Indian Contract Act- 1872- II

                                         UNIT- I
1. What is contract of Indemnity? Explain the right of indemnity
holder. Distinguish between contracts of Indemnity & Contract of
Guarantee.
2. Discuss the nature, rights and liabilities of a Surety.
3. Explain the essential feature of Guarantee. What are the
liabilities & rights of the Surety? Can the surety discharge from
his liability? What is the difference between contract of
Guarantee and Indemnity?
4. Liability of surety is co-extensive with that of Principal debtor.
                                     UNIT-II
1. Explain the standard of care required of a bailee in respect of
goods bailed to him.
2. What can be pledged? Who can make the valid Pledge?
Differentiate between Pledge & Lien.
3. What is bailment? What are the essentials of bailment? What
are the duties & rights of Finder of lost goods as a bailee?
 4. What is Pledge? Distinguish between Pledge and Bailment.
                                    UNIT – III
1. What is Agency? What are the various modes of creating
Agency relationship? Also describe the different kinds of Agent.
2. What are the circumstances in which agency is terminated?
3. Discuss fully the extent of Principals liabilities to third parties
for the act of Agent.
4. Define the term sub-Agent. How for is principal bound by the
acts of sub-agent? Distinguish between sub-agent and substituted
Agent.
                                   UNIT- IV
1. Sharing of profits in business is not conclusive evidence of the
existence of Partnership. Discuss with the help of relevant case
law.
2. How the firm is registered? What is the effect of Registration &
Non registration of firm?
3. Distinguish between partnership business and joint Hindu
family business.
4. Discuss the essentials of Partnership firm.
 5. Define the principal of Holding out.
6. What are the provisions of dissolution of partnership Firm?
                                  UNIT- V
Write short notes on the followings:-
i)               Continuing Guarantee.
ii)            Co-Sureties.
iii)         Feature of Bailment.
iv)          Rights of Pawnee to redeem.
v)             Kinds of Agent.
vi)          Agency by Ratification.
vii)       Nature of Partnership.
viii)     Registration of Firm.
ix)          Termination of Agency.
x)             Rights & duties of finder of lost goods.
xi)          Modes of discharge of surety.
xii)        Doctrine of Holding out.
xiii)     Minor admitted to benefit of partnership.
xiv)      Dissolution of firm.
xv)        General lien & Particular lien.
xvi)      Difference between Hypothecation & Pledge.
xvii)   Co-ownership & Partnership.
xviii)Partnership at will.
xix)      Dormant Partner.
xx)         Ostensible authority.
xxi)      Sub Agent & Substituted Agent.
xxii)   Pledge &Mortgage.

1. Define the Contract of Indemnity. Distinguish between contract

of Indemnity & contract of guarantee. And explain the rights of
indemnity holder.
 Introduction: - A Contract of indemnity is a direct engagement between two
parties whereby one promises to save another from harm. According to section
124 of the Indian Contract Act a contract of indemnity means,” 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.”
                  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 Section 124 of Indian Contract Act 1872 makes the life insurance was
a contract of indemnity. However the Contract Act -1872 makes the scope
narrower by defining the contract of indemnity.

DEFINITION: - As provisions made in section 124 of the Indian Contract Act-
1872 says that, “whenever one party promises to save the other from loss caused
to him by the conduct of the promisor himself or by  the conduct of other by the
conduct of the any other person is called a Contract of Indemnity.”
New India Assurance Company Ltd. Vs Kusumanchi Kameshwra Rao &
Others, 1997, A Contract of indemnity is a direct engagement between two
parties thereby one promises to save the other harm. It does not deal with those
classes of cases where the indemnity arises from loss caused by events or
accidents which do not or may not depend on the conduct of indemnifier or any
other person.

ESSENTIAL ELEMENTS:- The following are the essentials of the Contract

of Indemnity:-
1.    There must be a loss.
2.    The loss must be caused either by he promisor or by any other person.
3.    Indemnifier is liable only for the loss.
Thus it is clear that this contract is contingent in nature and is enforceable only
when the loss occurs.
                                  RIGHTS OF INDEMNITY HOLDER
The promisee in a contract of indemnity acting within the scope of his authority
is entitled to recover from the promisor so under Section 125 of the Act defines
the rights of an indemnity holder which are as under :-
1.    Right of recovering Damages: - All the damages that he is compelled to pay in
a suit in respect of any mater to which the promise of indemnity applies.
2.    Right of recovering Costs: - All the costs that he is compelled to pay in such
suit if in bringing o defending it he did not contravene the orders of the
promisor and has acted as it would have been prudent for him to act in the
absence of the contract of indemnity or if the promisor authorised him in
bringing or defending the suit.
3.    Right of recovering sums :- All the sums which he may have paid under the
terms of a compromise in any such suite if the compromise was not contrary to
the orders of the promisor and was one which would have been prudent for the
promisee to make in the absence of the contract of indemnity.
In another case of Mohit Kumar saha v/s New India Assurance Co.-1997 It was
held that the indemnifier must pay the full amount of the value of the vehicle
lost to theft as given by the Surveyor. Any settlement at the lesser value is
arbitrary and unfair and violates art.14 of the constitution.
                DIFFERENCE BETWEEN INDEMNITY & GUARANTEE
                INDEMNITY           GUARANTEE
1. In indemnity there are two, one There are three parties, Principal
who is indemnified and the other debtor, surety and the Creditor.
indemnifier.
2. It consists of only one contract There are three contracts between
under which indemnifier promises to surety, principal debtor and creditor.
pay in the event of certain loss.
3.  The contract of indemnity is made The object of contract of guarantee is
to protect the promise against some the security of the creditor.
likely loss. In guarantee the liability of surety is
4. The liability of the indemnifier in a only a secondary, when principal
contract of indemnity is a primary debtor default.
one.

CONCLUTION: - It has been noted above that section 124 recognises only
such contract as contract of indemnity where there is a promise to save another
person from loss which be caused by the conduct of the promisor himself or by
conduct of any other person.  It does not cover a promise to compensate for loss
not arising due to human agency. If under a contract of insurance an insurer
promises to pay compensation in the event of loss by fire.  Such contracts are
valid contracts as being contingent contracts under sec.31.

2. Discuss the nature, rights and liabilities of a surety.

INTRODUCTION:- The surety who is entitled to be reimbursed by the
principal debtor for the amount paid by him on his behalf. The liability of the
surety is co-extensive with that of the principal debtor unless it is otherwise
provided by the contract under section 128.
NATURE OF SURETY:- Section 128 surety liability is co-extensive with that
of the principal debtor which means that on a default having been made by the
principal debtor the creditor can recover from surety the all what he could have
recovered from the principal debtor.
 Example:- The principal debtor makes a default in the payment of a debt of
Rs.10,000.00, the Creditor may recover from the surety the sum of Rs.10000/-
plus interest becoming due thereon as well as the amount spent by him in
recovering that amount.
LIABILITY OF SURETY:- A bare perusal of section 128 of the Contract Act
would make it clear that the liability of a surety is co-extensive with that of he
principal debtor. The word co-extensive denotes that extent and can relate only
to quantum of the principal debt. Refer a case of Industrial Financial
Corporation of India v/s Kannur Spinning & Weaving Mills Ltd,
2002: However the liability of the surety does not cease merely because of
discharge of the principal debtor from liability.
Bank of Bihar Ltd. v/s Damodar Prasad, 1969: The Supreme Court
held that the liability of the surety is immediate and cannot be defended until the
creditor has exhausted all his remedies against the principal
debtor. Maharashtra Electricity Board Bombay v/s Official Liquidator and
Another, 1982: under a letter of guarantee the bank undertook to pay any
amount not exceeding Rs.50000/- to the Electricity Board. It was held that the
Bank is bound to pay the amount due under the letter of guarantee given by it to
the Board.
RIGHTS OF SURETY:- The surety has certain rights against the principal
debtor, the creditor and the co-sureties.  His right against each one of them are
being discussed as under :-
1.    Right of Subrogation: Under section 140 when a principal debtor makes a
default in the performance of his duty and on such default the surety makes the
necessary payment or makes performance of all what he is liable. Firstly the
surety can claim indemnity from the principal debtor secondly he is also entitled
to the benefits of every security which the creditor has against the principal
debtor. Case of Mukesh Gupta v/s Sicorn Ltd. Mumbai, 2004.
2.    Right of Indemnity against the principal debtor: Similarly as above when a
principal debtor makes a default the surety has to make the payment to the
creditor. After making the payment he can recover the same from him under
section 145 of the act.
3.    Right against Creditor to take back the securities deposited by the
Principal debtor:- After making the dues  the surety has all the rights which
are available to the creditor against the principal debtor under section 141 of the
act. He is entitled to the benefit of every security which the creditor has against
the principal debtor.
4.    Surety has no right to goods in hypothecation:- In case there is hypothecation
of the goods the goods remain in the possession of the borrower the surety
cannot invoke the provision of section 141 in such case. Refer a case of Bank of
India v/s Yogeshwar Kant Wahhera, 1987.
CONCLUSION: - Keeping in view the above facts it is revealed that the
surety’s nature, liabilities and rights are of such types once he stands surety for
any debt he will remain bound till the amount is repaid by the principal debtor. 
Although the surety has some rights such as right of subrogation, indemnity and
to taking back the securities but even though there are more complications in
this regard.  So one should stand surety for a  person who have some qualities of
good pay master.

