SYBCOM

SEM-3
SUBJECT: BUSINESS CONTRACT REGULATIONS (BCR)
MODULE 1
CHAPTER 1- INDIAN CONTRACT ACT, 1872
WHAT IS LAW?

What is it :- Law is a set of rules and regulation

Authority to decide :- decided by a particular state (Government)
Object/ Purpose:- :- meant for the purpose of keeping the peace and
Security of society.
Enforcing Authority :- Courts or police may enforce this system of rules
and Punish
Breaking of law :- punishment people who break the laws, such as by
paying a fine, or other penalty including jail.

1. ​ What is a Contract?
​ Sec. 2(h) defines a contract, “An agreement enforceable by law is a contract”.
Enforceable means rights and obligations are recognised by the court
Contract = Agreement + Enforceability
2. ​ Agreement
Sec. 2(e) defines, “Every promise and every set of promises, forming the consideration
for each other is an agreement”.
Agreement = Promise + Consideration
3. ​ Promise
Sec. 2(b) defines “When the person to whom the proposal is made signified his assent
thereto, the proposal is said to be accepted”. A proposal, when accepted, becomes a
promise.
Promise = Proposal + Acceptance
ESSENTIALS OF VALID CONTRACT
Meaning of a Contract
A contract is defined under section 2(h) of the Indian Contract Act, 1872 as "an
agreement enforceable by law". It arises when an offer made by one party is accepted by
the other party which is made with lawful consideration, mutual consent, and in the intent
to create a legal relation. To enforce a contract, certain conditions must be met, termed as
the elements of a valid contract.
 1. Offer and Acceptance
Every contract starts with a valid offer made by one party and its acceptance by
the other. The terms of the offer should be clear, definite, and communicated to the
offeree. Acceptance should be the same as terms of the offer without any modifications.
●​ Example: A house owner offers to sell a house for ₹50 lakh. The buyer agrees to
purchase it at the offered price. This is an example of a valid offer and acceptance.
2. Intention to Create Legal Relations
For an agreement to be a contract, the parties need to intend to create legal
obligations. Social or domestic agreements usually do not have that intention, whereas
business agreements usually do.
●​ Example: The agreement between a landlord and tenant to rent a house has legal
obligations, whereas the promise to go to a family dinner has no legal obligations.
3. Lawful Consideration
Consideration includes the valuation between the parties, including money, goods,
services, and a promise. It is real; it must be legal and moral and not prohibited by law.
●​ Example: In consideration of building an apartment, a contractor agrees to receive
₹20 lakh in cash. The money paid and the service of construction are proper
considerations.
4. Lawful Object (Section 23)
The object of the contract must be lawful and not against public policy, immoral,
or illegal. If the object is unlawful, the contract is void.
●​ Example: An agreement to smuggle goods is void since the object is illegal.
5. Capacity of Parties (Sections 11-12)
The parties to a contract shall have the legal capacity to do so.
o​ They must be above 18years of age
o​ They shall be of sound mind and
o​ Must not be disqualified by any law.
●​ Example: A 25-year-old with a sound mind making an agreement in partnership is
legal. However, an agreement entered with a 16-year-old minor is illegal because they
are below 18 years of age.
6. Free Consent
The contract should be an outcome of free consent, which is not induced by
coercion, undue influence, fraud, misrepresentation, or mistake. In case there is no free
consent, the contract is voidable at the option of the aggrieved (innocent) party.
●​ Example: In case a person is threatened to sell his car, the contract can be declared
voidable on the grounds of absence of free consent.
7. Agreement Not Expressly Declared Void
 A valid contract shall not fall within agreements expressed by the Indian Contract
Act as declared to be void; like
Agreement restraint of Marriage
Agreement restraint of Trade
Agreement restraint of Judicial Proceedings
wagering agreements or
those involving unlawful consideration
Illustration: A betting contract has been declared to be void
8. Certainty and Clarity (Freedom from Vagueness)
The terms of the contract must be clear and not vague or ambiguous. A contract
with uncertain terms is void.
●​ Illustration: An agreement to deliver "a reasonable quantity of rice" is vague and
void. But "100 kg of rice at ₹50 per kg" is a valid specification.
9. Legal Formalities
Some contracts are governed by specific legal formalities. They may be required
to be in writing, signed, registered, or attested, depending on their nature. If these
formalities are not completed with, then the contract becomes unenforceable.
●​ Example: A sale deed of immovable property is required to be in writing and
registered under the law.
10. Possibility of Performance (Section 56)
The contract should have obligations that are capable of being performed.
Contracts which require the performance of acts impossible to perform are void.
●​ Example: A contract to deliver goods to a place that has been destroyed by a natural
disaster is void for the impossibility of performance.

CLASSIFICATION OR TYPES OF CONTRACTS

 In connection with contracts, there are four types of classifications. Types of contracts
in contract law are as follows;
1)​ On the basis of Formation,
2)​ On the basis of Nature of Consideration,
3)​ On the basis of Execution and
4)​ On the basis of Validity.
1)​ ON THE BASIS OF FORMATION
On this base Contracts can be classified into three groups, namely Express, Implied,
Quasi Contracts.
a)​ Express contract
An express contract is one where the terms are clearly stated in words, spoken or
written.
“If the proposal or acceptance of any promise is made in words, the promise is said to
be express”. E.g. written words – by letter.
b)​ Implied contract
An implied contract is one which is inferred from the acts or conduct of the parties or
course of dealings between them. It is not the result of any express promise.
If the proposal or acceptance is made otherwise than in words, the promise is said to
be implied”. E.g.
​ - take a cup of tea in a restaurant.
​ - lifts ‘B’s luggage to be carried out of the railway station
c) Quasi contract
There is another category of implied contracts recognized by the contract Act known
as quasi contract.
In case of Quasi Contract there will be no offer and acceptance so, Actually
there will be no Contractual relations between the parties. Such a Contract which is
created by Operation of law is called Quasi Contract.
Sec. 68: When necessaries are supplied
Sec. 69: When expenses of one person are paid by another person.
Sec. 70: When one party is benefited by the activity of another party.
Sec. 71: In case of finder of lost goods.
Sec. 72: When payment is made by mistake or goods are delivered by mistake.
d) Contracts of Record
​ A contract of record is one, which is taken on the records of a court.
 A judgment of a court creates an obligation on the part of the person against whom
the judgment is recorded. It is not strictly speaking a contract because of the absence
of an agreement.
e) E-contract:
An agreement formed electronically, often through the internet.
2)​ On the basis of Nature of Consideration
Contracts are of two types. Namely Bilateral Contracts and Unilateral Contracts.
a)​ Bilateral Contracts: If considerations are moved in both directions after the
contract, it is called Bilateral Contract.
Example: A Contract has got formed between X and Y on 1st Jan, according to which
X has to deliver goods to Y on 3rd Jan and Y has to pay amount on 3rd Jan. It is a
bilateral contract.
b)​ Unilateral Contract: If considerations is to be moved in one direction only
after the Contract, it is called Unilateral Contract.
Example: A has lost his purse and B is its finder. Thereafter B searches for A and
hands it over to A. Then A offers to pay Rs. 1000/- to B to which B gives his
acceptance. Here, after the Contract consideration moves from A to B only. It is a
Unilateral Contract.
3)​ On the basis of Execution
On this basis contracts can be classified into two groups. namely,
a)​ Executed contract
​ An executed contract is one in which
●​ both the parties have performed their obligation or
●​ one party to the contract has performed his obligation.
E.g. In cash sale, the contract is executed once.
b) Executory Contract
An executory contract is one under which, both the parties in the contract have yet
to perform their respective obligation. There remains something to be done on both
the sides.
E.g. In a contract of sale both the delivery of goods and payment of price have to be
made on a future date, the contract is executory.
4)​ On the basis of Validity
On this base Contracts can be classified into 5 groups. namely Valid, Void, Voidable,
Illegal and Unenforceable Contracts.
a)​ Valid contract
The Contracts which are enforceable in a court of law are called Valid Contracts. In
other word contracts which satisfy all the essentials of valid contracts as laid down in
sec. 10 are valid contracts and enforceable in a court of law.
 b)​ Void contract
A Contract which is not enforceable in a court of law is called Void Contract.
​ A contract may subsequently void due to:
●​ Contract impossible or unlawful to perform
●​ Voidable contract may be void
●​ Change of law
Example: there is a Contract between X and Y where Y is a minor who has no
capacity to contract. It is a Void Contract.
c)​ Voidable: A Contract which is affected in only free consent, is called Voidable
Contract. That means it is a Contract which is made under certain pressure either
physical or mental. At the option of the suffering party (innocent), a voidable
contract may become either Valid or Void in future. For example: there is a
Contract between A and B, where B has forcibly made A involved in the Contract.
It is voidable at the option of A.
d)​ Unenforceable contract
An unenforceable contract is one which is valid in its substance and has all the
essentials of a void contract, but is not enforceable in a court of law due to certain
technical defects. Such as
a)​ Non registration of agreement
b)​ Under stamping
In these cases, parties have no legal records in the event of breach of ​ contract.
Some of the contracts can be enforced if the technical defect is removed. E.g.
under-stamp – pay deficit stamp.
e) Illegal Agreement
The word ‘illegal’ means contrary to law. An illegal agreement is one which exceeds
some rule of basic public policy or which is criminal in nature or which is immoral.
An illegal agreement is always void because it is against law enforcement in the
country. E.g. to commit murder is an illegal agreement.

