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Sec 10 ,
Lawful object
Agreement not declared void Certainty and possibility of performance Legal Formalities ;Writing ,stamping
Classification of contract
Valid contract
Void contract
Void able contract Illegal contract
Express contract
Implied contract QUISE Contract it is obligation imposed by
law
CLASSIFICATION ON THE BASIS OF EXECUTION Executed contract wholly performed by party Executory contract, here promise of both parties have yet to be performed
CONTRACT
SEC 2A SAYS : WHEN ONE PERSON SIGNIFIES TO ANOTHER HIS
WILLINGNESS TODO OR ABSTAIN FROM DOING ANYTHING , WITH A VIEW TO GET THE ASSENT OF THAT OTHER TO SUCH ACT OR ABSTINANCE IS CALLED A OFFER
CHARACTERSTIC OF OFFER
IT MUST BE AN WILLINGNESSTO DO OR ABSTAIN CH
SECOND PARTY
THE EXPERSSION OF WILLINGNESS MUST BE MADE
Types of offer: 1. EXPRESS AND IMPLIED expressed is by something spoken in words or written , Implied means by the conduct of the party we come to know that the want to enter into a contract ,eg:A bus run by a transport company in a particular route ,it is an implied offer from the company to carry the passengers on the route who are prepared to pay the specific fare , In a resturent ,there is implied promise to pay for consuming eatables
2. EXPRESS OR IMPLIED
3.OFER MUST INTEND TO CREAT A LEGAL RELATION 4. TERMS OF OFFER SHOULD BE CERTAIN
5 AN OFFER MAY BE MADE TO SPECIFIC PERSON OR TOANY ONE IN THE WORLD AT LARGE.CARLILV/S CARBOLIC SMOKE BALLS COMPANY
OFFER MUST EXPRESS THE FINAL WILLINGNESS OF THE OFFEROR EVERY OFFER MUST BE COMMUNICATED TO THE OFFEREE IN FITCH V/S SNEDKAR: S OFFERD TO REWARD TO ANY ONE RETURNS HIS LOST DOG F BROUGHT THE DOG WITH OUT KNOWLEDGE OF REWARD HELD HE IS NOT ENTITILED FOR
BINDING CONTRACT
TERMINATION OF OFFER Sec 6 BY NOTICE OF REVOCATION BY LAPS OF TIME BY FAILURE TO FULFIL A CONDITION PRECEDENT TO ACCEPT
BY FAILURE TO ACCEPT THE MODE
ACCEPTANCE
It is an expression by the offeree of his willingness to be bound by the terms of offer DEFINITION SEC 2B When the person to whom the proposal is made signifies his assent there to ,the proposal is said to be accepted . A proposal when accepted becomes promise
Reasonable Time
6. Acceptance Must be done to fulfill The Promise
8 Acceptance
9 Acceptance must be made before the lapse or revocation of offer 10 The accepter must be aware of the proposal at the time of offer 11 Silence does not imply acceptance
CONSIDERATION
Sec 2d the act tells consideration means When , at the desire the promisor, the promisee or any other person has done or abstained
Legal Rules Regarding Consideration 1 Consideration is required for both for formation and discharge of an agreement 2 Consideration may be past present or future 3 Consideration may be either positive or negative 4 Consideration must move i.e. must be done or promised to be done at the desire of the promisee
5.Consideration may be furnished by the Promisee or any other person 6.Consideration must be lawful 7.Cosideration must be real and not illusory
10 Consideration need not be adequate Here the inadequacy of the consideration will not make the contract void but it may be considered by the court of law in determining the question whether the consent to contract is freely given 11. Consideration must not be the performance of the existing duties
NO CONSIDERATION NO CONTRACT SEC 25 :the General rule is that an agreement made without consideration is void EXCEPTION A. Natural love and affection B. Compenseation for past volutary service C. Promise to pay time barred debt D. Completed gift E. Agency F. Remission Under sec 63 of contract act ,no consideration is necessary for an agreement to receive less than what is due G. Bailment H. Guarantee
CONTACTUAL CAPACITY
of
Sound mind ,
Age of majority and
subject
LEGAL DISABILITY
A. Foreign sovereigns ,ambassadors and envoys Because to sue such persons prior sanction of central
government is a must
Alien enemy Professionals in India, it is not a bar Corporation is restricted by the statue governing them Bankrupt Convict
FREE CONSENT Sec defines consent as follows two or more persons are said to consent when they agree up on the same thing in the same sense Consent is the very root of an agreement Consent is free if it is not caused by 1,Coersion 2. Undue influence 3.Fraud 4.Mis representation 5.Mistake
