Business Regulatory Framework : For Chaudhary Charan Singh University

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Cover Contents Syllabus Preface About the Author Chapter 1: The Indian Contract Act 1872: Nature and Kind of Contracts 1.1 Scope of the Act 1.2 What is a Contract? 1.2.1 Contract 1.2.2 Agreement 1.2.3 Promise 1.2.4 Proposal 1.2.5 Parties to an Agreement/a Contract 1.2.6 Enforceability of an Agreement 1.3 Essential Elements of Valid Contracts—Section 10 1.3.1 Offer and Acceptance 1.3.2 Intention to Create Legal Relation 1.3.3 Lawful Consideration 1.3.4 Free Consent 1.3.5 Lawful Object 1.3.6 Capacity of Parties 1.3.7 Agreement Must not be Expressly Declared Void or Illegal 1.3.8 Certainty of Meaning 1.3.9 Possibility to Perform 1.3.10 Legal Formalities 1.4 Distinguish Between an Agreement and a Contract 1.5 Types of Contract or Classifications of Contract 1.5.1 Express Contract 1.5.2 Implied Contract 1.5.3 Quasi-Contract 1.5.4 E-Contract 1.5.5 Executed Contract 1.5.6 Executory Contract 1.5.7 Partly Executed and Partly Executory Contract 1.5.8 Unilateral Contract 1.5.9 Bilateral Contract 1.5.10 Valid Contract 1.5.11 Void Contract 1.5.12 Voidable Contract 1.5.13 Illegal Agreement 1.5.14 Unenforceable Contract 1.5.15 Certain Contracts in Writing 1.6 Distinguish Between Void and Voidable Contracts 1.7 Distinguish Between Void and Illegal Agreements 1.8 Similarities Between Void and Illegal Agreements List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer—Multiple Choice Questions Chapter 2: The Indian Contract Act 1872: Offer and Acceptance of an Offer 2.1 Essential Elements of an Offer (Proposal) 2.1.1 Two Parties 2.1.2 Communication 2.1.3 Willingness 2.1.4 with Intention of Obtaining Assent 2.1.5 Offer May be Positive or Negative 2.2 Legal Rules as to Offer 2.3 Distinguish Between Invitation to Offer and an Offer 2.4 Classification of Offers or Kinds of Offers 2.4.1 Express Offer 2.4.2 Implied Offer 2.4.3 Specific Offer 2.4.4 General Offer 2.4.5 Cross Offer 2.4.6 Continuous Offer 2.4.7 Counter Offer 2.4.8 Legal Effects of Counter Offer 2.5 Distinguish Between General Offer and Specific Offer 2.6 Lapse of Offer or When Offer Comes to an End 2.6.1 Notice of Withdrawal 2.6.2 Lapse of Time 2.6.3 Non-Fulfillment of Condition Attached with an Offer 2.6.4 Counter Offer 2.6.5 Acceptance is not Made in the Prescribed Mode or Usual Manner by the Offeree 2.6.6 Death or Insanity of an Offeror or Offeree 2.6.7 Rejection of an Offer by the Offeree 2.6.8 Destruction of Subject–Matter 2.6.9 by Change in Provision of Act or any Law 2.7 Legal Rules for the Acceptance 2.7.1 Acceptance Must be Absolute and Unqualified 2.7.2 Acceptance Must be Communicated 2.7.3 Manner of Acceptance 2.7.4 Acceptance of Offer Must be from Competent Person 2.7.5 Time Limit for Acceptance 2.7.6 Acceptance May be Express or Implied 2.7.7 Mere Silence is not Acceptance of an Offer 2.7.8 Acceptance Subject to Contract is No Acceptance 2.8 General Rules as to Communication of Acceptance 2.8.1 In Case of Acceptance by Post 2.8.2 Delayed or No Delivery of Letter 2.8.3 Acceptance by Telephones, Telex or Fax 2.8.4 Place of Contract 2.8.5 Time of Contract 2.8.6 Communication of Acceptance in Case of Agent 2.8.7 Acceptance on Loudspeakers 2.9 Communication of Offer and Acceptance—Sections 4 and 5 2.9.1 Communication of Offer 2.9.2 Communication of Acceptance—Against the Offeror 2.9.3 Communication of Acceptance—Against the Offeree 2.9.4 Communication of Revocation of an Offer 2.9.5 Communication of Revocation of an Acceptance List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 3: The Indian Contract Act 1872: Capacity of Parties and Consideration 3.1 Capacity of Parties 3.1.1 Who are Competent to a Contract? 3.2 Minor 3.3 Effect of Minor’s Agreement 3.3.1 Agreement is Void 3.3.2 Minor can be a Promisee or Beneficiary 3.3.3 No Ratification 3.3.4 No Specific Performance 3.3.5 Restitution Order 3.3.6 Contract by Parent or Guardian 3.4 Different Position of a Minor 3.4.1 Minor Agent 3.4.2 Guarantee for and by a Minor 3.4.3 Minor and Insolvency 3.4.4 Minor as a Joint Promisor 3.4.5 Minor Shareholder 3.4.6 Minor and Negotiable Instruments Act 3.4.7 Service Contract 3.4.8 Minor as Trade Union Member 3.4.9 Liability for Tort 3.5 Minor’s Liability for Necessities 3.5.1 Things Must be Suitable to the Conditions in Life of the Minor 3.5.2 the Minor Must be in Need of Such Things 3.6 Person of Unsound Mind 3.6.1 an Idiot 3.6.2 Delirious Person 3.6.3 Hypnotized Person 3.6.4 Mental Decay 3.6.5 Drunken Person 3.7 Person Disqualified by Law 3.7.1 Body Corporate or Company or Corporation 3.7.2 Alien Enemy 3.7.3 Convict 3.7.4 Insolvent 3.8 What is Consideration? 