3   The liability of the surety is co-extensive with that of Principal debtor.

INTRODUCTION:- Surety’s Liability : The liability of the surety is co-
extensive with that of the principal debtor, unless it otherwise provided by the
contract for example A guarantees to B for the payment of a bill of exchange by
C, the acceptor. The bill is dishonoured by C. A is liable not only for the
amount of the bill but also for any interest and charges which may have become
due on it.
DEFINITION OF CO-EXTENSIVE:- Section 128 of the Indian contract Act
provides the following definition in respect of the surety liability:-
          “It says that the liability of the surety is co-extensive with that of the
principal debtor unless it otherwise provided by the Contract.” 
A case of law in this regard is of Andhra Bank Soryapeet v/s Anantnath
Goel-1991: It was held by the court that where there were joint promisors and
consideration was paid by only one of them the other piomisors were equally
liable to pay amount.  The liability of son was co-extensive with his father who
was principal debtor in view of section 127 and 128 of the Indian contract Act.
The gist of some the leading cases in which the liability of the surety is
co-extensive are given below to strengthening the answer of the question:-
       Kellappan Nambiar v/s Kanhi Raman-1957: In this case that if the principal
debtor happens to be a minor and the agreement made by him is void, the surety
too cannot be made liable in respect of the same because the liability of the
surety is co-extensive with that of principal debtor.  It has been held that the
guarantee of the loan or an overdraft to an infant is void because the loan to the
infant itself is void.
       That in case of State Bank of India v/s V.N. Anantha Krishnam-2005: that
in view of the provision of section 128 of Act the Presiding officer was not
correct in giving directions to the Bank to proceed against the property because
cash credit facility and the liability of surety was co-extensive with that of
principal debtor.
       In a case of Bank of Bihar Ltd. v/s Dr.Damodar Prasad -1969: The Supreme
Court held that the liability of the surety is immediate and cannot be defended
until the creditor has exhausted all his remedies against the principal debtor.
       A case of Industrial Financial Corporation of India v/s Kannur Spining &
Weaving Mills Ltd.-2002: It was held that the liability of surety does not cease
merely because of discharge of the principal debtor from liability.
       In a case of Harigobind Aggarwal v/s State Bank Of India-1956: It was held
that the principal debtor liability is reduced e.g. after the creditor has recovered
a part of the sum due from him out of his property the liability of the surety is
also reduced accordingly.
                                
CONCLUSION:- On deeply going into depth of provisions laid down in the
Act it is revealed that surety liability is co-extensive with that of principal
debtor means that his liability is exactly the same as that of the principal debtor.
Suppose if the default having made by the principal debtor the creditor can
recover the same from the surety all what he could have recovered from the
principal debtor.
 4. What do you understand by contract of guarantee? How does it differ
from contract of Indemnity?
INTRODUCTION: - The contract of guarantee may be an ordinary or some
different type of guarantee which is different from an ordinary guarantee.
Guarantee may be either oral or written. Basically it means that a contract to
perform the promise or discharge the liability of third person in case of his
default and such type of contracts are formed mainly to facilitate borrowing and
lending money which based on the following facts :- 
i)            Surety is the person by the whom the guarantee is given.
ii)          Principal debtor is the person from whom the assurance is given.
iii)        Creditor is the person to whom the guarantee is given.
DEFINITION: - “A contract of guarantee is a contract to perform the promise
or to discharge the liabilities of a third person in case of his default.  The person
who gives the guarantee is called surety, the person in respect of whose default
the guarantee is given is called Principal Debtor and the person to whom the
guarantee is given is called creditor. A guarantee may be either oral or written.”
ILLUSTRATION: - A promises to a shopkeeper C that A will pay for the
items being bought by B if B does not pay this is a contract of guarantee. In case
if B fails to pay C can sue A to recover the balance the same was held in
the case of Birkmyr v/s Darnell-1704, the court held that when two persons
come to shop one person buys and to give him credit the other person promises,
“ if he does not pay, I will”, this type of a collateral undertaking o be liable for
the default of another is called a contract of guarantee.
ESSENTIALS: - The following are the essential elements of Guarantee:-
1.    Existence of Creditor, Surety, and Principal debtor: - The economic
function of a guarantee is to enable a credit-less person to get a loan or
employment or something else.  Thus there must exist a principal debtor for a
recoverable debt for which the surety is liable in case of the default of the
principal debtor. In the case of Swan v/s Bank of Scotland -1836, It was held
that a contract of guarantee is a triplicate agreement between the creditor, the
principal debtor and the surety.
2.    Distinct Promise of Surety: - There must be distinct promise by the surety to
be answerable for the liability of the Principal debtor.
3.    Liability must be legally enforceable: - Only if the liability of the principal
debtor is legally enforceable, the surety can be made liable. For example a
surety cannot be made liable for a debt barred by Statute of Limitation.
4.    Consideration: - As with any valid contract the contract of guarantee also must
have a consideration.  The consideration in such contract is nothing but
anything done or the promise to do something for the benefit of the principal
debtor.  The section 127 of the Act clarify as under :-
“Anything done or any promise made for the benefit of principal debtor is
sufficient consideration to the surety for giving the guarantee.”
Illustrations: - 1. A agrees to sell to B certain goods if C guarantees for payment
of the price of the goods.  C promises to guarantee the payment in consideration
of A’s promise to deliver goods to B.  This is sufficient consideration for C’s
promise.
2. A sells and delivers goods to B. C afterwards requests A to forbear to sue B
for an year and promise if A does so he will guarantee the payment if B not pay.
A forbears to sue B for one year. This is sufficient consideration for C’s
guarantee.
5. It should be without misrepresentation or concealment: - Section 142 of
the Act specifies that a guarantee obtained by misrepresenting facts that are
material to the agreement is invalid, and section 143 specifies that a guarantee
obtained by concealing a material fact is invalid as well.
Illustration :- 1. A appoints B for collecting bills to account for some of the
bills. A asks B to get a guarantor for further employment. C guarantees B’s
conduct but C is not made aware of B previous mis-accounting by A.  B
afterwards defaults.  C cannot be held liable.
Illustration: 2- A promise to sell Iron to B if C guarantees payment. C
guarantees payment however, C is not made aware of the fact that A and B had
contracted that B will pay Rs.5/- higher that the market price. B defaults. C
cannot be held liable
A case of London General Omnibus V/s Holloway- 1912:  A person was
invited guarantee an employee, who was previously dismissed for dishonesty by
some employer. This fact was not told to the surety. Later on the employee
embezzled funds but the surety was not held liable.
                                            CONCLUSION
It is noted from the above mentioned facts that the contract of guarantee is a
triplicate agreement between Creditor, Surety and the Principal debtor. A person
who stands for surety known as guarantor for a third person (principal debtor)
who in case of his default to fulfil his promise or to discharge the liabilities. The
surety or guarantor has to make a distinct promise for payment of the liabilities
of the Principal debtor which must be legally enforced.
 5. What is continuing Guarantee? Under what circumstances it can be
revoked?
INTRODUCTION: - A guarantee which extends to a series of transactions is
called continuing guarantee. A guarantee may be an ordinary guarantee or a
continuing guarantee is almost different from an ordinary guarantee.
EXAMPLE:- A in consideration that B will employ C in collecting of Rent of
B’s Zamidari.  B promises that he is responsible to the amount of Rs.5000/- for
due collection and payment by C of those rents.  This is a continuing guarantee.
2. A guarantees payment to B, a tea-dealer, for any tea that C may buy from him
from time to time amount of Rs.100/-.  Afterwards, B supplies C tea for the
amount of Rs.200/- and C fails to pay. A’s guarantee is a continuing guarantee
and so A is liable for Rs.100/-.
  It is clearly noted from the above examples that continuing guarantee is given
to allow multiple transactions without having to create a new guarantee for each
transaction.
DEFINITION:- Section 129 of the Contact Act, continuing guarantee means a
guarantee which extends to a series of transactions without creating a new
guarantee for another transaction is called continuing guarantee.
Illustration:-  A guarantees payment to B for 5 sacks of rice to be delivered by
B to C over the period of one month.  B delivers sacks to C and C pays for it.
Later on B delivers 4 more sacks but C fails to pay. A’s guarantee is not a
continuing guarantee and so he is not liable to pay for the 4 sacks.
REVOCATION OF CONTINUING GUARANTEE:- Section 130 of the Act
a continuing guarantee can be revoked at any time by the surety by a notice to
the creditor. Once the guarantee is revoked the surety is not liable for any future
transaction however he is liable for all the transactions that happened before the
notice of revocation is given.
1.    A promises to pay B for all groceries bought by C for a period of 12 months if
he fails to pay. In the next three months C buys 2000/- worth of groceries. After
3 months, A revokes the guarantee by giving a notice to B.  C further purchases
1000 Rs of groceries.  C fails to pay.  A is not liable for 1000/- rupees of
purchase that was made after the notice but he is liable for 2000/- of purchase
made before the notice
2.    Lloyd’s v/s Harper-1880: It was held that employment of a servant is one
transaction.  The guarantee for a servant is thus not a continuing guarantee and
cannot be revoked as long as the servant is the same employment.  Wingfield
v/s De St Cron-1919: it was held that a person who guaranteed the rent
payment for his servant but revoked it after the servant left his employment was
not liable for the rents after revocation.
3.    A guarantees to B to the amount of Rs.10,000/- that C shall pay for the bills that
B may draw upon him.  B draws upon C and C accepts the bills.  Now A
revokes the guarantee.  C fails to pay the bill upon its maturity.  A is liable for
the amount upto Rs. 10,000.00.
4.    As per provisions laid down in Section 131 of the Act that the death of the
surety acts as a revocation of continuing guarantee with regards to future
transactions if there is no contract to the contrary.
                      It is pertinent to mention here that there must not be any contract
that keeps the guarantee alive even after the death.  In the case of Durga Priya
v/s Durga Pada -1928 : It was held by the court that in each case the contract
of guarantee between the parties must be looked into to determine whether the
contract has been revoked due to the death of the surety or not. It there is a
provision that says that death does not cause the revocation then the contract of
guarantee must be held to continue even after the death of the surety.
Conclusion:- A guarantee which extends to a series of transactions is called
continuing guarantee. A guarantee may be an ordinary guarantee or a continuing
guarantee is almost different from an ordinary guarantee. In Contract of
guarantee between the parties must be looked into to determine whether the
contract has been revoked due to the death of the surety or not. It there is a
provision that says that death does not cause the revocation then the contract of
guarantee must be held to continue even after the death of the surety.

