THE INDIAN CONTRACT ACT,1872

THE INDIAN CONTRACT ACT,1872
ACT No. 9 OF 1872 1*
[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.
1.Short title.-This Act may be called the Indian Contract Act,
1872.
Extent, Commencements.-It extends to the whole of India 2*[except the
State of Jammu and Kashmir]; and it shall come into force on the
first day of September, 1872.
3* 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Statute, Act or Regulation not hereby expressly repealed, nor any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.
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:
(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 It promisee ":
(d) When, at the desire of the promisor, the promisee
or any other person has clone 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 :
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1 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,
a. 4.
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.
2 Subs. by Act 3 of 1951, s. 3 and Sch., for " except Part B
States
3 The words " The enactments mentioned in the schedule hereto are
repealed to the extent specified in the third column thereof but "
were rep. by Act 10 of 1914.
This Act shall come into force in the State of Sikkim on 1-9-1984 vide
Notifn. No. s.o. 641 (E), dated 24.8.1984 Gaz. of India, Exty. Pt.II,
See. 3 (ii).
Extended to and brought into force in Dadra and Nagar Haveli (w.e.f.
1-7-65) by Reg. 6 of 1963, s.2 & Sch. I.
Extended to Goa, Daman and Diu by Reg. 11 of 1963, s.3 & Sch.
Extended to the Union territory of pondicherry by Act 26 of 1968, s.3
and Schedule.
Extended to Laccadive, Minicoy and Amindivi Islands (w.e.f. 1-10-
1967):vide Reg. 8 of 1965, s.3 & Sch.
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(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
CHAPTER I
OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS
3.
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 pro- posal acceptance
or revocation, or which., has the effect of communicating it.
4.
Communication when complete.
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.
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(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.
5.
Revocation of proposals and acceptances.
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.
Illustrations
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.
6.
Revocation how made.
6.Revocation how made.-A proposal is revoked-
(1) by the communication of notice of revocation by the pro
poser 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.
7.Acceptance must be absolute.-In order to convert a proposal
into a promise, the acceptance must(
1) be absolute and unqualified;
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(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.
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.
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.
CHAPTER II
OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
CHAPTER II
OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
10.
What agreements are contracts.
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.
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 subject, 3*and who is of sound mind, and is not disqualified
from contracting by any law to which he is subject.
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1 Subs. by Act 3 of 1951, for " Part A States and Part C States".
2 See e.g., s. 25, infra; the Indian Copyright Act, 1914 (3 of
1914), s. 5 of the First Schedule; the Apprentices Act, 1850 (19 of
1850), s. 8 ; the Conveyance of Land Act, 1854 (31 of 1854), ss. 14
and 18 ; the Carriers Act, 1865 (3 of 1865), ss. 6 and 7 ; the
Merchant Shipping Act, 1894 (57 and 58 Vict., c. 60), s. 24 (poll.
Stat., Vol. II).
3 See the Indian Majority Act, 1875 (9 of 1875).
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12.
What is a sound mind for the purposes of contracting.
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.
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.
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.
15. "Coercion" defined.-"Coercion" is the committing, or
threatening to commit, any act forbidden by the Indian Penal Code, 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. (45 of 1860.)
Explanation.-It is immaterial whether the Indian Penal Code is or
is not in force in the place where the coercion is employed. (45 of
1860.)
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.
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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
was not in force at the time when or place where the act was done.(45
of 1860.)
16.
"Undue influence" defined.
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 Ill 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.
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 agent,2*
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1 Subs. by Act 6 of 1899, s. 2, for the original s. 16.
2 Cf. s. 238, infra;
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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 speak,1* or unless his
silence is, in itself, equivalent to speech.
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.
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.
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1 See s. 143, infra.
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19.
Voidability of agreements without free consent.
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
incumbrance. 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 Al 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.
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.
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1 The words " undue influence " were rep. by Act 6 of 1899, s. 3.
2 Ins., ibid.
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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.
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 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.
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.
22.
Contract caused by mistake of one party as to matter of fact.
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.
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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 Para. 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 Was rep. by Act 24 of 1917, s. 3 and
Sch. II.
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23.
What considerations and objects are lawful and what not.
23.What considerations and objects are lawful and what not.-The
consideration or object of an agreement is lawful, unlessit
is forbidden by law1* ; 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.
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.
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1 See ss. 26, 27, 28 and 30, infra.
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(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.
Agreement void, if considerations and objects unlawful in part.
24.Agreement 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.
25.Agreement without consideration, void, uncles 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
(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.
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1 Subs. by Act 12 of 1891 for "assurances".
