 Student Name – Sumu Koirala

 Submitted to - Sukhadev Sapkota

 Date of submission – 2022/12/17

UNIT-ONE
Q.1 What is substantive law? [2]
Answer: Substantive law is a significant part of the law that defines the subject's rights,
duties, and liabilities. For example, a state that says, though shalt not steal. This would be
a substantive law. 
Substantive law may derive from the constitution. It has only prospective effects. It is
supreme in conflict with procedural law.
Q.2 What are the sources of business law? [2]
Answer: The followings are the sources of business law:
i. Legislation or statutory law
ii. Precedent
iii. Customs and Usages
iv. Commercial treaties and agreement
v. British Mercantile Law
vi. Writings and opinions of scholars

Q.3 ‘Sound business law contributes to promoting business activities.’ Explain [10]
Answer: Business law is one of the vital necessities of a business person or a business
firm. It is much necessary for a business firm as civil law are necessary for society. In the
absence of civil law, society cannot go ahead. Likewise, without business law, a business
cannot prosper, and without the progress of business in society, economic development is
out of the question. Hence, business law is essential not only to the business firm alone
but also to society.
Business law regulates all business activities by making various rules, regulations, and
provisions. Following the rules, regulations, and conditions, a business firm can continue
its operations smoothly in society along with economic development. Business law
provides the provisions for the establishment of the business firm, its internal
management, its formalities, and procedures for its final stage. Failure to follow the
rules, regulations, and provisions can bring a lot of trouble to a businessman like a jail
sentence, penalties, cancellation of license, seizing and freezing of the business assets,
etc.
Business laws were not only developed to protect consumers but also to preserve
competition. These laws are enforced by government agencies at different administrative
levels. Under business law, all enterprises are run in a disciplined way. All the parties
related to businesses get protection and feel responsible in their respective positions.
The above paragraphs clearly explain the importance of sound business law in
contributing to and promoting business activities.
Q.4 Define the sources of law. [10]
Answer: The term ‘source’ indicates the place or thing that produces something or from
where something emerges or comes into existence. The source of the law means the
place, institution, behaviors, or like from where the law emerges and obtains validity. The
source of the law is explained below:
 Tradition, customs, and usage – In ancient periods of time, people use various
ways to trade things like a barter system. There is uniqueness in traditional ways
of trading goods e.g. trading with Tibetan people. For this reason, tradition,
custom, and usage plays important role in the development of business law.
 Laws made by parliament - Parliament enacts that law which enhances or
promotes the business. It will also amend (modify) or repeal (cancel) those laws
that are not necessary. In other words, legislation is the main source of law. Law
made by the legislative body and enforced upon the public in the country is called
statutory law. This law is recognized by the courts as the major source of law. This
law is recognized by the courts as the major source of law. In a democratic
country, there is a legislative body, which is entitled and reportable to make laws
for different activities.
 Precedent: It is an earlier decision of the Supreme court which can be used in a
later case of similar nature. The court while deciding similar-natured disputes take
examples of a previous decision to interpret the law. For example, a court passed
verdicts to A when A was competing for B in some legal case. After some time, if
a similar case is lodged in the court, it can refer to its earlier decision to decide the
next verdict.
 Treaties and Agreements relating to Business: Bilateral or Multilateral
agreements or treaties are other important sources of business law. WTO and
SAFTA are examples of agreements that have a great impact on Business Law.
  Laws of other countries: British mercantile law is considered the source of
Nepalese Business law. It is recognized all over the world that England was the
first country to develop its market economy in the world. A number of favorable
law was enacted by England for its industry.
 Writing or opinion of the scholar of experts: Writings of scholars,
professionals, or experts are another source of business law. The in-depth research
and analysis of the scholar or professional in the business area will definitely help
develop business law.

Q.5 Define types of law based on various viewpoints. [15]

Answer: The term ‘law’ means a set of rules which are made and applied by the
sovereign authority. It consists of rules that regulate the conduct of individuals,
businesses, and other organizations within society. It is intended to protect a person and
their properties from unwanted interference from others, and it is the guidance of society
and treats them equally to every person. Therefore, every member of society should
regulate his or her acts as specified by the law or within the ambit of the law.
There are different types of law on the basis of various viewpoints. They are discussed
below.
i. Substantive law – The main law of the nation , which is the country's fundamental
law, is called substantive law. It defines the rights, duties, and liabilities of a
subject. It is a very important law of the nation. It has a prospective effect. It
determines the punishment for working against human conduct. Hence, procedural
law is based on substantive law.
ii. Procedural law – It is a supplementary law that describes the procedure or steps to
follow or complete the legal act. It has a retrospective effect. It is not the main law.
It gives us the knowledge of how to reach to the rules and regulations of law. It
does not tell us about the punishment but tells us about the procedures of the
punishment.
iii. Civil law – Civil law is a part of the law that is related to people’s property and
their life. It is related to civil or citizens of the nation. The main objective of civil
law is to secure the rights of the people, to enjoy their daily life, and to ensure
remedy in the case of violation. It is known as municipal or state law because it
may differ from one country to another. Civil law includes land law, contract law,
commercial law, and other rights-providing laws.
iv. Criminal law – The law that is related to criminal activities and procedures to
control criminal activities is called criminal law. Criminal activities are human
activities that are regarded as harmful to society or the state. The law also defines
 human conduct as a crime and declares the punishment for it. For example, the law
for prisoners comes under criminal law.
v. National law – All the laws enacted in a nation are called the national law of the
nation. There may be several types of national law such as constitutional law,
civil law and administrative law, and so on. It arranges the establishment of
various state organs (like executive, judiciary, and legislative) and defines their
power. It also clarifies the rights and duties of a person living in the nation’s
territory.
vi. International law – The law enacted by the international community is called
international law. It is made for establishing the relationship between various
nations and is binding for each one of them. In reality, international law is not
equal to national law on the ground of its efficacy because it has no sovereign
power to enforce it. Although it is considered a weak law, it is a real law because
it is made by using mutual sovereign power.
vii. Private law – The law enacted by the private sector for their legal welfare is called
public law. It deals with personal rights duties and liabilities. It may be civil and
criminal in nature. Contract law, family law, and commercial laws are illustrations
of this category of law.
viii. Public law – The law enacted for the public or public houses is called public law.
It defines and regulates the relationship between the state and the people. It deals
with state activities. Administrative law can be illustrated as such law.

