By Prof. Neha Patel
By Prof. Neha Patel
Contract Act-Specific Contracts
Contracts of Indemnity &
Contracts of Indemnity &
Guarantee
Guarantee
Chapter VIII (sec. 124- 147) of Indian ContractChapter VIII (sec. 124- 147) of Indian Contract
Act 1872 covers these provisions Act 1872 covers these provisions
A A contract by which one party contract by which one party promises to savepromises to save
the other from loss caused to him by the conduct the other from loss caused to him by the conduct of the promisor himself, or
of the promisor himself, or
by the conduct of any other person, is called a „contract of by the conduct of any other person, is called a „contract of
indemnity‟. (sec 124) indemnity‟. (sec 124)
Promisor >> indemnifier &Promisor >> indemnifier &
Promisee >> indemnity holder Promisee >> indemnity holder
Rights of indemnity holder when sued (sec 125)Rights of indemnity holder when sued (sec 125)
(all damages/all expenses-costs/all sums) (all damages/all expenses-costs/all sums)
Guarantee (Section 126)
Guarantee (Section 126)
A A contract of guarantee is a contract to performcontract of guarantee is a contract to perform
the promise or the promise or
Discharge the liability of a third person in case of hisDischarge the liability of a third person in case of his
default. default.
The person who givesThe person who gives – – „surety‟„surety‟
Who defaults –Who defaults – „principal debtor‟„principal debtor‟
TTo whoo whom it im it is givs givenen – – „creditor‟„creditor‟
It may be oral or written; express or impliedIt may be oral or written; express or implied
Guarantee- Features
Nature of surety‟s liability (coextensive/limitation) Kinds of guarantee (specific / continuing)
Revocation of Continuing Guarantee
(notice/death etc.)
Discharge of Surety (surety‟s liability ends) (revocation/creditor‟s conduct/invalidation)
Contract of Indemnity vs.
Contract of Guarantee
COI COG Two parties Liability Primary Only 1 contract Indemnifier not to act
on the request of Indemnified
Liability arises only in
Three parties Liability secondary Total 3 contracts Surety to give guarantee upon debtor‟s request Debt/duty already
Bailment
Delivery of goods by 1 person to another For some purpose
Upon contract that
When purpose is accomplished
Be returned or otherwise disposed of
According to the directions of the person delivering them
Person delivering the goods is called “Bailor” Person to whom goods are delivered is called
Essential Features of Bailment
Delivery of Moveable goods
Goods delivered for some purpose Return of Specific goods
Must be returned to bailor or disposed off As per the directions of the “Bailor”
After fulfillment of the purpose or After expiry of bailment period
Kinds of Bailment
Classified on the basis of Benefit or Reward
Gratuitous
No remuneration to any of the parties For exclusive benefit of Bailor or Bailee Example
Loan of book to a friend
Deposit of goods for safe custody
Non-Gratuitous
Goods given for reward- Remuneration or Consideration Example
Car Let out on Hire Tailoring for charges
Pawn or Pledge
Bailment, Sale & License
Sale
Ownership is Transferred
License
One party is permitted to place goods in premises
belonging to other person
Goods are not delivered to the Licenser
Bailment
Ownership is not Transferred
Duties of Bailee
To take reasonable care of goods delivered to
him
Not to make unauthorized use of goods Not to mix bailed goods with own goods To return the goods
To return accretions/increase to goods Not to set up any adverse title
Duties of Bailor
Disclose Faults/ Defects in goods
Repay necessary expenses in case of gratuitous
bail
Repay extra-ordinary expenses in Non-Gratuitous
bail
Indemnify bailee
Rights of Bailee
Enforcement of bailor‟s duties
Deliver goods to one of the several joint Bailors Deliver goods in good faith to bailor without title
Lien
Rights of Bailor
Enforcement of Bailees‟ duties
Terminate bailment if goods used wrongly
Demand return of goods at any time in case of
Pledge or Pawn
Bailment of goods as Security for payment of a
debt or
Performance of a promise
Bailor in this case is called “Pawner” Bailee is called “Pawnee”
Agency
Agent
A person employed to do any act of another or To represent another in dealings with third person
Principal
The person for whom such acts are undertaken
Agency
Rules of Agency
I can assign the rights to do those acts which I
have the right to do on my own Exceptions
Some acts are supposed to be done personally & can‟t be carried out by agents
Act of marriage
The acts of agent for all legal purposes are acts
Who may employ an Agent
Any person competent to contract
Who may be an Agent
Any person can become an agent
Minors & Lunatics can also be appointed as
agents
But in these cases complete liability is of the
Principal
No “Consideration” is necessary to create
Creation of Agency
Any person who is of the age of majority and isof
sound mind may employ an agent.(section183)
Between the principal and the third persons,any
person may become an agent. But noperson who is a minor and of unsound mind can become an agent.(184)
No consideration is necessary to create
anagency.(185)
Agency Creation
By Express Agreement
X a shop owner appoints Y to manage his shop by
executing Power of Attorney
By Implied Agreement
Inferred from the circumstances of the case Includes
Implied Agency
By Estoppel
Person by words or conduct induces 3rd party to
believe certain person is his agent
X tells to Y in presence of Z that X is Z‟s agent & Z
does not Contradict
By Holding out
A person by his past affirmative & positive conduct
leads 3rd person to believe person doing some act on his behalf is doing with authority
Implied Agency
By Necessity
Actual & definite necessity for acting on behalf of
principal
Impossible to obtain consent of the principal
By ratification
A without authority buys goods for B
B sells those goods to C on his own account
B‟s conduct implies a ratification of purchase made
for him by A
By Operation of Law
Other Agency Terms
Sub Agent
A person employed by & acting under the control of
original agent on agency business
Substituted Agent
Agent names or appoints a substituted agent at the
request of Principal
& the original agent altogether drops out of the
Types of Mercantile Agents
Factor
Commission agent Del credere Agent Broker
Duties of Agent
Follow principals directions or customs
Carry out work with reasonable skill & diligence Render accounts to principal
Communicate in case of difficulty Not to deal on his own account
Not to make any profit out of agency except
remunneration
On termination of agency due to death or insanity
Rights of Agent
Receive Remuneration
Retain sum received on account of principal Particular Lein- To retain goods
Indemnified against consequences of lawful acts
& acts done in goods faith
Compensation for injuries sustained due to
principal‟s neglect or lack of skills
Rights of Principal
Right to repudiate the Transaction
To claim any resulted benefit from Agency Right to Recover Damages
Duties of Principal
To indemnify against consequences of all lawful
acts of agent
To indemnify the agent against consequences of
acts done in good-faith
To pay compensation against agent‟sinjury To pay the agent the commission orother
Termination of Agency
According to section 201, an agency is
terminated by:
By an agreement between the parties, or By the principal revoking his authority; or
By the agent renouncing the business of agency; or By the business of agency being completed; or
By either the principal or the agent dying or
becoming of unsound mind; or
By the principal being adjudicatedan insolvent
Termination of Agency
Termination of Agency By Act of Parties Agreement Revocation by the Principal Renunciation by the Agent By Operation of LawCompletion of Business of Agency
Expiry of Time
Death of Principal or Agent
Insanity of Principal or Agent
Insolvency of Principal Destruction of Subject
Principal or agent become Alien Enemy
