revised contracts (till v- agency)

8/10/2019 Revised Contracts (Till v- Agency)

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CASE BOOK ON CONTRACTS II - (Special Contracts)

Prepared by Prof. K. Govindarajan

I CONTRACT OF INDEMNITY

SL.NO PARTIES TO THE CASE PRINCIPLES LAID DOWN

1

GajananMoreshwarParelkar

Vs Moreszzhwar Madan

Mantri, 1942 Bom.L.J. 703

Sections 124 and 125 of the Contract Act

are not exhaustive of the law of Indemnity

and the courts here would apply the same

principles that the courts in England do

2

Secretary of State Vs Bank of

India,1938, 65 I.A.286

Damages were permitted to be recovered

from the Bank on the principle of implied

contract of Indemnity.

3

Osman Jamal & Sons Ltd. VsGopal Purushottam, 1928 I.L.R.

56 Cal 262

The company being indemnifier was liable

and the liquidator is to keep the amount in

trust for payment of the vendor in respect of

whose supplies the company has incurredliability.

4

Centax (India) Ltd. Vs

VinmarImpex Inc., and others,A.I.R. 1986 Cal. 356

The enforceability of the contract of

indemnity depended on the terms and

conditions of the same.


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II Contract of Guarantee


5

State Bank of Patiala Vs Shri

Durga Oil and Flour Mills,

Mehatpur and others. A.I.R.1984 NOC 22 HP 13A

a) The execution of mortgage by deposit ofTitle deeds is sufficient to establish that they

have accepted to be Guarantors for the loan

given by the Bank

b) When the guarantee is existing and the

revival letter if any is given by the principal-

debtor, such revival letter is also binding on

the Guarantor.

6

R.D.Harbottle Ltd. Vs NationalWestminster Bank Ltd. 1978,

Q.B. 146.Nature and extent of a Bank Guarantee

explained

7

S.M.S.Demag AG Vs

NilachalIspat Nigam Ltd.

A.I.R. 2004 Orissa 89

In case of an unconditional Bank Guarantee

the court will not grant an injunction

restraining the Bank from honoring the

bank gurantee except in the case of fraud

and irretrievable injustice.

8

M/s. Basant Polymers, Alwar

Vs State Chemical &Pharmaceuticals Corporation of

India Ltd., and another A.I.R.

1986 Raj 1.

The Bank Guarantee, for all practical

purposes, should be taken to be a credit note

issued by the Bank and it should be

encashable just like credit-note ordinarily,

unless the intention of the parties is

otherwise.

9

Himadri Chemicals Industries

Ltd. Vs Coal Tar Refining

Company, A.I.R. 1927 SC2798.

Principles regarding the encashment of a

Bank Guarantee has been listed out.


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II Contract of Guarantee (CONTD)


10

Sita Ram Gupta Vs PunjabNational Bank ,A.I.R. 2008

S.C. 2416

The benefit available under Section 130 of theContract Act cannot be availed of if the

guarantee that was revoked is founded on an

agreement which cannot be said to be

unlawful.

11Bank of Bihar Ltd. Vs Damodar

Prasad, A.I.R. 1969 S.C. 297

It is not necessary to exhaust the remedies

of a decree-holder against the principal

debtor before proceeding against a surety or

guarantor.

12Union Bank of India Vs MankuNarayana, AIR, 1987 SC 1078

When there is a decree against the principaldebtor, guarantor and the mortgaged

property, the decree-holder bank should

first proceed against the mortgaged

property and then against the surety or

guarantor.

13

Anikumar Vs Central Bank of

India, AIR 1997 HP 150

When one of the co-sureties becomes

insolvent the entire liability to pay the

creditor the full amount lies on the other co-

sureties

14

Aypunni Mani VsDevassyKochouseph, AIR 1966

Ker 203

A statutory reduction or extinguishment of

the principal debtor's liability will operate

as a pro tanto reduction of the

extinguishment of surety's debt.

15

M.R.Chakrapani Vs Canara

Bank, AIR 1997 Kant 216When the creditor does any act or omission

impairing surety's eventual remedy, the

surety stands discharged.

16

National Provincial Bank of

England Vs Brackenbury, 190622 TLR 797

Where the document was to be signed by

four parties but only three parties signed,

the three parties signed were held to be not

bound on the ground of variance from the

terms of the guarantee.


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III CONTRACT OF BAILMENT


1Kaliyaperumal Vs Visalakshi,AIR 1938 Mad 32.

Held that that the bailee is not responsible forthe loss unless there has been an effective

delivery either actually or constructively

2

Coggs Vs Bernard, Harward

Law Review, 222,(1891 -1892) Classification of Bailment by LORD HOLT.