UNIT TWO
Q.1 Point out the basic distinctions of agreement and contract. [2]
Answer:
S.No Agreement Contract
.
1 It does not create a legal obligation to perform. It creates a legal
obligation to perform.
2 It has a wider scope than the contract. It is general It has limited scope than
in nature. the agreement. It is
specific in nature.

Q.2 What is the communication of an offer? [2]

Answer: An offer can only be considered valid after it is communicated to the offeree.
Communication of an offer in contract law is only complete when it is conveyed to the
other party and is accepted by them. The offer can be dispatched through any common
means such as post, email, telephone, or through word of mouth.

Q.3 Mention the meaning of the Roman maxim ‘ex mudo non oritur actio.’ [2]
Answer: The literal meaning of the Roman maxim ‘ex mudo non oritur actio’ is a
contract without consideration is void.
Consideration is a necessity under English Law as well as Nepali Law for entering into
contracts. Almost every contract requires consideration except a deed. To render any
contract binding, consideration is a necessary element.

Q.4 What is contractual capacity? [2]

Answer: Contractual capacity is an essential element of a valid contract. The parties
involved in a contract must be capable by law to enter into a contract. If a contract is
made with an incompetent person, it will be void.
OR
Contractual capacity is the ability of an individual to enter into a binding legal contract,
and in so doing expose themselves (or their company, if they have signatory authority) to
the obligations and consequences that flow from the contract.

Q.5 What is a fiduciary relationship? [2]

Answer: Fiduciary relationship means a relationship of trust and confidence. When a
person imposes faith and confidence on the other, he expects not to be betrayed. If the
other party betrays the confidence and trust reposed in him and gains an undue influence.

Q.6 What is the legality of the object? [2]

Answer: The legality of the object can be defined as the aim of the activities whether it is
legal or illegal. It says that the activities or any work, we are performing has an objective
from the legal point of view or not. Simply, it can be said that the target or the aim is
accepted or agreed upon legally or not.
Q.7 ‘All contracts are agreement but all agreements are not contract.’ Justify. [10]
Answer: The statement all agreements are not contracts but all contracts are agreement
is totally a fact. Here, a contract is an agreement with a legal value. That’s why all
contracts come into agreement. As both parties agree to perform the contract but as per
the agreement, both parties are not obliged to perform as per the agreement’s clauses
since the agreement doesn’t have legal value. Also, the agreement cannot be enforceable
by the law. Hence, all agreement never comes into the contract. For example, when two
friends agree to drink coffee together, it comes under an agreement. But it does not
constitute a contract because such an arrangement is not enforceable by law. Whereas,
running a company in partnership is a contract. Thus, the parties involved agree always.
All contracts are agreement and as an agreement does not have legal value, all agreement
is not contract.

Q.8 Why is it necessary to admit some exceptions to the rule – ‘No consideration No
contract’? Discuss along with the exceptions. [10]
Answer: The general rule of law is “no consideration, no contract”, i.e., in the absence of
consideration there will be no contract.
The response to the inquiry how do you make money from this contract is defined as a
consideration in contract law. For a contract to be legally binding, both parties must get
compensation. When you buy a jacket at your favorite shop, for example, clothing is the
consideration you get, while your money is the consideration the business receives.
A promise to do something you aren’t legally compelled to do or a vow not to do
something you have the legal authority to do is typically considered a consideration.
However, the law recognizes the following exceptions to the rule of consideration.
1. A promise made out of material love and affection: For example, A agreed to
pay Rs. 5000 to his younger brother out of natural love. This promise is in writing
and registered. If A refuses to pay Rs. 5,000 to his younger brother, the latter can
enforce the promise in Court and A cannot refuse payment on the ground of
absence of consideration. It should be noted that all four conditions must be
satisfied only then it will be valid without consideration, otherwise not.
2. A promise made to compensate for voluntary services: A promise to
compensate, wholly or in part, a person who has voluntarily done something for
the promisor, or something which the promisor was legally compellable to do, is
enforceable without consideration. This rule, in fact, recognizes past consideration
which was given without request or desire of the promisor.
 3. Written promise to pay a time-barred debt: A promise made in writing to pay a
debt barred by the Law of Limitation is enforceable even without consideration.
Example: A owes B Rs. 1,000 but the debt is barred by the Limitation Act. A
signs a written promise to pay B the sum of Rs. 1,000. This is a valid contract.
4. Gift, etc. actually made: A gave a watch as a gift to B on his birthday. Later on,
A cannot demand his watch (gift) back on the ground that there was no
consideration (as A did not get anything in return for the watch).