CAPACITY TO CONTRACT (Sec. 11)

Introduction
One of the essential elements of a valid contract is that the parties to the contract must
be competent to contract. An agreement becomes a contract if it is entered into
between the parties who are competent to contract. As per section 11 every person is
competent to contract:
1)​ Who is of the age of majority.
2)​ Who is of sound mind.
3)​ Who is not disqualified from contracting by any law to which he is ​ subject.
 Who is a minor?
According to section 3 of Indian Majority Act 1875
Who has not completed his 18 years of age.
But in cases where a guardian of a minor's person or property is appointed, or if his
property is in the charge of courts of wards, the minority continues up to completion
of 21 years.
Rules relating to minor’s contract:
1)​ Minor’s contract is absolutely void: A minor’s agreement being absolutely void,
neither he nor other party acquires any right or incurs any liability under the
agreement, nor is he liable to repay money that he has received under The Principle
behind this ruling is, a minor is incapable of judging what is good and bad for him. A
minor is incapable of giving a promise which imposes a legal obligation upon himself.
e.g. Mohori Bibi v/s. Dharmadas Ghose
Facts – A minor executed a mortgage deed for a sum of Rs. 20,000 out of which he
received Rs. 8,000. Minor filed a suit subsequently for setting aside the mortgage. The
money lender claimed a refund of Rs. 8,000 from the minor. It was held that the
minor's contract is altogether void and the money lender therefore cannot recover the
amount. A minor’s contract is not only void but void-ab-initio( void from the
beginning ) . He can neither sue nor be sued upon it.
2)​ Transfer in favour of Minor: There is, however, nothing in the contract act which
prevents a minor from being a promisee or a transferee. The law does not regard a
minor as incapable of accepting a benefit.
3)​ Ratification of a minor’s contract: Ratification means consenting to a post contract
entered into during minority at a future date on attending majority. Since the minor’s
contract is void-ab-initio it follows that there cannot be a question of ratifying it later
on completing 18 years of age.
4)​ Specific performance of a minor’s contract: As a minor's contract is absolutely
void, there can be no specific performance of such a contract. But a contract entered
into on his behalf by his parent, guardian or manager of his estate can be specifically
enforced by or against the minor.
5)​ False representation by a minor: A minor who falsely represents himself to be a
major and thereby induces another person to enter into a contract with him, can plead
minority as a defence.
A minor cannot be sued on the ground that he falsely represented that he is of full age
and thereby induced another person to enter into a contract.
6)​ Position of guardian of a minor: A void contract can be made by a guardian on
behalf of a minor if the following two conditions are satisfied.
●​ The guardian is competent to enter into a contract.
●​ The contract is for the minor's benefit or for legal necessaries.
7)​ A minor can be appointed as an agent: Minor is not personally liable for any act
done by him or the firm. Minor is also not liable to his principal for his act; at the
same time, he can make his principal responsible to a third person for his act.
8)​ A minor can be admitted for the benefit of partnership: A minor cannot be added
as full-fledged partner, though he may be admitted to the benefit of partnership. A
minor may be admitted in the partnership along with the consent of all the partners. A
minor partner cannot be personally liable for any obligation of the firm. But minor’s
share alone in the property of the firm will be liable.
9)​ A minor cannot be declared insolvent: A minor cannot be declared insolvent
because he is not bound to discharge any debt and as contract with minor is void.

CONSIDERATION
Meaning
Consideration is an essential element of a valid contract. A contract without
consideration is void and not enforceable. Consideration is a technical term used in
the sense of “quid pro quo” (i.e. something in return) when a party to an agreement
promises to do ‘something’, he must get ‘something’ in return. This ‘something’ is
defined as consideration.
E.g. ‘A’ agrees to sell his car to ‘B’ for Rs.1,00,000. The car is the consideration for
‘B’ and the price is the consideration for ‘A’.
Definition
Sec. 2(d) defines consideration “When at the desire of the promisor,
the promisee or any other person,
had done or abstained from doing or
does or abstains from doing or
promises to do or abstain from doing something,
such act or abstinence or promise is called consideration for the ​ promise.”
Essential elements of valid consideration
1)​ Consideration must move (transfer) at the desire of the promisor: It is to be
remembered that the act or no act must be done at the desire of the promisor. If the act
is done either voluntarily or at the desire of a third party, that act does not constitute
valid consideration.
2)​ Consideration may move (transfer) from the promisee or any other person:
Under Indian Law: Consideration may move from the promisee or any other person
i.e. stranger. This means that as long as there is consideration for promise it is
immaterial who has furnished it. Thus, the concept of “stranger to consideration” is
valid and acceptable. So, in India, a stranger to the consideration can sue on a
contract, provided that he is a party to the contract.
Chinnayya v/s Ramayya – ‘X’ an old lady, by a deed of gift, transferred certain
property to her daughter ‘R’ under the direction that she should pay an annuity to ‘X’s
brother ‘C’. The same day ‘R’ entered into an agreement with ‘C’ to pay him the
agreed amount. Afterwards, she (R) refused to fulfil her promise saying that no
consideration had moved from ‘C’ (brother of ‘X’).
 It was held that as per sec. 2(d) “the promisee or any other person means here
promisee had not given any consideration but the old lady i.e. ‘X’ (any other person)
had given the necessary consideration to ‘R’ to enter into the contract with ‘C’.
In this case promisee i.e. ‘C’ is a stranger to the consideration but he is not a stranger
to the contract (as he enters into contract with ‘R’ on the same day) and therefore he
can file a suit against ‘R’ and enforce the contract.
3)​ Consideration may be past, present or future: The words used in definition has
done or does, or to do means the consideration may be past, present or future.
Past consideration: When the promise given by one party is based on the
consideration received in the past, it is a past consideration.
Present consideration: When the promisor receives consideration immediately with
his promise, it is said to be present consideration. E.g. cash sale.
Future consideration: When the promisor has to receive consideration in future, the
consideration is said to be future.
4)​ Consideration may be positive or negative i.e. to do or to abstain from doing
something.
5) Consideration need not be adequate: Consideration need not necessarily be equal in
value of promise. The law simply provides that a contract should be supported by
consideration.
e.g. ‘A’ agreed to sell his watch worth Rs. 1000 to ‘B’ only for Rs. 100. It is a valid
consideration though inadequate.
The court may inquire whether there was free consent in the case.
6. ​ Performance of existing obligation is no consideration: The performance of an act
by a person who is already bound by law to perform the same act either as a public
duty or under the existing contractual obligation, does not continue a consideration for
a contract. E.g. ‘A’ promises to appear as a witness of a trial by a person served with
Notice will not support a promise to pay money thereof.
7. ​ Consideration must not be illegal, immoral or opposed to public policy:
Consideration would be illegal if i) it is forbidden by law ii) it is of such nature that if
permitted would defeat the provisions of any law iii) it is fraudulent iv) it involves or
implied injury to the person or property of another v) if the courts regard it as immoral
or opposed to public policy.

BREACH OF CONTRACT

when a party to a contract has refused to perform or disabled himself from performing his
promise, the promise may put an end to the contract.

Types
●​ Actual breach: takes place either
a)​ by non-performance of his obligation, when it is due.
 b)​ by non-performance of his obligation during the performance of the
contract.

●​ Anticipatory breach: When the promisor, before the due date of performance,
informs the other party, his intention of not performing his obligation, it is an
anticipatory breach of contract.

Remedies for breach of contract

If any of the parties refuse to perform his part of the promise, he is guilty of breach of
contract. The other party (aggrieved or innocent party) may enforce his right in a court of law.
Aggrieved party has following right:
1)​ Rescission of the contract
2)​ Suit for Damages.
3)​ Suit for Quantum meruit.
4)​ Suit for Specific performance.
5)​ Suit for Injunction.

1)​ Suit for Rescission of contract

Rescission of contract means cancellation of a contract.
a)​ By mutual consent
b)​ One party fails to perform, other party can cancel it
c)​ Voidable contract

2)​ Suit for Damages:

i.​ Damages are the monetary compensation.
ii.​ Payable by the defaulting party to the injured party.
iii.​ It is a compensation for the loss suffered by the aggrieved party and not for
the purpose of punishing the defaulting party.

