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ContentsI. INDEX i-iiII SHORT NOTES INDEX iii-ivIII ESSAY QUESTIONS AND ANSWERS 1-81IV. SHORT NOTES 82-94III. DICTIONARY OF CONTRACTS-II 95-100IV. IMPORTANT QUESTIONS 101

Indemnity and Guarantee 11 Contract of Indemnity 12 Contract of Guarantee 33 Contract of Indemnity and Contract of Guarantee 44 Liability of Surety 55 Continuing Guarantee 76 Discharge of Surety 97 Rights of Surety 11

Bailment 128 Bailment 129 Rights and Duties of Bailor 1510 Finder of lost goods 17

Pledge 1911 Pledge 1912 Agency 2313 Delegatus non potest delegare 2614 Creation of agency 3015 Ratification 3216 Termination of agency 33

The Sale of Goods Act, 1930 3517 Sale or Contract of sale 3518 Distinction between Sale and Agreement to Sell 3619 Goods 38

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20 Conditions and Warranties 3921 Implied Conditions and Warranties 4222 Caveat emptor 4523 Transfer of property or Passing of Ownership 4724 Nemo dat quod non habet or Transfer of Title 4925 Rights and Duties of the Seller and Buyer 5026 Unpaid Seller 5227 Auction Sale 54

The Indian Partnership Act, 1932 5628 Partnership and Its Essential elements 5629. Distinction between Partnership firm and Joint

Hindu Family Firm 5730 Kinds of Partnership 5831 Law of Partnership is an extension of Law of Agency 5932 Mode of Determining the existence of Partnership 6033 Registration of Partnership Firm 6234 Rights and Duties of Partners 6335 Relations of Partners to Third Parties 6436 Minor partner 6537 Rights and liabilities of Incoming and Outgoing Partners 6738 Dissolution of Partnership and Firm 68

The Negotiable Instrument Act, 1981 7139 Negotiable Instrument and its Special

characteristics 7140 Promissory note 7241 Bill of Exchange 7442 Cheque 7543 Crossing of Cheque 7744 Holder in Due Course 7945 Dishonour of a Cheque 80

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CONTRACT OF INDEMNITYSection-124

CONTRACT OF INDEMNITY: Indemnity means ‘to compensate’ or ‘to makegood the loss’. Indemnifier is a promisor and Indemnity-holder is a prom-isee. According to Section 124 Contract of Indemnity is ‘A contract bywhich one party promises to save the other party from loss caused tohim by the conduct of the promisor himself, or by the conduct of anyother person’. Illustration: A contracts to indemnify B against the conse-quences of any proceedings, which C may take against B in respect of acertain sum of 200 rupees. This is a contract of indemnity.A person who promises to indemnify is called ‘indemnifier’ and the personto whom the promise of indemnity is made is called ‘indemnity-holder’ or‘indemnified’. It is a protection against loss. This section applies only whenthe loss is caused by human agency. Hence, a contract of insurance inwhich insurer promises to pay compensation in the even of loss by fire is notcovered by the definition of Section 124, but they are valid contracts underSection 31. Promise to indemnify may be express or implied under Englishlaw. Illustration: B says to the shopkeeper-‘let A have the goods, I willsee you paid’. This is a contract of indemnity.Essentials:

1. There must be two parties2. There must be a promise to save the other party from loss3. The loss may be due to promisor himself or any other person.4. The contract must fulfil all the essentials of a valid contract.

Rights of Indemnity Holder (Promisee): Section 1251. Right to recover damages2. Right to recover costs3. Right to recover sums paid under compromise

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4. Right to sue for specific performance of the contract.Letter of credit: A letter of credit deals with bargain between the bankerand the vendor of the goods which imposes on the banker an absolute obli-gation to pay. An obligation under an irrevocable letter of credit to pay, hisbuyer-customer cannot instruct him not to pay. A letter of credit sometimeslooks like and is analogous to a contract of guarantee.Liability of Indemnifier: Under English Law no action can be takenagainst the indemnifier until the indemnity-holder had suffered actual loss.Under Indian law, a person must be indemnified before he can be indem-nified.Gajanan Moreshwar v. Moreshwar Madan AIR 1942 Bom 302 at 304the Bombay High Court held that if the indemnified has incurred a liabilityand that liability is absolute, he is entitled to call upon the indemnifier tosave him from that liability and to pay it off. This judgement was alsorecommended by the Law Commission in its 13th report on Indian Con-tract Act, 1872Oriental Insurance Co. Ltd v. Meena Variayal and Others 2007 (3)ALD 99 (SC) a regional manager of a company died in an accident when hewas using the car given to him by the company. The Court held that in theabsence of any special contract relating to indemnity, the insurance com-pany is not liable to indemnify