UNIT-II
6 EXPLAIN THE STANDARD OF CARE REQUIRED OF A BAILEE IN
RESPECT OF GOODS BAILED TO HIM.
INTROUCTION: - The standard of care is required is that of a reasonable
man.  The amount of care to be taken should be such as a man of ordinary
prudence would under similar circumstances take of his own goods of the same
bulk quantity and value as the goods bailed.
DEFINITION OF STANDARD OF CARE:- While going through the
contents of the provisions laid down in Section 151 of the Contract Act it is
 noticed that “in all cases of bailment the bailee is bound to take as much as care
of the goods bailed to him as a man of ordinary prudence would under similar
circumstances take of his own goods of the same bulk and quality and value and
value as the goods bailed.”
                 On perusal of the definition it is revealed uniform duty of
maintaining the standard of care in respect of the goods bailed to him.  However
the following steps may also be taken to maintain the standard of care:-
1.          The Bialee should act as a prudent man:  When the goods are bailed to him then
he should take such standard way of care as a man of ordinary prudence would
like to take of his own goods. If the bailee has not acted like an ordinary prudent
man he cannot be excused. A case of Union Bank of India v/s Udho Ram &
sons-1963: It was held railway did not take proper care and failed to keep an
eye on wagons which resulted theft.
2.          In Calcutta Credit Corportation Ltd. v/s Prince Peter of Greece-1964: A car
was received for repairs by a garage which was damaged by fire. The car was
parked in a garage which was a partitioned by wooden walls, it also stored the
paint and thinners. When the fire open the car where it was kept could not
opened for fifteen minutes when the fire was notice.  It was held that the bailee
had not taken a standard of care and he is liable.
3.          Barbant & Comp. v/s King, 1895: The House of Lords held that the only cases
where the bailee would be immune are laid down expressly in section 152 of the
contract act, If he has taken the amount of standard of care of it as described in
section 151 of act that the degree of care needed must be maintained. 4. Laxmi
Narayan v/s The Secretary for State for India:1923: that when a carrier of
goods transports jute in a boat which has leaks on its side and the goods get
damaged as a results of un attended and unsafe place and lack of standard
of care.
CONCLUSION:- The facts and factors mentioned above it is observed that the
degree of care needed varies with the kind of engagement and therefore when a
person undertakes such a job the law not only requires that he should possess
the requisite skill but also that he has the requisite plants and appliances and
well acquitted about maintaining the standard of care. and also that his premises
are also reasonable suitable for doing that job.
7. What can be pledged and who can make a valid pledge? Differentiate
Pledge and Lien.
INTRODUCTION: - Section 172 says pledge is a bailment the delivery of the
goods from the pawnor to the pawnee which is essential. There must be delivery
of the goods i.e. the transfer of possession from one person to another. The
delivery however, be either actual or constructive.  Mere agreement to transfer
of possession in future is not enough to constitute a Pledge. 
Revenue Athority v/s Sunderasanam Pictures, 1968: It was held that an
agreement wherein the producer of a film agrees to deliver final prints of the
film under production when the same are ready to a financier distributor in
 return for the finance provided by the latter is not pledge because there is no
deliver of goods.
WHAT CAN BE PLEDGED:- Pledge is a kind of bailment where the goods
are delivered by one person to another as security for payment or performance
of a promise. If the goods are in the possession of a third person there is deemed
to be no delivery of the goods unless and until the third person acknowledges to
the transferee that he holds the goods.  The following things can be pledged:-
i)            Only the moveable goods can be pledged.
ii)          The goods which are in possession of the True Owner should have a clear title
and valid documents.
WHO CAN MAKE A VALID PLEDGE:- Ordinarily he should be the owner
of the goods, or any person authorised by him in that behalf who can pledge the
goods. If a servant has the custody of the goods or a tenant gets the possession
of a furnished house, the servant cannot pledge the goods nor can a tenant
pledge the furnishing materials in his possession.
A person obtaining the goods fraudulently does not have any right to
pledge them as described in a case of Purshotam Das v/s Union of India-
1967. In the following exceptional cases a person who is neither the owner nor
having any authority from the owner for pledging the goods, but having
possession with the owner’s consent can make a pledge and confer rights on the
pledgee. These are as under:-
1.    Pledge by Mercantile Agent: Section 178 of the Act a mercantile Agent
having the possession of the goods with the consent of the owner but having
no authority to pledge them can make a pledge provided the pledgee or pawnee
is acting in good faith.  He must pledge the goods while acting in the ordinary
course of his business of a mercantile agent.
2.    PLEDGE BY PERSON IN POSSESSION UNDER A VOIDABLE
CONTRACT:  The Act recognises another exception to the rule that either the
owner or his duly authorised agent can pledge the goods. According to this a
person who has obtained the possession of the goods under a voidable contract.
              Voidable contract is a valid contract until it has been rescinded
and becomes void after the same has been rescinded. If the pawnor has
obtained the possession of the goods under a voidable contract but the contract
has not yet been rescinded, the pledgee is capable of having a good title to such
goods. Thus if a person has obtained the possession of goods by fraud,
misrepresentation, coercion or undue influence, he could make a valid pledge of
the goods if the same is done before the contract has been rescinded. A case
of Phillips v/s Brooks Ltd., 1919: It was in this case that pledge was valid.
3.    Pledge by a person with a limited interest: - This Provision have been given
in the section 179 of the act that a person having limited interest in the goods
may make a valid pledge. For example : A pledges the goods to B for Rs.5000/-
and B makes a sub pledge of those goods for Rs.8000/- A gets a right to take
back those goods only by paying Rs.5000/-as held in case of Belgawn Poiner
Urban Co-op Credit Bank v/s Satyaparmoda-1962.
                    Difference between Pledge & Lien
Pledge               Lien

Pledge is a kind of bailment and security. In right of lien it is not so as in

In a pledge pawne acquires a special interest in the Right to lien gives only a rig
property pledged. subject matter of the lien until
not transferable to a third perso

Pledge is deliver of goods to the creditor as security Lien is a right of a creditor to

for the debt. until his debt is paid or satisfied

CONCLUSION:- In Pledge which a kind of bailment and also to be considered

as security for the debt of the creditor. It is also essential in the Pledge that there
must be delivery of the moveable goods from pawnor to pawnee and transfer of
possession from one fellow to another. A person who is having the possession
of goods and consent of the true owner and acting in good faith can make a
valid pledge.

8. What is bailment? Explain its essential ingredients of Bailment? What

are the duties & rights of Finder of the goods as a Bailee?
INTRODUCTION:-Means delivery of goods i.e. moveable property by one
person who is generally the owner thereof, to another person for some purpose.
The goods are to be returned to the owner after accomplished the purpose to
take further action as per directions of the owner of the goods. A.T.Trust Ltd.,
v/s Trippunhura Devaswomi-1954. In a contract of bailment the person who
delivers the goods called the “Bailor” and to whom the goods are delivered is
called as “Bailee”.
DEFINITION:- Section 148 of the Indian Contract Act, A bailment is the
delivery of goods by one person to another for upon a contract that they shall
when purpose is accomplished be returned or otherwise disposed of according
to the directions of the person delivering them. The person delivering the goods
is known as BAILOR and the person to whom goods are delivered is known as
the BAILEE.
ESSENTIAL INGREDIENTS OF BAILMENT:- The following are the
essentials of the bailment under the Contract Act:-
(a) DELEVERY OF GOODS FOR SOME PURPOSE:- Delivery means
transfer of the goods from the possession of one person to another person.
Delivery need not always be actual, sometimes it may be constructive or
symbolic as per instructions laid down in section 149 of the Act, and this
section recognises it other than actual delivery.  However section 149 also
provides below in this regard:-
The delivery to the bailee may be made by doing anything which has the effect
of putting the goods in the possession of the intended bailee or any other person
authorized to hold them on his behalf.”                                                                                       
i)  Jagdish chand Trikha v/s Punjab National Bank, 1998 : It was held by the
court that the position of the bank was that of a Bailee and it failed in its duty to
take care of the goods and return them to the Bailor. The Bank was held liable
to pay the cost of Rs. 3,72,400/- along-with simple interest @12% from the date
of institution of the suit.
ii)  Ultzen v/s Ni coles, 1894:- It was held that the defendant was the bailee of
the coat as his servant had assumed the possession of the same and he was
therefore liable for its loss which  was occurred due to his negligence.
(b)  IF THE OWNER MAINTAINS CONTROL OVER THE GOODS
THERE IS NO BAILMENT:  When the person keeps his goods in the
premises of others but himself continues to have the control over them, this is
not sufficient delivery for being considered to be bailment. Kaliaporumal
Pillai v/s  Visalakshmi, 1938 : It was held that there was no bailment as she
had not handed over the possession of the jewels to the goldsmith, and therefore
the goldsmith could not be made liable for the loss. Punjab National Bank v/s
Sohan Lal, 1962, It was held that the locker could be operated even without the
key with the consumer.  The consumer’s control over the valuable things in the
locker had gone and the same with the bank, therefore the bank was liable being
bailee and thus Bank is liable for the loss of the belonging of the consumer in
the locker.
(c) THERE CAN BE BAILMENT WITHOUT CONTRACT:- In some cases
there can be a bailment when the person obtains the possession without a
contract of the bailment as it was done in the case of :Ram Gulam v/s Govt. Of
Uttar Pradesh- 1950, The court expressed that the property of plaintiff was
stolen and the same was recovered by the Police, Police kept the same in the
Malkhana. Property was again stolen from the Maalkhana and could not be
traced out.  Here the point of bailment raised since no contract of bailment was
made for which conviction is announced but the law itself recognises the finder
of the goods as bailee under section 71 of contract Act, hence it was held that
bailment can be even there when there is no contract of bailment. L.M. Co-
operative Bank v/s Prabhudass HathiBhai-1966:- It was held that the
government stood in the position of a Bailee to take due care of the goods.
 Govt., duty to prove that they had taken proper care as was possible for them
and the damage was due to reasons beyond their control.
RETURN OF GOODS AFTER THE PURPOSE IS ACHIEVED: OR
THEIR DISPOSAL ACCORDING TO THE BAILOR DIRECTIONS:- 
The delivery of the goods in a bailment is only for some purpose i.e. for safe
custody, for carriage, for repair etc., when the purpose is accomplished the
goods are to be returned or otherwise disposed of according to the directions of
the person delivering them. According to Section 148, the goods shall be when
purpose is achieved returned to the bailor or disposed of as per his directions i.e.
when the cloth is given for being stitched in to suit or gold for being converted
into ornaments or wheat for being converted into flour there is a bailment in
each case. When the money is deposited into a Bank, when the agent receives
some payment on behalf of Principal, he is not the bailee thereof because he is
only bound to pay an equivalent of it to the principal rather than the same
currency as done in the case of: - Secretary of State for India Council v/s
Sheo Singh-1880:  Some notes were given to Treasury for being cancelled,
there is no bailment as the same notes are not to be returned. Constructive
bailment does not confer any right to a stranger. Bailment regarding hiring of a
locker will not create relationship of Land lord and the tannent, as the Bank can
always open the locker with a Master Key.  The hirer of the locker is not in a
position to open the locker without the assistance of the Bank. The Hirer has to
operate the locker only within the Bank’s time but the bank has no such
limitation
CONCLUSION:- Keeping in view the above stated facts and the gist of the
decisions of the Courts it is noticed that the goods are to be returned to their
original owner after the purpose is accomplished or they are to be disposed of as
per the directions of the Bailor in same condition as these were bailed.
                      