Q.9 What is fraud? Enlist its elements. Distinguish between coercion and undue
influence. [10]
Answer: When a person discloses a thing that is false by knowing that fact, he holds was
a contract and the other party also enters into a contract relying upon what the former had
said, the contract is called fraud. Thus, in such a contract, a party deliberately falsifies the
statements in order to deceive the other party.
The followings are the elements of fraud:
i. Committed by a party to a contract
ii. There must be a false representation
iii. The representation must be related to the fact
iv. Actual acted
v. The aggrieved party must be suffered some damage

The followings are the differences between coercion and undue influence :

BASIS FOR
COERCION UNDUE INFLUENCE
COMPARISON

Meaning Coercion is an act of Undue Influence is an act of

threatening which influencing the will of the other
involves the use of party.
physical force.

Use of Psychological pressure Mental pressure or Moral force

or Physical force

Purpose To compel a person in To take unfair advantage of his

such a way that he enters position.
into a contract with the
 BASIS FOR
COERCION UNDUE INFLUENCE
COMPARISON

other party.

Criminal Nature Yes No

Relationship The relationship between The act of undue influence is

parties is not necessary. done only when the parties to the
contract are in a relationship.
Like teacher-student, doctor-
patient, etc.

Q.10 What is the performance of the contract? Discuss the importance of the
performance of a lawful contract. [10]
Answer: The term “Performance of contract” means that both, the promisor, and the
promisee have fulfilled their respective obligations, which the contract places upon them.
For instance,
 Bill Gates visits a stationery shop to buy a calculator. The shopkeeper
delivers the calculator and Bill Gates pays the price. The contract is said to
have been discharged by mutual performance.
 Lata promises to deliver goods to Narendra on a certain day on payment of
Rs 1,000. But Lata expires before the contracted date. Now Lata ‘s
representatives are bound to deliver the goods to Narendra, and Narendra is
bound to pay Rs 1,000 to Lata ‘s representatives.
In other words, performance is the fulfillment of respective promises by the concerned
parties on a matter as designed in the contract without making any variation in its terms
and conditions. It is also called the execution of the contract.
There are two types of performance of contract they are;
a. Actual performance - When a promisor to a contract has fulfilled his obligation in
accordance with the terms of the contract, the promise is said to have been actually
performed. The actual performance gives a discharge to the contract and the
liability of the promisor ceases to exist. For example, A agrees to deliver 10 bags
 of cement to B’s factory, and B promises to pay the price after delivery. A delivers
the cement on the due date and B makes the payment. This is an actual
performance.
b. Attempted performance - When the performance has become due, it is sometimes
sufficient if the promisor offers to perform his obligation under the contract. This
offer is known as attempted performance or more commonly tender. Thus, tender
is an offer of performance, which of course, complies with the terms of the
contract.
The followings are the importance of the performance of a lawful contract:
a) Performance promotes a good relationship between the parties. A good
performance encourages the parties to further transactions.
b) Both the parties feel greater profit and lesser loss from the consequences of
performance The parties have no further risk of disputing and invoking remedies
Both the parties are standing in the winning position since they get what they
want.
c) The performance opens further opportunities for exploring new areas of
transactions.
d) The purpose of making the contract is fulfilled by the performance as per
expectations and nothing remains to do between its parties.
e) The contract performance helps to build public confidence in public procurement
and provides the opportunity to implement quality assurance systems and
accountability mechanisms.

Q.11 What is meant by the termination of the contract? Describe the various modes of
termination of a contract. [10]
Answer: To terminate a contract means to end the contract prior to it being fully
performed by the parties. In other words, prior to the parties performing all of their
respective obligations required by the contract, their duty to perform these obligations
ceases to exist.
The termination of the contractual relationship is called the discharge of the contract. A
contract is said to be discharged or terminated when the rights and obligations come to an
end. It means the termination of the contract leaves nothing to do with the parties.
There are various modes of termination of the contract, a contract may be terminated or
discharged as given below:
a) Termination of Contract by performance - When both parties to a contract have
performed all their obligations under a contract, including all express and implied
offers, a contract comes to an end.

Each of the parties has performed their obligations with “perfect precision”:
exactly as was specified by the contract. And if the contract is for a fixed time –
say 2 years – if the contract has been performed with that perfect precision as at
the end of the 2 years

b) Termination of Contract by mutual consent/agreement - A contract may also be

terminated by mutual agreement between the parties. The contract is discharged by
agreement in any one of the following ways;

 Novation/renew (change of parties or

change of agreement)
 Remission/ partial waiver
 Waiver
 Rescission/Cancel
 Alteration
 Accord/consensus and satisfaction
c) Termination of Contract by laps of time - Prescribed time limit at contract
d) Termination of Contract by operation of law - Operation of law denotes as per law
or according to the law. The contract will be terminated by operation of law by the
following ways:
 Death of the promisor
 Insolvency
 Merger
 Unauthorized material alteration

e) Termination of Contract by the impossibility of performance – There are two types

of the impossibility of performance - initial impossibility and the subsequent
impossibility
 f) Termination of Contract by the breach - When any party fails to perform the
contractual liability then the contract is deemed to have been violated or breached
and come to an end. In the case of breach of contract, the contract is terminated.

