Discipline Specific Core

BUSINESS LAW
ASSIGNMENT - 2(PPT)

Submitted By: Submitted To:

SHRASHTI AGARWAL LEEZA MA’AM
24BPA057 Department of
B.COM (P) Commerce
SEMESTER - I
 SPECIAL
CONTRACTS
INDEX
1
INDEMNITY AND GUARANTEE

2
CONTRACT OF BAILMENT AND
PLEDGE

3
CONTRACT OF AGENCY
INDEMNITY
AND
GUARANTEE
CONTRACT OF INDEMNITY
• A contract by which one party promises to save the other
from loss caused to him by the conduct of the promisor
himself, or by the conduct of any other person, is called
a “contract of indemnity”.
• The person who promises to make good the loss is called
the indemnifier’.
• The person whose loss is to be made good is called ‘
`indemnity-holder’.
 CONTRACT OF GUARANTEE
A ‘contract of guarantee’ is a contract to perform the promise
or discharge the liability of a third person in case of his default.

There are three parties to a Contract of Guarantee :

1.Principal Debtor (Sec. 126):
The person in respect of whose default the guarantee is given .
2.Creditor (Sec. 126):
The person to whom the guarantee is given.
3.Surety (Sec. 126):
The person who gives the guarantee.
 DISTINCTION BETWEEN CONTRACT OF
INDEMNITY AND GUARANTEE
Basis Contract of Indemnity Contract of Guarantee

It is a contract to protect the other person

It is a contract to perform the promise or
from loss caused to him either by the conduct
1.Meaning discharge the liability of a third person in
of the parties or from an event or
case of his default (Sec. 126).
accident.

Two parties : The indemnifier and the Three Parties: the surety, the principal
2.Number of Parties
indemnified. debtor and the creditor.

To provide protection to the indemnified from To provide security or to ensure

3. Object of Contract
losses. discharge of a liability.

4. Nature of Liability of the surety to the creditor is

The liability of the indemnifier is primary.
Liability secondary

It is not necessary for the indemnifier to It is necessary that surety should give the
5. Request
act at the request of the indemnified. guarantee at the request of the debtor.
NATURE AND EXTENT OF SURETY’S LIABILITY

1. Surety’s liability is co-extensive.

2. Surety’s liability is secondary.
3. Surety’s liability arises immediately on the default
of the principal debtor.
4. Surety’s liability in continuing guarantee.
5. Surety’s liability where the original contract
between the principal debtor and creditor is void or
voidable.
6. Surety is a favoured debtor.
RIGHTS OF SURETY
DISCHARGE
OF
SURETY
 CONTRACT
OF
BAILMENT AND PLEDGE
 Meaning Of Bailment
According to Sec. 148, a “bailment” is the delivery of
goods by one person to another for some purpose, upon
a contract that they shall, when the purpose is
accomplished, be returned or otherwise disposed of
according to the directions of the person delivering
them.
The person delivering the goods is called the ‘bailor’.
The person to whom they are delivered is called the
‘bailee’.
 Kinds of Bailment
Types of Bailment

On the basis of reward On the basis of benefit

Bailment for Bailment for Bailment for

Gratuitous Non-Gratuitous
the exclusive the mutual the exclusive
Bailment Bailment
benefit of the benefit of benefit of the
bailor bailor and bailee
bailee
 DUTIES OF BAILOR
1. Duty to Disclose Faults in the Goods Bailed to the Bailee (Sec. 150).

2. Duty to Pay the Expenses of Bailment (Sec.158).

3. Duty to indemnify Bailee for Loss in case of Premature Termination of

Gratuitous Bailment (Sec. 159).

4. Duty to Indemnify Bailee for Loss in Case of Defective Title (Sec. 164).

5. Duty to receive the goods.

 DUTIES OF BAILEE
1. Duty to take Reasonable Care of the Goods Bailed. (Secs. 151 and 152).
2. Duty Not to Make Unauthorized Use of Goods Bailed (Sec. 154).
3. Duty Not to Mix the Goods Bailed with his Own Goods.
(a) Where the bailee mixes bailor’s goods with his own goods with the
bailor’s consent (Sec. 155).
(b) Where the bailee mixes bailor’s goods with his own goods without
the bailor’s consent and the goods are separable (Sec. 156).
(c) Where the mixture is not separable (Sec. 157).

4. Duty to Return the Goods (Sec. 160).

5. Duty to Return any Natural Increase or Profit from the Goods Bailed (Sec. 163).
RIGHTS OF BAILOR
1. Right to Enforce Bailee’s Duties.

