The Indian Contract Act, 1872
PRELIMINARY
1. Short title.
Extent.
Commencement.
Saving.
2. Interpretation-clause.
CHAPTER I
OF THE COMMUNICATION, ACCEPTANCE AND
REVOCATION OF PROPOSALS
3. Communication, acceptance and
revocation of proposals.
4. Communication when complete.
5. Revocation of proposals and acceptances.
6. Revocation how made.
7. Acceptance must be absolute.
8. Acceptance by performing conditions,
or receiving consideration.
9. Promises, express and implied.
CHAPTER II
OF CONTRACTS, VOIDABLE CONTRACTS AND
VOID
AGREEMENTS
10. What agreements are contracts.
11. Who are competent to contract.
12. What is a sound mind for the
purposes of contracting.
13. “Consent” defined.
14. “Free consent” defined.
15. “Coercion” defined.
16. “Undue influence” defined.
17. “Fraud” defined.
18. “Misrepresentation” defined.
19. Voidability of agreements without
free consent.
19A. Power to set aside contract
induced by undue influence.
20. Agreement void where both parties
are under mistake as to matter of fact.
21. Effect of mistakes as to law.
22. Contract caused by mistake of one
party as to matter of fact.
SECTIONS
23. What considerations and objects are
lawful, and what not.
Void agreements
24. Agreement void, if considerations
and objects unlawful in part.
25. Agreement without consideration,
void, unless it is in writing and registered, or is a promise to
compensate for something done, or is a
promise to pay a debt barred by limitation law.
26. Agreement in restraint of marriage,
void.
27. Agreement in restraint of trade,
void.
Saving of agreement not to carry on
business of which good-will is sold.
28. Agreements in restraint of legal
proceeding void.
Saving of contract to refer to
arbitration dispute that may arise.
Saving of contract to refer questions
that have already arisen.
Saving of a guarantee agreement of a
bank or a financial institution.
29. Agreements void for uncertainty.
30. Agreements by way of wager, void.
Exception in favour of certain prizes
for horse-racing.
Section 294A of the Indian Penal Code
not affected.
CHAPTER III
OF CONTINGENT CONTRACTS
31. “Contingent contract” defined.
32. Enforcement of contracts contingent
on an event happening.
33. Enforcement of contracts contingent
on an event not happening.
34. When event on which contract is
contingent to be deemed impossible, if it is the future conduct of
a living person.
35. When contracts become void which
are contingent on happening of specified event within fixed
time.
When contracts may be enforced, which
are contingent on specified event not happening within
fixed time.
36. Agreement contingent on impossible
events void.
CHAPTER IV
OF THE PERFORMANCE OF CONTRACTS
Contracts which must be performed
37. Obligation of parties to contracts.
38. Effect of refusal to accept offer
of performance.
39. Effect of refusal of party to
perform promise wholly.
By whom contracts must be performed
40. Person by whom promise is to be
performed.
41. Effect of accepting performance
from third person.
SECTIONS
42. Devolution of joint liabilities.
43. Any one of joint promisors may be
compelled to perform.
Each promisor may compel contribution.
Sharing of loss by default in
contribution.
44. Effect of release of one joint
promisor.
45. Devolution of joint rights.
Time and place for performance
46. Time for performance of promise,
when no application is to be made and no time is specified.
47. Time and place for performance of
promise, where time is specified and no application to be
made.
48. Application for performance on
certain day to be at proper time and place.
49. Place for performance of promise,
where no application to be made and no place fixed for
performance.
50. Performance in manner or at time
prescribed or sanctioned by promisee.
Performance of reciprocal promises
51. Promisor not bound to perform,
unless reciprocal promisee ready and willing to perform.
52. Order of performance of reciprocal
promises.
53. Liability of party preventing event
on which the contract is to take effect.
54. Effect of default as to that
promise which should be first performed, in contract consisting of
reciprocal promises.
55. Effect of failure to perform at
fixed time, in contract in which time is essential.
Effect of such failure when time is not
essential.
Effect of acceptance of performance at
time other than that agreed upon.
56. Agreement to do impossible act.
Contract to do an act afterwards
becoming impossible or unlawful.
Compensation for loss through
non-performance of act known to be impossible or unlawful.
57. Reciprocal promise to do things
legal, and also other things illegal.
58. Alternative promise, one branch
being illegal.
Appropriation of payments
59. Application of payment where debt
to be discharged is indicated.
60. Application of payment where debt
to be discharged is not indicated.
61. Application of payment where
neither party appropriates.
Contracts which need not be performed
62. Effect of novation, rescission, and
alteration of contract.
63. Promisee may dispense with or remit
performance of promise.
64. Consequences of rescission of
voidable contract.
65. Obligation of person who has
received advantage under void agreement, or contract that becomes
void.
66. Mode of communicating or revoking
rescission of voidable contract.
67. Effect of neglect of promisee to
afford promisor reasonable facilities for performance.
CHAPTER V
OF CERTAIN RELATIONS RESEMBLING THOSE
CREATED BY CONTRACT
SECTIONS
68. Claim for necessaries supplied to
person incapable of contracting, or on his account.
69. Reimbursement of person paying
money due by another, in payment of which he is interested.
70. Obligation of person enjoying
benefit of non-gratuitous act.
71. Responsibility of finder of goods.
72. Liability of person to whom money
is paid, or thing delivered, by mistake or under coercion.
CHAPTER VI
OF THE CONSEQUENCES OF BREACH OF
CONTRACT
73. Compensation for loss or damage
caused by breach of contract.
Compensation for failure to discharge
obligation resembling those created by contract.
74. Compensation for breach of contract
where penalty stipulated for.
75. Party rightfully rescinding
contract, entitled to compensation.
[CHAPTER VII SALE OF
GOODS.][Repealed.].
CHAPTERVIII
OF INDEMNITY AND GUARANTEE
124. “Contract of indemnity” defined.
125. Rights of indemnity-holder when sued.
126. “Contract of guarantee”, “surety”, “principal debtor”
and “creditor”.
127. Consideration for guarantee.
128. Surety’s liability.
129. “Continuing guarantee”.
130. Revocation of continuing guarantee.
131. Revocation of continuing guarantee by surety’s death.
132. Liability of two persons, primarily liable, not
affected by arrangement between them that one shall be
surety on other’s default.
133. Discharge of surety by variance in terms of contract.
134. Discharge of surety by release or discharge of
principal debtor.
135. Discharge of surety when creditor compounds with, gives
time to, or agrees not to sue, principal debtor.
136. Surety not discharged when agreement made with third
person to give time to principal debtor.
137. Creditor’s forbearance to sue does not discharge
surety.
138. Release of one co-surety does not discharge others.
SECTIONS
139. Discharge of surety of creditor’s act or omission
impairing surety’s eventual remedy.
140. Rights of surety on payment or performance.
141. Surety’s right to benefit of creditor’s securities.
142. Guarantee obtained by misrepresentation invalid.
143. Guarantee obtained by concealment invalid.
144. Guarantee on contract that creditor shall not act on it
until co-surety joins.
145. Implied promise to indemnify surety.
146. Co-sureties liable to contribute equally.
147. Liability of co-sureties bound in different sums.
CHAPTER IX
OF BAILMENT
148. “Bailment”, “bailor” and “bailee” defined.
149. Delivery to bailee how made.
150. Bailor’s duty to disclose faults in goods bailed.
151. Care to be taken by bailee.
152. Bailee when not liable for loss, etc., of thing bailed.
153. Termination of bailment by bailee’s act inconsistent
with conditions.
154. Liability of bailee making unauthorized use of goods
bailed.
155. Effect of mixture, with bailor’s consent, of his goods
with bailee’s.
156. Effect of mixture, without bailor’s consent, when the
goods can be separated.
157. Effect of mixture, without bailor’s consent, when the
goods cannot be separated.
158. Repayment, by bailor, of necessary expenses.
159. Restoration of goods lent gratuitously.
160. Return of goods bailed on expiration of time or
accomplishment of purpose.
161. Bailee’s responsibility when goods are not duly
returned.
162. Termination of gratuitous bailment by death.
163. Bailor entitled to increase or profit from goods
bailed.
164. Bailor’s responsibility to bailee.
165. Bailment by several joint owners.
166. Bailee not responsible on re-delivery to bailor without
title.
167. Right of third person claiming goods bailed.
168. Right of finder of goods.
May sue for specific reward offered.
169. When finder of thing commonly on sale may sell it.
170. Bailee’s particular lien.
171. General lien of bankers, factors, wharfingers,
attorneys and policy-brokers.
Bailments of pledges
172. “Pledge”, “Pawnor” and “Pawnee” defined.
173. Pawnee’s right of retainer.
SECTIONS
174. Pawnee not to retain for debt or promise other than
that for which goods pledged.
Presumption in case of subsequent advances.
175. Pawnee’s right as to extraordinary expenses incurred.
176. Pawnee’s right where pawnor makes default.
177. Defaulting pawnor’s right to redeem.
178. Pledge by mercantile agent.
178A. Pledge by person in possession under voidable
contract.
179. Pledge where pawnor has only a limited interest.
Suits by bailees or bailors against wrong-doers
180. Suit by bailor or bailee against wrong-doer.
181. Apportionment of relief or compensation obtained by
such suits.
CHAPTER X
AGENCY
Appointment and authority of agents
182. “Agent” and “principal” defined.
183. Who may employ agent.
184. Who may be an agent.
185. Consideration not necessary.
186. Agent’s authority may be expressed or implied.
187. Definitions of express and implied authority.
188. Extent of agent’s authority.
189. Agent’s authority in an emergency.
Sub-agents
190. When agent cannot delegate.
191. “Sub-agent” defined.
192. Representation of principal by sub-agent properly
appointed.
Agent’s responsibility for sub-agent.
Sub-agent’s responsibility.
193. Agent’s responsibility for sub-agent appointed without
authority.
194. Relation between principal and person duly appointed by
agent to act in business of agency.
195. Agent’s duty in naming such person.
Ratification
196. Right of person as to acts done for him without his
authority.
Effect of ratification.
197. Ratification may be expressed or implied.
198. Knowledge requisite for valid ratification.
199. Effect of ratifying unauthorized act forming part of a
transaction.
200. Ratification of unauthorized act cannot injure third
person.
Revocation of authority
SECTIONS
201. Termination of agency.
202. Termination of agency, where agent has an interest in
subject-matter.
203. When principal may revoke agent’s authority.
204. Revocation where authority has been partly exercised.
205. Compensation for revocation by principal, or
renunciation by agent.
206. Notice of revocation or renunciation.
207. Revocation and renunciation may be expressed or
implied.
208. When termination of agent’s authority takes effect as
to agent, and as to third persons.
209. Agent’s duty on termination of agency by principal’s
death or insanity.
210. Termination of sub-agent’s authority.
Agent’s duty to principal
211. Agent’s duty in conducting principal’s business.
212. Skill and diligence required from agent.
213. Agent’s accounts.
214. Agent’s duty to communicate with principal.
215. Right of principal when agent deals, on his own
account, in business of agency without
principal’s consent.
216. Principal’s right to benefit gained by agent dealing on
his own account in business of agency.
217. Agent’s right of retainer out of sums received on
principal’s account.
218. Agent’s duty to pay sums received for principal.
219. When agent’s remuneration becomes due.
220. Agent not entitled to remuneration for business
misconducted.
221. Agent’s lien on principal’s property.
Principal’s duty to agent
222. Agent to be indemnified against consequences of lawful
acts.
223. Agent to be indemnified against consequences of acts
done in good faith.
224. Non-liability of employer of agent to do a criminal
act.
225. Compensation to agent for injury caused by principal’s
neglect.
Effect of agency on contracts with third persons
226. Enforcement and consequences of agent’s contracts.
227. Principal how far bound, when agent exceeds authority.
228. Principal not bound when excess of agent’s authority is
not separable.
229. Consequences of notice given to agent.
230. Agent cannot personally enforce, nor be bound by,
contracts on behalf of principal.
Presumption of contract to contrary.
231. Rights of parties to a contract made by agent not
disclosed.
232. Performance of contract with agent supposed to be
principal.
233. Right of person dealing with agent personally liable.
SECTIONS
234. Consequence of inducing agent or principal to act on
belief that principal or agent will be held
exclusively liable.
235. Liability of pretended agent.
236. Person falsely contracting as agent not entitled to
performance.
237. Liability of principal inducing belief that agent’s
unauthorized acts were authorized.
238. Effect, on agreement, of misrepresentation or fraud by
agent.
CHAPTER XI
OF PARTNERSHIP
239. [Repealed.].
240. [Repealed.].
241. [Repealed.].
242. [Repealed.].
243. [Repealed.].
244. [Repealed.].
245. [Repealed.].
246. [Repealed.].
247. [Repealed.].
248. [Repealed.].
249. [Repealed.].
250. [Repealed.].
251. [Repealed.].
252. [Repealed.].
253. [Repealed.].
254. [Repealed.].
255. [Repealed.].
256. [Repealed.].
257. [Repealed.].
258. [Repealed.].
259. [Repealed.].
260. [Repealed.].
261. [Repealed.].
262. [Repealed.].
263. [Repealed.].
264. [Repealed.].
265. [Repealed.].
266. [Repealed.].
SCHEDULE—[Repealed.]
THE INDIAN CONTRACT ACT, 1872
ACT NO. 9 OF 18721
[25th April, 1872.]
Preamble—WHEREAS it is expedient to define and amend certain
parts of the law relating to
contracts;
It is hereby enacted as follows:—
PRELIMINARY
1. Short title.—This Act may be called the Indian Contract
Act, 1872.
Extent, Commencement.—It extends to the whole of India 2
[
3***]; and it shall come into force on
the first day of September, 1872.
Saving—4
*** Nothing herein contained shall affect the provisions of
any Statute, Act or Regulation
not hereby expressly repealed, nor any usage or custom of
trade, nor any incident of any contract, not
inconsistent with the provisions of this Act.
2. Interpretation-clause.—In this Act the following words
and expressions are used in the following
senses, unless a contrary intention appears from the
context:—
(a) When one person signifies to another his willingness to
do or to abstain from doing anything,
with a view to obtaining the assent of that other to such
act or abstinence, he is said to make a
proposal;
1. For the Statement of Objects and Reasons for the Bill
which was based on a a report of Her Majesty’s Commissioners
appointed to prepare a body of substantive law for India,
dated 6th July, 1866, see Gazette of India, 1867 Extraordinary, p. 34; for
the Report of the Select Committee, see ibid.,
Extraordinary, dated 28th March, 1872; for discussions in Council, see ibid.,
1867,
Supplement, p. 1064; ibid., 1871, p. 313, and ibid., 1872,
p. 527. It has been amended in C.P. by C.P. Act 1 of 1915 and in C.P.
and Berar by C.P. and Berar Act 15 of 1938.
The Chapters and sections of the Transfer of Property Act,
1882 (4 of 1882), which relate to contracts are, in places in which
that Act is in force, to be taken as part of this Act—see
Act 4 of 1882, s. 4.
This Act has been extended to Berar by the Berar Laws Act,
1941 (4 of 1941) to Dadra and Nagar Haveli by Reg. 6 of 1963,
s. 2 and Sch. I to
Goa, Daman and Diu by Reg. 11 of 1963, s. 3 and Sch., (w.e.f. 1-10-1965) to
Laccadive, Minicoy and
Amindivi Islands by
Reg. 8 of 1965, s. 3
and Sch., to Pondicherry by Act 26 of 1968, s. 3 and Sch. and has been declared
to be in force in—
the Sonthal Parganas—see Sonthal Parganas Settlement
Regulation, 1872 (3 of 1872), s. 3, as amended by the Sonthal
Parganas Justice and Laws Regulation, 1899 (3 of 1899), s.
3.
Panth Piploda—see the Panth Piploda Law Regulation, 1929 (1
of 1929), s. 2.
It has been declared, by notification under s. 3(a) of the
Scheduled Districts Act, 1874 (14 of 1874), to be in force in—
The Tarai of the Province of Agra—see Gazette of India,
1876, Pt. I, p. 505;
the Districts of Hazari bagh, Lohardaga and Manbhum, and Pargana
Dhalbhum and the Kolhan in the District of Singhbhum—
see Gazette of India, 1881, pt. I, p. 504.—The District of
Lohardaga included at this time the present District of Palamau which
was separated in 1894. The District of Lohardaga is now
called the Ranchi District—see Calcutta Gazette, 1899, pt. I, p. 44.
2. Subs. by Act 3 of 1951, s. 3 and Sch., for “except Part B
States.”
3. The words “except the State of Jammu and Kashmir” omitted
by Act 34 of 2019, s. 95 and the Fifth Schedule
(w.e.f. 31-10- 2019).
4. The words “The enactments mentioned in the Schedule
hereto are repealed to the extent specified in the third column thereof,
but” rep. by Act 10 of 1914, s. 3 and the Second Schedule.
11
(b) When the person to whom the proposal is made signifies
his assent thereto, the proposal is
said to be accepted. A proposal, when accepted, becomes a
promise;
(c) The person making the proposal is called the “promisor”,
and the person accepting the
proposal is called the “promisee”;
(d) When, at the desire of the promisor, the promisee or any
other person has done or abstained
from doing, or does or abstains from doing, or promises to
do or to abstain from doing, something,
such act or abstinence or promise is called a consideration
for the promise;
(e) Every promise and every set of promises, forming the
consideration for each other, is an
agreement;
(f) Promises which form the consideration or part of the
consideration for each other are called
reciprocal promises;
(g) An agreement not enforceable by law is said to be void;
(h) An agreement enforceable by law is a contract;
(i) An agreement which is enforceable by law at the option
of one or more of the parties thereto,
but not at the option of the other or others, is a voidable
contract;
(j) A contract which ceases to be enforceable by law becomes
void when it ceases to be
enforceable.
CHAPTER I
OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS
3.Communication, acceptance and revocation of proposals.—The
communication of proposals,
the acceptance of proposals, and the revocation of proposals
and acceptances, respectively, are deemed to
be made by any act or omission of the party proposing,
accepting or revoking by which he intends to
communicate such proposal, acceptance or revocation, or
which has the effect of communicating it.
4. Communication when complete.—The communication of a
proposal is complete when it comes
to the knowledge of the person to whom it is made.
The communication of an acceptance is complete,—
as against the proposer, when it is put in a course of
transmission to him, so as to be out of the
power of the acceptor;
as against the acceptor, when it comes to the knowledge of
the proposer.
The communication of a revocation is complete,—
as against the person who makes it, when it is put into a
course of transmission to the person to
whom it is made, so as to be out of the power of the person
who makes it;
as against the person to whom it is made, when it comes to
his knowledge.
Illustrations
(a) A proposes, by letter, to sell a house to B at a certain
price.
The communication of the proposal is complete when B
receives the letter.
(b) B accepts A’s proposal by a letter sent by post.
The communication of the acceptance is complete,
as against A when the letter is posted;
as against B, when the letter is received by A.
(c) A revokes his proposal by telegram.
The revocation is complete as against A when the telegram is
despatched. It is complete as against B when B receives it.
B revokes his acceptance by telegram. B’s revocation is
complete as against B when the telegram is despatched, and as
against A when it reaches him.
12
5. Revocation of proposals and acceptances.—A proposal may
be revoked at any time before the
communication of its acceptance is complete as against the
proposer, but not afterwards.
An acceptance may be revoked at any time before the
communication of the acceptance is complete
as against the acceptor, but not afterwards.
Illustration
A proposes, by a letter sent by post, to sell his house to
B.
B accepts the proposal by a letter sent by post.
A may revoke his proposal at any time before or at the
moment when B posts his letter of acceptance, but not afterwards.
B may revoke his acceptance at any time before or at the
moment when the letter communicating it reaches A, but not
afterwards.
STATE AMENDMENT
Uttar Pradesh
Amendment of section 5 of Act (9 of 1872).—In section 5 of
Indian contract Act, 1872, hereinafter
in this Chapter referred to as the principal Act, at the end
of the first paragraph, the following explanation
shall inserted, namely:--
“Explanation—Where an invitation to a proposal contains a
condition that any proposal made in
response to such invitation shall be kept open for a
specified time and a proposal is thereupon made
accepting such condition, such proposal may not be revoked
within such time.”
[Vide Uttar Pradesh Act, 57 of 1976, s. 2]
6. Revocation how made.—A proposal is revoked—
(1) by the communication of notice of revocation by the
proposer to the other party;
(2) by the lapse of the time prescribed in such proposal for
its acceptance, or, if no time is so
prescribed, by the lapse of a reasonable time, without
communication of the acceptance;
(3) by the failure of the acceptor to fulfil a condition
precedent to acceptance; or
(4) by the death or insanity of the proposer, if the fact of
his death or insanity comes to the
knowledge of the acceptor before acceptance.
7. Acceptance must be absolute.—In order to convert a
proposal into a promise, the acceptance
must—
(1) be absolute and unqualified;
(2) be expressed in some usual and reasonable manner, unless
the proposal prescribes the manner
in which it is to be accepted. If the proposal prescribes a
manner in which it is to be accepted, and the
acceptance is not made in such manner, the proposer may,
within a reasonable time after the
acceptance is communicated to him, insist that his proposal
shall be accepted in the prescribed
manner, and not otherwise; but if he fails to do so, he
accepts the acceptance.
8. Acceptance by performing conditions, or receiving
consideration.—Performance of the
conditions of a proposal, or the acceptance of any consideration
for a reciprocal promise which may be
offered with a proposal, is an acceptance of the proposal.
9. Promises, express and implied.—In so far as the proposal
or acceptance of any promise is made
in words, the promise is said to be express. In so far as
such proposal or acceptance is made otherwise
than in words, the promise is said to be implied.
13
CHAPTER II
OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
10. What agreements are contracts.—All agreements are
contracts if they are made by the free
consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not
hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in 1
[India] and not hereby expressly repealed
by which any contract is required to be made in writing2 or
in the presence of witnesses, or any law
relating to the registration of documents.
11. Who are competent to contract.—Every person is competent
to contract who is of the age of
majority according to the law to which he is subject3
, and who is of sound mind, and is not disqualified
from contracting by any law to which he is subject.
12. What is a sound mind for the purposes of contracting.—A
person is said to be of sound mind
for the purpose of making a contract, if, at the time when
he makes it, he is capable of understanding it
and of forming a rational judgment as to its effect upon his
interests.
A person who is usually of unsound mind, but occasionally of
sound mind, may make a contract
when he is of sound mind.
A person who is usually of sound mind, but occasionally of
unsound mind, may not make a contract
when he is of unsound mind.
Illustrations
(a) A patient in a lunatic asylum, who is at intervals of
sound mind, may contract during those intervals.
(b) A sane man, who is delirious from fever or who is so
drunk that he cannot understand the terms of a contract, or form a
rational judgment as to its effect on his interests, cannot
contract whilst such delirium or drunkenness lasts.
13. “Consent” defined.—Two or more persons are said to
consent when they agree upon the same
thing in the same sense.
14. “Free consent” defined.—Consent is said to be free when
it is not caused by—
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of sections 20, 21
and 22.
Consent is said to be so caused when it would not have been
given but for the existence of such
coercion, undue influence, fraud, misrepresentation or
mistake.
15. “Coercion” defined.—“Coercion” is the committing, or
threatening to commit, any act forbidden
by the Indian Penal Code (45 of 1860)or the unlawful
detaining, or threatening to detain, any property, to
the prejudice of any person whatever, with the intention of
causing any person to enter into an agreement.
1. Subs. by Act 3 of 1951, s. 3 and Sch., for “Part A States
and Part C States” which had been subs. by the A.O. 1950, for
“the Provinces”.
2. See e.g., s. 25, infra; the Copyright Act, 1957 (14 of
1957), s. 19; the Carriers Act, 1865 (3 of 1865) ss. 6 and 7;
the Companies Act, 1956 (1 of 1956), ss. 12, 30, 46 and 109.
3. See the Indian Majority Act, 1875 (9 of 1875).
14
Explanation.—It is immaterial whether the Indian Penal Code
(45 of 1860) is or is not in force in the
place where the coercion is employed.
Illustration
A, on board an English ship on the high seas, causes B to
enter into an agreement by an act amounting to criminal
intimidation under the Indian Penal Code (45 of 1860).
A afterwards sues B for breach of contract at Calcutta.
A has employed coercion, although his act is not an offence
by the law of England, and although section 506 of the Indian
Penal Code (45 of 1860) was not in force at the time when or
place where the act was done.
1
[16.“Undue influence” defined.—(1) A contract is said to be
induced by “undue influence” where
the relations subsisting between the parties are such that
one of the parties is in a position to dominate the
will of the other and uses that position to obtain an unfair
advantage over the other.
(2) In particular and without prejudice to the generality of
the foregoing principle, a person is deemed
to be in a position to dominate the will of another—
(a) where he holds a real or apparent authority over the
other, or where he stands in a fiduciary
relation to the other; or
(b) where he makes a contract with a person whose mental
capacity is temporarily or permanently
affected by reason of age, illness, or mental or bodily
distress.
(3) Where a person who is in a position to dominate the will
of another, enters into a contract with
him, and the transaction appears, on the face of it or on
the evidence adduced, to be unconscionable, the
burden of proving that such contract was not induced by
undue influence shall lie upon the person in a
position to dominate the will of the other.
Nothing in this sub-section shall affect the provisions of
section 111 of the Indian Evidence Act, 1872
(1 of 1872).
Illustrations
(a) A having advanced money to his son, B, during his
minority, upon B’s coming of age obtains, by misuse of parental influence, a
bond
from B for a greater amount than the sum due in respect of
the advance. A employs undue influence.
(b) A, a man enfeebled by disease or age, is induced, by B’s
influence over him as his medical attendant, to agree to pay B an unreasonable
sum for his professional services. B employs undue
influence.
(c) A, being in debt to B, the money-lender of his village,
contracts a fresh loan on terms which appear to be unconscionable. It lies on B
to
prove that the contract was not induced by undue influence.
(d) A applies to a banker for a loan at a time when there is
stringency in the money market. The banker declines to make the loan except at
an unusually high rate of interest. A accepts the loan on
these terms. This is a transaction in the ordinary course of business, and the
contract is
not induced by undue influence.]
17. “Fraud” defined.—“Fraud” means and includes any of the
following acts committed by a party
to a contract, or with his connivance, or by his agent2
, with intent to deceive another party thereto of his
agent, or to induce him to enter into the contract:—
(1) the suggestion, as a fact, of that which is not true, by
one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge
or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares
to be fraudulent.
Explanation.—Mere silence as to facts likely to affect the
willingness of a person to enter into a
contract is not fraud, unless the circumstances of the case
are such that, regard being had to them, it is the
duty of the person keeping silence to speak3
, or unless his silence is, in itself, equivalent to speech.
1. Subs. by Act 6 of 1899, s. 2, for the original s. 16.
2. Cf. s. 238, infra.
3. See s. 143, infra.
15
Illustrations
(a) A sells, by auction, to B, a horse which A knows to be
unsound. A says nothing to B about the horse’s unsoundness.
This is not fraud in A.
(b) B is A’s daughter and has just come of age. Here, the
relation between the parties would make it A’s duty to tell B if the
horse is unsound.
(c) B says to A—“If you do not deny it, I shall assume that
the horse is sound.” A says nothing. Here, A’s silence is
equivalent to speech.
(d) A and B, being traders, enter upon a contract. A has
private information of a change in prices which would affect B’s
willingness to proceed with the contract. A is not bound to
inform B.
18. “Misrepresentation” defined.—“Misrepresentation” means
and includes—
(1) the positive assertion, in a manner not warranted by the
information of the person making it,
of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive,
gains an advantage to the person
committing it, or any one claiming under him; by misleading
another to his prejudice, or to the
prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to
make a mistake as to the substance
of the thing which is the subject of the agreement.
19. Voidability of agreements without free consent.—When
consent to an agreement is caused by
coercion,1*** fraud or misrepresentation, the agreement is a
contract voidable at the option of the party
whose consent was so caused.
A party to a contract whose consent was caused by fraud or
misrepresentation, may, if he thinks fit,
insist that the contract shall be performed, and that he
shall be put in the position in which he would have
been if the representations made had been true.
Exception.—If such consent was caused by misrepresentation
or by silence, fraudulent within the
meaning of section 17, the contract, nevertheless, is not
voidable, if the party whose consent was so
caused had the means of discovering the truth with ordinary
diligence.
Explanation.—A fraud or misrepresentation which did not
cause the consent to a contract of the party
on whom such fraud was practised, or to whom such
misrepresentation was made, does not render a
contract voidable.
Illustrations
(a) A, intending to deceive B, falsely represents that five
hundred maunds of indigo are made annually at A’s factory, and
thereby induces B to buy the factory. The contract is
voidable at the option of B.
(b) A, by a misrepresentation, leads B erroneously to
believe that, five hundred maunds of indigo are made annually at A’s
factory. B examines the accounts of the factory, which show
that only four hundred maunds of indigo have been made. After this
B buys the factory. The contract is not voidable on account
of A’s misrepresentation.
(c) A fraudulently informs B that A’s estate is free from in
cumbrance. B thereupon buys the estate. The estate is subject to a
mortgage. B may either avoid the contract, or may insist on
its being carried out and the mortgage debt redeemed.
(d) B, having discovered a vein of ore on the estate of A,
adopts means to conceal, and does conceal, the existence of the ore
from A. Through A’s ignorance B is enabled to buy the estate
at an under-value. The contract is voidable at the option of A.
(e) A is entitled to succeed to an estate at the death of B;
B dies: C, having received intelligence of B’s death, prevents the
intelligence reaching A, and thus induces A to sell him his
interest in the estate. The sale is voidable at the option of A.
2
[19A. Power to set aside contract induced by undue
influence.—When consent to an agreement is
caused by undue influence, the agreement is a contract
voidable at the option of the party whose consent
was so caused.
1. The words “undue influence” rep. by Act 6 of 1899, s. 3.
2. Ins. by Act 6 of 1899, s. 3.
16
Any such contract may be set aside either absolutely or, if
the party who was entitled to avoid it has
received any benefit thereunder, upon such terms and
conditions as to the Court may seem just.
Illustrations
(a) A’s son has forged B’s name to a promissory note. B
under threat of prosecuting A’s son, obtains a bond from A for the
amount of the forged note. If B sues on this bond, the Court
may set the bond aside.
(b) A, a money-lender, advances Rs. 100 to B, an
agriculturist, and, by undue influence, induces B to execute a bond for
Rs. 200 with interest at 6 per cent. per month. The Court
may set the bond aside, ordering B to repay the Rs. 100 with such
interest as may seem just.]
20.Agreement void where both parties are under mistake as to
matter of fact.—Where both the
parties to an agreement are under a mistake as to a matter
of fact essential to the agreement, the agreement
is void.
Explanation.—An erroneous opinion as to the value of the
thing which forms the subject-matter of
the agreement, is not to be deemed a mistake as to a matter
of fact.
Illustrations
(a) A agrees to sell to B a specific cargo of goods supposed
to be on its way from England to Bombay. It turns out that,
before the day of the bargain, the ship conveying the cargo
had been cast away and the goods lost. Neither party was aware of the
these facts. The agreement is void.
(b) A agrees to buy from B a certain horse. It turns out
that the horse was dead at the time of the bargain, though neither
party was aware of the fact. The agreement is void.
(c) A, being entitled to an estate for the life of B, agrees
to sell it to C. B was dead at the time of the agreement, but both
parties were ignorant of the fact. The agreement is void.
21. Effect of mistakes as to law.—A contract is not voidable
because it was caused by a mistake as
to any law in force in 1
[India]; but a mistake as to a law not in force in 1
[India] has the same effect as a
mistake of fact.
2* * * * *
Illustration
A and B make a contract grounded on the erroneous belief
that a particular debt is barred by the Indian Law of Limitation:
the contract is not voidable.
3* * * * *
22. Contract caused by mistake of one party as to matter of
fact.—A contract is not voidable
merely because it was caused by one of the parties to it
being under a mistake as to a matter of fact.
23. What considerations and objects are lawful, and what
not.—The consideration or object of an
agreement is lawful, unless—
it is forbidden by law4
; or
is of such a nature that if permitted, it would defeat the
provisions of any law; or
is fraudulent ; or
involves or implies injury to the person or property of
another; or
the Court regards it as immoral, or opposed to public
policy.
1. The original words ‘British India” have successively been
amended by the A.O. 1948 and the A.O. 1950 to read as above.
2. Paragraph 2, ins. by the A.O. 1937, and as amended by the
A. O. 1948 was Rep. by the A. O. 1950.
3. The second Illustration to s. 21 rep. by Act 24 of 1917,
s. 3 and the Second Schedule.
4. See ss. 26, 27, 28 and 30, infra.
17
In each of these cases, the consideration or object of an
agreement is said to be unlawful. Every
agreement of which the object or consideration is unlawful
is void.
Illustrations
(a) A agrees to sell his house to B for 10,000 rupees. Here
B’s promise to pay the sum of 10,000 rupees is the consideration
for A’s promise to sell the house, and A’s promise to sell
the house is the consideration for B’s promise to pay the 10,000 rupees.
These are lawful considerations.
(b) A promises to pay B 1,000 rupees at the end of six
months, if C, who owes that sum to B, fails to pay it. B promises to
grant time to C accordingly. Here, the promise of each party
is the consideration for the promise of the other party, and they are
lawful considerations.
(c) A promises, for a certain sum paid to him by B, to make
good to B the value of his ship if it is wrecked on a certain
voyage. Here, A’s promise is the consideration for B’s
payment and B’s payment is the consideration for A’s promise and these
are lawful considerations.
(d) A promises to maintain B’s child, and B promises to pay
A 1,000 rupees yearly for the purpose. Here, the promise of
each party is the consideration for the promise of the other
party. They are lawful considerations.
(e) A, B and C enter into an agreement for the division
among them of gains acquired or to be acquired, by them by fraud.
The agreement is void, as its object is unlawful.
(f) A promises to obtain for B an employment in the public
service and B promises to pay 1,000 rupees to A. The agreement
is void, as the consideration for it is unlawful.
(g) A, being agent for a landed proprietor, agrees for
money, without the knowledge of his principal, to obtain for B a lease
of land belonging to his principal. The agreement between A
and B is void, as it implies a fraud by concealment, by A, on his
principal.
(h) A promises B to drop a prosecution which he has
instituted against B for robbery, and B promises to restore the value of
the things taken. The agreement is void, as its object is
unlawful.
(i) A’s estate is sold for arrears of revenue under the
provisions of an Act of the Legislature, by which the defaulter is
prohibited from purchasing the estate. B, upon an
understanding with A, becomes the purchaser, and agrees to convey the estate
to A upon receiving from him the price which B has paid. The
agreement is void, as it renders the transaction, in effect, a
purchase by the defaulter, and would so defeat the object of
the law.
(j) A, who is B’s mukhtar, promises to exercise his
influence, as such, with B in favour of C, and C promises to pay 1,000
rupees to A. The agreement is void, because it is immoral.
(k) A agrees to let her daughter to hire to B for
concubinage. The agreement is void, because it is immoral, though the letting
may not be punishable under the Indian Penal Code (45 of
1860).
Void agreements
24.Agreements void, if considerations and objects unlawful
in part.—If any part of a single
consideration for one or more objects, or any one or any
part of any one of several considerations for a
single object, is unlawful, the agreement is void.
Illustration
A promises to superintend, on behalf of B, a legal
manufacture of indigo, and an illegal traffic in other articles. B promises
to pay to A a salary of 10,000 rupees a year. The agreement
is void, the object of A’s promise, and the consideration for B’s
promise, being in part unlawful.
25. Agreement without consideration, void, unless it is in
writing and registered,or is a promise
to compensate for something done or is a promise to pay a
debt barred by limitation law.—An
agreement made without consideration is void, unless—
(1) it is expressed in writing and registered under the law
for the time being in force for the
registration of 1
[documents], and is made on account of natural love and
affection between parties
standing in a near relation to each other ; or unless
(2) it is a promise to compensate, wholly or in part, a
person who has already voluntarily done
something for the promisor, or something which the promisor
was legally compellable to do; or
unless;
1. Subs. by Act 12 of 1891, s. 2 and the Second Schedule,
Pt. I, for “assurances”.