POSITION OF FINDER OF GOODS

A person who finds goods belonging to another and takes them into his custody
is subject to the same responsibility as a bailee as provided in sec.71. Since the
position of the finder of goods is that of a bailee.  He is supposed to take the
same amount of care with regard to the goods as is expected of a bailee
under section 151.  He is also subject to all duties of a bailee including a duty to
return the goods after the true owner is found.
Section 168 and 169 confer certain rights on the finder of goods which are as
under:
1.    May sue for specific reward offered: The finder of goods has no right to sue the
owner for compensation or trouble and expenses voluntarily incurred by him to
preserve the goods, but he may retain the goods until he receives such
compensation and a specific reward offered by the owner for return of the
goods. Refer sec. 168 of the Act.
 2.    If true owner is diligence not found or he refuses to pay the lawful charges of
the finder of the goods, the finder may sell it on the following conditions:-
i)                When the thing is in danger of perishing or losing part of its value.
ii)              When the lawful charges of the finder, in respect of the found goods amount to
two-third of its value.
iii)            Right of Lien: He can retain the Lien on the  found goods until his expenses on
find goods are paid.
iv)            Right to sell the goods found:- Finder of the goods has the right to sell the
goods found by him under certain circumstances provided in section 169 of the
act with a reasonable notice mentioning the intention to sale the goods found.
                                                    

9. Define Pledge and distinguish between Pledge and Bailment.

INTRODUCTION:-- Section 172 of the Act: Since pledge is a bailment the
delivery of the goods from the pawnor to the pawnee which is essential. There
must be delivery of the goods i.e. the transfer of possession from one person to
another. The delivery however, be either actual or constructive.  Mere
agreement to transfer of possession in future is not enough to constitute a
Pledge. 
Revenue Athority v/s Sunderasanam Pictures-1968: It was held that an
agreement wherein the producer of a film agrees to deliver final prints of the
film under production when the same are ready to a financier distributor in
return for the finance provided by the latter is not pledge because there is no
deliver of goods.
DEFINITION OF PLEDGE:-  Section 172 of the Contract Act, “Pledge is the
bailment of goods as security for the payment of a debt or for the performance
of a promise.”  The delivery may be actual or constructive.  The possession in a
pledge must be judicial possession. Mere physical possession in not sufficient.
DEFINITION OF BAILMENT:- The delivery of the goods by the bailor to
the bailee is the essence of the bailment. Unless there is actual delivery there is
no contract of bailment.
 Section 148 of the contract act defines bailment as under:- “ A bailment is a
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.”
                         
                  DIFFERENCE BETWEEN PLEDGE & BAILMENT
              PLEDGE        BAILMENT
Pledge is a species of bailment. Bailment is a genus.

Pledge is bailment of goods as Bailment is a delivery of goods by

security for the payment of debt one person to another for some
or for the performance of a purpose upon a contract.
promise.
In the contract of bailment after the
Moveable property is subject- accomplishing of the purpose the
matter of pledge under the goods are to be returned or
contract Act. otherwise disposed of according to
the directions of the Bailor.
CONCLUSION:- In Pledge which a kind of bailment and also to be considered
as security for the debt of the creditor. It is also essential in the Pledge that there
must be delivery of the moveable goods. Whereas in the contract of bailment
there is a delivery of goods by one person to another for some purpose and
when the purpose is accomplished the goods are to be returned or to disposed of
as per the directions of the Bailor.

10. Explain the Rights and the Duties of BAILEE.

INTRODUCTION: - Bailee is one of the most important character of the
Bailment Contract. Bailee is of that to whom the goods are delivered by the
Bailor with some directions and to complete some certain purpose.  Bailee
receives only the moveable things and he has to returned the goods which he
receives after accomplishing the purpose or he has to disposed of that things
with the directions of the owner of that goods.
RIGHTS OF BAILEE:- Under the provisions of Indian Contract Act 1872, the
following are the rights to the bailee in Bailment contract:-
1.    RIGHT TO RECOVER NECESSARY EXPENSES INCURRED ON
BAILMENT:- According to section 158 of the Act when a contract of bailment
is made some remuneration is to be paid to the bailee for the services he renders
in respect of them.  So he has the right to recover the same.  In case of
gratuitous of bailment the bailee has no right even not entitled to receive any
remuneration for the services he renders.
         Section 158 says that, “Where by the conditions of the bailment the goods
are to be kept or to be carried or the work to be done upon them, the bailee for
 the bailor and the bailee is to receive no remuneration the bailor shall pay the
necessary expenses incurred by the bailee for the purpose of bailment.”
Illustration: - A leaves his horse with the neighbour for safe custody for a
week. B is entitled to recover the expenses incurred by him in feeding the horse.
2.    RIGHT TO RECOVER THE COMPENSATION:- According to section
164 of the act, “The Bailor  is responsible to the Bailee for any loss which the
bailee may sustain by reason that the bailor was not entitled to make the
bailment or to receive back the goods or to give directions in respect of them.”
          From the definition it is noticed that when the Bailor sometime not
entitled to make the bailment or to receive back the goods which may results a
loss to the bailee, then the bailee is entitled to recover the loss from the Bailor.
3.    RIGHT OF LIEN ON THE GOODS BAILED:- According to section 170-
171 of the Act the bailee can retain the lien on the goods of the Bailor and can
refuse to deliver them back to Bailor until his due remuneration for services he
renders or any amount due is paid by the Bailor. 
4.    Compensation for the loss caused by non-disclosure of faults in goods
Bailed:- The goods so bailed contain a fault which is known to the bailor but he
does not convey it to the bailee and as a result thereof bailee sustains some
injury.  The bailee can ask for the compensation.
5.    Loss caused by the defects of thing bailed:- When the things bailed for hire or
on rent the bailee can ask for compensations for the loss or injury caused by
both latent or patent defects of the thing bailed irrespective of awareness of
bailor about those defects as provided in sec.150 of the Act.
6.    Right to sue: The bailee has the right to sue the wrong-doer who wrongfully
deprives the bailee of the use or possession of the goods bailed or does them
any injury on the basis of instructions in Sec.180 of the Act.
DUTIES OF THE BAILEE:- A bailee has to observe the following duties:-
1.    Duty to take reasonable care of the goods bailed: under section 151-152 of
the act bailee is bound to take reasonable care of goods bailed to him as man of
ordinary prudent under similar circumstances as he is taking care of his own
goods.
2.    Duties not make unauthorised use of the goods bailed: Section 153-154 of
the act bailee is not authorised to make unauthorised use of the goods bailed to
him.
3.    Duty not to mix bailor’s goods with his own goods: Act says through its
section155 and 157 that bailee may not mix the bailed goods with his own
goods which will create a problem at the time of return of the goods to bailor.
4.    Duty to return the goods on fulfilment of the purpose: Section 159-161and
165-167 provides that when the purpose is accomplished the bailee has to return
the goods to bailor or to disposed of as per his directions.
5.    Duty to deliver to the bailor increase or profit on the goods bailed:- Under
secion 163 of the Act it is the duty of the bailee to pay to bailor the profits
earned through the goods bailed or any increase thereby.
 CONCLUSION:- If the bailee performed his duties with entire of his
dedications, honesty and in good-faith and also to enjoy his rights on the basis
of the provisions laid down in the Contact Act then there will be no creation of
any problem and the agreement will also be fulfilled. 

                                                  UNIT- III
 11. Explain various ways in which an agency relationship is created.  Also
describe about the different kinds of Agent?
INTRODUCTION:- An agent is a person employed to do any act for another
or to represent another in dealing with third parties. The person for whom such
act is done or who is so represented is called the principal. Where one person
mere gives advice to another in matter of business agency does not arise
because of such advice only does not create an Agency. Sayed Abdul Khader
v/s Rami Reddy,1979.
 The following are the various ways in which a relationship of agency is
created:-
WHO MAY EMPLOY AGENT:-  No person can employ an agent if he does
not possess capacity to contract. So a minor or person of unsound mind cannot
become the principal under section 183 of the Indian Contract Act.
WHO MAY BE AN AGENT:- According to section 184 of the Act any person
can be appointed as an agent but a person who is not of age of majority and of
sound mind cannot be made personally liable for the act done on behalf of the
principal. Minor can create contractual relation but a minor agent cannot be
made personally liable to the principal for the misconduct like an adult agent.
CONSIDERATION: No consideration is required for the creation of an
Agency under section 185 of the Act. A case of Digvijay Cement Co.Ltd. v/s
State Trading Corpn., 2006.
KINDS OF AGENT:- On the basis of provisions available in the Contract Act
the following are kinds of Agent in the business of Agency:-
1.    Del-Credere Agent:- Such type of Agent who for extra remuneration
undertakes the liability of guarantee the due performance of the contract by the
other party. He is also responsible for the solvency and performance of their
contracts by the other parties.
2.    COMMISSION AGENT:- A commission agent is person who purchases and
sells goods in the market on behalf of his employer on the best possible terms
and who gets commission for his labor.
3.    FACTOR:- He is such  type of agent who is given the possession of the goods
for the purpose of selling them.  He is entitled to sell the goods in his own
name. A factor has a right to retain the goods for a general balance of accounts.
4.    BROKER:- He is also to be known in the name of Mercantile Agent employed
for the purpose of sale and sale of goods. The main duty of a broker is to
establish privity between two parties for a transaction and he gets commission
for his labour. He is not entrusted with the possession of the goods. He merely
brings two parties together and if the deal is materialized he becomes entitled to
the commission.
5.    CO-AGENT:- Where several persons are expressly authorized with no
stipulation that anyone or more of them shall be authorized to act in name of the
whole body. They have a joint authority and they are called co-Agents.
6.    Sub-Agent:- The sub-agents are usually appointed by the original Agent in the
business of Agency. He works under the control of original Agent.
7.    PACCA- AARTIA:-   He is also known by this name only and he works in the
open market to sell the goods on commission basis.  He only sells the goods.
CONCLUSION:- As regards to determine whether relationship is that of Agent
and Principal or that of Master and servant. Agent has to remain faithful to his
principal and has work in good faith in the business of Agency. There must be
relation in between principal and the agent. Merely giving advice to another
person in the matter of business does not arise any business of agency. The
main object of the agency business that the agent makes the principal
answerable to third person.