Types of damages:
a)​ Ordinary damages – Damages which arise in the ordinary course of event from the
branch of contract are known as ordinary damages.

b)​ Special damages – Damages which arise due to some unusual and ​ special
circumstances and not from usual consequences of breach of contract. The special
circumstances were made known to the ​ other party at the time of contract.

c)​ Nominal damages – Injured party has actually not suffered any loss by reason
of breach. It is awarded simply to recognise the right of the party to claim
damages.

3)​ Suit for Quantum Meruit.

a)​ Quantum meruit means as much as merited or as much as ​ ​ earned.
b)​ In other words, it means payment in proportion to the ​​ ​ amount of
work done.
 4)​ Suit for specific performance
Where damages are not an adequate remedy, the court may direct the party in breach to carry
out his promise according to forms of contract. This is called specific performance of a
contract.

5)​ Suit for Injunction

It is an order of court, directing the other party to do or restrain from doing some act,
which is the subject matter of the contract and which the other party under the
contract is obligated to do or not to do.

CHAPTER 2 – SPECIAL CONTRACTS

CONTRACT OF INDEMNITY
MEANING: -
Indemnity is a protection or security against a loss. To indemnify means to compensate
another party for losses or damages that have occurred, or which may occur in the future. It is
a common practice for one party to promise to compensate another party for any loss that
may occur due to a contractual obligation.

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, is called a
“contract of indemnity”.
Illustration
New India Assurance Company insured the car owner Mr. B and promised to indemnify Mr.
B against the loss or damage caused to Mr. B. due to accident, theft, fire or flood. Here B
paid the premium of Rs. 20,000/- and in consideration Insurance company gave the promise
to compensate, if there is loss to Mr. B This is a contract of indemnity.​
PARTIES :-
Indemnifier :- ​ The person who promises to save the other from the loss is ( Promisor
) called Indemnifier.
Indemnity-holder.:- The person who is compensated is the indemnity-holder. (Promisee)
ESSENTIALS / FEATURES OF A CONTRACT OF INDEMNITY
A valid contract of indemnity should fulfill the following conditions:​

1.​ All the essentials of a valid contract: Contract of indemnity being a species of
contract must have all essentials of a valid contract like offer, acceptance, free
consent, competence of the parties, consideration, etc.
2.​ Promise to save the other party: There must be a promise to save the other party
from some loss.
3.​ Anticipated loss: A contract of indemnity is a security for an anticipated loss.
 4.​ There must be loss to the Promisee : The event mentioned in the contract must
happen and the promisee must incurred the loss. The purpose of an insurance contract
is-or should be – to restore the insured to the same financial position as before the
loss.
5.​ The loss may be caused due to the promisor or any other person :- It covers only
the actual loss that may be due to the promisor himself or any other person and it
covers only the loss caused by an event mentioned in the contract.
6.​ May be express or implied: The contract of indemnity may be express or implied.
An express promise is one where a person promises to compensate the other party in
express terms. Implied promise is one where the conduct of the promisor shows his
intention to indemnify the other party from loss.
7.​ Parties: A contract of indemnity involves two parties, the indemnifier who promises
to indemnify, and the indemnified or indemnity holder who is being indemnified.

CONTRACT OF GUARANTEE

MEANING

The most commonly the word guarantee designates a private transaction by means of which
one person, to obtain some trust, confidence or credit for another, engages to be answerable
for him.

A guarantee is a contract to answer for the payment of some debt, or the performance of some
duty by a third person who is primarily liable for that payment or performance.

DEFINITION :-

A “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a

third person in case of his default."

PARTIES:-

Surety:- The person who gives the guarantee is called the “surety”,

Principal Debtor :- The person in respect of whose default the guarantee is given is called
the “principal debtor”.

Creditor:- The person to whom the guarantee is given is called the

“creditor”.

Illustration
Seema gives a loan of Rs. 50,000 to Aditi on the promise that Atul will repay the loan to
Seema, if Aditi defaults in her payment. This is a contract of guarantee.

ESSENTIAL FEATURES OF A CONTACT OF GUARANTEE:

 1. All the essentials of a valid contract :- : Contract of indemnity being a species of
contract must have all essentials of a valid contract like free consent, competence of the
parties, consideration, etc.
2. A contract of Guarantee involves three contracts :-
There must be three parties in a contract of guarantee namely, the principal debtor, the
creditor and the surety.
In a Contract of Guarantee, there are three contracts
(a) Contract between principal debtor and creditor ( Contract of Loan)
(b)Contract between principal debtor and surety and (Contract of Indemnity)
(c) Contract between creditor and surety.( Contract of Guarantee)
[Link]: Since the contract of guarantee involves the creditor, principal debtor and the
surety, it is necessary that all the three parties agree to the contract.
4. Primary and secondary liability – The primary liability lies with the principal debtor.
The liability of the surety is only secondary in the sense that his liability arises only
when the principal debtor fails to pay his debt.
5. Liability must be existence and enforceable –
The debt or liability must be recognized by the court. It should not be time barred by law
of limitation otherwise the court will not recognize it.
6. Guarantee may be express or implied. Contract of Guarantee may be oral or in
writing. But under the English law, a contract of guarantee must always be in writing.
7. 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.

CONTRACT OF BAILMENT

INTRODUCTION:-

There are many instances of bailment in our daily lives – when we give our clothes for
laundry or a man visits a repair shop to get his television set fixed. The television set is left at
the shop where the repair man examines it and fixes the problem. Once fixed, the television
set has to be returned to its owner. There is a contract of bailment between the man and the
repair-man.

MEANING

The term bailment is derived from the French word bailler, meaning "to deliver." Bailment is
a process where the owner of certain goods places them in the temporary possession of
another person. In simple terms, bailment means that a person delivers his goods to another
person or put them in another’s possession for a specific purpose and there is an express or
implied understanding between the two people that once the purpose has been achieved, the
goods will be returned to the owner – the person who bailed them.

A bailment is not the same as a sale, which is an intentional transfer of ownership of personal
property in exchange for something of value. A bailment involves only a transfer of
possession or custody, not of ownership.

SEC. 148. ‘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.

PARTIES :-

Bailor:- ​ The person delivering the goods is called the ‘bailor’.

Bailee:- ​ The person to whom they are delivered is called the ‘bailee’.

Example:-
Mr. A delivers his watch to a watch-maker Mr. B for repair. Here A is the bailor, and Mr. B
watch- maker is the bailee and the contract between them is a contract of bailment.

CHARACTERISTICS OF BAILMENT
On analyzing the above definition, we find the following characteristics of bailment:
1. There should be a contract:
A bailment is based on a contract, i.e., contract between bailor and bailee. The contract of
bailment may be express or implied. In some cases e.g., in case of finder of goods, a contract
of bailment can be implied by law.
2. Movable Goods:
It should be noted that in bailment, only the possession of the goods is transferred not the
ownership. Again, only movable goods can be bailed as immovable goods cannot be
delivered.
3. Delivery of goods by one person to another:
In bailment, there must be delivery of goods by one person to another. However, the word,
'delivery' is very wide. It may be actual or constructive.
It should be noted that in bailment, only possession of the goods passes from one person to
another. Possession means control of goods to the exclusion of others. Mere custody of goods
as against possession is not sufficient. For example, a master while giving his goods to his
servant retains the possession with him and parts only with the custody of the goods.
Thus to create bailment, there must be delivery of goods.
Examples:
(1) A delivers his watch to a watch-maker for repair. Here it is a contract of bailment.
4. The goods are delivered for certain purpose:
The purpose may vary from safe-keeping or safe custody to repairing or changing the form of
the goods. If goods are delivered by mistake without any purpose then there is no bailment.
Examples:
(1) A leaves his suit-case with a Railway Cloak Room for safe custody.
(2) A gives his watch for repair to a watch-maker.
(3) A gives a piece of cloth to a tailor for stitching it into a shirt.
5. Return of specific goods :
For a transaction of bailment, it is necessary that the same goods must be returned.
Where money is deposited in a savings bank account or any other account, it is not a
transaction of bailment because the bank is not going to return the same currency notes but
will return only an equivalent amount. However, where money or valuables are kept in safe
custody, it will amount to a transaction of bailment as these will be returned in specie.
It should be noted that return of goods in species does not mean that their form cannot
change.
For example, Gold ornaments can be changed into new ones. A piece of cloth can be stitched
into a shirt.

6. Parties Involved:

●​ Bailor: The person delivering the goods.

●​ Bailee: The person receiving the goods.

CONTACT OF AGENCY

MEANING OF AGENCY :- Agency is a relationship between a principal and an agent in

which the principal delegates his or her rights to the agent to act on the principal's behalf.