3.8.1 Consideration is Defined Under Section 2(D) 3.9 Type of Consideration 3.9.1 Past Consideration 3.9.2 Present Consideration 3.9.3 Future Consideration 3.10 Essentials of Valid Consideration 3.10.1 Consideration Means Doing or not Doing Something 3.10.2 Consideration Must Move at the Desire of Promisor 3.10.3 Consideration May Move from Promisee or Other Person 3.10.4 Consideration May be Inadequate 3.10.5 Consideration May be Past, Present or Future 3.10.6 Act Promisor Bound to Do is not Consideration 3.10.7 Consideration Must be Lawful 3.10.8 Consideration Should be Possible to Perform 3.11 Stranger to Contract and Stranger to Consideration 3.11.1 Stranger to Consideration 3.11.2 Stranger to Contract 3.12 Exception to the Rule of—Stranger to Contract 3.12.1 Beneficiary 3.12.2 Family Settlement or Marriage Settlement 3.12.3 Assignment of Contract 3.12.4 Agency 3.13 Exception to Rule ‘No Consideration No Contract’—Section 25 3.13.1 Agreement on Account of Natural Love and Affection 3.13.2 Voluntary Past Services 3.13.3 Bailment 3.13.4 Agreement to Pay Time Barred Debt 3.13.5 Gift 3.13.6 Contract of Agency 3.13.7 Promise to Charities List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 4: The Indian Contract Act 1872: Free Consent 4.1 Meaning of a Consent—Section 13 4.2 Free Consent—Section 14 4.3 Coercion 4.4 Certain Threats Do not Amount to Coercion 4.4.1 Threat to Sue Does not Amount to Coercion 4.4.2 Statutory Compulsions 4.4.3 Threat to Strike 4.4.4 Detaining Property Under Mortgage 4.5 Undue Influence 4.6 When a Person is Deemed to be in Position to Dominance of will of Others? 4.6.1 When a Person Holds Real or Apparent Authority Over Other 4.6.2 When He Stands in Fiduciary Relationship Over Other 4.6.3 When Contract is Made with Mentally Weak Person 4.6.4 Contract with Pardanashin Woman 4.6.5 No Presumption of Dominance of will 4.7 Distinguish Between Coercion and Undue Influences 4.8 Fraud 4.9 Essential Elements of Fraud 4.9.1 False Representation 4.9.2 Material Fact 4.9.3 Rely Upon the False Representation 4.9.4 Silence is not Fraud 4.10 Exception to the Rule—Silence is not Fraud 4.10.1 it is Duty of a Person to Speak in Circumstances 4.10.2 Silence is Equivalent to Speech 4.11 Contract of Ubberimae Fidei 4.11.1 Contract of Insurance 4.11.2 Contracts for Sale of Immovable Property 4.11.3 Contracts of Marriage 4.11.4 Contracts of Family Settlement 4.11.5 Contract of Partnership 4.12 Effects of Fraud 4.13 Misrepresentation 4.13.1 Consequences of Misrepresentation 4.14 Essential Elements of Misrepresentation 4.15 Distiguish Between Fraud and Mispresentation 4.16 Similarities Between Fraud and Misrepresentation 4.17 Mistake 4.17.1 Mistake of Law 4.17.2 Mistake of Fact 4.18 Distinguish Between Unilateral Mistake and Bilateral Mistake List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 5: The Indian Contract Act 1872: Void Agreement and Contingent Contract 5.1 When an Object or a Consideration is Unlawful?—Section 23 5.1.1 If it is Forbidden (Prohibited) by Law 5.1.2 An Act Which would Defeat the Provisions of any Law 5.1.3 If it Creates Injury to any Person or Property of Person 5.1.4 Object or Consideration of an Agreement is Fraudulent 5.1.5 Where Court Consider it as Immoral or Against Public Policy 5.2 An Agreement Opposed to Public Policy 5.2.1 Trading with an Enemy 5.2.2 Agreement to Commit Crime 5.2.3 Agreement Interfering Course of Justice 5.2.4 Agreement Interfering Admistration 5.2.5 Stifling Prosecution 5.2.6 Maintenance Agreement 5.2.7 Champerty Agreement 5.2.8 Agreement in Restraint of Legal Proceeding 5.2.9 Agreement in Restraint of Parental Rights 5.2.10 Agreement in Restraint of Personal Freedom 5.2.11 Agreement in Restraint of Marriage 5.2.12 Marriage Brokerage 5.2.13 Agreements for Sale of Public Offices and Titles 5.3 Agreements in Restraint of Trade—Section 27 5.3.1 Exceptions to the Rule 5.4 Agreement in Restraint of Legal Proceedings—Section 28 5.5 Agreements Unlawful in Parts 5.5.1 Where Lawful Part can be Separated from the Unlawful Part 5.5.2 Where Lawful and Unlawful Parts Cannot be Separated 5.5.3 Reciprocal Promise to Do Things Legal and Also Other Things Illegal 5.5.4 Alternative Promise, One Branch Being Illegal 5.6 Wagering Agreement—Section 30 5.7 Essentials of Wagering Agreement 5.7.1 Promise to Pay Money or