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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.
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.
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.
Saving of agreement not to carry on business of which good-will
is sold.-Exception 1.-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.
28.Agreements in restraint of legal proceedings void.- 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 aby 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 that extent.
Saving of contract of refer to arbitration dispute that may
arise.-Exception 1.-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
---------------------------------------------------------------------
1 Exceptions 2 and 3 relating to agreements between partners
upon, or in anticipation of, dissolution of partnership and during
continuance of partnership, respectively were rep. by Act 9 of 1932,
s. 73 and Sch. II. See now ss. 11 and 36 (2) of that Act.
2* Ins. by Act, 1 of 1997, s.2. w.e.f. (8-1-1997).
---------------------------------------------------------------------
31
referred to arbitration, and that only the amount awarded in such
arbitration ?hall be recoverable in respect of the dispute so
referred.
Suits barred by such contracts.-1* When such a contract has been made,
a suit may be brought for its specific performance) and if a suit,
other than for such specific performance, or for the recovery of the
amount so awarded, is brought by one party to such contract against
any other such party, in respect of any subject which they have so
agreed to refer, the existence of such contract shall be a bar to the
suit.
Saving of contract to refer questions that have already arisen.
Saving of contract to refer questions that have already arisen.-
Exception 2.-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
arbitration.2*
29.
Agreements void for uncertainty.
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 I is nothing to show which of
the two prices was to be given. The agreement is void,
30.
Agreements by way of wager 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 The second clause of exception I to section 28 was rep. by Act
1 of 1877. The clause is, however. printed here in italics, because
the Contract Act is in force in certain Scheduled Districts to which
the Specific Relief Act does not apply.
2 Cf. the Arbitration Act, 1940 (10 of 1940).
---------------------------------------------------------------------
32
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.1*
--
Section 294A of the Indian Penal Code not affected.
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 apply.
CHAPTER III
OF CONTINGENT CONTRACTS
CHAPTER III
OF CONTINGENT CONTRACTS
31.
"Contingent contract" defined.
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.
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.
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.
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
---------------------------------------------------------------------
1 Cf. the Gaming Act (8 and 9 Vict., c. 109),s. 18,
---------------------------------------------------------------------
33
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.
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.
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.
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
CHAPTER IV.
OF THE PERFORMANCE OF CONTRACTS
Contracts which must be performed
37.
Obligation of parties to contracts.
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.
34
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.
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 nonperformance,
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,
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 a reasonable 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.
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.
35
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 nights 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.
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.
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.
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.
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.
---------------------------------------------------------------------
1 Subs. by Act 12 of 1891 for "one".
---------------------------------------------------------------------
36
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.
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.
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.
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.
---------------------------------------------------------------------
1 See s. 138, infra.
2 For an exception to s.45 in case of Government securities, see
the Indian Securities Act, 1920 (10 of 1920), s. 4.
---------------------------------------------------------------------
37.
Time and place for performance
46.
Time for performance of promise, when no application is to be made and
no time is specified.
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.
47.Time and place for performance of promise, where time is
specified and no application to be made.-When 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.
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.
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.
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.
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
38
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.
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.
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.
53.
Liability of party preventing event on which the contract is to take
effect.
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
---------------------------------------------------------------------
1 See s. 73, infra.
---------------------------------------------------------------------
39
the other party for any loss which he may sustain in consequence of
the non-performance 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.
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.
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.
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
40
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.1*
56.
Agreement to do impossible act.
56. Agreement to do impossible act. An agreement to do an act
impossible in itself is void.
Contract to do 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.2*
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 non-performance 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.
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.
---------------------------------------------------------------------
1 Cf. ss. 62 and 63, infra.
2 See s. 65, infra. See also the Specific Relief Act, 1877 (I of
1877), s. 13.
---------------------------------------------------------------------
41
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.
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.
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.
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.
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.
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.
42
Contracts which need not be performed
62.
Effect of novation, rescission, and alteration of contract.
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 promise.
63.Promisee may dispense with or remit performance of promise.- Every
promisee may dispense with or remit, wholly or in part, the the
performance of the promise made to him, or may extend the time for
such performance,1* 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 claim.2*
(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.
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
---------------------------------------------------------------------
1 But see s. 135, infra.
2 See s. 41, supra.
3 Subs. by Act 12 of 1891, s. 2 and Sch. II, for "
compensation".
---------------------------------------------------------------------
43
party to such contract, restore such benefit, so far as may be, to the
person from whom it was received.'
65.
Obligation of person who has received advantage under void agreement,
or contract that becomes void.
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.