Q.12 What is an unsound mind? What are the rules for making a contract with a person
having an unsound mind? Explain the legal effects of contracting with a person with an
unsound mind. [15]
Answer: Unsound mind is a mental state in which a person is incapable of understanding
the case and is incapable of making a rational judgment. A person of an unsound mind is
a person, who cannot decide what is right and what is wrong his mental faculties aren’t
supposed to be mature enough. The contract made with a person of unsound mind such as
a lunatic, idiot, or intoxicated person will be void.
The followings are the rules for making a contract with a person having an unsound
mind:
a) A person may conclude a contract when he is in sound mind at the time of the
contract even if, he is an unsound mind usually, a sound mind occasionally.
b) A person may not conclude a contract when he is in an unsound mind at the time
of the contract even if, he is in a sound mind usually, an unsound mind
occasionally
c) The test of soundness of mind is according to the capacity to understand the
business concerned and make a rational judgment with its impact on the person’s
interest.
d) Guardian of the person with an unsound mind may make a contract for the sake of
the interest of the person with an unsound mind.

The followings are the legal effects of contracting a person with an unsound mind:
A. It has a similar effect as that of the minor agreement Both types of agreements are
void or unenforceable but the agreement made for the sake of their benefit and
interest is valid and enforceable by law.
B. Section 506(3) of Muluki Civil Code, 2074 has mentioned that in concluding a
contract on behalf of a person who is incompetent or quasi-competent, his/her
guardian or curator may make such a contract for the sake of the benefit and
interest of such a person.
Q.13 What is an offer? Mention the legal rules regarding the offer. [15]
Answer: Offer is the first important element of a valid contract. We know that for
making an agreement, there must be at least two parties. So, when one party puts a
proposal to the other party with the hope of getting assent from the other party, then such
a proposal is regarded as an offer. So, if the offer is made without the hope of getting
assent from the other, it will not be regarded as a valid offer.
According to the explanation of sec. 504(3)(1) of the Civil Code, 2074 "Offer means an
offer made by one person to another person with the intent of obtaining his/her
acceptance to do or abstain from doing any act."
The followings are the legal rules regarding the offer:
• Express and implied offer – Express offer denotes the spoken and written offer
while an implied offer means an offer made by conduct rather than expression. For
example, A says to B to buy his motorcycle for Rs.50,000. This is an express
offer. A run a city bus. It is an implied offer.
• Positive or Negative Offer – If an offer is made to do something, it is a positive
offer while if an offer is made to abstain from doing something, it is known as a
negative offer. Ram offering his neighbor to make a boundary wall is a positive
offer. If Ram offers not to make such a wall, then Ram is making a negative offer.
• Intention to create a legal relationship – A valid offer must have the intention and
capacity to create a legal relationship. If the offer’s intention and capacity to create
a legal relationship are absent, then such an offer is void. Laila agreed to go on a
dinner date with Majnu. But Majnu didn’t arrive at the location. At this point,
Laila cannot file a complaint against Majnu in order to get legal remedy (काननु ी
उपचार) because Majnu’s offer did not have any intention to create a legal
relationship.
• Clarity and certainty – A valid offer must be worded or spoken clearly and with
certainty. Only an invalid offer is dubious (=unsure), ambiguous(=unclear), and
uncertain. Ram offered Sita to help her if she comes to his house. It is not an
offer because the term help is not clear and certain.
• Offer must be communicated - An offer can only be considered valid after it is
communicated to the offeree. Communication of an offer in contract law is only
complete when it is conveyed to the other party and is accepted by them. The offer
can be dispatched through any common means such as post, email, telephone, or
through word of mouth.
 • Specific or general officer – If an offer is made before a particular person, then
such an offer is called a specific offer. If the offer is available to any interested
person, then it is called a general offer. For example, the government giving a road
construction project to the locals is a specific offer, while the government finding
the builder from advertising in the newspaper is a general offer.
• Two identical cross-offer do not make a contract – When two parties make a
different but similar offer to propose to each other without having knowledge of
another offer is known as a cross or identical offer. A cross offer is not regarded as
acceptance. Thus, it doesn’t make a contract.
• Invitation to offer is not an offer – Just an invitation to an offer is not an offer. It is
a preliminary step in forming a contract. It is only a notice to make an offer by
another person. For example, the notice of house to-let or invitation of quotation,
etc. is not an offer.

Q14. What is a breach of contract? Distinguish between an anticipatory breach and an

actual breach of contract. Explain the remedies available to the party against the breach of
contract. [15]
Answer: Generally, a contract is formed for the fulfillment of its terms and condition but
all contracts are not fulfilled by its parties. This non-fulfillment of respective contractual
obligations by its parties on the stipulated date, time, and manner is known as a breach of
contract.
In other words, when any party fails to fulfill or refuses to fulfill the contractual
obligation within the prescribed or reasonable time or manner it is a state of breach of
contract.
The difference between the actual breach and anticipatory breach of contract:
Issues Actual breach Anticipated breach
Time factor This occurs at the time of This occurs before the time
performance. of performance.
Performance There may be defective There is no question of
performance. performance because it is
broken before the time of
performance.
Degree of loss In this case, there is a high In this case, there is no
degree of loss to the high degree of loss because
aggrieved party. the aggrieved party has an
opportunity to make a new
 contract with another
person.
Legal action The aggrieved party can The aggrieved party is not
immediately take legal bound to take legal action
action against the breach. immediately against the
breach.
Possibility of remuneration The breaching party may There is no possibility of
get remuneration for the remuneration for the
performed work if the court breaching party due to no
finds it appropriate. existence of any work.