COERSION
A person is compelled to enter into a contract by use of force by the other party or under threat . Coercion means committing or threatening to commit act forbidden by I.P.C The unlawfull detention of property Threatening to detain any property wrong fully
agreement proceed from any party Coercion maybe directed against any party Such a contract is void able at the option of the party
Undue influence
Fraud : sec 17 false suggestion as to fact , active concealment of fact the representation must relate to fact it may be by the party or his agent to contract. It should deceive and the other party is deceived or suffered damages mere silence does not amount to fraud unless the circumstances of the case show silence is equalent to speech
Effect of fraud :
The contract is void able Damages can be claimed
MISREPRESENTATION Where the representation is made falsely or believing it to be true with out the knowledge of statement being it to be true or any breech of duty with out intending to deceive other and
Mistake
Mistake of fact may be bilateral or unilateral it may be regarding identity of person or nature of contract Mistake as to subject matter is void
a) Mistake as to existence of the subject matter
b) Mistake as to identity and quality of subject matter c) Mistake as to quantity of subject matter
Unilateral mistake may be as to identification of persons or nature of transaction ,it generally does not affect the contract
Remedies for Mistake If the consent is caused by mistake of both the parties
then the agreement is void sec20 Where the contract is void on account of mistake ,any
3.The Object and Consideration must not be fraudulent 4.If it involves or implies injury to the other person or property of another e.g. :A request b an editor of news paper to publish a defamatory statement against C
5.The object and Consideration must not be Immoral 6 The object and Consideration must not be opposed to public policy eg;trading with a enemy ,agreement interfering with the course of justice 7Agreement in restraint of trade is also regarded as to that extent Void Sec 27 Sale of good will Acc to Sec 30 wagering agreement is void eg:betting Illegal Agreement is also void abnition40
Contingent Contract
,if some event ,collateral to such contract ,does or does not happen
There are three essential characteristic of a contingent contract Its performance depend upon the uncertainty of happening or non happening in future of some event .
It is this dependence on future which distinguishes a contingent
The rules regarding the performance of contingent contract is in sec 32 to 36 of the contract act ,are given below 1.The happening of a future uncertain Event Acc to Sec 32 Contingent contract to do or not to do any thing ,if an uncertain future event happens ,cannot be enforced by law unless and until that event has such event becomes impossible ,such contract becomes void . E.g. ,A makes a contract with B to sell a horse to B at a specified price ,if C to whom the horse has been offered ,refuses to buy the horse The contract cannot be enforced unless C refuses
ship is sunk .because when the ship is sink the event becomes
impossible as the ship cannot return. thus until the event becomes impossible the contract cannot be enforced
3.When Event to be Deemed Impossible sec34 4.THE Happening of an event within a Fixed time sec 35 If a person has undertaken to perform something with in a fixed time provided an event happens ,he is bound to perform his promise if the event happens with in the fixed time .if the time fixed lapse and the event does not happen ,or the event becomes impossible before the time fixed the contact becomes void eg; A promises to pay B a sum of money if a certain ship returns with in a year .the contract can be enforced if the ship returns with in one year and becomes void if it is burnt with in one year does not return
does not return with in the year ,or is burnt with in the year
6 .Impossible Event Acc to Sec .36. contingent contract to do or not to do any thing if an impossible event happens is void ,whether the impossibility is know to the party or not The
agreement is void
QUASI-CONTRACT
Suited to his condition in life ,the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person sec68 .