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 proposal.2*
67.
Effect of neglect of promisee to afford promisor reasonable facilities
for performance.
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 nonperformance of the contract if it is
caused by such neglector refusal.
CHAPTER V.
OF CERTAIN RELATIONS RESEMBLING THOSE CREATED) BY CONTRACT
CHAPTER V
OF CERTAIN RELATIONS RESEMBLING THOSE CREATED) BY CONTRACT
68.
Claim for necessaries supplied to person incapable of contracting, or
on his account.
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
---------------------------------------------------------------------
1 See s. 75, infra.
2 See ss. 3 and 5, supra.
---------------------------------------------------------------------
44
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.1*
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.
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.
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.
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 delivered.2*
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.
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 bailee.3*
72.
Liability of person to whom money is paid or thing delivered by
mistake or under coercion.
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.
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1 The property of a Government ward in Madhya Pradesh is not
liable under this section ; see the C. P. Court of Wards Act, 1899
(C.P. 24 of 1899), s. 31 (1).
2 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.
3 See ss. 151 and 152, infra.
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45
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
CHAPTER VI
OF THE CONSEQUENCES OF BREACH OF CONTRACT
73.
Compensation for loss or damage caused by 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.
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
46
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 180 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
47
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.
(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.
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
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1 Subs. by Act 6 of 1899, s. 4, for the first para. of s. 74.
---------------------------------------------------------------------
48.
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, recogni- zance
or other instrument of the same nature, or, under the provisions of
any law, or under the orders of the 1*[Central Government] or of any
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 A practises 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.
2*(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.]
2*[(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.]
2*[(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.]
2*[(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
---------------------------------------------------------------------
1 Subs. by the A.O. 1937 for "G. of I.".
2 Ins. by Act 6 of 1899, s. 4(2).
---------------------------------------------------------------------
49
of any instalment, the whole shall become due. This is a stipulation
by way of penalty.]
75.
Party rightfully rescinding contract entitled to compensation.
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 nonfulfilment
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.
Sale of goods.
CHAPTER VII.-[Sale of goods.] Rep. by the Indian Sale of Goods
Act 1930 (3 of 1930), s. 65.
CHAPTER VIII.
OF INDEMNITY AND GUARANTEE
CHAPTER VIII
OF INDEMNITY AND GUARANTEE
124.
"Contract of indemnity" defined.
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 indemnityholder when sued.
125.Rights of indemnityholder 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
50
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".
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.
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.
128.
Surety's liability.
128.Surety's liability.-The liability of the surety is coextensive
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".
129."Continuing guarantee".-A guarantee which extends to a series
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
pound 100, for any tea he may from time to time supply to C. B
supplies C with tea to above the value of pound 100, and C pays B for
it. Afterwards B supplies C with tea to the value of pound 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 pound 100.
51
(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.
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.
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.
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.
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 overdraw, and the
bank loses a sum of money. A is
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1 Ins. by Act 24 of 1917, s. 2 and Sch. I.
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52
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.
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 an 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
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.
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.
53
136.
Surety not discharged when agreement made with third person to give
time to principal debtor.
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.
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.
138.
Release of one co-surety does not discharge others.
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.
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
---------------------------------------------------------------------
1 See s. 44, supra.
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54
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.
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.
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.
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.
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.
(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.
55
144.
Guarantee on contract that creditor shall not act on it until cosurety
joins.
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.
implid promise to indemnify surety.
145.implid 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.
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*.
Illustraticns
(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, la and C are liable, as between
them selves, 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 onequarter,
and C to the extent of
---------------------------------------------------------------------
1 See s. 43 supra.
---------------------------------------------------------------------
56
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.
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 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 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.
CHAPTER IX
OF BAILMENT
CHAPTER IX
OF BAILMENT
148.
"Bailment" "bailor",and "bailee" defined.
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.
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.
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
57
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.
1*151.
Care to be taken by bailee.
1*151. 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
bailed.2*
1*152.
Bailee when not liable for loss,etc., of thing bailed.
1*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.
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 ad 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.
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.
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
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1 The responsibility of the Trustees of the Port of Madras
constituted under the Madras Port Trust Act, 1905 (Mad. 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.
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58
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 clue 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.
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.
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 re-mains 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.
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.
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.
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
59
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.
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.
1*161.
Bailee's responsibility when goods are not duly returned.
1*161. 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*
162.
Termination of gratuitous bailment by death.
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.
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.
Illustrdtion
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.
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.
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.
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
---------------------------------------------------------------------
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, see
the Madras Port Trust Act, 1905 (Mad. 2 of 1905).