PRINCIPLES OF AGENCY :-

Contracts of agency are based on two important principles, namely

a)Whatever a person can do personally shall also be allowed to be done through an agent
except in case of contracts involving personal services such as painting, marriage, singing,
etc.

b)He who does not act through a duly authorized agent does it by himself, i.e., the act of the
agent are considered the acts of the principal

DEFINITIONS:-

Agent:– An “agent” is a person employed to do any act for another, or to represent another in
dealing with third persons.
Principal:- The person for whom such an act is done, or who is so represented, is called the
“principal”.

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.

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 sound mind can become an agent, so as to be
responsible to the principal according to the provisions in that behalf herein contained.

ESSENTIAL FEATURES OF AGENCY:-

The agency has certain essential features. They are as follows:

1. An agent is link between the principal and the third party:-

Agency implies that one person (i.e. an agent) brings two other persons (i.e. a principal and a
third person) into a contractual relationship. That means an agent is a connecting link
between the principal and the third person .

2. An agent creates a legal relationship between the principal and the third party:- That
is he makes the principal answerable to the third party for his acts and also entitles the
principal to all the benefits accruing from his acts.

3. An agency established only for lawful acts:-

An agency can be established to do any act which the principal could do lawfully. If an
agency is established for an unlawful act it cannot be enforced by law.

4. Agency can be created only for those acts which can be delegated by a person to
another.

That means agency cannot be created for acts which must be done by a person himself and
cannot be delegated to an agent say painting, marrying, singing.

5. Contract may be express or implied :-

The agency relationship may be established by a contract between the principal and the agent
which may be written or oral, or may be established by implications, as in the case of
husband and wife, master and servant etc.

6. Competent parties :-

Though a valid contract requires that both the contracting parties must be competent to
contract, for a contract of agency, it is enough if only the principal is competent to contract.
The agent need not be competent to contract. In other words an agent may be incompetent to
contract, say a minor, lunatic, idiot etc.

7) Intention of the agent to act on behalf of the principal:-

There should be the intention on the part of the agent to act on behalf of the principal.
As such, if a person intends to act on behalf of another an agency arises even if the
contract between the parties provides that there is no such relationship. On the other
hand if a person intends to act on his own behalf and not on behalf of another there
cannot arise any agency, even if the person contends that he is an agent

8) No consideration is necessary to create an agency.

​ The fact that the principal has agreed to be represented by the agent is a sufficient
detriment to the principal to support the contract of the agency. Though no consideration is
necessary to support a contract of agency, an agent may be paid for. That means an agent may
be paid for ​ his services.

9) Authority of the agent :-

​ An agent is appointed with specific instructions and is authorized to act within the
scope of the instructions. As such the agents within the ​ scope of his authority are
regarded as the acts of the principal and such acts bind the principal as if the principal has
done them himself.

MODULE 2: CHAPTER- 3 SALE OF GOODS ACT, 1930

DEFINITION AND ESSENTIALS OF A CONTRACT OF SALE​ Section 4(1)

Define a Contract of Sale as “a contract of sale is a contract whereby the Seller transfers or
agrees to transfer the property in the goods to the buyer for a price”.

A contract of sale is a legal term including both sale and an agreement to sale. According to
Section 4 of the Act, Sale means the transfer of goods from a seller to the buyer for a price.
Where under a “contract of sale “the property in goods is immediately transferred from the
seller to the buyer. In “ Agreement to Sale “ the transfer of a property in goods is to take
place at a future date or subjected to the fulfilment of certain conditions.

Essentials of a contract of Sale :

(1) There should be two parties :

There must be two parties i.e Seller & Buyer. “Buyer “means a person who buys or agrees to
buy the goods & “Seller “means a person who sells or agrees to sell the goods. The seller &
the buyer should be two different persons because a man can not purchase his own goods.
The parties should also be competent as per Indian Contract Act.

(2) There should be movable goods :

There must be some goods .The goods which form the subject matter of the contract of sale
must be movable.

The term movable goods means every kind of movable property

other than ( Does not include) actionable claim & money and includes stock & shares,
growing crops, grass, and things attached to the land ,which are agreed to be separated from
land before sale or under the contract of sale.

(Here an actionable claim means a claim which can be enforced through the court of law.
Example : Trees, stones, sand are movable goods.)

(3) There should be transfer of property (ownership) in the goods from the seller to the
buyer:

By property means ‘ownership’, Ownership means right, title and interest in the property.
When the ownership in the goods passes from seller to buyer immediately after the contract
of sale is complete is called a Sale .For the transfer of ownership of goods it is not necessary
that the seller should deliver the possession of goods to the buyer. There must be a transfer
of general property i.e. general interest in the goods (ownership & not merely special interest
in the property. Because if special interest in the goods passes from one party to another
e.g. called pledge and not sale.

(4) Price :-

There should be payment of price of goods in terms of money by buyer to the seller. Price is
the money consideration in exchange for ownership of goods. The price should be paid in
money. If the price is paid wholly in the form of goods the transaction will be called barter
exchange. But if the price is to be paid partly in cash and partly in the form of goods it is
called a sale of goods. E.g. T.V. sale in exchange offer.

(5) Other condition :

The contract of sale should also satisfy other conditions of a valid contract such as competent
parties, free consent, lawful object & consideration etc.

(6) Form:

A contract of sale may be made in writing or by the words of mouth or partly in writing and
partly by words of mouth or may be implied from the conduct of the parties.

(7) Absolute or Conditional Sale:

A contract of sale of goods is a contract where the seller transfers or agrees to transfer the
property in goods to the buyer for a price. such contract of sale may be Absolute or
Conditional. The absolute contract is without any conditions. Conditional contract may be
contract with condition before or after the sale.

DISTINGUISH BETWEEN:

(A) SALE AND AGREEMENT TO SELL :

SALE ( Sale Deed) AGREEMENT TO SELL

1. DEFINITION

“ Sale is a contract whereby the seller “ Agreement to Sell “is a contract

transfers or agrees to transfer the whereby transfer of property in goods
property in goods to the buyer for a takes place at a future date subject to
price.” some conditions to be fulfilled by the
buyer ”.

2. EXECUTED/ EXECUTORY CONTRACT

Property in goods is passed from Here both the parties are yet to perform
seller to buyer. Here both the parties their mutual promises. Therefore, it is
have performed their mutual executory contract.
promises.
3. ACTUAL TRANSFER OF PROPERTY ( Ownership) IN GOODS

Immediate transfer of ownership in No immediate transfer, it takes place at

the goods, irrespective of the question future date & subject to some conditions.
of delivery.

4. PASSING OR RISK IN GOODS ( TO BUYER)

Rule :- Risk passes along with ownership)

The risk in the goods passes to the The risk in goods remains with the seller.
buyer, immediately on contract of It passes only when property passes to the
sale. buyer.

5. REMEDY AGAINST SELLER (Where Seller Commits Breach)

The buyer can file suit for damages The buyer can file suit for damages
and recovery of goods . against the seller. (Seller is the owner)

6. REMEDY AGAINST BUYER (Where Buyer Commits Breach)

Sellers can sue for the price. Sellers can sue for damages if the buyer
fails to make the payment in time . (
interest)

7. RIGHT IN REM/ PERSONAM

Sale creates a right in rem i.e. a right Here right in personam available only
against the whole world for the goods. against the person for any default in
performing his post.
 8. PASSING OF RISK ( Rule :- Risk Passes along with ownership)

If goods are destroyed by an accident, If goods are destroyed accidentally, the

the loss falls on the buyer though the loss falls on the seller, though possession
possession is with the seller. is with the buyer.

9. IN CASE OF INSOLVENCY OF SELLER

Buyer entitled to recover the goods The buyer shall have to prove the amount
from the official assignee or Court paid by him and claim a rateable dividend
receiver. out of assets of the seller.

10. IN CASE OF INSOLVENCY OF BUYER

Sellers must deliver goods for the Sellers may refuse to deliver the goods
official Assignee/ Court Receiver and unless they are paid for.
claim a rateable dividend for price of
goods.

HIRE PURCHASE AGREEMENT

Hire purchase is an arrangement for buying expensive consumer goods, where the buyer
makes an initial down payment and pays the balance plus interest in installments. The term
hire purchase is commonly known as an installment purchase plan.

With hire purchase agreements, the ownership of the goods is not officially transferred to the
buyer until all the payments have been made.

Hire purchase agreements are similar to rent-to-own transactions that give the hirer the option
to buy at any time during the agreement by paying the remaining amount of goods.
A contract of hire usually covers the common day finance agreements like purchase of
consumer durables like Motor Vehicles, Computers, Household appliances like Televisions,
Refrigerators etc. In the Industrial sector purchase of machinery etc is also financed by this
method of hire purchase.

The basic principle underlying the transaction is that the installment fixed is taken as hire
charges ( rental ) till the time of the last payment .

