MODULE 2

THE CONTRACT ACT 1872

The main object of Contract Act is to introduce clarity in business transactions. The law of contracts differs from other branches of law. It determines the circumstances in which promises made by parties to a contract shall be legally binding on them.

DEFINITIONS

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 or OFFER A proposal, when accepted, becomes a PROMISE of the offerer When a person to whom the proposal is made, signifies his assent thereto, the PROPOSAL is said to be ACCEPTED The person making the proposal is called the "PROMISOR", and the person accepting the proposal is called "PROMISEE

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; Every promise and every set of promises, forming the consideration for each other, is an AGREEMENT;

Promises which form the consideration or part of the consideration for each other are called RECIPROCAL PROMISES

An agreement enforceable by law is a CONTRACT Therefore CONTRACT = Agreement + Enforceability by Law. AGREEMENT = Offer + Acceptance + Enforceability by Law

Section 2(h) defines: An agreement enforceable by law is a contract.

Therefore there must be :

An agreement The agreement should be enforceable by law.

ARE ALL AGREEMENTS A CONTRACT??

All agreements are not contracts. Only those agreements enforceable by law are contracts.

AGREEMENT

Every promise and every set of promises, forming the consideration for each other, is an AGREEMENT.

CHARACTERISTICS OF AGREEMENT

Plurality of persons Consensus ad-idem

An agreement should be made to more than one person

There should be identity of minds

KINDS OF AGREEMENTS
Kinds of Agreements

Valid agreements

Invalid agreements

VALID AGREEMENTS

The one which is enforceable by law.

Eg: A contract which is done in par with a legal agreement. Sale deed.

INVALID AGREEMENTS Invalid agreements

Void

Voidable

Unenforceable

Illegal

TYPES OF CONTRACT

Validity

Mode of formation

Performance

VALIDITY

VOIDABLE CONTRACT: 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.
VOID AGREEMENT: An agreement not enforceable by law is said to be void. A void agreement does not create any legal right or obligation. Such agreement is void-ab-initio from the beginning itself. A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. In this case when the contract was entered into, may be valid and binding on the parties as per law, but subsequently it has become void. E.g., in the case of import contract, the agreement is enforceable, but if subsequently war brakes out then the agreement becomes void contract.

ILLEGAL AGREEMENTS: an illegal agreement is one, which transgresses (against) some basic rule of Public Policy or is of criminal in nature or is immoral. ALL ILLEGAL AGREEMENT IS VOID, BUT ALL VOID AGREEMENTS ARE NOT ILLEGAL. An illegal agreement is not only void between the immediate parties but has its further effect that even the collateral transactions to it become tinted with illegality. A collateral transaction is one, which is subsidiary, incidental or auxiliary to the principal contract.

UNENFORCEABLE CONTRACT: An unenforceable contract is one which cannot be enforced in a court of law because of some technical defect such as absence of consideration or absence of contract in writing. The parties to the contract may fulfill their obligations but in the event of breach of contract the other party cannot enforce it.

MODE OF FORMATION

Express contracts: If the terms of the contract are expressly agreed upon (whether by words spoken or written) at the time of formation of contract. Implied contracts: in this case the contract comes into existence by the acts or conducts of the parties E.g., Getting into a Public bus.

Quasi contract: strictly speaking quasi contracts are not contracts. A contract is one, which is entering into with the consent of the parties to the contract. A quasi contract is one, which is created by law. It is based on the principle that a person shall not be allowed to enrich himself unjustly at the expense of another.
E.g., Mr. A contracts to pay B Rs.20000 if Bs house is burnt. This is a contingent contract.

Contingent Contract: a type of contract- to do or not to do something, if some event, collateral to such contract does not happen

PERFORMANCE

Executed contract: An executed contract is one in which both the parties have performed their respective obligation. Executory contract: An executory contract is one where one or both the parties to the contract have still to perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory contract.

Unilateral contract: A unilateral contract is one in which only one party has to perform his obligation at the time of the formation of the contract, the other party having fulfilled his obligation at the time o the contract or before the contract comes into existence.

Bilateral contract: A bilateral contract is one in which the obligation on both the parties to the contract is outstanding at the time of the formation of the contract. Bilateral contracts are also known as contracts with executory consideration

ESSENTIALS OF A VALID CONTRACT

All agreements are contracts if they are made with: Offer and Acceptance Intention to create a legal relationship Lawful Consideration Capacity of the Parties Free Consent Lawful Object Certainty and Possibility of Performance Legal formalities If any of the above is missing, the contract becomes void

OFFER AND ACCEPTANCE

E.g., Mr. A has 3 cars. He asked Mr. B are you ready to purchase my car for Rs. 2 lakhs.

There must be minimum two parties to an agreement.

I.e. one party making the offer (also called as offerer/proposer/promisor) and the other accepting it (also called as offeree/proposee/promisee/acceptor)

The terms of offer must be definite

Acceptance must be unconditional.

OFFER MEANING
A person is said to have made a proposal/offer, when he 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

OFFER - KINDS OF OFFER:

E.g., When A says to B, Will you purchase my house at Chennai for Rs. 3 lakhs. .

Express offer - When offer is made by express spoken or written words

E.g., When a transport company runs a bus on a particular route, there is an implied offer by the transport co. to carry passengers for a certain fare. The acceptance of the offer is complete as soon as a passenger boards the bus.

Implied offer - An offer may also be implied from the conduct of the parties or the circumstances of the case.

E.g., If Mr. A asks to B, for his blue car for Rs. 2,00,000/-, Mr. C cannot accept the offer.

Specific offer - When an offer is made to a definite person, it is said to be Specific Offer. It can be accepted by the person to whom it is made. General offer When an offer is made to the world at large .

ESSENTIALS REGARDING OFFER

The offer must be given with an intention to create legal relationship - A social invitation even if it is accepted, does not create a legal relationship because it is not intended so.
The terms of the offer must be definite: the terms of the offer must be definite and certain and must not be ambiguous or vague.

Offer must be communicated: an offer to be complete must be communicated to the person to whom the offer is made. Mere by acting to the terms of the offer without knowledge, the offer cannot be treated as accepted. An acceptance of offer in ignorance of offer is no acceptance and does not confer any right on the acceptor.

