special contracts ppt
TRANSCRIPT
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Specific Contracts
Prepared By:
Nirav Vyas Assistant Professor
JVIMS-Jamnagar
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Topics to be covered
Indemnity
Guarantee
Pledge
Bailment
Agency
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Indemnity
efinition:
!A "ontract #y $%ic% one party promises to
save ot%er from loss caused to %im& #y t%e
conduct of t%e promisor %imself or #y conductof ot%er person& is called a contract of
indemnity' Sec ()*+,
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Example
If A and B are rivals and t%ey claim goods$%ic% ust arrived from a cargo via a train. Aenters into a contract $it% t%e cargo manager
and says to deliver t%e goods to %im and if inturn B sues t%e cargo manager for t%e goods& A $ill pay for it.
If A and B goes to s%op $%ere #y A enters intoa contract $it% s%op /eeper t%at %e $ill payfor t%e goods purc%ased #y B& it is calledindemnity
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0$o Parties to t%e contract
Indemnifier- 0%e person promising to ma/e
good t%e losses is called Indemnifier
Indemnified- 0%e person to $%om suc%
promise is made is called Indemnified
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12press Indemnity
Implied Indemnity
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Rights of Indemnified when sued (Sec
12!
All t%e damages $%ic% may #e compelled to
pay in any suit in respect of any matter
All costs t%at %e may incur in defending t%esuit
"ompromising costs
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"uarantee
efinition:-
A contract of guarantee is a contract to
perform t%e promise or disc%arge t%e lia#ility
of a t%ird person in case of %is default (Sec)*3,
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Example#
If A purc%ases goods from B and as/s for
credit of )4 days& B in turn says t%at if A
guarantees t%at if payment is not made after
)4 days t%en %e $ill pay. A enters into t%atcontract t%en t%is contract is called a
guarantee.
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$arties to a guarantee
0%ere %as to #e 5 parties to guarantee
Principal e#tor
"reditor
Surety
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Essential Elements of guarantee
"oncurrence
0%ere must #e concurrence of all t%ree parties
1ssential elements of valid contract
"apacity of parties
"onsideration( for details refer to ne2t slide,
Primary lia#ility in some person
6riting is not necessary
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%onsideration in guarantee
It is necessary t%at t%ere %as to #e a
consideration #et$een t%e principal de#tor
and t%e creditor #ut it need not #e $it% t%e
surety
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&ifference between Indemnity and
"uarantee
Indemnity 0%ere are * parties to
t%e contract i.eIndemnifier and
Indemnified 0%e lia#ility of
indemnifier is primaryand independent
0%ere is only ) contract
An indemnifier cannotsue a t%ird party for t%elosses paid
Guarantee 0%ere are 5 parties i.e
Principal de#tor& creditorand surety
0%e lia#ility of surety iscollateral to t%eperformance or nonperformance of principal
de#tor 0%ere are 5 contracts
0%e surety can sue t%eprincipal de#tor
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Bailment
Meaning and Definition
Requisites of bailment
Classification of bailment
Rights and Duties of Bailor
Rights and Duties of Bailee
Lien
Bailment and Pledge
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Meaning and Definition
The word ‘Bailment’ is derived from a Frenchword ‘Ballier’ which means ‘to deliver’
Definition: Acc to Sec 148 “Bailment means delivery ofgoods by one person to another for somepurpose, upon a contract, that they shall, whenthe purpose is accomplished, be returned ordisposed of according to the direction of theperson delivering them.
Bailment and Pledge
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There are basically two parties to Bailment
Bailor- The person delivering the goods
Bailee- The person receiving the goods
However there can be three parties to Bailmentalso
Bailor
BaileeSub-bailee
Bailment and Pledge
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Example
Mr A %as a general insurance of %is car& once
t%e car met $it% an accident so Mr A gave
t%at car to t%e Insurance company for repairs
7ere. A is #ailor and Insurance company is#ailee..
7o$ever& t%e insurance co. gave t%e car to
Mr " $%o is a mec%anic to repair t%e car.
7ere Mr " is a su# #ailee.