Money’s Worth 5.7.2 Performance Depend Upon Event 5.7.3 Change of Win or Loss 5.7.4 No Interest or Control Over an Event 5.8 Effects of Wagering Agreement Table 5.9 Distinguish Between a Wagering Agreement and an Insurance Contract Table 5.10 Distinguish Between a Wagering Agreement and a Contigent Contract 5.11 Illegal Agreement 5.11.1 Effects of Illegal Agreement 5.12 Contigent Contract—Section 31 5.13 Essential Features of Contigent Contract 5.13.1 Event in Future 5.13.2 Event Must be Uncertain 5.13.3 Event Must be Collateral 5.13.4 Event Must not Depend Upon Act of Party 5.14 Rules Regarding Enforcement of Contingent Contract 5.14.1 Contingent Contract Dependent on the Happening of Future Uncertain Event 5.14.2 Contingent Contract Dependent on the Non-Happening of Future Uncertain Event 5.14.3 Contingent Contract Dependent on Happening of Specified Uncertain Event Within Fixed Time 5.14.4 Contingent Contract Dependent on Non-Happening of Specified Uncertain Event Within Fixed Time 5.14.5 Contingent Contract Dependent Upon Impossible Events 5.15 Uncertain Agreement Table 5.16 Distinguish Between a Void Agreement and a Void Contract List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 6: The Indian Contract Act 1872: Performance of Contract 6.1 Essentials of a Valid Tender 6.1.1 it Must be Unconditional 6.1.2 it Must be at Proper Place 6.1.3 for Whole Obligation 6.1.4 in Legal Tender Money 6.1.5 it Must be Made at Proper Time and to a Proper Person 6.1.6 Reasonable Opportunity to Promisee 6.2 Effects of a Valid Tender 6.3 Types of Tenders 6.3.1 Tender of Goods and Services 6.3.2 Tender of Money 6.4 Contracts Which Need not to Perform 6.4.1 Performance Becomes Impossible 6.4.2 New Contract in Place of Old Contract 6.4.3 Waiver by Promisee 6.4.4 Promise Becomes Illegal 6.4.5 Rejection of Valid Tender 6.4.6 No Reasonable Facility 6.5 Who can Perform Contract? 6.5.1 Promisor 6.5.2 Legal Representative 6.5.3 Third Party 6.6 Performance of Joint Promise—Sections 42–45 6.6.1 Promisee May Compell to Perform any One of Joint Promisor 6.6.2 The Joint Promisors are Liable to Contribute Equally 6.6.3 Joint Promisors Liable to Share Loss Equally 6.6.4 Effect of Release of Joint Promisor 6.7 Time and Place for Performance of Promise—Sections 46–50 6.7.1 Time for Performance of Promise Where No Application is to be Made and No Time is Specified 6.7.2 Time and Place for Performance of Promise Where Time is Specified and No Application to be Made 6.7.3 Application for Performance on Certain Day to be at Proper Time and Place 6.7.4 Place for Performance of Promise Where No Application to be Made and No Place Fixed for Performance 6.7.5 Performance in Manner or at Time Prescribed or Sanctioned by Promisee 6.8 Who can Demand Performance of Promise? 6.8.1 Promisee 6.8.2 Legal Representative of Promisee 6.8.3 Third Party 6.8.4 Demand by Joint Promisees 6.9 Kinds of Reciprocal Promise 6.9.1 Mutual and Independent 6.9.2 Mutual and Dependent 6.9.3 Mutual and Concurrent 6.10 Rules Regarding Performance of Reciprocal Promises 6.10.1 Simultaneous Performance of Reciprocal Promise—Section 51 6.10.2 Order of Reciprocal Promise is Fixed—Section 52 6.10.3 Effect of Preventing Performance—Section 53 6.10.4 Effect of Default as to Promise to be Performed First Under Contract—Section 54 6.10.5 Effect of Promise to Do Legal and Illegal Things—Section 57 6.11 Time is the Essence of a Contract 6.11.1 Effect of Such Failure When Time is not Essential 6.11.2 Effect of Acceptance of Performance at Time Other than that Agreed Upon 6.12 Appropriation of Payments—Sections 59–61 6.12.1 Appropriation as Per Express Instructions 6.12.2 Appropriation as Per Circumstances Implying 6.12.3 Appropriation of Payment Where No Express Instructions or Implying Circumstances are there 6.12.4 Appropriation in Chronological Order, I.E., in Order of Time 6.12.5 Appropriation in Case of Current Account 6.12.6 In Case Interest is Also Due 6.12.7 Payment Received in Demand for Various Debts 6.12.8 Appropriation in Case of Trust Fund 6.13 Assignment and Succession of a Contract List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 7: The Indian Contract Act 1872: Discharge of a Contract 7.1 Discharge of a Contract 7.2 Discharge of a Contract on Performance 7.2.1 By an Actual Performance 7.2.2 By an Attempted Performance or a Tender 7.3 Discharge of a Contract by a Mutual Agreement or by an Implied Consent 7.3.1 Novation 7.3.2 Alteration 7.3.3 Rescission 7.3.4 Remission 7.3.5 Waiver 7.3.6 Merger 7.4 