Business Law Notes (Important Questions) - Unit 1 & 2 PDF

www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in BUSINESS LAW NOTES IMPORTANT ANSWERS Unit-I & II UNIT I CON...

www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in BUSINESS LAW NOTES IMPORTANT ANSWERS Unit-I & II UNIT I CONTRACT ACT-1872 IMPORTANT QUESTIONS Short question 1. Kinds of contract 2. Kinds of offer Essay questions 1. Define contract. Mention its elements 2. Define offer. Mention its elements 3. Explain the modes of discharge of contract 4. Explain the remedies for breach of contract SHORT QUESTIONS 1. Write a short note on price determination 2. Types of goods 3. Rights of consumers 4. Definition of 5. Consumer 6. Complaint 7. Complainant Essay questions 1. Define Sale of Goods Act. Mention its essential elements. 2. Differentiate between sale and agreement to sell. 3. Who is an unpaid seller? What are its rights of unpaid seller? 1.DEFINE CONTRACT ACT. WHAT ARE ITS ELEMENTS? The Indian Contract Act, 1872 prescribes the law relating to contracts in India and is the key act regulating Indian contract law. The Act is based on the principles of english common law. It is applicable to all the states of India. It determines the circumstances in www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in which promises made by the parties to a contract shall be legally binding. Under Section 2(h), the Indian Contract Act defines a contract as an agreement which is enforceable by law. The Act as enacted originally had 266 Sections; it had wide scope as explained below; General Principles of Law of Contract – Sections 01 to 75 Contract relating to Sale of Goods – Sections 76 to 123 Special Contracts- Indemnity, Guarantee, Bailment & Pledge and Agency – Sections 124 to 238 Contracts relating to Partnership – Sections 239 to 266 A contract is an agreement to do or not to do an act. It is legally binding agreement which is enforceable at law. There are two essential elements of contract - Agreement: - according to S 2(e) “every promise or set of promises forming the consideration for each other is called agreement.” - Enforceability at law; - an agreement to become a contract must give rise to legal obligation. Agreement= offer + acceptance Contract = Agreement + Enforceability at law Illustration- There is an agreement between A and B that A will construct a house for B, and B will pay Rs. 10 lakhs to A. The agreement between A and B is a contract because it is enforceable by law. Definition - According to section 2{h) of the Indian Contract Act, 1872, ‘An agreement which is enforceable by law is a Contract’. - Pollock- “Every agreement and promise enforceable by law is a contract”. The Indian Contract Act, 1872 itself defines and lists the Essentials of a Contract either directly or through interpretation through various judgements of the Indian judiciary. Section 10 of the contract enumerates the essential elements of the Contract Act-1872. Essential elements of a valid Contract 1.Offer and Acceptance 2.Intention to create a Legal relationship 3.Lawful Consideration 4.Competent parties 5.Free consent 6.Lawful Object 7.Not expressly declared void 8.Legal formalities 9.Impossibility of performance 1. Offer and Acceptance: There must be a lawful offer and acceptance for the formation of an agreement. The adjective ‘lawful’ implies that the offer and acceptance must satisfy the requirements of the contract act in relation thereto. The offer or proposal is defined under section 2(a) of the Contract Act. Section 2(b) of the Act provides that when an offer is accepted then it becomes a promise. Case laws - Felt house v. Bindley www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in -Carlil v. Carbolic Smoke Ball Co. 2.Intention to create a legal relationship: There must be a clear intention among the parties that the agreement should be attached by legal consequences and create a legal obligation. Agreements of a social or domestic nature do not contemplate a legal relationship, and as such, they do not give rise to a contract. Case Laws: Balfour v. Balfour– In this case, it was held that if an agreement is domestic in nature then that agreement is not enforceable by law. 3.Lawful Consideration- (Quid Pro Quo)– Third essential element of the valid contract is a consideration. The term consideration has been defined undersection 2(d) of the act. Case Laws: Currie v. Misa 4. Competent parties: section 11 of the act declares that who are competent to contract. According to this section the contracting parties Person of sound mind- The person should not be disqualified by law Must attain the age of majority 5.Free consent- Free consent of the parties is another essential of the contract. Section 14 of the Act defined the term free consent as follows- 1. Coercion 2. Undue Influence 3. Fraud 4. Misrepresentation 5. mistake 6. Lawful object – For the formation of a contract, it is also necessary that the parties to an agreement must agree to a lawful object. The object must not be fraudulent or illegal or immoral or against the public policy 7. Legal formalities: - there are certain contracts which by law need to be written and stamped as per the value of the contract. Such contracts cannot be enforced unless they are written and stamped 8. Not declared to be void:-. Contracts should not be expressly declared void. Any agreement which is unlawful, illegal or opposed to public policy are considered to be void. 10. Impossibility of performance: - contracts cannot be done for doing things which are impossible to perform. For example, a profit through magic. 2. Explain the different types of contract. 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 performance 3. On the basis of Execution and 4. On the basis of Validity. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in 1. Types of Contracts on the basis of Formation On this base Contracts can be classified into three groups, namely Express, Implied, Quasi Contracts. A. Express Contracts: The Contracts where there is expression or written are called Express Contracts. For example: A has offered to sell his house and B has given acceptance. It is Express Contract. b. Implied Contract: The Contracts where there is no expression are called implied contracts. Sitting in a Bus can be taken as example to implied contract between passenger and owner of the bus. c. Quasi Contract: In case of Quasi Contract there will be no offer and acceptance so, actually there will be no Contractual relations between the partners. Such a Contract which is created by Virtue of law is called Quasi Contract. Sections 68 to 72 of Contract Act read about the situations where court can create Quasi Contract. Example: A case on this occasion is Chowal Vs Cooper. In this case A`s husband becomes no more. She is very poor and therefore not capable of meeting even cost of cremation. B, one of her relatives, understands her position and spends his own money for cremation. It is done so without A`s request. Afterwards B claims his amount from A where A refuses to pay. Here court applies Sec. 68 and creates a Quasi Contract between them. 2. Types of Contracts on the basis of performance: On this base, Contracts are of two types. 1.Unilateral Contracts. 2. Bilateral contracts 1. Bilateral Contracts: If both the parties have not performed their promises then it is considered as 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 bilateral contract. 2.Unilateral Contract: If one party performs his promise and the other party is yet to perform his promise, it is called Unilateral Contract. Example: A has lost his purse and B is its finder. There after 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 Unilateral Contract. 3. Types of Contracts on the basis of Execution On this base Contracts can be classified into two groups. Executed Contracts. If performance is completed, it is called executed contract. Executory Contracts:- In case where contractual obligations are to be performed in future, it is called executor contract. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in 4.Types of Contracts On the basis of Validity On this base Contracts can be classified into 5 groups. 1.Valid 2. Void 3. Voidable 4.Illegal 5. Unenforceable Contracts. 1.Valid contact: The Contracts which are enforceable in a court of law are called Valid Contracts. To attain Validity the Contract should have certain features like consensus ad idem, Certainty, free consent, two directional consideration, fulfillment of legal formalities, legal obligations, lawful object, capacity of parties, possibility of performance, etc. Example: there is a Contract between X and Y and let us assume that their contract has all those above said features. It is Valid Contract. 2. Void contract: A Contract which is not enforceable in a court of law is called Void Contract. If a Contract is deficient in any one or more of the above features (Except free consent and legal formalities). It is called Void Contract. Example: there is a Contract between X and Y where Y is a minor who has no capacity to contract. It is Void Contract. 