other Sec(69): E.g. B is the tenant of A s land and pays the Land revenue which A is bound to pay than B is supposed to get back the money from A which he has paid on behalf of A
under Coersionsec72 he is bound to repay the same 6 Account Stated; here obligation arises from acceptance of indebtedness
Contract Essentials for the formation of a valid contract are absent in Quasi Contracts Essentials for the formation of a valid contract are Present in Contract In Quasi Contract obligation is imposed by law In contract obligation is created by the consent of the parties But in case of Breach of Both the contracts the remedy is same
7]Quantum Meruits It is to re compensate the party or person for value of work he has done .It is reasonable compensation where one person has rendered service to another in circumstances which indicates an understanding between them that it is to be paid for although no particular remuneration has been fixed the law will
Any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it ,to the person from whom he has received it
badly the party at default may claim the lump sum after
20,000. X did the complete work but Y complained of faulty workman ship . It cost Y another 3,000 to remedy the defect .it was held that X Could recover only RS 17,000from Y
DISCHARGE OF A CONTRACT
A contract may be terminated or discharged in an of the following ways 1)Performance of the promise or tender 2) By Mutual consent canceling the agreement substituting a new agreement in the place of t old 3)Subsequent impossibility of performance 4)Operation of law 5)Breach made by one party
DISCHARGE BY PERFORMANCE Performance may be 1.Actual performance 2.Attempted performance When both the parties perform their respective promises a contract is said to have been actually performed .Actual performance brings the contract to an end Attempted performance
Attempted Performance
Time for performance 1)Sec 46 tells : Where no time is specified The engagement should be performed within a reasonable time 2)when time is specified Sec 47 The promisor may perform it at any time during the
performance of it , it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise ,and to perform it in such place . If ,however a place is fixed for performance of the promise by the contract ,the promisor is bound to perform at that place only .place to be fixed should be reasonable to both the party's
DISCHARGE OF CONTRACT BY NEW AGREEMENT The rights and obligation created by an agreement can be discharged with performance by means of
1.Novation or substitution(sec62) Their being a contract in existence some new contract is substituted for it ,either between the same parties or between different parties ,the consideration being the discharge of the old contract . The old contract is revoked and substituted by new contract All the parties of the old contract must agree to it
The new agreement should be valid and made
before the breech of the original one If new agreement is unenforceable than the old contract is unenforceable
contract
4.Remission sec{63} It is acceptance of lesser sum than that was contracted for 5.Waiver Abandonment of right which a person is entitled to 6.Merger When a superior right and an inferior right coincide and meet in one and the same person the inferior right vanishes into the superior right
DISCHARGE OF CONTRACT BY IMPOSSIBILITY SEC.56 1Pre contractual impossibility or initial impossibility 2.Subsequent impossibility also known as post contractual impossibility The agreement in the first case is void ab initio due to absolute impossibility Even though the act was not impossible ,or unlawful in itself at the moment of time the agreement was made but becomes
1.Destruction of the object necessary for performance of the contract 2.Change in Law 3.Personal incapacity 4.None existence or none occurrence of the event or state of thing necessary for performance 5.Out break of war CASES NOT COVERED BY SUPERVENING IMPOSSIBILITY Where a contract is not discharged on the ground of supervening Impossibility 1.Difficulty of performance 2.Commercial impossibility
3.Impossibility due to the behavior of a third party 4 Self induces impossibility 5 Strikes ,Lock outs and civil Disturbance 6 partial impossibility or failure of one of the object 7.Rights and Obligation under a transfer of property under a
case
8.Temporary interruption or interventions
3.SEC56(para3)provides that ,
Where one person has promised to do something which he
knows, or with reasonable diligence ,might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance
of the promise.
Eg P contracts to marry B P being already married to C, and
being forbidden by the law to which he is subject to practice polygamy .P must make compensation to B for any loss caused to her by non performance of his promise
DOCTRINE OF FRUSTRATION
When the common object of the contract can no longer be
BREACH OF CONTRACT
performance is due
b) During the Performance of the contract ;
contract .
1.
BY RENUNCIATION (EXPRESS REPUDIATION) Anticipatory breech of contract takes place when one party express his inability to perform or renounce his inability to perform or renounce his liability under the contract expressly before the performance is due .This is know as express anticipatory breach of contract.
A promisor may, before the time for performance arrives ,by doing some act makes the performance of his promise impossible .The effect in such a case is the same as though he had renounced the contract at the time .This is know as Implied anticipatory breach of contract.
RIGHTS OF THE PROMISEE IN CASE OF ANTICIPATORY BREACH : 1.He can treat the contract as discharged so that he is absolved from the performance of his part of the promise 2. He can immediately take a legal action for Breach of contract Remedies in case of breach of contract 1 Suit for damages 2 Bring an action for specific performance 3 suit for injunction 4 Claim for quantum meruit 5 Restitution 6 suit to bring the contract to an end
DOCTRIN OF PRIVITY OF CONTRACT THAT MEANS PRIVITY OF CONTRACT THERE FORE A STRANGER TO CONTRACT CANNOT MAINTAIN A SUIT
EXCEPTION TO THE RULE 1,Benificiary in a trust or charge 2,ACKNOWLEDGMENT OF PAYMENT OR ESTOPPEL 3 AGREEMENT CREATING A CHARGE ON LAND 4.Family settlement 5.Assignee of contract
Bailment And Pleadge Bailment Definition : Sec 148 of the Indian Contract Act defines a Bailment as A Bailment is the delivery of goods ,by one person to another ,for some specified purpose ,and upon a contract that they shall ,when the purpose is accomplished ,be returned or other wise disposed of according to the direction of the person delivering them . The person delivering the goods is called the Bailor.The person to whom they are delivered is called the Bailee.