Distinguish Between a Novation and an Alteration 7.5 Distinguish Between a Rescission and an Alteration 7.6 Discharge of a Contract by Impossibility of Performance 7.6.1 Initial Impossibility or Pre-Contractual Impossibility 7.6.2 Known Impossibility 7.6.3 Unknown Impossibility 7.6.4 Supervening Impossibility or Post-Contractual Impossibility 7.7 Specific Grounds of Subsequent Impossibilities 7.7.1 Destruction of Subject–Matter 7.7.2 Incapacity or Death 7.7.3 Change in Law or Circumstances 7.7.4 Declaration of War 7.8 Cases Where a Contract is not Discharged on the Ground of Supervening Impossibility 7.8.1 Performance Becomes Difficult 7.8.2 Commercial Impossibility 7.8.3 Impossibility Due to the Conduct of Third Party 7.8.4 Strikes, Riots or Civil Disturbances 7.8.5 Self-Induced Impossibility 7.8.6 Failure of Object 7.9 Discharge of a Contract by Lapse of Time 7.10 Discharge of a Contract by Operation of Law 7.10.1 Death 7.10.2 Merger 7.10.3 Insolvency 7.10.4 Unauthorized Material Alteration 7.11 Discharge of a Contract by Breach of Contract 7.11.1 Consequences of Breach of Contract 7.11.2 Actual Breach of Contract 7.11.3 Anticipatory Breach of Contract List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 8: The Indian Contract Act 1872: Remedies for Breach of Contract and Quasi-contract 8.1 Rescission of a Contract—Section 39 8.1.1 Effects of Rescission of a Contract 8.2 Suit for Damages 8.3 Kinds of Damages 8.3.1 Ordinary Damages 8.3.2 Special Damages 8.3.3 Exemplary or Punitive or Vindictive Damages 8.3.4 Nominal Damages 8.3.5 Damages for Inconvenience 8.3.6 Liquidated Damages and Penalty 8.3.7 Forfeiture of Security Deposit 8.3.8 Payment of Interest 8.3.9 Cost of Suit or Decree 8.4 Suit for a Specific Performance 8.4.1 When a Specific Performance is Allowed? 8.4.2 When a Specific Performance is not Allowed? 8.5 Suit for Injunction 8.6 Quantum Meruit 8.6.1 Claim on Quantum Meruit by a Party not at Fault 8.6.2 Claim on Quantum Meruit by a Party at Fault 8.7 Quasi-Contract—Sections 68–72 8.7.1 Cases of Quasi-Contract 8.8 Distinguish Between a Quasi-Contract and a Contract List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 9: The Indian Contract Act 1872: Indemnity and Guarantee 9.1 Indemnity Contract 9.2 Essential Elements of an Indemnity Contract 9.2.1 Loss to One Party 9.2.2 Indemnity by the Promisor 9.2.3 Reason for Loss 9.3 Right of an Indemnity Holder—Section 125 9.3.1 Right to Recover Damages 9.3.2 Right to Recover Costs 9.3.3 Right to Recover Sums Paid in Compromise 9.4 Guarantee 9.5 Essential Elements of Contract of Guarantee 9.5.1 Concurrence 9.5.2 Primary Liability in Some Person 9.5.3 Essentials of a Valid Contract 9.5.4 Writing not Necessary 9.6 Kinds of Guarantee 9.6.1 Retrospective Guarantee 9.6.2 Prospective Guarantee 9.6.3 Specific Guarantee 9.6.4 Continuing Guarantee—Section 129 9.7 Revocation of a Continuing Guarantee 9.7.1 by Notice—Section 130 9.7.2 by Death of Surety—Section 131 9.7.3 on Discharge of Surety 9.8 Surety’s Liability—Section 128 9.8.1 Liability is Secondary and Conditional 9.8.2 Liability is Coextensive with Liability of Principal Debtor 9.8.3 Surety’s Liability May be Limited 9.9 Rights of Surety 9.9.1 Against the Principal Debtor—Sections 140 and 145 9.9.2 Against the Creditor 9.9.3 Against Co-Sureties 9.10 Discharge of a Surety 9.10.1 By Notice of Revocation—Section 130 9.10.2 By Death of Surety—Section 131 9.10.3 By Variance in Terms of Contract—Section 133 9.10.4 By Release or Discharge of Principal Debtor—Section 134 9.10.5 When Creditor Compound or Give Time to Debtor—Section 135 9.10.6 By Creditor’s Act—Section 139 9.10.7 By Release or Lose of Security by Creditor—Section 141 9.10.8 By Invalidation of Contract of Guarantee 9.11 Difference Between a Contract of Indemnity and a Contract of Guarantee List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 10: The Indian Contract Act 1872: Bailment and Pledge 10.1 What is a Bailment? 