18
(3) it is a promise, made in writing and signed by the
person to be charged therewith, or by his
agent generally or specially authorized in that behalf, to
pay wholly or in part a debt of which the
creditor might have enforced payment but for the law for the
limitation of suits.
In any of these cases, such an agreement is a contract.
Explanation 1.—Nothing in this section shall affect the
validity, as between the donor and donee, of
any gift actually made.
Explanation 2.—An agreement to which the consent of the
promisor is freely given is not void
merely because the consideration is inadequate; but the
inadequacy of the consideration may be taken into
account by the Court in determining the question whether the
consent of the promisor was freely given.
Illustrations
(a) A promises, for no consideration, to give to B Rs.
1,000. This is a void agreement.
(b) A, for natural love and affection, promises to give his
son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This
is a
contract.
(c) A finds B’s purse and gives it to him. B promises to
give A Rs. 50. This is a contract.
(d) A supports B’s infant son. B promises to pay A’s
expenses in so doing. This is a contract.
(e) A owes B Rs. 1,000, but the debt is barred by the
Limitation Act. A signs a written promise to pay B Rs. 500 on account of the
debt.
This is a contract.
(f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A’s
consent to the agreement was freely given. The agreement is a contract
notwithstanding the inadequacy of the consideration.
(g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A
denies that his consent to the agreement was freely given.
The inadequacy of the consideration is a fact which the
Court should take into account in considering whether or not A’s consent was
freely
given.
26. Agreement in restraint of marriage, void.—Every
agreement in restraint of the marriage of any
person, other than a minor, is void.
27. Agreement in restraint of trade, void.—Every agreement
by which any one is restrained from
exercising a lawful profession, trade or business of any
kind, is to that extent void.
Exception 1.—Saving of agreement not to carry on business of
which good-will is sold.—One
who sells the good-will of a business may agree with the
buyer to refrain from carrying on a similar
business, within specified local limits, so long as the
buyer, or any person deriving title to the good-will
from him, carries on a like business therein, provided that
such limits appear to the Court reasonable,
regard being had to the nature of the business.
1* * * * *.
28.Agreements in restraint of legal proceedings, void.—2
[Every agreement,—
(a) by which any party thereto is restricted absolutely from
enforcing his rights under or in
respect of any contract, by the usual legal proceedings in
the ordinary tribunals, or which limits the
time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or
discharges any party thereto, from any
liability, under or in respect of any contract on the expiry
of a specified period so as to restrict any
party from enforcing his rights,
is void to the extent.]
Exception 1.—Saving of contract to refer to arbitration
dispute that may arise.—This section
shall not render illegal a contract, by which two or more
persons agree that any dispute which may arise
between them in respect of any subject or class of subjects
shall be referred to arbitration, and that only
the amount awarded in such arbitration shall be recoverable
in respect of the dispute so referred.
3*****
Exception 2.—Saving of contract to refer questions that have
already arisen.—Nor shall this
section render illegal any contract in writing, by which two
or more persons agree to refer to arbitration
any question between them which has already arisen, or
affect any provision of any law in force for the
time being as to references to arbitration4
.
1. Exceptions 2 and 3 rep. by Act 9 of 1932, s. 73 and the
Second Schedule.
2. Subs. by Act 1 of 1997, s. 2, for certain words (w.e.f.
8-1-1997).
3. The second clause of Exception 1 to section 28 rep. by
Act 1 of 1877, s. 2 and Sch.
4. Cf. the Arbitration Act, 1940 (10 of 1940) and the
Companies Act, 1956 (1 of 1956), s. 389.
19
1
[Exception 3.—Saving of a guarantee agreement of a bank or a
financial institution.—This
section shall not render illegal a contract in writing by
which any bank or financial institution stipulate a
term in a guarantee or any agreement making a provision for
guarantee for extinguishment of the rights or
discharge of any party thereto from any liability under or
in respect of such guarantee or agreement on the
expiry of a specified period which is not less than one year
from the date of occurring or non-occurring of
a specified event for extinguishment or discharge of such
party from the said liability.
Explanation.—(i) In Exception 3, the expression “bank”
means—
(a) a “banking company” as defined in clause (c) of section
5 of the Banking Regulation
Act, 1949(10 of 1949);
(b) “a corresponding new bank” as defined in clause (da) of
section 5 of the Banking Regulation
Act, 1949(10 of 1949);
(c) “State Bank of India” constituted under section 3 of the
State Bank of India Act, 1955
(23 of 1955);
(d) “a subsidiary bank” as defined in clause (k) of section
2 of the State Bank of India (Subsidiary
Banks) Act, 1959(38 of 1959);
(e) “a Regional Rural Bank” established under section 3 of
the Regional Rural Banks
Act, 1976(21 of 1976);
(f) “a Co-operative Bank” as defined in clause (cci) of
section 5 of the Banking Regulation
Act, 1949(10 of 1949);
(g) “a multi-State co-operative bank” as defined in clause
(cciiia) of section 5 of the Banking
Regulation Act, 1949(10 of 1949); and
(ii) In Exception 3, the expression “a financial institution”
means any public financial institution
within the meaning of section 4A of the Companies Act,
1956(1 of 1956).]
29. Agreements void for uncertainty.—Agreements, the meaning
of which is not certain, or capable
of being made certain, are void.
Illustrations
(a) A agrees to sell to B “a hundred tons of oil”. There is
nothing whatever to show what kind of oil was intended. The
agreement is void for uncertainty.
(b) A agrees to sell to B one hundred tons of oil of a
specified description, known as an article of commerce. There is no
uncertainty here to make the agreement void.
(c) A, who is a dealer in cocoanut-oil only, agrees to sell
to B “one hundred tons of oil”. The nature of A’s trade affords an
indication of the meaning of the words, and A has entered
into a contract for the sale of one hundred tons of cocoanut-oil.
(d) A agrees to sell to B “all the grain in my granary at
Ramnagar”. There is no uncertainty here to make the agreement void.
(e) A agrees to sell B “one thousand maunds of rice at a
price to be fixed by C”. As the price is capable of being made
certain, there is no uncertainty here to make the agreement
void.
(f) A agrees to sell to B “my white horse for rupees five
hundred or rupees one thousand”. There is nothing to show which of
the two prices was to be given. The agreement is void.
30. Agreements by way of wager void.—Agreements by way of
wager are void; and no suit shall be
brought for recovering anything alleged to be won on any
wager, or entrusted to any person to abide the
result of any game or other uncertain event on which any
wager is made.
1. Ins. by Act 4 of 2013, s. 17 and the Schedule (w.e.f.
18-1-2013).
20
Exception in favour of certain prizes for horse-racing.—This
section shall not be deemed to
render unlawful a subscription or contribution, or agreement
to subscribe or contribute, made or entered
into for or toward any plate, prize or sum of money, of the
value or amount of five hundred rupees or
upwards, to be awarded to the winner or winners of any
horse-race.
Section 294A of the Indian Penal Code not affected.—Nothing
in this section shall be deemed to
legalize any transaction connected with horse-racing, to
which the provisions of section 294A of the
Indian Penal Code (45 of 1860) apply.
CHAPTER III
OF CONTINGENT CONTRACTS
31. “Contingent contract” defined.—A “contingent contract is
a contract to do or not to do
something, if some event, collateral to such contract, does
or does not happen.
Illustration
A contracts to pay B Rs. 10,000 if B’s house is burnt. This
is a contingent contract.
32. Enforcement of contracts contingent on an event
happening.—Contingent contracts to do or
not to do anything if an uncertain future event happens
cannot be enforced by law unless and until that
event has happened.
If the event becomes impossible, such contracts become void.
Illustrations
(a) A makes a contract with B to buy B’s horse if A survives
C. This contract cannot be enforced by law unless and until C
dies in A’s lifetime.
(b) A makes a contract with B to sell a horse to B at a
specified price, if C, to whom the horse has been offered, refuses to
buy him. The contract cannot be enforced by law unless and
until C refuses to buy the horse.
(c) A contracts to pay B a sum of money when B marries C. C
dies without being married to B. The contract becomes void.
33. Enforcement of contracts contingent on an event not
happening.—Contingent contracts to do
or not to do anything if an uncertain future event does not
happen can be enforced when the happening of
that event becomes impossible, and not before.
Illustration
A agrees to pay B a sum of money if a certain ship does not
return. The ship is sunk. The contract can be enforced when the
ship sinks.
34.When event on which contract is contingent to be deemed
impossible, if it is the future
conduct of a living person.—If the future event on which a
contract is contingent is the way in which a
person will act at an unspecified time, the event shall be
considered to become impossible when such
person does anything which renders it impossible that he
should so act within any definite time, or
otherwise than under further contingencies.
Illustration
A agrees to pay B a sum of money if B marries C. C marries
D. The marriage of B to C must now be considered impossible,
although it is possible that D may die and that C may
afterwards marry B.
35.When contracts become void which are contingent on
happening of specified event within
fixed time.—Contingent contracts to do or not to do anything
if a specified uncertain event happens
within a fixed time become void if, at the expiration of the
time fixed, such event has not happened, or if,
before the time fixed, such event becomes impossible.
21
When contracts may be enforced, which are contingent on
specified event not happening within
fixed time.—Contingent contracts to do or not to do
anything, if a specified uncertain event does not
happen within a fixed time may be enforced by law when the
time fixed has expired and such event has
not happened or, before the time fixed has expired, if it
becomes certain that such event will not happen.
Illustrations
(a) A promises to pay B a sum of money if a certain ship
returns within a year. The contract may be enforced if the ship
returns within the year, and becomes void if the ship is
burnt within the year.
(b) A promises to pay B a sum of money if a certain ship
does not return within a year. The contract may be enforced if the
ship does not return within the year, or is burnt within the
year.
36. Agreement contingent on impossible events
void.—Contingent agreements to do or not to do
anything, if an impossible event happens, are void, whether
the impossibility of the event is known or not
to the parties to the agreement at the time when it is made.
Illustrations
(a) A agrees to pay B 1,000 rupees if two straight lines
should enclose a space. The agreement is void.
(b) A agrees to pay B 1,000 rupees if B will marry A’s
daughter C. C was dead at the time of the agreement. The agreement
is void.
CHAPTER IV
OF THE PERFORMANCE OF CONTRACTS
Contracts which must be performed
37. Obligation of parties to contracts.—The parties to a
contract must either perform, or offer to
perform, their respective promises, unless such performance
is dispensed with or excused under the
provisions of this Act, or of any other law.
Promises bind the representatives of the promisors in case
of the death of such promisors before
performance, unless a contrary intention appears from the
contract.
Illustrations
(a) A promises to deliver goods to B on a certain day on
payment of Rs. 1,000. A dies before that day. A’s representatives
are bound to deliver the goods to B, and B is bound to pay
the Rs. 1,000 to A’s representatives.
(b) A promises to paint a picture for B by a certain day, at
a certain price. A dies before the day. The contract cannot be
enforced either by A’s representatives or by B.
38. Effect of refusal to accept offer of performance.—Where
a promisor has made an offer of
performance to the promisee, and the offer has not been
accepted, the promisor is not responsible for
non-performance, nor does he thereby lose his rights under
the contract.
Every such offer must fulfil the following conditions:—
(1) it must be unconditional;
(2) it must be made at a proper time and place, and under
such circumstances that the person to
whom it is made may have a reasonable opportunity of
ascertaining that the person by whom it is made is
able and willing there and then to do the whole of what he
is bound by his promise to do;
(3) if the offer is an offer to deliver anything to the
promisee, the promisee must have a
reasonable opportunity of seeing that the thing offered is
the thing which the promisor is bound by his
promise to deliver.
An offer to one of several joint promisees has the same
legal consequences as an offer to all of them.
22
Illustration
A contracts to deliver to B at his warehouse, on the 1st
March, 1873, 100 bales of cotton of a particular quality. In order to
make an offer of a performance with the effect stated in
this section, A must bring the cotton to B’s warehouse, on the appointed
day, under such circumstances that B may have areasonable
opportunity of satisfying himself that the thing offered is cotton of
the quality contracted for, and that there are 100 bales.
39. Effect of refusal of party to perform promise
wholly.—When a party to a contract has refused
to perform, or disabled himself from performing, his promise
in its entirety, the promisee may put an end
to the contract, unless he has signified, by words or
conduct, his acquiescence in its continuance.
Illustrations
(a) A, a singer, enters into a contract with B, the manager
of a theatre, to sing at his theatre two nights in every week during
the next two months, and B engages to pay her 100 rupees for
each night’s performance. On the sixth night A wilfully absents
herself from the theatre. B is at liberty to put an end to
the contract.
(b) A, a singer, enters into a contract with B, the manager
of a theatre, to sing at his theatre two night’s in every week during
the next two months, and B engages to pay her at the rate of
100 rupees for each night. On the sixth night, A wilfully absents
herself. With the assent of B, A sings on the seventh night.
B has signified his acquiescence in the continuance of the contract,
and cannot now put an end to it, but is entitled to
compensation for the damage sustained by him through A’s failure to sing on
the sixth night.
By whom contracts must be performed
40.Person by whom promise is to be performed.—If it appears
from the nature of the case that it
was the intention of the parties to any contract that any
promise contained in it should be performed by
the promisor himself, such promise must be performed by the
promisor. In other cases, the promisor or
his representatives may employ a competent person to perform
it.
Illustrations
(a) A promises to pay B a sum of money. A may perform this
promise, either by personally paying the money to B or by
causing it to be paid to B by another ; and, if A dies
before the time appointed for payment, his representatives must perform the
promise, or employ some proper person to do so.
(b) A promises to paint a picture for B. A must perform this
promise personally.
41. Effect of accepting performance from third person.—When
a promisee accepts performance
of the promise from a third person, he cannot afterwards
enforce it against the promisor.
42. Devolution of joint liabilities.—When two or more
persons have made a joint promise, then,
unless a contrary intention appears by the contract, all
such persons, during their joint lives, and, after the
death of any of them, his representative jointly with the
survivor or survivors, and, after the death of the
last survivor, the representatives of all jointly, must
fulfil the promise.
43.Any one of joint promisors may be compelled to
perform.—When two or more persons make a
joint promise, the promisee may, in the absence of express
agreement to the contrary, compel any 1
[one or
more] of such joint promisors to perform the whole of the
promise.
Each promisor may compel contribution.—Each of two or more
joint promisors may compel every
other joint promisor to contribute equally with himself to
the performance of the promise, unless a
contrary intention appears from the contract.
Sharing of loss by default in contribution.—If any one of
two or more joint promisors makes
default in such contribution, the remaining joint promisors
must bear the loss arising from such default in
equal shares.
1. Subs. by Act 12 of 1891, s. 2 and the Second Schedule,
Pt. I, for “one”.
23
Explanation.—Nothing in this section shall prevent a surety
from recovering from his principal,
payments made by the surety on behalf of the principal, or
entitle the principal to recover anything from
the surety on account of payments made by the principal.
Illustrations
(a) A, B and C jointly promise to pay D 3,000 rupees. D may
compel either A or B or C to pay him 3,000 rupees.
(b) A, B and C jointly promise to pay D the sum of 3,000
rupees. C is compelled to pay the whole. A is insolvent, but his
assets are sufficient to pay one-half of his debts. C is
entitled to receive 500 rupees from A’s estate, and 1,250 rupees from B.
(c) A, B and C are under a joint promise to pay D 3,000
rupees. C is unable to pay anything, and A is compelled to pay the
whole. A is entitled to receive 1,500 rupees from B.
(d) A, B and C are under a joint promise to pay D 3,000
rupees, A and B being only sureties for C. C fails to pay. A and B
are compelled to pay the whole sum. They are entitled to
recover it from C.
44.Effect of release of one joint promisor.—Where two or
more persons have made a joint promise,
a release of one of such joint promisors by the promisee
does not discharge the other joint promisor or
joint promisors; neither does it free the joint promisors so
released from responsibility to the other joint
promisor or joint promisors.1
45. Devolution of joint rights.—When a person has made a
promise to two or more persons jointly,
then, unless a contrary intention appears from the contract,
the right to claim performance rests, as
between him and them, with them during their joint lives,
and, after the death of any of them, with the
representative of such deceased person jointly with the
survivor or survivors, and, after the death of the
last survivor, with the representatives of all jointly.2
Illustration
A, in consideration of 5,000 rupees, lent to him by B and C,
promises B and C jointly to repay them that sum with interest
on a day specified. B dies. The right to claim performance
rests with B’s representative jointly with C during C’s life, and after
the death of C with the representatives of B and C jointly.
Time and place for performance
46. Time for performance of promise, when no application is
to be made and no time is
specified.—Where, by the contract, a promisor is to perform
his promise without application by the
promisee, and no time for performance is specified, the
engagement must be performed within a
reasonable time.
Explanation.—The question “what is a reasonable time” is, in
each particular case, a question of fact.
47.Time and place for performance of promise, where time is
specified and no application to be
made.—When a promise is to be performed on a certain day,
and the promisor has undertaken to perform
it without application by the promisee, the promisor may
perform it at any time during the usual hours of
business on such day and at the place at which the promise
ought to be performed.
Illustration
A promises to deliver goods at B’s warehouse on the first
January. On that day A brings the goods to B’s warehouse, but
after the usual hour for closing it, and they are not
received. A has not performed his promise.
48. Application for performance on certain day to be at
proper time and place.—When a
promise is to be performed on a certain day, and the
promisor has not undertaken to perform it without
application by the promisee, it is the duty of the promisee
to apply for performance at a proper place and
within the usual hours of business.
1. See s. 138, infra.
2. For an Exception to s. 45 in case of Government
securities, see the Public Debt Act, 1944 (18 of 1944), s. 8.
24
Explanation.—The question “what is a proper time and place”
is, in each particular case, a question
of fact.
49. Place for performance of promise, where no application
to be made and no place fixed for
performance.—When a promise is to be performed without
application by the promisee, and no place is
fixed for the performance of it, it is the duty of the
promisor to apply to the promisee to appoint a
reasonable place for the performance of the promise, and to
perform it at such place.
Illustration
A undertakes to deliver a thousand maunds of jute to B on a
fixed day. A must apply to B to appoint a reasonable place for
the purpose of receiving it, and must deliver it to him at
such place.
50. Performance in manner or at time prescribed or
sanctioned by promisee.—The performance
of any promise may be made in any manner, or at any time which
the promisee prescribes or sanctions.
Illustrations
(a) B owes A 2,000 rupees. A desires B to pay the amount to
A’s account with C, a banker. B, who also banks with C,
orders the amount to be transferred from his account to A’s
credit, and this is done by C. Afterwards, and before A knows of the
transfer, C fails. There has been a good payment by B.
(b) A and B are mutually indebted. A and B settle an account
by setting off one item against another, and B pays A the
balance found to be due from him upon such settlement. This
amounts to a payment by A and B, respectively, of the sums which
they owed to each other.
(c) A owes B 2,000 rupees. B accepts some of A’s goods in
reduction of the debt. The delivery of goods operates as a part
payment.
(d) A desires B, who owes him Rs. 100, to send him a note
for Rs. 100 by post. The debt is discharged as soon as B puts into
the post a letter containing the note duly addressed to A.
Performance of reciprocal promises
51.Promisor not bound to perform, unless reciprocal promisee
ready and willing to
perform.—When a contract consists of reciprocal promises to
be simultaneously performed, no promisor
need perform his promise unless the promisee is ready and
willing to perform his reciprocal promise.
Illustrations
(a) A and B contract that A shall deliver goods to B to be
paid for by B on delivery.
A need not deliver the goods, unless B is ready and willing
to pay for the goods on delivery.
B need not pay for the goods, unless A is ready and willing
to deliver them on payment.
(b) A and B contract that A shall deliver goods to B at a
price to be paid by instalments, the first instalment to be paid on
delivery.
A need not deliver, unless B is ready and willing to pay the
first instalment on delivery.
B need not pay the first instalment, unless A is ready and
willing to deliver the goods on payment of the first instalment.
52.Order of performance of reciprocal promises.—Where the
order in which reciprocal promises
are to be performed is expressly fixed by the contract, they
shall be performed in that order; and where the
order is not expressly fixed by the contract, they shall be
performed in that order which the nature of the
transaction requires.
Illustrations
(a) A and B contract that A shall build a house for B at a
fixed price. A’s promise to build the house must be performed
before B’s promise to pay for it.
(b) A and B contract that A shall make over his
stock-in-trade to B at a fixed price, and B promises to give security for the
payment of the money. A’s promise need not be performed
until the security is given, for the nature of the transaction requires
that A should have security before he delivers up his stock.
25
53. Liability of party preventing event on which the
contract is to take effect.—When a contract
contains reciprocal promises, and one party to the contract
prevents the other from performing his
promise, the contract becomes voidable at the option of the
party so prevented; and he is entitled to
compensation 1
from the other party for any loss which he may sustain in
consequence of the nonperformance of the contract.
Illustration
A and B contract that B shall execute certain work for A for
a thousand rupees. B is ready and willing to execute the work
accordingly, but A prevents him from doing so. The contract
is voidable at the option of B; and, if he elects to rescind it, he is
entitled to recover from A compensation for any loss which
he has incurred by its non-performance.
54. Effect of default as to that promise which should be
first performed, in contract consisting
of reciprocal promises.—When a contract consists of
reciprocal promises, such that one of them cannot
be performed, or that its performance cannot be claimed till
the other has been performed, and the
promisor of the promise last mentioned fails to perform it,
such promisor cannot claim the performance of
the reciprocal promise, and must make compensation to the
other party to the contract for any loss which
such other party may sustain by the non-performance of the
contract.
Illustrations
(a) A hires B’s ship to take in and convey, from Calcutta to
the Mauritius, a cargo to be provided by A, B receiving a certain
freight for its conveyance. A does not provide any cargo for
the ship. A cannot claim the performance of B’s promise, and must
make compensation to B for the loss which B sustains by the
non-performance of the contract.
(b) A contracts with B to execute certain builder’s work for
a fixed price, B supplying the scaffolding and timber necessary
for the work. B refuses to furnish any scaffolding or
timber, and the work cannot be executed. A need not execute the work, and
B is bound to make compensation to A for any loss caused to
him by the non-performance of the contract.
(c) A contracts with B to deliver to him, at a specified
price, certain merchandise on board a ship which cannot arrive for a
month, and B engages to pay for the merchandise within a
week from the date of the contract. B does not pay within the week.
A’s promise to deliver need not be performed, and B must
make compensation.
(d) A promises B to sell him one hundred bales of
merchandise, to be delivered next day, and B promises A to pay for them
within a month. A does not deliver according to his promise.
B’s promise to pay need not be performed, and A must make
compensation.
55. Effect of failure to perform at fixed time, in contract
in which time is essential.—When a
party to a contract promises to do a certain thing at or
before a specified time, or certain things at or
before specified times, and fails to do any such thing at or
before the specified time, the contract, or so
much of it as has not been performed, becomes voidable at
the option of the promisee, if the intention of
the parties was that time should be of the essence of the
contract.
Effect of such failure when time is not essential.—If it was
not the intention of the parties that time
should be of the essence of the contract, the contract does
not become voidable by the failure to do such
thing at or before the specified time; but the promisee is
entitled to compensation from the promisor for
any loss occasioned to him by such failure.
Effect of acceptance of performance at time other than that
agreed upon.—If, in case of a
contract voidable on account of the promisor’s failure to
perform his promise at the time agreed, the
promisee accepts performance of such promise at any time
other than that agreed, the promisee cannot
claim compensation for any loss occasioned by the
non-performance of the promise at the time agreed,
unless, at the time of such acceptance, he gives notice to
the promisor of his intention to do so.2
STATE AMENDMENT
Uttar Pradesh
Amendment of section 55.—In section 55 of the Principal Act,
in the third paragraph, for the words
“unless at the time of such acceptance he gives notice to
the promiser of his intention to do so”, the words
“where at the time of such acceptance he has waived his
right to do so” shall be substituted.”
[Vide Uttar Pradesh 57 of 1976, s. 26]
1. See s. 73, infra.
2. C.f. ss. 62 and 63, infra.
26
56. Agreement to do impossible act.—An agreement to do an
act impossible in itself is void.
Contract to do an act afterwards becoming impossible or
unlawful.—A contract to do an act
which, after the contract is made, becomes impossible, or,
by reason of some event which the promisor
could not prevent, unlawful, becomes void when the act
becomes impossible or unlawful.1
Compensation for loss through non-performance of act known
to be impossible or unlawful.—
Where one person has promised to do something which he knew,
or, with reasonable diligence, might
have known, and which the promisee did not know, to be
impossible or unlawful, such promisor must
make compensation to such promisee for any loss which such
promisee sustains through the nonperformance of the promise.
Illustrations
(a) A agrees with B to discover treasure by magic. The
agreement is void.
(b) A and B contract to marry each other. Before the time
fixed for the marriage, A goes mad. The contract becomes void.
(c) A contracts to marry B, being already married to C, and
being forbidden by the law to which he is subject to practise
polygamy, A must make compensation to B for the loss caused
to her by the non-performance of his promise.
(d) A contracts to take in cargo for B at a foreign port.
A’s Government afterwards declares war against the country in which
the port is situated. The contract becomes void when war is
declared.
(e) A contracts to act at a theatre for six months in
consideration of a sum paid in advance by B. On several occasions A is
too ill to act. The contract to act on those occasions
becomes void.
57.Reciprocal promise to do things legal, and also other
things illegal.—Where persons
reciprocally promise, firstly, to do certain things which
are legal, and, secondly, under specified
circumstances, to do certain other things which are illegal,
the first set of promises is a contract, but the
second is a void agreement.
Illustration
A and B agree that A shall sell B a house for 10,000 rupees,
but that, if B uses it as a gambling house, he shall pay A 50,000
rupees for it.
The first set of reciprocal promises, namely, to sell the
house and to pay 10,000 rupees for it, is a contract.
The second set is for an unlawful object, namely, that B may
use the house as a gambling house, and is a void agreement.
58. Alternative promise, one branch being illegal.—In the
case of an alternative promise, one
branch of which is legal and the other illegal, the legal
branch alone can be enforced.
Illustration
A and B agree that A shall pay B 1,000 rupees, for which B
shall afterwards deliver to A either rice or smuggled opium.
This is a valid contract to deliver rice, and a void
agreement as to the opium.
Appropriation of payments
59.Application of payment where debt to be discharged is
indicated.—Where a debtor, owing
several distinct debts to one person, makes a payment to
him, either with express intimation, or under
circumstances implying, that the payment is to be applied to
the discharge of some particular debt, the
payment, if accepted, must be applied accordingly.
1. See s. 65, infra.
27
Illustrations
(a) A owes B, among other debts, 1,000 rupees upon a
promissory note which falls due on the first June. He owes B no other debt of
that
amount. On the first June, A pays to B 1,000 rupees. The
payment is to be applied to the discharge of the promissory note.
(b) A owes to B, among other debts, the sum of 567 rupees. B
writes to A and demands payment of this sum. A sends to B 567 rupees. This
payment is to be applied to the discharge of the debt of
which B had demanded payment.
60. Application of payment where debt to be discharged is
not indicated.—Where the debtor has
omitted to intimate and there are no other circumstances
indicating to which debt the payment is to be
applied, the creditor may apply it at his discretion to any
lawful debt actually due and payable to him from
the debtor, whether its recovery is or is not barred by the
law in force for the time being as to the
limitation of suits.
61. Application of payment where neither party
appropriates.—Where neither party makes any
appropriation, the payment shall be applied in discharge of
the debts in order of time, whether they are or
are not barred by the law in force for the time being as to
the limitation of suits. If the debts are of equal
standing, the payment shall be applied in discharge of each
proportionably.
Contracts which need not be performed
62. Effect of novation, rescission, and alteration of
contract.—If the parties to a contract agree to
substitute a new contract for it, or to rescind or alter it,
the original contract, need not be performed.
Illustrations
(a) A owes money to B under a contract. It is agreed between
A, B and C that B shall thenceforth accept C as his debtor, instead of A. The
old debt of A to B is at an end, and a new debt from C to B
has been contracted.
(b) A owes B 10,000 rupees. A enters into an arrangement
with B and gives B a mortgage of his (A’s) estate for 5,000 rupees in place of
the
debt of 10,000 rupees. This is a new contract and
extinguishes the old.
(c) A owes B 1,000 rupees under a contract. B owes C 1,000
rupees B orders A to credit C with 1,000 rupees in his books, but C does not
assent to the arrangement. B still owes C 1,000 rupees, and
no new contract has been entered into.
63. Promisee may dispense with or remit performance of
promisee.—Every promisee may
dispense with or remit, wholly or in part, the performance
of the promisee made to him, or may extend the
time for such performance1
,or may accept instead of it any satisfaction which he
thinks fit.
Illustrations
(a) A promises to paint a picture for B. B afterwards
forbids him to do so. A is no longer bound to perform the promise.
(b) A owes B 5,000 rupees. A pays to B, and B accepts, in
satisfaction of the whole debt, 2,000 rupees paid at the time and place at which
the 5,000 rupees were payable. The whole debt is discharged.
(c) A owes B 5,000 rupees. C pays to B 1,000 rupees, and B
accepts them, in satisfaction of his claim on A. This payment is a discharge of
the whole claim2
.
(d) A owes B, under. a contract, a sum of money, the amount
of which has not been ascertained. A, without ascertaining the amount, gives
to B, and B, in satisfaction thereof, accepts, the sum of
2,000 rupees. This is a discharge of the whole debt, whatever may be its
amount.
(e) A owes B 2,000 rupees, and is also indebted to other
creditors. A makes an arrangement with his creditors, including B, to pay them
a
3
[composition] of eight annas in the rupee upon their
respective demands. Payment to B of 1,000 rupees is a discharge of B’s demand.
64. Consequences of rescission of voidable contract.—When a
person at whose option a contract is
voidable rescinds it, the other party thereto need not
perform any promise therein contained in which he is
promisor. The party rescinding a voidable contract shall, if
he have received any benefit thereunder from
another party to such contract, restore such benefit, so far
as may be, to the person from whom it was
received.4
1. But see s. 135, infra.
2. See s. 41, supra.
3. Subs. by Act 12 of 1891, s. 2 and the Second Schedule,
Pt. I, for “compensation”.
4. See s. 75, infra.
28
65. Obligation of person who has received advantage under
void agreement, or contract that
becomes void.—When an agreement is discovered to be void, or
when a contract becomes void, any
person who has received any advantage under such agreement
or contract is bound to restore it, or to
make compensation for it to the person from whom he received
it.
Illustrations
(a) A pays B 1,000 rupees in consideration of B’s promising
to marry C, A’s daughter. C is dead at the time of the promise.
The agreement is void, but B must repay A the 1,000 rupees.
(b) A contracts with B to deliver to him 250 maunds of rice
before the first of May. A delivers 130 maunds only before that
day, and none after. B retains the 130 maunds after the
first of May. He is bound to pay A for them.
(c) A, a singer, contracts with B, the manager of a theatre,
to sing at his theatre for two nights in every week during the next
two months, and B engages to pay her a hundred rupees for
each night’s performance. On the sixth night, A wilfully absents
herself from the theatre, and B, in consequence, rescinds
the contract. B must pay A for the five nights on which she had sung.
(d) A contracts to sing for B at a concert for 1,000 rupees,
which are paid in advance. A is too ill to sing. A is not bound to
make compensation to B for the loss of the profits which B
would have made if A had been able to sing, but must refund to B the
1,000 rupees paid in advance.
66. Mode of communicating or revoking rescission of voidable
contract.—The rescission of a
voidable contract may be communicated or revoked in the same
manner, and subject to the same rules, as
apply to the communication or revocation of a proposal1
.
67. Effect of neglect of promisee to afford promisor
reasonable facilities for performance.—If
any promisee neglects or refuses to afford the promisor
reasonable facilities for the performance of his
promise, the promisor is excused by such neglect or refusal
as to any non-performance caused thereby.
Illustration
A contracts with B to repair B’s house.
B neglects or refuses to point out to A the places in which
his house requires repair.
A is excused for the non-performance of the contract if it
is caused by such neglector refusal.
CHAPTER V
OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT
68. Claim for necessaries supplied to person incapable of
contracting, or on his account.—If a
person, incapable of entering into a contract, or any one
whom he is legally bound to support, is supplied
by another person with necessaries suited to his condition
in life, the person who has furnished such
supplies is entitled to be reimbursed from the property of
such incapable person.2
Illustrations
(a) A supplies B, a lunatic, with necessaries suitable to
his condition in life. A is entitled to be reimbursed from B’s
property.
(b) A supplies the wife and children of B, a lunatic, with
necessaries suitable to their condition in life. A is entitled to be
reimbursed from B’s property.
69.Reimbursement of person paying money due by another, in
payment of which he is
interested.—A person who is interested in the payment of
money which another is bound by law to pay,
and who therefore pays it, is entitled to be reimbursed by
the other.
1. See ss. 3 and 5, supra.
2. The property of a Government ward in Madhya Pradesh is
not liable under this section, see the C.P. Court of Wards Act, 1899
(24 of 1899), s. 31(1).
29
Illustration
B holds land in Bengal, on a lease granted by A, the
zamindar. The revenue payable by A to the Government being in arrear,
his land is advertised for sale by the Government. Under the
revenue law, the consequence of such sale will be the annulment of
B’s lease. B, to prevent the sale and the consequent
annulment of his own lease, pays to the Government the sum due from A. A
is bound to make good to B the amount so paid.
70.Obligation of person enjoying benefit of non-gratuitous
act.—Where a person lawfully does
anything for another person, or delivers anything to him,
not intending to do so gratuitously, and such
other person enjoys the benefit thereof, the latter is bound
to make compensation to the former in respect
of, or to restore, the thing so done or delivered1
.
Illustrations
(a) A, a tradesman, leaves goods at B’s house by mistake. B
treats the goods as his own. He is bound to pay A for them.
(b) A saves B’s property from fire. A is not entitled to
compensation from B, if the circumstances show that he intended to
act gratuitously.
71.Responsibility of finder of goods.—A person who finds
goods belonging to another, and takes
them into his custody, is subject to the same responsibility
as a bailee2
.
72. Liability of person to whom money is paid, or thing
delivered, by mistake or under
coercion.—A person to whom money has been paid, or anything
delivered, by mistake or under coercion,
must repay or return it.
Illustrations
(a)A and B jointly owe 100 rupees to C, A alone pays the
amount to C, and B, not knowing this fact, pays 100 rupees over
again to C. C is bound to repay the amount to B.
(b)A railway company refuses to deliver up certain goods to
the consignee, except upon the payment of an illegal charge for
carriage. The consignee pays the sum charged in order to
obtain the goods. He is entitled to recover so much of the charge as was
illegally excessive.
CHAPTER VI
OF THE CONSEQUENCES OF BREACH OF CONTRACT
73.Compensation for loss or damage caused by breach of
contract.—When a contract has been
broken, the party who suffers by such breach is entitled to
receive, from the party who has broken the
contract, compensation for any loss or damage caused to him
thereby, which naturally arose in the usual
course of things from such breach, or which the parties
knew, when they made the contract, to be likely to
result from the breach of it.
Such compensation is not to be given for any remote and
indirect loss or damage sustained by reason
of the breach.
Compensation for failure to discharge obligation resembling
those created by contract.—When
an obligation resembling those created by contract has been
incurred and has not been discharged, any
person injured by the failure to discharge it is entitled to
receive the same compensation from the party in
default, as if such person had contracted to discharge it
and had broken his contract.
Explanation.—In estimating the loss or damage arising from a
breach of contract, the means which
existed of remedying the inconvenience caused by the
non-performance of the contract must be taken into
account.
1. As to suits by minors under s. 70 in Presidency Small
Cause Courts, see the Presidency Small Cause Courts Act, 1882
(15 of 1882), s. 32.