(B) SALE AND HIRE PURCHASE :

SALE HIRE PURCHASE AGREEMENT

The general property (ownership) in Sellers agree to transfer general property

goods is transferred to the buyer only when a certain fixed no. of
1.
immediately. instalments are paid without default by
the buyer.

The Buyer is the owner of goods In case of Hire Purchase, the seller
becomes the owner of goods. The hirer
2.
is in the position of a bailee & not of an
owner until all instalments agreed to be
paid are actually paid without default.

Seller has no right over the goods Sellers can recover the goods, if the hirer
where the buyer fails to pay. He can committees default on payment of
3.
only sue for price but where installment.
possession is with the seller. He can,
in addition, exercise the right of lien
over goods.
 The Buyer has no opinion to put an The Buyer has the option to set aside the
end to the contract. contract. In case he decides to do so, he
4.
can not be held liable to pay the price.

5. Payment made by the buyer is Payment made by the hire purchaser is

appropriated towards the price of considered as hire charges till the option
goods. to purchase the goods is actually
exercised.

6. Sale of Goods Act,1930 Hire-Purchase Act,1972

Is a contract whereby, the seller A hire purchase agreement is a contract

7. transfers or agrees to transfer the where a person (the hirer) takes
property in goods to the buyer for the
possession of goods and pays for them in
price.
installments, with the ownership of the
goods remaining with the seller (or
finance company) until the final payment
is made. The hirer has the option to
purchase the goods outright once all
agreed payments are completed.
Example: Example:
8.
Buying groceries at a supermarket. Financing a car through a dealership
where you make monthly payments and
the car is only legally yours after the
final payment.

CONDITIONS ​

MEANING:

While entering into a contract of sale, parties make various stipulations with regard to the
quality of goods, time of delivery, time of payment etc. Such stipulation in a contract of sale
made with reference to goods which are the subject matter thereof, may be either a condition
or warranty. ​

CONDITION:

If a stipulation forms the very basis/important/ priority of the contract, it is a condition. E.g.:
Stipulation regarding quality, quantity, colour, design, packing of goods are regarded as a
condition and the seller is bound to give as per that condition otherwise the buyer has a right
to reject the goods.

Effects of Condition :

If the goods are not according to sample or contract not performed within stipulated
time i.e. the condition is not fulfilled, the aggrieved party has the right to repudiate (cancel)
the contract.

IMPLIED CONDITION :

(1) Condition as to title ( ownership) of the goods:

In every contract for sale of goods it is implied presumption that the seller has the right to
title, & interest the property to sell the goods.

(2) Sale by description:

When the sale of goods by description it is implied that goods shall correspond with
description. E.g.: If the buyer has ordered a Maruti car 800 model white colour, the seller
must deliver the car of the same description.​

(3) Sale by sample:

When selling goods by sample there is an implied condition that the bulk of goods shall
correspond with sample quality.

(4) Sale by sample and description:

Where the sale is made by sample as well as by description, there is an implied condition
that goods must correspond with both. If not, the buyer has the right to reject the goods.

(5) Sale as to quality or fitness for buyers purpose:

Where the buyer expressly or by implication makes known to the seller the particular purpose
for which he needs the goods and depends upon the skill and judgement of the seller, there is
an implied condition that the goods are reasonably fit for that particular purpose.

Example: A bought a hot water bottle from B, a retail chemist. A examined the bottle and
asked B if it would stand boiling water. B told him that it was intended to hold hot water. The
bottle burst after a few days' use and injured A’s wife. Held, B was liable for breach of
implied condition that the bottle was fit for the purpose for which it was meant. (Priest v.
Last)

(6) Condition as to merchantability :

There is an implied condition that the goods should be of merchantable quality. It means they
are commercially saleable under the description by which they are known in the market as
their full value. E.g. A pen that does not write or a watch that does not keep time are not of
merchantable quality.

(7) Implied Condition as to Wholesomeness:

In the case of eatables, apart from merchantability of goods it should be wholesome.

Example: F bought milk from A, a Dairy Company. The milk was contaminated with germs
of typhoid fever. F’s wife took the milk and was infected and died of it. A was held liable for
damages. (Frost v. Ayasbalry Dairy Co. Ltd.)

RIGHTS OF THE UNPAID SELLER

The seller of goods is deemed to be an unpaid seller :

(a) When the whole price of goods has not been paid. Or,

(b) When a conditional payment was made by B/E or other Negotiable Instrument ( cheque )
and the cheque has been dishonoured.

In simple words an unpaid seller is one who has sold the goods on ​ cash terms, but
has not received the whole price of goods from the buyer. The unpaid seller does not include
a seller who has sold goods on credit.

An unpaid seller has two rights :

(1) Against the goods ; ​

(2) Against the buyer personally.​

(1) RIGHT AGAINST THE GOODS:

(I) RIGHT OF LIEN:

Lien means to retain. An unpaid seller may keep the goods in his possession and refuse to
deliver them to the buyer until the full payment of the price. ( Possession is with the seller)

When Right can exercise:-

(a) Where the goods have been sold without any stipulation as to credit ; ( Cash Sale)

(b) Where the goods have been sold on credit but the term of credit has expired; ( Credit Sale
– period expired )
(c) Where the Buyer becomes insolvent, even though the term of credit has not expired.

When Right Terminate:-

Lien depends on physical possession of goods. Therefore, an unpaid seller loses his lien on
the goods.

(a) When he delivers them to a carrier or bailee.

(b) When the buyer or his agent lawfully obtains possession of goods.

(c) By waiver of his lien. ​

(II) RIGHT OF STOPPAGE OF GOODS IN TRANSIT:

This right comes into existence where the right of lien comes to an end. If the seller parts
with the possession of the goods to a carrier.

When Right can exercise:-

(a) The seller has parted with the possession of goods to a carrier;

(b) The goods are in transit.

(c) The buyer becomes insolvent.

(d) The buyer, his agent or his servant has not received the possession of the goods from the
carrier. The transit continues so long as the goods are not delivered to the buyer or his agent
for any reason.

When Right Terminate:-

(a) If the buyer obtains delivery of the goods before the arrival of the goods at the destination.

(b) If the carrier wrongfully refuses to deliver the goods to the buyer.

(c) If the goods are rejected by the buyer and the carrier is in possession of them.

(III) RIGHT OF RESALE:

This is the third right of the unpaid seller. The unpaid seller may exercise his right of​
resale of goods.

(a) Where the goods are of perishable nature ;

(b) Where the right of resale is expressly reserved in the contract ;

(c) Where in exercise of right of lien or stoppage of goods in transit & seller gives notice to
Buyer of his intention to re-sell the goods, if Buyer does not pay within a reasonable time.
​
(2) Right of the unpaid seller against the buyer personally:

I] Suit for Price

Under the contract of sale if the property of the goods is already passed but he refuses to pay
for the goods the seller becomes an unpaid seller. In such a case the seller can sue the buyer
for wrongfully refusing to pay him his due.

II] Suit for Damages for Non-Acceptance

If the buyer wrongfully refuses or neglects to accept and pay the unpaid seller, the seller can
sue the buyer for damages caused due to his non-acceptance of goods. Since the buyer
refused to buy the goods without any just cause, the seller may face certain damages.

Example: In the case of seller A. He agrees to sell to B 100 litres of milk for a decided price.
On the day, B refuses to accept the goods for no justifiable reason. A is not able to find
another buyer and the milk goes bad. In such a case, A can sue B for damages.

III] Repudiation of Contract before Due Date

If the buyer repudiates the contract before the delivery date of the goods the seller can still
sue for damages. Such a contract is considered as a rescinded contract, and so the seller can
sue for breach of contract. This is covered in the Indian Contract Act and is known as
Anticipatory Breach of Contract.

IV] Suit for Interest

If there is a specific agreement between the parties the seller can sue for the interest amount
due to him from the buyer. This is when both parties have specifically agreed on the interest
rate to be paid to the seller from the date on which the payment becomes due.

But if the parties do not have such specific terms, still the court may award the seller with the
interest amount due to him at a rate which it sees fit.