Bailment and Pledge
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Bailment can be express bailment or implied bailment
Example of Implied Bailment:
A Lady Mrs A reported for a theft of her jewellery topolice. Police found the jewellery and kept them intotheir custody. However, the Jewellery disappearedfrom the custody. Here, the Police had to pay for theloss of jewellery as it was Implied that the Police were bailee and the lady was bailor.
Bailment and Pledge
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Requisites or Essential features of bailment
"ontract
elivery of possession
A mere custody of goods cannot #e termed as
#ailment 8or some purpose
isposal or return of t%e goods
Bailment and Pledge
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Classification of Bailment
8or e2clusive #enefits of #ailor
8or e2clusive #enefits of #ailee
8or Mutual Benefits
Gratuitous Bailment
Non-gratuitous Bailment
Bailment and Pledge
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Duties of Bailor
To disclose the known faults (sec 150)
To bear extraordinary charges
To indemnify the bailee for the loss caused in
case of permanent termination of gratuitous bailment
To receive back the goods
To Indemnify the bailee
Bailment and Pledge
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Duties of Bailee
To take reasonable care of the goods Sec 151& 152
Not to make unauthorized use of the goods
Sec 154Not to set up an adverse title
To return any accretion to the goods
To return the goods
Bailment and Pledge
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Duties of Bailee
Not to mix goods bailed with his own goodsIf he mixes with the consent of the bailor, then both the parties should have mutual interest in
such mixtureIf he mixes without the consent of bailor andthe goods can be separated, then he must bearall the expenses of such separation
If he mixes without the consent of bailor andthe goods cannot be separated, then he isliable for the loss of the goods
Bailment and Pledge
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Rights of the Bailor
Avoidance of the contract Sec 153
Return of goods lent gratuitously Sec 159
Compensation from a wrong doer Sec 180
Bailment and Pledge
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Rights of Bailee
Delivery of goods to one of several joint bailors
Right to apply to court to stop delivery
Right to action against trespassersRight to Lien
Bailment and Pledge
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Lien
Lien means right of a person to retain thepossession of some goods belonging toanother until some debt or claim of theperson in possession is satisfiedParticular LienGeneral Lien
Bailment and Pledge
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Particular Lien
Acc sec 170; Where the bailee has inaccordance with bailment, rendered anyservice involving the exercise of labor and
skill, he has in absence of any contract tocontrary, a right to retain goods until hereceives due remuneration for those services.
Bailment and Pledge
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General Lien
A general lien is a right to retain all the goodsor any property of another until all the claimsof the holder are satisfied
Bailment and Pledge
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Rights and duties of a finder of goods
Right of Lien
Right to sue for reward
Right of sale
Bailment and Pledge
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Duties of finder of goods
He must take reasonable care of the goods
He must not use the goods for his ownpurpose
He must not mix the goods with his owngoods
He must try to find out the owner of the
goods
Bailment and Pledge
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Termination of Bailment
On the expiry of the time period
On the achievement of the object
Destruction of the subject matter
Gratuitous bailment can be terminated anytime by the bailorHowever the bailor is liable to pay the loss
caused to bailee for a pre mature terminationInconsistent use of the goods
Bailment and Pledge
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Pledge
The bailment of goods as security forpayment of a debt or performance or apromise is called pledge
Example: A takes Rs 1000/- from B and gives his watchas a security then this contract is calledpledge. The reason being that the watch is
bailed as a security for the amount owed by Ato B
Bailment and Pledge
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Rights of Pledgee
Right to exercise particular lien
Right to exercise particular lien forsubsequent advances
Right to recover extra ordinary expenses’Right against a true owner
Right to sue the pledger
Right to sale the goods
Bailment and Pledge
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Rights of a pledger
Right to get back the goods
Right to check that the goods are preserved
Bailment and Pledge
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Practical Problems
'r lends his car to 'r ) for attending a
conference from *amnagar to +bad, The bra-es of
car are not wor-ing properly and it is -nown to 'r
, .owever/ he does not let ) -now this fact, 'r )instead of going to the conference ta-es the car
from *amnagar to 'ount bu for a holiday and
meets with an accident, 0ater/ on 'r ) claims
compensation on the basis that the -nown fault wasnot disclosed by 'r , %an he succeed the case9
Bailment and Pledge
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Practical Problems
Mr A& a $are%ouse o$ner $as entrusted $it%
certain goods #elonging to Mr B for safe custody.