3. Voidable contract : A Contract which is deficient 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 suffering party, 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. 4. Illegal contract: If the contract has unlawful object it is called Illegal Contract. Example: There is a contract between X and Z according to which Z has to murder Y for a consideration of Rs. 10000/- from X. It is illegal contract. 5. Unenforceable contract: A contract which has not properly fulfilled legal formalities is called unenforceable contract. That means unenforceable contract suffers from some technical defect like insufficient stamp etc. After rectification of that technical defect, it becomes enforceable or valid contract. Example: A and B have drafted their agreement on Rs. 10/- stamp where it is to be written actually on Rs. 100/- stamp. It is unenforceable contract. 1. Define offer. Mention its elements. The whole process of entering into a contract starts with a proposal or an offer made by one party to another. To enter into an agreement such a proposal must be accepted. Let us take a look at the definition and classification of an offer and the essentials of a valid offer. Proposal or Offer: According to the Indian Contract Act 1872, proposal is defined as follows Section 2 (a) as “when one person will signify to another person his willingness to do or not do something (abstain) with a view to obtain the assent of such person to such an act or abstinence, he is said to make a proposal or an offer.” Let us look at some features or essentials of such an offer www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in The person making the offer/proposal is known as the “promisor” or the “offeror”. And the person who may accept such an offer will be the “promisee” or the “acceptor”. The offeror will have to express his willingness to do or abstain from doing an act. Only willingness is not enough. Or simply a desire to do/not do something will not constitute an offer. An offer can be positive or negative. It can be a promise to do some act, and can also be a promise to abstain (not do) some act/service. Both are valid offers. Classification of Offer There can be many types of offers based on their nature, timing, intention, etc. Let us take a look at the classifications of offers. 1.General Offer: A general offer is one that is made to the public at large. It is not made any specified parties. So any member of the public can accept the offer and be entitled to the rewards/consideration. Say for example you put out a reward for solving a puzzle. So if any member of the public can accept the offer and be entitled to the reward if he finishes the act. 2. Specific Offer: A specific offer, on the other hand, is only made to specific parties, and so only they can accept the said offer or proposal. They are also sometimes known as special offers. Like for example, A offers to sell his horse to B for Rs 5000/-. Then only B can accept such an offer because it is specific to him. 3. Cross Offer: In certain circumstances, two parties can make a cross offer. This means both make an identical offer to each other at the exact same time. However, such a cross offer will not amount to acceptance of the offer in either case. For example, both A and B send letters to each other offering to sell and buy A’s horse for Rs 5000/-. This is a cross offer, but it will be considered as acceptable for either of them. 4. Counter Offer: There may be times when a promise will only accept parts of an offer, and change certain terms of the offer. This will be a qualified acceptance. He will want changes or modifications in the terms of the original offer. This is known as a counteroffer. A counteroffer amounts to a rejection of the original offer. Elements of offer 1.It may be express or implied: An offer may be made either by words or by conduct. An offer, which is made by words spoken or written, is called an express offer. The offer, which is made by the conduct of a person, is called an implied offer. Example: 1. M says to N that he will sell his motorcycle to him for Rs.40,000. It is an express offer. 2. A railway coolie carries the luggage of B without being asked to do so B allows him to do so. It is an implied offer. 3. The new Khan Transport Company runs buses on different routes to carry passengers at the scheduled fares. This is an implied offer by the company. 2. It must create legal relation: The offer must be made in order to create legal relations otherwise, there will be no agreement. If an offer does into give rise to legal obligations between the parties it is not a valid offer in the eye of law. Example: 1. A invites B to dinner B accept the invitation. It does not create any legal relations, so there is no agreement. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in 2. A offers to sell his watch to B for Rs.200 and B agrees. There is an agreement because here the parties intend to create legal relations. 3. Three friends joined to enter a newspaper competition and agreed to share any winnings. It was held the intended to create legal relations and their agreement was therefore a contract. 3. It must be definite & clear: An offer must be definite and clear, if the terms of an offer are not definite and clear, it cannot be called a valid offer. If such offer is accepted it cannot create a binding contract. Example: A has two motorcycles. He offers B to sell one motorcycle for Rs.27,000. It is not a valid offer because it is not clear that which motor cycle A wanted to sell. 4. It is different from invitation to offer: An offer is different from an invitation to offer. It is also called invitation to treat or invitation to receive offer. An invitation to offer looks like offer but legally it is not offer. In the case of an invitation to offer, the person sending out the invitation does not make an offer but only invites the other party to make an offer. His object is to inform that he is willing to deal with anybody who after getting such information is willing to open negotiations with him. Such invitations for offers are not offers according to law and so cannot become agreement by acceptance. example: 1. Quotations, Catalogues of prices, display of goods with prices issue of prospectus by companies are examples of invitation to offer. 2. Display of goods in an auction sale is not an offer rather it is an invitation to offer. The offer will come from the buyer in the form of bids. 5. It may be specific or general: When an offer is made to a specified person or group of persons, it is called specific offer. Such an offer can be accepted only by the person or persons to whom it is made. A general offer, on the other hand, is one, which is made to public in general and it may be accepted by any person who fulfils the conditions mentioned in it. Both specified and general offers are valid. Example: 1. M makes an offer to N to sell his bicycle for Rs.800, it is a specific offer. In this case, only N can accept it. 2. A announces in a newspaper a reward of Rs.1,000 for anyone who will return his lost radio. It is general offer. 6. It must be communicated to the offeree: An offer is effective only when it is communicated to the offeree. If an offer is not communicated to the offeree it cannot be accepted. Thus an offer, which is not communicated, is not a valid offer. It applies to both specific and general offers. Example: A without knowing that a reward has been offered for the arrest of a particular criminal, catches the criminal and informs the police. A cannot recover the reward as he was not aware of it. 7. It should not contain negative condition: An offer should not contain a condition the non-compliance of which may be assumed as acceptance. An offeror cannot say that if acceptance is not communicated up to a certain date, the offer would be presumed to have been accepted. If the offeree does not reply, there is no contract, because no obligation to reply can be imposed on him, on the ground of justice no agreement because such condition cannot be imposed on the offeree. It is only a one sided offer. Example: A wrote to B offering to sell his book for Rs.500 adding that if he didn’t reply with in 5 days, the offeree would be presumed to have been accepted. There is no agreement b/c such condition can’t be imposed on the offeree. It is only a one sided offer. 8. It may be subject to any terms & conditions: www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in An offeror may attach any terms and conditions to the offer he makes. He may even prescribe the mode of acceptance. There is no contract, unless all the terms of the offer are accepted in the mode prescribed by the offeror. It must be noted that if the offeror asks for sending the acceptance by telegram and the offeree sends the acceptance by letter, and the offeror may reject such acceptance. Example: A asks B to send the reply of his offer by telegram but B sends reply by letter, A may reject such acceptance because it is opposed to the prescribed mode of communication. 