Module III - Indian Contract Act 1872 - Part 3

Indian Contract Act 1872 - Part III

Law of Indemnity & Guarantee (Ss. 124-125, Ss. 126-129, 132-147) – Concept, Essentials elements of Indemnity and Guarantee, Contract of Indemnity vs. Guarantee, Modes of Discharge of Surety.
Law of Bailment (S. 148, 152-154, 162, 172, 178, 178A, 179) – Concept, Essentials of Bailment, Kinds of Bailment, Rights and Duties of Bailor and Bailee                                                                                                                                   Law of Pledge – Concept, Essentials of valid Pledge, Lien - concept, Difference between Pledge and Lien, Rights of Pawnor & Pawnee. (Ss. 173, 174, 177)
Law of Agency (Ss. 182-185, 201-209) – Concept, Modes of creation of Agency, Modes of termination of Agency, Rights& Duties of Principal and Agent.

INDEMNITY : 

Indemnity means to compensate or to make good the loss.

Sec. 124  - "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."

Indemnifier (promisor) 

Indemnity holder (promisee)

ESSENTALS OF CONTRACT OF INDEMNITY :

1. Actual loss to promisee.

2. An Object or Consideration must be Lawful.

3. Definition is not complete and exhastive.

4. Indemnity may be express or implied.

GUARANTEE :

Section 126 : A contract of guarantee is a contract to perform the promise or to discharge the liability of third person in case of his default.

Guarantor 

PRINCIPAL DEBTOR : The person against whose default guarantee is given is called the principal debtor.

Creditor 

ESSENTIALS OF CONTRACT OF GUARANTEE :

1. Tripartite privity of contract

There are 3 contracts

2. Consideration for Guarantee.

3. primary and secondary liabilities.

4. Surety's distinct promise to be made liable.

5. No misrepresentation in the contract of Guarantee

6. Writing is not essential.

7. Liability must be legally enforceable..

8. Law as to bank guarantee

Aim is security of creditor.

DISTINCTION BETWEEN CONTRACT OF INDEMNITY AND CONTRACT OF GUARANTEE

1. Definition.

2. One or Three Contracts

3. Two or Three Parties.

4. Nature of Liability.

5. Aim of Contract.

6. Contingency.

7. Suit against third person.

CONTRACT OF BAILMENT

Section 148 : “A bailment is the delivery of goods from one person to another for some purpose , upon a contract, that they shall, when the purpose is accomplished, returned or otherwise disposed of according to the directions of the person delivering them.

Bailor – Bailee

Essentials of Contract of Bailment :

1.     1. Delivery of Goods from one person to another.

3.                      Actual or Constructive.

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         Vs

Vishalakshmi

      2. Contract for accomplishment of some purpose

      3. Return of specific goods to the bailor.

4.       4. Change of possession and not of ownership

5.       5. Bailment of only movable goods.

6.       6. Consideration.

 

Classification of Bailment :

1.       Bailment for safe deposit.

2.       Bailment for hire.

3.       Commodatum Bailment.

4.       Bailment by Pledge.

5.       Bailment for Carriage.

6.       Bailment for repairs.

On the basis of reward :

Gratuitous Bailment

Non Gratuitous Bailment

 

Duties and Liabilities of Bailor :

1.       To disclose known faults.

2.       To bear extraordinary expenses.

3.       To receive back the goods.

4.       To indemnify the Bailee in case of defective title.

5.       To indemnify the Bailee for the Loss in case of premature termination of Gratuitous Bailment.

6.       Give possession of goods to bailee.

 

Rights of Bailor :

1.       Bailor’s right to enforce Bailee’s duties :

2.       Bailor’s right to avoid contract :

3.       Bailor’s right to demand return of Goods at any time in Gratuitous Bailment.

4.       Bailor’s right to sue a wrongdoer.

5.       Bailor’s right to have a share in compensation.

 

 

Bailee’s Duties and Liabilities :

1.       To take reasonable care of the goods bailed.

2.       Not to make unauthorized use of the goods.

3.       To return the goods.

4.       Bailee’s responsibility when goods are not duly returned.

5.       Bailee is not responsible to re-delivery of goods to bailor without title.

6.       Bailee’s duties not to mix the goods with his own goods.

 

 

 Rights of Bailee

 1. Delivery of Goods to one of the several joint bailors of goods.

 2. Delivery of the goods to the bailor without title.

 3. Right to apply to the court to stop delivery of the goods.

 4. Bailee's Lien.

Pledge 

Section 172 : The bailment of goods as a security for payment of debt or performance of promise is called pledge.

Pledger / Pawnor  - Pledgee / Pawnee

Essentials of Pledge :

1. Bailment of goods as security.

2. Bailment of only movable goods.

3. Actual or constructive delivery of goods.

4. Juridicial or De Jury Possession of Goods. 

 

 

Lien :

A lien may be defined as a right of a person to detain or retain the goods or property, already in possession, but belonging to another person, until some debt or claim of the goods is satisfied. 

 

Difference between Pledge and Lien :

1. Security or Right to Retain.

2. Right to sell or retain the goods.

3. Creation by Law or Contract.

4. Possession

Rights of a Pawnee (Pledgee)

1. Pawnees right to retainer.

2. Pawnees right to retainer for subsequent advances.

3. Pawnee's right when Pawnor makes default.

Rights of a Pawnor (Pledgor)

1. Right to get back the goods.

2. Right to redeem the debt.

3. Preservation and Maintenance of goods.

4. Rights of an ordinary debtor.

CONTRACT OF AGENCY

Agent

Principal

Who can appoint an agent ?

Who can be an agent ?

Is consideration necessary to create an agency ?

MODES OF TERMINATION OF AGENCY

1. Termination of agency by act of the parties.

a. Agreement

b. Revocation by the principal.

c. Renouncing.

d. Completion of Performance.

Termination of agency by operation of Law

a. Death

b. Insolvency

c. Insanity.

Other Modes  of Termination.

a. Destruction of subject matter

b. Principal becoming an alien enemy.

c. Dissolution of Company

d. Termination of sub - agents authority.

e. Expiry of time.

AGENT'S DUTIES TO HIS PRINCIPAL

1. Agents duties to conduct the principal's business as per his directions.(S. 211)

2. To conduct business with skill and diligence. (S. 212)

3. To render accounts to his principal (S. 213)

4. To communicate with the principal in case of difficulty. (S. 214)

5. Not to deal on his own accounts without principal's consent. ( S. 215 & S. 216)

6. Agents duty to pay sums received for principal. ( S. 217 - S. 218)

7. To protect and preserve the interest of the principal ( S. 209)

8. Not to make secret profits.

9. Not to use information against the principal.

10. Not to set up adverse title.

11. Not to delegate authority.

Principle's duties to his agents.

1. To indemnify the agent against consequences of all the lawful act. (S. 222)

2. To indemnify the agent against consequences of acts done in good faith (Section 223)

3. Principal not liable for criminal acts of the agent. (S. 224)

4. To compensate the agent for injury caused by principal's neglect. (S. 225)

5. Principal's duty to pay the agreed commission.