10.2 Essentials of a Valid Bailment 10.2.1 Delivery of Possession 10.2.2 Contract Between the Parties 10.2.3 Delivery for Some Purpose 10.2.4 Return or Disposal of Goods 10.3 Types of Bailment 10.3.1 Gratuitous Bailment 10.3.2 Non-Gratuitous Bailment 10.3.3 Bailment for the Exclusive Benefit of a Bailor 10.3.4 Bailment for the Exclusive Benefit of a Bailee 10.3.5 Bailment for Mutual Benefit of Both Bailor and Bailee 10.4 Duties of a Bailee 10.4.1 Duty of Care—Sections 151 and 152 10.4.2 Compensation for an Unauthorized Use—Section 154 10.4.3 Duty not to Mix—Sections 155–157 10.4.4 Duty to Return Goods—Sections 160 and 161 10.4.5 Duty to Return Increase or Profit—Section 163 10.4.6 Duty not to Set Up Adverse Title 10.5 Duties of a Bailor 10.5.1 Duty to Disclose Fault—Section 150 10.5.2 Duty to Bear Extraordinary Expenses—Section 158 10.5.3 Duty to Indemnify Loss for Permanent Termination of Bailment—Section 159 10.5.4 Duty to Indemnify the Bailee for any Loss—Section 164 10.5.5 Duty to Receive Back the Goods—Section 164 10.5.6 Duty to Bear a Loss—Section 162 10.6 Bailee’s Rights 10.6.1 Return/Delivery of Goods—Section 165 10.6.2 File Suit to Court 10.6.3 To Recover Charges 10.6.4 Right of Lien 10.7 Bailor’s Rights 10.7.1 Enforcement 10.7.2 Termination of Bailment—Section 153 10.7.3 File Suit Against a Wrong Doer 10.7.4 to Demand Goods at any Time—Section 159 10.8 Termination of a Bailment 10.8.1 Efflux of Time 10.8.2 Fulfillment of Purpose 10.8.3 Inconsistent Use of Goods 10.8.4 Destruction of the Subject–Matter 10.8.5 Death of any Party 10.8.6 Termination by a Bailor 10.9 Lien 10.9.1 General Lien 10.9.2 Particular Lien 10.10 Difference Between a General Lien and a Particular Lien 10.11 Finder of Goods 10.12 Pledge 10.13 Rights of a Pawnee 10.13.1 Right of a Retainer—Sections 173 and 174 10.13.2 Extraordinary Expenses—Section 175 10.13.3 When a Pawnor Defaults—Section 176 10.13.4 To Sell Goods 10.14 Rights of a Pawnor 10.14.1 Redeem Goods Pledged 10.14.2 Surplus on Sale 10.15 Pledge by a Non-Owner 10.15.1 Mercantile Agent 10.15.2 Possession Under a Voidable Contract 10.15.3 Person with Limited Interest 10.15.4 Seller in Possession After Sale 10.16 Distinguish Between a Bailment and a Pledge List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 11: The Indian Contract Act 1872: Agency 11.1 Contract of Agency 11.1.1 Agent 11.1.2 Principal 11.2 Essentials for a Valid Agency 11.2.1 Agreement Between the Principal and the Agent 11.2.2 Agent Must Act in a Representative Capacity 11.2.3 Consideration 11.2.4 Capacity of a Party 11.3 Test of an Agency 11.4 Difference Between an Agent and a Servant 11.5 Difference Between an Agent and an Independent Contractor 11.6 Different Kinds of Agents 11.6.1 General Agent 11.6.2 Particular Agent 11.6.3 Universal Agent 11.6.4 Mercantile Agent 11.6.5 Factor 11.6.6 Broker 11.6.7 Commission Agent 11.6.8 Auctioneer 11.6.9 Del Credere Agent 11.7 Mode of Creating an Agency 11.7.1 Agency by an Express Agreement—Sections 186 and 187 11.7.2 Agency by an Implied Agreement—Section 187 11.7.3 Agency by Ratification—Sections 196 and 197 11.8 Requisites of a Valid Ratification—Sections 198–200 11.8.1 The Agent Must Expressly Contract Agent 11.8.2 The Principal Must be in Existence at the Time of the Contract 11.8.3 The Principal Must have Contractual Capacity, Both at the Time of the Contract and at the Time of the Ratification 11.8.4 Ratification Must be with Full Knowledge of Facts 11.8.5 The Act to be Ratified Must be Lawful and not Void or Illegal 11.8.6 Ratification Must be Done Within a Reasonable Time 11.8.7 The Whole Act to be Ratified 11.8.8 Ratification Must be Communicated 11.8.9 Ratification can be of the Acts Which the Principal Had the Power to Do 11.8.10 Ratification Should not Put a Third Party to Damages 11.9 Husband and Wife 11.10 Extent of an Agent’S Authority 11.10.1 Actual Authority—Section 186 11.10.2 Ostensible or Apparent Authority 11.10.3 Authority in Emergency—Section 189 11.10.4 When the Agent Exceeds His Authority 11.11 Delegation of Authority by an Agent 11.11.1 Delegation of Authority—Section 190 11.11.2 Exceptions to the Rule of ‘ 11.12 Sub-Agent—Section 191 11.12.1 Where a Sub-Agent is Properly Appointed—Section 192 11.12.2 Where a Sub-Agent is not Properly Appointed—Section 193 11.13 Substituted Agent or Co-Agent—Section 194 11.14 Difference Between a Sub-Agent and a Substituted Agent 11.15 Duties of an Agent 11.15.1 Duty to Follow the Instruction of Principal—Section 211 11.15.2 Duty to Carry Work with Care and Skill—Section 211 11.15.3 Duty to Render Accounts to the Principal—Section 213 11.15.4 Duty to Communicate with the Principal—Section 214 11.15.5 Duty not to Deal on His Own Account—Section 215 11.15.6 Duty not to Make Secret Profit—Section 216 11.15.7 Duty to Pay Sums Received for the Principal—Sections 217 and 218 11.15.8 Duty to Protect Interests of the Principal in Case of His Death or Insolvency—Section 209 11.15.9 Duty not to Delegate—Section 190 11.16 Rights of an Agent 11.16.1 Right to a Retainer—Section 217 11.16.2 Right to Receive