9. It must not contain cross offers: When two parties make similar offers to each other, in ignorance of each other’s such offers are called cross-offers. The acceptance of cross-offers does not result in complete agreement. Example: On 23rd December 2007, A wrote B to sell him 100 ton of iron at Rs.10,000 per ton. On the same day, B wrote to A to buy 100 tons of iron at Rs.10,000 per ton. There is no contract between A & B because the offers were similar and made in ignorance of the other and so there is no acceptance of each other’s offer. 1. Explain the modes of discharge of contract. Discharge of a contract implies termination of contractual obligations. This is because when the parties originally entered into the contract, the rights and duties in terms of contractual obligations were set up. Consequently when those rights and duties are put out then the contract is said to have been discharged. Once a contract stands discharged, parties to it are no more liable even though the obligations under the contract remain incomplete. A Contract is deemed to be discharged, that is, concluded and no longer binding, in the following circumstances. Discharge by performance.  Discharge of Contract by Substituted Agreement.  Discharge by lapse of time.  Discharge by operation of law.  Discharge by Impossibility of Performance.  Discharge by Accord and Satisfaction.  Discharge by breach. We shall examine each of them as follows. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in 1. Discharge by performance Where both the parties have either carried out or tendered (attempted) to carry out their obligations under the contract, is referred to as discharge of the contract by performance. Because performance by one party constitutes the occurrence of a constructive condition, the other party’s duty to perform is also triggered, and the person who has performed has the right to receive the other party’ s performance. The overwhelming majority of contracts are discharged in this way. 2. Discharge of Contract by Substituted Agreement A contract emanates from an agreement between the parties. It thus follows that, the contract must also be discharged by agreement. Therefore, what is required, inevitably, is mutuality. Discharge by substituted agreement arises when a contract is abandoned, or the terms within it are altered, and both the parties are in conformity over it. For example, A and B enter into some agreement, and A wants to change his mind and not to carry out his terms of the contract. If he does this unilaterally then he will be in breach of contract to B. However, if he approaches B and states that he would like to be released from his liabilities under the contract then the latter might agree. In that case the contract is said to be discharged by (bilateral) agreement. In effect B has promised not to sue A if he does not perform his part of the contract and the consideration for his promise is A ‘s promise not to sue B. Discharge by agreement may arise in the following ways. a. Novation: The term novation implies the substitution of a new contract for the original one. This arrangement may be either with the same parties or with different parties. For a novation to be valid and effective, the consent of all the parties, including the new one(s), if any, is essential. Moreover, the subsequent or second agreement must be one capable of enforcement in law, the consideration for which is the exchange of promises not to enforce the original contract. b. Rescission This refers to cancellation of all or some of the material terms of the contract. If the contracting parties mutually decide to do so, the respective contractual obligations of the parties stand terminated. c. Alteration This refers to a change in one or more of the terms of a contract with the consent of all the contracting parties. Alteration results in a new contract but parties to it remain the same. Here the assumption is that both the parties are to gain a fresh but different benefit from the new agreement. Remission This means the acceptance (by the promisee) of a lesser sum than what was contracted for, or a lesser fulfillment of the promise made. As per Section 63, ‘every promisee may (a) remit or dispense with it, wholly or in part, or (b) extend the time of performance, or (c) accept any other satisfaction instead of performance’. d. Waiver The term waiver implies abandonment or relinquishment of a right. Where a party deliberately abandons its rights under the contract, the other party is released of its obligations, otherwise binding upon it. 3. Discharge by lapse of time A contract stands discharged if not enforced within a specified period called the ‘period of limitation‘. The Limitation Act, 1963 prescribes the period of limitation for various contracts. For instance, period of limitation for exercising right to recover an immovable property is twelve years, and right to recover a debt is three years. Contractual rights become time barred after the expiry of this limitation period. Accordingly, if a debt is not recovered within three years of its payment becoming due, the debt ceases to be payable and is discharged by lapse of time. 4. Discharge by Impossibility of Performance Sometimes after a contract has been established, something might occur, though not at the fault of either party, which can render the contract impossible to perform, or illegal, or radically different from that originally undertaken.However, if whatever happens to prevent the contract from being performed  has not been caused by either party  could not have been foreseen, and www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in  its effect is to destroy the basis of the contract then the courts will, generality, state that the contract has become impossible to perform. If that happens then the contract is discharged and neither party will have any liability under it. Section 56 of the Indian Contract Act clearly provides that an agreement to do an act impossible in itself is void The performance of a contractual obligation may become subsequently impossible on a number of grounds. They include the following.  Objective impossibility of performance  Commercial impracticability  Frustration of purpose  Temporary impossibility 5. Discharge of operation of law A contract stands discharged by operation of law in the following circumstances. a. Unauthorized material alteration of a written document A party can treat a contract discharged (i.e., from his side) if the other party alters a term (such as quantity or price) of the contract without seeking the consent of the former. b. Statutes of Limitations A contract stands discharged if not enforced within a specified period called the ‘period of limitation’. The Limitation Act, 1963 prescribes the period of limitation for various contracts. For instance, limitation period for exercising right to recover an immovable property is twelve years and right to recover a debt is three years. Contractual rights become time barred after the expiry of this limitation period. Accordingly, if a debt is not recovered within three years of its payment becoming due, the debt ceases to be payable and is discharged by lapse of time. c. Insolvency A discharge in bankruptcy will ordinarily bar enforcement of most of a debtor’s contracts. d. Merger A contract also stands discharged through a merger that occurs when an inferior right accruing to party in a contract amalgamates into the superior right ensuing to the same party. For instance, A hires a factory premises from B for some manufacturing activity for a year, but 3 months ahead of the expiry of lease purchases that very premises. Now since A has become the owner of the building, his rights associated with the lease (inferior rights) subsequently merge into the rights of ownership (superior rights). The previous rental contract ceases to exist. DISCHARGE BY ACCORD AND SATISFACTION To discharge a contract by accord and satisfaction; the parties must agree to accept performance that is different from the performance originally promised. It may be studied under the following sub- heads. Accord An accord is an executory contract to perform an act that will satisfy an existing duty. An accord suspends, but does not discharge, the original contract. Satisfaction Satisfaction is the performance of the accord, which discharges the original contractual obligation. 