Offer may be conditional: When the offer is subject to conditions, they must be clearly communicated to the offeree. If the person accepts the offer without the knowledge of the conditions the offeror cant claim the fulfillment of conditions. But the conditions are clearly expressed, then offeree can plead ignorance

Offer must not contain a term that noncompliance of which may be assumed to amount to acceptance: the person making the offer cannot say that if acceptance is not communicated by a certain time, the offer would be considered as accepted. statement of price is not an offer: a mere declaration of intention or a mere statement of price is not construed as an offer to sell

ACCEPTANCE

When a 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 Acceptance may be implied or expressed. In express acceptance- it could be either expressed in written or spoken , while that given by conduct is termed as implied acceptance.

LEGAL RULES TO ACCEPTANCE

Unconditional - An acceptance in order to be binding must be absolute/complete and unconditional. The acceptance must be to all terms of offer. Communicated to the offeror Must be given in the prescribed mode - if the acceptance is not according to mode prescribed, or some usual or reasonable, there is no contract.

Given in a reasonable time - if any time limit is specified, the acceptance must be given within that time. If no time limit is specified by the offeror, then it must be given

Must be given by the parties, to whom the offer is made - When an offer is made to a particular person, it can be accepted by him alone. If it is accepted by another person, there is no valid acceptance Must be given before the offer lapses or withdrawn

It cannot precede an offer Once the offer is rejected it cannot be accepted by the offeree, unless the offeror renews the offer It cannot be implied for the silence - the acceptance of an offer cannot be implied from the silence of the offeree, unless the offeree has, by his previous conduct inducted that his silence means the acceptance

LAPSE OR TERMINATION OF OFFER

I. By communicating the notice of revocation - Offeror can give notice of revocation to offeree but before the acceptance is complete as against him. e.g., At an auction sale, A makes the highest bid of Bs goods. He withdraws the bid before the fall of the hammer. The offer has been revoked before its acceptance. II. Lapse of Time - If the time is fixed in the offer then offer revokes at a fixed time is over, otherwise after the reasonable time. e.g., A seller on Thursday offered wool to a purchaser and gave him 3 days time to accept. The purchaser accepted the offer on Monday, by that time A had sold the wool. Held, the offer had lapsed.

III. By non-fulfillment by the offeree of a condition

precedent to acceptance E.g., S a seller agrees to sell certain goods subject to the condition that B, the buyer, pays the agreed price before a certain date. S had sold the wool. If before the date buyer did not pay then the offer is revoked.

IV. By death or insanity of the offeror provided the offeree comes to know it before acceptance. But If he accepts an offer in ignorance of the death or insanity of the offeror, the acceptance is valid.

V. By counter offer - When offer is accepted with some modifications in the terms of the offer, then it amounts to counter offer. By putting counter offer the original offer comes to an end. E.g. A asks B, Are you ready to purchase my flat for 10 lakhs. B asks A, Are you ready to sell it to Rs. 8 lakhs. Bs question to A is a counter offer. E.g. An offeree agreed to accept half the quantity of goods offered by the offeror on the terms and conditions as would have applied to the full contract. Held, there was no contract as there was a counter offer to the offer

VI. If an offer is not accepted according to the prescribed or usual mode provided the offeror gives notice to the offeree within a reasonable time that the acceptance is not according to the prescribed or usual mode. If the offeror keeps quiet, he is deemed to have accepted the acceptance.
VII. If the law is changed. An offer comes to an end if the law is changed so as to make the contract contemplated by the offer illegal or incapable of performance.

VIII. Destruction of subject matter: - A offers B his cow for Rs. 4500/- In the mean time, the cow dies due to snake bite. The offer is lapsed. Rejection of offer: - An offeree may reject the offer. Once he does that he cannot subsequently accept it. Rejection of the offer may be express or implied. Express Rejection: The offeree may reject the offer expressly, i.e., by words written or spoken. This is effective only when notice of rejection reaches the offeror. Implied Rejection: Rejection of the offer is implied by law- where the offeree makes a counter-offer or where the offeree gives a conditional acceptance

REVOCATION OF OFFER
Revocation means taking back or Withdrawal or cancellation.

COMMUNICATION OF REVOCATION OF OFFER

The communication of a revocation is complete as against the person who makes it (i.e. for the revoking party), 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; (i.e. when the letter of revocation is posted.)

E.g., A Proposes, by a letter, to sell a house to B at a certain price. The letter is posted 15th May. It reaches B on 20th May. A revokes his offer by a telegram on 19th May. The telegram reaches B on 21st May. The revocation is complete as against A when the telegram is dispatched, i.e., on 19th May. It is complete as against B when he receives it, i.e., on 21st May.

(For the opposite party) as against the person to whom it is made, when it comes to his knowledge (when the letter reaches him)

TIME FOR REVOCATION OF PROPOSALS AND ACCEPTANCE

Ex: Mr. A proposes by a letter sent by post to sell his house to Mr. B. the letter is posted on the 1st of the month. Mr. B accepts the proposal by a letter sent by post on the 4th. The letter reaches Mr. A on the 6th.

A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

Mr. A may revoke his offer at any time before Mr. B posts his letter of acceptance, i.e., 4th but not afterwards Mr. B may revoke his acceptance at any time before the letter of acceptance reaches Mr. A, i.e., 6th, 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.

LOSS OF LETTER OF ACCEPTANCE IN POSTAL TRANSIT:

Acceptance is complete as against the offeror as soon as the letter of acceptance is posted.

The contract is complete even if the letter of acceptance goes astray or is lost through an accident in the post.
But in order to bind the offeror, it is important that the letter of acceptance is correctly addressed, adequately stamped and posted, Otherwise the acceptance is not complete

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 fulfill a condition precedent to acceptance; or (4) by the death or insanity of the Proposer, if the fact of the death or insanity comes to the knowledge of the acceptor before acceptance.

ESSENTIALS OF A VALID CONTRACT

Intention to create legal relationship

When two parties enter into an agreement their intention must be to create a legal relationship between them.