2. See ss. 151 and 152, infra.
30
Illustrations
(a)A contracts to sell and deliver 50 maunds of saltpetre to
B, at a certain price to be paid on delivery. A breaks his promise.
B is entitled to receive from A, by way of compensation, the
sum, if any, by which the contract price falls short of the price for
which B might have obtained 50 maunds of saltpetre of like
quality at the time when the saltpetre ought to have been delivered.
(b)A hires B’s ship to go to Bombay, and there take on
board, on the first of January, a cargo, which A is to provide, and to
bring it to Calcutta, the freight to be paid when earned.
B’s ship does not go to Bombay, but A has opportunities of procuring
suitable conveyance for the cargo upon terms as advantageous
as those on which he had chartered the ship. A avails himself of
those opportunities, but is put to trouble and expense in
doing so. A is entitled to receive compensation from B in respect of such
trouble and expense.
(c)A contracts to buy of B, at a stated price, 50 maunds of
rice, no time being fixed for delivery. A afterwards informs B that
he will not accept the rice if tendered to him. B is
entitled to receive from A, by way of compensation, the amount, if any, by
which the contract price exceeds that which B can obtain for
the rice at the time when A informs B that he will not accept it.
(d) A contracts to buy B’s ship for 60,000 rupees, but
breaks his promise. A must pay to B, by way of compensation, the
excess, if any, of the contract price over the price which B
can obtain for the ship at the time of the breach of promise.
(e) A, the owner of a boat, contracts with B to take a cargo
of jute to Mirzapur, for sale at that place, starting on a specified
day. The boat, owing to some avoidable cause, does not start
at the time appointed, whereby the arrival of the cargo at Mirzapur
is delayed beyond the time when it would have arrived if the
boat had sailed according to the contract. After that date, and before
the arrival of the cargo, the price of jute falls. The
measure of the compensation payable to B by A is the difference between the
price which B could have obtained for the cargo at Mirzapur
at the time when it would have arrived if forwarded in due course,
and its market price at the time when it actually arrived.
(f) A contracts to repair B’s house in a certain manner, and
receives payment in advance. A repairs the house, but not
according to contract. B is entitled to recover from A the cost
of making the repairs conform to the contract.
(g) A contracts to let his ship to B for a year, from the
first of January, for a certain price. Freights rise, and, on the first of
January, the hire obtainable for the ship is higher than the
contract price. A breaks his promise. He must pay to B, by way of
compensation, a sum equal to the difference between the
contract price and the price for which B could hire a similar ship for a
year on and from the first of January.
(h) A contracts to supply B with a certain quantity of iron
at a fixed price, being a higher price than that for which A could
procure and deliver the iron. B wrongfully refuses to
receive the iron. B must pay to A, by way of compensation, the difference
between the contract price of the iron and the sum for which
A could have obtained and delivered it.
(i) A delivers to B, a common carrier, a machine, to be
conveyed, without delay, to A’s mill informing B that his mill is
stopped for want of the machine. B unreasonably delays the
delivery of the machine, and A, in consequence, loses a profitable
contract with the Government. A is entitled to receive from
B, by way of compensation, the average amount of profit which
would have been made by the working of the mill during the
time that delivery of it was delayed, but not the loss sustained
through the loss of the Government contract.
(j) A, having contracted with B to supply B with 1,000 tons
of iron at 100 rupees a ton, to be delivered at a stated time,
contracts with C for the purchase of 1,000 tons of iron at
80 rupees a ton, telling C that he does so for the purpose of performing
his contract with B. C fails to perform his contract with A,
who cannot procure other iron, and B, in consequence, rescinds the
contract. C must pay to A 20,000 rupees, being the profit
which A would have made by the performance of his contract with B.
(k) A contracts with B to make and deliver to B, by a fixed
day, for a specified price, a certain piece of machinery. A does
not deliver the piece of machinery at the time specified,
and in consequence of this, B is obliged to procure another at a higher
price than that which he was to have paid to A, and is
prevented from performing a contract which B had made with a third
person at the time of his contract with A (but which had not
been then communicated to A), and is compelled to make
compensation for breach of that contract. A must pay to B,
by way of compensation, the difference between the contract price of
the piece of machinery and the sum paid by B for another,
but not the sum paid by B to the third person by way of compensation.
(l)A, a builder, contracts to erect and finish a house by
the first of January, in order that B may give possession of it at that
time to C, to whom B has contracted to let it. A is informed
of the contract between B and C. A builds the house so badly that,
before the first of January, it falls down and has to be
re-built by B, who, in consequence, loses the rent which he was to have
received from C, and is obliged to make compensation to C
for the breach of his contract. A must make compensation to B for
the cost of rebuilding the house, for the rent lost, and for
the compensation made to C.
(m)A sells certain merchandise to B, warranting it to be of
a particular quality, and B, in reliance upon this warranty, sells it
to C with a similar warranty. The goods prove to be not
according to the warranty, and B becomes liable to pay C a sum of
money by way of compensation. B is entitled to be reimbursed
this sum by A.
31
(n)A contracts to pay a sum of money to B on a day
specified. A does not pay the money on that day, B, in consequence of
not receiving the money on that day, is unable to pay his
debts, and is totally ruined. A is not liable to make good to B anything
except the principal sum he contracted to pay, together with
interest up to the day of payment.
(o)A contracts to deliver 50 maunds of saltpetre to B on the
first of January, at a certain price. B afterwards, before the first
of January, contracts to sell the saltpetre to C at a price
higher than the market price of the first of January. A breaks his promise.
In estimating the compensation payable by A to B, the market
price of the first of January, and not the profit which would
have arisen to B from the sale to C, is to be taken into
account.
(p)A contracts to sell and deliver 500 bales of cotton to B
on a fixed day. A knows nothing of B’s mode of conducting his
business. A breaks his promise, and B, having no cotton, is
obliged to close his mill. A is not responsible to B for the loss caused
to B by the closing of the mill.
(q)A contracts to sell and deliver to B, on the first of
January, certain cloth which B intends to manufacture into caps of a
particular kind, for which there is no demand, except at
that season. The cloth is not delivered till after the appointed time, and
too late to be used that year in making caps. B is entitled
to receive from A, by way of compensation, the difference between the
contract price of the cloth and its market price at the time
of delivery, but not the profits which he expected to obtain by making
caps, nor the expenses which he has been put to in making
preparation for the manufacture.
(r)A, a ship-owner, contracts with B to convey him from
Calcutta to Sydney in A’s ship, sailing on the first of January, and
B pays to A, by way of deposit, one-half of his
passage-money. The ship does not sail on the first of January, and B, after
being
in consequence detained in Calcutta for some time and
thereby put to some expense, proceeds to Sydney in another vessel, and,
in consequence, arriving too late in Sydney, loses a sum of
money. A is liable to repay to B his deposit, with interest, and the
expense to which he is put by his detention in Calcutta, and
the excess, if any, of the passage-money paid for the second ship over
that agreed upon for the first, but not the sum of money
which B lost by arriving in Sydney too late.
74. Compensation for breach of contract where penalty
stipulated for.—1
[When a contract has
been broken, if a sum is named in the contract as the amount
to be paid in case of such breach, or if the
contract contains any other stipulation by way of penalty,
the party complaining of the breach is entitled,
whether or not actual damage or loss is proved to have been
caused thereby, to receive from the party who
has broken the contract reasonable compensation not exceeding
the amount so named or, as the case may
be, the penalty stipulated for.
Explanation.—A stipulation for increased interest from the
date of default may be a stipulation by
way of penalty.]
Exception.—When any person enters into any bail-bond,
recognizance or other instrument of the
same nature, or, under the provisions of any law, or under
the orders of the 2
[Central Government] or of
any 3
[State Government], gives any bond for the performance of
any public duty or act in which the
public are interested, he shall be liable, upon breach of
the condition of any such instrument, to pay the
whole sum mentioned therein.
Explanation.—A person who enters into a contract with
Government does not necessarily thereby
undertake any public duty, or promise to do an act in which
the public are interested.
Illustrations
(a)A contracts with B to pay B Rs. 1,000, if he fails to pay
B Rs. 500 on a given day. A fails to pay B Rs. 500 on that day. B
is entitled to recover from A such compensation, not exceeding
Rs. 1,000, as the Court considers reasonable.
(b)A contracts with B that, if Apractises as a surgeon
within Calcutta, he will pay B Rs. 5,000. A practises as a surgeon in
Calcutta. B is entitled to such compensation; not exceeding
Rs. 5,000, as the Court considers reasonable.
(c)A gives a recognizance binding him in a penalty of Rs.
500 to appear in Court on a certain day. He forfeits his
recognizance. He is liable to pay the whole penalty.
1. Subs. by Act 6 of 1899, s. 4, for the first paragraph of
s. 74.
2. Subs. by the A.O. 1937, for “Government of India”.
3. Subs. by the A.O. 1950, for “Provincial Government”.
32
1
[(d)A gives B a bond for the repayment of Rs. 1,000 with
interest at 12 per cent. at the end of six months, with a stipulation
that, in case of default, interest shall be payable at the
rate of 75 per cent. from the date of default. This is a stipulation by way of
penalty, and B is only entitled to recover from A such
compensation as the Court considers reasonable.
(e) A, who owes money to B a money-lender, undertakes to
repay him by delivering to him 10 maunds of grain on a certain
date, and stipulates that, in the event of his not
delivering the stipulated amount by the stipulated date, he shall be liable to
deliver
20 maunds. This is a stipulation by way of penalty, and B is
only entitled to reasonable compensation in case of breach.
(f) A undertakes to repay B a loan of Rs. 1,000 by five
equal monthly instalments, with a stipulation that in default of
payment of any instalment, the whole shall become due. This
stipulation is not by way of penalty, and the contract may be
enforced according to its terms.
(g) A borrows Rs. 100 from B and gives him a bond for Rs.
200 payable by five yearly instalments of Rs. 40, with a
stipulation that, in default of payment of any instalment,
the whole shall become due. This is a stipulation by way of penalty.]
75.Party rightfully rescinding contract, entitled to
compensation.—A person who rightfully
rescinds a contract is entitled to compensation for any
damage which he has sustained through the
non-fulfilment of the contract.
Illustration
A, a singer, contracts with B, the manager of a theatre, to
sing at his theatre for two nights in every week during the next two
months, and B engages to pay her 100 rupees for each night’s
performance. On the sixth night, A wilfully absents herself from
the theatre, and B, in consequence, rescinds the contract. B
is entitled to claim compensation for the damage which he has
sustained through the non-fulfilment of the contract.
[CHAPTER VII.—SALES OF GOODS.] Rep.by the Indian Sale of
Goods Act, 1930 (3 of 1930), s. 65.
76.[‘Goods’ of defined.] Rep. by s. 65,ibid.
77.[‘Sale defined.] Rep. by s. 65,ibid.
78.[Sale how effected.] Rep. by s. 65,ibid.
79.[Transferofownershipofthingsold,whichhasyettobeascertained,madeorfinished.]Rep.bys.
65, ibid.
80. [Completion of sale of goods which the seller is to put
into state in which buyer is to take them.]
Rep. by s. 65,ibid.
81. [Completion of sale of goods, when seller has to do
anything thereto in order to as certain
price.] Rep. by s. 65,ibid.
82. [Completion of sale, when goods are uncertained at date
of contract.] Rep. by s. 65,ibid.
83. [Ascertainment of goods by subsequent appropriation.]
Rep. by s. 65,ibid.
84. [Ascertainment of goods by seller’s selection.] Rep. by
s. 65,ibid.
85. [Transfer of ownership of moveable property, when sold
together with immoveable.] Rep. by
s. 65, ibid.
86. [Buyer to bear loss after good have become his
property.] Rep. by s. 65,ibid.
87. [Transfer of ownership of goods agreed to be sold while
non existent.] Rep. by s. 65,ibid.
88. [Contract to sell and deliver, at a future day, goods
not in seller’s possession at date of
contract.] Rep. by s. 65,ibid.
89. [Determination of price not fixed by contract.] Rep. by
s. 65,ibid.
[DELIVERY.]Rep. by s. 65, ibid.
90. [Delivery how made.] Rep. by s. 65,ibid.
1. Added by Act 6 of 1899, s. 4.
33
91. [Effect of delivery to wharfinger or carrier.] Rep. by
s. 65,ibid.
92. [Effect of part-delivery.] Rep. by s. 65,ibid.
93. [Seller not bound to deliver until buyer applies for
delivery.] Rep. by s. 65,ibid.
94.[Place of delivery.] Rep.by the Indian Sale of Goods Act,
1930 (3 of 1930), s.65.
[SELLER’S LIEN.]Rep. by s. 65, ibid.
95.[Seller’s lien.]Rep. by s. 65,ibid.
96. [Lien where payment to be made at a future day, but no
time fixed for delivery.] Rep. by s. 65,
ibid.
97. [Seller’s lien where payment to be made at future day,
and buyer allows goods to remain in
seller’s possession.] Rep. by s. 65,ibid.
98. [Seller’s lien against subsequent buyer.] Rep. by s.
65,ibid.
[STOPPAGE IN TRANSIT.] Rep. by s. 65, ibid.
99. [Power of seller to stop in transit.] Rep. by s.
65,ibid.
100.[When goods are to be deemed in transit.] Rep. by s.
65,ibid.
101. [Continuance of right of stoppage.] Rep. by s. 65,ibid.
102. [Cessation of right on assignment, by buyer, of
document showing title.] Rep. by s. 65,ibid.
103. [How seller may stop where instrument of title assigned
to secure specific advance.] Rep. by s.
65, ibid.
104. [Stoppage how effected.] Rep. by s. 65,ibid.
105. [Notice of seller’s claim.] Rep. by s. 65, ibid.
106.[Right of seller on stoppage.] Rep. by s. 65,ibid.
[RESALE.] Rep. by s. 65, ibid.
107.[Resale on buyer’s failure to perform.] Rep. by s.
65,ibid.
[TITLE.] Rep. by s. 65, ibid.
108. [Title conveyed by seller of goods to buyer.] Rep. by
s. 65,ibid.
[WARRANTY.] Rep. by s. 65, ibid.
109.[Seller’s responsibility for badness of title.] Rep. by
s. 65,ibid.
110. [Establishment of implied warranty of goodness or
quality.] Rep. by s. 65,ibid.
111. [Warranty of soundness implied on sale of provisions.]
Rep. by s. 65,ibid.
112. [Warranty of bulk implied on sale of goods by sample.]
Rep. by s. 65,ibid.
113.[Warranty implied where goods are sold as being of a
certain denomination.] Rep. by s. 65,ibid.
114. [Warranty where goods ordered for a specified purpose.]
Rep. by s. 65,ibid.
115.[Warranty on sale of article of well known ascertained
kind.] Rep. by s. 65,ibid.
116. [Seller when not responsible for latent defects.] Rep.
by s. 65,ibid.
117. [Buyer’s right on breach of warranty.] Rep. by s.
65,ibid.
118. [Right of buyer on breach of warranty in respect of
goods not ascertained.] Rep. by s. 65,ibid.
[MISCELLANEOUS.] Rep. by s. 65, ibid.
119. [When buyer may refused to accept, if goods not ordered
are sent with goods ordered.]Rep. by
s. 65, ibid.
34
120. [Effect of wrongful refusal to accept.] Rep. by s.
65,ibid.
121. [Right of seller as to rescission, on failure of buyer
to pay price at time fixed.] Rep.by the
Indian Sale of Goods Act, 1930 (3 of 1930), s.65.
122. [Sale and transfer of lots sold by auction.] Rep. by s.
65,ibid.
123. [Effect of use, by seller, of pretended biddings to
raise price.] Rep. by s. 65,ibid.
CHAPTER VIII
OF INDEMNITY AND GUARANTEE
124.“Contract of indemnity” defined.—A contract by which one
party promises to save the other
from loss caused to him by the conduct of the promisor
himself, or by the conduct of any other person, is
called a “contract of indemnity”.
Illustration
A contracts to indemnify B against the consequences of any
proceedings which C may take against B in respect of a certain
sum of 200 rupees. This is a contract of indemnity.
125.Rights of indemnity-holder when sued.—The promisee in a
contract of indemnity, acting
within the scope of his authority, is entitled to recover
from the promisor—
(1) all damages which he may be compelled to pay in any suit
in respect of any matter to which
the promise to indemnify applies;
(2) all costs which he may be compelled to pay in any such
suit if, in bringing or defending it, he
did not contravene the orders of the promisor, and acted as
it would have been prudent for him to act
in the absence of any contract of indemnity, or if the
promisor authorized him to bring or defend the
suit;
(3) all sums which he may have paid under the terms of any
compromise of any such suit, if the
compromise was not contrary to the orders of the promisor,
and was one which it would have been
prudent for the promisee to make in the absence of any
contract of indemnity, or if the promisor
authorized him to compromise the suit.
126. “Contract of guarantee”, “surety”, “principal debtor”
and “creditor”.—A “contract of
guarantee” is a contract to perform the promise, or
discharge the liability, of a third person in case of his
default. The person who gives the guarantee is called the “surety”;
the person in respect of whose default
the guarantee is given is called the “principal debtor”, and
the person to whom the guarantee is given is
called the “creditor”. A guarantee may be either oral or
written.
127. Consideration for guarantee.—Anything done, or any
promise made, for the benefit of the
principal debtor, may be a sufficient consideration to the
surety for giving the guarantee.
Illustrations
(a) B requests A to sell and deliver to him goods on credit.
A agrees to do so, provided C will guarantee the payment of the
price of the goods. C promises to guarantee the payment in
consideration of A’s promise to deliver the goods. This is a sufficient
consideration for C’s promise.
(b) A sells and delivers goods to B. C afterwards requests A
to forbear to sue B for the debt for a year, and promises that, if
he does so, C will pay for them in default of payment by B.
A agrees to forbear as requested. This is a sufficient consideration for
C’s promise.
(c) A sells and delivers goods to B. C afterwards, without
consideration, agrees to pay for them in default of B. The
agreement is void.
35
128. Surety’s liability.—The liability of the surety is co-
extensive with that of the principal debtor,
unless it is otherwise provided by the contract.
Illustration
A guarantees to B the payment of a bill of exchange by C,
the acceptor. The bill is dishonoured by C. A is liable, not only
for the amount of the bill, but also for any interest and
charges which may have become due on it.
129. “Continuing guarantee”.—A guarantee which extends to a
series of transactions, is called a
“continuing guarantee”.
Illustrations
(a) A, in consideration that B will employ C in collecting
the rent of B’s zamindari, promises B to be responsible, to the
amount of 5,000 rupees, for the due collection and payment
by C of those rents. This is a continuing guarantee.
(b) A guarantees payment to B, a tea-dealer, to the amount
of £100, for any tea he may from time to time supply to C. B
supplies C with tea to above the value of £100, and C pays B
for it. Afterwards, B supplies C with tea to the value of £200. C
fails to pay. The guarantee given by A was a continuing
guarantee, and he is accordingly liable to B to the extent of £100.
(c) A guarantees payment to B of the price of five sacks of
flour to be delivered by B to C and to be paid for in a month. B
delivers five sacks to C. C pays for them. Afterwards B
delivers four sacks to C, which C does riot pay for. The guarantee given
by A was not a continuing guarantee, and accordingly he is
not liable for the price of the four sacks.
130.Revocation of continuing guarantee.—A continuing
guarantee may at any time be revoked by
the surety, as to future transactions, by notice to the
creditor.
Illustrations
(a) A, in consideration of B’s discounting, at A’s request,
bills of exchange for C, guarantees to B, for twelve months, the
due payment of all such bills to the extent of 5,000 rupees.
B discounts bills for C to the extent of 2,000 rupees. Afterwards, at the
end of three months, A revokes the guarantee. This
revocation discharges A from all liability to B for any subsequent discount.
But A is liable to B for the 2,000 rupees, on default of C.
(b) A guarantees to B, to the extent of 10,000 rupees, that
C shall pay all the bills that B shall draw upon him. B draws upon
C. C accepts the bill. A gives notice of revocation. C
dishonours the bill at maturity. A is liable upon his guarantee.
131.Revocation of continuing guarantee by surety’s
death.—The death of the surety operates, in
the absence of any contract to the contrary, as a revocation
of a continuing guarantee, so far as regards
future transactions.
132. Liability of two persons, primarily liable, not
affected by arrangement between them that
one shall be surety on other’s default.—Where two persons
contract with a third person to undertake a
certain liability, and also contract with each other that
one of them shall be liable only on the default of
the other, the third person not being a party to such
contract, the liability of each of such two persons to
the third person under the first contract is not affected by
the existence of the second contract, although
such third person may have been aware of its existence.
Illustration
A and B make a joint and several promissory note to C. A
makes it, in fact, as surety for B, and C knows this at the time
when the note is made. The fact that A, to the knowledge of
C, made the note as surety for B, is no answer to a suit by C against
A upon the note.
133.Discharge of surety by variance in terms of
contract.—Any variance, made without the
surety’s consent, in the terms of the contract between the
principal 1
[debtor] and the creditor, discharges
the surety as to transactions subsequent to the variance.
Illustrations
(a) A becomes surety to C for B’s conduct as a manager in
C’s bank. Afterwards, B and C contract, without A’s consent,
that B’s salary shall be raised, and that he shall become
liable for one-fourth of the losses on overdrafts. B allows a customer to
1. Ins. by Act 24 of 1917, s. 2 and the first Schedule.
36
overdraw, and the bank loses a sum of money. A is discharged
from his suretyship by the variance made without his consent, and
is not liable to make good this loss.
(b) A guarantees C against the misconduct of B in an office
to which B is appointed by C, and of which the duties are
defined by an Act of the Legislature. By a subsequent Act,
the nature of the office is materially altered. Afterwards, B
misconducts himself. A is discharged by the change from
future liability under his guarantee, though the misconduct of B is in
respect of a duty not affected by the later Act.
(c) C agrees to appoint B as his clerk to sell goods at a
yearly salary, upon A’s becoming surety to C for B’s duly accounting
for moneys received by him as such clerk. Afterwards,
without A’s knowledge or consent, C and B agree that B should be paid
by a commission on the goods sold by him and not by a fixed
salary. A is not liable for subsequent misconduct of B.
(d) A gives to C a continuing guarantee to the extent of
3,000 rupees for any oil supplied by C to B on credit. Afterwards B
becomes embarrassed, and, without the knowledge of A, B and
C contract that C shall continue to supply B with oil for ready
money, and that the payments shall be applied to the then,
existing debts between B and C. A is not liable on his guarantee for
any goods supplied after: this new arrangement.
(e) C contracts to lend B 5,000 rupees on the 1st March. A
guarantees repayment. C pays the 5,000 rupees to B on the 1st
January. A is discharged from his liability, as the contract
has been varied, inasmuch as C might sue B for the money before the
1st of March.
134.Discharge of surety by release or discharge of principal
debtor.—The surety is discharged by
any contract between the creditor and the principal debtor,
by which the principal debtor is released, or by
any act or omission of the creditor, the legal consequence
of which is the discharge of the principal
debtor.
Illustrations
(a) A gives a guarantee to C for goods to be supplied by C
to B. C supplies goods to B, and afterwards B becomes
embarrassed and contracts with his creditors (including C)
to assign to them his property in consideration of their releasing him
from their demands. Here B is released from his debt by the
contract with C, and A is discharged from his suretyship.
(b) A contracts with B to grow a crop of indigo on A’s land
and to deliver it to B at a fixed rate, and C guarantees A’s
performance of this contract. B diverts a stream of water
which is necessary for the irrigation of A’s land and thereby prevents
him from raising the indigo. C is no longer liable on his
guarantee.
(c) A contracts with B for a fixed price to build a house
for B within a stipulated time, B supplying the necessary timber. C
guarantees A’s performance of the contract. B omits to
supply the timber. C is discharged from his suretyship.
135. Discharge of surety when creditor compounds with, gives
time to, or agrees not to sue,
principal debtor.—A contract between the creditor and the
principal debtor, by which the creditor makes
a composition with, or promises to give time to, or not to
sue, the principal debtor, discharges the surety,
unless the surety assents to such contract.
136. Surety not discharged when agreement made with third
person to give time to principal
debtor.—Where a contract to give time to the principal
debtor is made by the creditor with a third
person, and not with the principal debtor, the surety is not
discharged.
Illustration
C, the holder of an overdue bill of exchange drawn by A as
surety for B, and accepted by B, contracts with M to give time to
B. A is not discharged.
137. Creditor’s forbearance to sue does not discharge
surety.—Mere forbearance on the part of
the creditor to sue the principal debtor or to enforce any
other remedy against him does not, in the absence
of any provision in the guarantee to the contrary, discharge
the surety.
Illustration
B owes to C a debt guaranteed by A. The debt becomes
payable. C does not sue B for a year after the debt has become
payable. A is not discharged from his suretyship.
37
138.Release of one co-surety does not discharge
others.—Where there are co-sureties, a release by
the creditor of one of them does not discharge the others;
neither does it free the surety so released from
his responsibility to the other sureties1
.
139. Discharge of surety by creditor’s act or omission
impairing surety’s eventual remedy.—If
the creditor does any act which is inconsistent with the
rights of the surety, or omits to do any act which
his duty to the surety requires him to do, and the eventual
remedy of the surety himself against the
principal debtor is thereby impaired, the surety is
discharged.
Illustrations
(a) B contracts to build a ship for C for a given sum, to be
paid by instalments as the work reaches certain stages. A becomes
surety to C for B’s due performance of the contract. C,
without the knowledge of A, prepays to B the last two instalments. A is
discharged by this prepayment.
(b) C lends money to B on the security of a joint and
several promissory note made in C’s favour by B, and by A as surety
for B, together with a bill of sale of B’s furniture, which
gives power to C to sell the furniture, and apply the proceeds in
discharge of the note. Subsequently, C sells the furniture,
but, owing to his misconduct and wilful negligence, only a small price
is realized. A is discharged from liability on the note.
(c) A puts M as apprentice to B, and gives a guarantee to B
for M’s fidelity. B promises on his part that he will, at least once
a month, see M make up the cash. B omits to see this done as
promised, and M embezzles. A is not liable to B on his guarantee.
140.Rights of surety on payment or performance.—Where a
guaranteed debt has become due, or
default of the principal debtor to perform a guaranteed duty
has taken place, the surety upon payment or
performance of all that he is liable for, is invested with
all the rights which the creditor had against the
principal debtor.
141.Surety’s right to benefit of creditor’s securities.—A
surety is entitled to the benefit of every
security which the creditor has against the principal debtor
at the time when the contract of suretyship is
entered into, whether the surety knows of the existence of
such security or not; and if the creditor loses,
or, without the consent of the surety, parts with such
security, the surety is discharged to the extent of the
value of the security.
Illustrations
(a)C, advances to B, his tenant, 2,000 rupees on the
guarantee of A. C has also a further security for the 2,000 rupees by a
mortgage of B’s furniture. C cancels the mortgage. B becomes
insolvent and C sues A on his guarantee. A is discharged from
liability to the amount of the value of the furniture.
(b)C, a creditor, whose advance to B is secured by a decree,
receives also a guarantee for that advance from A. C afterwards
takes B’s goods in execution under the decree, and then,
without the knowledge of A, withdraws the execution. A is discharged.
(c)A, as surety for B, makes a bond jointly with B to C, to
secure a loan from C to B. Afterwards, C obtains from B a further
security for the same debt. Subsequently, C gives up the
further security. A is not discharged.
142. Guarantee obtained by misrepresentation invalid.—Any
guarantee which has been obtained
by means of misrepresentation made by the creditor, or with
his knowledge and assent, concerning a
material part of the transaction, is invalid.
143. Guarantee obtained by concealment invalid.—Any
guarantee which the creditor has obtained
by means of keeping silence as to material circumstances, is
invalid.
Illustrations
(a)A engages B as clerk to collect money for him. B fails to
account for some of his receipts, and A in consequence calls
upon him to furnish security for his duly accounting. C
gives his guarantee for B’s duly accounting. A does not acquaint C with
B’s previous conduct. B afterwards makes default. The
guarantee is invalid.
1. See s. 44, supra.
38
(b)A guarantees to C payment for iron to be supplied by him
to B to the amount of 2,000 tons. B and C have privately
agreed that B should pay five rupees per ton beyond the
market price, such excess to be applied in liquidation of an old debt. This
agreement is concealed from A. A is not liable as a surety.
144. Guarantee on contract that creditor shall not act on it
until co-surety joins.—Where a
person gives a guarantee upon a contract that the creditor
shall not act upon it until another person has
joined in it as co-surety, the guarantee is not valid if
that other person does not join.
145.Implied promise to indemnify surety.—In every contract
of guarantee there is an implied
promise by the principal debtor to indemnify the surety, and
the surety is entitled to recover from the
principal debtor whatever sum he has rightfully paid under the
guarantee, but, no sums which he has paid
wrongfully.
Illustrations
(a)B is indebted to C, and A is surety for the debt. C
demands payment from A, and on his refusal sues him for the amount.
A defends the suit, having reasonable grounds for doing so,
but is compelled to pay the amount of the debt with costs. He can
recover from B the amount paid by him for costs, as well as
the principal debt.
(b)C lends B a sum of money, and A, at the request of B,
accepts a bill of exchange drawn by B upon A to secure the
amount. C, the holder of the bill, demands payment of it
from A, and, on A’s refusal to pay, sues him upon the bill. A, not having
reasonable grounds for so doing, defends the suit, and has
to pay the amount of the bill and costs. He can recover from B the
amount of the bill, but not the sum paid for costs, as there
was no real ground for defending the action.
(c)A guarantees to C, to the extent of 2,000 rupees, payment
for rice to be supplied by C to B. C supplies to B rice to a less
amount than 2,000 rupees, but obtains from A payment of the
sum of 2,000 rupees in respect of the rice supplied. A cannot
recover from B more than the price of the rice actually
supplied.
146. Co-sureties liable to contribute equally.—Where two or
more persons are co-sureties for the
same debt or duty, either jointly or severally, and whether
under the same or different contracts, and
whether with or without the knowledge of each other, the
co-sureties, in the absence of any contract to the
contrary, are liable, as between themselves, to pay each an
equal share of the whole debt, or of that part of
it which remains unpaid by the principal debtor1
.
Illustrations
(a)A, B and C are sureties to D for the sum of 3,000 rupees
lent to E. E makes default in payment. A, B and C are liable, as
between themselves, to pay 1,000 rupees each.
(b)A, B and C are sureties to D for the sum of 1,000 rupees
lent to E, and there is a contract between A, B and C that A is to
be responsible to the extent of one-quarter, B to the extent
of one- quarter, and C to the extent of one-half. E makes default in
payment. As between the sureties, A is liable to pay 250
rupees, B 250 rupees, and C 500 rupees.
147.Liability of co-sureties bound in different
sums.—Co-sureties who are bound in different sums
are liable to pay equally as far as the limits of their
respective obligations permit.
Illustrations
(a)A, B and C, as sureties for D, enter into three several
bonds, each in a different penalty, namely, A in the penalty of each
10,000 rupees, B in that of 20,000 rupees, C in that of
40,000 rupees, conditioned for D’s duly accounting to E. D makes default
to the extent of 30,000 rupees. A, B and C are each liable
to pay 10,000 rupees.
(b)A, B and C, as sureties for D, enter into three several
bonds, each in a different penalty, namely, A in the penalty of
10,000 rupees, B in that of 20,000 rupees, C in that of
40,000 rupees, conditioned for D’s duly accounting to E. D makes default
to the extent of 40,000 rupees. A is liable to pay 10,000
rupees, and B and C 15,000 rupees each.
(c)A, B and C, as sureties for D, enter into three several
bonds, each in a different penalty, namely, A in the penalty of
10,000 rupees, B in that of 20,000 rupees, C in that of
40,000 rupees, conditioned for D’s duly accounting to E. D makes default
to the extent of 70,000 rupees. A, B and C have to pay each
the full penalty of his bond.
1. See s. 43, supra.
39
CHAPTER IX
OF BAILMENT
148.“Bailment”“bailor” and “bailee” defined.—A “bailment” is
the delivery of goods by one
person to another for some purpose, upon a contract that
they shall, when the purpose is accomplished, be
returned or otherwise disposed of according to the
directions of the person delivering them. The person
delivering the goods is called the “bailor”. The person to
whom they are delivered is called, the “bailee”.
Explanation.—If a person already in possession of the goods
of another contracts to hold them as a
bailee, he thereby becomes the bailee, and the owner becomes
the bailor of such goods, although they
may not have been delivered by way of bailment.
149. Delivery to bailee how made.—The delivery to the bailee
may be made by doing anything
which has the effect of putting the goods in the possession
of the intended bailee or of any person
authorized to hold them on his behalf.
150.Bailor’s duty to disclose faults in goods bailed.—The
bailor is bound to disclose to the bailee
faults in the goods bailed, of which the bailor is aware,
and which materially interfere with the use of
them, or expose the bailee to extraordinary risks; and if he
does not make such disclosure, he is
responsible for damage arising to the bailee directly from
such faults.
If the goods are bailed for hire, the bailor is responsible
for such damage, whether he was or was not
aware of the existence of such faults in the goods bailed.
Illustrations
(a)A lends a horse, which he knows to be vicious, to B. He
does not disclose the fact that the horse is vicious. The horse
runs away. B is thrown and injured. A is responsible to B
for damage sustained.
(b)A hires a carriage of B. The carriage is unsafe, though B
is not aware of it, and A is injured. B is responsible to A for the
injury.
1151. Care to be taken by bailee.—In all cases of bailment
the bailee is bound to take as much care
of the goods bailed to him as a man of ordinary prudence
would, under similar circumstances, take of his
own goods of the same bulk, quality and value as the goods
bailed2
.
152.Bailee when not liable for loss, etc., of thing
bailed.—The bailee, in the absence of any special
contract, is not responsible for the loss, destruction or
deterioration of the thing bailed, if he has taken the
amount of care of it described in section 151.
153. Termination of bailment by bailee’s act inconsistent
with conditions.—A contract of
bailment is avoidable at the option of the bailor, if the
bailee does any act with regard to the goods bailed,
inconsistent with the conditions of the bailment.
Illustration
A lets to B, for hire, a horse for his own riding. B drives
the horse in his carriage. This is, at the ‘option of A, a termination
of the bailment.
154. Liability of bailee making unauthorized use of goods
bailed.—If the bailee makes any use of
the goods bailed which is not according to the conditions of
the bailment, he is liable to make
compensation to the bailor for any damage arising to the
goods from or during such use of them.
1. The responsibility of the Trustees of the Port of Madras
constituted under the Madras Port Trust Act, 1905 (Madras Act
2 of 1905), in regard to goods has been declared to be that
of a bailee under these sections, without the qualifying words “in the
absence of any special contract” in s. 152, see s. 40(1) of
that Act.
2.As to railway contracts see the Indian Railways Act, 1890
(9 of 1890), s. 72. As to the liability of common carriers, see the
Carriers Act, 1865 (3 of 1865), s. 8.
40
Illustrations
(a)A lends a horse to B for his own riding only. B allows C,
a member of his family, to ride the horse. C rides with care, but
the horse accidentally falls and is injured. B is liable to
make compensation to A for the injury done to the horse.
(b)A hires a horse in Calcutta from B expressly to march to
Benares. A rides with due care, but marches to Cuttack instead.
The horse accidentally falls and is injured. A is liable to
make compensation to B for the injury to the horse.
155. Effect of mixture, with bailor’s consent, of his goods
with bailee’s.—If the bailee, with the
consent of the bailor, mixes the goods of the bailor with
his own goods, the bailor and the bailee shall
have an interest, in proportion to their respective shares,
in the mixture thus produced.
156.Effect of mixture without bailor’s consent, when the
goods can be separated.—If the bailee,
without the consent of the bailor, mixes the goods of the
bailor with his own goods, and the goods can be
separated or divided, the property in the goods remains in
the parties respectively; but the bailee is bound
to bear the expense of separation or division, and any
damage arising from the mixture.