6.Discharge of contract by breach Breach occurs where one party to a contract fails to perform its contractual obligations, or the performance is defective. A breach of contract does not per se bring a contract to an end. The breach may give to the aggrieved party the right to terminate the contract but it is for the non-breaching side to decide whether or not to exercise that option. The aggrieved party has a right of election; that is to www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in say, it can choose either to affirm the contract or to terminate it. However, once that decision has been taken, it is, in principle, irrevocable. A Breach may be anticipatory or actual. a. Anticipatory Breach Also known as ‘breach by repudiation’, anticipatory breach occurs when one party states, before the arrival of the date fixed for performance, without justification that it cannot or will not carry out the material part of the contractual obligations on the agreed date or that it intends to perform in a way that is inconsistent with the terms of the contract. This may also occur where one party by some action makes performance impossible. For instance, A, after agreeing to sell his car to B on a fixed date, sells it to C. This is anticipatory breach. Effect of anticipatory breach Where there is an anticipatory breach, the non-breaching party may either  rescind the contract, or  treat the contract in force and wait for the time of performance. In first case, it can immediately sue for damages, i.e., it is not required to wait for the time for performance to expire. For example, [D agreed to employ P] as a courier for three months commencing on June 1. Before the said date D told P that his services would not be required. This was to be an anticipatory breach of contract and it entitled P to sue D for damages immediately. If the non-breaching party elects to treat the contract operative, it waits until the time of performance and then holds the other party liable for the non-performance. Thus, by doing so the non-breaching party is giving an opportunity to the breaching party to still perform, if it can, in order to get a valid discharge. b. Actual Breach Actual breach refers to the failure to perform contractual obligations when performance is due. Failure to perform obligations is the most common form of breach, wherein a seller fails to deliver the goods by the appointed time, or where, although delivered, the goods are not up to the mark in respect of quality or quantity specified in the contract. Effect of actual breach Breach is described as a method of discharge although it may not automatically discharge the contract. Breach of contract leads to two main remedies, namely breach of condition, and breach of warranty. Breach of a condition This is a major term, known as material breach, which entitles the injured party to damages, and gives it an option to treat the contract as subsisting or discharged. Breach of a warranty This is a minor term, known as non-material breach, which entitles the non-breaching party to damages. It does not have the right to repudiate the contract, although a non-material breach can give it the right to defer performance until the breach is made good. However, once the breach is remedied, the non-breaching party must go ahead and render its performance, minus any damages caused by the breach. Thus, it is clear from the above that not every breach entitles the injured party to treat the contract as discharged. It must be shown that the breach has affected a vital part of the contract, and that it is a breach of condition rather than breach of warranty. 1.what are the remedies for breach of contract? When a promise or agreement is broken by any of the parties we call it a breach of contract. So when either of the parties does not keep their end of the agreement or does not fulfil their obligation as per the terms of the contract, it is a breach of contract. There are a few remedies for breach of contract available to the wronged party. Let us take a look. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in 1] Recession of Contract When one of the parties to a contract does not fulfil his obligations, then the other party can rescind the contract and refuse the performance of his obligations. As per section 65 of the Indian Contract Act, the party that rescinds the contract must restore any benefits he got under the said agreement. And section 75 states that the party that rescinds the contract is entitled to receive damages and/or compensation for such a recession. 2) Restitution:- Restitution is a remedy designed to restore the injured party to its state or position before the contract was created. Unlike an award of damages, parties seeking restitution may not demand compensation for lost profits or other financial losses caused by a breach. Instead, restitution is meant to return any money or property given to the defendant under the contract back to the plaintiff. Typically, a party will seek restitution when a contract they entered has been voided by courts because of the defendant’s incompetence or incapacity. 3] Sue for Specific Performance This means the party in breach will actually have to carry out his duties according to the contract. In certain cases, the courts may insist that the party carry out the agreement. So if any of the parties fails to perform the contract, the court may order them to do so. This is a decree of specific performance and is granted instead of damages. For example, A decided to buy a parcel of land from B. B then refuses to sell. The courts can order B to perform his duties under the contract and sell the land to A. 4] Injunction www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in An injunction is basically like a decree for specific performance but for a negative contract. An injunction is a court order restraining a person from doing a particular act. So a court may grant an injunction to stop a party of a contract from doing something he promised not to do. In a prohibitory injunction, the court stops the commision of an act and in a mandatory injunction, it will stop the continuance of an act that is unlawful. 5] Quantum Meruit Quantum meruit literally translates to “as much is earned”. At times when one party of the contract is prevented from finishing his performance of the contract by the other party, he can claim quantum meruit. So he must be paid a reasonable remuneration for the part of the contract he has already performed. This could be the remuneration of the services he has provided or the value of the work he has already done. 2] Sue for Damages Section 73 clearly states that the party who has suffered, since the other party has broken promises, can claim compensation for loss or damages caused to them in the normal course of business. While “damages” generally refers to money awarded to a party who has suffered loss or injury, there are several different types of monetary remedies in the legal system. Some types of damages commonly issued in a breach of contract case include: Compensatory/Ordinary/Generasl Damages Compensatory damages are the most common remedy in cases of breach of contract. Usually this type of remedy is intended to compensate the non-breaching party for losses suffered as the result of a contract breach. They are not intended to punish the breaching party, but to make the injured party “whole again” under the law. For example, say that you hire a caterer to provide meals for a big party at the price of $1000, and you pay the fee. Before the party, happens, the caterer tells you that they are unable to provide the meals on the date of the party. You are able to find another caterer to provide the food, but the new caterer charges $1500. You file suit against the first caterer for breach of contract. Depending on the finding of the court in the case, the first caterer may be ordered to pay you $1500 in compensatory damages; this reimburses you for the additional fee that you incurred because the first caterer did not fulfill their part of the agreement. Special Damages. Special damages (also called “consequential damages”) cover any loss incurred by the breach of contract because of special circumstances or conditions that are not ordinarily predictable. These are actual losses caused by the breach, but not in a direct and immediate way. To obtain damages for this type of loss, the nonbreaching party must prove that the breaching party knew of the special circumstances or requirements at the time the contract was made. A contracted with B to supply steel rails who had in his turn contracted to supply the same to a railway company at a very high profit. At the time of entering into the contract, B’s contract with the railway company was made clear to A. A committed a breach www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in of contract. B can claim not only the difference between the market price and the contracted price on the delivery date, but will also be entitled to the profit which he would have made and the damages which he would have to pay to the railway company. Example: Punitive Damages Punitive damages are damages designed to punish a breaching party and deter parties from committing breaches. Such damages are rarely awarded for contract breaches, however, although they may be awarded in some tort or fraud cases that overlap contract cases. Example: Peter is a farmer. He issues a cheque for procuring seeds for his next crop. He has sufficient funds in his account but the bank erroneously dishonours the cheque. Peter files a suit claiming compensation for damages to his reputation. The Court awards a nominal amount as damages since Peter is not a trader. Nominal Damages Nominal damages are dispensed when the injured party did not suffer a monetary loss, but a judge wants to show that the injured party is in the right. Generally, nominal damages are very small in amount and are more symbolic in nature. A contracted to purchase a Scooter from B, a dealer. But he failed to purchase the scooter. However, the demand for the scooters far exceeded the supply, and B could sell the scooter agreed to be purchased without loss of profit. B is entitled only to nominal damages. Such damages will not be payable if the loss is abnormal in nature, i.e. not in the ordinary course of business. There are two types of damages according to the Act, Liqudated damages: Sometimes the parties to a contract will agree to the amount payable in case of a breach. This is known as liquidated damages. Unliquidated Damages: Here the amount payable due to the breach of contract is assessed by the courts or any appropriate authorities. 