12. What are the circumstances in which Agency is terminated?

INTRODUCTION:- Contract entered into through an Agent and obligations
arising from the acts done by an agent be enforced in the same manner and will
have the same legal consequences as if the contract has been entered into and
the acts done the principal in person as described in section 226 of the Act.
Where a Agent does not work in good faith and is not loyal to his principal and
tries to commit fraud or misrepresent in the business of Agency then principal is
bound to take steps towards termination of the agency.
The following may the reasons which can be responsible for the
termination of the Agency:-
1.    By the principal revoking his authority: Under section 203 of Contract Act-
1872 lays down that, the principal may save or otherwise revoke the authority
given to his agent at any time before the authority has been exercised so to bind
the principal.
2.    By the Agent renouncing the business of the Agency:- Section 206 of Indian
Contract Act, 1872 provides that, principal can revoke the agent’s authority so
also the agent can renounce the agency by giving a reasonable notice of
renunciation otherwise he will be liable to make the loss good for any damage.
Sec. 207 further mentions that like revocation the renunciation may also be
express or implied in the conduct of agent.
3.    By the business of the agency being completed:- In term of contract where the
period of completion of the business is made the agency automatically stands
terminated.
4.    By either the principal being adjudicated an insolvent:  Section 201  of the
Act clearly indicates that, the agency which may be validy created stands
revoked in the event of different situations including the death or insanity of the
principal or the agent or by insolvency of the principal.
5.    Principal should give reasonable notice of revocation:- Provisions says that a
reasonable notice of the revocation when he have the justification to revoke the
authority under sec.206.
6.    By either the principal or Agent dying or becoming unsound mind:
Section 201 also describes that, when principal dying or becoming of unsound
mind agent is bound o take on behalf of the representatives of his late principal
all reasonable steps for the protection of interests of agency.
7.    By the happening of any event rendering the agency unlawful: - Whenever
there is declaration of war the principal and agent may become alien enemies
also comes in the way of termination of the agency.
8.    If a limited period is given:- If the agency is for a fixed term, although with the
possibility of fresh appointment after the expiry of the term it automatically
terminates on expiry of the said term such agency cannot be said to be
irrevocable as in the case of P. sukhdev v/s Commissioner of Endowments-
1997.  Under sec.205.
9.     MANNER AND CIRCUMSTANCES OF REVOCATION:- The principal
may have where the agent has himself an interest in the property which forms
the subject matter of the agency, revoke the authority given to his agent at any
time before the authority has been exercised so as to bind the principal under
section 203 of the Act.  
The Principal cannot revoke the authority given to his agent after the agent has
partly exercised his authority so far as regards such acts and obligations as arise
from acts already done in the Agency as laid down in the section 204 of the Act.
The reasonable notice of revocation is essential. Revocation may be express or
implied in the Contract of the business under section 206 of the act.
The revocation and renunciation may be expressed or may be implied in the
conduct of the principal or agent respectively under section 207 of the act.
ILLUSTRATION: - A empowers B to let A’s house. Subsequently A lets it
himself. This implied revocation of B’s authority.
 CONCLUSION:- The effect of termination of Agency is on the maximum
level to the Agent about his earnings and also put the principal in financial
losses. Agent must remain faithful in the business of Agency.  He should
rendered the  accounts, financial matters, appointment of sub-agents and other
activities relating to Agency to the notice of his principal failing which it leads
to termination of Agency.

13. Discuss fully the extent of Principals liabilities to third parties for the
Act of the Agent.
INTRODUCTION:-  Agent is a person employed to do any act for another or
to represent another in dealing with third persons. There one of the most
essential characteristics of Agency is that the agent makes the principal
answerable to third persons. Principal is held bound by the obligations incurred
on his behalf by his agent.  Section 226 to 228 of the Act deals with the law
regarding the obligations of principal for the contract of his Agent.
We will find from the following provisions and illustrations that how the
Principal’s liabilities and is bound answerable to the third parties for the acts
done by his agent:-
1.    Principal’s obligation for acts of Agents:- Section  226 of the Indian Contract
Act provides that contract entered into through an Agent and obligations arising
from acts done by an Agent and will have the same legal consequences as if the
contract has been entered into and the acts done by the principal in person. This
section is based on the principle act as in Maxim which means that the act of an
Agent is the act of the principal.
ILLUSTRATION:- A being B’s Agent with the authority to receive money on
his behalf receives from C a sum of money due to B. C is discharged of his
obligation to pay the sum in question to B.
 2.    When an agent does more than he is authorized to do and when the part of what
he does, which is within his authority, can be separated from the part which is
beyond his authority the principal is liable only for so much part of what he
does as is within Agent’s authority as provided in Section 227 of the Act.
ILLUSTRATION:- A being the owner of a ship and cargo authorizes B to
procure an insurance for Rs.4000/- on the ship. B procures a policy for
Rs.4000/- on the ship and another for the like sum on the cargo.  A is bound to
pay the premium for the policy on the ship but not the premium for the policy
on the cargo.
3.    An agent does more than he is authorized to do and what he does beyond the
scope of his authority is not separable from what is within it the principal is not
liable for the transaction as provided in the section 228 of the Act.
ILLUSTRATION:- Where A authorizes B to buy 5000 sheep for him and B
buys 5000 sheep and 200 lambs for a sum rupees 6000/- . A may repudiate the
whole transaction.
4.    OSTENSIBLE AUTHORITY:- Section 237 of the Contract Act embodies the
principle of ostensible authority.  The section lays down When an agent has
without authority done acts or incurred obligations to third persons on behalf of
his principal, the principal is bound by such acts or obligations if he has by the
words or conduct induced such third persons to believe that such acts and
obligations were within the scope of the Agent’s authority.”
ILLUSTRATION:- A being B’s agent for the sale of goods induces C to buy
them by misrepresentation which he was not authorized by B to make. The
contract is voidable as between B and C, at the opinion of C. Under section
238 of the Act misrepresentation or fraud committed by an Agent may be
classified into two categories:-
i)                Under his actual or ostensible authority.
ii)              Which is not covered within his authority, the principal is liable for the acts
which fall under actual or ostensible authority.
5.    A leading case on this subject is of Lloyds v/s Grace Smith in which it was
held that a principal is liable for the fraud of his agent within the scope of his
authority whether the fraud is committed for the benefit of the Principal or for
the benefit of Agent.
CONCLUSION:-  On the perusal studies of the above provisions and the
illustrations it is seen that the liabilities of the Principal towards third persons
are based on the acts done by his agents.  However in some cases it is also seen
and Principal is not liable for any wrongful act or omission of his Agent while
acting without the principal authority outside the ordinary course of
employment or while not acting nor purporting to act on his principal’s behalf.
 14. Define the term Sub-Agent.  How for is principal bound by the acts of
Sub-Agents. Distinguish between Sub-Agent and Substituted Agent.
INTRODUCTION:- A rule which based on the principle that Agency is a
contract based on trust and mutual confidence between the parties. A principal
may have the mutual confidence in his Agent but not in the subsequent sub
Agent appointed by the Agent. There is a provision regarding ‘delegates non-
protest delegare’ which means of this maximum is that an agent to whom
another has delegated his own authority cannot delegate that authority to a third
person.
PROVISIONS MADE IN THE ACT:- Under section 190 of the Contract Act
which deals with delegation of an authority by the Agent describes as under:-
   “An agent cannot lawfully employ another to perform acts which he has
expressly or impliedly undertaken to perform personally unless by the ordinary
custom or trade a sub-agent may or from the nature of the agency a sub-agent
must be employed.”
However the general principle is that the agent cannot delegate his authority to a
third person but there are two exceptions to this general rule. These are:-
i)            When the ordinary custom of trade permits employment of a sub-agent.
ii)          When the nature of agency demands that employment of a su-agent is necessary
by the Agent.
Although there are two exceptional conditions no agent is authorized to
delegate his authority it the nature of his act is purely managerial and he is
supposed to use his personal skill in discharge of his duty or where he is
personally required to perform his duties.
SUB-AGENT:- Sub agent is a person employed by and acting under the control
of the original Agent in the business of Agency under section 191 of the Act.
LEGAL POSITION OF SUB-AGENT PROPERLY APPOINTED:- Sub
Agent may be either properly appointed or improperly appointed.  If he is
appointed by the Agent with the authority of his principal he is called sub-agent
properly appointed.  If he is appointed without the authority of principal he is
improperly appointed.
When the sub-agent is appointed properly with the consent of the principal, the
principal is bound by his acts and is responsible for his action as if he was an
agent appointed by the principal. 
The sub-agent is not responsible for his acts to principal. He is responsible only
for such acts to the original Agent.
But if the sub-agent is guilty of fraud or willful wrong against the principal he
becomes directly responsible to the principal under section 192 of the Act.
                          Difference between sub-Agent & substitute Agent
           SUB-AGENT          SUBSTITUTED AGENT
 Sub Agent is a person employed by
and acting under the control of the
original agent in the business of
agency.
A sub-agent is not generally
responsible to the principal but he is
responsible to the agent.
There is no privity of contract
between sub-agent and principal.
Substituted agent can be nominated by
the original Agent to act for the
principal for a certain part of the
business of agency.
A substituted agent by his mere
appointment becomes immediately
responsible to his principal.
A privity of contract is created
between the principal and the
substituted Agent.

CONCLUSION:- There is lot of difference in between sub-agent and

substituted agent one is appointed by the original agent is immediate
responsible to the original whereas the substituted agent is directly responsible
to the principal.  He is appointed for some part of the business of agency.