A ta/es reasona#le precautions #y %aving a safe
#uilding& strong loc/s and appoints a competent
$atc%man. 7o$ever& t%e goods $ere stolen due
to t%e negligence of t%e $atc%man $%o pro#a#ly
did not loc/ or $atc% properly. ater on Mr A
denies to pay t%e cost of t%e goods on t%e #asis
t%at %e %ad ta/en reasona#le care of t%e goods.
"an %e succeed9
Bailment and Pledge
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True or alse
Bailee must #ear all e2penses of t%e goods
#ailed to %im
A gratuitous #ailment can #e terminated #y t%e#ailor even #efore t%e stated time
As per t%e Indian a$ t%e contract of
guarantee must #e in $riting
8or a contract of guarantee& t%e primary lia#ility
is of suretyBailment and Pledge
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Agency
Definition: Agent- Sec 182- “Agent is a person employed to doany act for another or to represent another indealings with third person”
Agency- “ The relationship, based upon anagreement, where by one person acts for another intransaction with a third party is called agency”
Agency
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No consideration is required to createagency- Sec 185
Whenever principal gives his consent to someone to be his agent, that consent his enough considerationfor the principal to create an agency. However, anagent should get some consideration from the
principal. If he does not get any consideration, still hestarts acting as an agent for a certain work then hemust complete the work.
Agency
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Who can appoint an agent
Any party who is capable of contracting If an agent is working for a principal who is incompetent tocontracting then he is personally liable for the actions arisingout of that contract
Group of individuals Partners
Incorporated bodies Companies
Trade Unions etc.
Agency
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Who can be an agent
Any person of a sound mind and major by age can bean agent
Agency
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Different kinds of agency
Express agency
Implied Agency Agency by Estoppel
Agency by holding out Agency of necessity
Agency by Ratification
Agency coupled with interest
Agency
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Different kinds of agency
Agency by Estoppel- Sec 187 When a person has, by his conduct induced others to believe that a certain person is his agent, then he isestopped from subsequently denying it.
Example:Mr A has a shop in Rajkot and Jamnagar. He stays in Jamnagar so he asks a friend, Mr B,to do him a favour and tomanage the shop at Rajkot for a certain period. Mr B in turnmanages the shop and places orders behalf of Mr A. Then
here, all the actions of Mr B will have to be abide by Mr A onthe basis of Implied Agency of Estoppel
Agency
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Different kinds of agency
Agency by Holding out: Through the law of agency by estoppel, if a principal doessome affirmative action making a person to be believed asan agent then he has to hold out for all the actions of the
agent Example:
Mr A is a shopkeeper, he purchases stock from an another part ofcity. He asks regularly to his friend to place an order because hecould not travel that part of the city. Generally he places order on
credit of 15 days. Once he gives cash to his friend to place the orderon cash but the friend places the order on credit and pockets themoney. Here by holding out action, Mr A is liable by the action of hisImplied agent, that is his friend>
Agency
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Different kinds of agency
Agency of Necessity: If any person out of necessity both for him and theproposed principal acts an agent for the principal thensuch agency is called agency of necessity
Example:
A horse is sent by rail at the destination is not taken thedelivery by the owner. The station master has to feedthe horse. He has become the agent by necessity and
hence the owner must compensate him.
Agency
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Different kinds of agency
Agency of by ratification Where an agent does an act for his principal butwithout the knowledge of his authority. The principalis not bound by his action to the third party and also
the third party is not bound to perform the contract However, the principal, if desires, can ratify the act ofan agent
In this case the agency is deemed to be created fromthe moment the agent first acted and not from the date
of principal’s ratification.