3Lyell Vs Ganga Dai, 1875, 1

ALL 60..Bailor will be held liable if he fails to disclosethe defects known to him

4

Canara Bank Vs Bhavani Oil

Co., Chennamannur, AIR20004 Ker 273.

Banker will be liable for loss of goods

hypothecated even if there is an exclusion

clause contained in the agreement.

5SitalaBaksha Singh VsBarijNath, AIR 1936

Oudh, 264.

If the bailee has taken adequate care in

respect of the safety of goods bailed and if inspite of such care the gods have been lost,

the bailee is not responsible for the loss.

6

General Manager, Central

Railway Vs Lakshmi RatanCotton Mills Ltd, AIR 1971

All,531.

The position of the railway administration

regarding the goods entrusted to it is that of

a bailee.

7

Coldman Vs Hill, 1919 1 K.B

443,456

The failure of the bailee to lodge a policecomplaint if the goods have been lost whilst

in his custody will not absolve him from

liability


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III CONTRACT OF BAILMENT (CONTD)


8Rangaraju Vs Muthukrishna,

1963, 2 MLJ60

Held that the loss or damage of thingsbailed was prima facie evidence of the

negligence and the burden of disproving

negligence lied on the bailee..

9

Lilly Vs Double-day, 1881, 7

QBD 510.

If the goods are to be kept in one place as per

the terms of the agreement and if it is kept in

a different place and loss if occasioned

principle of deviation from the terms of the

contract will apply.

10Edwards Vs Newlands,1950,1All.L.R 1072. If the bailee changes the custody of the goodsto any other person without the consent of the

bailor it would amount to breach of duty by

the bailee.I

11Shaw & Co. Vs Symmons&

Sons, 1917, 1 K.B. 799

If the bailee has not chosen to return the

goods bailed within a reasonable time and if

loss occasions to the goods the bailee become

responsible for the loss of goods.

12

Hollins Vs Fowler, 1875, 7 HL

757

A finder of lost goods is entitled to retain

possession of the goods as against the whole

world except the true owner when he isdeprived of his possession by anybody he can

maintain an action for trespass.

13

Bevan Vs Waters, 1828, 3 Carr.

520.

Observation by Best, Chief Justice: "if a

man has an article delivered to him, on the

improvement of which he has to bestow

trouble and expense, he has a right to detain

it until his demand is paid "...

14 Chase Vs West more, 1816, 15M&S 180

Right of lien would attach to all goods even

though ondifferent dates deliveries were effected so long

as the work is covered under one contract.


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IV: Pledge or Pawn


1

Morvi Mercantile Bank Ltd. VsUnion of India, AIR 1965

SC 1954

A) Meaning of 'Pledge' explained.

B) The status of a Mercantile Agent

explained.

2Bank of Baroda, AhmadabadVs R. BachubaiHirahabai and

others, AIR, 1988 Guj 1.

Distinction between Pledge and

Hypothecation pointed out.

3

Hindustan Construction

Company Vs Board of

Revenue, AIR 1986 Ker 148

When tools, equipments and plants were

hypothecated as security for the advance, the

document was held not to be a mortgage deedbut only an agreement relating to pawn

4Bank of Bihar Vs State ofBihar, AIR 1971 SC 1210

When goods are held by the pledgee as

security under a cash credit agreement, if any

seizure is made by the Government, it

becomes the duty of the Government to pay

the amount.

5

State Bank of Hyderabad,Secunderabad, VS Susheela and

others, AIR 1980 AP 1.

If any sale proceeds have been deposited incourt, the Pawnee has a special right and his

lien being one of not ordinary nature no other

creditor can take away the money.

6

Rehmet Ali FatehUllah Vs

Lallan Prasad, 1962, ALJ. 374

If the goods pawned are not available in the

hands of the Pawnee and cannot return them

to the Pawnor, the Pawnee cannot compel the

debtor to pay the debt

7

Prabhat Bank Ltd. Vs BabuRam, AIR 1966, Aii. 134.

An agreement authorizing the sale of goodsby the Pawnee without proper notice to the

Pawnor "would be inconsistent with the

provisions of the Contract Act and as such

would be wholly void and unenforceable.


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V Law of Agency


1

A) Pole Vs Leask, 1860, 54 ER

481.

B) De Bussche Vs Alt, 1878, 8

Ch.D 286. .

A) 'No man can become the agent of another

except by the will of that other person'.

B) In as much as confidence in the particular

person employed is at the root of the contract

of agency, such authority cannot be implied

as an ordinary incident in a contract.

