyer unless and until the
goods are ascertained
2. Intention to PASS Property in Goods must be there: In a sale of specific or ascertained goods
the property in them is transferred to the buyer at such time as the parties to the contract
intend it to be regard shall be had to the terms of the contract, the conduct of the parties and
the circumstances of the case.

Distinction between sale and an agreement to sale as under

1. Nature: A sale is an executed contract. But, an agreement to sell is an executory contract. A sale is
called an executed contract because of the fact that in sale, considerations and delivery of goods takes
place simultaneously. On the other hand, an agreement to sale is called an executory contract because
the consideration is given at a future date and goods are delivered to the buyer at a future date.
2. Transfer of ownership: In case of sale, the ownership of the goods is transferred to the buyer
immediately. So, the buyer in case of sale becomes the owner of the goods. But, an agreement to sell
becomes a sale only when the ownership of the goods is transferred to the buyer. The ownership of the
goods is transferred to the buyer at some future date.
3. Transfer of risk: In case of sale, the buyer will have to bear the loss, even though the goods are in
possession of the seller. Because, in case of sale the risk is associated with ownerships. But in case of
an agreement to sell, the seller is to bear the risk of loss, even though the goods are in the possession
of the buyer.
4. Consequence of the breach: In case of breach of an agreement to sell by the seller, the buyer can
recover the damages from the seller. If the buyer fails to pay the consideration the seller can sue and
recover for damages from the buyer. But incase of breach of the contract by the seller, the buyer can
sue for the delivery of goods and sue for damages.
5. Insolvency of the buyer: In case of sale, if the buyer becomes an insolvent before paying the price,
the seller shall have to deliver the goods to the Official Assignee or Receiver except where he has a
lien over the goods. But in case of agreement to sell, the seller can refuse to deliver the goods to the
Official Assignee or Receiver until he is paid the full price of the goods.

6. Insolvency of the seller: In case of sale, if the seller becomes insolvent, the buyer can recover the
goods from the official receiver or assignee as the property of goods is with the buyer. But in case of
agreement to sell, if the buyer can claim only a ratable dividend and not the goods, if the seller
becomes insolvent and goods are taken from him by the Receiver or Official Assignee, the buyers
cannot recovers the goods from the Receiver or Official Assignee as he is not the owner of the goods.
7. General and particular property: By the contract of sale, a right is created against the whole world.
This means that the buyer has the right to use the parties to use the goods against others. But, by the
agreement to sell, the buyer gets the rights over the goods only against the seller.
8. Right of Re-Sale: The seller cannot re-sell the goods in case of sale, though the possession of goods
sold remains with the seller. But, the hire purchaser cannot re-sell till the time he pays all the
installment of hire.

CONDITION
It is defined in the following words, "A condition is stipulation essential breach to
the main purpose of the contract, the breach of which give rise to a right to treat
the contract as repudiated." So according the above definition it is clear that
condition is very essential for the performance of a contract. The breach of
condition will be regarded as the breach of the whole contract. Example A
buys from B a hair oil advertised as pure coconut oil. The oil turns out to be
mixed with herbs. A can return the oil and claim the refund of price.

WARRANTY

Sales act defines the warranty in the following words, "A warranty is a stipulation
collateral to the main purpose of the contract the breach of which gives rise to a
claim for damages but not to a right to reject the goods and treat the contract as
repudiated."
The above definition shows that for the implementation of a contract warranty is
not essential. For the breach of warranty only damages can be claimed.
Example A while selling his car to B, stated the car gives a mileage of 12 kms
per litre of petrol. The car gives only 10 kms per litre. B cannot reject the car. It is
breach of warranty. He can only claim damages for the loss due to extra
consumption of petrol.

IMPLIED CONDITIONS
Those conditions are not included in the contract but the law presumes their existence in the contract
are called implied conditions.
Following conditions are included by law in to a contract of sale of goods.
1. Right To Sell :This right is considered as an implied conditions in every sale contract. It is presumed that he can sell
the goods and he can enter in sale agreement.
2. Sale By Description :In this case implied condition is that goods shall the correspond with the description. A buyer can
reject if the goods if these are not according the description.
3. Sale By Sample :In this case goods must be supplied according the sample agreed upon condition.
i. The buyer may be able to compare the sample with the bulk.
ii. The goods should be free from any defect.
iii. The bulk should match with the quality of the sample.
4. Sale By Sample & Description :In this case goods supplied must correspond with sample and description both. So there is implied
condition in it that if bulk does not match with one even then buyer may reject the goods.
5. Condition of Merchantable Quality :-

Merchantable quality means that the goods must be sale able in the market as goods of that
description are sold. In case of any defect a seller must inform the buyer. It is implied condition.
6. Conditions As Quality To Fitness :Sometimes buyer informs the seller that he wants to purchase the goods for particular purpose. It is
implied condition that goods shall serve the purpose of buyer. As the buyer relays on the sellers skill
then seller should provide the goods according the description.
7. Wholesomeness Condition :It means conductive to health. When someone makes a sale of contract about the eatable goods this
condition is applied. If some one supply the goods and it damages to health then supplier will be
liable for damages. Example :- Sams Food Company supplied food on the marriage party of Mr.
Vicky. After eating the food people were infected and died. The company was held liable in damages.
IMPLIED WARRANTIES
1. Possession Of Goods :It is an implied warranty on the part of the seller that buyer shall enjoy the quiet possession of goods
sold to him without any disturbance. In case of any disturbance a buyer can claim the damages from
the seller.
2. Dangerous Nature Must Be Disclosed :It is necessary that seller should disclose the dangerous nature of the good sold to the buyer. If he does
not disclose then any type of loss suffered by the buyer will be compensated by the seller.
Example :- Mr. Noor sold the camel to Mr. naveed which is very dangerous. But he did not told about
the nature of the camel. The camel killed to Mr. Baqir son of Mr. Naveed due to the ignorance of the
nature of camel Mr. Noor will be liable to compensate Mr. Naveed.
3. Burden on Property :Before selling the goods, it is necessary that these should be free from any charge or encumbrance
from any third party. If a sellers does not tell about such burden on the goods to the buyer and later on
the buyer suffers a loss. The buyer can claim such damages from seller. Example :- Mr. Khaliq the
owner of a horse, pledges it with Mr. Karim. After a month, Mr. Khaliq obtains possession of the
horse from Mr. Karim for some purpose and sells it to the Mr. Jawad. Mr. Karim goes to Jwad and
tells him the pledge story. Mr. Jawad has to make the payment of pledged amount to Mr. Karim. In
this case of breach of warranty and Mr. Jawad is entitled to claim compensation from Mr. Khaliq.

Caveat Emptor Rule

While purchasing goods buyer must be very careful, at his own interest, buyer
has to select such goods only which are not of defective nature. In case where
buyer, negligently purchases defective goods, he cannot repudiate the contract
of sale. It is caveat emptor law.
A case on this point is Ward Vs Hobbs. In this case a contract of sale gets formed
between A and B according to the terms of which A has to sell an animal from his
farm to B. Negligently B selects an animal which has been suffering from some
sickness. That sickness is characterized by propagation from one animal to the
other and the ultimate effect is death of the animal. It should be noted that the
sickness is externally visible. B, negligently selects such animal and as a result
all animals present in B`s farm comes across death. B sues A. Court decides that
B is negligent, he cannot blame the seller for his (A) own negligence and
therefore B cannot claim any compensation. Thus cavit emptor rule protects the
seller. This rule is unfavorable to buyer.