EDUCATOR OF DELHI

BA LLB 5th SEMESTER

CONTRACT - II
IMPORTANT QUESTIONS
WITH ANSWERS
BY, MUKESH KIRAR

QUES 1:- Explain the Bailment and its various kinds and essential
requirements. Also explain the rights and duties of Bailee. ( 10 and
20 marks)

ANS :- 1. Meaning of bailment :

The term bailment is derived from French word 'bailor' which
means to deliver. Bailment is a delivery of goods on condition that
the receipent shall ultimately restore them to the Bailor or dispose
of them according to the direction of the Bailee or dispose of them
according to the direction of the Bailor.

The term bailment refers to a legal relationship between two parties

in common law, where assets or property are transferred from a
bailor to a bailee. In this relationship, the bailor transfers physical
possession of a piece of personal property to the bailee for a certain
period of time but retains ownership. There are three different types
of bailment, which benefit the bailor, bailee, or both.

A bailment occurs when someone temporarily transfers property to

another person for a limited time and a specific purpose. However,
ownership of the property is not transferred. This is what
differentiates a bailment from a sale.

2. Definition of bailment

Section 148 of the Indian Contract Act, 1872 defines bailment -

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. In bailment the person
delivering the goods is called the ‘bailor’ and the person to whom
they are delivered is called the ‘bailee’. There are five kinds of
bailment.
Examples - Hiring of goods, car , furniture etc.

The person who delivers the article is referred to as the bailor. The
person who takes the property is referred to as the bailee.
Generally, the elements of delivery, acceptance, and consideration
need to be present for an item to be bailed.

3. Essential elements of bailment

To constitute a contract of bailment, the following

conditions are to be satisfied.

(1) Delivery of possession of goods :

Delivery of goods from one person to another person for some

purpose is an essential elements of bailment. According to Section
149 of the Indian Contract Act, 1872 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 authorised
to hold them on his behalf.
(2) Delivery of possession upon a contract :
There can be no bailment without a contract. all conditions
for valid contract are to be satisfied, such as Competent parties,
free consent lawful object etc.
(3) Return or dispose of goods according to the direction :
In bailment the goods are delivered for specific purpose. after
the purpose is accomplished the goods may be returned to the
bailor in the same or altered direction, condition or maybe disposed
of as directed by bailor. If the person to whom the goods are
delivered is not bound to restore them to the person delivering them
or to deal with them according to the mandate their relationship will
not be that of bailor and bailee.
Different Types of Bailments :-
There are three different types of bailments:

1) A Bailment that Benefits Both the Bailor and Bailee: An

example of this would be parking your car in a paid parking lot.
You would get the benefit of parking your car and the owner of
the lot would get the benefit of the fee that is paid. A bailee
can face liability for damaging the bailed items if they were
negligent.
2) A Bailment that Only Benefits the Bailor: This is referred to as
a gratuitous bailment. Free valet service would be an example
of this because the valet service (bailee) would not be
receiving compensation for parking your car. A bailee can face
liability for damaging the bailed items if they have been
grossly negligent or acted in bad faith.
3) A Bailment that Only Benefits the Bailee: A common example
of this would be checking out a book or movie from the library.
You would be the bailee in this situation because you would be
taking the book or movie. The library (bailor) would receive no
benefit from loaning out the book, but would still expect it to
be returned at the end of the rental period. In this scenario, a
bailee can face liability for basically any damage done to the
bailed item. This is the highest standard of care required out
of the three categories.

When is a Bailment Terminated?

A bailment can be terminated in the following situations:

1) When the Purpose of the Bailment has Ended: For example, if you
remove your parked car from the lot it was parked in, the bailment
will be terminated.

2) At the End of a Fixed Term: If the parties agree that an item will
only be bailed for a specific period of time, the bailment will be
terminated when that time frame ends.

3) If the Bailed Property is Destroyed: If there isn’t a property for

the bailment, then the bailment will naturally end. If One Party Gives
Notice of Termination: This only applies to bailments that have been
set for an indefinite period.
Duties of Bailee and Bailor
As per the section 148 of the Indian Contract Act, 1872, a bailment
is a contract where one person delivers goods to another person for
some purpose. The person delivering the goods is the Bailor and the
person receiving the goods is the Bailee. After the accomplishment
of the purpose, the Bailee needs to return these goods to the Bailor
or dispose of them according to the directions of the Bailor.

Duties of a bailee in respect of goods are as follows:

1. Take proper care of goods According to section 151, it is the
duty of a bailee to take care of goods bailed to him. Bailee should
take care of these goods as an ordinary man will take care of his
goods of the same value, quality, and quantity. Thus, if the bailee
takes due care of goods then he will not be liable for any loss,
deterioration of such goods. Also, the bailee needs to take the same
degree of care of goods whether the bailment is for reward or
gratuitous. However, the bailee is not liable for any loss due to the
happening of any act by God or public enemies though he agrees to
take special care of the goods.

2. Not to make unauthorized use As per section 153, the

Bailee shall not make any unauthorized use of goods bailed. In case
he makes any unauthorized use, then bailor can terminate the
bailment. Bailor can also claim for damages caused to goods bailed
due to unauthorized use as per Section 154.

3. Keep goods separate The bailee needs to keep the goods

separately from his own goods. He should not mix the goods under
bailment with his own goods. In case bailee mixes the goods with
his own goods without the consent of the bailor, then: Bailor also
has an interest in the mixture. If the goods can be separated or
divided, the property in the goods remains with both the parties.
But, the bailee bears the expenses of separation or any damages
arising from the mixture. If it is not possible to separate the goods,
the bailee shall compensate the bailor for the loss of goods.

4. Not set adverse title A bailee must not set an adverse title to
the goods bailed.

5. Return Goods The duty of the bailee is to return the goods

without demand on the accomplishment of the purpose or the
expiration of the time period. In case of his failure to do so, he shall
be liable for the loss, destruction, deterioration, damages or
destruction of goods even without negligence.

6. Return increase or profits A bailee shall return the goods

along with any increase or profit accruing to the goods to the bailor,
in the absence of any contract to the contrary

. For example, A leaves a hen in the custody of B. The hen gets a

chick. B shall deliver the hen along with the chick to A. Duties of a
bailor are as follows:

It is the duty of a bailor to disclose all faults. If bailor fails to

disclose such faults then he will be responsible for the damage
caused to goods or loss suffered by the bailee.

Also, the bailor is under the duty to pay the extraordinary expenses
incurred by the bailee for such bailment.

It is the duty of the bailor to accept the goods after the purpose for
which such goods were bailed is accomplished.