Illustration
A bails 100 bales of cotton marked with a particular mark to
B. B, without A’s consent, mixes the 100 bales with other bales
of his own, bearing a different mark: A is entitled to have
his 100 bales returned, and B is bound to bear all the expense incurred
in the separation of the bales, and any other incidental
damage.
157. Effect of mixture, without bailor’s consent, when the
goods cannot be separated.—If the
bailee, without the consent of the bailor, mixes the goods
of the bailor with his own goods, in such a
manner that it is impossible to separate the goods bailed
from the other goods, and deliver them back, the
bailor is entitled to be compensated by the bailee for the
loss of the goods.
Illustration
A bails a barrel of Cape flour worth Rs. 45 to B. B, without
A’s consent, mixes the flour with country flour of his own,
worth only Rs. 25 a barrel. B must compensate A for the loss
of his flour.
158. Repayment, by bailor, of necessary expenses.—Where, by
the conditions of the bailment, the
goods are to be kept or to be carried, or to have work done
upon them by the bailee for the bailor, and the
bailee is to receive no remuneration, the bailor shall repay
to the bailee the necessary expenses incurred
by him for the purpose of the bailment.
159.Restoration of goods lent gratuitously.—The lender of a
thing for use may at any time require
its return, if the loan was gratuitous, even though he lent
it for a specified time or purpose. But if, on the
faith of such loan made for a specified time or purpose, the
borrower has acted in such a manner that the
return of the thing lent before the time agreed upon would
cause him loss exceeding the benefit actually
derived by him from the loan, the lender must, if he compels
the return, indemnify the borrower for the
amount in which the loss so occasioned exceeds the benefit
so derived.
160.Return of goods bailed, on expiration of time or
accomplishment of purpose.—It is the duty
of the bailee to return, or deliver according to the
bailor’s directions, the goods bailed, without demand, as
soon as the time for which they were bailed has expired, or
the purpose for which they were bailed has
been accomplished.
1161. Bailee’s responsibility when goods are not duly
returned.—If, by the default of the bailee,
the goods are not returned, delivered or tendered at the
proper time, he is responsible to the bailor for any
loss, destruction or deterioration of the goods from that
time.2
1. S. 161 has been declared to apply to the responsibility
of the Trustees of the Port of Madras as to goods in their possession
seethe Madras Port Trust Act, 1905 (Madras Act 2 of 1905).
2. As to Railway contracts, see the Indian Railways Act,
1890 (9 of 1890), s. 72.
41
162. Termination of gratuitous bailment by death.—A
gratuitous bailment is terminated by the
death either of the bailor or of the bailee.
163. Bailor entitled to increase or profit from goods
bailed.—In the absence of any contract to the
contrary, the bailee is bound to deliver to the bailor, or
according to his directions, any increase or profit
which may have accrued from the goods bailed.
Illustration
A leaves a cow in the custody of B to be taken care of. The
cow has a calf. B is bound to deliver the calf as well as the cow
to A.
164. Bailor’s responsibility to bailee.—The bailor is
responsible to the bailee for any loss which the
bailee may sustain by reason that the bailor was not
entitled to make the bailment, or to receive back the
goods, or to give directions respecting them.
165.Bailment by several joint owners.—If several joint
owners of goods bail them, the bailee may
deliver them back to, or according to the directions of, one
joint owner without the consent of all in the
absence of any agreement to the contrary.
166.Bailee not responsible on re-delivery to bailor without
title.—If the bailor has no title to the
goods, and the bailee, in good faith, delivers them back to,
or according to the directions of, the bailor, the
bailee is not responsible to the owner in respect of such
delivery1
.
167.Right of third person claiming goods bailed.—If a
person, other than the bailor, claims goods
bailed he may apply to the Court to stop the delivery of the
goods to the bailor, and to decide the title to
the goods.
168.Right of finder of goods, may sue for specific reward
offered.—The finder of goods has no
right to sue the owner for compensation for trouble and
expense voluntarily incurred by him to preserve
the goods and to find out the owner; but he may retain the
goods against the owner until he receives such
compensation; and, where the owner has offered a specific
reward for the return of goods lost, the finder
may sue for such reward, and may retain the goods until he
receives it.
169.When finder of thing commonly on sale may sell it.—When
a thing which is commonly the
subject of sale is lost, if the owner cannot with reasonable
diligence be found, or if he refuses, upon
demand, to pay the lawful charges of the finder, the finder
may sell it—
(1) when the thing is in danger of perishing or of losing
the greater part of its value, or,
(2) when the lawful charges of the finder, in respect of the
thing found, amount to two-thirds of
its value.
170. Bailee’s particular lien.—Where the bailee has, in
accordance with the purpose of the
bailment, rendered any service involving the exercise of
labour or skill in respect of the goods bailed, he
has, in the absence of a contract to the contrary, a right
to retain such goods until he receives due
remuneration for the services he has rendered in respect of
them.
Illustrations
(a) A delivers a rough diamond to B, a jeweller, to be cut
and polished, which is accordingly done. B is entitled to retain the
stone till he is paid for the services he has rendered.
(b) A gives, cloth to B, a tailor, to make into a coat. B
promises A to deliver the coat as soon as it is finished, and to give a
three months’ credit for the price. B is not entitled to
retain the coat until he is paid.
1. See the Indian Evidence Act, 1872 (1 of 1872), s. 117.
42
171.General lien of bankers, factors, wharfingers, attorneys
and policy-brokers.—Bankers,
factors, wharfingers, attorneys of a High Court and
policy-brokers may, in the absence of a contract to the
contrary, retain as a security for a general balance of
account, any goods bailed to them; but no other
persons have a right to retain, as a security for such
balance, goods bailed to them, unless there is an
express contract to that effect1
.
Bailments of Pledges
172.“Pledge”“pawnor”,and “pawnee” defined.—The bailment of
goods as security for payment of
a debt or performance of a promise is called “pledge”. The
bailor is in this case called the “pawnor”. The
bailee is called the “pawnee”.
173.Pawnee’s right of retainer.—Thepawnee may retain the
goods pledged, not only for payment of
the debt or the performance of the promise, but for the
interest of the debt, and all necessary expenses
incurred by him in respect of the possession or for the
preservation of the goods pledged.
174.Pawnee not to retain for debt or promise other than that
for which goods pledged.
Presumption in case of subsequent advances.—The pawnee shall
not, in the absence of a contract to
that effect, retain the goods pledged for any debt or
promise other than the debt or promise for which they
are pledged; but such contract, in the absence of anything
to the contrary, shall be presumed in regard to
subsequent advances made by the pawnee.
175. Pawnee’s right as to extraordinary expenses
incurred.—Thepawnee is entitled to receive
from the pawnor extraordinary expenses incurred by him for
the preservation of the goods pledged.
176. Pawnee’s right where pawnor makes default.—If the
pawnor makes default in payment of the
debt, or performance, at the stipulated time of the promise,
in respect of which the goods were pledged,
the pawnee may bring a suit against the pawnor upon the debt
or promise, and retain the goods pledged as
a collateral security; or he may sell the thing pledged, on
giving the pawnor reasonable notice of the sale.
If the proceeds of such sale are less than the amount due in
respect of the debt or promise, the pawnor
is still liable to pay the balance. If the proceeds of the
sale are greater than the amount so due, the pawnee
shall pay over the surplus to the pawnor.
177. Defaulting pawner’s right to redeem.—If a time is
stipulated for the payment of the debt, or
performance of the promise, for which the pledge is made,
and the pawnor makes default in payment of
the debt or performance of the promise at the stipulated
time, he may redeem the goods pledged at any
subsequent time before the actual sale of them2
; but he must, in that case, pay, in addition, any expenses
which have arisen from his default.
3
[178. Pledge by mercantile agent.—Where a mercantile agent
is, with the consent of the owner, in
possession of goods or the document of title to goods, any
pledge made by him, when acting in the
ordinary course of business of a mercantile agent, shall be
as valid as if he were expressly authorised by
the owner of the goods to make the same; provided that the
pawnee acts in good faith and has not at the
time of the pledge notice that the pawnor has not authority
to pledge.
Explanation.—In this section, the expressions “mercantile
agent” and “documents of title” shall have
the meanings assigned to them in the Indian Sale of Goods
Act, 1930 (3 of 1930).
178A. Pledge by person in possession under voidable
contract.—When the pawnor has obtained
possession of the goods pledged by him under a contract
voidable under section 19 or section 19A, but
1. As to lien of an agent, see s. 221, infra. As to lien of
a Railway Administration, see the Indian Railways Act, 1890 (9 of 1890),
s. 55.
2. For limitation, see the Limitation Act, 1963 (36 of
1963), the Second Schedule.
3. Ss. 178 and 178A subs. by Act 4 of 1930, s. 2, for the
original s. 178.
43
the contract has not been rescinded at the time of the
pledge, the pawnee acquires a good title to the
goods, provided he acts in good faith and without notice of
the pawnor’s defect of title.]
179. Pledge where pawnor has only a limited interest.—Where
a person pledges goods in which
he has only a limited interest, the pledge is valid to the
extent of that interest.
Suits by bailees or bailors against wrong-doers
180.Suit by bailor or bailee against wrong-doer.—If a third
person wrongfully deprives the bailee
of the use or possession of the goods bailed, or does them
any injury, the bailee is entitled to use such
remedies as the owner might have used in the like case if no
bailment had been made; and either the
bailor or the bailee may bring a suit against a third person
for such deprivation or injury.
181. Apportionment of relief or compensation obtained by
such suits.—Whatever is obtained by
way of relief or compensation in any such suit shall, as
between the bailor and the bailee, be dealt with
according to their respective interests.
CHAPTER X
AGENCY
Appointment and authority of agents
182.“Agent” and “principal” defined.—An “agent” is a person
employed to do any act for another,
or to represent another in dealings with third persons. The
person for whom such act is done, or who is so
represented, is called the “principal”.
183. Who may employ agent.—Any person who is of the age of
majority according to the law to
which he is subject, and who is of sound mind, may employ an
agent.
184. Who may be an agent.—As between the principal and third
persons, any person may become
an agent, but no person who is not of the age of majority
and of sound mind can become an agent, so as to
be responsible to his principal according to the provisions
in that behalf herein contained.
185. Consideration not necessary.—No consideration is
necessary to create an agency.
186. Agent’s authority may be expressed or implied.—The
authority of an agent may be expressed
or implied1
.
187. Definitions of express and implied authority.—An authority
is said to be express when it is
given by words spoken or written. An authority is said to be
implied when it is to be inferred from the
circumstances of the case; and things spoken or written, or
the ordinary course of dealing, may be
accounted circumstances of the case.
Illustration
A owns a shop in Serampore, living himself in Calcutta, and
visiting the shop occasionally. The shop is managed by B, and
he is in the habit of ordering goods from C in the name of A
for the purposes of the shop, and of paying for them out of A’s funds
with A’s knowledge. B has an implied authority from A to
order goods from C in the name of A for the purposes of the shop.
188. Extent of agent’s authority.—An agent, having an
authority to do an act, has authority to do
every lawful thing which is necessary in order to do such
act.
An agent having an authority to carry on a business, has
authority to do every lawful thing necessary
for the purpose, or usually done in the course, of
conducting such business.
1. See, however, the Registration Act, 1908 (16 of 1908), s.
33; see also the Code of Civil Procedure, 1908 (5 of 1908), Sch. I,
Order III, rule 4.
44
Illustrations
(a) A is employed by B, residing in London, to recover at
Bombay a debt due to B. A may adopt any legal process necessary
for the purpose of recovering the debt, and may give a valid
discharge for the same.
(b) A constitutes B his agent to carry on his business of a
ship-builder. B may purchase timber and other materials, and hire
workmen, for the purpose of carrying on the business.
189.Agent’s authority in an emergency.—An agent has
authority, in an emergency, to do all such
acts for the purpose of protecting his principal from loss
as would be done by a person of ordinary
prudence, in his own case, under similar circumstances.
Illustrations
(a) An agent for sale may have goods repaired if it be
necessary.
(b) A consigns provisions to B at Calcutta, with directions
to send them immediately to C, at Cuttack. B may sell the
provisions at Calcutta, if they will not bear the journey to
Cuttack without spoiling.
Sub-Agents
190. When agent cannot delegate.—An agent cannot lawfully
employ another to perform acts
which he has expressly or impliedly undertaken to perform
personally, unless by the ordinary custom of
trade a sub-agent may, or, from the nature of the agency, a
sub-agent must, be employed.
191. “Sub-agent” defined.—A “sub-agent” is a person employed
by, and acting under the control of,
the original agent in the business of the agency.
192. Representation of principal by sub-agent properly
appointed.—Where a sub-agent is
properly appointed, the principal is, so far as regards
third persons, represented by the sub-agent, and is
bound by and responsible for his acts, as if he were an
agent originally appointed by the principal.
Agent’s responsibility for sub-agent.—The agent is
responsible to the principal for the acts of the
sub-agent.
Sub-agent’s responsibility.—The sub-agent is responsible for
his acts to the agent, but not tothe
principal, except in cases of fraud or wilful wrong.
193. Agent’s responsibility for sub-agent appointed without
authority.—Where an agent, without
having authority to do so, has appointed a person to act as
a sub-agent, the agent stands towards such
person in the relation of a principal to an agent, and is
responsible for his acts both to the principal and to
third persons; the principal is not represented, by or
responsible for the acts of the person so employed,
nor is that person responsible to the principal.
194.Relation between principal and person duly appointed by
agent to act in business of
agency.—Where an agent, holding an express or implied
authority to name another person to act for the
principal in the business of the agency, has named another person
accordingly, such person is not a
sub-agent, but an agent of the principal for such part of
the business of the agency as is entrusted to him.
Illustrations
(a)A directs B, his solicitor, to sell his estate by
auction, and to employ an auctioneer for the purpose. B names C, an
auctioneer, to conduct the sale. C is not a sub-agent, but
is A’s agent for the conduct of the sale.
(b)A authorizes B, a merchant in Calcutta, to recover the
moneys due to A from C & Co. B instructs D, a solicitor, to take
legal proceedings against C & Co. for the recovery of
the money. D is not a sub-agent, but is solicitor for A.
195. Agent’s duty in naming such person.—In selecting such
agent for his principal, an agent is
bound to exercise the same amount of discretion as a man of
ordinary prudence would exercise in his own
case; and, if he does this, he is not responsible to the
principal for the acts or negligence of the agent so
selected.
45
Illustrations
(a)A instructs B, a merchant, to buy a ship for him. B
employs a ship-surveyor of good reputation to choose a ship for A.
The surveyor makes the choice negligently and the ship turns
out to be unseaworthy and is lost. B is not, but the surveyor is,
responsible to A.
(b)A consigns goods to B, a merchant, for sale. B, in due
course, employs an auctioneer in good credit to sell the goods of A,
and allows the auctioneer to receive the proceeds of the
sale. The auctioneer afterwards becomes insolvent without having
accounted for the proceeds. B is not responsible to A for
the proceeds.
Ratification
196. Right of person as to acts done for him without his
authority. Effect of ratification.—
Where acts are done by one person on behalf of another, but
without his knowledge or authority, he may
elect to ratify or to disown such acts. If he ratify them,
the same effects will follow as if they had been
performed by his authority.
197.Ratification may be expressed or implied.—Ratification
may be expressed or may be implied
in the conduct of the person on whose behalf the acts are
done.
Illustrations
(a)A, without authority, buys goods for B. Afterwards B
sells them to C on his own account; B’s conduct implies a
ratification of the purchase made for him by A.
(b)A, without B’s authority, lends B’s money to C.
Afterwards B accepts interest on the money from C. B’s conduct implies
a ratification of the loan.
198.Knowledge requisite for valid ratification.—No valid
ratification can be made by a person
whose knowledge of the facts of the case is materially
defective.
199.Effect of ratifying unauthorized act forming part of a
transaction.—A person ratifying any
unauthorized act done on his behalf ratifies the whole of
the transaction of which such act formed a part.
200.Ratification of unauthorized act cannot injure third
person.—An act done by one person on
behalf of another, without such other person’s authority,
which, if done with authority, would have the
effect of subjecting a third person to damages, or of
terminating any right or interest of a third person,
cannot, by ratification, be made to have such effect.
Illustrations
(a)A, not being authorized thereto by B, demands, on behalf
of B, the delivery of a chattel, the property of B, from C, who is
in possession of it. This demand cannot be ratified by B, so
as to make C liable for damages for his refusal to deliver.
(b)A holds a lease from B, terminable on three months’
notice. C, an unauthorized person, gives notice of termination to A.
The notice cannot be ratified by B, so as to be binding on
A.
Revocation of Authority
201. Termination of agency.—An agency is terminated by the
principal revoking his authority; or
by the agent renouncing the business of the agency; or by
the business of the agency being completed; or
by either the principal or agent dying or becoming of
unsound mind; or by the principal being adjudicated
an insolvent under the provisions of any Act for the time
being in force for the relief of insolvent debtors.
202.Termination of agency, where agent has an interest in
subject-matter.—Where the agent has
himself an interest in the property which forms the
subject-matter of the agency, the agency cannot, in the
absence of an express contract, be terminated to the
prejudice of such interest.
Illustrations
(a) A gives authority to B to sell A’s land, and to pay
himself, out of the proceeds, the debts due to him from A. A cannot
revoke this authority, nor can it be terminated by his
insanity or death.
46
(b) A consigns 1,000 bales of cotton to B, who has made
advances to him on such cotton, and desires B to sell the cotton,
and to repay himself out of the price, the amount of his own
advances. A cannot revoke this authority, nor is it terminated by his
insanity or death.
203.When principal may revoke agent’s authority.—The
principal may, save as is otherwise
provided by the last preceding section, revoke the authority
given to his agent at any time before the
authority has been exercised so as to bind the principal.
204.Revocation where authority has been partly
exercised.—The principal cannot revoke the
authority given to his agent after the authority has been
partly exercised, so far as regards such acts and
obligations as arise from acts already done in the agency.
Illustrations
(a)A authorizes B to buy 1,000 bales of cotton on account of
A, and to pay for it out of A’s moneys remaining in B’s hands.
B buys 1,000 bales of cotton in his own name, so as to make
himself personally liable for the price. A cannot revoke B’s
authority so far as regards payment for the cotton.
(b) A authorizes B to buy 1,000 bales of cotton on account
of A, and to pay for it out of A’s moneys remaining in B’s hands.
B buys 1,000 bales of cotton in A’s name, and so as not to
render himself personally liable for the price. A can revoke B’s
authority to pay for the cotton.
205.Compensation for revocation by principal, or
renunciation by agent.—Where there is an
express or implied contract that the agency should be
continued for any period of time, the principal must
make compensation to the agent, or the agent to the
principal, as the case may be, for any previous
revocation or renunciation of the agency without sufficient
cause.
206. Notice of revocation or renunciation.—Reasonable notice
must be given of such revocation or
renunciation, otherwise the damage thereby resulting to the
principal or the agent, as the case may be,
must be made good to the one by the other.
207.Revocation and renunciation may be expressed or
implied.—Revocation and renunciation
may be expressed or may be implied in the conduct of the
principal or agent respectively.
Illustration
A empowers B to let A’s house. Afterwards A lets it himself.
This is an implied revocation of
B’s authority.
208.When termination of agent’s authority takes effect as to
agent, and as to third persons.—
The termination of the authority of an agent does not, so
far as regards the agent, take effect before it
becomes known to him, or, so far as regards third persons,
before it becomes known to them.
Illustrations
(a) A directs B to sell goods for him, and agrees to give B
five per cent. commission on the price fetched by the goods. A
afterwards, by letter, revoke B’s authority. B, after the
letter is sent, but before he receives it, sells the goods for 100 rupees. The
sale is binding on A, and B is entitled to five rupees as
his commission.
(b) A, at Madras, by letter, directs B to sell for him some
cotton lying in a warehouse in Bombay, and afterwards, by letter,
revokes his authority to sell, and directs B to send the
cotton to Madras. B, after receiving the second letter, enters into a contract
with C, who knows of the first letter, but not of the
second, for the sale to him of the cotton. C pays B the money, with which B
absconds. C’s payment is good as against A.
(c) A directs B, his agent, to pay certain money to C. A
dies, and D takes out probate to his will. B, after A’s death, but
before hearing of it, pays the money to C. The payment is
good as against D, the executor.
209.Agent’s duty on termination of agency by principal’s
death or insanity.—When an agency is
terminated by the principal dying or becoming of unsound
mind, the agent is bound to take, on behalf of
the representatives of his late principal, all reasonable
steps for the protection and preservation of the
interests entrusted to him.
47
210. Termination of sub-agent’s authority.—The termination
of the authority of an agent causes
the termination (subject to the rules herein contained
regarding the termination of an agent’s authority) of
the authority of all sub-agents appointed by him.
Agent’s duty to principal
211.Agent’s duty in conducting principal’s business.—An
agent is bound to conduct the business
of his principal according to the directions given by the
principal, or, in the absence of any such
directions, according to the custom which prevails in doing
business of the same kind at the place where
the agent conducts such business. When the agent acts
otherwise, if any loss be sustained, he must make it
good to his principal, and if any profit accrues, he must
account for it.
Illustrations
(a) A, an agent engaged in carrying on for B a business, in
which it is the custom to invest from time to time, at interest, the
moneys which may be in hand, omits to make such investment.
A must make good to B the interest usually obtained by such
investments.
(b) B, a broker, in whose business it is not the custom to
sell on credit, sells goods of A on credit to C, whose credit at the
time was very high. C, before payment, becomes insolvent. B
must make good the loss to A.
212. Skill and diligence required from agent.—An agent is
bound to conduct the business of the
agency with as much skill as is generally possessed by
persons engaged in similar business, unless the
principal has notice of his want of skill. The agent is
always bound to act with reasonable diligence, and
to use such skill as he possesses; and to make compensation
to his principal in respect of the direct
consequences of his own neglect, want of skill, or
misconduct, but not in respect of loss or damage which
are indirectly or remotely caused by such neglect, want of
skill, or misconduct.
Illustrations
(a)A, a merchant in Calcutta, has an agent, B, in London, to
whom a sum of money is paid on A’s account, with orders to
remit. B retains the money for a considerable time. A, in
consequence of not receiving the money, becomes insolvent. B is liable
for the money and interest from the day on which it ought to
have been paid, according to the usual rate, and for any further
direct loss-as, e.g., by variation of rate of exchange-but
not further.
(b)A, an agent for the sale of goods, having authority to
sell on credit, sells to B on credit, without making the proper and
usual enquiries as to the solvency of B. B, at the time of
such sale, is insolvent. A must make compensation to his principal in
respect of any loss thereby sustained.
(c)A, an insurance-broker employed by B to effect an
insurance on a ship, omits to see that the usual clauses are inserted in
the policy. The ship is after wards lost. In consequence of
the omission of the clauses nothing can be recovered from the
underwriters. A is bound to make good the loss to B.
(d)A, a merchant in England, directs B, his agent at Bombay,
who accepts the agency, to send him 100 bales of cotton by a
certain ship. B, having it in his power to send the cotton,
omits to do so. The ship arrives safely in England. Soon after her arrival
the price of cotton rises. B is bound to make good to A the
profit which he might have made by the 100 bales of cotton at the time
the ship arrived, but not any profit he might have made by
the subsequent rise.
213.Agent’s accounts.—An agent is bound to render proper
accounts to his principal on demand.
214.Agent’s duty to communicate with principal.—It is the
duty of an agent, in cases of difficulty,
to use all reasonable diligence in communicating with his
principal, and in seeking to obtain his
instructions.
215.Right of principal when agent deals, on his own account,
in business of agency without
principal’s consent.—If an agent deals on his own account in
the business of the agency, without first
obtaining the consent of his principal and acquainting him
with all material circumstances which have
come to his own knowledge on the subject, the principal may
repudiate the transaction, if the case shows,
either that any material fact has been dishonestly concealed
from him by the agent, or that the dealings of
the agent have been disadvantageous to him.
48
Illustrations
(a)A directs B to sell A’s estate. B buys the estate for himself
in the name of C. A, on discovering that B has bought the
estate for himself, may repudiate the sale, if he can show
that B has dishonestly concealed any material fact, or that the sale has
been disadvantageous to him.
(b)A directs B to sell A’s estate B, on looking over the
estate before selling it, finds a mine on the estate which is unknown
to A. B informs A that he wishes to buy the estate for
himself, but conceals the discovery of the mine. A allows B to buy, in
ignorance of the existence of the mine. A, on discovering
that B knew of the mine at the time he bought the estate, may either
repudiate or adopt the sale at his option.
216. Principal’s right to benefit gained by agent dealing on
his own account in business of
agency.—If an agent, without the knowledge of his principal,
deals in the business of the agency on his
own account instead of on account of his principal, the
principal is entitled to claim from the agent any
benefit which may have resulted to him from the transaction.
Illustration
A directs B, his agent, to buy a certain house for him. B
tells A it cannot be bought, and buys the house for himself. A may,
on discovering that B has bought the house, compel him to
sell it to A at the price he gave for it.
217.Agent’s right of retainer out of sums received on
principal’s account.—An agent may retain,
out of any sums received on account of the principal in the
business of the agency, all moneys due to
himself in respect of advances made or expenses properly incurred
by him in conducting such business,
and also such remuneration as may be payable to him for
acting as agent.
218. Agent’s duty to pay sums received for
principal.—Subject to such deductions, the agent is
bound to pay to his principal all sums received on his
account.
219.When agent’s remuneration becomes due.—In the absence of
any special contract, payment
for the performance of any act is not due to the agent until
the completion of such act; but an agent may
detain moneys received by him on account of goods sold,
although the whole of the goods consigned to
him for sale may not have been sold, or although the sale
may not be actually complete.
220.Agent not entitled to remuneration for business
misconducted.—An agent who is guilty of
misconduct in the business of the agency, is not entitled to
any remuneration in respect of that part of the
business which he has misconducted.
Illustrations
(a) A employs B to recover, 1,00,000 rupees from C, and to
lay it out on good security. B recovers the 1,00,000 rupees; and
lays out 90,000 rupees on good security, but lays out 10,000
rupees on security which he ought to have known to be bad,
whereby A loses 2,000 rupees. B is entitled to remuneration
for recovering the 1,00,000 rupees and for investing the 90,000
rupees. He is not entitled to any remuneration for investing
the 10,000 rupees, and he must make good the 2,000 rupees to B.
(b)A employs B to recover 1,000 rupees from C. Through B’s
misconduct the money is not recovered. B is entitled to no
remuneration for his services, and must make good the loss.
221. Agent’s lien on principal’s property.—In the absence of
any contract to the contrary, an agent
is entitled to retain goods, papers and other property,
whether movable or immovable of the principal
received by him, until the amount due to himself for
commission, disbursements and services in respect
of the same has been paid or accounted for to him.
Principal’s duty to agent
222.Agent to be indemnified against consequences of lawful
acts.—The employer of an agent is
bound to indemnify him against the consequences of all
lawful acts done by such agent in exercise of the
authority conferred upon him.
49
Illustrations
(a)B, at Singapur, under instructions from A of Calcutta,
contracts with C to deliver certain goods to him. A does not send
the goods to B, and C sues B for breach of contract. B
informs A of the suit, and A authorizes him to defend the suit. B defends
the suit, and is compelled to pay damages and costs, and
incurs expenses. A is liable to B for such damages, costs and expenses.
(b)B, a broker at Calcutta, by the orders of A, a merchant
there, contracts with C for the purchase of 10 casks of oil for A.
Afterwards A refuses to receive the oil, and C sues B. B
informs A, who repudiates the contract altogether. B defends, but
unsuccessfully, and has to pay damages and costs and incurs
expenses. A is liable to B for such damages, costs and expenses.
223.Agent to be indemnified against consequences of acts
done in good faith.—Where one person
employs another to do an act, and the agent does the act in
good faith, the employer is liable to indemnify
the agent against the consequences of that act, though it
cause an injury to the rights of third persons.
Illustrations
(a)A, a decree-holder and entitled to execution of B’s
goods, requires the officer of the Court to seize certain goods,
representing them to be the goods of B. The officer seizes
the goods, and is sued by C, the true owner of the goods. A is liable to
indemnify the officer for the sum which he is compelled to
pay to C, in consequence of obeying A’s directions.
(b)B, at the request of A, sells goods in the possession of
A, but which A had no right to dispose of, B does not know this,
and hands over the proceeds of the sale to A. Afterwards C,
the true owner of the goods, sues B and recovers the value of the
goods and costs. A is liable to indemnify B for what he has
been compelled to pay to C, and for B’s own expenses.
224.Non-liability of employer of agent to do a criminal
act.—Where one person employs another
to do an act which is criminal, the employer is not liable
to the agent, either upon an express or an implied
promise, to indemnify him against the consequences of that
Act1
.
Illustrations
(a) A employs B to beat C, and agrees to indemnify him
against all consequences of the act. B thereupon beats C, and has to
pay damages to C for so doing. A is not liable to indemnify
B for those damages.
(b)B, the proprietor of a newspaper, publishes, at A’s
request, a libel upon C in the paper, and A agrees to indemnify B
against the consequences of the publication, and all costs
and damages of any action in respect thereof. B is sued by C and has to
pay damages, and also incurs expenses. A is not liable to B
upon the indemnity.
225.Compensation to agent for injury caused by principal’s
neglect.—The principal must make
compensation to his agent in respect of injury2
caused to such agent by the principal’s neglect or want of
skill.
Illustration
A employs B as a bricklayer in building a house, and puts up
the scaffolding himself. The scaffolding is unskilfully put up,
and B is in consequence hurt. A must make compensation to B.
Effect of agency on contracts with third persons
226. Enforcement and consequences of agent’s
contracts.—Contracts entered into through an
agent, and obligations arising from acts done by an agent,
may be enforced in the same manner, and will
have the same legal consequences, as if the contracts had
been entered into and the acts done by the
principal in person.
Illustrations
(a)A buys goods from B, knowing that he is an agent for
their sale, but not knowing who is the principal. B’s principal is the
person entitled to claim from A the price of the goods, and
A cannot, in a suit by the principal, set-off against that claim a debt
due to himself from B.
1. See s. 24, supra.
2. Cf. the Indian Fatal Accidents Act, 1855 (13 of 1855).
50
(b)A, being B’s agent, with authority to receive money on
his behalf, receives from C a sum of money due to B. C is
discharged of his obligation to pay the sum in question to
B.
227. Principal how far bound, when agent exceeds
authority.—When an agent does more than he
is authorized to do, and when the part of what he does,
which is within his authority, can be separated
from the part which is beyond his authority, so much only of
what he does as is within his authority is
binding as between him and his principal.
Illustration
A, being owner of a ship and cargo, authorizes B to procure
an insurance for 4,000 rupees on the ship. B procures a policy
for 4,000 rupees on the ship, and another for the like sum
on the cargo. A is bound to pay the premium for the policy on the ship,
1
THE INDIAN CONTRACT ACT, 1872
____________
ARRANGEMENT OF SECTIONS
____________
SECTIONS
PREAMBLE
PRELIMINARY
1. Short title.
Extent.
Commencement.
Saving.
2. Interpretation-clause.
CHAPTER I
OF THE COMMUNICATION, ACCEPTANCE AND
REVOCATION OF PROPOSALS
3. Communication, acceptance and revocation of proposals.
4. Communication when complete.
5. Revocation of proposals and acceptances.
6. Revocation how made.
7. Acceptance must be absolute.
8. Acceptance by performing conditions, or receiving
consideration.
9. Promises, express and implied.
CHAPTER II
OF CONTRACTS, VOIDABLE CONTRACTS AND VOID
AGREEMENTS
10. What agreements are contracts.
11. Who are competent to contract.
12. What is a sound mind for the purposes of contracting.
13. “Consent” defined.
14. “Free consent” defined.
15. “Coercion” defined.
16. “Undue influence” defined.
17. “Fraud” defined.
18. “Misrepresentation” defined.
19. Voidability of agreements without free consent.
19A. Power to set aside contract induced by undue influence.
20. Agreement void where both parties are under mistake as
to matter of fact.
21. Effect of mistakes as to law.
22. Contract caused by mistake of one party as to matter of
fact.
2
SECTIONS
23. What considerations and objects are lawful, and what
not.
Void agreements
24. Agreement void, if considerations and objects unlawful
in part.
25. Agreement without consideration, void, unless it is in
writing and registered, or is a promise to
compensate for something done, or is a promise to pay a debt
barred by limitation law.
26. Agreement in restraint of marriage, void.
27. Agreement in restraint of trade, void.
Saving of agreement not to carry on business of which
good-will is sold.
28. Agreements in restraint of legal proceeding void.
Saving of contract to refer to arbitration dispute that may
arise.
Saving of contract to refer questions that have already
arisen.
Saving of a guarantee agreement of a bank or a financial
institution.
29. Agreements void for uncertainty.
30. Agreements by way of wager, void.
Exception in favour of certain prizes for horse-racing.
Section 294A of the Indian Penal Code not affected.
CHAPTER III
OF CONTINGENT CONTRACTS
31. “Contingent contract” defined.
32. Enforcement of contracts contingent on an event
happening.
33. Enforcement of contracts contingent on an event not
happening.
34. When event on which contract is contingent to be deemed
impossible, if it is the future conduct of
a living person.
35. When contracts become void which are contingent on
happening of specified event within fixed
time.
When contracts may be enforced, which are contingent on
specified event not happening within
fixed time.
36. Agreement contingent on impossible events void.
CHAPTER IV
OF THE PERFORMANCE OF CONTRACTS
Contracts which must be performed
37. Obligation of parties to contracts.
38. Effect of refusal to accept offer of performance.
39. Effect of refusal of party to perform promise wholly.
By whom contracts must be performed
40. Person by whom promise is to be performed.
41. Effect of accepting performance from third person.
3
SECTIONS
42. Devolution of joint liabilities.
43. Any one of joint promisors may be compelled to perform.
Each promisor may compel contribution.
Sharing of loss by default in contribution.
44. Effect of release of one joint promisor.
45. Devolution of joint rights.
Time and place for performance
46. Time for performance of promise, when no application is
to be made and no time is specified.
47. Time and place for performance of promise, where time is
specified and no application to be
made.
48. Application for performance on certain day to be at
proper time and place.
49. Place for performance of promise, where no application
to be made and no place fixed for
performance.
50. Performance in manner or at time prescribed or
sanctioned by promisee.
Performance of reciprocal promises
51. Promisor not bound to perform, unless reciprocal
promisee ready and willing to perform.
52. Order of performance of reciprocal promises.
53. Liability of party preventing event on which the
contract is to take effect.
54. Effect of default as to that promise which should be
first performed, in contract consisting of
reciprocal promises.
55. Effect of failure to perform at fixed time, in contract
in which time is essential.
Effect of such failure when time is not essential.
Effect of acceptance of performance at time other than that
agreed upon.
56. Agreement to do impossible act.
Contract to do an act afterwards becoming impossible or
unlawful.
Compensation for loss through non-performance of act known
to be impossible or unlawful.
57. Reciprocal promise to do things legal, and also other
things illegal.
58. Alternative promise, one branch being illegal.
Appropriation of payments
59. Application of payment where debt to be discharged is
indicated.
60. Application of payment where debt to be discharged is
not indicated.
61. Application of payment where neither party appropriates.
Contracts which need not be performed
62. Effect of novation, rescission, and alteration of
contract.
63. Promisee may dispense with or remit performance of
promise.
64. Consequences of rescission of voidable contract.
65. Obligation of person who has received advantage under
void agreement, or contract that becomes
void.
66. Mode of communicating or revoking rescission of voidable
contract.
67. Effect of neglect of promisee to afford promisor
reasonable facilities for performance.
4
CHAPTER V
OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT
SECTIONS
68. Claim for necessaries supplied to person incapable of
contracting, or on his account.
69. Reimbursement of person paying money due by another, in
payment of which he is interested.
70. Obligation of person enjoying benefit of non-gratuitous
act.
71. Responsibility of finder of goods.
72. Liability of person to whom money is paid, or thing
delivered, by mistake or under coercion.