UNIT-IV
15.      Sharing of Profits in business is not conclusive evidence of the existence of
partnership.
INTRODUCTION:- The object of every partnership must be to carry on a
business for the sake of profits and share the same.  Therefore clubs, societies
which do not aim at making profits are not said to be a partnership.  The
definition of term ‘Profits’ in the Partnership Act is that ‘net- gains’ i.e. he
excess of the returns over outlay. At one time it was thought that a person who
shared the profits must incur the liability also as he was deemed to be a Partner
as it was held in a case of Grace v/s Smith, 1775. This principle was again
confirmed in a case of Waugh v/s Carver, 1793, it was held that the person
sharing the profits does not always incur the liability of partners unless the real
relation between them is that of partners.
ESSENTIALS:- Although sharing of profits is one of the essential elements of
every partnership but every person who shares the profits need not always be a
partner.
Example No.1: - I may pay a share of profits to the manager of my business
instead paying him fixed salary so that he may takes more interest in the
 progress of the business, such person sharing the profits is simply my servant or
agent but not my partner.  Example No. 2:- A share of profits may be paid by a
business man to a money-lender by way of payment towards the return of his
loan and interest thereon, such a money-lender does not thereby become a
partner.
a.       The principle laid down in Cox v/s Hickman-1860: this principle forms the
basis of the provisions of section 6 of the Partnership Act which gives a caution
that the presence of only some of essentials of partnership does not necessarily
result in partnership. For determining the existence of partnership there must
be had to the real relation between the parties after taking all the relevant facts
into consideration.
b.      In determining whether a group of persons is or not a firm or whether a person
is or is not a partner in a firm.  To answer this query an explanation is given
below:
(i)   Sharing of profits or of gross returns arising from property by persons holding
a joint or common interest in that property does not of itself make such
persons as partners.
(ii) Receipt by a person of a share of the profits of a business or of a payment
contingent upon the earning of profits or varying with the profits earned by a
business does not of itself make him a partner with the persons carrying on the
business and in particulars the receipt of such a share by a servant or agent as
remuneration a case of McLaren v/s Verschoyle-190l, or by a widow or child
of a deceased partner.
(iii) Mollow March & Co. v/s Courts of Wards-1872: In this case a Hindu Raja
advanced a large amount to a firm. Raja was given extensive powers of control
over the business and he was to get commission on profits until the repayment
of loan with 12% interest. It was held by the Raja could not be made liable for
the debts contracted in the agreement was not to create Partnership but simply
to provide security.
(iv) In a case of Walker v/s Hi4sch-1884: A person was working as clerk. The
served a notice by the defendants terminating his services.  Clerk contented that
he was a partner and claimed dissolution of firm. I was held that though he
shared the profits he was having the capacity of a servant only. He was not a
partner and could not see dissolution of the firm.
CONCLUSION:- On nut-shell it could be concluded that just sharing the
profits in the business is not conclusive existence of the partnership till it create
some relationship between the persons who have entered into Partnership.

16.      How the firm is registered? What is the effect of Registration & Non-
Registration of firms?
INTRODUCTION: - In the Contract Act it is not necessary that the firm
should be registered at the time of its formation. However a firm may be got
registered at any-time after the creation of Partnership. Act does not lay down
any-time limit within which the firm should be registered provided in section
63 of Partnership Act.  The act does not impose any penalties for non
registration of firms.There are some disabilities are provided in sec.69 of the
Act for unregistered firms and their partners.
HOW THE FIRM IS REGISTERED:- The partnership agreement or any
transaction between the partners and third parties is void on the basis of non-
registration of partnership firm and the partners themselves. In addition to the
above no prudent partner or firm should hesitate to get his or its name registered
at the earliest possible opportunity. The procedure of registration is very simple
as provided in section 58 and 59 of the Act.
A registration of firm may be affected by submitting to the Registrar of Firms a
statement in the prescribed form and accompanied by the prescribed fee. The
application must bear the following information:-
The firm’s name. Place of business and the name of other places where the firm
can carry on business. Date of joining of each partner with their permanent
addresses. The duration of the firm.
When the Registrar is satisfied that the above mentioned requirements have
been complied with and then he shall record an entry of statement in the
register. This amounts to the registration of the firm.
Section 69 of the Act imposes certain claims in the Civil Courts. This section
provides pressure which is to be brought to bear on partners to have the firm
and themselves registered. The pressure consists in denying certain right of
litigation to the firm or partners not registered under this act. A cause of action
arose when the firm was unregistered but was registered at the time of filing the
suit.  It was held in the case of State of U.P., v/s Hamid Khan & Bros. and
othrs-1986: it was held that section 69 to be inapplicable in this case.
                         EFFECTS OF NON-REGISTRATION& REGISTRATION
       ON REGISTRATION  OF       ON NON-REGISTERED
FIRM FIRM
Any partner, nominee and authorized No partner, nominee and agent can
agent can bring a suit to enforce a bring a suit to enforce a right arising
right arising from a contract against from a contract against any firm or
any past or present partner and for the any past or present partner of the
third parties too. firm or third parties.
Registered firm can claim of set-off or The disabilities as provided in sec.69
other proceedings to enforce a right of the act i.e.to claim of set-off or
arising from a contract u/s 69 of the other proceedings to enforce a right
Act. arising from a contract.
 Filing of the return every year is It is not required to file the return by
necessary. the un-registered firm.

Loonkaran v/s Ivan E. John, 1977, it was held that sec.69 is mandatory and
unregistered partnership firms cannot bring a suit to enforce a right arising out
of a contract falling within the ambit of sec.69 void.
In M/s Balaji Constructions co., Mumbai v/s Mrs. Lira Siraj Sheikh, 2006 It
was observed  that the firm was not registered on the date of filing of suit and
person suing as partners were not shown in register of firm and suit by such
firm hit by section 69(2) of Partnership Act and was liable to be dismissed.
CONCLUSION :- It is very well established that the partnership agreement or
transaction between the partners and third parties is void on the ground of Non-
Registration of the firm as well as of Partners. To enforce any right arising out
of a contract the registration of both firm and partners are necessary for the
benefit of the both.

17.       Distinguish between partnership business and Joint Hindu family business.

INTRODUCTION: According to Partnership Act persons who have entered
into partnership are individually called partners and coactively a firm and the
name under which their business is carried on Is called firm name.  In the eyes
of law a firm is merely a collective name of individuals who have entered into a
partnership.                              
 Whereas in Joint Hindu family business it is based on status of persons by
virtue of his being born in the particular family. The distinctions between these
two can be made on the basis of following facts:-
                                                        DIFFERENCE
ORDINARY PARTERNSHIP JOINT HINDU FAMILY
BUSINESS
An agreement between the parties to No such agreement is required. A
join the partnership is necessary. joint family business is created by
operation of law.
The members of ordinary partnership The members of the joint family have
have no interest in the partnership by their interest & become shareholders
birth. and entitled to profits in the business
by birth.

The partnership in ordinary On the death of one or more

partnership is automatically dissolved members the joint family business
in case of death of any partner. does not dissolve.

In case of ordinary partnership each In case of joint family business there

 partner has to render accounts to his is no accounting between the member
co-partners. and neither any of them can ask for
the account regarding profits and
losses of the business.
In ordinary partnership each partner is In joint family business the manager
the agent of the firm for the purpose or managers has as implied authority
of business of the firm. to contract, debts and pledge the
property and credit of the family for
the ordinary purposes of family
business.
In case of ordinary partnership the In joint family business the
relationship between partners arises coparceners are the joint owners of
out of a contract. the family property and their mutual
rights are the result of a status and
not a contract.

CONCLUSION:- After going through the facts mentioned above it are clear

that there are lot and lot of difference in between an ordinary Partnership and
Joint Hindu family business. Ordinary partnership is a result of agreement
between the parties to join partnership to share the profits earned by the
business being carried out from partnership whereas in joint family business
there is no need of an agreement it is created by operation of law. In ordinary
partnership each of the partners has to render the account and to work as an
agent.  In joint business there is no need to render account of profit and loss.
18. Discuss the essentials of Partnership Firm.
INTRODUCTION: - Indian partnership Act was enacted in 1932 and it came
into force on Ist day of October, 1932.  A partnership arises from a contract and
therefore such a contract is governed not only by the provisions of the
Partnership Act but also by general law of contract.
DEFINITION OF PARTNERSHIP:- Kent’s view “Partnership as a contract
of two or more competent persons to place their money, efforts, labour and skill
or some of them in lawful commerce or business and to share the profit and bear
the loss in certain proportions. “Dixon defines partnership as, “Group of
Persons”. According of Pollock, “Partnership is a relation which subsists
between persons who have agreed to share the profits of a business carried on
by all or any of them on behalf of all of them.”
Definition:- Section 4 of the Indian Partnership Act defines the ‘Partnership’ as
under:-Partnership is the relation between persons who have agreed to share the
profits of a business carried on by all or any of them acting for all.”
NATURE OF PARTNERSHIP:- Partnership is a form of business
organization, where two or more persons join together for jointly carrying on
some business. It is an improvement over the ‘Sole-trade’ business, where one
 single individual with his own resources, skill and effort carries on his own
business. Any two or more persons can join together for creating Partnership.
 In certain respects a partnership is a more suitable form of business
organization than a Company. For the creation of partnership just an agreement
between various persons is required.  Whereas in the case of company there are
a lot of procedural formalities which have to be gone through to create a
Company. In the case of company the control over regarding distribution of
profits, holding of meetings, maintaining of accounts runs through a statutory
control. Whereas in partnership firm the partners are the master of their affairs.
 ESSENTIALS OF PARTNERSHIP: THE FOLLOWING ARE THE
ESSENTIALS OF THE PARTNERSHIP:-             
1.          PERSONS WHO HAVE AGREED:- A question is arises at the preliminary
stage is  that, “ who are the persons and who can agree for partnership:
(i)             MINORS: - A minor is incompetent to contract case of Mohori Bibi v/s
Damodardass Ghosh-1903: Minor may not become partner but he can be
admitted to benefit of partnership and can share the profits.  He cannot be liable
for the losses.
(ii)           CORPORATION: - A corporation is a legal person therefore corporation may
enter into a partnership with the condition only if the constitution of the
corporation must empowers it to form a partnership and not otherwise.
(iii)         FIRM: - Firm is also recognized as a legal person in India and it cannot enter
into a partnership.  A firm which is proprietorship firm or a company registered
under the Company’s Act can very well enter into a partnership but here is
mentioned that partnership firm is not a legal person therefore it is not
competent to enter into a partnership. Duli chand v/s CIT, 1956.
(iv)         ALIEN: - A national of other country may be a friendly alien or an enemy
alien. A friendly Alien can enter into Partnership but latter Cannot except when
he is under the protection of that country. 
2.    TO SHARE THE PROFITS OF A BUSINESS:- This line consists the two
parts: 1. To share the profit and  2. Of a business.  However the explanation of
these two terms are as under :-
(i)             Business:-This definition is not exhaustive. The existence of business is
essential unless there is no intention to carry on business and to share the
profits, there can be no partnership. Therefore the objects of the partnership and
business must be lawful. Case of R.R.Sharma v/s Ruben, 1946.
(ii)            Sharing of Profits:- A case of Cox v/s Hickman, 1860: though sharing of the
profits of business is essential. The definition leave it opens as to how and when
these profits are to be shared. In order to continue the partnership the actual
existence of a business carried on by partners with an agreement to share profits
of such business is essential.
(iii)          Sharing of losses Grace V/s Smith-1775, Mutual Agency and Acting for all
and to carry on the business are the essential terms of the partnership.
 CONCLUSION:- In order to constitute partnership there must not only be
sharing of profits but there must be also the relationship and the principle of
agency. Section 4 of the act that there must be actual existence of a business
carried on by the partners with an agreement to share the profits of such
business is essential.