It is the duty of the bailor to indemnify the bailee for the cost
incurred due to the defective title of goods bailed to the bailee

Duties of a bailor

Duties of a bailor are as follows:

1. It is the duty of a bailor to disclose all faults. If bailor fails

to disclose such faults then he will be responsible for the
damage caused to goods or loss suffered by the bailee.

2. Also, the bailor is under the duty to pay the extraordinary

expenses incurred by the bailee for such bailment.

3. It is the duty of the bailor to accept the goods after the

purpose for which such goods were bailed is accomplished.

4. It is the duty of the bailor to indemnify the bailee for the

cost incurred due to the defective title of goods bailed to
the bailee.
QUES 2:- What is the difference between Indemnity and Guarantee ?
What are the essential elements of guarantee?
ANS :- Indemnity
The literal meaning of Indemnity is protection against loss or
enacting to compensate or protect somebody from the loss or make
good to the loss. Basically, a contract of indemnity is when a person
promises to another person that in case another person suffers from
loss, the first person will compensate the loss. It is defined under
section 124 of the Indian Contract Act 1872 under chapter VIII of
Indemnity and Guarantee.
It states, A contract by which one party promises to save the
another from loss caused to him by him by the conduct of the
promisor himself, or by the conduct of any other person, is called a
contract of indemnity.

For e.g., A contracts to indemnify B against the consequences of

any proceedings which C may take against B in respect of a certain
sum of Rs. 400. This is a contra t of indemnity. The person who
promises to indemnify is known as Indemnifier. The person in whose
favour such promise is made is known as Indemnified or indemnified
holder.

The features include:

1) 2 parties Promise by one person to another to save from loss.
2) Loss may be caused by the promisor or any other person.
3) Contingent in nature.
4) Satisfy all essentials of the contract.

Rights of Indemnified or Indemnity Holder: Sec 125 of ICA

He is entitled to recover from the indemnifier.

1) All damages paid by him in any suit.

2) All costs he might have to pay.
3) All sums which he might have paid on a compromise.

Rights of Indemnifier:
1) Rights under Doctrine of subrogation.
2) To sue against 3rd party after indemnifying the indemnity
holder
3) Not to compensate for losses not covered under Contract of
Indemnity.
 Guarantee
The basic meaning of guarantee is an undertaking to answer
for the payment or performance, so, contract of guarantee is a
contract to perform the promise or discharge the liability of a
third person in case of his default. It is comprised of the
simultaneousness of the principal debtor, the creditor, and the
surety.
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. The person to whom the guarantee
is given is called the creditor. A guarantee may be either in
written or oral form. The capacity of an agreement of
assurance is to empower an individual to get an advance on
products using a loan, or a work. An agreement of assurance
is rendered void without valid consideration.
According to S. 126, a contract to perform the promise or to
discharge the liability of a 3rd person in case of default.
For e.g., A takes a loan from the bank. A promise to the bank
to repay the loan. B also makes a promise to the bank saying
that if A does not repay the loan then I will pau'. In this case, a
is the Principal Debtor, B is the surety, and the bank is the
creditor.
The Essentials of a Contract of Guarantee are:
1) Tripartite Agreement: A contract of guarantee entails three
parties, principal creditor, creditor, and surety. In a successful
contract of guarantee, there must be three separate contracts
between the three parties and each contract must be
consenting
2) Existence of Liability: Here the main liability lies with the
principal debtor. Secondary liability lies with the surety which
can only be invoked once the principal debtor defaults on its
payment.
3) Essentials of a Valid Contract: Like any other general
contract, it maintains free consent, consideration, lawful
object, and competency of contracting parties as to the
essentials of a valid contract.
 4) Medium of Contract: The Indian Contract Act, 1872, does
not strictly mention the need for any written form of a contract
or guarantee. Both oral and written form will suffice

Difference between Indemnity and Guarantee

1)Number of Parties: A contract of guarantee always has three
parties; they are, the creditor, the principal debtor, and the surety;
for e.g., Bank Loan, whereas a contract of indemnity has two
parties, the indemnifier, and the indemnity holder

2)Number of Contracts: In a contract of indemnity, there is a single

promise or contract; a promise to pay if there is a loss. For e.g.,
Insurer and Insured, in a contract of guarantee, by contrast, there
are multiple promises , i.e., between principal debtor and creditor,
between creditor and surety, and an implied contract between the
principal debtor and the surety.

3)Nature: A contract of indemnity is for reimbursement of loss,

whereas the contract of guarantee is for the security of the creditor
or assurance to the creditor

4)Liability: In a contract of indemnity, the liability of the indemnifier

is primary (Fire Insurance), whereas in a contract of guarantee, the
debtor is primarily liable, and the surety assumes secondary liability
because the customer is primary liable in default of his payment
then after the surety has liability.

5)Object: The purpose is of safety from an uncertain future event in

a contract of indemnity, for e.g., Fire Insurance, whereas the
purpose in a contract of guarantee is to assure the other party of
the performance of an obligation.

6)Scope: The Scope is limited in a contract of indemnity as it

doesn't include contracts of guarantee, whereas the scope is wider
in a contract of guarantee as it includes a contract of indemnity.

7)Consideration: Indemnifiers receive consideration from the

indemnity holder at the beginning of the contract, e.g., premium in
case of fire insurance. But Surety doesn't receive any consideration.
The only consideration for the surety is the expected gain of the
principal debtor.
8)Existence of liability: In indemnity, the contingency present is
that of the possibility or risk of suffering a loss to which the
indemnifier agrees to indemnify for e.g., in fire insurance, the
compensation would be given only when a fire occurs viz uncertain;
while in guarantee, there is an existing debt or duty whose
performance is guaranteed by the surety.

9)Subrogation: In a contract of indemnity, the indemnifier cannot

sue a third party in his own name for the loss compensated unless
they have the right. The surety is entitled to file a suit against the
principal debtor in his own name if only he has discharged the
obligation of the creditor, then he steps in the shoes of the principal
debtor.

10)Discharge: The indemnifier is not necessarily discharged with

the discharge of the persons for whom the indemnity was given.
After paying compensation, it's not necessary the fire insurance
company is free from all the liabilities. The surety is discharged
from his liability with the discharge of the principal debtor for e.g.,
the guarantee is over when surety pays off the amount to the bank.

11)Interests of the parties: The indemnifier has some interest in

the transaction other than indemnity like commission, but the
surety has no such interest except that of guarantee.

12)Types: The contract of indemnity has no types, whereas the

contract of guarantee has 2 types: specific and continuing
guarantee.