CHAPTER VI
OF THE CONSEQUENCES OF BREACH OF CONTRACT
73. Compensation for loss or damage caused by breach of
contract.
Compensation for failure to discharge obligation resembling
those created by contract.
74. Compensation for breach of contract where penalty
stipulated for.
75. Party rightfully rescinding contract, entitled to
compensation.
[CHAPTER VII SALE OF GOODS.][Repealed.].
76. [Repealed.].
77. [Repealed.].
78. [Repealed.].
79. [Repealed.].
80. [Repealed.].
81. [Repealed.].
82. [Repealed.].
83. [Repealed.].
84. [Repealed.].
85. [Repealed.].
86. [Repealed.].
87. [Repealed.].
88. [Repealed.].
89. [Repealed.].
[DELIVERY.][Repealed.].
90. Repealed.].
91. [Repealed.].
92. [Repealed.].
93. [Repealed.].
94. [Repealed.]
[SELLER’S LIEN.][Repealed.].
95. [Repealed.].
96. [Repealed.].
97. [Repealed.].
98. [Repealed.]
[STOPPAGE IN TRANSIT.][Repealed.].
99. [Repealed.].
100. [Repealed.].
101. [Repealed.].
5
SECTIONS
102.[Repealed.].
103.[Repealed.].
104.[Repealed.].
105.[Repealed.].
106.[Repealed.].
[RESALE.][Repealed.].
107. [Repealed.].
[TITLE.][Repealed.].
108.[Repealed.].
[WARRANTY.]Repealed.].
109. [Repealed.].
110. [Repealed.].
111. [Repealed.].
112. [Repealed.].
113. [Repealed.].
114. [Repealed.].
115. [Repealed.].
116. [Repealed.].
117. [Repealed.].
118. [Repealed.].
[MISCELLANEOUS.][Repealed.].
119.[Repealed.].
120.[Repealed.].
121.[Repealed.].
122.[Repealed.].
123.[Repealed.].
CHAPTERVIII
OF INDEMNITY AND GUARANTEE
124. “Contract of indemnity” defined.
125. Rights of indemnity-holder when sued.
126. “Contract of guarantee”, “surety”, “principal debtor”
and “creditor”.
127. Consideration for guarantee.
128. Surety’s liability.
129. “Continuing guarantee”.
130. Revocation of continuing guarantee.
131. Revocation of continuing guarantee by surety’s death.
132. Liability of two persons, primarily liable, not
affected by arrangement between them that one shall be
surety on other’s default.
133. Discharge of surety by variance in terms of contract.
134. Discharge of surety by release or discharge of
principal debtor.
135. Discharge of surety when creditor compounds with, gives
time to, or agrees not to sue, principal debtor.
136. Surety not discharged when agreement made with third
person to give time to principal debtor.
137. Creditor’s forbearance to sue does not discharge
surety.
138. Release of one co-surety does not discharge others.
6
SECTIONS
139. Discharge of surety of creditor’s act or omission
impairing surety’s eventual remedy.
140. Rights of surety on payment or performance.
141. Surety’s right to benefit of creditor’s securities.
142. Guarantee obtained by misrepresentation invalid.
143. Guarantee obtained by concealment invalid.
144. Guarantee on contract that creditor shall not act on it
until co-surety joins.
145. Implied promise to indemnify surety.
146. Co-sureties liable to contribute equally.
147. Liability of co-sureties bound in different sums.
CHAPTER IX
OF BAILMENT
148. “Bailment”, “bailor” and “bailee” defined.
149. Delivery to bailee how made.
150. Bailor’s duty to disclose faults in goods bailed.
151. Care to be taken by bailee.
152. Bailee when not liable for loss, etc., of thing bailed.
153. Termination of bailment by bailee’s act inconsistent
with conditions.
154. Liability of bailee making unauthorized use of goods
bailed.
155. Effect of mixture, with bailor’s consent, of his goods
with bailee’s.
156. Effect of mixture, without bailor’s consent, when the
goods can be separated.
157. Effect of mixture, without bailor’s consent, when the
goods cannot be separated.
158. Repayment, by bailor, of necessary expenses.
159. Restoration of goods lent gratuitously.
160. Return of goods bailed on expiration of time or
accomplishment of purpose.
161. Bailee’s responsibility when goods are not duly
returned.
162. Termination of gratuitous bailment by death.
163. Bailor entitled to increase or profit from goods
bailed.
164. Bailor’s responsibility to bailee.
165. Bailment by several joint owners.
166. Bailee not responsible on re-delivery to bailor without
title.
167. Right of third person claiming goods bailed.
168. Right of finder of goods.
May sue for specific reward offered.
169. When finder of thing commonly on sale may sell it.
170. Bailee’s particular lien.
171. General lien of bankers, factors, wharfingers,
attorneys and policy-brokers.
Bailments of pledges
172. “Pledge”, “Pawnor” and “Pawnee” defined.
173. Pawnee’s right of retainer.
7
SECTIONS
174. Pawnee not to retain for debt or promise other than
that for which goods pledged.
Presumption in case of subsequent advances.
175. Pawnee’s right as to extraordinary expenses incurred.
176. Pawnee’s right where pawnor makes default.
177. Defaulting pawnor’s right to redeem.
178. Pledge by mercantile agent.
178A. Pledge by person in possession under voidable
contract.
179. Pledge where pawnor has only a limited interest.
Suits by bailees or bailors against wrong-doers
180. Suit by bailor or bailee against wrong-doer.
****181. Apportionment of relief or compensation obtained by such suits.
CHAPTER X
AGENCY
Appointment and authority of agents
182. “Agent” and “principal” defined.
183. Who may employ agent.
184. Who may be an agent.
185. Consideration not necessary.
186. Agent’s authority may be expressed or implied.
187. Definitions of express and implied authority.
188. Extent of agent’s authority.
189. Agent’s authority in an emergency.
Sub-agents
190. When agent cannot delegate.
191. “Sub-agent” defined.
192. Representation of principal by sub-agent properly
appointed.
Agent’s responsibility for sub-agent.
Sub-agent’s responsibility.
193. Agent’s responsibility for sub-agent appointed without
authority.
194. Relation between principal and person duly appointed by
agent to act in business of agency.
195. Agent’s duty in naming such person.
Ratification
196. Right of person as to acts done for him without his
authority.
Effect of ratification.
197. Ratification may be expressed or implied.
198. Knowledge requisite for valid ratification.
199. Effect of ratifying unauthorized act forming part of a
transaction.
200. Ratification of unauthorized act cannot injure third
person.
8
Revocation of authority
SECTIONS
201. Termination of agency.
202. Termination of agency, where agent has an interest in
subject-matter.
203. When principal may revoke agent’s authority.
204. Revocation where authority has been partly exercised.
205. Compensation for revocation by principal, or
renunciation by agent.
206. Notice of revocation or renunciation.
207. Revocation and renunciation may be expressed or
implied.
208. When termination of agent’s authority takes effect as
to agent, and as to third persons.
209. Agent’s duty on termination of agency by principal’s
death or insanity.
210. Termination of sub-agent’s authority.
Agent’s duty to principal
211. Agent’s duty in conducting principal’s business.
212. Skill and diligence required from agent.
213. Agent’s accounts.
214. Agent’s duty to communicate with principal.
215. Right of principal when agent deals, on his own
account, in business of agency without
principal’s consent.
216. Principal’s right to benefit gained by agent dealing on
his own account in business of agency.
217. Agent’s right of retainer out of sums received on
principal’s account.
218. Agent’s duty to pay sums received for principal.
219. When agent’s remuneration becomes due.
220. Agent not entitled to remuneration for business
misconducted.
221. Agent’s lien on principal’s property.
Principal’s duty to agent
222. Agent to be indemnified against consequences of lawful
acts.
223. Agent to be indemnified against consequences of acts
done in good faith.
224. Non-liability of employer of agent to do a criminal
act.
225. Compensation to agent for injury caused by principal’s
neglect.
Effect of agency on contracts with third persons
226. Enforcement and consequences of agent’s contracts.
227. Principal how far bound, when agent exceeds authority.
228. Principal not bound when excess of agent’s authority is
not separable.
229. Consequences of notice given to agent.
230. Agent cannot personally enforce, nor be bound by,
contracts on behalf of principal.
Presumption of contract to contrary.
231. Rights of parties to a contract made by agent not
disclosed.
232. Performance of contract with agent supposed to be
principal.
233. Right of person dealing with agent personally liable.
9
SECTIONS
234. Consequence of inducing agent or principal to act on
belief that principal or agent will be held
exclusively liable.
235. Liability of pretended agent.
236. Person falsely contracting as agent not entitled to
performance.
237. Liability of principal inducing belief that agent’s
unauthorized acts were authorized.
238. Effect, on agreement, of misrepresentation or fraud by
agent.
CHAPTER XI
OF PARTNERSHIP
239. [Repealed.].
240. [Repealed.].
241. [Repealed.].
242. [Repealed.].
243. [Repealed.].
244. [Repealed.].
245. [Repealed.].
246. [Repealed.].
247. [Repealed.].
248. [Repealed.].
249. [Repealed.].
250. [Repealed.].
251. [Repealed.].
252. [Repealed.].
253. [Repealed.].
254. [Repealed.].
255. [Repealed.].
256. [Repealed.].
257. [Repealed.].
258. [Repealed.].
259. [Repealed.].
260. [Repealed.].
261. [Repealed.].
262. [Repealed.].
263. [Repealed.].
264. [Repealed.].
265. [Repealed.].
266. [Repealed.].
SCHEDULE—[Repealed.]
10
THE INDIAN CONTRACT ACT, 1872
ACT NO. 9 OF 18721
[25th April, 1872.]
Preamble—WHEREAS it is expedient to define and amend certain
parts of the law relating to
contracts;
It is hereby enacted as follows:—
PRELIMINARY
1. Short title.—This Act may be called the Indian Contract
Act, 1872.
Extent, Commencement.—It extends to the whole of India 2
[
3***]; and it shall come into force on
the first day of September, 1872.
Saving—4
*** Nothing herein contained shall affect the provisions of
any Statute, Act or Regulation
not hereby expressly repealed, nor any usage or custom of
trade, nor any incident of any contract, not
inconsistent with the provisions of this Act.
2. Interpretation-clause.—In this Act the following words
and expressions are used in the following
senses, unless a contrary intention appears from the
context:—
(a) When one person signifies to another his willingness to
do or to abstain from doing anything,
with a view to obtaining the assent of that other to such
act or abstinence, he is said to make a
proposal;
1. For the Statement of Objects and Reasons for the Bill
which was based on a a report of Her Majesty’s Commissioners
appointed to prepare a body of substantive law for India,
dated 6th July, 1866, see Gazette of India, 1867 Extraordinary, p. 34; for
the Report of the Select Committee, see ibid.,
Extraordinary, dated 28th March, 1872; for discussions in Council, see ibid.,
1867,
Supplement, p. 1064; ibid., 1871, p. 313, and ibid., 1872,
p. 527. It has been amended in C.P. by C.P. Act 1 of 1915 and in C.P.
and Berar by C.P. and Berar Act 15 of 1938.
The Chapters and sections of the Transfer of Property Act,
1882 (4 of 1882), which relate to contracts are, in places in which
that Act is in force, to be taken as part of this Act—see
Act 4 of 1882, s. 4.
This Act has been extended to Berar by the Berar Laws Act,
1941 (4 of 1941) to Dadra and Nagar Haveli by Reg. 6 of 1963,
s. 2 and Sch. I to
Goa, Daman and Diu by Reg. 11 of 1963, s. 3 and Sch., (w.e.f. 1-10-1965) to
Laccadive, Minicoy and
Amindivi Islands by
Reg. 8 of 1965, s. 3
and Sch., to Pondicherry by Act 26 of 1968, s. 3 and Sch. and has been declared
to be in force in—
the Sonthal Parganas—see Sonthal Parganas Settlement
Regulation, 1872 (3 of 1872), s. 3, as amended by the Sonthal
Parganas Justice and Laws Regulation, 1899 (3 of 1899), s.
3.
Panth Piploda—see the Panth Piploda Law Regulation, 1929 (1
of 1929), s. 2.
It has been declared, by notification under s. 3(a) of the
Scheduled Districts Act, 1874 (14 of 1874), to be in force in—
The Tarai of the Province of Agra—see Gazette of India,
1876, Pt. I, p. 505;
the Districts of Hazari bagh, Lohardaga and Manbhum, and Pargana
Dhalbhum and the Kolhan in the District of Singhbhum—
see Gazette of India, 1881, pt. I, p. 504.—The District of
Lohardaga included at this time the present District of Palamau which
was separated in 1894. The District of Lohardaga is now
called the Ranchi District—see Calcutta Gazette, 1899, pt. I, p. 44.
2. Subs. by Act 3 of 1951, s. 3 and Sch., for “except Part B
States.”
3. The words “except the State of Jammu and Kashmir” omitted
by Act 34 of 2019, s. 95 and the Fifth Schedule
(w.e.f. 31-10- 2019).
4. The words “The enactments mentioned in the Schedule
hereto are repealed to the extent specified in the third column thereof,
but” rep. by Act 10 of 1914, s. 3 and the Second Schedule.
11
(b) When the person to whom the proposal is made signifies
his assent thereto, the proposal is
said to be accepted. A proposal, when accepted, becomes a
promise;
(c) The person making the proposal is called the “promisor”,
and the person accepting the
proposal is called the “promisee”;
(d) When, at the desire of the promisor, the promisee or any
other person has done or abstained
from doing, or does or abstains from doing, or promises to
do or to abstain from doing, something,
such act or abstinence or promise is called a consideration
for the promise;
(e) Every promise and every set of promises, forming the
consideration for each other, is an
agreement;
(f) Promises which form the consideration or part of the
consideration for each other are called
reciprocal promises;
(g) An agreement not enforceable by law is said to be void;
(h) An agreement enforceable by law is a contract;
(i) An agreement which is enforceable by law at the option
of one or more of the parties thereto,
but not at the option of the other or others, is a voidable
contract;
(j) A contract which ceases to be enforceable by law becomes
void when it ceases to be
enforceable.
CHAPTER I
OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS
3.Communication, acceptance and revocation of proposals.—The
communication of proposals,
the acceptance of proposals, and the revocation of proposals
and acceptances, respectively, are deemed to
be made by any act or omission of the party proposing,
accepting or revoking by which he intends to
communicate such proposal, acceptance or revocation, or
which has the effect of communicating it.
4. Communication when complete.—The communication of a
proposal is complete when it comes
to the knowledge of the person to whom it is made.
The communication of an acceptance is complete,—
as against the proposer, when it is put in a course of
transmission to him, so as to be out of the
power of the acceptor;
as against the acceptor, when it comes to the knowledge of
the proposer.
The communication of a revocation is complete,—
as against the person who makes it, when it is put into a
course of transmission to the person to
whom it is made, so as to be out of the power of the person
who makes it;
as against the person to whom it is made, when it comes to
his knowledge.
Illustrations
(a) A proposes, by letter, to sell a house to B at a certain
price.
The communication of the proposal is complete when B
receives the letter.
(b) B accepts A’s proposal by a letter sent by post.
The communication of the acceptance is complete,
as against A when the letter is posted;
as against B, when the letter is received by A.
(c) A revokes his proposal by telegram.
The revocation is complete as against A when the telegram is
despatched. It is complete as against B when B receives it.
B revokes his acceptance by telegram. B’s revocation is
complete as against B when the telegram is despatched, and as
against A when it reaches him.
12
5. Revocation of proposals and acceptances.—A proposal may
be revoked at any time before the
communication of its acceptance is complete as against the
proposer, but not afterwards.
An acceptance may be revoked at any time before the
communication of the acceptance is complete
as against the acceptor, but not afterwards.
Illustration
A proposes, by a letter sent by post, to sell his house to
B.
B accepts the proposal by a letter sent by post.
A may revoke his proposal at any time before or at the
moment when B posts his letter of acceptance, but not afterwards.
B may revoke his acceptance at any time before or at the
moment when the letter communicating it reaches A, but not
afterwards.
STATE AMENDMENT
Uttar Pradesh
Amendment of section 5 of Act (9 of 1872).—In section 5 of
Indian contract Act, 1872, hereinafter
in this Chapter referred to as the principal Act, at the end
of the first paragraph, the following explanation
shall inserted, namely:--
“Explanation—Where an invitation to a proposal contains a
condition that any proposal made in
response to such invitation shall be kept open for a
specified time and a proposal is thereupon made
accepting such condition, such proposal may not be revoked
within such time.”
[Vide Uttar Pradesh Act, 57 of 1976, s. 2]
6. Revocation how made.—A proposal is revoked—
(1) by the communication of notice of revocation by the
proposer to the other party;
(2) by the lapse of the time prescribed in such proposal for
its acceptance, or, if no time is so
prescribed, by the lapse of a reasonable time, without
communication of the acceptance;
(3) by the failure of the acceptor to fulfil a condition
precedent to acceptance; or
(4) by the death or insanity of the proposer, if the fact of
his death or insanity comes to the
knowledge of the acceptor before acceptance.
7. Acceptance must be absolute.—In order to convert a
proposal into a promise, the acceptance
must—
(1) be absolute and unqualified;
(2) be expressed in some usual and reasonable manner, unless
the proposal prescribes the manner
in which it is to be accepted. If the proposal prescribes a
manner in which it is to be accepted, and the
acceptance is not made in such manner, the proposer may,
within a reasonable time after the
acceptance is communicated to him, insist that his proposal
shall be accepted in the prescribed
manner, and not otherwise; but if he fails to do so, he
accepts the acceptance.
8. Acceptance by performing conditions, or receiving
consideration.—Performance of the
conditions of a proposal, or the acceptance of any consideration
for a reciprocal promise which may be
offered with a proposal, is an acceptance of the proposal.
9. Promises, express and implied.—In so far as the proposal
or acceptance of any promise is made
in words, the promise is said to be express. In so far as
such proposal or acceptance is made otherwise
than in words, the promise is said to be implied.
13
CHAPTER II
OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
10. What agreements are contracts.—All agreements are
contracts if they are made by the free
consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not
hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in 1
[India] and not hereby expressly repealed
by which any contract is required to be made in writing2 or
in the presence of witnesses, or any law
relating to the registration of documents.
11. Who are competent to contract.—Every person is competent
to contract who is of the age of
majority according to the law to which he is subject3
, and who is of sound mind, and is not disqualified
from contracting by any law to which he is subject.
12. What is a sound mind for the purposes of contracting.—A
person is said to be of sound mind
for the purpose of making a contract, if, at the time when
he makes it, he is capable of understanding it
and of forming a rational judgment as to its effect upon his
interests.
A person who is usually of unsound mind, but occasionally of
sound mind, may make a contract
when he is of sound mind.
A person who is usually of sound mind, but occasionally of
unsound mind, may not make a contract
when he is of unsound mind.
Illustrations
(a) A patient in a lunatic asylum, who is at intervals of
sound mind, may contract during those intervals.
(b) A sane man, who is delirious from fever or who is so
drunk that he cannot understand the terms of a contract, or form a
rational judgment as to its effect on his interests, cannot
contract whilst such delirium or drunkenness lasts.
13. “Consent” defined.—Two or more persons are said to
consent when they agree upon the same
thing in the same sense.
14. “Free consent” defined.—Consent is said to be free when
it is not caused by—
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of sections 20, 21
and 22.
Consent is said to be so caused when it would not have been
given but for the existence of such
coercion, undue influence, fraud, misrepresentation or
mistake.
15. “Coercion” defined.—“Coercion” is the committing, or
threatening to commit, any act forbidden
by the Indian Penal Code (45 of 1860)or the unlawful
detaining, or threatening to detain, any property, to
the prejudice of any person whatever, with the intention of
causing any person to enter into an agreement.
1. Subs. by Act 3 of 1951, s. 3 and Sch., for “Part A States
and Part C States” which had been subs. by the A.O. 1950, for
“the Provinces”.
2. See e.g., s. 25, infra; the Copyright Act, 1957 (14 of
1957), s. 19; the Carriers Act, 1865 (3 of 1865) ss. 6 and 7;
the Companies Act, 1956 (1 of 1956), ss. 12, 30, 46 and 109.
3. See the Indian Majority Act, 1875 (9 of 1875).
14
Explanation.—It is immaterial whether the Indian Penal Code
(45 of 1860) is or is not in force in the
place where the coercion is employed.
Illustration
A, on board an English ship on the high seas, causes B to
enter into an agreement by an act amounting to criminal
intimidation under the Indian Penal Code (45 of 1860).
A afterwards sues B for breach of contract at Calcutta.
A has employed coercion, although his act is not an offence
by the law of England, and although section 506 of the Indian
Penal Code (45 of 1860) was not in force at the time when or
place where the act was done.
1
[16.“Undue influence” defined.—(1) A contract is said to be
induced by “undue influence” where
the relations subsisting between the parties are such that
one of the parties is in a position to dominate the
will of the other and uses that position to obtain an unfair
advantage over the other.
(2) In particular and without prejudice to the generality of
the foregoing principle, a person is deemed
to be in a position to dominate the will of another—
(a) where he holds a real or apparent authority over the
other, or where he stands in a fiduciary
relation to the other; or
(b) where he makes a contract with a person whose mental
capacity is temporarily or permanently
affected by reason of age, illness, or mental or bodily
distress.
(3) Where a person who is in a position to dominate the will
of another, enters into a contract with
him, and the transaction appears, on the face of it or on
the evidence adduced, to be unconscionable, the
burden of proving that such contract was not induced by
undue influence shall lie upon the person in a
position to dominate the will of the other.
Nothing in this sub-section shall affect the provisions of
section 111 of the Indian Evidence Act, 1872
(1 of 1872).
Illustrations
(a) A having advanced money to his son, B, during his
minority, upon B’s coming of age obtains, by misuse of parental influence, a
bond
from B for a greater amount than the sum due in respect of
the advance. A employs undue influence.
(b) A, a man enfeebled by disease or age, is induced, by B’s
influence over him as his medical attendant, to agree to pay B an unreasonable
sum for his professional services. B employs undue
influence.
(c) A, being in debt to B, the money-lender of his village,
contracts a fresh loan on terms which appear to be unconscionable. It lies on B
to
prove that the contract was not induced by undue influence.
(d) A applies to a banker for a loan at a time when there is
stringency in the money market. The banker declines to make the loan except at
an unusually high rate of interest. A accepts the loan on
these terms. This is a transaction in the ordinary course of business, and the
contract is
not induced by undue influence.]
17. “Fraud” defined.—“Fraud” means and includes any of the
following acts committed by a party
to a contract, or with his connivance, or by his agent2
, with intent to deceive another party thereto of his
agent, or to induce him to enter into the contract:—
(1) the suggestion, as a fact, of that which is not true, by
one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge
or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares
to be fraudulent.
Explanation.—Mere silence as to facts likely to affect the
willingness of a person to enter into a
contract is not fraud, unless the circumstances of the case
are such that, regard being had to them, it is the
duty of the person keeping silence to speak3
, or unless his silence is, in itself, equivalent to speech.
1. Subs. by Act 6 of 1899, s. 2, for the original s. 16.
2. Cf. s. 238, infra.
3. See s. 143, infra.
15
Illustrations
(a) A sells, by auction, to B, a horse which A knows to be
unsound. A says nothing to B about the horse’s unsoundness.
This is not fraud in A.
(b) B is A’s daughter and has just come of age. Here, the
relation between the parties would make it A’s duty to tell B if the
horse is unsound.
(c) B says to A—“If you do not deny it, I shall assume that
the horse is sound.” A says nothing. Here, A’s silence is
equivalent to speech.
(d) A and B, being traders, enter upon a contract. A has
private information of a change in prices which would affect B’s
willingness to proceed with the contract. A is not bound to
inform B.
18. “Misrepresentation” defined.—“Misrepresentation” means
and includes—
(1) the positive assertion, in a manner not warranted by the
information of the person making it,
of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive,
gains an advantage to the person
committing it, or any one claiming under him; by misleading
another to his prejudice, or to the
prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to
make a mistake as to the substance
of the thing which is the subject of the agreement.
19. Voidability of agreements without free consent.—When
consent to an agreement is caused by
coercion,1*** fraud or misrepresentation, the agreement is a
contract voidable at the option of the party
whose consent was so caused.
A party to a contract whose consent was caused by fraud or
misrepresentation, may, if he thinks fit,
insist that the contract shall be performed, and that he
shall be put in the position in which he would have
been if the representations made had been true.
Exception.—If such consent was caused by misrepresentation
or by silence, fraudulent within the
meaning of section 17, the contract, nevertheless, is not
voidable, if the party whose consent was so
caused had the means of discovering the truth with ordinary
diligence.
Explanation.—A fraud or misrepresentation which did not
cause the consent to a contract of the party
on whom such fraud was practised, or to whom such
misrepresentation was made, does not render a
contract voidable.
Illustrations
(a) A, intending to deceive B, falsely represents that five
hundred maunds of indigo are made annually at A’s factory, and
thereby induces B to buy the factory. The contract is
voidable at the option of B.
(b) A, by a misrepresentation, leads B erroneously to
believe that, five hundred maunds of indigo are made annually at A’s
factory. B examines the accounts of the factory, which show
that only four hundred maunds of indigo have been made. After this
B buys the factory. The contract is not voidable on account
of A’s misrepresentation.
(c) A fraudulently informs B that A’s estate is free from in
cumbrance. B thereupon buys the estate. The estate is subject to a
mortgage. B may either avoid the contract, or may insist on
its being carried out and the mortgage debt redeemed.
(d) B, having discovered a vein of ore on the estate of A,
adopts means to conceal, and does conceal, the existence of the ore
from A. Through A’s ignorance B is enabled to buy the estate
at an under-value. The contract is voidable at the option of A.
(e) A is entitled to succeed to an estate at the death of B;
B dies: C, having received intelligence of B’s death, prevents the
intelligence reaching A, and thus induces A to sell him his
interest in the estate. The sale is voidable at the option of A.
2
[19A. Power to set aside contract induced by undue
influence.—When consent to an agreement is
caused by undue influence, the agreement is a contract
voidable at the option of the party whose consent
was so caused.
1. The words “undue influence” rep. by Act 6 of 1899, s. 3.
2. Ins. by Act 6 of 1899, s. 3.
16
Any such contract may be set aside either absolutely or, if
the party who was entitled to avoid it has
received any benefit thereunder, upon such terms and
conditions as to the Court may seem just.
Illustrations
(a) A’s son has forged B’s name to a promissory note. B
under threat of prosecuting A’s son, obtains a bond from A for the
amount of the forged note. If B sues on this bond, the Court
may set the bond aside.
(b) A, a money-lender, advances Rs. 100 to B, an
agriculturist, and, by undue influence, induces B to execute a bond for
Rs. 200 with interest at 6 per cent. per month. The Court
may set the bond aside, ordering B to repay the Rs. 100 with such
interest as may seem just.]
20.Agreement void where both parties are under mistake as to
matter of fact.—Where both the
parties to an agreement are under a mistake as to a matter
of fact essential to the agreement, the agreement
is void.
Explanation.—An erroneous opinion as to the value of the
thing which forms the subject-matter of
the agreement, is not to be deemed a mistake as to a matter
of fact.
Illustrations
(a) A agrees to sell to B a specific cargo of goods supposed
to be on its way from England to Bombay. It turns out that,
before the day of the bargain, the ship conveying the cargo
had been cast away and the goods lost. Neither party was aware of the
these facts. The agreement is void.
(b) A agrees to buy from B a certain horse. It turns out
that the horse was dead at the time of the bargain, though neither
party was aware of the fact. The agreement is void.
(c) A, being entitled to an estate for the life of B, agrees
to sell it to C. B was dead at the time of the agreement, but both
parties were ignorant of the fact. The agreement is void.
21. Effect of mistakes as to law.—A contract is not voidable
because it was caused by a mistake as
to any law in force in 1
[India]; but a mistake as to a law not in force in 1
[India] has the same effect as a
mistake of fact.
2* * * * *
Illustration
A and B make a contract grounded on the erroneous belief
that a particular debt is barred by the Indian Law of Limitation:
the contract is not voidable.
3* * * * *
22. Contract caused by mistake of one party as to matter of
fact.—A contract is not voidable
merely because it was caused by one of the parties to it
being under a mistake as to a matter of fact.
23. What considerations and objects are lawful, and what
not.—The consideration or object of an
agreement is lawful, unless—
it is forbidden by law4
; or
is of such a nature that if permitted, it would defeat the
provisions of any law; or
is fraudulent ; or
involves or implies injury to the person or property of
another; or
the Court regards it as immoral, or opposed to public
policy.
1. The original words ‘British India” have successively been
amended by the A.O. 1948 and the A.O. 1950 to read as above.
2. Paragraph 2, ins. by the A.O. 1937, and as amended by the
A. O. 1948 was Rep. by the A. O. 1950.
3. The second Illustration to s. 21 rep. by Act 24 of 1917,
s. 3 and the Second Schedule.
4. See ss. 26, 27, 28 and 30, infra.
17
In each of these cases, the consideration or object of an
agreement is said to be unlawful. Every
agreement of which the object or consideration is unlawful
is void.
Illustrations
(a) A agrees to sell his house to B for 10,000 rupees. Here
B’s promise to pay the sum of 10,000 rupees is the consideration
for A’s promise to sell the house, and A’s promise to sell
the house is the consideration for B’s promise to pay the 10,000 rupees.
These are lawful considerations.
(b) A promises to pay B 1,000 rupees at the end of six
months, if C, who owes that sum to B, fails to pay it. B promises to
grant time to C accordingly. Here, the promise of each party
is the consideration for the promise of the other party, and they are
lawful considerations.
(c) A promises, for a certain sum paid to him by B, to make
good to B the value of his ship if it is wrecked on a certain
voyage. Here, A’s promise is the consideration for B’s
payment and B’s payment is the consideration for A’s promise and these
are lawful considerations.
(d) A promises to maintain B’s child, and B promises to pay
A 1,000 rupees yearly for the purpose. Here, the promise of
each party is the consideration for the promise of the other
party. They are lawful considerations.
(e) A, B and C enter into an agreement for the division
among them of gains acquired or to be acquired, by them by fraud.
The agreement is void, as its object is unlawful.
(f) A promises to obtain for B an employment in the public
service and B promises to pay 1,000 rupees to A. The agreement
is void, as the consideration for it is unlawful.
(g) A, being agent for a landed proprietor, agrees for
money, without the knowledge of his principal, to obtain for B a lease
of land belonging to his principal. The agreement between A
and B is void, as it implies a fraud by concealment, by A, on his
principal.
(h) A promises B to drop a prosecution which he has
instituted against B for robbery, and B promises to restore the value of
the things taken. The agreement is void, as its object is
unlawful.
(i) A’s estate is sold for arrears of revenue under the
provisions of an Act of the Legislature, by which the defaulter is
prohibited from purchasing the estate. B, upon an
understanding with A, becomes the purchaser, and agrees to convey the estate
to A upon receiving from him the price which B has paid. The
agreement is void, as it renders the transaction, in effect, a
purchase by the defaulter, and would so defeat the object of
the law.
(j) A, who is B’s mukhtar, promises to exercise his
influence, as such, with B in favour of C, and C promises to pay 1,000
rupees to A. The agreement is void, because it is immoral.
(k) A agrees to let her daughter to hire to B for
concubinage. The agreement is void, because it is immoral, though the letting
may not be punishable under the Indian Penal Code (45 of
1860).
Void agreements
24.Agreements void, if considerations and objects unlawful
in part.—If any part of a single
consideration for one or more objects, or any one or any
part of any one of several considerations for a
single object, is unlawful, the agreement is void.
Illustration
A promises to superintend, on behalf of B, a legal
manufacture of indigo, and an illegal traffic in other articles. B promises
to pay to A a salary of 10,000 rupees a year. The agreement
is void, the object of A’s promise, and the consideration for B’s
promise, being in part unlawful.
25. Agreement without consideration, void, unless it is in
writing and registered,or is a promise
to compensate for something done or is a promise to pay a
debt barred by limitation law.—An
agreement made without consideration is void, unless—
(1) it is expressed in writing and registered under the law
for the time being in force for the
registration of 1
[documents], and is made on account of natural love and
affection between parties
standing in a near relation to each other ; or unless
(2) it is a promise to compensate, wholly or in part, a
person who has already voluntarily done
something for the promisor, or something which the promisor
was legally compellable to do; or
unless;
1. Subs. by Act 12 of 1891, s. 2 and the Second Schedule,
Pt. I, for “assurances”.
18
(3) it is a promise, made in writing and signed by the
person to be charged therewith, or by his
agent generally or specially authorized in that behalf, to
pay wholly or in part a debt of which the
creditor might have enforced payment but for the law for the
limitation of suits.
In any of these cases, such an agreement is a contract.
Explanation 1.—Nothing in this section shall affect the
validity, as between the donor and donee, of
any gift actually made.
Explanation 2.—An agreement to which the consent of the
promisor is freely given is not void
merely because the consideration is inadequate; but the
inadequacy of the consideration may be taken into
account by the Court in determining the question whether the
consent of the promisor was freely given.
Illustrations
(a) A promises, for no consideration, to give to B Rs.
1,000. This is a void agreement.
(b) A, for natural love and affection, promises to give his
son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This
is a
contract.
(c) A finds B’s purse and gives it to him. B promises to
give A Rs. 50. This is a contract.
(d) A supports B’s infant son. B promises to pay A’s
expenses in so doing. This is a contract.
(e) A owes B Rs. 1,000, but the debt is barred by the
Limitation Act. A signs a written promise to pay B Rs. 500 on account of the
debt.
This is a contract.
(f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A’s
consent to the agreement was freely given. The agreement is a contract
notwithstanding the inadequacy of the consideration.
(g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A
denies that his consent to the agreement was freely given.
The inadequacy of the consideration is a fact which the
Court should take into account in considering whether or not A’s consent was
freely
given.
26. Agreement in restraint of marriage, void.—Every
agreement in restraint of the marriage of any
person, other than a minor, is void.
27. Agreement in restraint of trade, void.—Every agreement
by which any one is restrained from
exercising a lawful profession, trade or business of any
kind, is to that extent void.
Exception 1.—Saving of agreement not to carry on business of
which good-will is sold.—One
who sells the good-will of a business may agree with the
buyer to refrain from carrying on a similar
business, within specified local limits, so long as the
buyer, or any person deriving title to the good-will
from him, carries on a like business therein, provided that
such limits appear to the Court reasonable,
regard being had to the nature of the business.
1* * * * *.
28.Agreements in restraint of legal proceedings, void.—2
[Every agreement,—
(a) by which any party thereto is restricted absolutely from
enforcing his rights under or in
respect of any contract, by the usual legal proceedings in
the ordinary tribunals, or which limits the
time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or
discharges any party thereto, from any
liability, under or in respect of any contract on the expiry
of a specified period so as to restrict any
party from enforcing his rights,
is void to the extent.]
Exception 1.—Saving of contract to refer to arbitration
dispute that may arise.—This section
shall not render illegal a contract, by which two or more
persons agree that any dispute which may arise
between them in respect of any subject or class of subjects
shall be referred to arbitration, and that only
the amount awarded in such arbitration shall be recoverable
in respect of the dispute so referred.
3*****
Exception 2.—Saving of contract to refer questions that have
already arisen.—Nor shall this
section render illegal any contract in writing, by which two
or more persons agree to refer to arbitration
any question between them which has already arisen, or
affect any provision of any law in force for the
time being as to references to arbitration4
.
1. Exceptions 2 and 3 rep. by Act 9 of 1932, s. 73 and the
Second Schedule.
2. Subs. by Act 1 of 1997, s. 2, for certain words (w.e.f.
8-1-1997).
3. The second clause of Exception 1 to section 28 rep. by
Act 1 of 1877, s. 2 and Sch.
4. Cf. the Arbitration Act, 1940 (10 of 1940) and the
Companies Act, 1956 (1 of 1956), s. 389.