the Remuneration—Sections 219 and 220 11.16.3 Right of Lien—Section 221 11.16.4 Right to be Indemnified—Section 222 11.16.5 Right of Compensation—Section 225 11.17 Position of a Principal and an Agent in Relation to Third Parties 11.18 Principal Relationship Where an Agent Contracts for a Named Principal 11.18.1 Acts of the Agents are Within His Authority—Section 226 11.18.2 Agent Act in Excess His Authority—Section 227 11.18.3 Consequences of Notice Given to Agent—Section 229 11.18.4 Principal Inducing Belief that Agent’s Unauthorized Acts are Authorized—Section 237 11.18.5 Misrepresentation or Fraud by an Agent—Section 238 11.19 Principal’s Relation Where an Agent Contracts for an Unnamed Principal 11.20 Principal’s Relation Where an Agent Contracts for an Undisclosed Principal 11.20.1 Position of an Agent 11.20.2 Position of a Principal 11.20.3 Position of a Third Party 11.21 Personal Liabilies of an Agent 11.21.1 When the Agent Acts for a Foreign Principal—Section 230 11.21.2 When the Agent Acts for an Undisclosed Principal—Section 230 11.21.3 When Agent Acts for an Incompetent Principal—Section 230 11.21.4 When the Contract Expressly Provides 11.21.5 When the Agent Acts for a Principal not in Existence 11.21.6 When the Agent Signs a Contract in His Own Name 11.21.7 When the Agent Acts Beyond His Authority 11.21.8 Where there is a Misrepresentation or Fraud by Agent 11.21.9 Where the Trade, Usage or Custom Makes the Agent Personally Liable 11.21.10 Where Authority is Coupled with an Interest 11.21.11 Pretended Agent—Sections 235 and 236 11.22 Termination of an Agency 11.23 Termination of an Agency by the Act of Parties 11.23.1 By an Agreement 11.23.2 By Revocation of an Authority 11.23.3 By Renunciation of Agency by Agent 11.24 Termination of an Agency by the Operation of Law 11.24.1 By Performance 11.24.2 By Efflux of Time 11.24.3 By Death or Insanity 11.24.4 By Insolvency 11.24.5 On Destruction of Subject Matter 11.24.6 On Winding Up of Company 11.24.7 On Principal Becoming an Alien Enemy 11.25 Irrevocable Agency 11.25.1 Where the Agency is Coupled with an Interest 11.25.2 Where an Agent has Incurred a Personal Liability 11.25.3 Where an Agent has Partly Exercised an Authority List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 12: Sales of Goods Act 1930 12.1 Applicability 12.2 Definition 12.2.1 Buyer—Section 2(1) 12.2.2 Seller—Section 2(13) 12.2.3 Delivery—Section 2(2) 12.2.4 Price—Section 2(10) 12.2.5 Goods—Section 2(7) 12.2.6 Agreement to Sell 12.2.7 Sale 12.2.8 Document of Title—Section 2(4) 12.2.9 Property—Section 2(11) 12.3 Essentials of Valid Sales 12.3.1 Two Parties 12.3.2 Goods 12.3.3 Transfer of Property 12.3.4 Consideration 12.3.5 Elements of Contract 12.3.6 Form of Contract of Sale 12.3.7 Delivery of Goods 12.4 Distinguish Between a Sale and an Agreement to Sell 12.5 Distinguish Between a Sale and a Hire–Purchase 12.6 Distinguish Between a Sale and a Bailment 12.7 Contract for Work and Skill 12.8 Types of Goods 12.8.1 Existing Goods 12.8.2 Future Goods 12.8.3 Contingent Goods 12.9 Price of Goods—Sections 9 and 10 12.9.1 Method 1 12.9.2 Method 2 12.9.3 Method 3 12.9.4 Method 4 12.10 Consequences of Destruction of Specific Goods—Sections 7 and 8 12.10.1 If Goods Perish Before Making of Contract 12.10.2 Where a Part of the Goods is Perished Before Making of Contract 12.10.3 If Goods Perish After the ‘Agreement to Sell’ but Before ‘Sale’ 12.11 Conditions and Warranties 12.12 Implied Conditions 12.12.1 Conditions as to Title—Section 14(a) 12.12.2 Conditions as to Description—Section 15 12.12.3 Sale by Sample—Section 17 12.12.4 Sale by Description as Well as Sample—Section 15 12.12.5 Conditions as to Quality and Fitness for Buyer’S Purpose—Section 16 12.12.6 Conditions as to Merchantability—Section 16 12.12.7 Condition as to Wholesomeness 12.13 Implied Warranties 12.13.1 Warranty as to Quiet Possession—Section 14 12.13.2 Warranty Against Encumbrances—Section 14 12.13.3 Warranty as to Quality and Fitness by Usage of Trade—Section 16 12.13.4 Warranty to Disclose the Dangerous Nature of Goods 12.13.5 Circumstances When a Condition can be Treated as Warranty 12.14 Distinguish Between a Condition and a Warranty 12.15 Doctrine of Caveat Emptor 12.16 Transfer of Ownership of Specific Goods—Sections 20–22 12.16.1 Ownership is Transferred at the Time of Making Contract 12.16.2 Ownership is Transferred When Goods are Put in Deliverable State 12.16.3 Ownership is Transferred When Goods in Deliverable State Put to Weighed or Measured