In a general sense, a contract is a private law made and applicable by the contracting
parties. The minimum condition of the contract must be made in accordance with the law.
It means a contract creates a legal obligation between the parties. When the terms of a
contract are breached by one party then the aggrieved party can enjoy the following legal
remedies mentioned in the Muluki Civil Code, 2074.
• Right to rescission/cancel of the contract (Sec. 535.2)
• Right to claim compensation (Sec. 537.1-3)
a. If actual loss: the same amount of actual loss.
b. If mentioned in the contract: the same amount mentioned in the contract
c. If not mentioned in the contract: the reasonable amount suffered by him
• Right to sue for usual performance (Sec. 540)
• Right to sue for an injunction (Sec. 541.1-3)
Q15. What is the assignment of the contract? Explain and illustrate the rules regarding
the assignment of the contract. [15]
Answer: An assignment of contract is said to occur when one party to an existing
contract (the “assignor”) hands off the contract's obligations and benefits to another party
(the "assignee"). Ideally, the assignor wants the assignee to step into his shoes and
assume all of his contractual obligations and rights. In order to do that, the other party to
the contract must be properly notified.
The followings are the rules regarding the assignment of the contract:
a) Assignments of contracts do not have to be in writing. Assignments of contracts
for the sale of goods, however, must be in writing.
 b) Unless the agreement limits the assignment of rights, most contracts are
assignable.
c) Multiple Assignments - A party can partially assign a contract or assign the same
contract to multiple parties. Different jurisdictions follow different rules regarding
the priority of the assignees.
d) If a court adjudicates the matter, the assignee winning at court may be vested with
the authority to establish priority in the performance of assigned rights.

Example: Gita is a party to a contract with ABC Corp. She assigned her rights
under a contract to Sita and later to Radhika. Sita sues me and ABC Corp to
establish her priority regarding the performance of the contract. The court may
award priority to Radhika or Gita.

e) If the assignee executes a novation, the novation establishes priority. A novation is

a new contract between individuals that replaces a party to the contract or
obligations or rights under the agreement.

Example: I am a party to a contract with ABC Corp. I assign my rights under a

contract to Tammy and later to Shammy. Shammy enters into a novation
agreement with ABC Corp that replaces me under the contract and establishes her
as the obligee. June will have priority of performance above Tammy.

UNIT-3

Q1. Define bailment. [2]

Answer. The word 'Bailment' is derived from the French word 'Bailler' which means to
deliver something. Hence in this context, bailment can be defined as the delivery of
goods or property by a person to another for a defined purpose on the condition that after
the purpose is accomplished the goods have to be returned. Bailment is the change in the
possession of goods, not the change in the ownership of goods.

Q2. How a continuing guarantee can be revoked?[2]

a) By the notice of revocation
b) By the death of surety
c) By the discharge of surety
Q3. Define pledge. Discuss the right and duties of the pawner and pawnee.[15]
Answer. Pledge is a special kind of bailment, where properties are bailed as security for
obtaining a debt or for performing a promise. When a person takes out a loan from a
financial institute or money lender, or when a person promises to do something for
another, he keeps some property as security with the latter. If the farmer fails to pay his
loan back or fails to perform his promise, the latter can recover his sum by selling the
property of the farmer which he bails as security, in the market. Here, the possession of
goods is transferred as security. Pledge is also known as a pawn.
Followings are the right of Pawner are as follows:
i. Right to receive the goods back: If the pledger repays his debt in time or if he
fulfills his promise, then he has the right to receive the properties back.
ii. Right to receive accretion in the goods pledged: If in the case, the pledge raises
the property or is earned through the property, then that accretion belongs to the
pledger and not to the pledgee.
iii. Right to claim compensation: Pledge has the right to claim compensation against
the pledgee if he suffers loss in any of the following cases:
i. Unauthorized use of goods by the pledgee.
ii. Unauthorized mixing of pledged goods with the goods of the pledgee.
iii. Acting inconsistent with the terms of the pledge.
iv. Right to sue the pledgee for receiving the goods pledged:
v. Right to redeem/cash the goods from sale by the pledgee: If the pledger cannot
fulfill his promise and the pledgee notice the pledger that he is going to sell the
vi. pledged property in the market then by repaying the loan the pledger has the right
to claim the remaining amount.
The following are duties of the pawner:
a) To meet his obligation on the stipulated date and comply with the terms of the
contract.
b) To pay the rest of the duties, if it is inadequate by the sale of the goods pledged.
c) To disclose the facts of detection and goodness of the goods pledged.
d) To compensate the extraordinary expenses incurred for necessary care of the
goods pledged.
The rights of the pawnee are as follows:
i. Rights to retain continuous possession
ii. Right of retainer for subsequent advances
iii. Right to extra-ordinary expenses
iv. Right to sue the pawner or sell the goods or default of the pawner
The duties of the pawnee are as follows:
i. To take reasonable care of the goods pledged
ii. Not to make any unauthorized use of goods pledge
iii. Not to mix the goods pledged with his own goods
iv. To deliver any accretion to the goods pledged to the pawner