19
1
[Exception 3.—Saving of a guarantee agreement of a bank or a
financial institution.—This
section shall not render illegal a contract in writing by
which any bank or financial institution stipulate a
term in a guarantee or any agreement making a provision for
guarantee for extinguishment of the rights or
discharge of any party thereto from any liability under or
in respect of such guarantee or agreement on the
expiry of a specified period which is not less than one year
from the date of occurring or non-occurring of
a specified event for extinguishment or discharge of such
party from the said liability.
Explanation.—(i) In Exception 3, the expression “bank”
means—
(a) a “banking company” as defined in clause (c) of section
5 of the Banking Regulation
Act, 1949(10 of 1949);
(b) “a corresponding new bank” as defined in clause (da) of
section 5 of the Banking Regulation
Act, 1949(10 of 1949);
(c) “State Bank of India” constituted under section 3 of the
State Bank of India Act, 1955
(23 of 1955);
(d) “a subsidiary bank” as defined in clause (k) of section
2 of the State Bank of India (Subsidiary
Banks) Act, 1959(38 of 1959);
(e) “a Regional Rural Bank” established under section 3 of
the Regional Rural Banks
Act, 1976(21 of 1976);
(f) “a Co-operative Bank” as defined in clause (cci) of
section 5 of the Banking Regulation
Act, 1949(10 of 1949);
(g) “a multi-State co-operative bank” as defined in clause
(cciiia) of section 5 of the Banking
Regulation Act, 1949(10 of 1949); and
(ii) In Exception 3, the expression “a financial institution”
means any public financial institution
within the meaning of section 4A of the Companies Act,
1956(1 of 1956).]
29. Agreements void for uncertainty.—Agreements, the meaning
of which is not certain, or capable
of being made certain, are void.
Illustrations
(a) A agrees to sell to B “a hundred tons of oil”. There is
nothing whatever to show what kind of oil was intended. The
agreement is void for uncertainty.
(b) A agrees to sell to B one hundred tons of oil of a
specified description, known as an article of commerce. There is no
uncertainty here to make the agreement void.
(c) A, who is a dealer in cocoanut-oil only, agrees to sell
to B “one hundred tons of oil”. The nature of A’s trade affords an
indication of the meaning of the words, and A has entered
into a contract for the sale of one hundred tons of cocoanut-oil.
(d) A agrees to sell to B “all the grain in my granary at
Ramnagar”. There is no uncertainty here to make the agreement void.
(e) A agrees to sell B “one thousand maunds of rice at a
price to be fixed by C”. As the price is capable of being made
certain, there is no uncertainty here to make the agreement
void.
(f) A agrees to sell to B “my white horse for rupees five
hundred or rupees one thousand”. There is nothing to show which of
the two prices was to be given. The agreement is void.
30. Agreements by way of wager void.—Agreements by way of
wager are void; and no suit shall be
brought for recovering anything alleged to be won on any
wager, or entrusted to any person to abide the
result of any game or other uncertain event on which any
wager is made.
1. Ins. by Act 4 of 2013, s. 17 and the Schedule (w.e.f.
18-1-2013).
20
Exception in favour of certain prizes for horse-racing.—This
section shall not be deemed to
render unlawful a subscription or contribution, or agreement
to subscribe or contribute, made or entered
into for or toward any plate, prize or sum of money, of the
value or amount of five hundred rupees or
upwards, to be awarded to the winner or winners of any
horse-race.
Section 294A of the Indian Penal Code not affected.—Nothing
in this section shall be deemed to
legalize any transaction connected with horse-racing, to
which the provisions of section 294A of the
Indian Penal Code (45 of 1860) apply.
CHAPTER III
OF CONTINGENT CONTRACTS
31. “Contingent contract” defined.—A “contingent contract is
a contract to do or not to do
something, if some event, collateral to such contract, does
or does not happen.
Illustration
A contracts to pay B Rs. 10,000 if B’s house is burnt. This
is a contingent contract.
32. Enforcement of contracts contingent on an event
happening.—Contingent contracts to do or
not to do anything if an uncertain future event happens
cannot be enforced by law unless and until that
event has happened.
If the event becomes impossible, such contracts become void.
Illustrations
(a) A makes a contract with B to buy B’s horse if A survives
C. This contract cannot be enforced by law unless and until C
dies in A’s lifetime.
(b) A makes a contract with B to sell a horse to B at a
specified price, if C, to whom the horse has been offered, refuses to
buy him. The contract cannot be enforced by law unless and
until C refuses to buy the horse.
(c) A contracts to pay B a sum of money when B marries C. C
dies without being married to B. The contract becomes void.
33. Enforcement of contracts contingent on an event not
happening.—Contingent contracts to do
or not to do anything if an uncertain future event does not
happen can be enforced when the happening of
that event becomes impossible, and not before.
Illustration
A agrees to pay B a sum of money if a certain ship does not
return. The ship is sunk. The contract can be enforced when the
ship sinks.
34.When event on which contract is contingent to be deemed
impossible, if it is the future
conduct of a living person.—If the future event on which a
contract is contingent is the way in which a
person will act at an unspecified time, the event shall be
considered to become impossible when such
person does anything which renders it impossible that he
should so act within any definite time, or
otherwise than under further contingencies.
Illustration
A agrees to pay B a sum of money if B marries C. C marries
D. The marriage of B to C must now be considered impossible,
although it is possible that D may die and that C may
afterwards marry B.
35.When contracts become void which are contingent on
happening of specified event within
fixed time.—Contingent contracts to do or not to do anything
if a specified uncertain event happens
within a fixed time become void if, at the expiration of the
time fixed, such event has not happened, or if,
before the time fixed, such event becomes impossible.
21
When contracts may be enforced, which are contingent on
specified event not happening within
fixed time.—Contingent contracts to do or not to do
anything, if a specified uncertain event does not
happen within a fixed time may be enforced by law when the
time fixed has expired and such event has
not happened or, before the time fixed has expired, if it
becomes certain that such event will not happen.
Illustrations
(a) A promises to pay B a sum of money if a certain ship
returns within a year. The contract may be enforced if the ship
returns within the year, and becomes void if the ship is
burnt within the year.
(b) A promises to pay B a sum of money if a certain ship
does not return within a year. The contract may be enforced if the
ship does not return within the year, or is burnt within the
year.
36. Agreement contingent on impossible events
void.—Contingent agreements to do or not to do
anything, if an impossible event happens, are void, whether
the impossibility of the event is known or not
to the parties to the agreement at the time when it is made.
Illustrations
(a) A agrees to pay B 1,000 rupees if two straight lines
should enclose a space. The agreement is void.
(b) A agrees to pay B 1,000 rupees if B will marry A’s
daughter C. C was dead at the time of the agreement. The agreement
is void.
CHAPTER IV
OF THE PERFORMANCE OF CONTRACTS
Contracts which must be performed
37. Obligation of parties to contracts.—The parties to a
contract must either perform, or offer to
perform, their respective promises, unless such performance
is dispensed with or excused under the
provisions of this Act, or of any other law.
Promises bind the representatives of the promisors in case
of the death of such promisors before
performance, unless a contrary intention appears from the
contract.
Illustrations
(a) A promises to deliver goods to B on a certain day on
payment of Rs. 1,000. A dies before that day. A’s representatives
are bound to deliver the goods to B, and B is bound to pay
the Rs. 1,000 to A’s representatives.
(b) A promises to paint a picture for B by a certain day, at
a certain price. A dies before the day. The contract cannot be
enforced either by A’s representatives or by B.
38. Effect of refusal to accept offer of performance.—Where
a promisor has made an offer of
performance to the promisee, and the offer has not been
accepted, the promisor is not responsible for
non-performance, nor does he thereby lose his rights under
the contract.
Every such offer must fulfil the following conditions:—
(1) it must be unconditional;
(2) it must be made at a proper time and place, and under
such circumstances that the person to
whom it is made may have a reasonable opportunity of
ascertaining that the person by whom it is made is
able and willing there and then to do the whole of what he
is bound by his promise to do;
(3) if the offer is an offer to deliver anything to the
promisee, the promisee must have a
reasonable opportunity of seeing that the thing offered is
the thing which the promisor is bound by his
promise to deliver.
An offer to one of several joint promisees has the same
legal consequences as an offer to all of them.
22
Illustration
A contracts to deliver to B at his warehouse, on the 1st
March, 1873, 100 bales of cotton of a particular quality. In order to
make an offer of a performance with the effect stated in
this section, A must bring the cotton to B’s warehouse, on the appointed
day, under such circumstances that B may have areasonable
opportunity of satisfying himself that the thing offered is cotton of
the quality contracted for, and that there are 100 bales.
39. Effect of refusal of party to perform promise
wholly.—When a party to a contract has refused
to perform, or disabled himself from performing, his promise
in its entirety, the promisee may put an end
to the contract, unless he has signified, by words or
conduct, his acquiescence in its continuance.
Illustrations
(a) A, a singer, enters into a contract with B, the manager
of a theatre, to sing at his theatre two nights in every week during
the next two months, and B engages to pay her 100 rupees for
each night’s performance. On the sixth night A wilfully absents
herself from the theatre. B is at liberty to put an end to
the contract.
(b) A, a singer, enters into a contract with B, the manager
of a theatre, to sing at his theatre two night’s in every week during
the next two months, and B engages to pay her at the rate of
100 rupees for each night. On the sixth night, A wilfully absents
herself. With the assent of B, A sings on the seventh night.
B has signified his acquiescence in the continuance of the contract,
and cannot now put an end to it, but is entitled to
compensation for the damage sustained by him through A’s failure to sing on
the sixth night.
By whom contracts must be performed
40.Person by whom promise is to be performed.—If it appears
from the nature of the case that it
was the intention of the parties to any contract that any
promise contained in it should be performed by
the promisor himself, such promise must be performed by the
promisor. In other cases, the promisor or
his representatives may employ a competent person to perform
it.
Illustrations
(a) A promises to pay B a sum of money. A may perform this
promise, either by personally paying the money to B or by
causing it to be paid to B by another ; and, if A dies
before the time appointed for payment, his representatives must perform the
promise, or employ some proper person to do so.
(b) A promises to paint a picture for B. A must perform this
promise personally.
41. Effect of accepting performance from third person.—When
a promisee accepts performance
of the promise from a third person, he cannot afterwards
enforce it against the promisor.
42. Devolution of joint liabilities.—When two or more
persons have made a joint promise, then,
unless a contrary intention appears by the contract, all
such persons, during their joint lives, and, after the
death of any of them, his representative jointly with the
survivor or survivors, and, after the death of the
last survivor, the representatives of all jointly, must
fulfil the promise.
43.Any one of joint promisors may be compelled to
perform.—When two or more persons make a
joint promise, the promisee may, in the absence of express
agreement to the contrary, compel any 1
[one or
more] of such joint promisors to perform the whole of the
promise.
Each promisor may compel contribution.—Each of two or more
joint promisors may compel every
other joint promisor to contribute equally with himself to
the performance of the promise, unless a
contrary intention appears from the contract.
Sharing of loss by default in contribution.—If any one of
two or more joint promisors makes
default in such contribution, the remaining joint promisors
must bear the loss arising from such default in
equal shares.
1. Subs. by Act 12 of 1891, s. 2 and the Second Schedule,
Pt. I, for “one”.
23
Explanation.—Nothing in this section shall prevent a surety
from recovering from his principal,
payments made by the surety on behalf of the principal, or
entitle the principal to recover anything from
the surety on account of payments made by the principal.
Illustrations
(a) A, B and C jointly promise to pay D 3,000 rupees. D may
compel either A or B or C to pay him 3,000 rupees.
(b) A, B and C jointly promise to pay D the sum of 3,000
rupees. C is compelled to pay the whole. A is insolvent, but his
assets are sufficient to pay one-half of his debts. C is
entitled to receive 500 rupees from A’s estate, and 1,250 rupees from B.
(c) A, B and C are under a joint promise to pay D 3,000
rupees. C is unable to pay anything, and A is compelled to pay the
whole. A is entitled to receive 1,500 rupees from B.
(d) A, B and C are under a joint promise to pay D 3,000
rupees, A and B being only sureties for C. C fails to pay. A and B
are compelled to pay the whole sum. They are entitled to
recover it from C.
44.Effect of release of one joint promisor.—Where two or
more persons have made a joint promise,
a release of one of such joint promisors by the promisee
does not discharge the other joint promisor or
joint promisors; neither does it free the joint promisors so
released from responsibility to the other joint
promisor or joint promisors.1
45. Devolution of joint rights.—When a person has made a
promise to two or more persons jointly,
then, unless a contrary intention appears from the contract,
the right to claim performance rests, as
between him and them, with them during their joint lives,
and, after the death of any of them, with the
representative of such deceased person jointly with the
survivor or survivors, and, after the death of the
last survivor, with the representatives of all jointly.2
Illustration
A, in consideration of 5,000 rupees, lent to him by B and C,
promises B and C jointly to repay them that sum with interest
on a day specified. B dies. The right to claim performance
rests with B’s representative jointly with C during C’s life, and after
the death of C with the representatives of B and C jointly.
Time and place for performance
46. Time for performance of promise, when no application is
to be made and no time is
specified.—Where, by the contract, a promisor is to perform
his promise without application by the
promisee, and no time for performance is specified, the
engagement must be performed within a
reasonable time.
Explanation.—The question “what is a reasonable time” is, in
each particular case, a question of fact.
47.Time and place for performance of promise, where time is
specified and no application to be
made.—When a promise is to be performed on a certain day,
and the promisor has undertaken to perform
it without application by the promisee, the promisor may
perform it at any time during the usual hours of
business on such day and at the place at which the promise
ought to be performed.
Illustration
A promises to deliver goods at B’s warehouse on the first
January. On that day A brings the goods to B’s warehouse, but
after the usual hour for closing it, and they are not
received. A has not performed his promise.
48. Application for performance on certain day to be at
proper time and place.—When a
promise is to be performed on a certain day, and the
promisor has not undertaken to perform it without
application by the promisee, it is the duty of the promisee
to apply for performance at a proper place and
within the usual hours of business.
1. See s. 138, infra.
2. For an Exception to s. 45 in case of Government
securities, see the Public Debt Act, 1944 (18 of 1944), s. 8.
24
Explanation.—The question “what is a proper time and place”
is, in each particular case, a question
of fact.
49. Place for performance of promise, where no application
to be made and no place fixed for
performance.—When a promise is to be performed without
application by the promisee, and no place is
fixed for the performance of it, it is the duty of the
promisor to apply to the promisee to appoint a
reasonable place for the performance of the promise, and to
perform it at such place.
Illustration
A undertakes to deliver a thousand maunds of jute to B on a
fixed day. A must apply to B to appoint a reasonable place for
the purpose of receiving it, and must deliver it to him at
such place.
50. Performance in manner or at time prescribed or
sanctioned by promisee.—The performance
of any promise may be made in any manner, or at any time which
the promisee prescribes or sanctions.
Illustrations
(a) B owes A 2,000 rupees. A desires B to pay the amount to
A’s account with C, a banker. B, who also banks with C,
orders the amount to be transferred from his account to A’s
credit, and this is done by C. Afterwards, and before A knows of the
transfer, C fails. There has been a good payment by B.
(b) A and B are mutually indebted. A and B settle an account
by setting off one item against another, and B pays A the
balance found to be due from him upon such settlement. This
amounts to a payment by A and B, respectively, of the sums which
they owed to each other.
(c) A owes B 2,000 rupees. B accepts some of A’s goods in
reduction of the debt. The delivery of goods operates as a part
payment.
(d) A desires B, who owes him Rs. 100, to send him a note
for Rs. 100 by post. The debt is discharged as soon as B puts into
the post a letter containing the note duly addressed to A.
Performance of reciprocal promises
51.Promisor not bound to perform, unless reciprocal promisee
ready and willing to
perform.—When a contract consists of reciprocal promises to
be simultaneously performed, no promisor
need perform his promise unless the promisee is ready and
willing to perform his reciprocal promise.
Illustrations
(a) A and B contract that A shall deliver goods to B to be
paid for by B on delivery.
A need not deliver the goods, unless B is ready and willing
to pay for the goods on delivery.
B need not pay for the goods, unless A is ready and willing
to deliver them on payment.
(b) A and B contract that A shall deliver goods to B at a
price to be paid by instalments, the first instalment to be paid on
delivery.
A need not deliver, unless B is ready and willing to pay the
first instalment on delivery.
B need not pay the first instalment, unless A is ready and
willing to deliver the goods on payment of the first instalment.
52.Order of performance of reciprocal promises.—Where the
order in which reciprocal promises
are to be performed is expressly fixed by the contract, they
shall be performed in that order; and where the
order is not expressly fixed by the contract, they shall be
performed in that order which the nature of the
transaction requires.
Illustrations
(a) A and B contract that A shall build a house for B at a
fixed price. A’s promise to build the house must be performed
before B’s promise to pay for it.
(b) A and B contract that A shall make over his
stock-in-trade to B at a fixed price, and B promises to give security for the
payment of the money. A’s promise need not be performed
until the security is given, for the nature of the transaction requires
that A should have security before he delivers up his stock.
25
53. Liability of party preventing event on which the
contract is to take effect.—When a contract
contains reciprocal promises, and one party to the contract
prevents the other from performing his
promise, the contract becomes voidable at the option of the
party so prevented; and he is entitled to
compensation 1
from the other party for any loss which he may sustain in
consequence of the nonperformance of the contract.
Illustration
A and B contract that B shall execute certain work for A for
a thousand rupees. B is ready and willing to execute the work
accordingly, but A prevents him from doing so. The contract
is voidable at the option of B; and, if he elects to rescind it, he is
entitled to recover from A compensation for any loss which
he has incurred by its non-performance.
54. Effect of default as to that promise which should be
first performed, in contract consisting
of reciprocal promises.—When a contract consists of
reciprocal promises, such that one of them cannot
be performed, or that its performance cannot be claimed till
the other has been performed, and the
promisor of the promise last mentioned fails to perform it,
such promisor cannot claim the performance of
the reciprocal promise, and must make compensation to the
other party to the contract for any loss which
such other party may sustain by the non-performance of the
contract.
Illustrations
(a) A hires B’s ship to take in and convey, from Calcutta to
the Mauritius, a cargo to be provided by A, B receiving a certain
freight for its conveyance. A does not provide any cargo for
the ship. A cannot claim the performance of B’s promise, and must
make compensation to B for the loss which B sustains by the
non-performance of the contract.
(b) A contracts with B to execute certain builder’s work for
a fixed price, B supplying the scaffolding and timber necessary
for the work. B refuses to furnish any scaffolding or
timber, and the work cannot be executed. A need not execute the work, and
B is bound to make compensation to A for any loss caused to
him by the non-performance of the contract.
(c) A contracts with B to deliver to him, at a specified
price, certain merchandise on board a ship which cannot arrive for a
month, and B engages to pay for the merchandise within a
week from the date of the contract. B does not pay within the week.
A’s promise to deliver need not be performed, and B must
make compensation.
(d) A promises B to sell him one hundred bales of
merchandise, to be delivered next day, and B promises A to pay for them
within a month. A does not deliver according to his promise.
B’s promise to pay need not be performed, and A must make
compensation.
55. Effect of failure to perform at fixed time, in contract
in which time is essential.—When a
party to a contract promises to do a certain thing at or
before a specified time, or certain things at or
before specified times, and fails to do any such thing at or
before the specified time, the contract, or so
much of it as has not been performed, becomes voidable at
the option of the promisee, if the intention of
the parties was that time should be of the essence of the
contract.
Effect of such failure when time is not essential.—If it was
not the intention of the parties that time
should be of the essence of the contract, the contract does
not become voidable by the failure to do such
thing at or before the specified time; but the promisee is
entitled to compensation from the promisor for
any loss occasioned to him by such failure.
Effect of acceptance of performance at time other than that
agreed upon.—If, in case of a
contract voidable on account of the promisor’s failure to
perform his promise at the time agreed, the
promisee accepts performance of such promise at any time
other than that agreed, the promisee cannot
claim compensation for any loss occasioned by the
non-performance of the promise at the time agreed,
unless, at the time of such acceptance, he gives notice to
the promisor of his intention to do so.2
STATE AMENDMENT
Uttar Pradesh
Amendment of section 55.—In section 55 of the Principal Act,
in the third paragraph, for the words
“unless at the time of such acceptance he gives notice to
the promiser of his intention to do so”, the words
“where at the time of such acceptance he has waived his
right to do so” shall be substituted.”
[Vide Uttar Pradesh 57 of 1976, s. 26]
1. See s. 73, infra.
2. C.f. ss. 62 and 63, infra.
26
56. Agreement to do impossible act.—An agreement to do an
act impossible in itself is void.
Contract to do an act afterwards becoming impossible or
unlawful.—A contract to do an act
which, after the contract is made, becomes impossible, or,
by reason of some event which the promisor
could not prevent, unlawful, becomes void when the act
becomes impossible or unlawful.1
Compensation for loss through non-performance of act known
to be impossible or unlawful.—
Where one person has promised to do something which he knew,
or, with reasonable diligence, might
have known, and which the promisee did not know, to be
impossible or unlawful, such promisor must
make compensation to such promisee for any loss which such
promisee sustains through the nonperformance of the promise.
Illustrations
(a) A agrees with B to discover treasure by magic. The
agreement is void.
(b) A and B contract to marry each other. Before the time
fixed for the marriage, A goes mad. The contract becomes void.
(c) A contracts to marry B, being already married to C, and
being forbidden by the law to which he is subject to practise
polygamy, A must make compensation to B for the loss caused
to her by the non-performance of his promise.
(d) A contracts to take in cargo for B at a foreign port.
A’s Government afterwards declares war against the country in which
the port is situated. The contract becomes void when war is
declared.
(e) A contracts to act at a theatre for six months in
consideration of a sum paid in advance by B. On several occasions A is
too ill to act. The contract to act on those occasions
becomes void.
57.Reciprocal promise to do things legal, and also other
things illegal.—Where persons
reciprocally promise, firstly, to do certain things which
are legal, and, secondly, under specified
circumstances, to do certain other things which are illegal,
the first set of promises is a contract, but the
second is a void agreement.
Illustration
A and B agree that A shall sell B a house for 10,000 rupees,
but that, if B uses it as a gambling house, he shall pay A 50,000
rupees for it.
The first set of reciprocal promises, namely, to sell the
house and to pay 10,000 rupees for it, is a contract.
The second set is for an unlawful object, namely, that B may
use the house as a gambling house, and is a void agreement.
58. Alternative promise, one branch being illegal.—In the
case of an alternative promise, one
branch of which is legal and the other illegal, the legal
branch alone can be enforced.
Illustration
A and B agree that A shall pay B 1,000 rupees, for which B
shall afterwards deliver to A either rice or smuggled opium.
This is a valid contract to deliver rice, and a void
agreement as to the opium.
Appropriation of payments
59.Application of payment where debt to be discharged is
indicated.—Where a debtor, owing
several distinct debts to one person, makes a payment to
him, either with express intimation, or under
circumstances implying, that the payment is to be applied to
the discharge of some particular debt, the
payment, if accepted, must be applied accordingly.
1. See s. 65, infra.
27
Illustrations
(a) A owes B, among other debts, 1,000 rupees upon a
promissory note which falls due on the first June. He owes B no other debt of
that
amount. On the first June, A pays to B 1,000 rupees. The
payment is to be applied to the discharge of the promissory note.
(b) A owes to B, among other debts, the sum of 567 rupees. B
writes to A and demands payment of this sum. A sends to B 567 rupees. This
payment is to be applied to the discharge of the debt of
which B had demanded payment.
60. Application of payment where debt to be discharged is
not indicated.—Where the debtor has
omitted to intimate and there are no other circumstances
indicating to which debt the payment is to be
applied, the creditor may apply it at his discretion to any
lawful debt actually due and payable to him from
the debtor, whether its recovery is or is not barred by the
law in force for the time being as to the
limitation of suits.
61. Application of payment where neither party
appropriates.—Where neither party makes any
appropriation, the payment shall be applied in discharge of
the debts in order of time, whether they are or
are not barred by the law in force for the time being as to
the limitation of suits. If the debts are of equal
standing, the payment shall be applied in discharge of each
proportionably.
Contracts which need not be performed
62. Effect of novation, rescission, and alteration of
contract.—If the parties to a contract agree to
substitute a new contract for it, or to rescind or alter it,
the original contract, need not be performed.
Illustrations
(a) A owes money to B under a contract. It is agreed between
A, B and C that B shall thenceforth accept C as his debtor, instead of A. The
old debt of A to B is at an end, and a new debt from C to B
has been contracted.
(b) A owes B 10,000 rupees. A enters into an arrangement
with B and gives B a mortgage of his (A’s) estate for 5,000 rupees in place of
the
debt of 10,000 rupees. This is a new contract and
extinguishes the old.
(c) A owes B 1,000 rupees under a contract. B owes C 1,000
rupees B orders A to credit C with 1,000 rupees in his books, but C does not
assent to the arrangement. B still owes C 1,000 rupees, and
no new contract has been entered into.
63. Promisee may dispense with or remit performance of
promisee.—Every promisee may
dispense with or remit, wholly or in part, the performance
of the promisee made to him, or may extend the
time for such performance1
,or may accept instead of it any satisfaction which he
thinks fit.
Illustrations
(a) A promises to paint a picture for B. B afterwards
forbids him to do so. A is no longer bound to perform the promise.
(b) A owes B 5,000 rupees. A pays to B, and B accepts, in
satisfaction of the whole debt, 2,000 rupees paid at the time and place at which
the 5,000 rupees were payable. The whole debt is discharged.
(c) A owes B 5,000 rupees. C pays to B 1,000 rupees, and B
accepts them, in satisfaction of his claim on A. This payment is a discharge of
the whole claim2
.
(d) A owes B, under. a contract, a sum of money, the amount
of which has not been ascertained. A, without ascertaining the amount, gives
to B, and B, in satisfaction thereof, accepts, the sum of
2,000 rupees. This is a discharge of the whole debt, whatever may be its
amount.
(e) A owes B 2,000 rupees, and is also indebted to other
creditors. A makes an arrangement with his creditors, including B, to pay them
a
3
[composition] of eight annas in the rupee upon their
respective demands. Payment to B of 1,000 rupees is a discharge of B’s demand.
64. Consequences of rescission of voidable contract.—When a
person at whose option a contract is
voidable rescinds it, the other party thereto need not
perform any promise therein contained in which he is
promisor. The party rescinding a voidable contract shall, if
he have received any benefit thereunder from
another party to such contract, restore such benefit, so far
as may be, to the person from whom it was
received.4
1. But see s. 135, infra.
2. See s. 41, supra.
3. Subs. by Act 12 of 1891, s. 2 and the Second Schedule,
Pt. I, for “compensation”.
4. See s. 75, infra.
28
65. Obligation of person who has received advantage under
void agreement, or contract that
becomes void.—When an agreement is discovered to be void, or
when a contract becomes void, any
person who has received any advantage under such agreement
or contract is bound to restore it, or to
make compensation for it to the person from whom he received
it.
Illustrations
(a) A pays B 1,000 rupees in consideration of B’s promising
to marry C, A’s daughter. C is dead at the time of the promise.
The agreement is void, but B must repay A the 1,000 rupees.
(b) A contracts with B to deliver to him 250 maunds of rice
before the first of May. A delivers 130 maunds only before that
day, and none after. B retains the 130 maunds after the
first of May. He is bound to pay A for them.
(c) A, a singer, contracts with B, the manager of a theatre,
to sing at his theatre for two nights in every week during the next
two months, and B engages to pay her a hundred rupees for
each night’s performance. On the sixth night, A wilfully absents
herself from the theatre, and B, in consequence, rescinds
the contract. B must pay A for the five nights on which she had sung.
(d) A contracts to sing for B at a concert for 1,000 rupees,
which are paid in advance. A is too ill to sing. A is not bound to
make compensation to B for the loss of the profits which B
would have made if A had been able to sing, but must refund to B the
1,000 rupees paid in advance.
66. Mode of communicating or revoking rescission of voidable
contract.—The rescission of a
voidable contract may be communicated or revoked in the same
manner, and subject to the same rules, as
apply to the communication or revocation of a proposal1
.
67. Effect of neglect of promisee to afford promisor
reasonable facilities for performance.—If
any promisee neglects or refuses to afford the promisor
reasonable facilities for the performance of his
promise, the promisor is excused by such neglect or refusal
as to any non-performance caused thereby.
Illustration
A contracts with B to repair B’s house.
B neglects or refuses to point out to A the places in which
his house requires repair.
A is excused for the non-performance of the contract if it
is caused by such neglector refusal.
CHAPTER V
OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT
68. Claim for necessaries supplied to person incapable of
contracting, or on his account.—If a
person, incapable of entering into a contract, or any one
whom he is legally bound to support, is supplied
by another person with necessaries suited to his condition
in life, the person who has furnished such
supplies is entitled to be reimbursed from the property of
such incapable person.2
Illustrations
(a) A supplies B, a lunatic, with necessaries suitable to
his condition in life. A is entitled to be reimbursed from B’s
property.
(b) A supplies the wife and children of B, a lunatic, with
necessaries suitable to their condition in life. A is entitled to be
reimbursed from B’s property.
69.Reimbursement of person paying money due by another, in
payment of which he is
interested.—A person who is interested in the payment of
money which another is bound by law to pay,
and who therefore pays it, is entitled to be reimbursed by
the other.
1. See ss. 3 and 5, supra.
2. The property of a Government ward in Madhya Pradesh is
not liable under this section, see the C.P. Court of Wards Act, 1899
(24 of 1899), s. 31(1).
29
Illustration
B holds land in Bengal, on a lease granted by A, the
zamindar. The revenue payable by A to the Government being in arrear,
his land is advertised for sale by the Government. Under the
revenue law, the consequence of such sale will be the annulment of
B’s lease. B, to prevent the sale and the consequent
annulment of his own lease, pays to the Government the sum due from A. A
is bound to make good to B the amount so paid.
70.Obligation of person enjoying benefit of non-gratuitous
act.—Where a person lawfully does
anything for another person, or delivers anything to him,
not intending to do so gratuitously, and such
other person enjoys the benefit thereof, the latter is bound
to make compensation to the former in respect
of, or to restore, the thing so done or delivered1
.
Illustrations
(a) A, a tradesman, leaves goods at B’s house by mistake. B
treats the goods as his own. He is bound to pay A for them.
(b) A saves B’s property from fire. A is not entitled to
compensation from B, if the circumstances show that he intended to
act gratuitously.
71.Responsibility of finder of goods.—A person who finds
goods belonging to another, and takes
them into his custody, is subject to the same responsibility
as a bailee2
.
72. Liability of person to whom money is paid, or thing
delivered, by mistake or under
coercion.—A person to whom money has been paid, or anything
delivered, by mistake or under coercion,
must repay or return it.
Illustrations
(a)A and B jointly owe 100 rupees to C, A alone pays the
amount to C, and B, not knowing this fact, pays 100 rupees over
again to C. C is bound to repay the amount to B.
(b)A railway company refuses to deliver up certain goods to
the consignee, except upon the payment of an illegal charge for
carriage. The consignee pays the sum charged in order to
obtain the goods. He is entitled to recover so much of the charge as was
illegally excessive.
CHAPTER VI
OF THE CONSEQUENCES OF BREACH OF CONTRACT
73.Compensation for loss or damage caused by breach of
contract.—When a contract has been
broken, the party who suffers by such breach is entitled to
receive, from the party who has broken the
contract, compensation for any loss or damage caused to him
thereby, which naturally arose in the usual
course of things from such breach, or which the parties
knew, when they made the contract, to be likely to
result from the breach of it.
Such compensation is not to be given for any remote and
indirect loss or damage sustained by reason
of the breach.
Compensation for failure to discharge obligation resembling
those created by contract.—When
an obligation resembling those created by contract has been
incurred and has not been discharged, any
person injured by the failure to discharge it is entitled to
receive the same compensation from the party in
default, as if such person had contracted to discharge it
and had broken his contract.
Explanation.—In estimating the loss or damage arising from a
breach of contract, the means which
existed of remedying the inconvenience caused by the
non-performance of the contract must be taken into
account.
1. As to suits by minors under s. 70 in Presidency Small
Cause Courts, see the Presidency Small Cause Courts Act, 1882
(15 of 1882), s. 32.
2. See ss. 151 and 152, infra.
30
Illustrations
(a)A contracts to sell and deliver 50 maunds of saltpetre to
B, at a certain price to be paid on delivery. A breaks his promise.
B is entitled to receive from A, by way of compensation, the
sum, if any, by which the contract price falls short of the price for
which B might have obtained 50 maunds of saltpetre of like
quality at the time when the saltpetre ought to have been delivered.
(b)A hires B’s ship to go to Bombay, and there take on
board, on the first of January, a cargo, which A is to provide, and to
bring it to Calcutta, the freight to be paid when earned.
B’s ship does not go to Bombay, but A has opportunities of procuring
suitable conveyance for the cargo upon terms as advantageous
as those on which he had chartered the ship. A avails himself of
those opportunities, but is put to trouble and expense in
doing so. A is entitled to receive compensation from B in respect of such
trouble and expense.
(c)A contracts to buy of B, at a stated price, 50 maunds of
rice, no time being fixed for delivery. A afterwards informs B that
he will not accept the rice if tendered to him. B is
entitled to receive from A, by way of compensation, the amount, if any, by
which the contract price exceeds that which B can obtain for
the rice at the time when A informs B that he will not accept it.
(d) A contracts to buy B’s ship for 60,000 rupees, but
breaks his promise. A must pay to B, by way of compensation, the
excess, if any, of the contract price over the price which B
can obtain for the ship at the time of the breach of promise.
(e) A, the owner of a boat, contracts with B to take a cargo
of jute to Mirzapur, for sale at that place, starting on a specified
day. The boat, owing to some avoidable cause, does not start
at the time appointed, whereby the arrival of the cargo at Mirzapur
is delayed beyond the time when it would have arrived if the
boat had sailed according to the contract. After that date, and before
the arrival of the cargo, the price of jute falls. The
measure of the compensation payable to B by A is the difference between the
price which B could have obtained for the cargo at Mirzapur
at the time when it would have arrived if forwarded in due course,
and its market price at the time when it actually arrived.
(f) A contracts to repair B’s house in a certain manner, and
receives payment in advance. A repairs the house, but not
according to contract. B is entitled to recover from A the cost
of making the repairs conform to the contract.
(g) A contracts to let his ship to B for a year, from the
first of January, for a certain price. Freights rise, and, on the first of
January, the hire obtainable for the ship is higher than the
contract price. A breaks his promise. He must pay to B, by way of
compensation, a sum equal to the difference between the
contract price and the price for which B could hire a similar ship for a
year on and from the first of January.
(h) A contracts to supply B with a certain quantity of iron
at a fixed price, being a higher price than that for which A could
procure and deliver the iron. B wrongfully refuses to
receive the iron. B must pay to A, by way of compensation, the difference
between the contract price of the iron and the sum for which
A could have obtained and delivered it.
(i) A delivers to B, a common carrier, a machine, to be
conveyed, without delay, to A’s mill informing B that his mill is
stopped for want of the machine. B unreasonably delays the
delivery of the machine, and A, in consequence, loses a profitable
contract with the Government. A is entitled to receive from
B, by way of compensation, the average amount of profit which
would have been made by the working of the mill during the
time that delivery of it was delayed, but not the loss sustained
through the loss of the Government contract.
(j) A, having contracted with B to supply B with 1,000 tons
of iron at 100 rupees a ton, to be delivered at a stated time,
contracts with C for the purchase of 1,000 tons of iron at
80 rupees a ton, telling C that he does so for the purpose of performing
his contract with B. C fails to perform his contract with A,
who cannot procure other iron, and B, in consequence, rescinds the
contract. C must pay to A 20,000 rupees, being the profit
which A would have made by the performance of his contract with B.