to Ascertained Price 12.17 Transfer of Ownership in the Case of Unascertained Goods—Sections 18 and 23 12.18 Transfer of Ownership in Case of Goods Sale on Approval or on Sale or Return Basis—Section 24 12.19 Passing of Risk 12.20 Rules Regarding Delivery of Goods—Sections 32–39 12.20.1 Payment of Price 12.20.2 Buyer’s Duty to Demand Goods 12.20.3 Types or Mode of Delivery 12.20.4 Place of Delivery 12.20.5 Time of Delivery 12.20.6 Expenses 12.20.7 Delivery of Wrong Quantity 12.20.8 Delivery of Mixed Quality–Quantity 12.20.9 Delivery by Instalment 12.20.10 Right to Examine—Section 41 12.20.11 Delivery to Carrier or Wharfinger—Section 39 12.20.12 Seller Duty on Valid Delivery of Goods 12.20.13 Acceptance of Delivery—Section 42 12.20.14 Wrongful Refusal to Take Delivery 12.20.15 Goods Sent by Sea Route 12.21 Unpaid Seller 12.22 Rights of Unpaid Seller 12.22.1 Rights of Unpaid Seller Against the Goods When Ownership is Transferred 12.22.2 Rights of Unpaid Seller Against the Goods When Ownership is not Transferred 12.22.3 Rights of Unpaid Seller Against Buyer 12.23 Right of Lien 12.24 Right of Stoppage in Transit—Sections 50–52 12.24.1 Duration of Transit—Section 51 12.25 Right of Resale 12.26 Right to Withhold Delivery of Goods 12.27 Delivery to Carrier 12.28 Buyer’s Right Against the Seller or Remedies Against Seller—Sections 55–61 12.28.1 Suit for Damage for Non-Delivery 12.28.2 Suit for Specific Performance 12.28.3 Suit for Breach of Warranty 12.28.4 Right to Repudiate the Contract 12.28.5 Suit for Interest 12.29 Sale by Non-Owners or Transfer of Title by Non-Owners—Sections 27–30 12.29.1 Sale by Mercantile Agent 12.29.2 Sale by One of the Joint Owners—Section 28 12.29.3 Sale by Person in Possession Under Voidable Contract 12.29.4 Sale by Seller in Possession After Sale—Section 30 12.29.5 Sale by Unpaid Seller 12.29.6 Sale by Liquidator 12.29.7 Sale by Finder of Goods 12.29.8 Sale by Pawnee or Pledgee 12.30 Auction Sale—Section 64 12.31 Delivery of Goods in Contract by Sear Route 12.31.1 Cif Contract 12.31.2 F.O.B. Contract 12.31.3 Ex-Ship Contract List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 13: The Negotiable Instrument Act 1881 13.1 Introduction to Negotiable Instruments 13.2 Essentials or Characteristics of a Negotiable Instrument 13.3. Presumptions as to Negotiable Instruments 13.4 Promissory Note—Section 4 13.5 Essentials Characteristics of a Promissory Note 13.5.1 In Writing 13.5.2 Express Promise to Pay 13.5.3 Definite and Unconditional Promise 13.5.4 Signed by Maker 13.5.5 Promise to Pay a Certain Sum 13.5.6 Payee Must be Certain 13.5.7 Stamped 13.5.8 Parties 13.6 Bill of Exchange—Section 5 13.7 Difference Between Promissory Note and Bill of Exchange 13.8 Cheque—Section 7 13.8.1 Truncated Cheque 13.8.2 Cheque in Electronic Form 13.8.3 Presentment of Truncated Cheque 13.9 Difference Between Bill of Exchange and Cheque 13.10 Difference Between Electronic Cheque and Trancated Cheque 13.11 Capacity of a Person to be a Party to a Negotiable Instrument 13.12 Classification of Negotiable Instruments 13.12.1 Order Instrument—Section 13 13.12.2 Bearer Instrument—Section 13 13.12.3 Demand Instrument—Sections 19–21 13.12.4 Time Instrument 13.12.5 Inland Instrument—Section 11 13.12.6 Foreign Instrument—Section 12 13.12.7 Ambigious Instrument—Section 17 13.12.8 Accommodation Bill 13.12.9 Fictitious Bill 13.12.10 Documentary Bill 13.12.11 Clean Bill 13.13 Distinguish Between Inland and Foreign Bills 13.14 Incomplete Instrument or Inchoate Instrument—Section 20 13.15 Distinguish Between Ambiguous Instrument and Inchoate Instrument 13.16 Maturity of a Negotiable Instrument—Sections 22–25 13.16.1 Calculation of Days 13.17 A Negotiable Instrument Made Without Consideration 13.18 Negotiation—Section 14 13.18.1 Negotiation by Delivery 13.18.2 Negotiation by Endorsement and Delivery 13.19 Endorsement—Sections 15 and 16 13.20 Kinds of Endorsements—Sections 16, 50, 52 and 56 13.20.1 Blank or General Endorsement 13.20.2 Special or Full Endorsement 13.20.3 Restrictive Endorsement 13.20.4 Partial Endorsement 13.20.5 Conditional or Qualified Endorsement 13.21 Negotiation Back 13.21.1 Effects of Negotiation Back 13.22 Distinction Between Negotiation and Assignment 13.23 Crossing of Cheque 13.23.1 Modes or Types of Crossing—Sections 123–131(a) 13.24 Bouncing or Dishonour of Cheques—Sections 31 and 138 13.24.1 Liability of Drawee on Dishonour 13.24.2 Liability of Drawer on Dishonour 13.25 Holder—Section 8 13.25.1 Meaning of ‘Holder’ 13.25.2 Meaning