                                                    

19. Principle/Doctrine of Holding Out.

INTRODUCTION:-Every partner is liable for all acts of the firm done while
he is a partner. Therefore generally a person who is not a partner in the firm
cannot be made liable for an act of the firm. In certain cases however a person
who is not a partner in the firm may be deemed to be a partner or held out to be
a partner for the purpose of his liability towards a third party.
 The basis of liability of such a person is not that he was himself a partner or
was sharing the profits o4 was taking part in the management of the business
but the basis is the application of the law of estoppels because of which he is
held out to be a partner or deemed to be a partner by “holding out”
 DEFINITION OF HOLDING OUT Section 28 of the Partnership Act makes
the following provision under this doctrine:-
(1)Anyone 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 anyone 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 death of the partner the business is continued in the old firm
name the continued use of that name or of the deceased partner’s as a part
thereof shall not itself make his legal representative or his estate liable for any
act of the firm done after his death.
 ESSENTIAL INGREDIENTS: 1. Representation: - The representation
may be in any of the three ways:-
 i) By words written or spoken: - In case of Bevanv/s The National Bank
Ltd., a person permitted his name to be used in the title of the firm. Therefore
he was held liable under this principle.
ii) By conduct:- In the case of Parter v/s Lincell: a person by his conduct
represented as a partner and was held liable. Martyn v/s Gray-1863: It was
held that by knowingly permitting himself or suffering himself to be represented
as a partner.
iii) Alleged Representation relied:- In the case of Munton v/s Rutherford: it
was held that Mrs.Ruherford was not liable as a partner by estoppels or holding
out.
iv)Credit to Firm on Representation:- In the case of Oriental bank of
Commerce v/s S.R.Kishore & Co.-1992: It was held he was liable for the acts
of the firm on the basis of the principle of “holding out”.  Section 28 of the Act
is based upon the principle of estoppels by conduct. Where a man holds himself
out as a partner or allows others to do it, he is then properly stopped from
denying the character he has assumed, and upon the faith of which creditors
may be presumed to have acted. A man doing so may be rightly held liable as a
partner by estoppels as held in a case of Mollwo March & Co. v/s Court of
Wards-1872.
The representation on which a case of “Holding Out” is sought to be
established may be express or implied it may consist of verbal or written
statements or even may be by conduct. Form of representation is not material in
such case.
EXCEPTIONS TO THE DOCRINE OF HOLDING OUT:-
1. Tort: The principle of holding a person liable for act of a firm on the ground
of holding out cannot be extended to include liability arising out of tort.
2. Liability of Retired Partner: - The rule of holding-out provided in this
section is also applicable to the retired partner who retires from the firm without
giving proper public notice of his retirement. In such case person who even
subsequent to the retirement give credit to the firm on the belief that he was a
partner will be entitled to hold him liable as held in a case of Scrarf v/s
Jardine-1882.
3. Insolvency of Partner: - Insolvency of the partner extinguished as the
liability of a partner and he cannot be held liable even upon this doctrine.
4. Dormant Partner: His retirement does not require a public notice for
bringing end to his liability. According to proviso to section 45(1) of the
partnership Act a dormant partner is not liable for the acts done after the date on
which he ceases to be a partner.
 CONCLUSION: Anyone who by words spoken or written or by conduct
represents himself or knowingly permits himself to be represented to be a
partner in firm is liable as a partner in that firm to anyone who has on the faith
of any such representation given credit to the firm, he must bear the
consequences u/s28.

REGISTRATION OF PARTNERSHIP FIRM

In the Act of Partnership there are provisions of registration of the
partnership firm but there is no where mention about the penalties for non-
registration of firm.  It is therefore quite optional for a firm to get itself
registered or not.  It is also obvious that registration of the partnership firm will
 not less than a boon when there arisen of the legal consequences at the later
stage.
             Section 69 of the Partnership Act imposes certain claims in the Civil
Courts, this section also provides the pressure which is to be brought to bear on
the partners to have the firm and themselves registered. The pressure consists
denying of certain rights of litigation to the firm or partners not registered under
this Act. A case of State of U.P v/s Hamid Khan & Bros and others-1986.
     In a case of Vatyapuri  v/s M. Sundaresan-2002:  It was held by the Court
that the suit is not maintainable as one of two remaining partners of an un-
registered firm retired resulting in dissolution of the firm and surviving sole
partner filed  suit for recovery of dues to dissolved partnership.
In another case of CIT v/s Jayalakshmi Rice and Oil Mills-1971: It was held
by the Court that the unregistered firm can bring a suit after getting the firm
registered.
It was held by the Court that in the case where the suit is brought by the un-
registered firm subsequent registration of firm while suit is pending would cure
this defect in the case of M/s Samy Uktha Cotton Trading Co. v/s
B.V.Suhhaiah-2005.
CONCLUSION:- Registration of the firm as well as of the partners is quite
essential part of the business of partnership.  It also held the firm and the
partners to avoid un-necessary hurdles for smooth running of the business. The
registration of the firm as well as of the partners is optional in the Partnership
Act.

                               

CONTINUING GUARANTEE:- A guarantee may be an ordinary guarantee or

a continuing guarantee.  A continuing guarantee is different from an ordinary
guarantee, as described in a case of Syndicate Bank v/s Channaveerappa Beari-
2006: in this case in ordinary guarantee the surety is liable only in respect of a
single transaction whereas in case of continuing guarantee the liability of the
surety extends to any successive transactions which come within its scope.
DEFININATION:- Section 129 of the Contract Act which provides that, “A
guarantee which extends to a series of transactions is called a “continuing
guarantee.”
       Such guarantee may be in respect of a series transactions during a fixed period
e.g. for one year. It has been done in the case of Eastern Bank Ltd., v/s Parts
Services of India Limited-1986:  
       A in consideration that B will employ C in collecting the rent of B’s zamidari
promises B to be responsible, to the amount of Rs.5000/- for due collection and
payment by C of those rents. This is a continuing guarantee.
       A guarantees payment to B, a tea-dealer, to the amount of 100 pounds for any
tea he may from time to time supply to C. B supplies C with tea to the above
value of l00 pounds and C pays B for it. Afterwards B supplies C with a tea to
the value of 200 pounds.  C fails to pay.  The guarantee given by A was a
continuing guarantee and he accordingly liable to pay extent of l00 pounds.  
       A guarantees payment to B of the price of five sacks of flour to be delivered by
B to C and to be paid for in a month.  B delivers five sack to C.  C pays for
them.  Afterwards B delivers four sacks to C which C did not pay for it. The
guarantee given by A was not a continuing guarantee, and accordingly he is not
liable for the price of the four sacks.     
                                  CONCLUSION                    
No doubts the continuing guarantee is a different from the from an ordinary
guarantee. In continuing guarantee the liability of surety extends to a series of
transactions. In continuing guarantee the surety has been empowered to revoke
a continuing guarantee for future transactions by giving a notice to the creditor
as it has been provided in section 130 of the Act. However his liability in
respect of the transactions which have already been made continues to exists.
Whereas his liabilities for the future transactions comes to an end.

                                          

CO-SURITIES
Sometimes there may be conditions in a contract of guarantee that there shall be
a co-surety also.  Where a person gives a guarantee upon a contract that the
creditor shall not act upon it until another person has joined in it as co-surety,
the guarantee is not valid if the other person does not join. (It has also been
provided in section 144 of the act.)  It means that in such a contract liability of
the surety is dependent on the condition precedent that a co-surety will join. The
surety can be made liable under such a contract only if the co-surety joins,
otherwise not. On the basis of provision under  section 128.
                                 LIABILITY OF CO-SURETY
From the above statement it has been noticed that the liability of sureties is co-
extensive with that of the principal debtor.  It implies that the creditor can
proceed against the principal debtor or the surety at his discretion unless it is
otherwise provided in the contract. 
The same principle is applicable with regard to the rights and liabilities of the
co-sureties.  Since the liability of the co-surety is joint and several a co-
surety cannot insist that the creditor should proceed either against the principal
debtor or against any other surety before proceeding against him.
 A case in this regard is of State Bank of India v/s G.J.Herman-1998: It was
held that neither the court nor a co-surety can insist that the creditor should first
proceed against another surety before proceeding against him. Such direction
would go against the co-extensiveness.
In the case of Bank of Bihar Ltd. v/s Dr. Damodar Prasad-1969: It was held
that the liability of the surety is immediate and cannot be defended until the
creditor has exhausted all his remedies against the principal debtor.
                                               CONCLUSION
It has already been noted that section 128 declares that the liability of the surety
is co-extensive with that of principal debtor. The word co-extensive denotes that
extent and can relate only to the quantum of the principal debt.  However the
liability of the surety does not cease merely because of discharge principal
debtor from liability. Refer a case of Industrial Financial Corp. of India v/s
Kannur Spinning & Weaving Mills Ltd.-2002.