QUES 3:- Discuss liabilities and rights of a surety in contract of

guarantee. Would the liabilities be differ if there are more than one
sureties ?

QUES 4:- Explain the right of surety against the principal debtor,
creditor and co-sureties.

ANS :- Surety’s Liability

According to section 128 of Indian Contract Act, 1872, the liability of

a surety is co-extensive with that of principal debtor’s unless the
contract provides. Liability of surety is same as that of the principal
debtor. A creditor can directly proceed against the surety. A creditor
can sue the surety directly without sueing principal debtor. Surety
becomes liable to make payment immediately when the principal
debtor makes default in such payment.

However, primary liability to make payment is of the principal debtor,

surety’s liability is secondary. Also, where the principal debtor cannot
be held liable for any payment due to any defect in documents, then
surety is also not responsible for such payment.

Rights Against creditor

1) Rights over securities .

2) Rights to set off.

Rights Against principal Debtors

1) Right of Subrogation

2) Right to claim indemnity

Rights Against co – Sureties

1) For same amount

2) For different amount

Rights Against the creditor

1) Surety's right to benefit of creditor's securities ( sec 141) :- 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
discharge to the extent of the value of security.

2) Right to set off :- The sureties are entitled to adjust the center
claim which the principal debtor has against the creditor.

Right against the principal Debtor

a) Right of Subrogation (sec 140) where a guaranteed debts 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. This right is
known as the right of subrogation; it means that as payment of the
guaranteed debt or performance of the guaranteed duty the surety
steps into the shoes of the creditor.

b) Implied promise to indemnity surety ( sec 145 ) :- In

every contract of guarantee there is an implied promise by the
principal debtor to indemnity the surety. The surety is entitled to
recover from the principal debtor whatever some he has rightfully
paid under the guarantee but no sums which he has paid wrongfully.

Right against co- sureties

a) Co - sureties liable to contribute equally (sec 146 ) Equally of
burden is the basis of co-suretyship. This is contained in sec 146
which states that "When two or more persons are co-sureties for the
same debt or duty either jointly or separately 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 debtor".

b) Liability of co-sureties bound in different sums (sec 147) The

principal of equal contribution is, however subject to the maximum
limit fixed by a surety to his liability. Co-sureties who are bound in
different sums are liable to pay equally as far as the limits of their
respective obligations permit.

c) Liabilities of surety (sec 128) The liability of the surety is co-

extensive with that of the principal Debtor i.e as long as the
principal Debtor is liable the surety is liable once the creditor
releases the Principal Debtor the liability of surety will
automatically cease.

Discharge of a surety

• By giving notice of revocation for future transactions

(section 130).

• In case of death of surety, the guarantee is revoked for all

the future transactions (section 131).
 • When there is a change in terms and condition of the
contract between the creditor and principal debtor without
obtaining the consent of surety. The surety will be
discharged of all the transactions taking place after such
change in terms and condition (section 133). For example –
Q rents his house to R at a fixed rent, P becomes surety for
rent payable by R to Q. R and Q agree on a higher rent for
which they do not obtain P’s consent. In such a case P will
be discharged as a surety after such change in contract.

• In case the creditor releases the debtor or makes any

omission due to which results in the discharge of principal
debtor’s liability (section 134).

• When the principal debtor makes payment of debt.

• When the creditor enters into an arrangement with the

principal debtor for not to sue him or to provide extra time
for payment of debt, the surety will be discharged (section
135).

• The surety will be discharged when the creditor does any

act which is inconsistent with the rights of surety.

QUES 5:- Distinguish between pledge from Bailment and mortgage.

ANS :- Bailment vs. Pledge

Bailment and Pledge are two types of contracts that can get

confusing. Bailment is defined as per Section 148, Indian Contract

Act 1872 as the transfer of movable goods from one party to another

party for any specific purposes such as service, promise or

need whereas, pledge is defined in Section 172 as the transfer of

movable goods/property to the lender (banks or financial institutions)

or person as security to acquire a loan/debt or performance of

contract or promise. It should be noted that pledge is a special kind

of bailment and hence every pledge is a bailment, but every bailment

is not pledge.
To understand these two concepts better we can use the help of

examples. If Mr. Sharma were to give his clothes to the dry cleaners

to have them deep cleaned this transfer of good would be known as

bailment. Whereas, if Mr. Sharma went to the bank to get a gold loan,

the transfer of his gold in exchange of a loan would be known as

pledge.

The specific differences between them are as follows:

1. Their purpose– The purpose of bailment is to service,
safekeep or repair. It is carried out for either a profit or non-profit
reason. The purpose of pledge is securing a loan, or performance of

a promise. It is done with a profit-motive.

2. Right to use– The bailee can use the movable asset reasonably or

for the specific purpose exactly as they are authorized to do so. On

the other hand, the pawnee is prohibited from using the goods for

any purpose. They have the right to only hold onto the goods until

the debt is paid off.

3. Right to sell– The bailee is entrusted with the products for a

specified reason, therefore the bailee has no right to sell the goods

but is obligated to return it after the purpose has been fulfilled. If

the bailed goods are sold, it would amount to conversion. Whereas

the pawnee has the right to sell the pledged goods to recover the

outstanding debt in case of default, after giving the pawnor

reasonable notice of the sale.

4. Consideration– Consideration may or may not be involved in the

bailment contract. It depends on the conditions of the contract.

Even when no consideration is involved, the contract of Bailment is

valid. However, since the entire notion of a pledge is to serve as a

security for an obligation, the presence of consideration is

necessary. Without a consideration, the contract of pledge will not

exist.

5. Reimbursement claims– In the case of non-gratuitous bailment,

the bailee has the right to recover all the expenses incurred from

the bailment. The bailee has the right to recover all extraordinary

expenditures incurred for gratuitous bailment. For pledge, the

pawnor has the duty to pay for any extraordinary expenditure

incurred by the pawnee in the preservation of the goods.

6. Responsibility– According to section 152, the bailee cannot be

held responsible for the loss, destruction or deterioration of the

thing bailed, if he takes due care, acts as a prudent man, makes

authorized use of the property, and does not mix the bailor’s

property with his own. If the pledged goods have been lost or

damaged due to the fault or negligence of the pawnee, he/she will

be held liable, and may lose his/she claim against the pawnor to

that extent.
Pledge vs Mortgage
It is very important to understand that both pledge and mortgage are

used to create a charge over properties or goods of the borrower as

collateral against the loan provided. But there are some important

differences between the two, and both cannot be used as a

replacement for each other.