In Balfour v Balfour,a husband agreed to pay $20 to his wife every month while he was abroad. On failure of pay the wife sued him for the recovery of amount. It was held that it was a domestic agreement which do not intend to create legal relations

If there is no such intention to create legal relationship , there can be no contract between the parties.

ESSENTIALS OF A VALID CONTRACT

Lawful Consideration

E.g., A agrees to sell his car to B for Rs.15000/-, for As promise the consideration is Rs.15000/- and for Bs promise the consideration is the car.

When a party to an agreement promises to do something, he must get something in return. This something in return is defined as consideration.

LEGAL RULES TO CONSIDERATION

Move at the desire or request of promisor - An act constituting consideration must have been done at the desire or request of the promisor, if it is done at the desire of the third party or without the desire of the promisor it will not be a good consideration. It may move from the Promisee or any other Person This means that as long as there is a consideration for a promise it is immaterial who has furnished it. But a stranger to the consideration will be able to sue only if he is a party to the contract

E.g., A borrows Rs. 20,000/- from B at a rate of 10% p.a. but A fails to pay the amount. B

is now about to file a suit and A agrees now to pay a higher rate of interest. B agrees for not filing a suit. This forbearance is a valid consideration.

It may consist of an Act or Abstinence (means not doing something) Consideration can be past, present or future

It need not be adequate - Consideration as said something in return and something this something in return need not be equal in value to Something given. The law requires that the contract must be supported by consideration and not the adequate consideration. Must be real & not illusionary - There is no real consideration in the following cases: Physical impossibility: A promises to put life into Bs dead wife on the consideration of Rs.999. As promise is physically impossible to perform. Legal impossibility: A owes Rs.500 to B, he promises to pay Rs.50 to C, the servant of B, who inreturn promise to discharge A from the liability. This is legally impossible, because C cannot discharge A from the debt due to B. Uncertain consideration: A engages B for doing certain work and promises to pay a Reasonable some. There is no recognized method of ascertaining the Reasonable Some. The promise is unenforceable due to uncertainty.

Should not be illegal - the consideration given for an agreement must not be unlawful. A consideration to the contract must not be against Public Policy, Immoral and illegal

CL: There was a promise to pay to the vakil an additional sum if the suit was successful. Held, the promise was void for the want of consideration. The vakil was under a pre-existing contractual obligation to render the best of his services under the original contract. (Ramachandra Chintaman vs. Kalu Raju)

It must be something which the promisor is not already bound to do: a promise to do what one is already bound to do, either by general law or under an existing contract, is not a good consideration for the new promise, since it adds nothing to the pre-existing legal or contractual obligation.

EXCEPTION TO THE RULES OF CONSIDERATION

Eg: On a birthday party of A, his father Mr. B promises to give him Rs. 10000/-. Mr. B puts his promise in writing and gets it registered it. It is a valid consideration.

Where an agreement is expressed in writing and registered under the law for the time being in force for the registration of the documents and is made on account of natural law and affection between parties standing to the near relation to each other, it is enforceable even if there is no consideration

Promise to pay a time-bared debt: A promise to pay a time-bared debt by the debtor is enforceable provided it is made in writing and signed by the person to be charged therewith or by his agent. The debt must be such of which the creditor might have enforced payment but for the law for the limitation of suits Completed gifts Compensation for the past voluntary services Charitable subscription

E.g. P finds Ss purse and gives it to him. S promises to give P Rs. 100/- This is a contract i.e., A promise, to compensate, wholly or in part, a person, who has already voluntarily done something for the promisor, is enforceable, even though without consideration

Compensation for the past voluntary services - is binding.

DOCTRINE OF PRIVITY OF CONTRACT

Meaning: The general rule is that only the parties to a contract can sue and be sued upon the contract. In other words, if a person is not a party to the contract (i.e., a stranger to contract), he cannot sue. It implies the mutuality of will and legal bonding between the parties. It refers to the relationship between the parties who have entered into a contract. Stranger to Contract V. Stranger to Consideration
A who is indebted to B, sells his property to C. C promises to pay off the debt to B. When C fails to pay; B has no right to sue C, because he is a stranger to contract.

CAPACITY TO CONTRACT

Every person is competent to contract who is of: the age of majority according to the law to which he is subject, sound mind, and is not disqualified from contracting by any law to which he is subject. Section 11 declares the following persons to be incompetent to contract. Minors Persons of unsound mind Persons disqualified by any law for the time being in force. Idiot Lunatic with unsound mind Alien enemy Convicts

MINOR

According to Section 3 of the Indian Majorities Act, 1875, a minor is a person who has not completed eighteen years of age. In the following two cases, he attains majority after twenty one years of age:
Where

a guardian of a minors person or property has been appointed under the guardian and wards Act, 1890, or the superintendence of a minors property is assumed to be court of wards.

Where

The rules governing minors agreements are based on two fundamental rules:

The first rule is that the law protects minors against their own inexperience and against the possible improper designs of those more experienced. The second rule is that, in pursuing the above object, the law should not cause unnecessary hardship to person who deals with minors.

Legal rules of Minors:

A minor mortgaged his house in favour of a money lender to secure a loan of Rs.20, 000/- Subsequently the minor sued for setting a side the mortgage, stating that he was underage when he executed the mortgage. Held, the mortgage was void and, therefore, it was cancelled. Further the money lender requested for the repayment of the amount advanced to the minor as part of the consideration for the mortgage was also not accepted (Mohiri Bibi vs. Dharamodas Ghose)

An agreement with minor is void- ab-initio

Case law: M, Aged 17, agreed to purchase a second hand scooter for Rs.5000/from N. he paid Rs.200/- as advance and agreed to pay the balance the next day and collect the scooter. When he came with the balance money next day, N told him that he has changed his mind and offered to return the advance. N cannot avoid the contract, though M may, if he likes. (Sharafat Ali v/s Noor Mohd)

He can be a Promisee or a Beneficiary: incapacity of minor to enter into a contract means incapacity to bind him-self by a contract. There is nothing that debars him from being a beneficiary. Such contract may be enforced at the option of the minor and not the other party.