Q5. Define agent and principal. Explain the rights and duties of an agent in detail. [15]
Answer: An agent is a person who works as the representative of another person or on
behalf of the principal. An agent may work for several principals but he is not subject to
the direct control and supervision of the principal. An agent may be paid by way of
commission based on work done. Whereas the principal is the person who employs the
agent to work on his behalf.
The followings are the rights of the agent:
a. Right to indemnification against the consequences of acts done in good faith:
The agent has a right to be indemnified against the consequences of the acts done in good
faith.
b. Right of particular lien: After the performance of the contract if the agent didn't
get his remuneration, reimbursement of expenses, and compensation of loss, then
the agent has a right to retain the property of the principal as long as he didn't get
the sums receivable.
c. Right to stoppage of goods in transit: An agent has a right to stop the goods in
transit if he comes to know that the agent has become insolvent after he dispatches
the goods to the agent which he purchases with his own money or by incurring his
personal liability.
The followings are the duties of the agents:
A. To follow the principals' instructions: It is the first duty of the agent to
obey the terms and conditions of the contract and follow all the instructions
of the principal in performing the contract. If the agent performs his
 activities neglecting the principal's instructions and loss occurs as result,
then the agent himself is held liable for such loss.
B. To act with diligence and skill: An agent has to act with reasonable care,
diligence, and skill he should take as much care of the principal's work as
of his own business. If in the case due to his negligence or carelessness the
principal suffers a loss, the agent will be held liable to pay compensation
for such loss.
C. To send proper accounts: It is always necessary for the principal to know
how much of the work has been undertaken by the agent, what sum of
money the agent has spent in with to the agency service, and many more.
Such matters can be revealed only through the account maintained by the
agent. Hence the agent should supply such an account to the principal as
whenever demanded by the principal.
D. To communicate to the principal: In the case of performing an agency
contract, if the agent feels any difficulties or requires further instruction
from the principal, he should communicate such matters to the principal as
soon as possible.
E. Not to deal on his own account: An agent must not deal his account with
the transactions of his principal unless he gets consent from his principal to
do so. In these circumstances, the principal may.

Q6. Define the sales of goods and differentiate between condition and warranty.
[10]
Answer. The sale of goods refers to the "transfer of ownership of goods" against a price
from one person to another. The sales and purchase transaction plays an important role in
the business. Almost all the basic purpose of production such as agricultural and
industrial products is to sell them at the local, national or international level. One who
sells the goods is called the seller and the other who purchases the goods is called the
buyer. Thus, the sale of goods is the act performed between buyer and seller and the
contract of sale of goods is created between them which is called a contract of sale.

The followings are the differences between condition and warranty:

Condition Warranty
Condition is a term that is essential for the Warranty is only collateral for the main
main purpose of the contract, thus, it is a purpose of the contract. Thus, it is a
primary character. secondary character.
 Without the fulfillment of the condition, The contract can be performed even
the contract cannot be performed. without the fulfillment of warranties.

Breach of the condition gives the Breach of warranties gives the aggrieved
aggrieved party a right to claim, the party a right only to claim for damage.
damage as to reject the goods.

A breach of condition may be treated as a The breach of warranty cannot be treated

breach of warranty and is urgent not only as breach of condition and is necessary but
necessary. not urgent.

Q7. Why is it important to study the law relating to carriage? What are the rights
commonly processed by the carrier? [10]
Answer: Carriage plays an important role in the economic development of the country.
Whenever we buy goods, we need to carry them from the place we brought the goods to
the place where we consume them. Similarly, when we sell goods, we have to carry them
from the selling place to the buying place. With the help of carriage, we can make this
movement of goods very easy, without carriage, the development of business is
impossible. If the business is considered as a human body, the carriage should be
considered as blood circulation into it. As to make the body alive, blood circulation is
indispensable, and to make the business progress, carriage is equally necessary.
Some of the importance is as follows.
• To facilitate the movement of goods between places conveniently had
promptly
• To regulate, manage and control business properly.
• To mobile labor, raw materials, finished goods, tools, and equipment.
• To manage the rights and duties of the carrier
• To stabilize the market price.
• To make the marketing field efficient
• To help in the economic development of the country.
• To make international trade easier.
The followings are the rights of the carrier, which it commonly holds:
  Right to receive remuneration: After providing carriage service, a common
carrier enjoys the right to receive remuneration equal to the amount as mentioned
in the contract.
 Right to service additional fare: A Common carrier has the right to receive
additional fare for the additional service offered by the carrier such as special care
of the goods one the way.
 Right to refuse to carry goods: A Common carrier has to do the regular business
of carrying goods without discrimination but in the following conditions, the
common carrier has the right to refuse to carry goods.

a) If the carrier is fully loaded.

b) If the nature of goods is different from those which the carrier usually
carries.
c) If the goods to be carried are highly risky.
d) If the goods to be carried are not properly packed.
 e) If the consignor
Right of compensation: denies paying
If the consignor the disclose
doesn't charge ofthe
thematerial
carrier. fact of the
goods loadedf)in Ifthe
thecarrier
carrierand
is not informed
suffers of then
a loss, the maternal facthas
the carrier of the goods.
right to claim
compensation for such damages and loss.
 Right of lien: If the payment is not paid by the consignor, then the carrier has the
right to retain the goods until he receives his remuneration.
 Right to take a necessary step: carrying certain goods to a certain place in time is
the duty of a common carrier. If the consignor does not agree to receive goods.
Then the carrier may take the following steps.
a) If the goods are destroyable in nature, the courier can sell them by giving
notice to the consignor.
b) If, possible goods should be stored in a near go-down.
c) The carriers enjoy additional fares for store shares, reasonable care of
goods, etc.
 Right to limit liabilities: The carrier has the right to limit his liabilities by
entering into a special contract with the consignor as regards the carrying of non-
scheduled goods. Like, it may be agreed between the parties that the carrier will
not be responsible for any loss or damage arising from unexpected and unavailable
emergencies.