Mortgage can be defined in Transfer of Property Act, 1882 under

section 58 as “A mortgage is the transfer of an interest in specific

immoveable property for the purpose of securing the payment of

money advanced or to be advanced by way of loan, an existing or

future debt, or the performance of an engagement which may give

rise to a pecuniary liability. The transferor is called a mortgagor, the

transferee a mortgagee; the principal money and interest of which

payment is secured for the time being arc called the mortgage-

money, and the instrument (if any) by which the transfer is effected

is called a mortgage-deed.”

1. Nature – In case of pledge, it always takes place on

movable property for example, gold, shares, NSC, FD,
Insurance policy, etc. And being opposite in nature
mortgage only takes place for immovable properties like
house, building, land, machinery, plant, etc.

• Right to Use – Being one of the main differences and as

mentioned before also, under pledge the pawnee cannot
use the goods kept with him in pledge but a different case
scenario in mortgage the mortgagee has the right to use the
property which is mortgaged to him.

• Written Contract – Under pledge it is not necessary for the

contract to be in written form. But for mortgage it is
necessary to have a written contract. Also, it is necessary
to testify it by two witnesses and register it.

• Right to Sell – In pledge the lender or pawnee can sell the

goods pledged by the borrower or pawnor if the borrower is
unable to pay the debt. Hence, in order to recover the
amount of debt lender can sell the asset in pledge. In case
of mortgage, the mortgagee will have to file a suit in the
court to get possession of the property and sell it to recover
the debt amount.

• Possession – In pledge the possession remains with the

lender or pawnee and as we know in mortgage the lender
 has right over goods mortgaged but the possession is with
the borrower only.

QUES 6:- What are the rights and duties of an agent as provided in
the contract Act 1872.

ANS :- In a contract of agency, the principal appoints an agent to

perform some specific task or business on his behalf. The principal is
bound by the acts of his agent and is thus, responsible for his acts to
the third parties.

Rights and Duties of Agents

Rights of agents

1. Right to Remuneration

As per section 219, an agent has a right to receive the agreed

remuneration or in absence of agreement, a reasonable remuneration
for rendering the services to the principal that are not voluntary or
gratuitous. He becomes eligible to receive the remuneration as soon
as he completes the work that he undertook.

2. Lien on Goods

Some agents who have the possession of goods, securities or

properties of their principal also have a lien on these goods,
securities or properties regarding their remuneration and also for any
expenses or liabilities that they incur. When he is an unpaid seller, he
has a right to stop the goods in transit.

3. Right to be Indemnified

An agent represents his principal to the third parties. As per sections

222 and 223, an agent has a right to be indemnified by his principal
for all charges, expenses, and liabilities that he incurs during the
course of the agency.

Duties of agents
A principal has a right to sue his agent for damages in case of breach
of duty by the agent. The duties of agents are:

1. As per section 211, an agent shall act within the scope of

authority that his principal confers upon him. Also, he shall
strictly follow the directions of his principal. However, in
the absence of express instructions from his principal, he
shall follow the custom prevailing at the place where he
carries out his business, in a similar type of business.

2. Section 212 states that he shall work with reasonable skill

and diligence. Also, where the nature of the agent’s
profession requires him to possess a special skill, he shall
exercise the skill that a member of that profession will
exercise.

3. An agent shall disclose properly any material information to

his knowledge to the principal that can influence the
making of the contract.

4. As per section 213, an agent shall is under the duty not to

disclose any confidential information of his principal.

5. Section 215 states that an agent shall not compete with his
principal. In other words, his interest shall not conflict with
his duty.

6. It is the duty of the agent to keep true and fair accounts

and prepare them on a reasonable notice to render them.

7. An agent shall not make any secret profit and shall disclose
any extra profit he makes to the principal. Where the
principal finds that the agent is making secret profits, he
may dismiss the agent without notice, recover the amount
of profit and also refuse to pay him his remuneration. He
may also repudiate a contract where a third party is also
involved in the fraud and recover the damages.

8. He shall not appoint a sub-agent.

Exceptions to the principle of Delegates non-protest delegate

The above principle means that a delegate cannot further delegate.
Therefore, an agent cannot appoint a sub-agent. However, there are
the following exceptions to this principle:

1. When the principal allows delegation.

2. Where it is the custom or usage of trade to delegate.

3. When delegation is necessary for proper and efficient

performance.

4. Where it becomes essential due to some emergency

5. When the principal knows that the agent’s intention is to

delegate.

6. Where the work is ministerial.

QUES 7:- Explain the relationship between principal and his agent .
Can a minor be appointed as an agent

ANS :- Agency is described as a connection in which one party, the

principal, delegates certain authority to another party, the agent, to
represent him or act on his behalf in dealing with a third party in
order to create a legally binding relationship between the former
and the latter. Their relationship is founded on the Latin phrase "Qui
Facit via alium facit per se," which means "he who acts through
another is recognized in law to act himself."

DIFFERENT KINDS OF AGENCY

Depending upon the authority provided to the agent, the Agency

can of the following kinds:

1) Auctioneers– An auctioneer is a mercantile agent within the

meaning of Section 2(9) of the Sale of Goods Act. He is
primarily an agent whose job is to sell goods and other
property by auction, i.e., by open sale. He is only permitted to
sell the items vested in him and is not authorized to offer
guarantees on behalf of the seller unless specifically approved
by his principal.
2) Factors - A factor is a commercial agent who is entrusted
with the possession of commodities for the purpose of sale.
 According to Section 171 of the Contract Act, a factor has a
right of general lien on the goods belonging to his principal,
which are in his possession, for the general balance of the
account.
3) Brokers - A broker is a person who has the right to negotiate
the sale or purchase of products on behalf of his principal in
contrast to a factor, he does not own any items. He only
makes the two parties engage in a contract. He gets his
compensation anytime any deal materializes through his
efforts.
4) Del Credere Agents – These are commercial agents who, in
exchange for an additional commission guarantee the
fulfillment of the contract by an obligation like that of a surety,
and such obligation arises if the third party fails to pay to the
principal.

FEATURES OF A CONTRACT OF AGENCY

Section 183: The principal should be competent to contract

Section 183 states that any individual who has reached the age of
majority and is of sound mind may designate an agent. In other
words, any person who is legally capable of contracting can
designate an agent. Minors and persons of unsound minds cannot
select an agent.

As per Section 11 of the Indian Contract Act, 1872, the precondition

of a valid contract is the competency of the parties to the contract.
Because the agent in an agency creates a contractual connection
between his principle and the third party, both the principal and the
third party must be competent to contract.