MODULE 2: CHAPTER- 4 DRAFTING OF CONTRACTS

Deed of Indemnity​
This Deed of Indemnity is made at Kalyan on this 25th day of September, 2025.​
​
​ BETWEEN​
​
SHRI. VIJAY ARUN PATIL Age 43 Years, Occ. Business, Hindu Adult, Residing at Flat
No. 504 Sreyesh Palace, Opp. Adarsh Hindi School, Ram Baugh, Kalyan (West) 421301,
(hereinafter referred to as the “Indemnifier”, which term shall, mean and include his heirs,
executors, administrators, legal representatives and assigns)​
 ​
​ AND​
​
SHRI GANESH PRABHU GUPTA Age. 41 Years Hindu Adult, Residing at Flat No, 304,
Vikas Society, New High School, Ram Baugh, Kalyan (West) 421301. (hereinafter referred to
as the “Indemnified”, which term shall, mean and include his heirs, executors, administrators,
legal representatives and assigns).​
​
​ ​ WHEREAS​
The Indemnifier has agreed to indemnify the Indemnified against certain losses, damages,
costs, charges and expenses in connection with 211, 2ND Floor, Patel Plaza, Near Ajit
Scanning Centre, Murbad Road, Kalyan (West) -421301​
​
The Indemnified has agreed to accept such indemnity subject to the terms and conditions set
forth herein.​
​
NOW THIS DEED WITNESSETH AS FOLLOWS:​
1) Indemnity​
The Indemnifier hereby agrees and undertakes to indemnify and keep indemnified against all
actions, claims, demands, losses, damages, costs, charges and expenses whatsoever which the
Indemnified may incur due to fire in the above said property.​
​
2) Duration​
This indemnity shall remain valid and binding until 1 Year from the date of Contract.

​
3) Limit of Liability​
The liability of the Indemnifier under this deed shall be limited to Rs. 5 Lacs.​
​
4) Governing Law​
This Deed shall be governed by and construed in accordance with the laws of Special
Contracts of India and Local Authority.​
​
5) Dispute Resolution​
Any disputes arising under this deed shall be settled amicably, failing which the same shall
be referred to arbitration in accordance with the Arbitration and Conciliation Act, 1996.​
​
IN WITNESS WHEREOF​
The parties hereto have executed this Deed of Indemnity on the day, month and year first
written above.​
​
SIGNED AND DELIVERED BY​
​
Indemnifier:​
Name:​
Address:​
Signature:​
​
Indemnified:​
Name:​
Address:​
Signature:​
​
Witnesses:​
​
a) _________________________ (Name & Address)​
​
b) _________________________ (Name & Address)

​ ​ ​ Deed of Guarantee

This Deed of Guarantee is made at Kalyan on this 25th day of September, 2025.

​ BETWEEN

SHRI GANESH PRABHU GUPTA Age. 41 Years Hindu Adult, Residing at Flat No, 304,
Vikas Society, New High School, Ram Baugh, Kalyan (West) 421301. (hereinafter referred to
as the “Guarantor”, which expression shall, include his/her heirs, executors, administrators,
legal representatives and assigns)

​ ​ IN FAVOUR OF

State Bank of India, Dombivli (east) (hereinafter referred to as the “Beneficiary”, which
expression shall, include his/her heirs, executors, administrators, legal representatives and
assigns).

​ ​ WHEREAS

At the request of the Guarantor, the Beneficiary has agreed to extend financial support to
SHRI. VIJAY ARUN PATIL Age 43 Years, Occ. Business, Hindu Adult, Residing at Flat
No. 504 Sreyesh Palace, Opp. Adarsh Hindi School, Ram Baugh, Kalyan (West) 421301
(hereinafter referred to as the “Principal Debtor”).

The Guarantor has agreed to guarantee due repayment by the Principal Debtor to the
Beneficiary.

NOW THIS DEED WITNESSETH AS FOLLOWS:

1)​ Guarantee

The Guarantor hereby irrevocably and unconditionally guarantees to the Beneficiary the due
payment of all obligations and liabilities of the Principal Debtor to the Beneficiary under
Loan Agreement for Rs. 5 Lacs.

2)​ Continuing Guarantee

This guarantee shall be a continuing guarantee and shall remain in force until all dues,
liabilities and obligations of the Principal Debtor are fully discharged to the satisfaction of the
Beneficiary.

3)​ Guarantor’s Liability

The liability of the Guarantor shall be co-extensive with that of the Principal Debtor and the
Beneficiary shall not be bound to exhaust remedies against the Principal Debtor before
proceeding against the Guarantor.

4)​ Revocation

This Guarantee shall not be revoked by the death, insolvency or disability of the Guarantor
and shall remain binding on his legal representatives and heirs.

5)​ Governing Law

This Deed shall be governed by and construed in accordance with the laws of Special
Contracts of India and Local Authority.

IN WITNESS WHEREOF

The Guarantor has executed this Deed of Guarantee on the day, month and year first above
written.

SIGNED AND DELIVERED BY

Guarantor:

Name:

Address:

Signature:

Beneficiary:

Name:

Address:
Signature:

Witnesses:

a) ​ _________________________ (Name & Address)

b)​ _________________________ (Name & Address)

​ Agreement for Sale of Immovable Property

This Agreement for Sale is made at Kalyan on this 25th day of September, 2025.

​ BETWEEN

SHRI SHIV GUPTA Age. 41 Years Hindu Adult, Residing at Flat No, 304, Vikas Society,
New High School, Ram Baugh, Kalyan (West) 421301. (hereinafter called the “Seller”)

​ AND

SHRI. RAM PATIL Age 43 Years, Occ. Business, Hindu Adult, Residing at Flat No. 504
Sreyesh Palace, Opp. Adarsh Hindi School, Ram Baugh, Kalyan (West) 421301 (hereinafter
called the “Buyer”).

​ WHEREAS

The Seller is the absolute owner and in lawful possession of the property described below.

The Seller has agreed to sell and the Buyer has agreed to purchase the said property on the
terms and conditions set out herein.

NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:

1)​ Property Description

The property agreed to be sold is situated at Kalyan, more particularly described as 211, 2ND
Floor, Patel Plaza, Near Ajit Scanning Centre, Murbad Road, Kalyan (West) -421301
(hereinafter called the “Property”).

2)​ Sale Consideration

The total sale price for the Property is Rs. 50,00,000/- (Rupees Fifty Lacs)

3) Payment

a) The Buyer has paid an advance money of Rs. 5 Lacs to the Seller on execution of this
Agreement.

b) The balance amount of Rs. 45 Lacs shall be paid by the Buyer to the Seller at the time of
execution of the Sale Deed.

4) Possession

The Seller shall deliver vacant and peaceful possession of the Property to the Buyer at the
time of execution and registration of the Sale Deed.

5)​ Execution of Sale Deed

The Seller agrees to execute a proper Sale Deed in favour of the Buyer or his nominee on
receipt of full sale consideration. The Buyer shall bear the stamp duty, registration charges,
and other legal expenses of the Sale Deed.

6)​ Clear Title

The Seller assures that the Property is free from all encumbrances, claims, charges, and
litigation. The Seller shall indemnify the Buyer against any loss due to defective title.

7)​ Default

If the Buyer fails to pay the balance consideration and complete the purchase, the earnest
money shall be forfeited by the Seller.

If the Seller fails to execute the Sale Deed, the Buyer shall be entitled to enforce specific
performance or claim refund with damages.

IN WITNESS WHEREOF

The parties hereto have signed this Agreement on the date, month, and year first above
written.

Seller:

Name:

Signature:

Buyer:
Name:

Signature:

Witnesses:

a) ​ _________________________ (Name & Signature)

b)​ _________________________ (Name & Signature)

Loan Agreement
This Loan Agreement is made at Kalyan on this 25th day of September, 2025.

BETWEEN

State Bank of India (SBI), a public sector bank, having its registered office at

Dombivli east, (hereinafter called the “Lender”)

AND

Mr. Sachin Tendulkar, an individual, residing at Flat No. 604 Suyash Palace, Opp. Adarsh
Hindi School, Ram Baugh, Kalyan (West) 421301 (hereinafter called the “Borrower”).

TERMS AND CONDITIONS

1)​ Loan Amount

The Lender agrees to lend to the Borrower a sum of Rs. 10,00,000 (Rupees Ten Lacs)
(hereinafter called the “Loan”).

2)​ Disbursement

The Loan amount is paid by the Lender to the Borrower on the execution of this Agreement
by Cheque No. 253679.

3)​ Repayment

The Borrower agrees to repay the Loan to the Lender in full on or before 25th December,
2030 together with interest at the rate of 12% per annum.

4)​ Prepayment

The Borrower may repay the Loan earlier without any penalty.
5)​ Default

In case of default in repayment, the Borrower shall be liable to pay the outstanding amount
along with additional interest/penalty as may be agreed between the parties.

6)​ Security

Primary Security: As security for the Loan, the Borrower agrees to mortgage the property
described as Flat No. 901, 9th Floor, Sidhhivinayak Building, Manpada Road, Dombivli, with
a total area of 1000 square feet.

7)​ Governing Law

This Agreement shall be governed by and construed in accordance with the laws of India.

Jurisdiction: Any disputes arising out of or in connection with this Agreement shall be subject
to the exclusive jurisdiction of the courts located at Dombivli, Maharashtra.

IN WITNESS WHEREOF

The parties have signed this Loan Agreement on the day, month and year first above written.