FEATURE OF BAIMENT:- Bailment consists in delivery of goods i.e.

movable property by one person who is generally the owner thereof to another
person for some purpose.  The goods are to be returned to their owner after the
purpose is accomplished or they are to dispose of according to the directions of
person delivering the goods.
For example :-  When you take a fan on hire or give your suit for dry cleaning
or you give your wrist watch for repairs or give a parcel to a carrier for being
transported to some place there is bailment in each of above
cases. DEFINITION:Section 148 of the Indian Contract Act defines the
bailment as under:-
           The bailment is a delivery of goods by one person to another for some
purpose upon a contract that they shall return the goods bailed to him when the
purpose of contract is accomplished or to disposed of the goods as per the
directions of the bailor.
FEATURE OF BAILMENT:-The following are the feature of the bailment:-
1.    Delivery of the goods for some purpose:- The delivery to the bailee may be
made by doing anything which has the effect of putting the goods in the
possession of the intended bailee or of any person authorised to hold them on
his behalf. Refer a case of Jagdish Chandra Trikha v/s Punjab National
Bank:1998: the plaintiff deposited the jewellery worth Rs 3,72,000/- the bank
as a bailee failed to take due care of the goods hence bank was held liable to pay
a sum of Rs.3,72,000.00 plus interest @ 12% p.a.
2.    There can be bailment without a contract:- In a case of Ram gulam v/s Govt.
Of UP-1950: The property of the plaintiff was stolen and recovered by the bank
and kept in Maalkhana. It was again stolen and could not be traced out. The
court in point of decision in the case that bailment contract cannot arise without
a contract.  The law itself recognises the finder of goods as bailee in some
subsequent cases so it was held that the bailment can be there even without a
contract.
3.    Return of goods after the work is achieved: Section 148 says that the bailee
has  to return the goods as and when the purpose is accomplished or to disposed
of them as per the directions of the bailor. Case of Secy. Of State for India in
Council v/s Sheo Singh-1880.
It is very easy to make sure that in the bailment of contract there is a
delivery of the goods by one person to another for some purpose. When the
work or the purpose is accomplished it is the duty of the Bailee to return back
the goods so bailed to the Bailor.

KINDS OF AGENT:- ‘Agent’ is a person employed to do any act for another

or to represent another in dealing with third person.  The person for whom such
act is done or who is so represented is called the ‘Principal’.  The agent acts on
behalf of the principal depending upon on the authority he has been given. The
agent is of following kinds:-
1.    Auctioneers: - Auctioneer is an agent whose business is to sell goods or other
property by auction i.e. by open sale. The authority vested in him is to sell the
goods only and not to give warranties on behalf of the seller.
2.    Del credere Agent: - Such type of agent who works for extra remuneration. He
takes the liability to guarantee the due performance of the contract. He is
responsible for the solvency and performance of their contracts by the other
parties and thus indemnifies employer against loss.
3.    Commission Agent: Such type of agent who purchases and sells goods in the
market on behalf of his employer on the best possible terms and who paid
commission for the labour of this agent.
4.    Factor :- A Factor is an agent who is given the possession of goods for the
purpose of selling them. He entitled to sell the goods in his own name.  He has
the right to retain the goods for a general balance of accouts.
5.    Broker :- Broker is a mercantile agent employed for the purpose of sale and
sale of goods. The main duty of a broker is to establish privity between two
parties for a transaction and he gets commission for his labour.
6.    Co-Agent: Where several persons are expressly authorised with no stipulation
that anyone or more of them shall be authorised to act in the name of whole
body. They have a joint authority and they are called co-agents.
 7.    Sub-Agent:  such type of a person who employed and acting under the control
of original agent in the business of agency.
8.    Pacca Artia: He also works on commission basis. He gets the goods from his
principal and sells them in the market.
Keeping in view the above facts we can conclude that an agent is a person
employed to do any act for another or represent another in dealing with third
persons. Where one person mere gives an advice to another in matter of
business of agency does not arise because of such advice agency does not
create.

                                                   
NATURE OF PARTNERSHIP:- Section 4 of Indian Partnership Act
1932,                               That partnership is the relations which subsist between
persons who have agreed to combine their property, labour and skill in some
business and to share the profits thereof between them.  The Present definition
is wider than one contained in the Partnership Act.
DEFINITION:- According to Partnership Act 1932 the definition of the
Partnership is as under: “Partnership is the relation between persons who
have agreed to share the profits of business carried on by all or any of them
acting for all.”
                                      NATURE OF PARTNERSHIP
On the basis of provisions laid down in the act of partnership the nature of the
partnership is of the following aspects :-
i)                There should be an agreement between the persons who wants to be partners.
ii)              The purpose of creating partnership should be carrying on of business.
iii)            The motive of creating of partnership should be earning and sharing of the
profits.
iv)            The business of the firm should be carried on by all of them or any of them
acting for all.
The partnership Act is very much clear about it concept and it gives the
directions regarding creation of a partnership by having an agreement for
sharing of their property, labour and skill in some business which aimed to
share the earning and profits.
                                   TERMINATION OF AGENCY
INTRODUCTION:-  The agency which may be validly created stands
terminated in the event of different situations as the principal revoked his
authority, or by the agent renunciation of business of the agency or the death or
unsound mind any of the i.e. principal or of the agent. Even when the principal
being adjudicated in insolvent.
                        DEFINATION OF TERMINATION OF AGENCY
On the basis of provisions laid down in the Act under section 20, “That the
agency is terminated by the principal revoking his authority or by the Agent
renouncing the business of the agency being completed or either the principal or
agent dying or becoming of unsound mind or by the principal being adjudicated
an insolvent under the provisions of any act for the time being in force in the
relief of insolvent debtors.”
                      DIFFERENT MODES OF TERMINATION OF AGENCY
The following are the modes under which an Agency can be terminated:-
1.    By Revocation of Agent’s Authority:- The revocation of agent’s authority can
be made by the principal subject to the condition:-
i)                Revocation may be express or implied as provided in section 207 of the Act.
2.    By the Principal revoking his authority:  Provisions have been made in the
section 203 of the Act that Principal may revoke his authority given to his
agent.
3.    By the Agent renouncing the business of the Agency:- Under section 207 of
the Act, It is mentioned that theAgent should give a reasonable notice to his
Principal, otherwise Agent can be made liable to make good any damage caused
to Principal.
4.    By the completion of Business of Agency:- When the agency is created for the
fixed time by an express or implied contract and after expiry of the term it
automatically terminates on the expiry of the said term u/s 205 of Act.
5.    By either death or Unsound mind of Principal or of Agent:- Section 201 of
the Act laid down that the agency is stands terminated on the death of the
Principal or of the Agent.
6.    By the Principal being adjudicated an Insolvent:- Section 201 also says that
the agency can be terminated if principal being adjudicated as an insolvent.
In addition to above as provided in section 210 that all the sub-agencies
shall remain terminated on the termination of original agency.
CONCLUSION:- Agency can be terminated on the above mentioned reasons.

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Question No.6: What are the provisions regarding dissolution of
partnership firm?
INTRODUCTION:- Dissolution of partnership means coming to an end of the
relation known as Partnership between various partners.  It may also can be
defined as the breaking up or extinction of the relationship which subsisted
between all the partners of the firm as held in a case of Santdas v/s sheodyal-
1971:
Here we are to note the significance of words in definition is, “between all
partners “means every one of the members of the firm cease to carry on
business of partnership. Thus where one or more members ceased to be partners
in such firm while others remain the firm is not said to be dissolved.
DEFINITION: - The term dissolution of the Partnership firm has been defined
in Section 39 of the Partnership Act which lies as, “the dissolution of
partnership between all the partners of a firm is called the, ‘dissolution of
the firm’.”
MODES OF DISSOLUTION: - There are five different modes of the
dissolution of a firm:
Dissolution: = I without the interference of Court.
                       Ii. With the orders of the Court.  
1. Without the interference of the Court: - there are four modes of dissolution
of firm:-1.By Agreement under section 40 of the Act. 2, Compulsory
dissolution u/s-41.  3. on the happening of certain contingencies u/s 42. 4. by
Notice u/s 44 of Act.
1. Dissolution by Agreement: - As partners can create partnership by making a
contract as between them, they are also similarly free to end this relationship
and thereby dissolve the firm by their mutual consent. 
Sometimes there may have been a contract between the partners indicating as to
when and how a firm may be dissolved, such firm can be dissolved in
accordance to such contract. A firm may be dissolved with the consent of all the
partners or in accordance with a contract between the partners as provided
in section 40 of the Act. A case in this regard is of, EFD.Mehta v/s MFD
Mehta-1971.
2.Compulsory dissolution:- Under Section 41 of the Act, if by the happening
of any event which makes it unlawful for the business of the firm or for the
partners to carry it on in partnership.
(a)If by the adjudication of all the partners or of all the partners but one as
insolvent declared by the court.
3.On he happening of certain contingencies:- On the grounds of the gist of
contract made between the partners of a firm may dissolved :-  i) If the
partnership firm constituted for a fixed term. By the expiry of the term firm can
be dissolved. Ii) By the death of a partner may results dissolution unless rest of
partners agrees to contrary.  iii) It firm is constituted to carry out one or more
adventures or undertaking by the completion thereof. On completion of the
same firm may be dissolved.
4.Dissolution by Notice of Partnership:- If the partnership is azt will the firm
may be dissolved by any partner giving notice in writing to all the other partners
of his intention dissolve the firm as provided in section 44 of this act, with the
following conditions:-
 a). The notice for dissolution of partnership must contain the clear intention of
dissolving the firm which must be a final one. The date on which firm is
dissolved must be indicated in the notice. A case of Mir Abdul Khaliq v/s
Addul Gaffar Serifff-1985.
 b). Notice must be given in writing.
 c). Written notice must be given to all other partners of the firm.
5. Dissolution By Court:- A firm may be dissolved at the suit of a partner on
any of grounds which provided in Section 44 of Act:-
i. That the partner has become of an unsound mind.
ii. That the partner has become in any way permanent incapable of performing
his duties as a partner but in the case of Whitewell v/s Arthur- 1885: it was
held partial incapacity cannot be a ground for dissolution of partnership firm.
iii. That a partner is guilty of such misconduct as would prejudicially affect the
business of the firm, a case of Harrison v/s Tenent-1856.
iv. That the business cannot be carried on except at loss.