Case

law: M, A minor, borrowed Rs.5000/- from L and executed a Promissory note in favour of L. after attaining the majority, he executed another Promissory note in settlement of the first note. The second Promissory note is void for the want of consideration. (Indran Rama Swamy v/s Anthiappa Chettiar)

He can always plead minority: even if he has, by misrepresenting his age, induced the other party to contract with him, he cannot be sued either in contract or in tort for fraud because if the injured party were allowed to sue for fraud, it would be giving him an indirect means of enforcing the void agreement.

Ex: Mr. M, a minor, obtains a loan by mortgaging his property. He is not liable to refund the loan not only that, even his mortgaged property cannot be made liable to pay the debt.

If he has received any benefit under a void agreement, he cannot be asked to compensate or pay for it: section 65 which provides for restitution in case of agreements discovered to be void does not apply to the minor

There can be no specific performance of the contract with minor, since agreement with minor is void-ab-inito: Cant file a suit for specific non performance. But if a contract is entered into on his behalf by his Parents / guardian then the same can be enforced by or against the minor provided the contract is : (a) within the scope of the authority of the Parent / guardian, and (b) for the benefit of the minor.

He cannot enter into a contract of Partnership: a minor can be admitted as a beneficiary of Profits of a Partnership firm already in existence, with the consent of all the existing Partners. But he cannot be admitted as a Partner

He can be an agent: an agent is merely connecting link between Principal and third Party. The movement the Principal and third party comes into contract with each other, the agent drops out with any personal liability, hence a minor can act as agent.

His Parents / guardian are / is not liable for the contracts of the minor: the exemption to this rule is that where the minor act as an agent of his Parent / guardian, the Parent / guardian shall be liable for his acts.

He cannot be adjudged as an insolvent.

He cannot be a shareholder in a Company. He can be member in a Trade union: A Person who attained the age of 14 years can be admitted as a member.

Case

law: G, a minor, entered into a contract with R, a noted billiards player, to pay him certain sum of money to learn the game and play matches with him during his world tour. R spent time and money in making arrangements for billiards matches. Held, G was liable to pay as the agreement was one for necessaries as it was in effect for teaching, instructions and employment and was reasonable and for the benefit of the infant. (Robarts v/s Gray)

Minors liability for necessaries: a minor is liable to pay out of his property for necessaries supplied to him or to anyone whom he is legally bound to support (Section 68). The claim arises not out of contract but out of what are called Quasi-Contracts. Again it is only the property of the minor, which is liable for meeting the liability arising out of such contracts. He is not personally liable.

UNSOUND MIND

A person is said to be of sound mind for the propose of making a contract, if, at the time when he makes it, he is capable of understanding the terms of the contract and To form a rational judgment as to its effect upon his interest. Therefore, if both of the above is not satisfied, then is a person suffering of unsound mind.Eg: Idiots Lunatics Drunkards A person, who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind

FEW OTHER PERSONS ARE ALSO PROHIBITED TO ENTER INTO A CONTRACT.

Alien Enemy. Insolvent. Foreign Sovereigns, their diplomatic staff and accredited representatives of the foreign states. Corporations (beyond MOA and AOA). Convicts

FREE CONSENT

According to section 14, an agreement can be treated as a valid contract when the consent of the parties are free and not under any undue influence, fear or pressure etc. The consent of the parties must be genuine and free consent.

A consent is said to be free when it is not caused by (i) coercion, (ii) undue influence (iii) fraud, Vitiating elements in Contract (iv) misrepresentation, or (v) mistake.

If the contract made by any of the above four reason, at the option of the aggrieved party it could be treated as a void contract. If the agreement induced by mutual mistake the agreement would stand void or canceled

VITIATING ELEMENTS IN A CONTRACT

E.g.

Coercion

Coercion" is the committing, or threatening to commit, any act/crime or the unlawful detaining, or threatening to detain, any property or any act forbidden by the Indian Penal Code 1860 with the intention of causing any person to enter into an agreement. Threat to commit Suicide amount to Coercion

A threatens B to shoot him if he does not release him from debt which A owes to B. This is coercion.

UNDUE INFLUENCE

When a special kind of relationship exists between the parties such that one party is in a position to exercise undue influence over the other. And such party uses his position to dominate the will of the other party to obtain an unfair advantage over the other party Essentials: There must be two persons. The relationship should satisfy between them. One should dominate the other. There must be unfair advantage. It is a moral character

Some of the examples where undue influence exists between the following relations: Superior and subordinate Principal and agent Case Laws: A Spiritual guru induced his devotee Doctor and Patent to gift him the whole of his property in turn of a Promoter and Company promise of salvation of the devotee. Held, the consent Solicitor and Client of the devotee was given under the undue influence. Father and Son (Mannu Singh v/s Umadat Teacher and Student Panday) Spiritual guru and devotee

FRAUD

Essentials: There must be a representation There must be two persons There must be an active concealment of the fact The person making the representation does not believe it to be true There must be an intention of the proposer or the promiser to deceive the other person The other person must have relied upon the representation and must have been deceived and suffered loss The representation must have been made before the Commencement of the contract The representation must relate to a material fact which exists now or existed in the past

MISREPRESENTATION

Essentials:
It

must be representation of material fact It must be made before the conclusion of the contract It must be wrong but the person making it believes it to be true It must have been made without any intention of deceiving the other Person It need not be made directly made to the Plaintiff

MISTAKE

Mistake may be defined as an erroneous belief about something.

It may be of two kinds mistake of law

Mistake of own country Mistake of foreign country

mistake of fact
A bilateral mistake Unilateral mistake

MISTAKE OF LAW

Mistake of law of the country is no excuse, is a well-settled rule of law. A Party to the contract cannot be allowed to ask for relief on the ground that the act was done in ignorance of law.

E.g.

A & B purchases and sells a plot of land of 195 sq.mts. in Dublin, believing that a house can be constructed over it. Actually in Dublin house cannot be constructed on a plot less than 200 sq.mts. The contract can be avoided.

Mistake of law of a foreign country: such mistake is treated as mistake of fact, and such agreement is treated as void

MISTAKE OF FACT

E.g. A person was induced to sign a gift deed (will), on the presentation that it was a power attorney. E.g. X goes to a shop and introduces himself as Y and purchases some goods on credit. The contract is void.