UNIT-4
Q1. Write two differences between quasi-contract and contract. [2]
Answer:
 Issues Quasi-contract Contract
Essentials In this contract, the necessary The necessary elements of
elements of a valid contract are a valid contract are present.
absent.
Form of contract This contract is not made in written Such a contract may be
form. made in written or oral
form.

Q2. What is your understanding of the concept of unjust enrichment? [2]

Answer: When one party benefits at another's expense in an unjust situation, there is
unjust enrichment involved. Unjust enrichment typically occurs in situations involving a
breach of contract when one party provides goods and services and expects payment only
to find that the other party refuses to pay. 
For example, if you have two puppies and take them to the groomer for a cleaning and
nail clipping. The groomer finishes the work on the first puppy, but something comes up,
and he cannot attend to the other puppy. The groomer is unjustly enriched because you
paid for both puppies, but only one had been taken care of. 
Q3. Define torts. [2]
Answer: When a person has suffered any kind of physical, mental, financial, or other
kind of loss through direct or indirect commission or omission of another person then the
person who has suffered such loss can claim compensation from the person who caused
the loss. This is called torts.
Q4. Give the concept of quasi-contract and distinguish it from the contingent contract.
[10]
Answer: The word ‘Quasi’ means pseudo. Hence, a quasi-contract is a pseudo-contract.
When we talk about a valid contract we expect it to have certain elements like offer and
acceptance, consideration, the capacity to contract, and free will.
A quasi-contract refers to the obligation of the contract created out of order by the court
not to let one party get unfair benefit out of the situation at the expense of other parties
where there is the absence of initial agreement among the parties and there is a dispute
between them.
Priyanka and Deepika enter a contract under which Priyanka agrees to deliver a basket of
fruits to Deepika’s residence and Deepika promises to pay Rs 1,500 after consuming all
the fruits. However, Priyanka erroneously delivers a basket of fruits at Nimrit ‘s
residence instead of Deepika’s. When Nimrit gets home, she assumes that the fruit basket
is a birthday gift and consumes them. Although there is no contract between Priyanka and
Nimrit, the Court treats this as a Quasi-contract and orders Nimrit to either return the
basket of fruits or pay Priyanka.
The followings are the differences between the contingent contract and quasi-contract:
Issues Contingent contract Quasi-contract
Formation This is formed by the It is formed by the conduct
exchange of promises of its parties or by
between the parties. performing the duties.
Another name It is known as a conditionalIt is known as an implied
or direct contract. or indirect or constructive
contract.
Conduct It is a possibility-based It is a conduct-based or
contract. duty-based contract.
Contract It must be made in writing. It is not made as a written
contract.
Contain It contains insurance, It contains a supply of
indemnity, guarantee, and goods, money, or work to
the like. another person.

Q5. Write the principal of Damnum Sine Injuria and Injuria Sine Damno. [10]
Answer: In the law of torts, Damnum Sine Injuria and Injuria Sine Damnum are
commonly heard. The word ‘Damnum’ is a Latin word that means damage. The word
Sine is also a Latin word meaning without and the word ‘Injuria’ is also a Latin word that
means injury of lawful personal privileges. Thus, the word Damnum Sine Injuria means
any damage which is caused apart from harm as well as the prejudice, or in simple terms,
it means the damage done without the violation of legal rights.
Therefore, a brief explanation of this term is given below:
Damnum Sine Injuria as the meaning suggests is a situation where the damage of any
kind is done to another person without violating the legal rights of the other person. For
example, A, a shop owner sells stationery items to primary school students for three years
and next to A's shop, B opens another stationary shop and sells his items at a lower price
compared to A's. Now, A cannot sue B as he did not violate any of the legal rights of A
because by opening a shop just next to A is no illegal act. Therefore, in this case,
although A suffered a sufficient monetary loss in his business, he cannot sue B for
opening another stationary shop. So, we can say A was a victim of Damnum Sine Injuria.
The maxim Injuria Sine Damnum is just the opposite of Damnum Sine Injuria.
Injuria means injury of lawful persons. Sine means without. Damnum means damage
Thus, the maxim Injuria Sine Damnum means the legal injury caused to the plaintiff
without any damage to the physical injury, or in simple terms, it means a situation where
no damage has been caused by a particular act, but that act violated a legal right of
another.
Therefore, even by an act of any person, no damage is caused to the other. But if there
has been a violation of the legal right of the other person, then the person committing
such a violation will be held guilty even if no damage has been caused.
Q6. Illustrate concepts and definitions of unjust enrichment. [10]
Answer:
Unjust can be defined as something which is not according to the accepted standards of
fairness or justice.
When a person gains something from another, then it is said that the person is enriched.
This enrichment can be both just and unjust. A student receives a graduation present from
his parents for the graduation; it is also an enrichment which is just. When a person
wrongfully uses others’ property at the expense of others, then it is unjust.
When one party benefits at another's expense in an unjust situation, there is unjust
enrichment involved. Unjust enrichment typically occurs in situations involving a breach
of contract when one party provides goods and services and expects payment only to find
that the other party refuses to pay. 
For example, if you have two puppies and take them to the groomer for a cleaning and
nail clipping. The groomer finishes the work on the first puppy, but something comes up,
and he cannot attend to the other puppy. The groomer is unjustly enriched because you
paid for both puppies, but only one had been taken care of. 