3. Write a short note on Digital Signature Concept of Digital Signature  Meaning and definition of Digital Signature digital signature means the authentication of any electronic record by a person who has subscribed for the digital signature in accordance to the procedure mentioned under act. Information Technology Act, 2000 gives legal recognition to digital signatures.  Meaning and definition electronic Signature  Types of electronic signature Unsecured Signature www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in o Email Signature: Just typing one’s name at the end of an email or sending a message on letterhead. They can be easily forged. o Web Signature: Web-based clickwrap contracts create a lot of difficulties in ECommerce. Secured Signature: This includes the signatures which are digitally secured and also which have more legal weightage.  Difference Between Electronic Signature and Digital Signature  Features of Digital Signature o The authenticity of the sender. o The integrity of the message o Non- Repudiation o Authentication Using Digital Signature  Importance A key is a sequence of symbols that controls the operation of a cryptographic transformation. It involves two processes which are as follows. o Encryption: The process of transforming the plain message into a cipher text. Asymmetric Encryption Symmetric Encryption o Decryption: The reversal of Cipher text into the original message.  Benefits of Digital Signature Authenticity. Non-deniability. Message cannot be altered in between the transmission.  Process The original message of the sender is demarcated in order to get the message digest, with the help of the hash function. Then the private key is used to encrypt the message digest. The encrypted message digest becomes the digital signature by using the signature function. The digital signature is then attached to the original data Two things are transmitted to the recipient:  The procedure of digital signature as: www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in o To sign an electronic record or any other item of information, the signer first applies the hash function in the signer’s software. A hash function is a function which is used to map data of arbitrary size onto data of a fixed size. The values returned by a hash function are called hash values, hash codes, digests, or simply hashes o The hash function computes a hash result of standard length, which is unique to the electronic record. o The signer’s software transforms the hash result into a Digital Signature using the signer’s private key. o The resulting Digital Signature is unique to both electronic record and private key which is used to create it. o The Digital Signature is attached to its electronic record and stored or transmitted with its electronic record.  Verification Of Digital Signature The recipient receives the original message and the digital signature. After this, there are two steps which need to be followed: A new message digest is recovered from the original message by applying the hash result. The signer’s public key is applied to the digital signature received by the recipient and another message digest is recovered as the outcome of it. If both the message digests are identical, it means that the message is not altered.  Problems with Digital Signature It functions online. Therefore, it has to be either purchased or downloaded It lacks trust and authenticity  Digital Signature Certificate (DSC) o A method to prove the authenticity of an electronic document. o It can be presented electronically to prove the identity, to access information or sign certain documents digitally. o The Central Government has appointed a Controller of Certifying Authorities who grants a license to the Certifying Authorities to issue digital signature certificates to the subscriber.  Who needs a DSC? www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in o A vendor and a bidder o A Chartered Accountant o Banks o Director of a company o A Company Secretary o Other Authorized Signatories  Elements of Digital Certificate o Owner’s public key. o Owners name. o The expiration date of Public Key. o Name of the issuer. o Serial Number of the certificate. o A digital signature of the user.  Types of Certificate o Only Sign o Encrypt o Sign along with Encryption  Validity o The DSC is valid up to a maximum period of three years. Unit-II SALE OF GOODS ACT-1930 1. Define sale of goods act. Mention its features. Originally, the transactions related to sale and purchase of goods was regulated by Chapter VII (Sections 76 to 123) of Indian Contract Act, 1872 – which was broadly based on English www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in common law. A need was felt to overhaul the law due to rapid growth of mercantile transactions and various progressive English judgments being passed to meet the needs of the community. Thus, the provisions of Chapter VII were repealed, suitably amended keeping in mind the English Sales of Goods, 1893 and recent judicial decisions of the time. A separate act, the Sale of Goods Act came into force on 1st July 1930. Scope:- It extends to the whole of India except the State of Jammu and Kashmir. It does not affect rights, interests, obligations and titles acquired before the commencement of the Act. The Act deals with sale but not with mortgage or pledge of the goods. Definition of Sale Section 4 of the Sales of Goods Act, 1930 defines a sale of goods as a “contract of sale whereby the seller transfers or agrees to transfer the property in goods to the buyer for price”. The term ‘contract of sale’ includes both a sale and an agreement to sell. A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer by the other party. The contract may be oral or in writing. A contract of sale may be absolute or conditional. Formalities of a contract of sale: Section 5 of the Act specifically provides for the following three steps or formalities in a contract of sale:- 1) Offer and Acceptance: A contract of sale is made by an offer to buy or sell the goods for a price and acceptance of such offer. 2) Delivery and Payment: It is not necessary that the payment for the goods to the seller and delivery of goods to the buyer must be simultaneous. They can be made at different times or in instalments – as per the contract. 3) Express or Implied: The contract can be in writing, oral or implied. It can also be partly oral and partly written. Essentials The five essential features of a contract of sale are as discussed below: 1) Two parties 2) Subject matter to be goods 3) Transfer of ownership of goods 4) Consideration is price. 5) Essential elements of a valid contract 1) Two parties: A sale has to be bilateral because the goods have to pass from one person to another. There must be a buyer – a person who buys or agrees to buy the goods and a seller – www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in a person who sells or agrees to sell goods. The seller and the buyer must be different persons. A part owner can sell to another part owner. A partner may, therefore, sell to his firm or a firm may sell to a partner. But if joint owners distribute property among themselves as per mutual agreement, it is not ‘sale’. A person cannot be the seller of his own goods as well as the buyers of them. 2) Subject matter to be goods: The term ‘goods’ is defined in Section 2(7). It states that ‘goods’ “means every kind of movable property other than, 2. actionable claims 3. and money; and includes stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”. 3) Transfer of ownership of Goods: There must be transfer of ownership or an agreement to transfer the ownership of goods from the seller to the buyer.Delivery of goods refers to a voluntary transfer of possession of goods from one person to another. Delivery may be constructive or actual depending upon the circumstances of each case. A contract may provide for the immediate delivery of the goods or immediate payment of the price or both. Alternatively, the delivery or payment may be made by instalments or be postponed. 