The court, in Syed Abdul Khader vs. Rami Reddy [AIR 1979 SC 553],
found that the connection of agency occurs anytime one person
called the agent has permission to act on behalf of another person,
called the principal, and the latter consents to do so. The contract
contains the genes for the partnership.

Although a juvenile cannot appoint an agent for himself, there is

nothing in Section 183 that prevents a minor's guardian from
appointing an agent on his behalf.
Section 184: The agent may not be competent to contract
In terms of the agent's ability to bind both the principal and a third
party, anybody can become an agent. It means that even if an agent
is a minor or otherwise unfit to contract, he can create a legitimate
contract between his principal and a third party. In this case, the
agent serves merely as a conduit between the principal and the
third party.

The capacity of the agent to bind himself by a contract between

himself and his principle - It is not required for the agent to be
competent to contract in order to commit himself to the principal.
However, in such instances, the agent is not liable to the principal
for his actions.

Section 185: No consideration is not necessary to be an agent

The law does not need any such factor for the legitimacy of an
agency contract. The principal agrees to be bound by the acts
performed on his behalf by the agent, which serves as sufficient
damage to the principal.

In general, an agent gets paid a commission for services done, but

no payment is required at the time of his engagement. For example,
when a person committed to becoming an agent for the sale of land
of Mr. A, the person is not compensated at the time of his
appointment. He is only compensated when the appointment's
purpose has been met. However, just providing gratis employment
or power does not obligate the agent to do anything.

Responsibilities of an Agent

• According to the Latin maxim, 'Delegatus non-potest delegare,'

it is the agent's duty not to delegate his authority unless and
until it is necessary according to the custom of trade,
business, or when the act does not require personal skill or
the principal expressly or implicitly agrees to the appointment
of sub-agent.
• Section 195 requires the agent to use his judgment in
appointing a replacement agent for the principal.
• According to Section 214, it is the agent's responsibility to
exercise all reasonable effort in communicating with the
principal and obtaining his instructions.
 • According to Sections 215 and 216, it is the Agent’s
responsibility not to trade on his behalf without the
authorization of the principal. Further, he has a duty not to
conceal and disclose material facts from the principal.
• It is the agent's responsibility to pay any payments received
on behalf of the principal. (Section 218)

Liability of Agent

• Every agent is answerable for his sub-agent's actions or

wrongdoings (Section 192 and 193).
• As previously stated, it is the responsibility of the agent to
keep the principal's account up to date. He is accountable for
any misappropriation or damage caused by acting contrary to
instructions. (Section 211)
• An agent is liable for loss caused by negligence, lack of
expertise, or malfeasance. (Section 212)
• Agents are liable for fraud committed by them. (Section 238)

Obligations and Duties of Principal

• Section 217 requires that the agent could retain the money
due to himself out of the sums received on account of the
principal in the business of the agency. Such retainer could be
in respect of advance made or expenses incurred by the agent
in conducting the business of his principal.
• Sections 222 and 223 require the principle to compensate the
agent against third parties for any allowed lawful activities
performed by him in the course of business on behalf of the
principal. If this is not done, the principal will be held
accountable.
• Section 224 explicitly specifies that when an agent commits a
tort on behalf of the principle in the course of business, a
principal is not liable for indemnifying for illegal conduct
perpetrated by his agent.
• Section 225 states that it is the principal's responsibility to
pay the agent for any harm caused by the principal's
negligence or lack of expertise. In case of failure to do so, the
principal will be held accountable.
QUES 8:- Discuss the different modes by which the agency can be
terminated.

ANS :- Termination of Agency

An agent is a person employed to do any act or enter into a

contractual relationship with others (third parties) on behalf of his
principal. An agent acts as a connecting link between his principal
and third parties.

While representing his principal, an agent acts in the same capacity

as of his principal. An agent is authorized by his principal to act on his
behalf. An agent binds his principal legally in business transactions
with third parties due to their agency relationship.

According to Section 201 of the Indian Contract Act, 1872,

Termination of agency takes place in the following circumstances: –

1. By revocation of authority by the principal.

2. By renunciation of his authority by the agent.

3. On the performance of the contract of agency.

4. On the death of either principal or agent.

5. By insanity of either principal or agent.

6. With the expiration of time period fixed for the contract of

agency.

7. By an agreement made between the principal and his agent.

8. With the insolvency of principal or agent (in few cases).

9. When the principal and his agent is an

incorporated company, by its dissolution

10. With the destruction of the subject matter. (section 56)

When Termination takes Effect

Termination of an agency takes its effect when it becomes known to

an agent. When the principal revokes the agency, it comes into effect
only when it is known to the agent. However, in the case of third
parties, termination comes into effect only when such termination of
agency comes to their knowledge.

According to Section 210 of the Indian Contract Act, 1872 termination

of an agent’s authority also terminates the sub-agents authority
appointed by the agent. A per Section 209 of Indian Contract Act,
1872 it is the duty of an agent to protect his principal’s interest in
case his principal becomes of unsound mind or dies.

It is the duty of an agent that on the termination of an agency due to

death of the principal or his becoming insane, to take all the
reasonable steps on behalf of his late principal or dying principal to
protect the interest that the latter entrusts to him.

QUES 9 :- What effect of fraud and misrepresentation by agent on

the contract? Explain with cases.

ANS :- Section 238 in The Indian Contract Act, 1872

238. Effect, on agreement, of misrepresentation or 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. —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
1) A, being B’s agent for the sale of goods, induces C to buy them by
a misrepresentation, which he was not authorized by B to make.
The contract is voidable, as between B and C, at the option of C.
2) 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 consignor.
QUES 10 :- Explain that in every contract of sale there is an implied
condition that the seller has the right to sell the goods.

ANS :- Implied Conditions

Conditions and Warranties may be either express or implied. The

implied conditions and warranties are those which are presumed by
law to be present in the contract though they have not been put into
it in expressed words. Implied conditions are dealt with in Sections
14 to 17 of the Sale of Goods Act, 1930. Unless otherwise agreed, the
law incorporates into a contract of a sale of goods the following
implied conditions:

Condition As To Title

In every contract of sale, the first implied condition on the part of the
seller is that:

a. in case of a sale, he has a right to sell the goods,

b. and in the case of an agreement to sell, he will have the

right to sell the goods at the time when the property is to
pass. Buyer is entitled to reject the goods and to recover
the price if the title turns out to be defective. [Section
14(a)].

example. A bought a tractor from another person B. The person B had

no title to the tractor. Person A then goes on to use the tractor for
three months. Three months later, the legal owner of the tractor
spots it and demands it back from A. In this, the law holds that A is
bound within the law to hand over the tractor to the real owner of the
tractor. A has the right to sue B, for the recovery of the purchase
price.