2 As to railway contracts, see the Indian Railways Act, 1890 (9
of 1890), s. 72.
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60
bailor, the bailee is not responsible to the owner in respect of such
delivery1*.
167.
Right of third person claiming goods bailed.
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.
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.
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 line.
170. Bailee's particular line.-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.
171.
General line of bankers, factors, wharfingers, attorneys and
policybrokers.
171.General line of bankers, factors, wharfingers, attorneys and
policybrokers.-Bankers, factors, wharfingers, attorneys of a High
Court and policy-brokers may, in the absence of a contract to the
contrary,
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1 See the Indian Evidence Act, 1872 (1 of 1872), s. 117.
---------------------------------------------------------------------
61
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 effect.1*
Bailments of Pledges
172.
"Pledge" "pawnor",and "pawnee" defined.
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.
173.Pawnee's right of retainer.-The pawnee 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.
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.
175.Pawnee's right as to extraordinary expenses incurred. The
pawnee 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.
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 pledge 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.
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1 As to lien of an agent, see s. 22 1, infra. As to lien of a
Railway Administration, see the Indian Railways Act, 1890 (9 of 1890),
s. 55.
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62
177.
Defaulting pawnor's right to redeem.
177.Defaulting pawnor's right to redeem.-If a time is stipulated
for the payment of the debt, of 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 them' ; but he must, in that case, pay, in addition, any expenses
which have arisen from his default.
178.
Pledge by mercantile agent.
2*[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 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.
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.
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.
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1 For limitation. see the Indian Limitation Act, 1908 (9 of
1908), Sch. 1, Article 145.
2 Ss. 178 and 178A were subs. by Act 4 of 1930, s. 2, for the
original s. 178.
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63
181.
Apportionment of relief or compensation obtained by such suits.
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.
CHAPTER X
AGENCY
Appointment and authority of agents
182.
"Agent" and "principal" defined.
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.
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.
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.
185.Consideration not necessary.-No consideration is necessary to
create an agency,
186.
Agent's authority may be expressed or implied.
186. Agent's authority may be expressed or implied.-The authority
of an agent may be expressed or implied.1*
187.
Definitions of express and implied authority.
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.
---------------------------------------------------------------------
1 See, however. the Indian Registration, Act, 1908. (16 of 1908),
s. 33. See also the Code of Civil Procedure, 1908 (Act 5 of 1908).
Sch. I, Order III, rule 4.
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64
188.
Extent of agent's authority.
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.
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.
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.
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 subagent
may, or, from the nature of the agency, a sub-agent must, be
employed.
191.
"Sub-agent" defined.
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.
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 to ,the principal, except in case of fraud
or wilful wrong.
65
193.
Agent's responsibility for sub-agent appointed without authority.
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.
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.
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.
Illustrations
(a)A instructs B, a merchant, to buy a ship for him. B employs a
shipsurveyor 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.
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.
66
197.
Ratification may be expressed or implied.
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.
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.
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.
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 chatte1*, 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.
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.
202.Termination of agency where agent has an interest in subjectmatter.-
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.
67
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.
(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.
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.
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.
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.
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.
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.
68
208.
When termination of agent's authority takes effect as to agent, and as
to third persons.
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.
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.
210.
Termination of subagent's authority.
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.
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.
69
212.
Skill and diligence required from agent.
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.
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.
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.
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.
70
Illustrations
(a)A directs B to sell A's estate. B buys the estate for himself
in the name of C. A, oh 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 ` 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.
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.
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.
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.
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.
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
71
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 line on principal's property.
221. Agent's line 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.
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.
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.
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.
72
224.
Non-liability of employer of agent to do a criminal act.
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
Act.1*
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.
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.
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.
(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.
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.
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1 See s. 24, supra.
2 Cf. the Indian Fatal Accidents Act, 1855 (13 of 1855).
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73
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.
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.
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.
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.
74
231.
Rights of parties to a contract made by agent not disclosed.
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.
232.
Performance of contract with agent supposed to be principal.
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.
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.
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.
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.
75
236.
Person falsely contracting as agent not entitled to performance.
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.
237.Liability of principal induving belief that agent's
unauthorised 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 consiggns goods to B for sale, and gives him instructions not to
sell under a gixed 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.
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 hhe 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.
CHAPTER XI.-[Of Partnership.] Rep. by the Indian Partnership Act,
1932 (9 of 1932), s. 73 and Schh. II.
SCHEDULE.-[Enactments repealed.] Rep. by the Repealing and Amending
Act, 1914 (10 of 1914), s. 3 and Sch. II.