4) Consideration is Price: The consideration in a contract of sale has to be price i.e., money. If goods are offered as the consideration for goods, it will not amount to sale. It will be barter. If there is no consideration, it will be called gift. But where the goods are sold for definite sum and the price is paid partly in kind and partly in cash, the transaction is a sale. Consideration is an essential for a valid contract as per the Indian Contract Act, 1872. It is the duty of a buyer who has received and appropriated the goods to pay a reasonable price. According to Section 2(10) ‘price’ means the money consideration for the sale of goods. section 9 lays down how the price may be fixed in a contract of sale: 1. a) It can be fixed by the contract itself; or 2. b) It can be fixed in a manner provided by the contract, such as appointment of a valuer; 3. c) It can be determined by the course of dealings between the parties; or d) If the price is not capable of being fixed in any of the ways mentioned ways, the buyer is bound to pay reasonable price 5) Essential elements of a valid contract: All the essentials of a valid contract must be present. viz., competent parties, free consent, legal object and so on. The transfer of possession and ownership under the Act has to be voluntary and not be tainted with fraud or duress. 6. Time: Any stipulation with respect to time is not deemed to be of essence to a contract of sale unless a different intention appears from the terms of the contract. 2. Explain the difference between sale and agreement to sale or sale and absolute sale www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in SALE & AGREEMENT TO SELL A contract of sale is a generic term and includes both an actual sale and an agreement to sell. Section 4 provides that if the property in goods is transferred from the seller to the buyer under a contract, the contract is called a sale. Where the transfer of the property in the goods will take place at a future time or is subject to some condition which has to be fulfilled, the contract is called an agreement to sell. Such an agreement to sell becomes a sale when the prescribed time lapses or the conditions are fulfilled. Sale Here the property in goods is transferred at once to the buyer from the seller. The Section 4(3) of the Act says that “where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is then known as a sale.” A sale is carried out on deliverable goods. Goods are said to be in a deliverable state when they are in such a condition that the buyer would, under the contract, be bound to take delivery of them [Section 2(3)]. Agreement To Sell We saw that in a sale the property in the goods is transferred from the seller to the buyer. However, in an agreement to sell, the ownership of the property in goods is not transferred immediately. The objective of the agreement is to transfer the goods at a future date, once some contingent clauses in the agreement or certain conditions are satisfied. 4. EXPALIN THE VARIOUS KINDS OF GOODS Meaning and types of goods Meaning of goods[Section 2(7)] Goods means every kind of movable property other than actionable claims and money,and includes the following: Stock and share www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in Growing crops,grass and thing attached to or forming part of the land which are agreed to be served before sale or under the Contract of sale Types of Goods[Section 6] 1.Existing Goods Existing goods mean the goods which are either owned or possessed by the seller at the time of contract of sale.The existing goods may be specific or ascertained or unascertained as follows: a) Specific Goods[Section 2(14)]: These are the goods which are identified and agreed upon at the time when a contract of sale is made-For example,specified TV,VCR,Car,Ring. b) Ascertained Goods: Goods are said to be ascertained when out of a mass of unascertained goods,the quantity extracted for is identified and set aside for a given contract.Thus,when part of the goods lying in bulk are identified and earmarked for sale,such goods are termed as ascertained goods. c) Unascertained Goods: These are the goods which are not identified and agreed upon at the time when a contract of sale is made e.g. goods in stock or lying in lots. 2. Future Goods[Section 2(6)] Future goods mean goods to be manufactured or produced or acquired by the seller after the making of the contract of sale. There can be an agreement to sell only. There can be no sale in respect of future goods because one cannot sell what he does not possess. 3. Contingent Goods [Section 6(2)] These are the goods the acquisition of which by the seller depends upon a contingency which may or may not happen. Example;_ eggs, goods to arrive, future crops Write a short note on modes of fixing price. Price Of Goods Meaning[Section 2(10)] Price means the money consideration for a sale of goods. Modes of determining Price [Section 9(1)] There are three modes of determining the price as under: It may be fixed by the contract or It may be left to be fixed in an agreed manner www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in It may be determined by the course of dealing between the parties. Thus, the price need not necessarily be fixed at the time of sale. Consequences of not determining the Price in any of the Mode [Section 9(2)] Where the price is not determined in accordance with Section 9(1),the buyer must pay seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. It may be noted that a reasonable price need not be market price. Consequence of not Fixing Price by third party [Section 10(1)] The agreement to sell goods becomes void if the following two conditions are fulfilled. If such agreement provided that the price is to be fixed by the valuation of a third party, If such third party cannot or does not make such valuation. 6.Write a short note on Caveat Emptor. THE RULE OF CAVEAT EMPTOR Section 16 of the Sale of Goods Act states that, “subject to the provisions of this Act or any other law for the time being in force, there is not implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale”, brings the common law rule of Caveat Emptor, which means ‘let the buyer beware’. When the sellers display their goods in the open market, it is for the buyer to make a proper selection or choice of the goods. The buyer alone shall be responsible for checking the quality and suitability of goods before a purchase is made. The said rule owes its origin to the fact that in the early times most of the sales used to took place in the market. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in However, the rule of caveat emptor has certain EXCEPTIONS to it. 1. when a buyer brings the purpose of buying goods to the knowledge of the seller, relies on seller’s skill and goods are of a description which is in the course of seller’s business, it becomes the duty of the seller to deliver reasonably fit goods to the buyer; 2. Where the goods are sold by sample and the goods do not match with the sample; 3. Where the goods have been sold by both sample and description and the goods match with sample but do not match with the sample; and 4. When the goods have been sold by making some fraud or misrepresentation. 7.Explain the rights of unpaid seller under the Sale of Goods Act 1930. In every contract of sale, a seller is under an obligation to deliver the goods sold and buyer is under an obligation to pay the requisite amount set or quid pro quo i.e something in return, under the contract of sale, by them. This is known as reciprocal promise as per Section 2(f) of the Indian Contract Act. In other words, any set of promises made which forms the consideration or part of the consideration for each other are called reciprocal promises and every contract of sale of goods consists of reciprocal promises. In certain cases, when a buyer refuses or fails to pay the requisite amount to the seller, the seller becomes an unpaid seller and can exercise certain rights against the buyer. These rights are considered as seller’s remedies in case there is a breach of contract by the buyer. These remedies can be against: 1. Buyer 2. Goods According to Section 45(1) of Sale of Goods Act, 1930, the seller is considered as an unpaid seller when: a- When the whole price has not been paid, then the seller has an immediate right of action for the price. b- When Bills of Exchange or other negotiable instrument has been received as conditional payment, and the pre-requisite condition has not been fulfilled by reason of the dishonour of the instrument or otherwise. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in For instance, X sold some goods to Y for $50 and received a cheque. On presentment, the cheque was dishonoured by the bank. X is an unpaid seller. Seller also includes a person who is in a position of a seller i.e. agent, consignor who had himself paid or is responsible for the price. A. Rights against buyer 1. Suit for the price When any goods are passed on to the buyer and the buyer has wrongfully neglected or refused to pay as per the terms and conditions of the contract, the seller may sue him as per the Section 55(1) because once the property has been passed the buyer is bound to pay the price. But in the case due date of payment has been passed and goods had not been delivered yet, the seller can sue the buyer for the wrongful neglect or refusal on his part according to clause 2 of Section 55. In case the price is due in foreign currency the damages must be calculated at the rate of exchange prevailing at the time when the price was due not on the judgement date. 2. Suit for damages In case there is a wrongful refusal on the part of buyer for acceptance of goods and payment of money, the seller can sue him for damages of non-acceptance as per Section 56. In case the goods have a ready market, the seller has to resell the goods and buyer have to pay the losses www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in if incurred. If the seller does not resell the goods the difference between contract and market price at the day of breach is taken as a measure for damages. If the difference between them is nil seller gets nominal value. 3. Suit for interest As stated under Section 61, where there is a specific agreement between buyer and seller with regards to interest on the price of goods from the date on which payment becomes due, the seller may recover interest from a buyer. But if there were no such agreement the seller may charge interest from the day he notifies the buyer. If there is no contract to the contrary, the court of law may award interest to the seller at such rate as it thinks fit on the amount of the price from the date on which amount is payable. 4. Repudiation of the contract before the due date According to Section 60, the rule of anticipatory breach contract applies, wherein, if buyer repudiates the contract before the date of delivery the seller can consider the contract as rescinded and can sue for damages of the breach. According to this Section, if one party repudiates before due date other has two courses of action. Either he may immediately accept the breach and bring the action of damages the contract is rescinded and damages will be assessed according to the prices then prevailing or he can wait for the date of delivery. In the second case, the contract is open at risk and will be a benefit to both parties. Ma be the party changes is mind and agree to perform and damages will be assessed according to prices on the day of delivery. B. Rights against goods 1. Lien Lien is a right which seller of goods can exercise when a buyer has not paid the price of goods, under this right seller can retain the possession of goods as an agent or bailee for the www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in buyer. The seller can retain his possession as per Section 47 under the following circumstances: 1- In case the buyer is insolvent. 2- When the term of goods sold on credit is expired. 3- Goods sold without any stipulation as to credit. When the goods are sold on credit the right to lien is suspended during the term of credit and lien exist only for the price of goods, not any additional charges. According to Section 48 if the seller has delivered a part of unpaid goods he can exercise his right of lien on rest. In Grice V Richardson, the sellers had delivered a part of the three parcels of tea comprised in the sales, and they had not been paid for the part which remained with them. They were allowed to keep it till the payment of the price. Where, however, a part of goods delivered which show an agreement to waive the lien, the seller cannot the remainder. Termination of lien :- Termination of lien takes place when the seller losses the possession of goods. As per Section 49, under following circumstances right of lien is terminated- 1.Waiver of lien- The right of lien is an implied right attached by law in every contract of sale, the seller has the autonomy to waive this right, it may be expressed or implied from the conduct of the seller. a. When buyer or agent lawfully obtains possession of goods. Once the buyer got the possession of goods from the seller, all the rights of the seller in respect to goods are ceased even if the price is not paid. The seller can recover the price as a normal debt because the acceptance of possession gives absolute, unqualified and indefeasible right of goods to the buyer. When the goods are given again to the seller for repair he cannot access the right of lien. b. When the seller delivers goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in When the seller has delivered goods to the carrier for transmission, his right of lien is ceased but the right to stoppage in transit is still accessible by him. In case seller regains possession of goods in transit by stoppage his right to lien 2.Stoppage in transit When the goods have been transferred to carrier or bailee for the purpose of transmission to the buyer, who has become insolvent, the seller has the right to stop the goods in transit in order to protect himself against the loss that may arise due to insolvency. As per Section 50, there are four essential requirements for stopping the goods in transit: 1. Unpaid seller. 2. Buyer insolvent. 3. Property should have passed to the buyer. 4. Property should be in course of transit. The course of transit depends upon the capacity of middleman to hold the goods. Middleman should be an intervening person between the seller who has parted with the goods and the buyer who has not yet received the goods. SECTION 5 lays down the rules and regulations related to commencement and end of the transit, this Section is divided into seven sub-Sections which solve all the issues related to commencement and end of transit: a. Delivery to the buyer- Goods are considered to be in transit from the time when they are delivered to the carrier or other bailee for the purpose of transmission to the buyer, till the goods are received by the buyer himself or his agent takes delivery of them. interception by the buyer- When the buyer or the agent takes the delivery of the goods from the carrier, the transit ends even before their arrival at the appointed destination. In case the carrier delivers the goods before the arrival of the buyer, although it is wrongful and the carrier may be held liable for the damages but the transit ends here. c. Acknowledgement to the buyer- The transit is considered to come to an end when the goods arrive at the appointed destination and the carrier acknowledges to the buyer or his agent that he is now holding the goods on his behalf. It is immaterial if the gods are still in www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in the carrier or the buyer has indicated another destination. In order to put an end to the original contract of carriage, a very clear acknowledgement is required. d Rejection by the buyer– When the buyer rejects the goods and the carrier or other bailee continues to possess them, the goods are held to be still in transit. This will also include the case when the seller himself refuses to take back goods. e. Delivery to ship charted by the buyer- It is a question of fact whether the carrier is acting independently or as an agent of the buyer at the time when the goods are delivered to a ship charted by buyer. As soon as the goods are loaded on the ship, the transit ends if the carrier is acting as an agent of the buyer. f. Wrongful refusal to delivery- When the carrier wrongfully denies delivering the goods to the buyer or his agent the transit is at the end. It is obvious that goods should have arrived at their destination because otherwise, the carrier has the right to refuse to deliver them. g. Part delivery- in the case when the goods have been delivered partly, the seller has a right to stop the delivery of the rest of the goods unless the part delivery shows an agreement to the possession of the whole. For instance, A sells to B 20kg of wheat, 10kg has been transferred to B but rest 10kg is still in transit, in case B fails to pay A has a right to stop the goods in transit. 3. Resale:-Exercising the right of lien or stoppage does not rescind the agreement but reselling of goods does and without this right, the other two rights of lien and stoppage would not be of much usage because he can only retain goods under these right till the buyer pays back the money. The unpaid seller can exercise his right under following conditions and circumstances- 1- Seller before reselling the goods needs to send a notice to the buyer except in the case of perishable goods, giving him last chance to pay the price and take back the goods within a reasonable time. If the buyer does not pay the money back seller has the right to resell the goods. If the seller fails to give notice of his intention to resell, he cannot claim damages from the buyer and he has to give any profit. 2- If there is any loss in the resale of goods he can claim the loss from the buyer, on the contrary, if there is profit buyer cannot claim it. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in 3- Seller gives rightful ownership to buyer after the resale it does not matter notice of resale is given or not to defaulted buyer. 