Contract of Indemnity
Definition: Section 124 – A contract by which one party promises to save the other from loss caused by the
conduct of the promisor or another person.
Parties:
• Indemnifier – Who promises to indemnify.
• Indemnity Holder – Who is protected.
Nature: Contract of indemnity is contingent; liability arises only on loss.
Rights of Indemnity Holder (Sec. 125):
• Right to recover damages paid.
• Right to recover legal costs.
• Right to recover sums paid under compromise.
Commencement of Liability:
• Liability begins when loss becomes certain. (Gajanan Moreshwar v. Moreshwar – Indemnity available before
actual loss paid.)
Case Laws:
• Adamson v. Jarvis – Auctioneer indemnified for loss caused by principal.
• Secretary of State v. Bank of India – Implied indemnity recognized.
Contract of Guarantee
Section 126 – A contract to perform the promise or discharge liability of third person in case of default.
Parties:
• Principal Debtor
• Creditor
• Surety
Nature:
• Surety’s liability is secondary.
Types:
• Specific Guarantee – for one transaction.
• Continuing Guarantee – for series (Sec. 129).
Rights of Surety:
• Against Principal Debtor – Right of subrogation (Sec. 140), right of indemnity (Sec. 145).
• Against Creditor – Right to benefit of securities (Sec. 141).
• Against Co-sureties – Equal contribution (Sec. 146-147).
Discharge of Surety:
• By variance in contract (Sec. 133)
• By release of principal debtor (Sec. 134)
• By giving extra time (Sec. 135)
• By loss of securities (Sec. 141)
Case Laws:
• Bank of Bihar v. Damodar Prasad – Creditor need not exhaust remedies.
• Punjab National Bank v. Vikram Cotton Mills – Continuing guarantee clarified.
Contract of Bailment
Section 148 – Delivery of goods by one person to another for some purpose.
Parties:
• Bailor
• Bailee
Essentials:
• Delivery of movable goods.
• Transfer of possession not ownership.
Rights & Duties:
Bailee's Duties:
• Take reasonable care (Sec. 151).
• Not to make unauthorized use (Sec. 153).
• Return goods (Sec. 160).
Bailor’s Duties:
• Disclose faults (Sec. 150).
• Pay necessary expenses (Sec. 158).
Finder of Goods (Sec. 168-169):
• Has rights similar to bailee.
• May retain goods until compensation.
Case Laws:
• Kaliaperumal v. Visalakshmi – Delivery must be real to constitute bailment.
Pledge
Section 172 – Bailment of goods as security for debt.
Parties:
• Pawnor
• Pawnee
Rights of Pawnee:
• Right to retain goods (Sec. 173).
• Right to sell after notice (Sec. 176).
Rights of Pawnor:
• To redeem goods before sale.
Case:
• Lallan Prasad v. Rahmat Ali – Pawnee must return goods on payment.
Agency
Section 182 – Agent is a person employed to act for principal.
Creation of Agency:
• Express
• Implied
• Necessity
• Ratification
Duties of Agent:
• Follow directions (Sec. 211)
• Reasonable skill and diligence (Sec. 212)
• Render accounts (Sec. 213)
Termination:
• By act of parties
• By death/insanity of principal
Partnership Act 1932
Section 4 – Partnership is a relation between persons who agree to share profits of business carried on by all or
any of them acting for all.
Essential Elements:
• Agreement
• Sharing of profits
• Mutual agency
Types of Partners:
• Active
• Sleeping
• Nominal
Registration:
• Not compulsory but unregistered firms cannot sue (Sec. 69).
Case:
• Cox v. Hickman – Mutual agency is real test of partnership.
Limited Liability Partnership Act 2008
LLP is a body corporate formed and incorporated under this Act (Sec. 3). It has separate legal entity and perpetual
succession.
Key Features:
• Partners have limited liability.
• No maximum limit on partners.
• Separate legal personality.
Differences with Partnership:
• Liability limited vs unlimited.
• LLP is registered corporate entity.
Case Reference:
• Registrar of Companies v. Dharmendra Kumar – LLP has distinct entity separate from partners.
Sale of Goods Act 1930
Contract of Sale (Sec. 4): Transfer of property in goods from seller to buyer for price.
Conditions and Warranties:
• Conditions essential (Sec. 12).
• Warranties collateral.
Passing of Property (Sec. 18-25):
• Property passes when parties intend.
Unpaid Seller (Sec. 45-54):
• Rights against goods – lien, stoppage in transit, resale.
• Rights against buyer – suit for price.
Case:
• Rowland v. Divall – Buyer entitled refund if seller had no title.