Condition As To Description

If there is a contract of sale of goods by description, a default implied

condition is that these goods must correspond with this description.
The buyer is not bound to accept and pay for the goods which are not
in accordance with the description of goods. [Section (15)]
 example. Suppose a ship was contracted to be sold as “copper-
fastened vessel” but actually it was only partly copper-fastened. This
means that the goods did not correspond to the description and
hence they can be returned or if the buyer took the goods, he could
claim damages for breach.

Sale By Sample

In a contract of sale by sample, there is an implied condition that:

a. the bulk shall correspond with the sample in the quality;

b. the buyer shall have or shall be given a reasonable

opportunity/chance of comparing the bulk with the sample,
and

c. the goods shall be free from any defect that may render
them unmerchantable, which would not be apparent on a
reasonable examination of the sample. [Section (17)]

For example, a company sells certain belts made up of a special

material by sample for the Indian Army. The belts are found to be
made up of plastic of cheaper quality, not discoverable by ordinary
inspection. In this case, the buyer is entitled to the refund of the price
plus damages.

Sale By Sample As Well As By Description

Where the goods are sold by a sample as well as by description the

implied condition is that the bulk of the goods supplied must
correspond both with the sample and the description. In case the
goods correspond with the sample but do not tally with the
description or vice versa, the buyer can repudiate the contract.
[Section 15]

For example, A agrees to sell a certain oil described as refined

rapeseed oil to B, warranted only equal to sample. The goods that A
tenders are found to be equal to the sample but containing a mixture
of hemp oil. In such a case B can reject the goods.

Condition As To Quality Or Fitness

Condition As To Merchantability

This is implied only where the sale is by description and the goods
should be of ‘merchantable quality’ i.e. the goods must be such as are
reasonably saleable under the description by which they are known in
the market. [Section 16(2)]

For example, A purchases a certain quantity of black yarn from B who

is a dealer in yarn. A finds the black yarn to be damaged by the white
ants. Thus the condition as to merchantability has been broken and A
is entitled to reject it as unmerchantable.

Conditions As To Wholesomeness

In the case of eatables and provisions, there is another implied

condition that the goods shall be wholesome, in addition to the
implied condition as to merchantability.

For example, A supplies B with milk. The milk contains bacteria and
B’s wife consumes the milk and is diagnosed with a disease. She later
succumbs to the disease. Hence, there was a breach of condition as
to the fitness of the supplies and A was liable to pay damages to B in
this case.

Express Conditions

An express condition is any stipulation, essential to the main function

of the contract, which is put in the contract at the will of the two
parties.

QUES 11:- Define sale . What are the essentials of sale

distinguishing between sale and agreement to sale.

ANS :- According to Section 4 of the Sales of Goods Act, contract of

sale of goods means “a contract where by the seller transfers or

agrees to transfer the property in goods to the buyer for a price.” A

contract of sale may be absolute or conditional according as the

parties desire. It may be between one part-owner and another. The

term “contract of sale” is a generic term. A contract of sale may be

either a sale or an agreement to sell.

Sale: Where under a contract of sale, the property in goods is

immediately transferred from the seller to the buyer, the contract is

called a sale. Thus, it is an executed contract.

Agreement to Sell: Where under a contract of sale, the transfer of

property in goods is to take place at a future time or subject to the

fulfillment of certain conditions, the contract is called an agreement

to sell. It is an executory contract. An agreement to sell becomes a

sale when the time elapses or the conditions are fulfilled subject to

which the property in the goods was to be transferred.

Essentials of Contract of sale:
Two Parties: A sale has to be bilateral because the property in
goods has to pass from one person to another. Therefore there must

be two parties seller and buyer. A person cannot buy his own goods.

Goods: The subject-matter of the contract of sale must be goods

i.e. movable property. Transactions involving sale and purchase of

immovable property are out of the purview of the Sales of Goods

Act. Contracts for providing a certain service cannot be taken as a

contract for sale of goods.

Transfer of General Property: Transfer of property means

transfer, of ownership rights. A mere transfer of possession of

goods cannot be called sale. It does not mean that there should be

physical delivery of goods.

Price: The consideration for sale of goods must be money i.e. price.

Where goods are transferred for any other consideration, that will

not be sale, but an exchange or barter. But in case the

consideration consists partly of goods and partly of money, it will be

taken as a contract of sale.

Contract: A contract of sale is a special type of contract. Being a

contract it must fulfill all essential requirements of a valid contract

as defined in Section 10 of Indian Contract Act, viz, competence of

parties, free consent, consideration, lawful object and valid offer

and acceptance.
BASIS FOR
SALE AGREEMENT TO SELL
COMPARISON

Meaning When in a contract of When in a contract of

sale, the exchange of sale the parties to
goods for money contract agree to
consideration takes exchange the goods for a
place immediately, it price at a future specified
is known as Sale. date is known as an
Agreement to Sell.

Nature Absolute Conditional

Type of Contract Executed Contract Executory Contract

Transfer of risk Yes No

Title In sale, the title of In an agreement to sell,

goods transfers to the the title of goods remains
buyer with the transfer with the seller as there is
of goods. no transfer of goods.

Right to sell Buyer Seller

Consequences of Responsibility of buyer Responsibility of seller

subsequent loss
 BASIS FOR
SALE AGREEMENT TO SELL
COMPARISON

or damage to the
goods

Tax VAT is charged at the No tax is levied.

time of sale.

Suit for breach of The buyer can claim Here the buyer has the
contract by the damages from the right to claim damages
seller seller and proprietary only.
remedy from the party
to whom the goods are
sold.

Right of unpaid Right to sue for the Right to sue for damages.
seller price.

Definition of Sale

A sale is a type of contract in which the seller transfers the

ownership of goods to the buyer for a money consideration. Here
the relationship amidst the seller and buyer is of creditor and
debtor. It is the result of an agreement to sell when the conditions
are fulfilled and the specified time is over.

Definition of Agreement to Sell

An agreement to sell is also a contract of sale of goods, in which

the seller agrees to transfer goods to the buyer for a price at a later
date or after the fulfilment of a condition.

When there is a willingness of the both the parties to constitute a

sale i.e. the buyer agrees to buy, and the seller is ready to sell the
goods for monetary value. In an agreement to sell the performance
of the contract is done at a future date, i.e. when the time elapses
or when the necessary conditions are satisfied. After the contract is
executed, it becomes a valid sale. All the necessary conditions
required at the time of sale should exist in the case of an agreement
to sell too.