Unilateral Mistake - Unilateral means only one party to a contract is under a mistake of fact. A contract can be avoided on the ground of unilateral mistake, if it can be shown that mistake was caused by Fraud or misrepresentation.
Types:

A unilateral mistake may beMistake as to the nature of transaction Mistake as to identity of party

Bilateral

Mistake - Where both the parties to an agreement are under a mistake as to a matter of fact, the agreement is void. Types Mistake as to existence of subject-matter Identity of subject-matter Title of subject-matter Quality of subject-matter Quantity of subject-matter Price of subject-matter E.g. A agrees to buy a horse from B at certain price. The horse was dead at the time of bargain and neither party was aware about the fact. Held, the agreement is void.

LAWFUL OBJECTS

The object of the agreement must not be illegal or unlawful It is forbidden by law - An act is forbidden by law when it is punishable under the criminal law or is prohibited by special legislation or regulations made by the competent authority. is of such nature that, if permitted it would defeat the provisions of any law

 is

fraudulent - an agreement if any made for any fraudulent purpose is void. Thus, an agreement with an intention of fraud of creditors with a view to defeat their right is void. of involves or implies, injury to the person or property of another - injury means wrong, harm or damage. Person means ones body, property includes both movable and immovable.

the Court regards it as immoral - an agreement, the consideration or object of which is immoral, e.g., agreement between husband and wife for future separation, is unlawful (Sumitra Devi v/s Sulekha Kundu)

opposed to public policy An agreement which is injurious to the general public or is against the interest of the society

Agreement not declared void or illegal: Agreements which have been expressly declared void or illegal by law are not enforceable at law; hence does not constitute a valid contract.

 CERTAINTY AND POSSIBILITY OF PERFORMANCE The terms of agreement must be certain and not vague. If it is not possible to ascertain the meaning of the agreement, it is not enforceable at law. Also, agreements to do impossible acts cannot be enforced

LEGAL FORMALITIES

A contract may be oral or in writing. If, however, the law requires for a particular contract, it should comply with all the legal formalities as to writing, registration and attestation.

IE;

The contract act does not insist that the agreement must be in writing, it could be oral. But, in some cases the law strictly insist that the agreement must be in writing like agreement to sell immovable property must be in writing and should be registered under the Transfer of Property Act, 1882. These agreement are valid only when they fulfill the formalities like writing, registration, signing by the both the parties are completed. If these legal formalities are not completed, it cannot be treated as a valid contract.

PERFORMANCE OF A CONTRACT

It means fulfilling of their respective legal obligations created under the contract by both the promisor and promisee.

Performance by all the parties of the respective obligations is the normal and natural mode of discharging or terminating a 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. As representatives are bound to deliver the goods to B, and B is bound to pay Rs. 1,000 to As 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 As representative or by B [section 37]. The performance can be actual performance or attempted performance, i.e. offer to perform.

Section 38 specifies that 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.

WHO CAN DEMAND PERFORMANCE???

A person cannot acquire rights under a contract to which he is not a party. ( T.G Venkataraman vs. State of Madras)

It is only the promisee who can demand performance of the promise under a contract .

BY WHOM CONTRACTS MUST BE PERFORMED ???

By the promisor himself By the promisor or his agent By the legal representatives

Performance by a third person

BY WHOM CONTRACTS MUST BE PERFORMED ???

Section 40 specifies: That 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.

Obligations of Parties to Contracts Actual Performance: If the promisor makes an offer of performance to the promisee and the offer to perform is accepted by the promisee.
Attempted

Performance: If the promisor makes an offer of performance to the promisee; but the offer to perform is not accepted by the promisee (also called offer to perform or tender).

PERSONS LIABLE FOR, AND ENTITLED TO, PERFORMANCE (SEC 40 & SEC 42)

Persons liable for Performance: Promisor Agent of Promisor Any of the several joint promisors Legal Representatives of a Promisor

Persons entitled to Performance: Promisee Agent of Promisee All the joint promisees together Legal Representatives of a Promisee

PERFORMANCE OF JOINT PROMISE

Jointly and severally liable unless otherwise provided Claim from other joint promisors, if he is compelled to perform the whole promise or makes a default in performance of his promise Where one of the joint promisors is released, other joint promisors shall continue to be liable.

DISCHARGE OF A CONTRACT

Discharge of a contract means termination of the contractual relations between the parties to a contract. A contract is said to be discharged when the rights and obligations of the parties under the contract come to an end.

MODES OF DISCHARGE OF CONTRACT

Performance

Lapse of time

Discharge of contract
Agreement

Operation of law

Impossibility

Breach

DISCHARGE BY PERFORMANCE

(a) By Actual Performance: A contract is said to be discharged by actual per-formance when the parties to the contract perform their promises in accordance with the terms of the contract. (b) By Attempted Performance or Tender: A contract is said to be discharged by attempted performance when the promisor has made an offer of performance to the promisee but it has not been accepted by the promisee.

DISCHARGE BY MUTUAL AGREEMENT Since a contract is created by mutual agreement, it can also be discharged by mutual agreement. A contract can be discharged by mutual agreement in any of the following ways: a) Novation b) Rescission c) Alteration d) Remission

Novation [Section 62] Novation means the substitution of a new contract for the original contract. Such a new contract may be either between the same parties or between different parties. The consideration for the new contract is the discharge of the original contract.

Example i) A owes money to B under a contract. It is agreed between A, Band C that B shall henceforth accept C as his debtor, instead of A. The old debt of A to B no longer exists and a new debt from C to B has been contracted.

Rescission [Section 62]

Rescission means cancellation of the contract by any party or all the parties to a contract. Example X promises Y to sell and deliver 100 Bales of cotton on 1st Oct. at his godown and Y promises to pay for goods on 1st Nov. X does not supply the goods. Y may rescind the contract.