CONTRACT OF GUARANTEE

CONTRACT OF GUARANTEE: Guarantee means assurance or promise. Ac-cording to Section 126 Contract of Guarantee is: “A contract of guaran-tee’ is a contract to perform the promise, or discharge the liability, of a thirdperson in case of his default.” Con ract of guarantee is also known as‘contract of surety-ship’.The person who gives the guarantee is called the ‘surety’, the person inrespect of whose default the guarantee is given is called ‘principal debtor’,and the person to whom the guarantee is given is called the ‘creditor’. Aguarantee may be either oral or written. (S126) It may be expressed oreven be implied. A contract of guarantee must be supported by considera-tion. e.g. A gives a loan of Rs 10000 to B and C promises to A that if Bdoes not repay loan, he (C) will pay. This is a contract of guarantee. Here

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B is the principal debtor, C is the surety, and A is the creditor.Essentials of Guarantee

1. There must be an existing recoverable principal debt or2. There must be duty to perform an obligation3. Primary liability in some person4. There must be tripartite agreement5. Concurrence of all the three parties6. Essentials of a valid contract must be fulfilled7. There must be consideration (Section 127)8. Writing is not necessary but in England it must be in writing

A guarantee for the past and future debt is invalid but it is enforceable onlywhen some further debt is incurred after the guarantee. All the three partiesto the contract of guarantee must accept the terms of contract. There mustbe a primary liability in some person other than the surety. There is nocontract of guarantee without an element of ‘liability’. Minor is an excep-tion to such rule. The liability of the principal debtor is primary and theliability of the surety is secondary. The principle debtor is liable only whenthere is a default. On failure of principal debtor, the money is claimed fromthe surety and the surety executes promissory note, he becomes a principaldebtor.

Banks and Contract of guarantee: Sometimes, banks on behalf of aparty in a contract may give ‘performance guarantee’ which is otherwiseknown as ‘performance bond’. Banks are bound by such undertaking.

BSES Ltd. v. Fenner India Ltd. and another 2006 SCC 728 The Su-preme Court held that the bank is bound to pay according to the tender of itsguarantee. The relation between the supplier and the customer is immate-rial.Consideration for Guarantee: Section 127: According to Section 127anything done, or any promise made, for the benefit of the principal debtor,may be a sufficient consideration to the surety for giving the guarantee.Like every other contract, a contract of guarantee should also be sup-ported by some consideration. Thus, where a loan is given or goods soldon credit on the basis of a guarantee that is sufficient consideration. Aguarantee without consideration is void.

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Shortnotes IndexActive partner 84Actual delivery 84Agency 84Agency arising after the event 32Agency by estoppel 84Agency by express agreement 30Agency by holding out 84Agency by implied agreement 31Agency by necessity 84Agency by operation of law 32Agency by ratification 31Ascertained goods 38Auction sale 84Bailment 85Bailment for Hire 15Bailment for Reward 15Bailment without reward 15Bill of Exchange 85Broker 85Caveat emptor 85Caveat venditor 85Cheque 85Classification of agents 23Co-agent 85Commission agent 86Condition 86Conditions and warranties 86Constructive delivery 86Contingent goods 39Continuing guarantee 86Contract of Guarantee 86Contract of indemnity 87Contract of sale of goods 87Crossing 87Damping 55Del credere agent 87

Delegatus non potest delegare 87Delivery of possession 14Discharge of surety 87Dishonour of a cheque 87Dissolution 88Dissolution of partnership 68Doctrine of Relation Back 88Dormant partner 88Effect of ratification 33Existing goods 38Expost facto agency 32Factor or Mercantile agent 88Finder of lost goods 88Future goods 88General agent 88General crossing 78Generic goods 39Goods 88Goodwill 89Gratuitous Bailment 89Holder 89Holder in due course 89Implied authority 89Implied bailment 89Implied Conditions 90Implied warranty 90Incoming partner 67Irrevocable agency 34Letter of credit 90Liability of Co-surety 07Liability of Indemnifier 02Liability of Surety 90Lien 90Limited partnership 58Minor partner 90Mutual Agency 90

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Table of CasesA. Subash Babu v. State of A.P 2011 88Akbar Sheikh and others v. State of West Bengal 2009 17Anuradha Kshirasagar v. State of Maharastra 1991 97Arjuna v. State of Orissa 1969 80Asharam and Another v. State of U.P. 2007 80Arvind Kumar & Another v. State of M.P. 2007 33Attorney General v. Lachma Devi, 1986 10B N. Srikantiah v. Mysore State 1958 48Bachan Singh v. State of Punjab, 1980 10Baladin v. State 1956 40Baldevji v. State of Gujarat 1979 52Balkrishna Shetty v. State of Mysore 1966 42Balwant Singh v. State of Punjab 1995 38Barendra Kumar Ghosh v. King Emperor 1924 14 (Postmaster’s Murder Case) 1924 14Basudev v. State of Pepsu 1956 29Bhalchandra v. State of Maharashtra 1968 57Bidhuti Bhusan v. Bhuban Ram 1918 43Byomkesh Battacharya v. L.N. Datta 1978 80C.V. Govindappa and Others v. State of Karnataka 1988 93CBI v. Kishore Singh 2011 49Chahat Khan v. State of Haryana 1972 48Chaman Lal and Others v. State of Punjab and Another 2009 36Chirangi v. State 1952 21Chokkalingam Pillai v. State 1912 71Dara Singh v. Republic of India 2011 36Darshan Singh v. State of Punjab and another 2010 32Deep Chand v. State of Rajasthan 1961 59Devendra and others v. State of U.P. and another 2009 78Devi Lal v. State of Rajasthan 2008 54Dhanonjoy v. Provat Chandra Biswas 1934 82Dr. Vimla v. Delhi Administration 1963 86Gabbu v. State of M.P. 2006 65Ganesh Chandra v. Jiw Raj 1965 30Ganesh D. Savarkar 1909 37Ghanshyam Misra v. State 1957 68