Characteristics of Bailment : It is based upon a contract , The finder of an goods is an exception to this ,he is a bailer even
though no contract is arrived between the finder and the true owner It involves delivery of goods either actual or constructive The possession of goods must changes ,though temporarily Ownership over goods is retained by the owner Delivery of goods here is for some purpose May be safe custody security of debt ,repair Conversion
create is accomplished ,the goods are to be returned or disposed according to the instruction of the bailor ,The goods returned should be the same ones which were bailed Bailment is possible only for goods movables and not to immovables Gratuitous and Non gratuitous Bailment A Gratuitous bailment is that in which neither the bailor nor the bailee is entitled to any remuneration Non gratuitous B ailment here either the bailee or the bailor gets remuneration
Rights of Bailor
Claim damages
Right of termination Right to share in the compensation received in any suit by the
bailee Duties of the Bailor To disclose fault in the goods bailed Repayment of the expenses
Right to Remuneration
Right to Particular lien Right to general lien Right to claim compensation in case of faulty goods Right to Inter plead Right to bailment by several owners Right to sue against wrong doers
Duties of Bailee Duty of reasonable care of goods bailed Not to make unauthorized use of goods bailed Duty not to mix goods bailed with other goods Duty to return goods with out demand to retain the same Duty not to set up adverse title Termination of Bailment Lapse of time Accomplishment of purpose Inconsistent use of goods (Sec153) Death(sec162) Gratuitous bailment (Sec159)
Pledge Sec172 of Indian contract Act says Pledge is a bailment of goods as security for payment of debt or performance of promise The person offering the security is called as the Pawnor or the pledger, And The person who receives the goods is called as the pawnee or the pledgee Here there should be bailment of goods The object of such bailment should be to hold the goods as a security for payment of a debt or performance of promise and not for safe custody or any other purpose
Delivery of goods
Delivery for specific purpose Delivery with a condition that the goods shall be returned in
specific time when the purpose is over or disposed of according to the direction of the bailor Only the possession and not the ownership is transferred Rights of the Pledgee Right of retainer Security for subsequent Advances\debts
Right to indemnity
Right against deprivation
Duties of a Pledgee\Pawnee Take reasonable care Not to make any unauthorized use Return on repayment Return any increase or profit Right to increase or profit
Negotiable Instrument Act 1881 Meaning and Definition of Negotiable Instrument A Negotiable Instrument is a written contract evidencing a right to receive money and it may be transferred by negotiation i.e. either by delivery or by endorsement . The term Negotiable Instrument", Literally means A document transferable by delivery This act came into force on 1-3-1882 Sec 13(1) of NIA says NI means a promissory note,bill of exchange or Cheque payable either to order or to bearer
Easy transferability
Title :A bonafide transferee for value i.e holder in due course of a
NI gets a complete ,independent and indefeasible title to the instrument even though there are some defect in the title of the transferor Right to file Suit The transferee of NI is entitled to file a suit in his own name for enforcing any right or claim on the basis of the instrument i.e. there is a right of action in itself and he is not dependent on another's title No need of giving a Notice of transfer of NI to the party liable to pay
,endorsed negotiated for consideration Date :Every NI are made drawn on the date it bears Time of acceptance : Every accepted bill was accepted within a reasonable time after its date and before its maturity Order of endorsement :The endorsement on a NI were made in the order they appear Stamping :A lost PN,BOE or cheque was duly stamped
holder in due course Proof of Protest :In a suit upon an instrument which has been dishonored ,the court shall ,on proof of protest, presume the fact of dishonor ,unless and until such fact is disapproved This presumption would not arise if an instrument has been obtained by fraud or for unlawful consideration Parties to Negotiable Instrument Drawer : The maker of a negotiable instrument Drawee:He is person on whom the instrument is drawn
the transferor or any of the previous parties .His title is not affected even if the person from whom he has taken the instrument had defective title
he had lost the instrument or the instrument had been taken from him by fraud or for unlawful consideration Every prior party to the NI is liable there on to the HIDC until the instrument is duly paid The party liable on PN or BOE cannot avoid their liability to the HIDC by pleading that the delivery of the instrument is conditional or restrictive
No maker of the PN, BOE,Cheque can deny as against the holder in due courses the validity of the instrument NO endorser of NI can deny as against the HIDC the signature or capacity to contract of any prior party to the instrument The acceptor of a BOE drawn in a fictitious name cannot raise against the HIDC the plea that the
drawer is a fictitious person PROMISSORY NOTE Sec 4 of NI defines PN It Is an instrument in writing not being a bank note or a currency note containing an unconditional undertaking signed by the maker ,to pay a certain sum of money only to, or the order of a certain person or to the bearer of the instrument Parties to the PN Maker Payee Holder Endorser
Essential Features of a PN
IT must be in writing