of ‘Holder in Due Course’—Section 9 13.26 Privileges of a Holder in Due Course 13.27 Difference Between Holder and Holder in Due Course 13.28 Payment in Due Course—Section 10 13.29 Protection to Paying Banker—Section 85 13.30 Liability/Duty of the Paying Banker and Collecting Banker—Section 129 13.30.1 Duties of Collecting Banker 13.31 When Banker Must Refuse to Honour a Customer’S Cheque 13.32 Banker May Refuse to Honour a Customer’S Cheque 13.33 Effect of Non-Presentment of Cheque Within Reasonable Time 13.34 Material Alteration—Sections 87–89 13.34.1 Effect of Material Alteration—Sections 87 and 88 13.35 Acceptance of Bill 13.35.1 Essentials of a Valid Acceptance 13.35.2 Types of Acceptance 13.35.3 Effect of Qualified Acceptance 13.36 Dishonour by Non-Acceptance 13.36.1 Effects 13.37 Acceptance for Honour 13.37.1 Conditions for ‘Acceptance for Honour’ 13.37.2 Liability of Acceptor for Honour 13.37.3 Rights of Acceptor for Honour 13.38 Payment for Honour 13.38.1 Conditions for ‘Payment for Honour’ 13.38.2 Rights of Payer for Honour 13.39 Dishonour by Non-Payment 13.40 Notice of Dishonour 13.40.1 When Notice of Dishonour is Unnecessary or Excused? 13.41 Noting and Protesting—Sections 99–104(a) 13.42 Drawee in Case of Need 13.43 Discharge of a Negotiable Instrument 13.43.1 Payment in Due Course 13.43.2 Cancellation 13.43.3 Release 13.43.4 Negotiation Back 13.44 Discharge of a Party 13.44.1 By Payment 13.44.2 By Cancellation 13.44.3 By Release 13.44.4 By Allowing Drawee More than 48 Hours to Accept 13.44.5 By Qualified Acceptance 13.44.6 By Material Alteration 13.44.7 By Negotiation Back 13.44.8 By Operation of Law 13.45 Hundi 13.45.1 Nam Jog Hundi 13.45.2 Diiani Jog Hundi 13.45.3 Darshani Hundi 13.45.4 Miadi Hundi or Muddati Hundi 13.45.5 Shahjog Hundi 13.45.6 Jokhmi Hundi 13.45.7 Peth 13.45.8 Perpeth 13.45.9 Khoka List of Landmark Judgements Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions Chapter 14: Foreign Exchange Management Act 1999 14.1 Application of Act—Section 1 14.2 Fera vs. Fema 14.3 Definition 14.3.1 Person—Section 2(u) 14.3.2 Person Resident in India—Section 2(v) 14.3.3 Currency—Section 2(h) 14.3.4 Foreign Currency—Section 2(m) 14.3.5 Foreign Exchange—Section 2(n) 14.3.6 Foreign Security—Section 2(o) 14.3.7 Person Resident Outside India—Section 2(w) 14.4 Authorized Persons 14.4.1 Authorized Persons—Section 2(c) 14.4.2 Duties of Authorized Person 14.4.3 Authorization and Its Revocation 14.5 Current Account Transaction 14.5.1 Prohibited Current Account Transactions 14.5.2 Current Account Transactions with Prior Approval of the Cg 14.5.3 Current Account Transactions with Prior Approval of the RBI 14.6 Export of Goods and Services 14.6.1 Indication of Importer–Exporter Code Number (IEC) 14.6.2 Period Within Which Export Value of Goods/Software to be Realized 14.6.3 Transfer of Documents 14.7 Capital Account Transactions—Section 2(E) 14.7.1 Permissible Capital Account Transactions for Residents 14.7.2 Permissible Capital Account Transactions for Non-Residents 14.7.3 Prohibited Capital Account Transactions 14.8 Acquisition and Transfer of Immovable Property in India 14.8.1 Acquisition and Transfer of Property in India by a Person of Indian Origin (PIO) 14.8.2 Acquisition of Immovable Property for Carrying on Business 14.9 Acquisition and Transfer of Immovable Property Outside India 14.10 Establishment in India of Branch or Office or Other Place of Business 14.10.1 Liaison Office 14.11 Acceptance of the Deposit 14.11.1 Deposits by the India Company and NBFC from NRUI/PI on Repatriation Basis 14.11.2 Deposits by Indian Proprietorship/Film/Company and NBFC on Non-Repatriation Basis from NRI/PIO/OCB 14.12 Export and Import of Currency 14.12.1 Export and Import of Indian Currency and Currency Notes 14.12.2 Prohibition of Export of Indian Coins 14.12.3 Import of Foreign Exchange Into India 14.12.4 Export of Foreign Exchange and Currency Notes 14.12.5 Export and Import of Currency to or from Nepal and Bhutan 14.13 Possession and Retention of Foreign Currency 14.13.1 Limit for Possession and Retention of Foreign Currency or Foreign Coins 14.14 Realization, Repartiation and Surrender of Foreign Exchange 14.14.1 Duty of Persons to Realize Foreign Exchange 14.14.2 Period for Surrender in Certain Cases 14.15 Enforcement Directorate 14.16 Departmental Adjudication—Section 16 14.17 Compounding of Offence 14.18 Liberalized Remittance Scheme for Resident Individuals Test Your Knowledge Multiple Choice Questions Answer-Multiple Choice Questions