Q7. Explain the rules regarding the quasi-contract. Also, point out its nature too. [15]
Answer: A quasi-contract refers to the obligation of the contract created out of order by
the court not to let one party get unfair benefit out of the situation at the expense of other
parties where there is the absence of initial agreement among the parties and there is a
dispute between them.
The followings are the rules regarding the quasi-contract:
a) Indirect or quasi-contract deemed to be made (Sec.648) - If any person does
any certain lawful, voluntary, or unilateral acts that may give rise to a juridical
relationship an indirect or quasi-contract shall be deemed to be made. If an indirect
or quasi-contract is made, an obligation shall be created from this contract
 b) If other’s property managed voluntarily, not to be abandoned (Negotiorum
gestio) (Sec.649) - If a person manages or operates a secret business or property of
another person on his or her own without information to, or authority from, that
other person, the person shall, so long as such secret business or property
continues to exist, not abandon such business or property without handing it over
to that other person, his or her successor or agent or until that other person
removes him or her.
c) To care for or manage property taken in custody (Sec.- 650) – if a person takes
the custody of a property belonging to another person for its care or management,
the person shall take care of and manage the property in good faith as if that where
his or her own property. If a person who takes custody of a property to another
person causes loss or damage to the property dishonestly or recklessly, the person
is responsible to pay compensation therefor.
d) One who delegates authority not to be free from obligation (Sec 651)
e) Reasonable costs to be paid for saving property in times of calamity. (Sec 652)
f) Right to claim reimbursement (Sec 653)
g) Right to claim for maintenance (Sec 654)

Q8. Mention any three circumstances that give rise to liability based on unjust
enrichment under the civil code. [15]
Answer: When one party benefits at another's expense in an unjust situation, there is
unjust enrichment involved. Unjust enrichment typically occurs in situations involving a
breach of contract when one party provides goods and services and expects payment only
to find that the other party refuses to pay. 
The followings are the three circumstances that give rise to liability based on unjust
enrichment under the civil code:
a) Things which are taken by mistake to be returned (solutioindebiti): Section
665 of the code has made the provision in this regard. According to this provision,
if any person takes or receives, by mistake, any goods which he or she is not
entitled to take or receive, he or she shall return the goods to the person from
whom he or she has taken or received them.
b) To pay back debt paid by mistake: Section 666 of the code has made the
provision in this regard. According to this provision, if a person pays a debt to
another person by mistake because the person thinks that he or she is bound to do
so and proves that he or she is not bound to do so that other person who receives
such an amount shall return it to him.
 c) To pay debt paid by the third person: Section 668 of the code has made the
provision in this regard. According to this provision, if a debt payable by a person
is paid by a third person without the debtor’s knowledge the debtor shall pay the
debt to the person who has paid it.
d) To return goods or amount taken with malafide intention and benefits
accrued therefrom (Sec. 665)
e) Right to claim reimbursement if the payable tax is paid by another person
(Sec. 669)
f) Goods found may be kept upon giving information to the police (Sec.670)
g) Limitation to sue (Sec. 671)

Q9. Define tort and mention its characteristics. [15]

Answer: When a person has suffered any kind of physical, mental, financial, or another
kind of loss through direct or indirect commission or omission of another person then the
person who has suffered such loss can claim compensation from the person who caused
the loss. This is called tort.
A tort is not a crime. Although criminal law and tort law grew from the same roots, they
are today quite distinct and different. Criminal law is designed to provide security for the
citizen of the state. It attempts to define that conduct that society finds abhorrent and
therefore necessary to control. Those who commit crimes are prosecuted by the state and
are subject to a punishment that reflects the abhorrence of the state or society for the
particular crime.
The followings are some of the important characteristics of torts:
 Tort is a private wrong that contravenes the legal rights of an individual or a
group. It breaks the legal rights of an individual or specific group of individuals.
 The person who engages in a tort is called “tort-feasor” or “wrong-does”, not the
criminal.
 Tort is a civil case and the legal remedy of tort is compensation.
 Compensation is recovered for the actual loss, not the hypothetical one under the
tort.
 Tort litigation is compoundable which means the complainant can withdraw the
suit filed by him.
 Tort is a specie of infringement (the act of breaking the terms of a law, agreement,
etc.; violation) of a person’s rights or civil wrong.
 The Third party may be responsible for liability if the law imposes it on such a
party.
 Non-imprisonment or fine can be imposed on the wrongdoer in tort.
 A tort is an uncodified law. Uncodified law is a law that does not have any written
statutes or acts, and it has to rely on precedents and case laws.
 Tort is an infringement of a right in rem: There are two types of rights – right in
rem and right in persona. Right in rem is the right that is available to the whole
world and right in persona is a right available against any particular person. A tort
is a violation of a right in rem.