2Loon Karan Vs John and Co.,

AIR, 1967, All 308, 311The crucial test of the status of an agent is

that his acts bind the principal

3Delhi Electric Supply

Undertaking Vs Basanti Devi,

AIR 2000 SC 43.

The employer who deducts the LIC premium

under the Salary Savings Scheme is an agent

of the LIC.

4

Sakthi Sugar Ltd. Vs Union of

India, AIR, 1981, Delhi 212.

Held that the State Trading Corporation,

which was a legal entity, when permitted to

export sugar, did not become the agent ofUOI, we while exercising that commercial

function

5

Lakshmi Narain Ram Gopal &

Sons Vs Hyderabad

Government, AIR. 1954 SC 364

Differences between an agent and servant

pointed out.

6

Champa Ram Vs Tulsi Ram,

1927, 26 All.L.J. 81

A DEL CREDERE agent incurs only a

secondary liability towards the principal. His

legal position is partly that of an 'insurer' and

partly that of a 'surety' for the parties withwhom he deals.


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V Law of Agency (Continued)


7Peacock Vs Baijinath, 1891, 18

I.A. 78The principal has no right of account

against a banian (sub-agent).

8Calico Printers' AssociationBarday's Bank, 1931 145 LT

51.

Held that the principal cannot recover

damages from the sub-agent.

9De Bu ssche Vs Alt, 1878, 8

Ch,D. 286

Where in the course of employment,

unforeseen emergencies arise which

impose upon the agent the necessity of

employing a substitute, and that when

such authority exists and is dulyexercised privities of contract arises

between the principal and the substitute

10

Mersey Docks Trustees Vs

Gibbs, 1866, 1 HL 93.

Held that an officer of the Government

e.g., Post-master General was not liable

for the acts of those employed under

him, because the latter were not his

servants but the servants of the

Government.

11

Devanham Vs Mellon, 1880, 6AC 24.

A presumption arises that a wife can

pledge her husband's credit for

necessaries from the fact of cohabitation.

12Andrews Vs Ramsay & Co.,

1903, 2 KB 635.

In my opinion if an agent directly or

indirectly colludes with the other side

and so acts in opposition to the interests

of his principal he is not entitled to any

commission".

13

Ram Prasad Vs State of MP,

AIR, 1970, SC 1818 at P 1821.Significance of Agent's lien explained.


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14

Firm PannalalJankidas Vs

Mohanlal, AIR, 1951 SC 144.

Held that the agent is liable to

compensate her principal to the full

value of the goods as she had failed to

insure the goods as per the directions of

the Principal.

15

ArlapaNaick Vs

NarsiKeshavji, 1871, 8 BHC

AC 19.

Instructions involving performance of a

void or illegal act need not be followed.

16

Gloriya Chemicals Vs

R.K.Cables, AIR 1988 Delhi213.

If an Advocate has acted contrary to the

instructions given by his client, or

against the custom or practice of his

profession and any loss was caused to his

client thereby, he must make good the

loss.

17Baxter Vs Gapp& Co. Ltd,

1939, 2 All.E.R. 752.A person acting as a skilled agent is

expected to have reasonable skill and

knowledge in regard to his duties.

18

S. Paul & Co. Vs State of

Tripura, AIR 1984 Cal. 378.Held that the duty to keep accounts is a

statutory duty and cannot be negative by

agreements.

19De Bussche Vs Alt, 1878,

Ch.D 286.Secret profits, if any, earned by the

agent can be recovered by the Principal.

20 Smith Vs Anderson, 1848,137, ER 9.

Where a merchant abroad buys goods

here through an agent, the seller

contracts with the agent and there is nocontract or privy between him and the

foreign principal.


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21Bhojabhi Vs Hayem Samuel,

1898, 22 Bom. 754

Held that the Secretary of the committee

was liable on a rental agreement made

by him where the principal was an

association in England.

22TutikaBasavaraju Vs Parry &

Co. 1903, 27 Mad 315.When foreign principals have contracted

in their names, the agent in India is not

liable.

23

Alliance Mills Vs IndianCements Ltd, AIR 1989 Cal.

59.

If an agent has entered into a contract

for the purchase of goods describinghimself as the purchaser, not disclosing

his status as an agent, he could enforce

the contract and he is also personally

liable for the same.

24

Cicifford George Pinto VsM.R.Shenava, AIR 2005 Karn.

167

If an agent has been authorized by a

power of Attorney to sell only one

property and if he has sold more than

one property, the transactions are

binding on the Principal in view of theconduct of the Principal inducing the

third parties to believe that the act of the

agent is within the scope of his authority.