IT must contain a express promise or clear undertaking to pay Promise must be definite and unconditional
It should be dated
The rate of interest :Must be paid at the rate from the date of
the instrument
between the transferor and the transfree Procedure for Suits: In India a special procedure is provided for suit on promissory note and BOE under order 37-a of CPC Number of transfer :These instrument can be transferred in infinitum till they are at maturity Rule of Evidence These instruments are in writing and signed by the parties :they are used as evidence of the fact of indebtedness because they have special rule of evidence Exchange ;NI are considered as substitute for money
Bill oF Exchange According to Sec 5 of the N.I.Act A bill of Exchange is an instrument in writing containing an unconditional order ,signed by the maker ,directing a certain person to pay a certain sum of money only to,or to the order of ,a certain person or to the bearer of the instrument There are usually three parties to a bill of Exchange : The maker of the Bill of Exchange called the Drawer(Creditor) The person who is directed to pay Drawee(Debtor) The person who is entitled to receive the money (payee)
case of Need ,Acceptor for Honour Essential feature of BILL Of Exchange IT is an Instrument in writing IT must contain an order to pay, which is express, certain and unconditional The Drawer must be certain The drawee must be certain The payee must be certain The instrument must be duly signed by the drawer The amount of the money to be paid must be certain
and ascertainable The payment must be in legal tender money The money must be payable to a definite person or according to his order The bill may be payable on demand or after a specified or definite period of time IT must be properly stamped It must be dated Acceptance of The Bill :A mere drawing of the Bill does not make it valid and legal document .It must be accepted by the drawee before payment can be claimed .When the Drawee of BOE signifies his
assent to the order of the drawer by signing his name across the face of the bill with or with out the word Accepted", It is called the acceptance of the bill. Than the drawee becomes the Acceptor of the Bill. An acceptance is complete when it is given in writing on the bill, Signed by the drawee or his agent and it is delivered to the holder ,or Notice of acceptance is given to him or his agent Acceptance must be absolute and unconditional Presentment for acceptance is compulsory
due date Presentment for payment should be made with in a reasonable time to the person who is liable A bill is said to be dishonored if it is not accepted The drawer and all the endorsers are liable for holder for dishonor Any person to whom the notice of dishonor is not given is discharged from his obligation Noting and Protesting It is a procedure taken on the dishonor In order to get evidence for that purpose the dishonoured instrument is handed to a Notary Public
of dishonor ,Noting is not compulsory in case of inland bills . Protest : When a pronote or a bill has been dishonored by non acceptance or non payment ,the holder may ,with in a reasonable time ,cause such dishonor to be noted and certified by a notary public. Such certificate is called as Protest . It is a formal notaries certificate attesting the dishonor of the PN or BOE
Distinction Between a Promissory Note and Bill of Exchange Acceptance :A bill needs to be accepted to make it valid. The drawee puts his signature as acceptor. No such acceptance is required in case of PN Nature of Liability : The liability of the drawer of a BOE is secondary and conditional .The drawee or the acceptor is primarily liable . The liability of the maker of the PN is primary and absolute as he himself is the main debtor Immediate Relation :The drawer of the BOE stands in the immediate relation with the acceptor or the payee .The maker of the PN stands in the immediate
relation with the payee Notice to the prior parties :Notice to the prior party is a must in case of dishonor of BOE.This is not needed in case of PN Sets :Foreign bills are drawn in 3 sets .In case of PN this is not there Protest: Foreign bills must be protested .In case of PN this is not required Conditional Acceptance :A bill may be accepted conditionally .NO such condition may be laid by the maker of PN Acceptor for Honour:Acceptor for honour can even make the payment of a bill.PN cannot be paid so
Cheques
Definition: Sec 6 of the NI Act defines , A cheque is a BOE and not expressed to be payable other wise than on demand and payable only through a banker. Essentials It is a Instrument in writing Order to pay money only Order should be unconditional It must be signed by the maker or the drawer It must be drawn on a specified banker Sum must be certain It is always payable on demand It is in a printed form
dishonors the cheque Types of Cheques: Cheques may be broadly classified as open chequeand crossed cheques . A crossed cheque is one which has two transverse parallel lines, markedAcross its face ,with or without the words and company or any abbreviation there of .There are two kinds of crossing:
General crossing and Special crossing : General crossing is were a cheque bears in its face an additional words and company or any abbreviation there of between two parallel transverse lines, or of two parallel transverse line simply, either with or without the word as not negotiable That addition shall be deemed a crossing and the cheque shall be deemed to have been crossed generally Special crossing: Sec 124 says where a cheque bears across its face an addition of the name of the banker, either with or with out the word not negotiable that addition shall be deemed to be crossed specially and to be crossed to that banker