Agency
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Different kinds of agency
Agency of by ratification Example:
Mr Antony who is a share broker enters in to anagreement with Mr Jefferson, the member of the BOD ofa company to convert the debentures held by him into
fully paid equity shares. Mr Jefferson actually has noauthority given to him by the company to enter into suchagreement. However the co. found this offer attractiveand ratified the actions of Mr. Jefferson. After some timeMr Antony denied of performing the contract saying thatMr Jefferson did not have any right to enter in theagreement as he was not given any agency.
Here, Mr Antony cannot escape from his liabilities as theagency is created through ratification
Agency
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Different kinds of agency
Agency coupled with interest Where the agent has himself an interest in the subjectmatter of the agency apart from the regularremuneration, then such kind of agency is called
Agency coupled with interest. Example: Ms. Cynthia borrows Rs 10000 from Mrs Parker. WhenMrs. Parker asks for her money back she tells her that
she is not in a position to pay the money, instead shegives her cell phone to Mrs Parker and asks her to sellit for her and clear debts of herself.
Agency
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&uties of an gent
To conduct the business of agency according to theprincipal’s direction (Sec 211)
The agent should conduct the business with such skillsand diligence as required (Sec 212)
To render proper accounts (Sec 213) To communicate with agent in case of difficulty (Sec 214) Not to make any secret profits Not to deal on his own account Not entitled to remuneration for misconduct Not to disclose any confidential information To take reasonable steps for protection of the interest incase of death of principal
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Rights of gent
;ig%t to remuneration (Sec *)
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$rincipal+s &uties towards gent
Bound to indemnify t%e agent
Bound to compensate %is agent in respect of
inury due to %is neglect
0i bilit f $ i i l t Thi d
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0iability of $rincipal to Third
$arties Any act done #y agent to$ards t%e t%ird party #inds t%e
principal
6%ere t%e agent e2ceeds %is aut%ority t%en t%e part $%ic%
$as falling under %is aut%ority can only #ind t%e principal
lia#le 0%e principal is lia#le even for misrepresentation and
frauds committed #y agent. 7o$ever if t%e agent commits
it e2ceeding %is aut%ority t%en t%e principal is not lia#le
0%e principal remains lia#le to t%e t%ird parties even $%ere
%is name $as not disclosed.
7e is #ound #y any notice given to t%e agent $it%in t%e
course of t%e #usiness
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inds of gents
0%ere are mainly t%ree classification of Agents
Special and General Agents
Mercantile or commercial Agents
Non mercantile or non commercial Agents Special and General Agents
Any person entitled to $or/ as an agent for
someone only for some particular act t%en %e>s%e is
called a special agent. ?n t%e ot%er %and t%e person$%o is appointed to represent t%e principal in all
matters concerning a particular #usiness is called a
general Agent.
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inds of gents
Mercantile or "ommercial Agents
Mercantile agents are of follo$ing types Bro/er
8actor
"ommission Agent
el credere
Auctioneer
Pa//a and @atc%a Adatias
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inds of gents
Non mercantile or Non commercial Agents
;efer #y yourself page num#er )+
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Termination of gency(Sec 231!
?n revocation #y t%e principal
If t%e agency is for a single $or/& t%en it may #e
revo/ed any time #efore t%e commencement of
$or/
If t%e agency is a continuous agency& t%en a notice
of revocation is essential to t%e agent as $ell as
t%e t%ird party
7o$ever if no sufficient cause is produced for
revocation t%en compensation must #e paid to t%eagent
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Termination of gency(Sec 231!
?n t%e e2piry of fi2ed time period
?n t%e performance of any specific o#ective
Insanity or deat% of principal or agent
estruction of su#ect matter
Insolvency of t%e principal
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ou $ill %ave to prepare t%e follo$ing
0ypes of Agent
Agency #y ;atification
Agency coupled $it% interestPo$er of Attorney
ou $ill %ave to give a speec% on t%at
0%e candidate $ill #e c%osen #y me on t%e spot
0%is activity $ill #e done on *=t%
Anyone not coming on t%at day $ill not #e allo$ed to sit
in t%e internal e2am