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Sections 124 to 147

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Lien

Lien is the right of a person (usually thecreditor) to retain the possession of thegoods and securities belonging toanother person (the debtor) till the

amounts due to him from such ownerare fully realized. Specific/ Particular lien

General lienBankers lien

Bankers set off- One account to anotheraccount- When there are two accountsof the customer, then the bank have the

remedy of set off

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Important clauses inCommercial transactions

Description of Parties

RECITALS OF SUBJECT ( Narrativeand Introductory)

ConsiderationsCovenantsSignature and attestations

Stamp duty, Registration etcArbitration clause

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Employer and employeecontract

Duties of employee- Loyalty,obedience and care

Employment-at- will

Consideration, collective bargaining terminations Liquidated damages Data privacy Confidentiality Non disclosure agreement Indemnification

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Other features

Indemnity is not given byrepayment after payment.Indemnity requires that the

partyto be indemnified shall never becalled upon to pay.

Certain Rights of indemnityholder to ask for damages,

costs or any other sums paid in

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Diff. b/w 124 & 126

Number of parties Object or purpose- reimbursement

of loss. For the security of a debt orgood conduct of an employee

Number of contracts- one. Threecontracts

Nature of liability in 124 primary,

126 Secondary Request by the debtor in 126 not in

124 Existing debt or duty

Right to sue

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Nature and extent of Suretysliabilty

Sec.128 the liability of thesurety is co-extensive with thatof the principal debtor unless

otherwise agreed

Same as that of PD

Neither more or less

By special contract it may bemade less than that of PD, butnever greater

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The liability of the surety issecondary or contingent

Arise immediately on the default ofthe PD

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Indemnity and Guarantee

Specific provisions relating toI&G u/s 124 to 147

In addition to these specificprovisions u/s 124 to 147, thegeneral principles of contractsare also applicable

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148 Vs 172

As to purpose- pledge is the bailment ofgoods for some specific purpose (toprovide a security for a loan or for the

fullfillment of an obligation) 148 is for apurpose other than above two- frorepairs, safe custody etc.

As to right of sale in 172 afeter notice

but not in 148 As to right of using the goods- in 172 no

while in 148 no such restriction existsfor a bailee in case nature of transactionso requires.

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Pledge by non-owners

Mercantile agents (178)

Person in possession undervoidable contract-178-A

Pledgor in possession of goodsafter sale

Seller in possession of goodsafter sale

Buyer in possession of goods

under an agreement to sell -

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ESSENTIAL FEATURESOF INDEMNITY There are two persons , the indemnifier

the indemnified or the indemnity holder There must be loss either by the

promisors conduct or by any other

persons conduct It is a contingent contract by nature It may be express or implied

Sec125 deals with the commencement

of the indemnifiers liability. His liabilitycommences when the event causing theloss occurs or when the event saving theindemnified from the loss becomesimpossible

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Indemnity

Meaning = to make good the lossor to compensate the party whohas suffered the loss.

Section 124= a contract by whichone party promises to save theother from loss caused to him by

the conduct of the promisorhimself, or by the conduct of anyother person, is called a

contract of Indemnity

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It is a promise to compensate foror security against damage, lossor injury.

In wider sense it includes allcontracts of insurance,guarantee.

It is not a collateral but anindependent contract

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Example

A contract to Indemnity Bagainst the consequences of anyproceedings which C may take

against B in respect of certainsum of Rs.2000. This is acontract of Indemnity.

A is indemnifier = the personwho promises to make good theloss.

B is indemnity- Holder= the

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ESSENTILAS

It is contract to make good theloss

Loss must be caused to thepromisee

The loss may be caused by thepromisor or by any other person

Promisor undertake the makegood the loss.

The promisor is known as theidemnifier and the romisee as

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Cont.

Whether Contract of Indemnityas per section 124 covers theloss caused by the Events or

accidents which do not dependupon the conduct of thePromisor or any other person.

If strictly interpreted it wouldnot cover.

Contract of insurance would be

outside the purview of the

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GUARANTEE(Sec 126)

A CONTRACT OF GUARANTEE IS A CONTRACTTO PERFORM THE PROMISE, OR DISCHARGETHE LIABILITY,OF A THIRD PERSON IN CASEOF HIS DEFAULT. THE PERSON WHO GIVES

THE GUARANTEE IS KNOWN AS THESURETY, THE PERSON IN RESPECT OF

WHOM THE GUARANTEE IS GIVEN IS KNOWNAS THE PRINCIPAL DEBTOR, AND THEPERSON TO WHOM THE GUARANTEE ISGIVEN IS CALLED THE CREDITOR. A

GUARANTEE MAY BE EITHER ORAL ORWRITTEN.

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ESSENTIAL FEATURESOF GUARANTEE Concurrence of three contracts

Primary liability is that of the principal

debtor In case the debtor is a minor , the

suretys liability becomes primary

All the essentials of a valid contract It may be in writing or oral

There need not be full disclosure offacts to the surety before he gives the

guarantee

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Guarantee

A (contract) of guarantee is acontract to perform the promise,or discharge the liability, of a

third person in case of hisdefault

(Section 126, The Indian

Contract Act) 3 parties surety (guarantor),

principal-debtor and creditor

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TYPES OF GUARANTEE SPECIFIC GUARANTEE :

When a guarantee extends to a

single transaction or debt it is known asa specific or simple guarantee

CONTINUING GUARANTEE :

When a guarantee extends to a series oftransactions

It is called continuing guarantee

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BAILMENT Sec 148 The word Bailment is derived from the

French word ballier which means todeliver .