If the seller rescinds the contract, then the buyer can claim
damages for the breach of contract. On the other hand, the unpaid
seller can also sue the buyer for damages.

QUES 12:- The rule of caveat emptor has become almost the rule of
caveat venditor Discuss.

ANS :- Doctrine of Caveat Emptor

“Caveat Emptor” is a Latin phrase that translates to “let the buyer

beware”. It is specifically defined in Section 16 of the act “there is no
implied warranty or condition as to the quality or the fitness for any
particular purpose of goods supplied under such a contract of sale”

A seller makes his goods available in the open market. The buyer
previews all his options and then accordingly makes his choice. Now
let’s assume that the product turns out to be defective or of
inferior quality.

This doctrine says that the seller will not be responsible for this. The
buyer himself is responsible for the choice he made.

So the doctrine attempts to make the buyer more conscious of his

choices. It is the duty of the buyer to check the quality and the
usefulness of the product he is purchasing. If the product turns out to
be defective or does not live up to its potential the seller will not be
responsible for this.

Let us see an example. A bought a horse from B. A wanted to enter

the horse in a race. Turns out the horse was not capable of running a
race on account of being lame. But A did not inform B of his
intentions. So B will not be responsible for the defects of the horse.
The Doctrine of Caveat Emptor will apply.

However, the buyer can shift the responsibility to the seller if the
three following conditions are fulfilled.
 • if the buyer shares with the seller his purpose for the
purchase

• the buyer relies on the knowledge and/or technical

expertise of the seller

• and the seller sells such goods

Exceptions to the Doctrine of Caveat Emptor

The doctrine of caveat emptor has certain specific exceptions. Let us

take a brief look at these exceptions.

1] Fitness of Product for the Buyer’s Purpose

When the buyer informs the seller of his purpose of buying the goods,
it is implied that he is relying on the seller’s judgment. It is the duty of
the seller then to ensure the goods match their desired usage.

Say for example A goes to B to buy a bicycle. He informs B he wants

to use the cycle for mountain trekking. If B sells him an ordinary
bicycle that is incapable of fulfilling A’s purpose the seller will be
responsible. Another example is the case study of Priest v. Last.

2] Goods Purchased under Brand Name

When the buyer buys a product under a trade name or a branded
product the seller cannot be held responsible for the usefulness
or quality of the product. So there is no implied condition that the
goods will be fit for the purpose the buyer intended.

3] Goods sold by Description

When the buyer buys the goods based only on the description there
will be an exception. If the goods do not match the description then
in such a case the seller will be responsible for the goods.

4] Goods of Merchantable Quality

Section 16 (2) deals with the exception of merchantable quality. The
sections state that the seller who is selling goods by description has
a duty of providing goods of merchantable quality, i.e. capable of
passing the market standards.

So if the goods are not of marketable quality then the buyer will not
be the one who is responsible. It will be the seller’s responsibility.
However if the buyer has had a reasonable chance to examine
the product, then this exception will not apply.

5] Sale by Sample
If the buyer buys his goods after examining a sample then the rule of
Doctrine of Caveat Emptor will not apply. If the rest of the goods do
not resemble the sample, the buyer cannot be held responsible. In
this case, the seller will be the one responsible.

For example, A places an order for 50 toy cars with B. He checks one
sample where the car is red. The rest of the cars turn out orange.
Here the doctrine will not apply and B will be responsible.

6] Sale by Description and Sample

If the sale is done via a sample as well as a description of the
product, the buyer will not be responsible if the goods do not
resemble the sample and/or the description. Then the responsibility
will fall squarely on the seller.

7] Usage of Trade
There is an implied condition or warranty about the quality or the
fitness of goods/products. But if a seller deviated from this then the
rules of caveat emptor cease to apply. For example, A bought goods
from B in an auction of the contents of a ship. But B did not inform A
the contents were sea damaged, and so the rules of the doctrine will
not apply here.

8] Fraud or Misrepresentation by the Seller

This is another important exception. If the seller obtains the consent
of the buyer by fraud then caveat emptor will not apply. Also if the
seller conceals any material defects of the goods which are later
discovered on closer examination then again the buyer will not be
responsible. In both cases, the seller will be the guilty party.

QUES 13:- Distinguish between condition and warranty . When

condition to be treated as warranty.

BASIS FOR
CONDITION WARRANTY
COMPARISON

Meaning A requirement or event A warranty is an

that should be assurance given by the
performed before the seller to the buyer about
completion of another the state of the product,
action, is known as that the prescribed facts
Condition. are genuine.

Defined in Section 12 (2) of Indian Section 12 (3) of Indian

Sale of Goods Act, Sale of Goods Act, 1930.
1930.

What is it? It is directly associated It is a subsidiary

with the objective of provision related to the
the contract. object of the contract.

Result of breach Termination of Claim damages for the

contract. breach.

Violation Violation of condition Violation of warranty

can be regarded as a does not affect the
violation of the condition.
warranty.

Remedy available Repudiate the contract Claim damages only.

to the aggrieved as well as claim
party on breach damages.
Definition of Condition

Certain terms, obligations, and provisions are imposed by the buyer

and seller while entering into a contract of sale, which needs to be
satisfied, which are commonly known as Conditions. The conditions
are indispensable to the objective of the contract. There are two
types of conditions, in a contract of sale which are:

• Expressed Condition: The conditions which are clearly

defined and agreed upon by the parties while entering into the
contract.
• Implied Condition: The conditions which are not expressly
provided, but as per law, some conditions are supposed to be
present at the time making the contract. However, these
conditions can be waived off through express agreement.
Some examples of implied conditions are:
• The condition relating to the title of goods.
• Condition concerning the quality and fitness of the
goods.
• Condition as to wholesomeness.
• Sale by sample
• Sale by description.

Definition of Warranty

A warranty is a guarantee given by the seller to the buyer about the

quality, fitness and performance of the product. It is an assurance
provided by the manufacturer to the customer that the said facts
about the goods are true and at its best. Many times, if the warranty
was given, proves false, and the product does not function as
described by the seller then remedies as a return or exchange are
also available to the buyer i.e. as stated in the contract.

A warranty can be for the lifetime or a limited period. It may be

either expressed, i.e., which is specifically defined or implied, which
is not explicitly provided but arises according to the nature of sale
like:

• Warranty related to undisturbed possession of the buyer.