Alteration [Section 62] Alteration means a change in the terms of a contract with mutual consent of the parties. Alteration discharges the original contract and creates a new contract. However, parties to the new contract must not change. Example X promises to sell and deliver 100 bales of cotton on 1st Oct. and Y promises to pay for goods on 1st Nov. Afterwards, X and Y mutually decide that the goods shall be delivered in five equal installments at Zs godown. Here, original contract has been discharged and a new contract has come into effect.

Remission [Section 63] Remission means acceptance by the promisee of a lesser fulfillment of the promise made. According to Section 63, Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit. Example i) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.

DISCHARGE BY OPERATION OF LAW

A contract may be discharged by operation of law in the following cases:

By

Death of the Promisor By Insolvency By Unauthorised Material Alteration By the Identity of Promisor and Promisee

Example: X draws a bill receivable on Y who accepts the same. X endorses the bill in favour of Z who in turn endorses in favour of Y. Here, Y is both promisor and promisee and hence the other parties are discharged.

DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE

The effects of impossibility of the performance of a contract may be discussed under the following two heads:

(a) Effects of Initial Impossibility (b) Effects of Supervening Impossibility

Effects of Initial Impossibility [Section 56] Initial impossibility means the impossibility existing at the time of making the contract. The effects of initial impossibility are as under.

Case: Where both the promisor and promisee know about the initial impossibility. Effect: Such agreement is void ab initio. Example X undertakes to put life into the dead wife of Y. This agreement is void. Case: Where both the promisor and promisee do not know about the initial impossibility Effect: Such agreement is void on the ground of mutual mistake. Example X agrees to sell his horse to Y. Unknown to both the parties; the horse was dead at the time of making the agreement. This agreement is void.

Case: Where the promisor alone knows about the initial impossibility Effect: Such promisor must compensate for any loss which such promisee sustains through the nonperformance of the promise. Example 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.

Effects of Supervening Impossibility [Section 56] Supervening impossibility means impossibility which does not exist at the time of making the contract but which arises subsequently after the formation of the contract.

Case: Where an act becomes impossible after the contract is made. Effect: The contract to do such an act becomes void when the act becomes impossible. Case: Where an act becomes unlawful by reason of some event beyond the control of promisor. Effect: The contract to do such an act becomes void when the act becomes unlawful.

Case: Where the promisor alone knows about the impossibility.

Effect: Such promisor must compensate the promisee for any loss which such promisee might have suffered on account of non-performance of the promise.

Case: Where an agreement is discovered to be void or where a contract becomes void. Effect: Any person who has received any benefit under such agreement or contract is bound to restore it or to make compensation for it, to the person from whom he received it. [Section 65] Example: X contracts to sing for Y at a concert for Rs 1,000, which is paid in advance. X is too ill to sing. X must refund Rs 1,000 to Y.

DISCHARGE BY LAPSE OF TIME

A contract is discharged if it is not performed or enforced within a specified period, called period of limitation. The Limitation Act, 1963 has prescribed the different periods for different contracts.
E.g: Period of limitation for exercising right to recover a debt is 3 years, and to recover an immovable property is 12 years. The contractual parties cannot exercise their rights after the expiry of period of limitation.

DISCHARGE BY BREACH OF CONTRACT

A contract is said to be discharged by breach of contract if any party to the contract refuses or fails to perform his part of the contract or by his act makes it impossible to perform his obligation under the contract.

A breach of contract may occur in the following two ways: Anticipatory Breach of Contract: Anticipatory breach of contract occurs when party declares his intention of not performing the contract before the performance is due. Actual Breach of Contract :Actual breach of contract occurs in the following two ways: (i) On Due Date of Performance: If any party to a contract refuses or fails to perform his part of the contract at the time fixed for performance, it is called an actual breach of contract on due date of performance.

During the Course of Performance: If any party has performed a part of the contract and then refuses or fails to perform the remaining part of the contract, it is called an actual breach of contract during the course of performance.

Remedies for Breach

Remedies

Common law

Equitable remedies

Damages

Recission

Restitution

Specific Performance

Injunction

Quantum meruit

Anton Piller order

DAMAGES

Main purpose of damages is to enable the innocent party to receive MONETARY COMPENSATION. Damages are a common law remedy and awarded as of right. They are calculated on the basis of looking at what the position of the plaintiff would have been if the contract had been properly performed. They are assessed on a once and for all basis at the date of breach.

DAMAGES

Steps in determining an award of damages

DAMAGES

Causation Is there a causal connection between the breach and the loss suffered? The plaintiff must show that the breach of contract by the defendant was the cause of the loss. The general test used by the courts is the same as that used in assessing damages in general the but for test CASE: Alexander v Cambridge Credit Corporation Ltd (in rec) (1987) Note the but for test is not an exclusive test, e.g. there is the common sense test, which was approved in: CASE: Chappel v Hart (1998)

DAMAGES

Remoteness The loss or injury must not be too remote, i.e. losses must be reasonably related to the contract. Hadley v Baxendale (1854) indicates 2 types of loss are recoverable: loss arising from the breach in the usual or normal course of things; and loss arising from special or exceptional circumstances where it can be shown that the defendant had actual knowledge of the plaintiffs needs CASE: Victoria Laundry v Newman Industries [1949) CASE: Commonwealth of Australia v Amann Aviation Pty Ltd (1991)

Damages

DAMAGES

The aim of damages is to put the injured party back as close to the position they would have been in had the breach never occurred.

Damages are recoverable for provable or economic loss as well as: expectation losses reliance losses CASE: Commonwealth of Australia v Amann Aviation Pty Ltd (1991) distress and disappointment CASE: Jarvis v Swan Tours [1972] CASE: Jackson v Horizon Holidays [1975] CASE: Baltic Shipping Co Ltd v Dillon (1993) physical injury CASE: Grant v Australian Knitting Mills Ltd [1936]
Difficulty in calculation is not a ground for disallowing a claim CASE: Howe v Teefy (1927)

DAMAGES

Mitigation of damages

The plaintiff must take reasonable steps to minimise or mitigate their loss. Failure to do so can result in a reduction of damages.
CASE: Payzu v Saunders [1919]

Mitigation is a question of fact and the onus of proof is on the defendant.