Bailment means delivery of goods by oneperson to another for some purpose ,upona contract ,that they shall ,when thepurpose is accomplished ,be returned orotherwise disposed of according to theinstructions of the person delivering them.

The person delivering the goods is calledthe bailor and the person to whom theyare delivered is called the bailee.

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Essentials of bailmentssentials of bailmentThere are two persons namely Bailor

and Bailee.

Bailor means the person delivering

the goods, Bailee means the personto whom the goods are delivered.

Their must be delivery of goods .

The goods must be in deliverablecondition.

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Only the goods are delivered

but not the ownership of goods,their must be purpose.

Bailey can use the goods.

Goods must be returned ordisposed off after the purposeis accomplished.

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Duties and rights ofBailor and BaileeDuties of bailor.To disclose known faults.To bear extraordinary expenses of

bailment.To indemnify bailee for loss in case

of pre mature termination of

gratuitous bailment.To receive back the goods.

To indemnify the bailee.

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Rights of bailorEnforcement of rights.

Avoidance of contract. (Sec153)

Return of goods lent gratuitously.(Sec

159)

Compensation from a wrong doer.(Sec 180)

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Rights of bailee Delivery of goods to one of several joint

bailor of goods.(Sec 165). Delivery of goods to bailor without title. (Sec

166). Right to apply to court to stop delivery. (Sec

167)

Right to action against trespassers. (Sec 180)

Bailee s lien.

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PLEDGE

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PLEDGE (SEC 172)The bailment of goods as security

for payment of a debt orperformance of a promise is

called Pledge.

The bailor in this case is called thepledger or pawnor and the

bailee is called the pledgee orpawnee

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RIGHTS AND DUTIES OFPAWNOR AND PAWNEE

Rights of Pawnee.

Right of retainer.

Right of retainer for subsequent

advances.Right to extraordinary expenses.

Right against true owner, when the

Pawnors title is defective.Pawnees rights where pawnor

makes default .

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Rights of Pawnor Right to get back goods.

Right to redeem debt.

Presentation and maintenance of thegoods.

Rights of an ordinary debtor.

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AGENCY

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AGENTSec 182 defines an agent as a

person employed to do anyact for another , or to

represent another indealings with third

personsthe person for

whom such act is done is scalled the principal

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ESSENTIALS OFRELATIONSHIP OFAGENCY

Agreement between principal &agent

Intention of agent to act on behalfof the principal

Anyone can be an agent

Anyone can employ an agent

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Essentials of the ValidAgency

There should be an agreementb/w the P and the A

The agent must act in therepresentative capacity

The principal must be competentto contract

The agent need not becompetent to contract

The consideration is notnecessar

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Cont.

A appointed B to purchase 100 bagsof rice on his behalf.

Justice Ramaswami in krishna vGanpathi AIR 1955 Mad 648

Every person who acts for anotheris not an agent

A domestic servant

Representative character andderivative authority may briefly besaid to be distinguishing features ofan agent

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CREATION OFAGENCY BY EXPRESS AGREEMENT

BY IMPLIED AGREEMENT

Agency by estoppelAgency by holding out

Agency by necessity. (Butter/

Strike) AGENCY BY RATIFICATION

AGENCY BY OPERATION OF LAW

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Cont.

Power of Attorney

When a person by his conduct orstatement, willfully leadsanother person to believe that acertain person is his agent, thenhe is estooped or prevented

from denying the truth of theagency

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Holding out

Kind of agency by estoppel

Some prior positive or affirmativeconduct of the principal, whichindicates that a person was alreadyhis conduct

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Ratification

Confirmation of the acts alreadydone.

Ex-post facto agency

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REQUISITES OF VALIDRATIFICATION Agent must act as an agent for his principal

Principal must be in existance at the time ofcontract Ratification must be with full knowledge of

facts Ratification should be done within a

reasonable time of the performance of the

act The act to be ratified should be of lawful

nature The ratification can be done only to the

whole transaction & not any part of it (Sec199)

Ratification should be communicated withthe party to contract

Ratification should not cause any damagesto a third party

Ratification can only be of acts which

principal had the right to do

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SUB-AGENT &SUBSTITUTED AGENTA sub agent is aperson employed

& acting under the control of the

agent in the business of theagency (Sec 191)

A substituted agent is a personnamed by the agent, on an

express or implied authority from

the principal, to act for the

DIFFERENCES BETWEEN SUB

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DIFFERENCES BETWEEN SUB-AGENT & SUBSTITUTE-AGENT

SUB-AGENT

1. He works underthe agent

2. There is no

contact betweenthe agent & theprincipal

3. Agent is wholly &

solely responsiblefor the acts of thesub-agent

SUBSTITUTEAGENT

1. He works underthe pprincipal

2. There is acontractbetween him &the principal

3. Agent is in noway responsiblefor the acts of

the substituted

i i f

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Termination of agency By act of parties

Agreement

Revocation by the principalRevocation by the agent

By operation of law Performance of the contract

Expiry of timeDeath of either partyInsanity of either partyInsolvency of either partyDestruction of the subject matter

Principal becoming an alien enemyDissolution of a companyTermination of sub-agents authority

WARRANTY

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WARRANTY

A warranty is a stipulationcollateral to the main purpose ofthe contract, the breach of which

gives rise to a claim for damagesbut not to a right to reject thegoods and treat the contract as

repudiated- Section 12, The Saleof Goods Act, 1930.

C t t

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Caveat emptor

Caveat emptor= Buyer thebeware