(k) A contracts with B to make and deliver to B, by a fixed
day, for a specified price, a certain piece of machinery. A does
not deliver the piece of machinery at the time specified,
and in consequence of this, B is obliged to procure another at a higher
price than that which he was to have paid to A, and is
prevented from performing a contract which B had made with a third
person at the time of his contract with A (but which had not
been then communicated to A), and is compelled to make
compensation for breach of that contract. A must pay to B,
by way of compensation, the difference between the contract price of
the piece of machinery and the sum paid by B for another,
but not the sum paid by B to the third person by way of compensation.
(l)A, a builder, contracts to erect and finish a house by
the first of January, in order that B may give possession of it at that
time to C, to whom B has contracted to let it. A is informed
of the contract between B and C. A builds the house so badly that,
before the first of January, it falls down and has to be
re-built by B, who, in consequence, loses the rent which he was to have
received from C, and is obliged to make compensation to C
for the breach of his contract. A must make compensation to B for
the cost of rebuilding the house, for the rent lost, and for
the compensation made to C.
(m)A sells certain merchandise to B, warranting it to be of
a particular quality, and B, in reliance upon this warranty, sells it
to C with a similar warranty. The goods prove to be not
according to the warranty, and B becomes liable to pay C a sum of
money by way of compensation. B is entitled to be reimbursed
this sum by A.
31
(n)A contracts to pay a sum of money to B on a day
specified. A does not pay the money on that day, B, in consequence of
not receiving the money on that day, is unable to pay his
debts, and is totally ruined. A is not liable to make good to B anything
except the principal sum he contracted to pay, together with
interest up to the day of payment.
(o)A contracts to deliver 50 maunds of saltpetre to B on the
first of January, at a certain price. B afterwards, before the first
of January, contracts to sell the saltpetre to C at a price
higher than the market price of the first of January. A breaks his promise.
In estimating the compensation payable by A to B, the market
price of the first of January, and not the profit which would
have arisen to B from the sale to C, is to be taken into
account.
(p)A contracts to sell and deliver 500 bales of cotton to B
on a fixed day. A knows nothing of B’s mode of conducting his
business. A breaks his promise, and B, having no cotton, is
obliged to close his mill. A is not responsible to B for the loss caused
to B by the closing of the mill.
(q)A contracts to sell and deliver to B, on the first of
January, certain cloth which B intends to manufacture into caps of a
particular kind, for which there is no demand, except at
that season. The cloth is not delivered till after the appointed time, and
too late to be used that year in making caps. B is entitled
to receive from A, by way of compensation, the difference between the
contract price of the cloth and its market price at the time
of delivery, but not the profits which he expected to obtain by making
caps, nor the expenses which he has been put to in making
preparation for the manufacture.
(r)A, a ship-owner, contracts with B to convey him from
Calcutta to Sydney in A’s ship, sailing on the first of January, and
B pays to A, by way of deposit, one-half of his
passage-money. The ship does not sail on the first of January, and B, after
being
in consequence detained in Calcutta for some time and
thereby put to some expense, proceeds to Sydney in another vessel, and,
in consequence, arriving too late in Sydney, loses a sum of
money. A is liable to repay to B his deposit, with interest, and the
expense to which he is put by his detention in Calcutta, and
the excess, if any, of the passage-money paid for the second ship over
that agreed upon for the first, but not the sum of money
which B lost by arriving in Sydney too late.
74. Compensation for breach of contract where penalty
stipulated for.—1
[When a contract has
been broken, if a sum is named in the contract as the amount
to be paid in case of such breach, or if the
contract contains any other stipulation by way of penalty,
the party complaining of the breach is entitled,
whether or not actual damage or loss is proved to have been
caused thereby, to receive from the party who
has broken the contract reasonable compensation not exceeding
the amount so named or, as the case may
be, the penalty stipulated for.
Explanation.—A stipulation for increased interest from the
date of default may be a stipulation by
way of penalty.]
Exception.—When any person enters into any bail-bond,
recognizance or other instrument of the
same nature, or, under the provisions of any law, or under
the orders of the 2
[Central Government] or of
any 3
[State Government], gives any bond for the performance of
any public duty or act in which the
public are interested, he shall be liable, upon breach of
the condition of any such instrument, to pay the
whole sum mentioned therein.
Explanation.—A person who enters into a contract with
Government does not necessarily thereby
undertake any public duty, or promise to do an act in which
the public are interested.
Illustrations
(a)A contracts with B to pay B Rs. 1,000, if he fails to pay
B Rs. 500 on a given day. A fails to pay B Rs. 500 on that day. B
is entitled to recover from A such compensation, not exceeding
Rs. 1,000, as the Court considers reasonable.
(b)A contracts with B that, if Apractises as a surgeon
within Calcutta, he will pay B Rs. 5,000. A practises as a surgeon in
Calcutta. B is entitled to such compensation; not exceeding
Rs. 5,000, as the Court considers reasonable.
(c)A gives a recognizance binding him in a penalty of Rs.
500 to appear in Court on a certain day. He forfeits his
recognizance. He is liable to pay the whole penalty.
1. Subs. by Act 6 of 1899, s. 4, for the first paragraph of
s. 74.
2. Subs. by the A.O. 1937, for “Government of India”.
3. Subs. by the A.O. 1950, for “Provincial Government”.
32
1
[(d)A gives B a bond for the repayment of Rs. 1,000 with
interest at 12 per cent. at the end of six months, with a stipulation
that, in case of default, interest shall be payable at the
rate of 75 per cent. from the date of default. This is a stipulation by way of
penalty, and B is only entitled to recover from A such
compensation as the Court considers reasonable.
(e) A, who owes money to B a money-lender, undertakes to
repay him by delivering to him 10 maunds of grain on a certain
date, and stipulates that, in the event of his not
delivering the stipulated amount by the stipulated date, he shall be liable to
deliver
20 maunds. This is a stipulation by way of penalty, and B is
only entitled to reasonable compensation in case of breach.
(f) A undertakes to repay B a loan of Rs. 1,000 by five
equal monthly instalments, with a stipulation that in default of
payment of any instalment, the whole shall become due. This
stipulation is not by way of penalty, and the contract may be
enforced according to its terms.
(g) A borrows Rs. 100 from B and gives him a bond for Rs.
200 payable by five yearly instalments of Rs. 40, with a
stipulation that, in default of payment of any instalment,
the whole shall become due. This is a stipulation by way of penalty.]
75.Party rightfully rescinding contract, entitled to
compensation.—A person who rightfully
rescinds a contract is entitled to compensation for any
damage which he has sustained through the
non-fulfilment of the contract.
Illustration
A, a singer, contracts with B, the manager of a theatre, to
sing at his theatre for two nights in every week during the next two
months, and B engages to pay her 100 rupees for each night’s
performance. On the sixth night, A wilfully absents herself from
the theatre, and B, in consequence, rescinds the contract. B
is entitled to claim compensation for the damage which he has
sustained through the non-fulfilment of the contract.
[CHAPTER VII.—SALES OF GOODS.] Rep.by the Indian Sale of
Goods Act, 1930 (3 of 1930), s. 65.
76.[‘Goods’ of defined.] Rep. by s. 65,ibid.
77.[‘Sale defined.] Rep. by s. 65,ibid.
78.[Sale how effected.] Rep. by s. 65,ibid.
79.[Transferofownershipofthingsold,whichhasyettobeascertained,madeorfinished.]Rep.bys.
65, ibid.
80. [Completion of sale of goods which the seller is to put
into state in which buyer is to take them.]
Rep. by s. 65,ibid.
81. [Completion of sale of goods, when seller has to do
anything thereto in order to as certain
price.] Rep. by s. 65,ibid.
82. [Completion of sale, when goods are uncertained at date
of contract.] Rep. by s. 65,ibid.
83. [Ascertainment of goods by subsequent appropriation.]
Rep. by s. 65,ibid.
84. [Ascertainment of goods by seller’s selection.] Rep. by
s. 65,ibid.
85. [Transfer of ownership of moveable property, when sold
together with immoveable.] Rep. by
s. 65, ibid.
86. [Buyer to bear loss after good have become his
property.] Rep. by s. 65,ibid.
87. [Transfer of ownership of goods agreed to be sold while
non existent.] Rep. by s. 65,ibid.
88. [Contract to sell and deliver, at a future day, goods
not in seller’s possession at date of
contract.] Rep. by s. 65,ibid.
89. [Determination of price not fixed by contract.] Rep. by
s. 65,ibid.
[DELIVERY.]Rep. by s. 65, ibid.
90. [Delivery how made.] Rep. by s. 65,ibid.
1. Added by Act 6 of 1899, s. 4.
33
91. [Effect of delivery to wharfinger or carrier.] Rep. by
s. 65,ibid.
92. [Effect of part-delivery.] Rep. by s. 65,ibid.
93. [Seller not bound to deliver until buyer applies for
delivery.] Rep. by s. 65,ibid.
94.[Place of delivery.] Rep.by the Indian Sale of Goods Act,
1930 (3 of 1930), s.65.
[SELLER’S LIEN.]Rep. by s. 65, ibid.
95.[Seller’s lien.]Rep. by s. 65,ibid.
96. [Lien where payment to be made at a future day, but no
time fixed for delivery.] Rep. by s. 65,
ibid.
97. [Seller’s lien where payment to be made at future day,
and buyer allows goods to remain in
seller’s possession.] Rep. by s. 65,ibid.
98. [Seller’s lien against subsequent buyer.] Rep. by s.
65,ibid.
[STOPPAGE IN TRANSIT.] Rep. by s. 65, ibid.
99. [Power of seller to stop in transit.] Rep. by s.
65,ibid.
100.[When goods are to be deemed in transit.] Rep. by s.
65,ibid.
101. [Continuance of right of stoppage.] Rep. by s. 65,ibid.
102. [Cessation of right on assignment, by buyer, of
document showing title.] Rep. by s. 65,ibid.
103. [How seller may stop where instrument of title assigned
to secure specific advance.] Rep. by s.
65, ibid.
104. [Stoppage how effected.] Rep. by s. 65,ibid.
105. [Notice of seller’s claim.] Rep. by s. 65, ibid.
106.[Right of seller on stoppage.] Rep. by s. 65,ibid.
[RESALE.] Rep. by s. 65, ibid.
107.[Resale on buyer’s failure to perform.] Rep. by s.
65,ibid.
[TITLE.] Rep. by s. 65, ibid.
108. [Title conveyed by seller of goods to buyer.] Rep. by
s. 65,ibid.
[WARRANTY.] Rep. by s. 65, ibid.
109.[Seller’s responsibility for badness of title.] Rep. by
s. 65,ibid.
110. [Establishment of implied warranty of goodness or
quality.] Rep. by s. 65,ibid.
111. [Warranty of soundness implied on sale of provisions.]
Rep. by s. 65,ibid.
112. [Warranty of bulk implied on sale of goods by sample.]
Rep. by s. 65,ibid.
113.[Warranty implied where goods are sold as being of a
certain denomination.] Rep. by s. 65,ibid.
114. [Warranty where goods ordered for a specified purpose.]
Rep. by s. 65,ibid.
115.[Warranty on sale of article of well known ascertained
kind.] Rep. by s. 65,ibid.
116. [Seller when not responsible for latent defects.] Rep.
by s. 65,ibid.
117. [Buyer’s right on breach of warranty.] Rep. by s.
65,ibid.
118. [Right of buyer on breach of warranty in respect of
goods not ascertained.] Rep. by s. 65,ibid.
[MISCELLANEOUS.] Rep. by s. 65, ibid.
119. [When buyer may refused to accept, if goods not ordered
are sent with goods ordered.]Rep. by
s. 65, ibid.
34
120. [Effect of wrongful refusal to accept.] Rep. by s.
65,ibid.
121. [Right of seller as to rescission, on failure of buyer
to pay price at time fixed.] Rep.by the
Indian Sale of Goods Act, 1930 (3 of 1930), s.65.
122. [Sale and transfer of lots sold by auction.] Rep. by s.
65,ibid.
123. [Effect of use, by seller, of pretended biddings to
raise price.] Rep. by s. 65,ibid.
CHAPTER VIII
OF INDEMNITY AND GUARANTEE
124.“Contract of indemnity” defined.—A contract by which one
party promises to save the other
from loss caused to him by the conduct of the promisor
himself, or by the conduct of any other person, is
called a “contract of indemnity”.
Illustration
A contracts to indemnify B against the consequences of any
proceedings which C may take against B in respect of a certain
sum of 200 rupees. This is a contract of indemnity.
125.Rights of indemnity-holder when sued.—The promisee in a
contract of indemnity, acting
within the scope of his authority, is entitled to recover
from the promisor—
(1) all damages which he may be compelled to pay in any suit
in respect of any matter to which
the promise to indemnify applies;
(2) all costs which he may be compelled to pay in any such
suit if, in bringing or defending it, he
did not contravene the orders of the promisor, and acted as
it would have been prudent for him to act
in the absence of any contract of indemnity, or if the
promisor authorized him to bring or defend the
suit;
(3) all sums which he may have paid under the terms of any
compromise of any such suit, if the
compromise was not contrary to the orders of the promisor,
and was one which it would have been
prudent for the promisee to make in the absence of any
contract of indemnity, or if the promisor
authorized him to compromise the suit.
126. “Contract of guarantee”, “surety”, “principal debtor”
and “creditor”.—A “contract of
guarantee” is a contract to perform the promise, or
discharge the liability, of a third person in case of his
default. The person who gives the guarantee is called the “surety”;
the person in respect of whose default
the guarantee is given is called the “principal debtor”, and
the person to whom the guarantee is given is
called the “creditor”. A guarantee may be either oral or
written.
127. Consideration for guarantee.—Anything done, or any
promise made, for the benefit of the
principal debtor, may be a sufficient consideration to the
surety for giving the guarantee.
Illustrations
(a) B requests A to sell and deliver to him goods on credit.
A agrees to do so, provided C will guarantee the payment of the
price of the goods. C promises to guarantee the payment in
consideration of A’s promise to deliver the goods. This is a sufficient
consideration for C’s promise.
(b) A sells and delivers goods to B. C afterwards requests A
to forbear to sue B for the debt for a year, and promises that, if
he does so, C will pay for them in default of payment by B.
A agrees to forbear as requested. This is a sufficient consideration for
C’s promise.
(c) A sells and delivers goods to B. C afterwards, without
consideration, agrees to pay for them in default of B. The
agreement is void.
35
128. Surety’s liability.—The liability of the surety is co-
extensive with that of the principal debtor,
unless it is otherwise provided by the contract.
Illustration
A guarantees to B the payment of a bill of exchange by C,
the acceptor. The bill is dishonoured by C. A is liable, not only
for the amount of the bill, but also for any interest and
charges which may have become due on it.
129. “Continuing guarantee”.—A guarantee which extends to a
series of transactions, is called a
“continuing guarantee”.
Illustrations
(a) A, in consideration that B will employ C in collecting
the rent of B’s zamindari, promises B to be responsible, to the
amount of 5,000 rupees, for the due collection and payment
by C of those rents. This is a continuing guarantee.
(b) A guarantees payment to B, a tea-dealer, to the amount
of £100, for any tea he may from time to time supply to C. B
supplies C with tea to above the value of £100, and C pays B
for it. Afterwards, B supplies C with tea to the value of £200. C
fails to pay. The guarantee given by A was a continuing
guarantee, and he is accordingly liable to B to the extent of £100.
(c) A guarantees payment to B of the price of five sacks of
flour to be delivered by B to C and to be paid for in a month. B
delivers five sacks to C. C pays for them. Afterwards B
delivers four sacks to C, which C does riot pay for. The guarantee given
by A was not a continuing guarantee, and accordingly he is
not liable for the price of the four sacks.
130.Revocation of continuing guarantee.—A continuing
guarantee may at any time be revoked by
the surety, as to future transactions, by notice to the
creditor.
Illustrations
(a) A, in consideration of B’s discounting, at A’s request,
bills of exchange for C, guarantees to B, for twelve months, the
due payment of all such bills to the extent of 5,000 rupees.
B discounts bills for C to the extent of 2,000 rupees. Afterwards, at the
end of three months, A revokes the guarantee. This
revocation discharges A from all liability to B for any subsequent discount.
But A is liable to B for the 2,000 rupees, on default of C.
(b) A guarantees to B, to the extent of 10,000 rupees, that
C shall pay all the bills that B shall draw upon him. B draws upon
C. C accepts the bill. A gives notice of revocation. C
dishonours the bill at maturity. A is liable upon his guarantee.
131.Revocation of continuing guarantee by surety’s
death.—The death of the surety operates, in
the absence of any contract to the contrary, as a revocation
of a continuing guarantee, so far as regards
future transactions.
132. Liability of two persons, primarily liable, not
affected by arrangement between them that
one shall be surety on other’s default.—Where two persons
contract with a third person to undertake a
certain liability, and also contract with each other that
one of them shall be liable only on the default of
the other, the third person not being a party to such
contract, the liability of each of such two persons to
the third person under the first contract is not affected by
the existence of the second contract, although
such third person may have been aware of its existence.
Illustration
A and B make a joint and several promissory note to C. A
makes it, in fact, as surety for B, and C knows this at the time
when the note is made. The fact that A, to the knowledge of
C, made the note as surety for B, is no answer to a suit by C against
A upon the note.
133.Discharge of surety by variance in terms of
contract.—Any variance, made without the
surety’s consent, in the terms of the contract between the
principal 1
[debtor] and the creditor, discharges
the surety as to transactions subsequent to the variance.
Illustrations
(a) A becomes surety to C for B’s conduct as a manager in
C’s bank. Afterwards, B and C contract, without A’s consent,
that B’s salary shall be raised, and that he shall become
liable for one-fourth of the losses on overdrafts. B allows a customer to
1. Ins. by Act 24 of 1917, s. 2 and the first Schedule.
36
overdraw, and the bank loses a sum of money. A is discharged
from his suretyship by the variance made without his consent, and
is not liable to make good this loss.
(b) A guarantees C against the misconduct of B in an office
to which B is appointed by C, and of which the duties are
defined by an Act of the Legislature. By a subsequent Act,
the nature of the office is materially altered. Afterwards, B
misconducts himself. A is discharged by the change from
future liability under his guarantee, though the misconduct of B is in
respect of a duty not affected by the later Act.
(c) C agrees to appoint B as his clerk to sell goods at a
yearly salary, upon A’s becoming surety to C for B’s duly accounting
for moneys received by him as such clerk. Afterwards,
without A’s knowledge or consent, C and B agree that B should be paid
by a commission on the goods sold by him and not by a fixed
salary. A is not liable for subsequent misconduct of B.
(d) A gives to C a continuing guarantee to the extent of
3,000 rupees for any oil supplied by C to B on credit. Afterwards B
becomes embarrassed, and, without the knowledge of A, B and
C contract that C shall continue to supply B with oil for ready
money, and that the payments shall be applied to the then,
existing debts between B and C. A is not liable on his guarantee for
any goods supplied after: this new arrangement.
(e) C contracts to lend B 5,000 rupees on the 1st March. A
guarantees repayment. C pays the 5,000 rupees to B on the 1st
January. A is discharged from his liability, as the contract
has been varied, inasmuch as C might sue B for the money before the
1st of March.
134.Discharge of surety by release or discharge of principal
debtor.—The surety is discharged by
any contract between the creditor and the principal debtor,
by which the principal debtor is released, or by
any act or omission of the creditor, the legal consequence
of which is the discharge of the principal
debtor.
Illustrations
(a) A gives a guarantee to C for goods to be supplied by C
to B. C supplies goods to B, and afterwards B becomes
embarrassed and contracts with his creditors (including C)
to assign to them his property in consideration of their releasing him
from their demands. Here B is released from his debt by the
contract with C, and A is discharged from his suretyship.
(b) A contracts with B to grow a crop of indigo on A’s land
and to deliver it to B at a fixed rate, and C guarantees A’s
performance of this contract. B diverts a stream of water
which is necessary for the irrigation of A’s land and thereby prevents
him from raising the indigo. C is no longer liable on his
guarantee.
(c) A contracts with B for a fixed price to build a house
for B within a stipulated time, B supplying the necessary timber. C
guarantees A’s performance of the contract. B omits to
supply the timber. C is discharged from his suretyship.
135. Discharge of surety when creditor compounds with, gives
time to, or agrees not to sue,
principal debtor.—A contract between the creditor and the
principal debtor, by which the creditor makes
a composition with, or promises to give time to, or not to
sue, the principal debtor, discharges the surety,
unless the surety assents to such contract.
136. Surety not discharged when agreement made with third
person to give time to principal
debtor.—Where a contract to give time to the principal
debtor is made by the creditor with a third
person, and not with the principal debtor, the surety is not
discharged.
Illustration
C, the holder of an overdue bill of exchange drawn by A as
surety for B, and accepted by B, contracts with M to give time to
B. A is not discharged.
137. Creditor’s forbearance to sue does not discharge
surety.—Mere forbearance on the part of
the creditor to sue the principal debtor or to enforce any
other remedy against him does not, in the absence
of any provision in the guarantee to the contrary, discharge
the surety.
Illustration
B owes to C a debt guaranteed by A. The debt becomes
payable. C does not sue B for a year after the debt has become
payable. A is not discharged from his suretyship.
37
138.Release of one co-surety does not discharge
others.—Where there are co-sureties, a release by
the creditor of one of them does not discharge the others;
neither does it free the surety so released from
his responsibility to the other sureties1
.
139. Discharge of surety by creditor’s act or omission
impairing surety’s eventual remedy.—If
the creditor does any act which is inconsistent with the
rights of the surety, or omits to do any act which
his duty to the surety requires him to do, and the eventual
remedy of the surety himself against the
principal debtor is thereby impaired, the surety is
discharged.
Illustrations
(a) B contracts to build a ship for C for a given sum, to be
paid by instalments as the work reaches certain stages. A becomes
surety to C for B’s due performance of the contract. C,
without the knowledge of A, prepays to B the last two instalments. A is
discharged by this prepayment.
(b) C lends money to B on the security of a joint and
several promissory note made in C’s favour by B, and by A as surety
for B, together with a bill of sale of B’s furniture, which
gives power to C to sell the furniture, and apply the proceeds in
discharge of the note. Subsequently, C sells the furniture,
but, owing to his misconduct and wilful negligence, only a small price
is realized. A is discharged from liability on the note.
(c) A puts M as apprentice to B, and gives a guarantee to B
for M’s fidelity. B promises on his part that he will, at least once
a month, see M make up the cash. B omits to see this done as
promised, and M embezzles. A is not liable to B on his guarantee.
140.Rights of surety on payment or performance.—Where a
guaranteed debt has become due, or
default of the principal debtor to perform a guaranteed duty
has taken place, the surety upon payment or
performance of all that he is liable for, is invested with
all the rights which the creditor had against the
principal debtor.
141.Surety’s right to benefit of creditor’s securities.—A
surety is entitled to the benefit of every
security which the creditor has against the principal debtor
at the time when the contract of suretyship is
entered into, whether the surety knows of the existence of
such security or not; and if the creditor loses,
or, without the consent of the surety, parts with such
security, the surety is discharged to the extent of the
value of the security.
Illustrations
(a)C, advances to B, his tenant, 2,000 rupees on the
guarantee of A. C has also a further security for the 2,000 rupees by a
mortgage of B’s furniture. C cancels the mortgage. B becomes
insolvent and C sues A on his guarantee. A is discharged from
liability to the amount of the value of the furniture.
(b)C, a creditor, whose advance to B is secured by a decree,
receives also a guarantee for that advance from A. C afterwards
takes B’s goods in execution under the decree, and then,
without the knowledge of A, withdraws the execution. A is discharged.
(c)A, as surety for B, makes a bond jointly with B to C, to
secure a loan from C to B. Afterwards, C obtains from B a further
security for the same debt. Subsequently, C gives up the
further security. A is not discharged.
142. Guarantee obtained by misrepresentation invalid.—Any
guarantee which has been obtained
by means of misrepresentation made by the creditor, or with
his knowledge and assent, concerning a
material part of the transaction, is invalid.
143. Guarantee obtained by concealment invalid.—Any
guarantee which the creditor has obtained
by means of keeping silence as to material circumstances, is
invalid.
Illustrations
(a)A engages B as clerk to collect money for him. B fails to
account for some of his receipts, and A in consequence calls
upon him to furnish security for his duly accounting. C
gives his guarantee for B’s duly accounting. A does not acquaint C with
B’s previous conduct. B afterwards makes default. The
guarantee is invalid.
1. See s. 44, supra.
38
(b)A guarantees to C payment for iron to be supplied by him
to B to the amount of 2,000 tons. B and C have privately
agreed that B should pay five rupees per ton beyond the
market price, such excess to be applied in liquidation of an old debt. This
agreement is concealed from A. A is not liable as a surety.
144. Guarantee on contract that creditor shall not act on it
until co-surety joins.—Where a
person gives a guarantee upon a contract that the creditor
shall not act upon it until another person has
joined in it as co-surety, the guarantee is not valid if
that other person does not join.
145.Implied promise to indemnify surety.—In every contract
of guarantee there is an implied
promise by the principal debtor to indemnify the surety, and
the surety is entitled to recover from the
principal debtor whatever sum he has rightfully paid under the
guarantee, but, no sums which he has paid
wrongfully.
Illustrations
(a)B is indebted to C, and A is surety for the debt. C
demands payment from A, and on his refusal sues him for the amount.
A defends the suit, having reasonable grounds for doing so,
but is compelled to pay the amount of the debt with costs. He can
recover from B the amount paid by him for costs, as well as
the principal debt.
(b)C lends B a sum of money, and A, at the request of B,
accepts a bill of exchange drawn by B upon A to secure the
amount. C, the holder of the bill, demands payment of it
from A, and, on A’s refusal to pay, sues him upon the bill. A, not having
reasonable grounds for so doing, defends the suit, and has
to pay the amount of the bill and costs. He can recover from B the
amount of the bill, but not the sum paid for costs, as there
was no real ground for defending the action.
(c)A guarantees to C, to the extent of 2,000 rupees, payment
for rice to be supplied by C to B. C supplies to B rice to a less
amount than 2,000 rupees, but obtains from A payment of the
sum of 2,000 rupees in respect of the rice supplied. A cannot
recover from B more than the price of the rice actually
supplied.
146. Co-sureties liable to contribute equally.—Where two or
more persons are co-sureties for the
same debt or duty, either jointly or severally, and whether
under the same or different contracts, and
whether with or without the knowledge of each other, the
co-sureties, in the absence of any contract to the
contrary, are liable, as between themselves, to pay each an
equal share of the whole debt, or of that part of
it which remains unpaid by the principal debtor1
.
Illustrations
(a)A, B and C are sureties to D for the sum of 3,000 rupees
lent to E. E makes default in payment. A, B and C are liable, as
between themselves, to pay 1,000 rupees each.
(b)A, B and C are sureties to D for the sum of 1,000 rupees
lent to E, and there is a contract between A, B and C that A is to
be responsible to the extent of one-quarter, B to the extent
of one- quarter, and C to the extent of one-half. E makes default in
payment. As between the sureties, A is liable to pay 250
rupees, B 250 rupees, and C 500 rupees.
147.Liability of co-sureties bound in different
sums.—Co-sureties who are bound in different sums
are liable to pay equally as far as the limits of their
respective obligations permit.
Illustrations
(a)A, B and C, as sureties for D, enter into three several
bonds, each in a different penalty, namely, A in the penalty of each
10,000 rupees, B in that of 20,000 rupees, C in that of
40,000 rupees, conditioned for D’s duly accounting to E. D makes default
to the extent of 30,000 rupees. A, B and C are each liable
to pay 10,000 rupees.
(b)A, B and C, as sureties for D, enter into three several
bonds, each in a different penalty, namely, A in the penalty of
10,000 rupees, B in that of 20,000 rupees, C in that of
40,000 rupees, conditioned for D’s duly accounting to E. D makes default
to the extent of 40,000 rupees. A is liable to pay 10,000
rupees, and B and C 15,000 rupees each.
(c)A, B and C, as sureties for D, enter into three several
bonds, each in a different penalty, namely, A in the penalty of
10,000 rupees, B in that of 20,000 rupees, C in that of
40,000 rupees, conditioned for D’s duly accounting to E. D makes default
to the extent of 70,000 rupees. A, B and C have to pay each
the full penalty of his bond.
1. See s. 43, supra.
39
CHAPTER IX
OF BAILMENT
148.“Bailment”“bailor” and “bailee” defined.—A “bailment” is
the delivery of goods by one
person to another for some purpose, upon a contract that
they shall, when the purpose is accomplished, be
returned or otherwise disposed of according to the
directions of the person delivering them. The person
delivering the goods is called the “bailor”. The person to
whom they are delivered is called, the “bailee”.
Explanation.—If a person already in possession of the goods
of another contracts to hold them as a
bailee, he thereby becomes the bailee, and the owner becomes
the bailor of such goods, although they
may not have been delivered by way of bailment.
149. Delivery to bailee how made.—The delivery to the bailee
may be made by doing anything
which has the effect of putting the goods in the possession
of the intended bailee or of any person
authorized to hold them on his behalf.
150.Bailor’s duty to disclose faults in goods bailed.—The
bailor is bound to disclose to the bailee
faults in the goods bailed, of which the bailor is aware,
and which materially interfere with the use of
them, or expose the bailee to extraordinary risks; and if he
does not make such disclosure, he is
responsible for damage arising to the bailee directly from
such faults.
If the goods are bailed for hire, the bailor is responsible
for such damage, whether he was or was not
aware of the existence of such faults in the goods bailed.
Illustrations
(a)A lends a horse, which he knows to be vicious, to B. He
does not disclose the fact that the horse is vicious. The horse
runs away. B is thrown and injured. A is responsible to B
for damage sustained.
(b)A hires a carriage of B. The carriage is unsafe, though B
is not aware of it, and A is injured. B is responsible to A for the
injury.
1151. Care to be taken by bailee.—In all cases of bailment
the bailee is bound to take as much care
of the goods bailed to him as a man of ordinary prudence
would, under similar circumstances, take of his
own goods of the same bulk, quality and value as the goods
bailed2
.
152.Bailee when not liable for loss, etc., of thing
bailed.—The bailee, in the absence of any special
contract, is not responsible for the loss, destruction or
deterioration of the thing bailed, if he has taken the
amount of care of it described in section 151.
153. Termination of bailment by bailee’s act inconsistent
with conditions.—A contract of
bailment is avoidable at the option of the bailor, if the
bailee does any act with regard to the goods bailed,
inconsistent with the conditions of the bailment.
Illustration
A lets to B, for hire, a horse for his own riding. B drives
the horse in his carriage. This is, at the ‘option of A, a termination
of the bailment.
154. Liability of bailee making unauthorized use of goods
bailed.—If the bailee makes any use of
the goods bailed which is not according to the conditions of
the bailment, he is liable to make
compensation to the bailor for any damage arising to the
goods from or during such use of them.
1. The responsibility of the Trustees of the Port of Madras
constituted under the Madras Port Trust Act, 1905 (Madras Act
2 of 1905), in regard to goods has been declared to be that
of a bailee under these sections, without the qualifying words “in the
absence of any special contract” in s. 152, see s. 40(1) of
that Act.
2.As to railway contracts see the Indian Railways Act, 1890
(9 of 1890), s. 72. As to the liability of common carriers, see the
Carriers Act, 1865 (3 of 1865), s. 8.
40
Illustrations
(a)A lends a horse to B for his own riding only. B allows C,
a member of his family, to ride the horse. C rides with care, but
the horse accidentally falls and is injured. B is liable to
make compensation to A for the injury done to the horse.
(b)A hires a horse in Calcutta from B expressly to march to
Benares. A rides with due care, but marches to Cuttack instead.
The horse accidentally falls and is injured. A is liable to
make compensation to B for the injury to the horse.
155. Effect of mixture, with bailor’s consent, of his goods
with bailee’s.—If the bailee, with the
consent of the bailor, mixes the goods of the bailor with
his own goods, the bailor and the bailee shall
have an interest, in proportion to their respective shares,
in the mixture thus produced.
156.Effect of mixture without bailor’s consent, when the
goods can be separated.—If the bailee,
without the consent of the bailor, mixes the goods of the
bailor with his own goods, and the goods can be
separated or divided, the property in the goods remains in
the parties respectively; but the bailee is bound
to bear the expense of separation or division, and any
damage arising from the mixture.
Illustration
A bails 100 bales of cotton marked with a particular mark to
B. B, without A’s consent, mixes the 100 bales with other bales
of his own, bearing a different mark: A is entitled to have
his 100 bales returned, and B is bound to bear all the expense incurred
in the separation of the bales, and any other incidental
damage.
157. Effect of mixture, without bailor’s consent, when the
goods cannot be separated.—If the
bailee, without the consent of the bailor, mixes the goods
of the bailor with his own goods, in such a
manner that it is impossible to separate the goods bailed
from the other goods, and deliver them back, the
bailor is entitled to be compensated by the bailee for the
loss of the goods.
Illustration
A bails a barrel of Cape flour worth Rs. 45 to B. B, without
A’s consent, mixes the flour with country flour of his own,
worth only Rs. 25 a barrel. B must compensate A for the loss
of his flour.
158. Repayment, by bailor, of necessary expenses.—Where, by
the conditions of the bailment, the
goods are to be kept or to be carried, or to have work done
upon them by the bailee for the bailor, and the
bailee is to receive no remuneration, the bailor shall repay
to the bailee the necessary expenses incurred
by him for the purpose of the bailment.
159.Restoration of goods lent gratuitously.—The lender of a
thing for use may at any time require
its return, if the loan was gratuitous, even though he lent
it for a specified time or purpose. But if, on the
faith of such loan made for a specified time or purpose, the
borrower has acted in such a manner that the
return of the thing lent before the time agreed upon would
cause him loss exceeding the benefit actually
derived by him from the loan, the lender must, if he compels
the return, indemnify the borrower for the
amount in which the loss so occasioned exceeds the benefit
so derived.
160.Return of goods bailed, on expiration of time or
accomplishment of purpose.—It is the duty
of the bailee to return, or deliver according to the
bailor’s directions, the goods bailed, without demand, as
soon as the time for which they were bailed has expired, or
the purpose for which they were bailed has
been accomplished.
1161. Bailee’s responsibility when goods are not duly
returned.—If, by the default of the bailee,
the goods are not returned, delivered or tendered at the
proper time, he is responsible to the bailor for any
loss, destruction or deterioration of the goods from that
time.2
1. S. 161 has been declared to apply to the responsibility
of the Trustees of the Port of Madras as to goods in their possession
seethe Madras Port Trust Act, 1905 (Madras Act 2 of 1905).
2. As to Railway contracts, see the Indian Railways Act,
1890 (9 of 1890), s. 72.
41
162. Termination of gratuitous bailment by death.—A
gratuitous bailment is terminated by the
death either of the bailor or of the bailee.
163. Bailor entitled to increase or profit from goods
bailed.—In the absence of any contract to the
contrary, the bailee is bound to deliver to the bailor, or
according to his directions, any increase or profit
which may have accrued from the goods bailed.
Illustration
A leaves a cow in the custody of B to be taken care of. The
cow has a calf. B is bound to deliver the calf as well as the cow
to A.
164. Bailor’s responsibility to bailee.—The bailor is
responsible to the bailee for any loss which the
bailee may sustain by reason that the bailor was not
entitled to make the bailment, or to receive back the
goods, or to give directions respecting them.
165.Bailment by several joint owners.—If several joint
owners of goods bail them, the bailee may
deliver them back to, or according to the directions of, one
joint owner without the consent of all in the
absence of any agreement to the contrary.
166.Bailee not responsible on re-delivery to bailor without
title.—If the bailor has no title to the
goods, and the bailee, in good faith, delivers them back to,
or according to the directions of, the bailor, the
bailee is not responsible to the owner in respect of such
delivery1
.
167.Right of third person claiming goods bailed.—If a
person, other than the bailor, claims goods
bailed he may apply to the Court to stop the delivery of the
goods to the bailor, and to decide the title to
the goods.