bankers with in the crossed lines it is called double crossing .Its purpose is to enable the payee or holder to get the cheque collected through any one of the banker . Restrictive Crossing: Not negotiable crossing and account payee crossing are said to be Restrictive crossing Not negotiable crossing loses its special feature of negotiability ,but remains transferable like other goods Account payee crossing are like Account payee only
The drawer
The holder of the cheque Banker on whose favor the cheque is crossed can again specially
cross it A crossing can be opened by the drawer by writing the word pay cash and put his full signature Dis honouring of cheques When payment must be refused When the drawer has countermanded payment When banker has received the notice of customers death
order prohibiting the payment When the banker receives a notice of assignment by the customer of the credit balance of his account When money is held in trust If there is defect in the title of the party presenting it When the customer has closed his account In case off out break of war and the customer is a foreigner
to the customer Penal action for dishonor of the cheque Sec 138 0f NI Act says He or she will be deemed to have committed an offence and punishable with fine with imprisonment for a term which may extended to one year ,or with fine may go up to twice the amount of the cheque or both Notice shall be issued regarding dishonour to the drawer And he has an option to make the payment with in 15 days of receipt of notice
negligence received payment for the customer of the cheque crossed generally or specially to himself shall not ,in case the title to the cheque proves defective incurs any liability to the
the payment Protection for collection of crossed cheque only Collection on behalf of the customer As an agent of customer Received payment in good faith With out negligence Statutory protection to the paying Banker NI Act gives legal protection to the paying banker if the payment is done in good faith and with out negligence
Drawee:
A cheque is drawn on a specified banker only A BOE can be drawn on any one including the banker
certain period after date or sight Payable to the bearer on demand :Cheque is always payable on demand and may be made payable to bearer or order .a BOE cannot be drawn payable to the bearer on demand
accepted before payment can be claimed NO days of grace is allowed in case of cheque .IN case of time bill there is a grace period of three days In case of cheque there is a presumption that customer is having sufficient credit balance ,In case of BOE no such presumption is there A cheque can be crossed generally or specially BOE cannot be crossed Stamping is not needed in case of cheque Stamping is a must in case of BOE except in the case of demand bill
drawer .The payment of BOE cannot be counter minded by the drawer Cheque is not intended for circulation but immediate payment The BOE may be circulated by endorsing it A cheque is not generally discounted ,A bill can be discounted and rediscounted IF the cheque is not presented for it is discharged from payment on the due date , The drawer of a BOE is discharged if it is not duly
presented to the acceptor for payment or else Liability :The drawer of a cheque is primaryly laible for payment The drawee or the acceptor of a bill is primarily liable ;Statutory protection; is provided to the banker in case of forged endorsement The drawee of BOE has no such protection Noting and Protesting :A cheque need not be noted and protested .A BOE must be noted and protested when it is dishonoured Cheques are not issued in sets Foreign bills are generally drawn in sets of 2 or 3
Endorsement Sec15 of NIAct says : when the maker or holder of a NI signs the same ,other wise than as maker, for the purpose of negotiation ,on the back or face there of on a slip of paper annexed there to ,or so signs for the same purpose ,a stamped paper intended to be completed as aNI he is said to endorse the same ,and called as :endorser Parties to Endorsement Endorser Endorsee
Types of Endorsement
Blank or General
Full or special Restricted endorsement Partial Endorsement
with out recourse to me SanFrais :No expenses should be incured on my account Facultative Endorsement :He waives his rights to receive notice of dishonor
BY Cancellation
BY release or waiver BY payment
Operation of Law
LAW OF INSURANCE General Principles of insurance The law of insurance is a branch of Law of contract the parties of insurance also have the Right and duties against each other IT should have the essential elements of a valid contract It should be in writing ,printed stamped ,signed by the insurer and handed over to the insured IT must have like contract offer,acceptance,consideration,freeconsent,contractual capacity,lawfulobject etc;
note Principle of cooperation and probability is the bases of insurance Utmost good faith Indemnity Contingent contract Insurable interest The policy specifies the term or period of time it covers THE risk of the insurer commences after the contract of insurance is entered into Premium is the consideration paid by the assured to the insurer for the risk undertaken
proximately caused by any perils insured against MITIGATION OF LOSS :IN the event of mishap to the insured property if the assure does not take necessary step to mitigate the loss the insurer can avoid the payment of loss which is attributed to the assured negligence Contribution :the aim of contribution is to distribute the actual amount of loss among the different insurers who are liable under different policies in the same subject matter SUBROGATION: The doctrine of subrogation
insurer and as a result the insurer shall subrogate to all the rights