Lender:

Name:

Signature:

Borrower:

Name:

Signature:

Witnesses:

a) ​ _________________________ (Name & Signature)

b)​ _________________________ (Name & Signature)

MCQs on Indian Contract Act, 1872, Special
Contracts, and Sale of Goods Act, 1930
Part I: Indian Contract Act, 1872 (General Provisions)
1. 1. The Indian Contract Act, 1872 came into force on:

● a) 1st September, 1872

● b) 1st October, 1872

● c) 1st July, 1872

● d) 1st January, 1873

Answer: b) 1st October, 1872

2. 2. The Indian Contract Act, 1872 originally deals with:

● a) Contract and Partnership

● b) Contract and Sale of Goods

● c) Contract and Contracts relating to Partnership, Contract relating to contracts with

companies, etc.

● d) Contract and Contract relating to Partnership & Contract relating to Contracts with
Companies

Answer: b) Contract and Sale of Goods

3. 3. According to Section 2(h) of the Indian Contract Act, 1872, a contract is defined
as:

● a) An agreement enforceable by law

● b) A promise enforceable by law

● c) Every agreement

● d) An agreement not enforceable by law

Answer: a) An agreement enforceable by law

4. 4. A proposal when accepted becomes a:

● a) Contract

● b) Promise

● c) Agreement

● d) Consideration

Answer: b) Promise

5. 5. Consideration in a contract means:

● a) Natural love and affection

● b) Something in return (quid pro quo)

● c) Free consent of parties

● d) Agreement between parties

Answer: b) Something in return (quid pro quo)

6. 6. An agreement without consideration is:

● a) Valid

● b) Void

● c) Illegal

● d) Enforceable

Answer: b) Void (subject to certain exceptions under Section 25)

7. 7. Which of the following is NOT essential for a valid contract?

● a) Free consent

● b) Lawful consideration

● c) Lawful object
● d) Written document in all cases

Answer: d) Written document in all cases

8. 8. Minor’s agreement under Indian Contract Act is:

● a) Valid

● b) Voidable

● c) Void-ab-initio

● d) Enforceable

Answer: c) Void-ab-initio

9. 9. Consent is said to be free when it is not caused by:

● a) Coercion

● b) Undue influence

● c) Fraud

● d) All of the above

Answer: d) All of the above

10. 10. A contract entered into by a person of unsound mind is:

● a) Valid

● b) Void

● c) Voidable

● d) Enforceable

Answer: b) Void

11. 11. Which Section of the Indian Contract Act defines ‘proposal’?

● a) Section 2(a)
● b) Section 2(b)

● c) Section 2(c)

● d) Section 2(h)

Answer: a) Section 2(a)

12. 12. A contract which ceases to be enforceable by law becomes:

● a) Voidable

● b) Illegal

● c) Void

● d) Unlawful

Answer: c) Void

13. 13. A wagering agreement is:

● a) Void

● b) Illegal

● c) Valid

● d) Voidable

Answer: a) Void

14. 14. Quasi-contracts are based on the principle of:

● a) Consideration

● b) Unjust enrichment

● c) Free consent

● d) Natural love and affection

Answer: b) Unjust enrichment

15. 15. Breach of contract means:

● a) Failure to perform contractual obligation

● b) Refusal to perform by one party

● c) Refusal to perform by both parties

● d) All of the above

Answer: d) All of the above

16. 16. Which one of the following is NOT a type of contract?

● a) Valid contract

● b) Void contract

● c) Illegal contract

● d) Dependent contract

Answer: d) Dependent contract

17. 17. Which of the following is an essential element of a valid contract?

● a) Lawful object

● b) Consideration

● c) Free consent

● d) All of the above

Answer: d) All of the above

18. 18. Who is competent to contract under Section 11 of the Act?

● a) Every person who is of the age of majority

● b) Every person of sound mind

● c) Every person not disqualified by law

● d) All of the above

Answer: d) All of the above

19. 19. Which of the following does NOT render consent invalid?

● a) Coercion

● b) Fraud

● c) Undue influence

● d) Lawful persuasion

Answer: d) Lawful persuasion

20. 20. Which Section of the Indian Contract Act defines “consideration”?

● a) Section 2(d)

● b) Section 2(a)

● c) Section 2(h)

● d) Section 2(g)

Answer: a) Section 2(d)

21. 21. Past consideration in India is:

● a) Not valid

● b) Valid

● c) Illegal

● d) Voidable

Answer: b) Valid

22. 22. Which of the following is a contract without consideration but valid?

● a) Agreement made out of natural love and affection in writing and registered
● b) Agreement to compensate a person for voluntary services

● c) Agreement to pay a time-barred debt in writing

● d) All of the above

Answer: d) All of the above

23. 23. A contract with a minor is:

● a) Valid

● b) Void

● c) Voidable

● d) Legal

Answer: b) Void

24. 24. A person is said to be of sound mind if he is capable of:

● a) Understanding the contract

● b) Forming a rational judgment

● c) Both (a) and (b)

● d) Neither

Answer: c) Both (a) and (b)

25. 25. A contract made under coercion is:

● a) Valid

● b) Void

● c) Voidable at the option of the aggrieved party

● d) Illegal

Answer: c) Voidable at the option of the aggrieved party

26. 26. A misrepresentation is said to occur when:

● a) A false statement is made innocently

● b) A fact is concealed deliberately

● c) A promise is made without intention to perform

● d) Consent is obtained by undue pressure

Answer: a) A false statement is made innocently

27. 27. In case of undue influence, the burden of proof lies on:

● a) The person alleging undue influence

● b) The stronger party in a fiduciary relationship

● c) The court

● d) Both parties equally

Answer: b) The stronger party in a fiduciary relationship

28. 28. A contract which is opposed to public policy is:

● a) Valid

● b) Void

● c) Voidable

● d) Enforceable

Answer: b) Void

29. 29. The principle of “quantum meruit” means:

● a) As much as earned

● b) As much as paid

● c) As much as promised
● d) As much as possible

Answer: a) As much as earned

30. 30. An agreement in restraint of trade is:

● a) Valid

● b) Void

● c) Voidable

● d) Illegal

Answer: b) Void (subject to some exceptions)

31. 31. Which of the following is NOT a type of contingent contract?

● a) Dependent on happening of an event

● b) Dependent on non-happening of an event

● c) Dependent on the will of a party

● d) Dependent on happening of an event within a specified time

Answer: c) Dependent on the will of a party

32. 32. Quasi-contracts are contained in which Sections of the Indian Contract Act?

● a) Sections 65–70

● b) Sections 68–72

● c) Sections 10–20

● d) Sections 50–55

Answer: b) Sections 68–72

33. 33. Remedies for breach of contract include:

● a) Rescission of contract
 ● b) Suit for damages

● c) Specific performance and injunction

● d) All of the above

Answer: d) All of the above

34. 34. The damages which are naturally arising in the usual course of things are called:

● a) Special damages

● b) General damages

● c) Exemplary damages

● d) Nominal damages

Answer: b) General damages

35. 35. The Indian Contract Act applies to:

● a) Whole of India

● b) Whole of India except Jammu & Kashmir (earlier)

● c) Whole of India except the State of Jammu & Kashmir and Nagaland

● d) Only to Union Territories

Answer: b) Whole of India except Jammu & Kashmir (originally; after

abrogation it extends to whole India)

Part II: Special Contracts under Indian Contract Act, 1872

36. 1. A contract of indemnity is defined under which Section of the Indian Contract Act?

● a) Section 124

● b) Section 126

● c) Section 128
● d) Section 130

Answer: a) Section 124

37. 2. In a contract of indemnity, the indemnifier is liable:

● a) Only for damages

● b) Only for costs

● c) Only for sums paid under compromise

● d) For all damages, costs and sums payable

Answer: d) For all damages, costs and sums payable

38. 3. A contract of guarantee involves:

● a) Two parties

● b) Three parties

● c) Four parties

● d) One party only

Answer: b) Three parties

39. 4. In a contract of guarantee, the person who gives the guarantee is called:

● a) Creditor

● b) Principal debtor

● c) Surety

● d) Indemnifier

Answer: c) Surety

40. 5. The liability of surety is:

● a) Secondary
● b) Primary

● c) Conditional

● d) Non-existent

Answer: a) Secondary

41. 6. A contract of bailment is defined under which Section of the Act?

● a) Section 146

● b) Section 148

● c) Section 152

● d) Section 160

Answer: b) Section 148

42. 7. The delivery of goods for some purpose, upon a contract, to be returned when the
purpose is accomplished, is called:

● a) Pledge

● b) Mortgage

● c) Bailment

● d) Hypothecation

Answer: c) Bailment

43. 8. In a contract of bailment, the person delivering the goods is called:

● a) Bailee

● b) Bailor

● c) Pawnee

● d) Pledger

Answer: b) Bailor
44. 9. In case of gratuitous bailment, the bailor is bound to disclose:

● a) Nothing at all

● b) Known defects in the goods

● c) Future risks

● d) Terms of loan

Answer: b) Known defects in the goods

45. 10. Pledge is defined under which Section?