• The warranty that the goods are free of any charge.
 • Disclosure of harmful nature of goods.
• Warranty as to quality and fitness

Condition to be treated as warranty:

Section 13 of the Sale of Goods Act lays down the following two

conditions when a condition becomes a warranty:

1. Waiver by buyer: Where a contract of sale is subject to any
condition to be to at the fulfilled by the seller, the buyer may
(a) waive the condition, or (b) elect to treat the breach of the
condition as a breach of warranty. The buyer has the option
accept the goods and claim damages from the seller. If he
once decides to waive the condition, he cannot afterwards
insist on its fulfilment. [Section 13(1)]
2. Acceptance of goods by buyer: Where a contract of sale is
not severable, ie. it is indivisible and the buyer has accepted
the goods or part thereof, the breach of any condition is to
be treated as a breach of a warranty. [Section 13(2)]
Example : Certain goods were promised to be delivered on
June 1, time being made the essence of the contract. The
goods were delivered on June 2. The buyer accepts the
goods.
QUES 14:- Distinguish between sale by description and sale by
sample.

ANS :- A. Sale by sample-

Sale by sample has been defined in Section 17 (2) of the Act and
contains the following implied conditions in contract of sale by
sample- (a) that the bulk shall correspond with the sample in
quality; (b) that the buyer shall have reasonable opportunity of
comparing the bulk with the sample; (c) that the goods shall be free
from any defect which render them "unmerchantable" and which
would not be apparent on a reasonable examination of sample. The
purpose of sample is to give the details of the goods, intended to be
purchased by visible means, which may be difficult or impossible to
be expressed in words, owing to the imperfection of language. In a
sale by sample it is necessary that the goods sold must be similar
to the sample in quality.
Illustration In Godley v. Perry, (1960) 1 All ER. 36, implied conditions
in the case of sale by sample were beautifully summarised. In this
case a retailer purchased a number of plastic to 4 catapults from a
wholesaler in a sale by sample. He sold one of them to a boy of six
years. When the boy was playing with the toy it broke and injured
the left eye of that boy. Injury was so serious that the effected eye
was to be removed ultimately. The retailer had to pay compensation
to the boy. The retailer in his own turn, claimed compensation from
the wholesaler C. While purchasing the toys, the retailer had
examined the sample and could not find any defect. It was held that
the goods were unmerchantable and therefore the retailer should be
indemnified by the wholesaler, for the loss suffered. Sale by sample
does not of necessity take place whenever a 'sample is shown; sale
by sample take place when there is a term in the contract, express
or implied, to that effect; the whole of the circumstance must be
looked to.

Sale of goods by description.

There is an implied condition that the goods shall correspond to the

description and if sale was also by sample, a condition that the bulk
shall correspond of such description, whether it corresponds with
the sample or not are said to be sold by "description" when the
goods being goods unascertained at the time of contract, they are
sought to be identified by suitable words describing their nature.
Thus contract of sale a "Fiat motor car, 1954 model" is a contract
for sale of a motor car by description. The buyer in such a case
relies on the description given by the seller, on agreeing the terms
of the contract, the law therefore requires the seller to deliver to
the buyer in performance of the contract an article which answers
the description given by the seller in the contract. It is not
necessary that the Article offered should be perfect; what is
required is that it must be saleable in the market under that
description where goods are sold by description; which the buyer
had no opportunity to inspect the goods must not only answer the
description but must also he merchantable or saleable under that
description (S. 15 read with S. 16, cl. 2) National Traders v.
Hindustan Soap Works (AIR 1959 Mad. 112). In another case it was
held that where goods whether specific or unascertained, are sold
under a trade description, without misrepresentation or a warranty,
the fact that is unknown to both parties, the goods of that trade
description lack a particular quality is not a ground to treat the
contract as nullity [Harrison & Jones Ltd. v. Bientir etc. Lta., (1913)
1 All E. R. 993]. It may in some cases be difficult to distinguish a
description from a warranty, but in all cases where the purchaser
has not seen the goods and buys them relying on the description
alone, whether the goods be specific or unascertained, there is
"contract for the sale of goods by description." If goods are brought
by description from a seller who deals in goods of that description
(whether he be a manufacturer or not)

Difference between "Sale by sample" and "Sale by

Description" :- Sale by Sample
1. In the sale by sample the sample of the goods to be sold or
purchased is shown to the buyer who after examining the goods
agrees to buy them in gross.

2. In the case "sale by sample" no reliance is given to the words of

the seller. The purchaser himself inspects the goods to make him
sure about the qualities of the goods.

3. In the case of sale by sample the goods supplied should

correspond to the sample.

Sale by Description

1. In the case of "sale by description" only description is made

about the thing and only on the basis of that transaction takes
place.

2. In a sale by description reliance is given to the description made

by the seller.

3. In the case of sale by description it should correspond to the

description.

QUES 15 :- Explain stoppage in transit of goods.

ANS :- Right of Stoppage in Transit

This right is an extension to the right of lien. The right of stoppage in
transit means that an unpaid seller has the right to stop the goods
while they are in transit, regain possession, and retain them till he
receives the full price.

If an unpaid seller has parted with the possession of the goods and
the buyer becomes insolvent, then the seller can ask the carrier to
return the goods back. This is subject to the provisions of the Act.

Duration of Transit (Section 51)

Goods are in the course of transit from the time the seller delivers
them to a carrier or a bailee for transmission to the buyer until the
buyer or his agent takes delivery of the said goods.

Some scenarios of the transit ending:

• The buyer or his agent obtain delivery before the goods

reach the destination. In such cases, the transit ends once
the delivery is obtained.

• Once the goods reach the destination and the carrier of

bailee informs the buyer or his agent that he holds the
goods, then the transit ends.

• If the buyer refuses the goods and even the seller refuses
to take them back the transit is not at an end.

• In some cases, goods are delivered to a ship chartered by

the buyer. Depending on the case, it is determined that if
the master is functioning as an agent or carrier of the
goods.

• If the carrier or other bailee wrongfully refuses to deliver

the goods to the buyer or his agent, the transit ends.

• If a part-delivery of the goods has been made and the

unpaid seller stops the remaining goods in transit, then the
transit ends for those goods. This is provided that there is
no agreement to give up the possession of all the goods.
How Stoppage is Affected (Section 52)
There are two ways of stopping the transit of goods:

1. The seller takes actual possession of the goods

2. If the goods are in the possession of a carrier or other

bailee, then the seller gives a notice of stoppage to him. On
receiving the notice, the carrier or bailee must re-deliver
the goods to the seller. The seller bears the expenses of
the re-delivery.
Effect of Stoppage
Even if the unpaid seller exercises his right of stoppage in transit, the
contract stays valid. The buyer can ask for delivery of the goods after
making the payment.