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Shortnotes

A b d uct io n : Ab d u c t io nmeans taking away aperson illegally by force or

deception. According to section 362whoever by force compels, or by anydeceitful means induces, any personto go from any place is said to ab-duct that person. Abduction may becommitted against a person of any ageAbduction is an auxiliary (helping) act.Abetment: Abetment means encour-aging or instigating to commit a crime.A person who helps or encouragesanother to commit a crime is calledan abettor. Eg: A encourages “B”to kill “C”. A is an abettor.It is an of-fence to encourage or instigate an-other to commit crime. Criminal lawpunishes all those who support and en-courage the other to commit crime.Abetment by Aid: Aiding meansassisting or facilitating the commis-sion of crime. It is an offence to as-sist or supply a thing which facilitatethe commission of crime by another.Abetment by Conspiracy: It is anoffence of abetment to engage withone or more persons in a conspiracyto commit an offence. Mere agree-ment is not sufficient there must bean agreement between one or morepersons to do a legal act by illegalmeans, or to do an illegal act.

Abetment by illegal omission:When a person is bound legally to doa thing but deliberately omit doing hisduty, then the person will be liable forabetment by illegal omission.Abetment by instigation: It is anoffence of abetment to provoke, in-cite, urge or encourage another to doa crime. Mere advice is not an abet-ment active suggestion or stimulationto commit crime amounts to instiga-tion. .Accident: Accident means an unex-pected act which results injury to an-other. A man is not criminally respon-sible for unintended and unknownconsequences of his lawful acts donein a lawful manner, by a lawfulmeans, with proper care and caution.Act of public servant: Culpable ho-micide is not a murder if a public ser-vant or a person helping the publicservant exceeds the power given tohim and if the public servant exceedsthe power given to him by law andcauses death by an act, while dis-charging the official duties with goodfaith, without any ill intention, it is nota murder. It is only culpable homi-cide not amounting to murderActus non facit reuim, nisi menssit rea : it means ‘the act itself doesnot constitute crime unless done with

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DictionaryAbandon: leave, forsakeAberration: mental disorderAbolish: do away with, annulAbortion: miscarriageAbsolute: perfect, unconditionalAbusing: misuseAccessories:partners in crimeAccompany:go with, followAccomplice: guilty associateAccomplishment: completionAccord: agreementAccost: speak to someoneAccusation: allegation , blameAccused: charged with crimeAcquittal: dischargeAddicted: habituatedAdministered: givenAdmissible: acceptable ,validAffidavit: a written statementAffray: quarrel , fightAggravated:make worseAiding: help ,assistAmputation: cutting of limbAnnoy: troubleAnnoyance: vexation , troubleApology: begging pardonAppellants: one who appealsApprehension: fearAppropriate: use for oneselfArbitrator: umpireArrears: balance, still dueAssault: attackAssent: consentAtrocities: cruel actsAttempt: trial, behaviourAuxiliary: helping

Averment: assent, affirmBad faith: ill willBailable: which can released undersecurityBarbarous: uncivilized ,rudeBattery: beatingBigamy: marrying somebodywhile being married to somebody elseBlackmail: extortion of moneyby threatsBlasphemous: grossly irreligiousBonafide: good faithBonafide belief: faith of goodnessBreach of duty: violation ofresponsibilityBreach of trust: violation of beliefBurden of proof: responsibility toproveBystander: spectatorCapital punishment: deathpunishmentCattle: cows, sheep and otherdomestic animalsCensure: blame, faultCessation of motion: end ofmovementsChastity: sexual purity, sexualmoralityCheating: deceive ,falsificationCircumstantial evidence: proofbased on inferenceCo-conspirators: co-member ofcriminal planCoercion: compulsion ,forceCognizable offence: crime fallingunder judicial notice

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Author Title, Edition, Publisher and Place

Achuthan Pillai P.S Criminal Law (1995) EasternBook Co, Lucknow.

Gandhi B.M Indian Penal Code (1996), EasternBook Co, Lucknow

Gaur. K.D A Text Book on the Indian PenalCode (1998), Universal, Delhi.

Gaur. K.D Criminal Law: Cases and Materi-als (1999), Butterworths, India

Hidayathullaw, M., et.al., Ratanlal and Dhirajlat’s TheIndian Penal Code (1994 reprint),Wadhwa & Co., Nagpur.

Ratanlan-Dhirajlal Indian Penal Code (1994 reprint)

Reference Books