● a) Section 172

● b) Section 148

● c) Section 180

● d) Section 130

Answer: a) Section 172

46. 11. The person who delivers the goods as security in a pledge is called:

● a) Pawnor

● b) Pawnee

● c) Bailor

● d) Bailee

Answer: a) Pawnor

47. 12. The pawnee has a right to retain goods pledged:

● a) For payment of debt or performance of promise

● b) For any other dues of pawnor

● c) For personal expenses

● d) For future contracts

Answer: a) For payment of debt or performance of promise

48. 13. A contract of agency is based on the principle of:

● a) Nemo dat quod non habet

● b) Delegatus non potest delegare

● c) Qui facit per alium facit per se

● d) Caveat emptor

Answer: c) Qui facit per alium facit per se

49. 14. An agent is defined under which Section of the Act?

● a) Section 182

● b) Section 185

● c) Section 190

● d) Section 192

Answer: a) Section 182

50. 15. Consideration is essential in a contract of agency.

● a) True

● b) False

Answer: b) False

51. 16. The authority of an agent may be:

● a) Express

● b) Implied

● c) Both (a) and (b)

● d) Neither

Answer: c) Both (a) and (b)

52. 17. A sub-agent is appointed by:

● a) The principal directly

● b) The agent, under authority from principal

● c) The court only

● d) The creditor

Answer: b) The agent, under authority from principal

53. 18. The relationship between principal and agent is based on:

● a) Contract only

● b) Trust and confidence

● c) Statute only

● d) None of the above

Answer: b) Trust and confidence

54. 19. An agency may be terminated by:

● a) Revocation by the principal

● b) Renunciation by the agent

● c) Death or insanity of either

● d) All of the above

Answer: d) All of the above

55. 20. When the agent acts beyond authority and the act is ratified by the principal, it is
called:

● a) Delegation
 ● b) Ratification

● c) Revocation

● d) Compensation

Answer: b) Ratification

Part III: Sale of Goods Act, 1930

56. 1. The Sale of Goods Act, 1930 came into force on:

● a) 1st July, 1930

● b) 1st May, 1930

● c) 1st June, 1930

● d) 1st September, 1930

Answer: a) 1st July, 1930

57. 2. The Sale of Goods Act, 1930 was originally part of:

● a) Indian Penal Code

● b) Indian Contract Act, 1872

● c) Transfer of Property Act

● d) Partnership Act, 1932

Answer: b) Indian Contract Act, 1872

58. 3. A contract of sale of goods is defined under:

● a) Section 2(1)

● b) Section 4(1)

● c) Section 5

● d) Section 6
 Answer: b) Section 4(1)

59. 4. A contract of sale includes:

● a) Sale

● b) Agreement to sell

● c) Both (a) and (b)

● d) Hire purchase agreement

Answer: c) Both (a) and (b)

60. 5. In a “sale” ownership of goods is transferred:

● a) Immediately

● b) In future

● c) Never

● d) Partially

Answer: a) Immediately

61. 6. In an “agreement to sell” ownership of goods is transferred:

● a) Immediately

● b) At a future time or on fulfillment of conditions

● c) Never

● d) At the option of the buyer

Answer: b) At a future time or on fulfillment of conditions

62. 7. Goods which are identified and agreed upon at the time of contract are called:

● a) Future goods

● b) Specific goods

● c) Contingent goods
● d) Generic goods

Answer: b) Specific goods

63. 8. Goods yet to be manufactured or acquired by the seller are called:

● a) Future goods

● b) Existing goods

● c) Specific goods

● d) Ascertained goods

Answer: a) Future goods

64. 9. Which of the following is NOT included in “goods” under the Act?

● a) Growing crops

● b) Stocks and shares

● c) Money

● d) Things attached to land

Answer: c) Money

65. 10. The term “price” under the Sale of Goods Act means:

● a) Consideration in money

● b) Consideration in goods

● c) Consideration in kind

● d) Consideration in services

Answer: a) Consideration in money

66. 11. A condition is a stipulation:

● a) Essential to the main purpose of the contract

● b) Collateral to the contract

● c) Not affecting the contract

● d) Which cannot be waived

Answer: a) Essential to the main purpose of the contract

67. 12. A warranty is a stipulation:

● a) Essential to the contract

● b) Collateral to the main contract

● c) Without legal effect

● d) Which always voids the contract

Answer: b) Collateral to the main contract

68. 13. Breach of condition gives the buyer the right to:

● a) Reject the goods

● b) Claim damages

● c) Both (a) and (b)

● d) None

Answer: c) Both (a) and (b)

69. 14. Breach of warranty gives the buyer the right to:

● a) Repudiate the contract

● b) Reject the goods

● c) Claim damages only

● d) Both (a) and (c)

Answer: c) Claim damages only

70. 15. Doctrine of Caveat Emptor means:

● a) Let the seller beware

● b) Let the buyer beware

● c) Let both beware

● d) None

Answer: b) Let the buyer beware

71. 16. Caveat emptor has exceptions in case of:

● a) Sale by description

● b) Sale by sample

● c) Fitness for a particular purpose

● d) All of the above

Answer: d) All of the above

72. 17. In a sale by sample:

● a) Bulk must correspond with sample

● b) Buyer must get opportunity to compare bulk with sample

● c) Goods must be free from latent defects

● d) All of the above

Answer: d) All of the above

73. 18. In sale by description, the goods must:

● a) Match the description

● b) Be better than the description

● c) Be inferior to the description

● d) Have no relation to the description

Answer: a) Match the description

74. 19. In case of sale of goods by description as well as sample, goods must:

● a) Match description only

● b) Match sample only

● c) Match both sample and description

● d) Match neither

Answer: c) Match both sample and description

75. 20. Property in specific goods passes to buyer when:

● a) Contract is made

● b) Goods are ascertained

● c) Parties intend it to pass

● d) Payment is made

Answer: c) Parties intend it to pass

76. 21. In sale of unascertained goods, ownership passes when goods are:

● a) Paid for

● b) Appropriated to the contract

● c) Delivered

● d) Weighed

Answer: b) Appropriated to the contract

77. 22. Risk prima facie passes with:

● a) Possession
● b) Ownership

● c) Delivery

● d) Payment

Answer: b) Ownership

78. 23. Sale by a person not the owner is valid if:

● a) Owner consents

● b) Buyer acquires good title under law

● c) Goods are sold in market

● d) None

Answer: b) Buyer acquires good title under law

79. 24. Right of lien is available to an unpaid seller when:

● a) Goods are in possession of seller

● b) Goods are delivered

● c) Buyer refuses delivery

● d) Goods are lost

Answer: a) Goods are in possession of seller

80. 25. Right of stoppage in transit is available when:

● a) Goods are with seller

● b) Goods are in transit and buyer is insolvent

● c) Goods are delivered to buyer

● d) None

Answer: b) Goods are in transit and buyer is insolvent

81. 26. An unpaid seller includes:

● a) One who has received full price

● b) One who has received conditional payment

● c) One who has no right over goods

● d) None

Answer: b) One who has received conditional payment

82. 27. Unpaid seller’s right against the goods are:

● a) Right of lien

● b) Right of stoppage in transit

● c) Right of resale

● d) All of the above

Answer: d) All of the above

83. 28. Unpaid seller’s rights against buyer personally include:

● a) Suit for price

● b) Suit for damages

● c) Suit for interest

● d) All of the above

Answer: d) All of the above

84. 29. Auction sales are dealt with under:

● a) Section 61

● b) Section 64

● c) Section 69
● d) Section 70

Answer: b) Section 64

85. 30. In auction sales, ownership is transferred:

● a) On delivery

● b) On payment

● c) On fall of hammer

● d) On approval

Answer: c) On fall of hammer

86. 31. In an auction sale, the seller may reserve:

● a) Right to bid

● b) Right to resale

● c) Right to withdraw goods

● d) All of the above

Answer: d) All of the above

87. 32. If a seller delivers to buyer goods less than contracted, the buyer may:

● a) Reject the goods

● b) Accept and pay proportionately

● c) Both (a) and (b)

● d) None

Answer: c) Both (a) and (b)

88. 33. If seller delivers more goods than contracted, buyer may:

● a) Reject all goods

● b) Accept contracted quantity and reject excess

● c) Accept whole and pay at contract rate

● d) All of the above

Answer: d) All of the above

89. 34. In a contract of sale, if goods perish before sale but after agreement to sell, loss
falls on:

● a) Buyer

● b) Seller

● c) Both equally

● d) None

Answer: a) Buyer

90. 35. The Sale of Goods Act, 1930 applies to:

● a) Movable goods only

● b) Immovable property

● c) Both movable and immovable

● d) Services

Answer: a) Movable goods only