168.Right of finder of goods, may sue for specific reward
offered.—The finder of goods has no
right to sue the owner for compensation for trouble and
expense voluntarily incurred by him to preserve
the goods and to find out the owner; but he may retain the
goods against the owner until he receives such
compensation; and, where the owner has offered a specific
reward for the return of goods lost, the finder
may sue for such reward, and may retain the goods until he
receives it.
169.When finder of thing commonly on sale may sell it.—When
a thing which is commonly the
subject of sale is lost, if the owner cannot with reasonable
diligence be found, or if he refuses, upon
demand, to pay the lawful charges of the finder, the finder
may sell it—
(1) when the thing is in danger of perishing or of losing
the greater part of its value, or,
(2) when the lawful charges of the finder, in respect of the
thing found, amount to two-thirds of
its value.
170. Bailee’s particular lien.—Where the bailee has, in
accordance with the purpose of the
bailment, rendered any service involving the exercise of
labour or skill in respect of the goods bailed, he
has, in the absence of a contract to the contrary, a right
to retain such goods until he receives due
remuneration for the services he has rendered in respect of
them.
Illustrations
(a) A delivers a rough diamond to B, a jeweller, to be cut
and polished, which is accordingly done. B is entitled to retain the
stone till he is paid for the services he has rendered.
(b) A gives, cloth to B, a tailor, to make into a coat. B
promises A to deliver the coat as soon as it is finished, and to give a
three months’ credit for the price. B is not entitled to
retain the coat until he is paid.
1. See the Indian Evidence Act, 1872 (1 of 1872), s. 117.
42
171.General lien of bankers, factors, wharfingers, attorneys
and policy-brokers.—Bankers,
factors, wharfingers, attorneys of a High Court and
policy-brokers may, in the absence of a contract to the
contrary, retain as a security for a general balance of
account, any goods bailed to them; but no other
persons have a right to retain, as a security for such
balance, goods bailed to them, unless there is an
express contract to that effect1
.
Bailments of Pledges
172.“Pledge”“pawnor”,and “pawnee” defined.—The bailment of
goods as security for payment of
a debt or performance of a promise is called “pledge”. The
bailor is in this case called the “pawnor”. The
bailee is called the “pawnee”.
173.Pawnee’s right of retainer.—Thepawnee may retain the
goods pledged, not only for payment of
the debt or the performance of the promise, but for the
interest of the debt, and all necessary expenses
incurred by him in respect of the possession or for the
preservation of the goods pledged.
174.Pawnee not to retain for debt or promise other than that
for which goods pledged.
Presumption in case of subsequent advances.—The pawnee shall
not, in the absence of a contract to
that effect, retain the goods pledged for any debt or
promise other than the debt or promise for which they
are pledged; but such contract, in the absence of anything
to the contrary, shall be presumed in regard to
subsequent advances made by the pawnee.
175. Pawnee’s right as to extraordinary expenses
incurred.—Thepawnee is entitled to receive
from the pawnor extraordinary expenses incurred by him for
the preservation of the goods pledged.
176. Pawnee’s right where pawnor makes default.—If the
pawnor makes default in payment of the
debt, or performance, at the stipulated time of the promise,
in respect of which the goods were pledged,
the pawnee may bring a suit against the pawnor upon the debt
or promise, and retain the goods pledged as
a collateral security; or he may sell the thing pledged, on
giving the pawnor reasonable notice of the sale.
If the proceeds of such sale are less than the amount due in
respect of the debt or promise, the pawnor
is still liable to pay the balance. If the proceeds of the
sale are greater than the amount so due, the pawnee
shall pay over the surplus to the pawnor.
177. Defaulting pawner’s right to redeem.—If a time is
stipulated for the payment of the debt, or
performance of the promise, for which the pledge is made,
and the pawnor makes default in payment of
the debt or performance of the promise at the stipulated
time, he may redeem the goods pledged at any
subsequent time before the actual sale of them2
; but he must, in that case, pay, in addition, any expenses
which have arisen from his default.
3
[178. Pledge by mercantile agent.—Where a mercantile agent
is, with the consent of the owner, in
possession of goods or the document of title to goods, any
pledge made by him, when acting in the
ordinary course of business of a mercantile agent, shall be
as valid as if he were expressly authorised by
the owner of the goods to make the same; provided that the
pawnee acts in good faith and has not at the
time of the pledge notice that the pawnor has not authority
to pledge.
Explanation.—In this section, the expressions “mercantile
agent” and “documents of title” shall have
the meanings assigned to them in the Indian Sale of Goods
Act, 1930 (3 of 1930).
178A. Pledge by person in possession under voidable
contract.—When the pawnor has obtained
possession of the goods pledged by him under a contract
voidable under section 19 or section 19A, but
1. As to lien of an agent, see s. 221, infra. As to lien of
a Railway Administration, see the Indian Railways Act, 1890 (9 of 1890),
s. 55.
2. For limitation, see the Limitation Act, 1963 (36 of
1963), the Second Schedule.
3. Ss. 178 and 178A subs. by Act 4 of 1930, s. 2, for the
original s. 178.
43
the contract has not been rescinded at the time of the
pledge, the pawnee acquires a good title to the
goods, provided he acts in good faith and without notice of
the pawnor’s defect of title.]
179. Pledge where pawnor has only a limited interest.—Where
a person pledges goods in which
he has only a limited interest, the pledge is valid to the
extent of that interest.
Suits by bailees or bailors against wrong-doers
180.Suit by bailor or bailee against wrong-doer.—If a third
person wrongfully deprives the bailee
of the use or possession of the goods bailed, or does them
any injury, the bailee is entitled to use such
remedies as the owner might have used in the like case if no
bailment had been made; and either the
bailor or the bailee may bring a suit against a third person
for such deprivation or injury.
181. Apportionment of relief or compensation obtained by
such suits.—Whatever is obtained by
way of relief or compensation in any such suit shall, as
between the bailor and the bailee, be dealt with
according to their respective interests.
CHAPTER X
AGENCY
Appointment and authority of agents
182.“Agent” and “principal” defined.—An “agent” is a person
employed to do any act for another,
or to represent another in dealings with third persons. The
person for whom such act is done, or who is so
represented, is called the “principal”.
183. Who may employ agent.—Any person who is of the age of
majority according to the law to
which he is subject, and who is of sound mind, may employ an
agent.
184. Who may be an agent.—As between the principal and third
persons, any person may become
an agent, but no person who is not of the age of majority
and of sound mind can become an agent, so as to
be responsible to his principal according to the provisions
in that behalf herein contained.
185. Consideration not necessary.—No consideration is
necessary to create an agency.
186. Agent’s authority may be expressed or implied.—The
authority of an agent may be expressed
or implied1
.
187. Definitions of express and implied authority.—An authority
is said to be express when it is
given by words spoken or written. An authority is said to be
implied when it is to be inferred from the
circumstances of the case; and things spoken or written, or
the ordinary course of dealing, may be
accounted circumstances of the case.
Illustration
A owns a shop in Serampore, living himself in Calcutta, and
visiting the shop occasionally. The shop is managed by B, and
he is in the habit of ordering goods from C in the name of A
for the purposes of the shop, and of paying for them out of A’s funds
with A’s knowledge. B has an implied authority from A to
order goods from C in the name of A for the purposes of the shop.
188. Extent of agent’s authority.—An agent, having an
authority to do an act, has authority to do
every lawful thing which is necessary in order to do such
act.
An agent having an authority to carry on a business, has
authority to do every lawful thing necessary
for the purpose, or usually done in the course, of
conducting such business.
1. See, however, the Registration Act, 1908 (16 of 1908), s.
33; see also the Code of Civil Procedure, 1908 (5 of 1908), Sch. I,
Order III, rule 4.
44
Illustrations
(a) A is employed by B, residing in London, to recover at
Bombay a debt due to B. A may adopt any legal process necessary
for the purpose of recovering the debt, and may give a valid
discharge for the same.
(b) A constitutes B his agent to carry on his business of a
ship-builder. B may purchase timber and other materials, and hire
workmen, for the purpose of carrying on the business.
189.Agent’s authority in an emergency.—An agent has
authority, in an emergency, to do all such
acts for the purpose of protecting his principal from loss
as would be done by a person of ordinary
prudence, in his own case, under similar circumstances.
Illustrations
(a) An agent for sale may have goods repaired if it be
necessary.
(b) A consigns provisions to B at Calcutta, with directions
to send them immediately to C, at Cuttack. B may sell the
provisions at Calcutta, if they will not bear the journey to
Cuttack without spoiling.
Sub-Agents
190. When agent cannot delegate.—An agent cannot lawfully
employ another to perform acts
which he has expressly or impliedly undertaken to perform
personally, unless by the ordinary custom of
trade a sub-agent may, or, from the nature of the agency, a
sub-agent must, be employed.
191. “Sub-agent” defined.—A “sub-agent” is a person employed
by, and acting under the control of,
the original agent in the business of the agency.
192. Representation of principal by sub-agent properly
appointed.—Where a sub-agent is
properly appointed, the principal is, so far as regards
third persons, represented by the sub-agent, and is
bound by and responsible for his acts, as if he were an
agent originally appointed by the principal.
Agent’s responsibility for sub-agent.—The agent is
responsible to the principal for the acts of the
sub-agent.
Sub-agent’s responsibility.—The sub-agent is responsible for
his acts to the agent, but not tothe
principal, except in cases of fraud or wilful wrong.
193. Agent’s responsibility for sub-agent appointed without
authority.—Where an agent, without
having authority to do so, has appointed a person to act as
a sub-agent, the agent stands towards such
person in the relation of a principal to an agent, and is
responsible for his acts both to the principal and to
third persons; the principal is not represented, by or
responsible for the acts of the person so employed,
nor is that person responsible to the principal.
194.Relation between principal and person duly appointed by
agent to act in business of
agency.—Where an agent, holding an express or implied
authority to name another person to act for the
principal in the business of the agency, has named another person
accordingly, such person is not a
sub-agent, but an agent of the principal for such part of
the business of the agency as is entrusted to him.
Illustrations
(a)A directs B, his solicitor, to sell his estate by
auction, and to employ an auctioneer for the purpose. B names C, an
auctioneer, to conduct the sale. C is not a sub-agent, but
is A’s agent for the conduct of the sale.
(b)A authorizes B, a merchant in Calcutta, to recover the
moneys due to A from C & Co. B instructs D, a solicitor, to take
legal proceedings against C & Co. for the recovery of
the money. D is not a sub-agent, but is solicitor for A.
195. Agent’s duty in naming such person.—In selecting such
agent for his principal, an agent is
bound to exercise the same amount of discretion as a man of
ordinary prudence would exercise in his own
case; and, if he does this, he is not responsible to the
principal for the acts or negligence of the agent so
selected.
45
Illustrations
(a)A instructs B, a merchant, to buy a ship for him. B
employs a ship-surveyor of good reputation to choose a ship for A.
The surveyor makes the choice negligently and the ship turns
out to be unseaworthy and is lost. B is not, but the surveyor is,
responsible to A.
(b)A consigns goods to B, a merchant, for sale. B, in due
course, employs an auctioneer in good credit to sell the goods of A,
and allows the auctioneer to receive the proceeds of the
sale. The auctioneer afterwards becomes insolvent without having
accounted for the proceeds. B is not responsible to A for
the proceeds.
Ratification
196. Right of person as to acts done for him without his
authority. Effect of ratification.—
Where acts are done by one person on behalf of another, but
without his knowledge or authority, he may
elect to ratify or to disown such acts. If he ratify them,
the same effects will follow as if they had been
performed by his authority.
197.Ratification may be expressed or implied.—Ratification
may be expressed or may be implied
in the conduct of the person on whose behalf the acts are
done.
Illustrations
(a)A, without authority, buys goods for B. Afterwards B
sells them to C on his own account; B’s conduct implies a
ratification of the purchase made for him by A.
(b)A, without B’s authority, lends B’s money to C.
Afterwards B accepts interest on the money from C. B’s conduct implies
a ratification of the loan.
198.Knowledge requisite for valid ratification.—No valid
ratification can be made by a person
whose knowledge of the facts of the case is materially
defective.
199.Effect of ratifying unauthorized act forming part of a
transaction.—A person ratifying any
unauthorized act done on his behalf ratifies the whole of
the transaction of which such act formed a part.
200.Ratification of unauthorized act cannot injure third
person.—An act done by one person on
behalf of another, without such other person’s authority,
which, if done with authority, would have the
effect of subjecting a third person to damages, or of
terminating any right or interest of a third person,
cannot, by ratification, be made to have such effect.
Illustrations
(a)A, not being authorized thereto by B, demands, on behalf
of B, the delivery of a chattel, the property of B, from C, who is
in possession of it. This demand cannot be ratified by B, so
as to make C liable for damages for his refusal to deliver.
(b)A holds a lease from B, terminable on three months’
notice. C, an unauthorized person, gives notice of termination to A.
The notice cannot be ratified by B, so as to be binding on
A.
Revocation of Authority
201. Termination of agency.—An agency is terminated by the
principal revoking his authority; or
by the agent renouncing the business of the agency; or by
the business of the agency being completed; or
by either the principal or agent dying or becoming of
unsound mind; or by the principal being adjudicated
an insolvent under the provisions of any Act for the time
being in force for the relief of insolvent debtors.
202.Termination of agency, where agent has an interest in
subject-matter.—Where the agent has
himself an interest in the property which forms the
subject-matter of the agency, the agency cannot, in the
absence of an express contract, be terminated to the
prejudice of such interest.
Illustrations
(a) A gives authority to B to sell A’s land, and to pay
himself, out of the proceeds, the debts due to him from A. A cannot
revoke this authority, nor can it be terminated by his
insanity or death.
46
(b) A consigns 1,000 bales of cotton to B, who has made
advances to him on such cotton, and desires B to sell the cotton,
and to repay himself out of the price, the amount of his own
advances. A cannot revoke this authority, nor is it terminated by his
insanity or death.
203.When principal may revoke agent’s authority.—The
principal may, save as is otherwise
provided by the last preceding section, revoke the authority
given to his agent at any time before the
authority has been exercised so as to bind the principal.
204.Revocation where authority has been partly
exercised.—The principal cannot revoke the
authority given to his agent after the authority has been
partly exercised, so far as regards such acts and
obligations as arise from acts already done in the agency.
Illustrations
(a)A authorizes B to buy 1,000 bales of cotton on account of
A, and to pay for it out of A’s moneys remaining in B’s hands.
B buys 1,000 bales of cotton in his own name, so as to make
himself personally liable for the price. A cannot revoke B’s
authority so far as regards payment for the cotton.
(b) A authorizes B to buy 1,000 bales of cotton on account
of A, and to pay for it out of A’s moneys remaining in B’s hands.
B buys 1,000 bales of cotton in A’s name, and so as not to
render himself personally liable for the price. A can revoke B’s
authority to pay for the cotton.
205.Compensation for revocation by principal, or
renunciation by agent.—Where there is an
express or implied contract that the agency should be
continued for any period of time, the principal must
make compensation to the agent, or the agent to the
principal, as the case may be, for any previous
revocation or renunciation of the agency without sufficient
cause.
206. Notice of revocation or renunciation.—Reasonable notice
must be given of such revocation or
renunciation, otherwise the damage thereby resulting to the
principal or the agent, as the case may be,
must be made good to the one by the other.
207.Revocation and renunciation may be expressed or
implied.—Revocation and renunciation
may be expressed or may be implied in the conduct of the
principal or agent respectively.
Illustration
A empowers B to let A’s house. Afterwards A lets it himself.
This is an implied revocation of
B’s authority.
208.When termination of agent’s authority takes effect as to
agent, and as to third persons.—
The termination of the authority of an agent does not, so
far as regards the agent, take effect before it
becomes known to him, or, so far as regards third persons,
before it becomes known to them.
Illustrations
(a) A directs B to sell goods for him, and agrees to give B
five per cent. commission on the price fetched by the goods. A
afterwards, by letter, revoke B’s authority. B, after the
letter is sent, but before he receives it, sells the goods for 100 rupees. The
sale is binding on A, and B is entitled to five rupees as
his commission.
(b) A, at Madras, by letter, directs B to sell for him some
cotton lying in a warehouse in Bombay, and afterwards, by letter,
revokes his authority to sell, and directs B to send the
cotton to Madras. B, after receiving the second letter, enters into a contract
with C, who knows of the first letter, but not of the
second, for the sale to him of the cotton. C pays B the money, with which B
absconds. C’s payment is good as against A.
(c) A directs B, his agent, to pay certain money to C. A
dies, and D takes out probate to his will. B, after A’s death, but
before hearing of it, pays the money to C. The payment is
good as against D, the executor.
209.Agent’s duty on termination of agency by principal’s
death or insanity.—When an agency is
terminated by the principal dying or becoming of unsound
mind, the agent is bound to take, on behalf of
the representatives of his late principal, all reasonable
steps for the protection and preservation of the
interests entrusted to him.
47
210. Termination of sub-agent’s authority.—The termination
of the authority of an agent causes
the termination (subject to the rules herein contained
regarding the termination of an agent’s authority) of
the authority of all sub-agents appointed by him.
Agent’s duty to principal
211.Agent’s duty in conducting principal’s business.—An
agent is bound to conduct the business
of his principal according to the directions given by the
principal, or, in the absence of any such
directions, according to the custom which prevails in doing
business of the same kind at the place where
the agent conducts such business. When the agent acts
otherwise, if any loss be sustained, he must make it
good to his principal, and if any profit accrues, he must
account for it.
Illustrations
(a) A, an agent engaged in carrying on for B a business, in
which it is the custom to invest from time to time, at interest, the
moneys which may be in hand, omits to make such investment.
A must make good to B the interest usually obtained by such
investments.
(b) B, a broker, in whose business it is not the custom to
sell on credit, sells goods of A on credit to C, whose credit at the
time was very high. C, before payment, becomes insolvent. B
must make good the loss to A.
212. Skill and diligence required from agent.—An agent is
bound to conduct the business of the
agency with as much skill as is generally possessed by
persons engaged in similar business, unless the
principal has notice of his want of skill. The agent is
always bound to act with reasonable diligence, and
to use such skill as he possesses; and to make compensation
to his principal in respect of the direct
consequences of his own neglect, want of skill, or
misconduct, but not in respect of loss or damage which
are indirectly or remotely caused by such neglect, want of
skill, or misconduct.
Illustrations
(a)A, a merchant in Calcutta, has an agent, B, in London, to
whom a sum of money is paid on A’s account, with orders to
remit. B retains the money for a considerable time. A, in
consequence of not receiving the money, becomes insolvent. B is liable
for the money and interest from the day on which it ought to
have been paid, according to the usual rate, and for any further
direct loss-as, e.g., by variation of rate of exchange-but
not further.
(b)A, an agent for the sale of goods, having authority to
sell on credit, sells to B on credit, without making the proper and
usual enquiries as to the solvency of B. B, at the time of
such sale, is insolvent. A must make compensation to his principal in
respect of any loss thereby sustained.
(c)A, an insurance-broker employed by B to effect an
insurance on a ship, omits to see that the usual clauses are inserted in
the policy. The ship is after wards lost. In consequence of
the omission of the clauses nothing can be recovered from the
underwriters. A is bound to make good the loss to B.
(d)A, a merchant in England, directs B, his agent at Bombay,
who accepts the agency, to send him 100 bales of cotton by a
certain ship. B, having it in his power to send the cotton,
omits to do so. The ship arrives safely in England. Soon after her arrival
the price of cotton rises. B is bound to make good to A the
profit which he might have made by the 100 bales of cotton at the time
the ship arrived, but not any profit he might have made by
the subsequent rise.
213.Agent’s accounts.—An agent is bound to render proper
accounts to his principal on demand.
214.Agent’s duty to communicate with principal.—It is the
duty of an agent, in cases of difficulty,
to use all reasonable diligence in communicating with his
principal, and in seeking to obtain his
instructions.
215.Right of principal when agent deals, on his own account,
in business of agency without
principal’s consent.—If an agent deals on his own account in
the business of the agency, without first
obtaining the consent of his principal and acquainting him
with all material circumstances which have
come to his own knowledge on the subject, the principal may
repudiate the transaction, if the case shows,
either that any material fact has been dishonestly concealed
from him by the agent, or that the dealings of
the agent have been disadvantageous to him.
48
Illustrations
(a)A directs B to sell A’s estate. B buys the estate for himself
in the name of C. A, on discovering that B has bought the
estate for himself, may repudiate the sale, if he can show
that B has dishonestly concealed any material fact, or that the sale has
been disadvantageous to him.
(b)A directs B to sell A’s estate B, on looking over the
estate before selling it, finds a mine on the estate which is unknown
to A. B informs A that he wishes to buy the estate for
himself, but conceals the discovery of the mine. A allows B to buy, in
ignorance of the existence of the mine. A, on discovering
that B knew of the mine at the time he bought the estate, may either
repudiate or adopt the sale at his option.
216. Principal’s right to benefit gained by agent dealing on
his own account in business of
agency.—If an agent, without the knowledge of his principal,
deals in the business of the agency on his
own account instead of on account of his principal, the
principal is entitled to claim from the agent any
benefit which may have resulted to him from the transaction.
Illustration
A directs B, his agent, to buy a certain house for him. B
tells A it cannot be bought, and buys the house for himself. A may,
on discovering that B has bought the house, compel him to
sell it to A at the price he gave for it.
217.Agent’s right of retainer out of sums received on
principal’s account.—An agent may retain,
out of any sums received on account of the principal in the
business of the agency, all moneys due to
himself in respect of advances made or expenses properly incurred
by him in conducting such business,
and also such remuneration as may be payable to him for
acting as agent.
218. Agent’s duty to pay sums received for
principal.—Subject to such deductions, the agent is
bound to pay to his principal all sums received on his
account.
219.When agent’s remuneration becomes due.—In the absence of
any special contract, payment
for the performance of any act is not due to the agent until
the completion of such act; but an agent may
detain moneys received by him on account of goods sold,
although the whole of the goods consigned to
him for sale may not have been sold, or although the sale
may not be actually complete.
220.Agent not entitled to remuneration for business
misconducted.—An agent who is guilty of
misconduct in the business of the agency, is not entitled to
any remuneration in respect of that part of the
business which he has misconducted.
Illustrations
(a) A employs B to recover, 1,00,000 rupees from C, and to
lay it out on good security. B recovers the 1,00,000 rupees; and
lays out 90,000 rupees on good security, but lays out 10,000
rupees on security which he ought to have known to be bad,
whereby A loses 2,000 rupees. B is entitled to remuneration
for recovering the 1,00,000 rupees and for investing the 90,000
rupees. He is not entitled to any remuneration for investing
the 10,000 rupees, and he must make good the 2,000 rupees to B.
(b)A employs B to recover 1,000 rupees from C. Through B’s
misconduct the money is not recovered. B is entitled to no
remuneration for his services, and must make good the loss.
221. Agent’s lien on principal’s property.—In the absence of
any contract to the contrary, an agent
is entitled to retain goods, papers and other property,
whether movable or immovable of the principal
received by him, until the amount due to himself for
commission, disbursements and services in respect
of the same has been paid or accounted for to him.
Principal’s duty to agent
222.Agent to be indemnified against consequences of lawful
acts.—The employer of an agent is
bound to indemnify him against the consequences of all
lawful acts done by such agent in exercise of the
authority conferred upon him.
49
Illustrations
(a)B, at Singapur, under instructions from A of Calcutta,
contracts with C to deliver certain goods to him. A does not send
the goods to B, and C sues B for breach of contract. B
informs A of the suit, and A authorizes him to defend the suit. B defends
the suit, and is compelled to pay damages and costs, and
incurs expenses. A is liable to B for such damages, costs and expenses.
(b)B, a broker at Calcutta, by the orders of A, a merchant
there, contracts with C for the purchase of 10 casks of oil for A.
Afterwards A refuses to receive the oil, and C sues B. B
informs A, who repudiates the contract altogether. B defends, but
unsuccessfully, and has to pay damages and costs and incurs
expenses. A is liable to B for such damages, costs and expenses.
223.Agent to be indemnified against consequences of acts
done in good faith.—Where one person
employs another to do an act, and the agent does the act in
good faith, the employer is liable to indemnify
the agent against the consequences of that act, though it
cause an injury to the rights of third persons.
Illustrations
(a)A, a decree-holder and entitled to execution of B’s
goods, requires the officer of the Court to seize certain goods,
representing them to be the goods of B. The officer seizes
the goods, and is sued by C, the true owner of the goods. A is liable to
indemnify the officer for the sum which he is compelled to
pay to C, in consequence of obeying A’s directions.
(b)B, at the request of A, sells goods in the possession of
A, but which A had no right to dispose of, B does not know this,
and hands over the proceeds of the sale to A. Afterwards C,
the true owner of the goods, sues B and recovers the value of the
goods and costs. A is liable to indemnify B for what he has
been compelled to pay to C, and for B’s own expenses.
224.Non-liability of employer of agent to do a criminal
act.—Where one person employs another
to do an act which is criminal, the employer is not liable
to the agent, either upon an express or an implied
promise, to indemnify him against the consequences of that
Act1
.
Illustrations
(a) A employs B to beat C, and agrees to indemnify him
against all consequences of the act. B thereupon beats C, and has to
pay damages to C for so doing. A is not liable to indemnify
B for those damages.
(b)B, the proprietor of a newspaper, publishes, at A’s
request, a libel upon C in the paper, and A agrees to indemnify B
against the consequences of the publication, and all costs
and damages of any action in respect thereof. B is sued by C and has to
pay damages, and also incurs expenses. A is not liable to B
upon the indemnity.
225.Compensation to agent for injury caused by principal’s
neglect.—The principal must make
compensation to his agent in respect of injury2
caused to such agent by the principal’s neglect or want of
skill.
Illustration
A employs B as a bricklayer in building a house, and puts up
the scaffolding himself. The scaffolding is unskilfully put up,
and B is in consequence hurt. A must make compensation to B.
Effect of agency on contracts with third persons
226. Enforcement and consequences of agent’s
contracts.—Contracts entered into through an
agent, and obligations arising from acts done by an agent,
may be enforced in the same manner, and will
have the same legal consequences, as if the contracts had
been entered into and the acts done by the
principal in person.
Illustrations
(a)A buys goods from B, knowing that he is an agent for
their sale, but not knowing who is the principal. B’s principal is the
person entitled to claim from A the price of the goods, and
A cannot, in a suit by the principal, set-off against that claim a debt
due to himself from B.
1. See s. 24, supra.
2. Cf. the Indian Fatal Accidents Act, 1855 (13 of 1855).
50
(b)A, being B’s agent, with authority to receive money on
his behalf, receives from C a sum of money due to B. C is
discharged of his obligation to pay the sum in question to
B.
227. Principal how far bound, when agent exceeds
authority.—When an agent does more than he
is authorized to do, and when the part of what he does,
which is within his authority, can be separated
from the part which is beyond his authority, so much only of
what he does as is within his authority is
binding as between him and his principal.
Illustration
A, being owner of a ship and cargo, authorizes B to procure
an insurance for 4,000 rupees on the ship. B procures a policy
for 4,000 rupees on the ship, and another for the like sum
on the cargo. A is bound to pay the premium for the policy on the ship,
but not the premium for the policy on the cargo.
228.Principal not bound when excess of agent’s authority is
not separable.—Where an agent
does more than he is authorized to do, and what he does
beyond the scope of his authority cannot be
separated from what is within it, the principal is not bound
to recognize the transaction.
Illustration
A authorizes B to buy 500 sheep for him. B buys 500 sheep
and 200 lambs for one sum of 6,000 rupees. A may repudiate
the whole transaction.
229.Consequences of notice given to agent.—Any notice given
to or information obtained by the
agent, provided it be given or obtained in the course of the
business transacted by him for the principal,
shall, as between the principal and third parties, have the
same legal consequences as if it had been given
to or obtained by the principal.
Illustrations
(a)A is employed by B to buy from C certain goods, of which
C is the apparent owner, and buys them accordingly. In the
course of the treaty for the sale, A learns that the goods
really belonged to D, but B is ignorant of that fact. B is not entitled to
set-off a debt owing to him from C against the price of the
goods.
(b)A is employed by B to buy from C goods of which C is the
apparent owner. A was, before he was so employed, a servant
of C, and then learnt that the goods really belonged to D,
but B is ignorant of that fact. In spite of the knowledge of his agent, B
may set-off against the price of the goods a debt owing to
him from C.
230.Agent cannot personally enforce, nor be bound by,
contracts on behalf of principal.—In the
absence of any contract to that effect, an agent cannot
personally enforce contracts entered into by him on
behalf of his principal, nor is he personally bound by them.
Presumption of contract to contrary—Such a contract shall be
presumed to exist in the following
cases:—
(1) where the contract is made by an agent for the sale or
purchase of goods for a merchant
resident abroad;
(2) where the agent does not disclose the name of his
principal;
(3) where the principal, though disclosed, cannot be sued.
231.Rights of parties to a contract made by agent not
disclosed.—If an agent makes a contract
with a person who neither knows, nor has reason to suspect,
that he is an agent, his principal may require
the performance of the contract; but the other contracting
party has, as against the principal, the same
rights as he would have had as against the agent if the
agent had been principal.
If the principal discloses himself before the contract is
completed, the other contracting party may
refuse to fulfil the contract, if he can show that, if he
had known who was the principal in the contract, or
if he had known that the agent was not a principal, he would
not have entered into the contract.
51
232. Performance of contract with agent supposed to be
principal.—Where one man makes a
contract with another, neither knowing nor having reasonable
ground to suspect that the other is an agent,
the principal, if he requires the performance of the
contract, can only obtain such performance subject to
the rights and obligations subsisting between the agent and
the other party to the contract.
Illustration
A, who owes 500 rupees to B, sells 1,000 rupees worth of
rice to B. A is acting as agent for C in the transaction, but B has
no knowledge nor reasonable ground of suspicion that such is
the case. C cannot compel B to take the rice without allowing him
to set-off A’s debt.
233.Right of person dealing with agent personally liable.—In
cases where the agent is personally
liable, a person dealing with him may hold either him or his
principal, or both of them, liable.
Illustration
A enters into a contract with B to sell him 100 bales of
cotton, and afterwards discovers that B was acting as agent for C. A
may sue either B or C, or both, for the price of the cotton.
234. Consequence of inducing agent or principal to act on
belief that principal or agent will be
held exclusively liable.—When a person who has made a
contract with an agent induces the agent to act
upon the belief that the principal only will be held liable,
or induces the principal to act upon the belief
that the agent only will be held liable, he cannot
afterwards hold liable the agent or principal respectively.
235. Liability of pretended agent.—A person untruly
representing himself to be the authorized
agent of another, and thereby inducing a third person to
deal with him as such agent, is liable, if his
alleged employer does not ratify his acts, to make
compensation to the other in respect of any loss or
damage which he has incurred by so dealing.
236.Person falsely contracting as agent not entitled to
performance.—A person with whom a
contract has been entered into in the character of agent, is
not entitled to require the performance of it, if
he was in reality acting, not as agent, but on his own
account.
237.Liability of principal inducing belief that agent’s
unauthorized acts were authorized.—
When an agent has, without authority, done acts or incurred
obligations to third persons on behalf of his
principal, the principal is bound by such acts or
obligations, if he has by his words or conduct induced
such third persons to believe that such acts and obligations
were within the scope of the agent’s authority.
Illustrations
(a) A consigns goods to B for sale, and gives him
instructions not to sell under a fixed price. C, being ignorant of B’s
instructions, enters into a contract with B to buy the goods
at a price lower than the reserved price. A is bound by the contract.
(b) A entrusts B with negotiable instruments endorsed in
blank. B sells them to C in violation of private orders from A. The
sale is good.
238. Effect, on agreement, of misrepresentation of fraud, by
agent.—Misrepresentation made, or
frauds committed, by agents acting in the course of their
business for their principals, have the same
effect on agreements made by such agents as if such
misrepresentations or frauds had been made or
committed by the principals; but misrepresentations made, or
frauds committed, by agents, in matters
which do not fall within their authority, do not affect
their principals.
Illustrations
(a) A, being B’s agent for the sale of goods, induces C to
buy them by a misrepresentation, which he was not authorized by
B to make. The contract is voidable, as between B and C, at
the option of C.
(b) A, the captain of B’s ship, signs bills of lading
without having received on board the goods mentioned therein. The bills
of lading are void as between B and the pretended cosignor.
52
CHAPTER XI.—[OF PARTNERSHIP.]Rep. by the Indian Partnership
Act, 1932 (9 of 1932), s. 73
and the Second Schedule.
239. [‘Partnership’ defined.] Rep. by s. 73 and the Second
Schedule, ibid.
240. [Lender not a partner by advancing money for share of
profits.] Rep. by s. 73 and the Second
Schedule, ibid.
241. [Property left in business by retiring partner, or
decreased partner’s preventative.] Rep. by s. 73
and the Second Schedule, ibid.
242. [Servant or agent remunerated by share of profits, not
a partner.] Rep. by s. 73 and the Second
Schedule, ibid.
243. [Widow or child of deceased partner receiving annuity
out of profits, not a partner.] Rep. by s.
73 and the Second Schedule, ibid.
244. [Person receiving portion of profits for sale of
good-will, no a partner.] Rep. by s. 73 and the
Second Schedule, ibid.
245. [Responsibility of person leading another to believe
him a partner.] Rep. by s. 73 and the Second
Schedule, ibid.
246. [Liability of person permitting him self to be
represented as a partner.] Rep. by s. 73 and the
Second Schedule, ibid.
247. [Minor partner not personally liable, but his share
is.] Rep. by s. 73 and the Second Schedule,
ibid.
248. [Liability of minor partner on attaining majority.]
Rep. by s. 73 and the Second Schedule, ibid
249. [Partner’s liability for debts of partnership.] Rep.
bys. 73 and the Second Schedule, ibid.
250. [Partner’s liability to third person for neglect or
fraud of co-partner.] Rep. by s. 73 and the
Second Schedule, ibid.
251. [Partner’s power to bind co-partners.] Rep. by s. 73
and the Second Schedule, ibid.
252. [Annulment of contract defining partner’s rights and
obligations.] Rep. by s. 73 and the Second
Schedule, ibid.
253. [Rules determining partner’s mutual relations, where no
contract to contrary.] Rep. by s. 73 and
the Second Schedule, ibid.
254. [When Court may dissolve partnership.] Rep. by s. 73
and the Second Schedule, ibid.
255. [Dissolution of partnership by prohibition of business.]
Rep. by s. 73 and the Second Schedule,
ibid.
256. [Rights and obligations of partners in partnership
continued after expiry of term for which it was
entered into.] Rep. by s. 73 and the Second Schedule, ibid.
257. [General duties of partners.] Rep. by s. 73 and the
Second Schedule, ibid
258. [Account, to firm, of benefit derived from transaction
affecting partnership.]Rep. by s. 73 and the
Second Schedule, ibid.
259. [Obligations, to firm, of partner carrying on
business.] Rep. by s. 73 and the Second Schedule,
ibid.
53
260. [Revocation of continuing guarantee by charge by change
in firm.] Rep. by the Indian
Partnership Act, 1932 (9 of 1932), s. 73 and the Second
Schedule.
261. [Non-liability of deceased partner’s estate for
subsequent obligations.] Rep. by s. 73 and the
Second Schedule, ibid.
262. [Payment of partnership debts, and of separate debts.]
Rep. by s. 73and the Second Schedule,
ibid.
263. [Continuance, of partners rights and obligations after
dissolution.] Rep. by s. 73and the Second
Schedule, ibid.
264. [Notice of dissolution.] Rep. by s. 73and the Second
Schedule, ibid.
265. [Right of partners to apply for winding-up after
termination of partnership.] Rep. by s. 73 and
the Second Schedule, ibid.
266. [Limited-liability partnerships, incorporate
partnerships, and joint-stock companies.] Rep. by s.
73and the Second Schedule, ibid.
SCHEDULE.—[Enactments repealed.] Rep. by the Repealing and
Amending Act, 1914 (10 of 1914),
s. 3 and the Second Schedule.
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