and remedies of the insured against the third party . SOme times their may be reinsurance and some times there may be double insurance
LIFE INSURANCE:
Meaning: IT is a contract under which one person ,in consideration of the premium paid ,Either in lumpsum,monthly,quarterly,halfyearly or yearly ,undertake to pay to the person for whose benefit the insurance is made ,a certain sum of money either on the death of the person whose life is insured or on the expiry of a specified period of time The person who agrees to pay is called the insurer The person whose life is insured is called as the assured The consideration payed is called the premium
Insurable Interest :
A person has an unlimited insurable interest in his life A child has an insurable interest in the life of the father But a father has no insurable interest in the life of his son unless he is dependent on the son .Same in the case of elder brother A husband has an insurable interest in the life of his wife and vice versa A creditor has an insurable to the extent of his debt in the life of the debtor A surety has an insurable interest in the life of the co-surety
the copartner AN employee employed for a specified period has an insurable interest in their life of the employer AN employer in the life of the employee Kinds of Life policies Whole life policies Endowment policy Joint Life policy ANNUITY :Here the amount is payable not in one lumpsum but montly ,qurterly or half yearly or annual installments after the assured attains a certain
age and he will get money back after a certain period Child endowment policy LIFE POLICY With profit or with out profit policy Group Insurance MONey back policy Sinking found policy Janta policy :This covers risk of death by accident for one year only with nominal premium Limited payment policy
any person ,who attains majority and who can enter into a valid contract can take out a life insurance policy HE has to fill up a proposal Form supplied by the insurer The proposer is required to undergo a medical examination NO need of medical examination if the proposer is a government or semi government employee in the age of 18-45 and the policy amount does not exceed 4 lakhs RS EVEN though is not a semgovt or govt employee
issuance of the First premium Receipt there comes into existence a binding contract and the risk commences from the date of issuance of notice Policy Conditions: Premium Days of grace i.e30 days Proof of age Incontestable clause :under sec 45 of IIAct 1938 ,no policy can be disputed by the insurer after it has
Suicide Clause :If the assured commits suicide with in one year
of the commencement of the risk on the policy whether the policy holder was insane or not the LIC will not be liable for the money Nomination or Assignment Surrender Value Paid up Value Loan value Assignment of Life policies : On the death of the insured ,the legal representatives of the insured can collect the sum assured The holder of the LI p can deal with it like any other property he can sell, assign or transfer it as a security for loan or give it away as gift
nominated on behalf of the policy holders claim can be made by them Conflicting Claim :Sec 47 of Insurance Act 1928 provides were an insurer is of the opinion that, by reason of conflicting claim to insufficiency of the proof of title or any other reason ,it is impossible for the insurer to obtain a satisfactory discharge for the payment of the money insured for ,the insurer may apply to pay the money in the court having jurisdiction over the place where the money is payable
Fire Insurance Definition: It is insurance against any loss caused by fair Characteristics of Fire Insurance Indemnity Good faith Contract Insurable Interest Contribution subrogation and Reinsurance Cause Proxima :Fire policies cover losses caused proximately by fire Specific Exception :i.e. Fire policies generally
contains a condition that the insurer will not be liable if the fire is caused by riot ,civil disturbance ,war or explosion. In case of absence of any specific exception the insurer is liable for the losses caused b fire what ever may be the cause of fair Assignment :Assignment can be done as a chose in action under TP Act ,But assignee cannot recover damages unless he has as insurable interest in the property at the time when the loss occurred a stranger cannot sue on the FP Payment of Claims :Upon occurrence of fire the insurer shall be immediately notified so as to that the insurer can take step to salvage the remainder compaines keep
detect the fraud Type of Fire Insurance Ordinary Fire Insurance Specific Policy: here the liability of the insurer is limited to give a specific sum which is less than the value of the property Valued policy :Here insurer agrees to pay a specific sum irrespective of the actual loss suffered Average policy : Where a property is insured for a sum less than its value and a clause is their in the policy stating the same this is called Average policy
Replacement policy :here the insurer undertakes not to pay the value of the property lost but the cost of replacement of the property destroyed or damaged . Floating policy :Where one policy covers property situated in different places is called as floating policy Combined policy :A signal policy may cover losses due to variety of causes Clauses of a Fire policy Average clause :This clause provides that if the sum insured under the policy is less than the value of the property on the date of fire ,the amount of lo