4- Sometimes the seller reserves exclusive right to resale the goods if the buyer makes a default in payment, in such cases the buyer cannot ask for profit on resale if no notice is served and seller has the exclusive right to resale. Rights against seller 1- Damages for non-delivery Section 57 states that, whenever any seller or refuses to deliver the goods to the buyer, the buyer may sue for non-delivery of goods. If the buyer has paid any amount he is entitled to recover it. Quantum of damages is decided through market forces, contract and market price on the day of the breach is considered as damages. If the buyer wants to claim that damages he must prove it in the court of law, otherwise, he cannot get a penny more than refund i.e the amount he has already paid. Buyer must try to keep the loss at a minimum by purchasing the goods from other sources instead of waiting for the market to fluctuate. 2- Suit for specific performance Acc to Section 58 when goods are specific or ascertained and there is a breach of contract committed on the part of the seller then the buyer can appeal to the court of law for specific performance. The seller has to perform the contract and he does not have any option of retaining the goods by paying damages. The power of the court to order specific performance is subject to the provisions of chapter II of Specific Relief Act, 1963. 3- Suit for breach of warranty As stated under Section 59, the buyer cannot reject the goods solely on the basis of breach of warranty on the part of the seller or when a buyer is forced to treat a breach of condition as a breach of warranty. But he may sue the seller for damages or set up against the seller the breach of the warranty in the extinction of the price. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in According to Section 60, the rule of anticipatory breach contract applies, wherein, if any party repudiates the contract before the date of delivery the other party can consider the contract as rescinded and can sue for damages of the breach. According to this Section, if one party repudiates before due date other has two courses of action. Either he may immediately accept the breach and bring the action of damages the contract is rescinded and damages will be assessed according to the prices then prevailing or he can wait for the date of delivery. In the second case, the contract is open at risk and will be a benefit to both parties. Maybe the party changes is mind and agree to perform and damages will be assessed according to prices on the day of delivery. Conclusion The seller becomes an unpaid seller when either he had not been paid in full or the buyer has failed to meet the maturity of bills of exchange or any other negotiable instrument accepted by seller as a condition precedent. Under this situation, the seller can resell the goods if he had exercised the right of lien or stoppage in transit, after giving notice to the buyer and the new buyer will have good title over the goods. In this case, the seller has the right to sue the buyer for failure to pay the required amount as well as a lien. On the contrary, if the seller fails to deliver goods to the buyer, he may sue the seller for non-performance and can claim damages or specific performance. Consumer Protection Act-1986 1Write a short note on the following 1. Complainant Section 2(1) of the Act defines various terms used in the Act. Some of the definitions are given hereunder: Complainant means (i) a consumer www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in (ii) any voluntary consumer association registered under the Companies Act, 1956, or under any other law for the time being in force (iii) the Central Government or any State Government, who or which makes a complaint (iv) one or more consumers where there are numerous consumers having the same interest (v) in case of death of a consumer, his legal heir or representative 2. Complaint Complaint means any allegation in writing made, with a view to obtaining any relief, by a complainant that (i) an unfair trade practice restrictive trade practice has been adopted by any trader or service provider ii) the goods bought by him or agreed to be bought by him suffer from one or more defects (iii) the services hired or availed of or agreed to be hired or availed of by him suffer from deficiency in any respect (iv) a trader or the service provider, as the case may be, has charged for the goods or for the services mentioned in the complaint, a price in excess of the price parties. (v) goods which will be hazardous to life and safety when used are being offered for sale to the public, (vi) services which are hazardous or likely to be hazardous to life and safety of the public when used, are being offered by the service provider which such person could have known with due diligence to be injurious to life and safety. 3. Consumer consumer means any person who (a) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or (b) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purpose. [Section 2(1)(d)]. Lesson 3 Consumer Therefore, to be a ‘consumer’ under the Act: (i) the goods or services must have been purchased or hired or availed of for consideration which has been paid in full or in part or under any system of deferred payment, i.e. in respect of hire purchase transactions; (ii) goods purchased should not be meant for re-sale or for a commercial purpose. Goods purchased by a dealer in the ordinary course of his business and those which are in the course of his business to supply would be deemed to be for ‘re-sale; and (iii) in addition to the purchaser(s) www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in of goods, or hirer(s) or users of services, any beneficiary of such services, using the goods/services with the approval of the purchaser or hirer or user would also be deemed a ‘consumer under the Act. 4. Goods Goods, in terms of Section 2(1)(i) has been defined to mean goods as defined in the Sale of Goods Act, 1930. As per Section 2(7) of the Sale of Goods Act, 1930 Goods means every kind of movable property 164 EP-ECL other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale. Therefore, most consumer products come under the purview of this definition. 5. Service Service :The term ‘service’ is defined under Section 2(1)(o) as to mean service of any description which is made available to potential users and includes, but not limited to the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service 6.Restrictive Trade Practice means a trade practice which tends to bring about manipulation of price or its conditions of delivery or to affect flow of supplies in the market relating to goods or services in such a manner as to impose on the consumers unjustified costs or restrictions and shall include— (a) delay beyond the period agreed to by a trader in supply of such goods or in providing the services which has led or is likely to lead to rise in the price; (b) any trade practice which requires a consumer to buy, hire or avail of any goods or, as the case may be, services as condition precedent to buying, hiring or availing of other goods or services.[Section 2(1)(nn)]. 7. Defects Defect means any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force or under any contract, express or implied, or as is claimed by the trader in any manner whatsoever in relation to any goods [Section 2(1)(f)] 8. Deficiency Deficiency means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service [Section 2(1)(g)]. Failure to maintain the quality of performance required by the law or failure to provide services as per warranties given, by the provider of the service would amount to ‘deficiency’. 9.Consumer Rights (Sec.6) The Consumer Protection Act, 1986 recognizes the 6 specific rights of the consumer. They are:- www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com  www.android.universityupdates.in | www.universityupdates.in | www.ios.universityupdates.in 1. Right to Safety: It means that every consumer has a right to be protected against the marketing of goods and services which are hazardous to life and property. 2. Right to Information: Every consumer has a right to be informed about the quality, quantity, potency, purity, standard and price of goods so as to protect the consumer against unfair trade practices. 3. Right to Choose: Every consumer has a right to choose from a variety of goods and services available at competitive prices. 4. Right to be Heard: Whenever a consumer has a complaint, he had a right to be heard and assured that his interest will receive due consideration at appropriate forums. 5. Right to Consumer Education: Central government, as well as state government, should develop the interest of consumer education and information programs bearing in mind, the cultural tradition of the people of the country. 6. Right to Seek Redressal: Consumer has a right to seek redressal against unfair trade practice by the seller. www.android.previousquestionpapers.com | www.previousquestionpapers.com | www.ios.previousquestionpapers.com