Damages
Damages

Nominal
(No actual loss suffered)

Ordinary (Usual remedy)

Exemplary (punitive)

General

Special

TYPES OF DAMAGES

The type of damages that will be awarded will be determined by the seriousness of the breach and whether the contract has specified the amount of damages to be paid in the event of breach:

nominal damages plaintiffs legal rights have been infringed but they have suffered no actual loss CASE: Charter v Sullivan [1957] ordinary damages loss suffered by the plaintiff as a result of the breach and can be either general or special damages exemplary damages punitive and may be awarded for non-economic loss CASE: Jackson v Horizon Holidays [1975]

TYPES OF DAMAGES

Liquidated damages Awarded where a plaintiff is able to sue for a specified sum, which must be a genuine or bona fide pre-estimate of the actual loss that will flow from the breach. Unliquidated damages Awarded where an injured party has no fixed sum in mind and leaves the court to decide the amount. Penalty A threat to ensure performance and not enforceable because they are not a genuine pre-estimate of the damage that will result from the breach CASE: Dunlop Pneumatic Tyre Co v New Garage and Motor Co Ltd [1915]

Equitable Remedies
Equitable Remedies

Recission

Restitution

Specific Performance

Injunction

Quantum meruit

Anton Piller Order

These are discretionary remedies at equity and are only granted where damages are not an adequate remedy.

EQUITABLE REMEDIES

Rescission A right available to an injured party. Does not require the intervention of the court. Entitles the injured party to set the contract aside and is only available for breach of a condition. Substantial restoration must be possible as the injured party is restored to their pre-contractual position.

The right to rescission is lost if the injured party: continues with the transaction; fails to act or act within a reasonable time; or if an innocent third party acquires an interest in the
subject matter.

EQUITABLE REMEDIES

Restitution

Is based on the concept of unjust enrichment and sometimes referred to as quasi-contract. The plaintiff must establish: the benefit was at the plaintiffs expense; it would be unjust to allow the defendant to keep that benefit or enrichment; and CASE: Pavey & Matthews Pty Ltd v Paul (1987) the defendant must obtain a benefit or enrichment; the defendant has no defences to rely upon.

EQUITABLE REMEDIES

Restitution can be used if: the defendant has received a sum of money from the plaintiff and there has been a total failure of consideration or a mistake of fact; CASE: McCormack v Commonwealth (1984) under a mistake of law; CASE: David Securities Pty Ltd v Commonwealth Bank (1992) under duress or compulsion. Restitution makes use of the doctrine of quantum meruit CASE: Pavey & Matthews Pty Ltd v Paul (1987) CASE: Planche v Colburn (1831) CASE: Sumpter v Hedges [1898]

EQUITABLE REMEDIES

Specific Performance

A remedy compelling performance.

It is only granted at the courts discretion where the court can supervise the implementation of the contract. It is not available in contracts involving personal services because the court is unable to adequately supervise the task CASE: Ryan v Mutual Tontine Westminster Chambers Assoc [1893]

EQUITABLE REMEDIES

Injunction

It is a restraining order which prevents a person from breaking a contract.

It is a discretionary remedy and aims at enforcing negative promises. It normally cannot be used where it would achieve the same result as specific performance.

EQUITABLE REMEDIES

Mareva Injunction Prevents the defendant from removing assets from the courts jurisdiction. CASE: Mareva Compania Naviera SA v International Bulk Carriers SA, The Mareva [1975] Anton Piller Order Prevents a defendant from disposing of any evidence before trial. CASE: Anton Piller KG v Manufacturing Processes Ltd [1976] Quantum Meruit Arises where there has been part-performance, and only where it can be implied that payment would be made.

STATUTES OF LIMITATIONS

An injured party can loose their right to an action unless they act within a certain time period.
The statutes of limitations of the States and Territories determine the time limits within which an injured party must take action. Prevents actions remaining open indefinitely.

VOID AGREEMENTS

Agreements by incompetent parties Agreements under mutual mistake of fact material to the agreement Agreement with unlawful consideration or object (a) immoral & illegal agreements (b) agreements opposed to public policy Agreements unlawful in part Agreements without consideration Agreements in restraint of marriage Agreements in restraint of legal proceedings Agreements which are uncertain and ambiguous Agreement by way of wager or wagering agreements Agreements to do impossible acts

WAGERING AGREEMENTS
Example: P and Q enter into an agreement Definition: that if Australias team wins the test match, Agreement between two P will pay Rs. 100 andparties if it loses Q will pay Rs. 100 to P One promises to pay money or moneys worth On happening of some uncertain event In consideration of other partys promise to pay If that event does or does not happen

BAILMENT, BAILOR AND BAILEE

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 instructions of the person delivering them. (Section 148)

Bailor is the person delivering the goods Bailee is the person to whom the goods are delivered.

ESSENTIALS OF BAILMENT
Contract Delivery of the Goods Delivery of possession of goods by Bailor to Bailee Possession (not ownership) is transferred Modes of Delivery Purpose (goods must be returned after a specific purpose is accomplished) Consideration (generally in the form of money payment)

DUTIES OF THE BAILOR

Disclose faults in goods (Sec 150) Bear Expenses (Sec 158) Indemnify(secure in respect of harm) Bailee (Sec 159 & Sec 164) Receipt of Goods back on termination of bailment

DUTIES OF BAILEE (OR) RIGHTS OF BAILOR

Care of Goods (Sec 153) To act consistently with the terms (Sec 153) Compensation for damage to goods (Sec 154) Not to mix goods bailed with others With bailors consent (Sec 155) Without bailors consent Return of the goods bailed (Sec 160) Compensation for failure to return (Sec 161) Increase or profit from goods bailed (Sec 163) Delivery of goods to Joint Bailors (Sec 165)

RIGHTS OF BAILEE Enforcement of Bailors duties Delivery of goods to Joint Bailors Delivery of goods when Bailors title is defective (Sec 166) Right of Lien (Secs 170 & 171) Wrongful deprivation of goods (Secs 180 & 181)

PLEDGE
Pledge is a Bailment of goods as security for payment of a debt or performance of a promise Pawnor is the Bailor of such goods Pawnee is the Bailee of the goods Eg., A borrows Rs.200 from B and keeps his watch as security for payment of the debt, the bailment of watch is a pledge.