25

Lloyd Vs Grace Smith & Co.,

1912, AC 716.

If an agent commits fraud,

misrepresentation or torts in the course

of agency he is liable for the loss that has

occasioned.

26

Armstrong Vs Stokes, 1872, 7

QB 598

Where a person employs another to

make a contract of purchase he as

Principal , is liable to the seller, though

the seller never heard of his existence

and entered into the contract solely on

the credit of the person whom he

believed to be the Principal though, in

fact, he was not.


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27

Williams Vs North China

Insurance Co., 1876, 1 CPD757.

When an agent has insured the goods

without the Principal's authority and if

the Principal ratified his agent's act of

insurance, the Principal is bound even if

he has notice of the loss at the time of

ratification.

28Bolten Vs Lambert, 1885, 41

Ch.D.295.

Ratification relates back to the date on

which the offer was first accepted.

29

Imperial Bank of Canada VsBegely 1936, ALJ 944.

The first essential to the doctrine of

ratification with its necessary

consequences of relating back is that the

agent shall not be acting for him, but

shall be intending to bind a named or

ascertainable Principal.

30Kelner Vs Baxter, 1866, LR 2

CP 174.

A promoter of a company was held

personally liable since at the time of

entering onto a contract the companywas not in existence.

31

M.P.State Cooperative Bank

Ltd. Vs P.B.Dalal, AIR 1967Bom. 279.

Held that the authority of an agent to

collect bills and to remit the proceeds

when realized by demand drafts come to

an end as soon as the drafts were

dispatched.

32Blackburn Vs Scholes, 1810, 2

Camp. 341.A broker employed to sell the goods

became functus officio on the completion

of the sale.

33

Lalljee Vs Dadabhai, 1916, 23

Cal L.J. 190,202.

"Where an agent has been appointed fora fixed term, the expiration of the term

puts an end to the agency whether the

purpose of the agency has been

accomplished or not".


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34

Moosajee Ahmed & Co. Vs

Administrator General, 1921,

60 IC 739.

When a person enters into a contract

with an agent after the Principal's death

with knowledge of the fact would be

precluded from subsequently impugning

the validity of the transaction on the

ground of want of authority of the agent

35Madhusudan Vs RakhalChandra, 1816, ILR 43.

Held that if after the termination of

agency by the death of the Principal the

erstwhile agent continued in the serviceof the deceased's Principal's heirs, a new

agency was created and there was

nothing to show in Section 209 that the

agency continued on old terms.

36Salton Vs New Beeston Cycle

Co., 1900, 1 Ch.D. 43.Death or insanity revokes an agent's

authority

37 Parker Vs Smith, 1812, 104ER 1133.

Bankruptcy of the agent also terminatesthe agency.

38French & Co Vs Leeston

Shipping & Co., 1922, 1 AC

451.

Where the subject-matter for which the

agency was created, the agency comes to

an end.

39

Jagadhari Vs Rustomji, 1885, 9

Bom. 311.

Held that where an agent was

authorized to recover a sum of money

due by a third party to the Principal and

to pay himself, out of the amount so

recovered , the debts due to him fromthe Principal, the agent had an interest

in the subject matter of the agency, and

the authority could not be revoked.


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40Chappell Vs Bray, 1860, 6

H&N 143.

Held that where in pursuance of the

authority the agent had incurred

contractual liability to pay money to a

third party, he was entitled to be

indemnified in respect of payments

made by him though the Principal then

forbade the payments.

41

Rivers Steam Navigation Co.

Vs Bisweswar, 1928, Cal. 371.

The doctrine of 'imputed notice' dealt

with in Section 229 is based on theassumption that an agent who gets

notice or receives any information does

do his duty to communicate the same to

the Principal and therefore the

knowledge of the agent is the knowledge

of the Principal.

42

Wylie Vs Pollen, 1863, 32 LJ

Ch. 782.

The rule laid down in Section 229 is

intended to declare general principle of

law. It is not a mere question ofconstructive notice or inference of fact

but a rule of law which imputes the

knowledge of the agent to the Principal.

43

Bawden Vs London etc.

Assurance Co., 1882, 2 QB534

If the agent had knowledge of a

particular fact it will be imputed to the

Principal and the contract cannot be

avoided on the ground of non-disclosure.

44Proudfoot Vs Monteflori,

1867, LR 2 QB 511.

When the knowledge of an agent was

imputed to the Principal , the Principal

is considered to have notice as from the

time when he would have received notice

if the agent had performed his duty and

communicated with him with reasonable

diligence.

revised contracts (till v- agency)

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