payable will be proportionately reduced ,and the insurer shall be deemed to be his own insurer for the balance Alteration clause: This clause provides that the insurance will cease to attach if ,with out the previous sanction of the insurer ,the trade or manufacture carried on the premises is changed, so as to increase the risk ,or if the building insured becomes unoccupied or if the property insured is removed to place other than stated in the policy Marine clause :When goods are insured both under marine and fire policy ,this clause in that case reliefs
insurer of any liability for losses which is recoverable under a marine policy except in respect of any excess beyond the amount recoverable there under Reinstatement clause; This clause gives an option to the insurer to reinstate the premises instead of paying money to the insured .The object of this clause is to prevent any fraudulent claim being presented Contribution clause :this Clause is inserted when the subject matter insured is insured with more than one insurer .It provides that the insured shall claim from each insurer a rateable proportion of his loss
dispute and prescribes the procedure Procedure for effecting Fire policy : Proposer has to fill a proposal form describing the location with the principle of at most good faith The insurer asses the risk to be insured The property is fully inquired and examined by the surveyor If the insurer thinks that the property is fit to be insured he gives his acceptance on payment of the premiume After this the insurer issue a cover note by stamping tha policy
Register and recover his claim by a notice of loss Rights of the insurer : Right to avoid the policy Right of entry and control over the property Right of reinstatement Right to subrogation :Stepping in to the shoes of insured Right of contribution: Right of salvage :Where the insurer pays for the loss in full he is entitled by way of salvage to all that remaining things
or damage the insured is further required to submit to the insurance company a claim in writing for the loss or damage containing the particulars of item of property damaged or destroyed Evidence in support of claim has to be produced
MARINE INSURANCE ACT,1963 IT is defined as an agreement where by the insurer undertakes to indemnify the assured in the manner and to the extent there by agreed, against marine losses, that is to say ,the losses incidental to marine adventure (sec 3), An instrument containing the contract is called as a Marine Policy. The consideration for policy is called as premium. The insurer is called Under writer The person who is there by indemnified is call the Insured
4 The sum insured 5.The name or names of the insurer or insurers. it must be signed by or on behalf of the insurer ESSENTIALS OF A MARINE INSURANCE POLICY ; It should fulfill all the conditions of a valid contract It is a contract of indemnity It must be in writing and duly stamped The insured must have a insurable interest in the subject matter insured at the time when the losses occurs
time
It is a contract of at most good faith The doctrine of subrogation and contribution applies A marine policy is invariably subject to average clause
,warranties etc; Types of marine policy: 1 Voyage Policy : It covers a particular voyage 2 Time Policy : It covers a specified period of time 3 Mixed Policy 4Valued policy :Policy which mentions the value
Of the subject matter . Unvalued or open policy :It does not specify the value of the subject matter .but subject to the limits of the sum insured Floating policy :It is a policy Which describes the insurance in general terms and leaves the name of the ship and other particulars to be defined by subsequent declaration Honorary or Wagering policy :Here assured has no insurable interest in the subject matter It is void and value less in a court of law Lost or Not policy :the insurer insures the goods
Irrespective whether it is lost or not Determination of a Insurable value That is the amount of the valuation of the insurable interest for the purpose of insurance . and representation has to be made in a proper manner Expressed and implied Warranties; In commercial transaction a breach of warranties may give raise to claim for damages ,but in insurance law ,the party aggrieved is entitled to repudiate the his liability. A warranty is given for the benefit of the insurer and as provided under Sec 36
Thus if a ship is warranted as well or in good safety on a particular day ,it would constitute a warranty with in the meaning of this section . Express warranties : It must be included in or written upon the policy or must be contained in some document referred to in the policy E.g. : the ship is safe on a particular day or the ship will proceed to its destination with out any deviation Implied Warranties: Sea worthiness of Ship Legality of adventure Neutrality
Voyage (sec44to 47): Where the subject matter is insured by a voyage policy .There is an implied condition that the adventure must be commenced with in a reasonable time and on its failure the insurer may avoid the contract In case of change of voyage or deviation also the insurer is discharged from liability as from the time of change of voyage ASSIGMENT OF POLICY :Policy can be transferred by assignment either before or after loss .It can be done either by writing endorsed on the policy or in other customary manner
The insurer need not be informed at all MARINE LOSSES :FOR a particular policy to cover a loss ,the direct or dominant cause of loss will be taken in to consideration i.e. proximate cause Kinds of losses : a) Total losses: 1. Actual total losses 2. Constructive total losses b) Partial losses : 1.General average loss 2.Particular average loss
objects and the insurance is provided basing upon these losses . some times there may be abandonment of the subject matter of the insurance It should be in writing or by words of mouth ,with reasonable diligence .On a valid abandonment ,the insurer is entitled to take over the interest of the assured