ESSENTIAL ELEMENTS OF A CONTRACT OF PLEDGE

Delivery of Goods (may be actual or constructive) Security Goods Only goods can be pledged. Goods includes Shares, Documents, Promissory Notes, Bills of Exchange or Valuable things. However, money i.e., currency notes, cannot be pledged.

RIGHTS OF A PAWNEE/PLEDGEE
Right of Retainer (Sec 173) Retainer for subsequent advances (Sec 174) Reimbursement of Expenses (Sec 175) Rights in case of default by Pawnor (Sec 176)

Suit Retention/Sale

of Goods Surplus/Deficit on Sale No Notice

Right against true owner (Sec 178A)

RIGHTS OF A PAWNOR
To get back goods To redeem goods before sale (Sec 177) Right to Notice of Sale Goods in proper condition

PLEDGE V. BAILMENT

Pledge Purpose: specific Sale of goods: Pledgee has a right of sale of pledged on default of pawnor Use of goods: No right

Bailment Purpose: other purposes like repairs, safe custody, etc., Sale of goods: No right Use of goods: Can use as per the terms of the contract

LAW OF AGENCY

Definitions (Sec 182) Agent Is a person employed To do any act for another, or To represent another in dealings with third parties Principal Is the person For whom such act is done, or Who is so represented

WHO CAN APPOINT AGENT (SEC 183)

Any person who Has attained the age of majority and Is of sound mind, can appoint another person as his agent to act on his behalf with an authority to bind him.

WHO MAY BECOME AGENT (SEC 184)

As between Principal and the third party, any person can become an Agent. Even a person who

Has

not attained majority; or Is of unsound mind, can become an agent of another.

ESSENTIALS OF A CONTRACT OF AGENCY

Test for Agency Rules as to Agency (Maxim: qui facit per alium facit per se) Elements of Agency

Intention Express/Implied Agreement Consideration

not necessary Capacity to employ agent Capacity to be employed as agent

KINDS OF AGENTS

Based on Authority
Universal Agent
General Agent Special Agent

Based on Nature of Work

Commercial

or Mercantile Agents Non-mercantile Agents

DUTIES OF AN AGENT/RIGHTS OF THE PRINCIPAL

To act as per Principals directions (Sec 211) Skill and diligence (Sec 212) Render proper Accounts (Sec 213) Communicate with Principal (Sec 214) Not to deal on his account (Secs 215 & A employs B to recover Rs. own 1 lac from C. Through Bs misconduct the 216) money is not recovered from C. B is not entitled to remuneration for his services, shall received make good the loss sustained. Pay all and sums (Sec 218) No remuneration for business misconducted (Sec 220)

The Principal instructed his agents to deliver goods only against cash but agent delivered them on credit. Held Agent was liable for the price which purchaser to pay (Paulauthority Bier V. Chottalal) A, anthe agent for salefailed of goods, having to sell on credit, sells to B on credit, without making proper and usual enquiries as to his solvency. B, at the time of such sale is insolvent. A must make compensation to his principal in respect of any loss thereby sustained.

CONTD.,
Not to make secret profits Not to disclose information Upon termination of agency (Sec 209) Not to delegate authority (Sec 190) Liable to pay damages

RIGHTS OF AN AGENT/DUTIES OF THE PRINCIPAL

Right of Retainer (Sec 217) Right to Remuneration (Secs 219 & 220) Right of Lien (hold property to recover debt Sec 221) Right to be indemnified (Secs 222, 223, & 224) Right to compensation (Sec 225) Right of stoppage in transit Liability of Principal inducing others (Sec 237)

A residing in Delhi and has a house at Kolkata. He appoints B MODE OF CREATION OF AGENCY in Kolkata, by a Power of Attorney, as a caretaker of his house. A owns a shop in Noida but lives in Delhi. He visits the shop occasionally which is managed by B. B usually orders from C in As formay the shop, and pays them out of As with As knowledge. * Agent have to sell goods instantly if it funds is of perishable nature and name B has an implied authority from A to order from goods from C in his name for cannot withstand until further instructions Principal. the shop. sent by rail was not taken delivery at the destination. The station * A horse master has to feed the horse. The Station master becomes an Agent by A without authority, B. compensate Later B behalf sells him. them to C on his own Meaning: When a buys person doesfor some act on of another without necessity and hence thegoods, owner shall account; Bs conduct implies aact ratification of purchase made for him by A. others knowledge, the may be ratified(to approve or sanction such Agency by Estoppel or confirm) or disown by the other person. When he opts to ratify the same, he is bound by the acts as if he had expressly authorised the Agency by Holding Out Pperson consigns * Partners goods are to N instructions as Agents not each to other sell below and also a fixed of the price. Firm. J to do theconsidered act onwith his behalf (Secof 196). enters into an agreement N (who does not the reserve * The management of a with Company is also considered to indicate act as an Agents of price) for the purchase of entire lot at a sum below reserve price. P keeps Agency in case of Necessity the Company. quiet. P is stopped from later denying did not have authority P allows his servant A to buy goods for that him N on credit from the C and pays to for sell below the reserve price. them regularly. On one occasion, P pays A cash to purchase goods. A purchases goods on credit and pockets the money. C can recover the price from P since through previous dealings, P has held out A as his Agent.

Express Agreement Implied Agreement

Agency by Ratification By operation of Law

CONDITIONS FOR A RELATIONSHIP TO BE AN AGENCY BY NECESSITY:

Agent should neither be in a position nor have any opportunity to communicate with his Principal within the time available. Actual and definite commercial necessity to act promptly. Acted bonafide and for the benefit of his Principal. Adopted the most reasonable and practicable cause. Possession of the goods belonging to his principal and which are subject of contract.

TERMINATION OF AGENCY

By Act of Parties Agreement (mutual agreement) Revocation by Principal thro notice Renunciation by Agent thro reasonable notice By Operation of Law Completion of Business Impossibility of performance Expiry of fixed period of time Insanity or death of Principal or Agent Destruction of subject matter Insolvency of Principal Termination of Sub-agents authority Dissolution of a Company Principal or Agent becoming Alien enemy