2. Right of Termination of Bailment (Sec. 153).

3. Right to Demand the Goods Back (Sec. 159).

4. Right to Demand Return of the Goods on Completion of
Bailment (Sec. 160).

5. Right to Claim Any Increase or Profit (Sec. 163).

 RIGHTS OF BAILEE
1. Right to Claim Damages Caused in Case of Faulty Goods (Sec. 150).

2. Right to Claim Reimbursement of Expenses (Sec. 158).

3. Right to be Indemnified in Case of Gratuitous Bailment (Sec. 159).

4. Right to Deliver Back the Goods in Case Of Joint Bailors (Sec. 165).

5. Right to Claim Damages in Case of Bailor’s Refusal to Receive

Back the Goods.
6. Right to Sue a Wrongdoer (Sec. 180).
7. Division of relief or compensation obtained by such suits (Sec. 181).
 MEANING OF PLEDGE
DEFINITION OF PLEDGE (SEC.172)
“The Bailment of goods as security for payment of
a debt or performance of a promise is called
pledge.”
The bailor in this case is called the ‘pawnor’ and
the bailee is called the ‘pawnee’.
Pledge is a special kind of bailment.
Difference between Bailment & Pledge
 RIGHTS OF PAWNEE
1. Right to retain the pledged goods until
( i) Amount of the debt;
(ii) Interest due thereon;
(iii) Expenses incurred by him in possession or preservation of the goods pledged are paid.

2. Right to recover extraordinary expenses (sec 175):

Pawnee has no right to retain the goods if such expenses are not paid but he is entitled to sue the
Pawnor for recovery of extraordinary expenses incurred in the preservation of the goods pledged.

3. Right to retain the goods for subsequent advance :

Right to retain the goods for subsequent advance is presumed in absence of contract to the contrary.

4. Right to file a suit in case of default by the pawnor.

5. Right to sell goods in case of default by pawnor after giving reasonable notice of sale.
DUTIES OF PAWNEE
1. Duty to take reasonable care of goods.
2. Duty not to make unauthorized use of
goods.
3. Duty not to mix goods pledged with his
goods.
4. Duty to return the goods to pawnor on
payment of dues.
 RIGHTS OF PAWNOR / PLEDGOR
1.Enforcement of Pawnee’s duties:
(i) on making payment he can get back the pledged goods alongwith
the accretion (increase), if any.
(ii) the pawner can file a suit if the pawnee makes an unauthorized
sale.
2. Defaulting Pawnor’s Right to Redeem (sec. 177)
Defaulting pawnor is one who makes default in payment of the debt
at the stipulated time. He may redeem the goods pledged at any
subsequent time before actual sale after paying his debt and
additional expenses incurred by pawnee due to pawnor’s default,
if any.
DUTIES OF PAWNOR / PLEDGOR

1. Duty to repay the loan .

2.Duty to pay extraordinary expenses
incurred by pawnee for the preservation
of the pledged goods.
 PLEDGE BY NON-OWNER
Pledge by non-owner shall be valid in the following situations
provided the pawnee acts in good faith and without notice of the
pawnor’s defect of title.
1. Unauthorized pledge by mercantile agent.
2. Pledge by person in possession of goods under voidable contract.
3. Pledge by person in possession of goods after sale.
4. Unauthorized pledge by one of the joint owners.
5. Pledge by person who has limited interest in goods shall be valid
to the extent of that interest.
6. Pledge by buyers in possession of goods under an agreement
to sell.
CONTRACT
OF
AGENCY
 CONTRACT OF AGENCY
The law relating to agency is in under Secs. 182 to 238
of the Indian Contract Act, 1872.

Definition of Agent and Principal

According to Sec. 182 of the Act, An ‘agent’ is a person employed
to do any act for another, or to represent another in dealings
with third person. The person for whom such act is done, or who
is so represented, is called the ‘principal’. The relationship
between the agent and the principal is called ‘agency’.
 ESSENTIAL FEATURES
OF
A CONTRACT OF AGENCY
Express or implied agreement between the Principal
and the Agent.
Principal must be Competent to Contract.
Agent Need not be Competent to Contract.
Creation of Legal Relations
Consideration Not Required (Sec. 185).
MODES OF CREATION OF AGENCY

1. Agency by Express 2. Agency by Implied

3. Agency by Ratification 4.Agency by Operation of law
Agreement Agreement

It happens when someone

There are certain cases
acts on your behalf without
when agency arises by
Implied agency, arises from your permission, but later,
In express agency, the agent operation of law. For
conduct, circumstances or you approve what they did.
is appointed by words instance, the law treats
relationship of parties. By agreeing to it, it’s as if
spoken or by agreement in partners as agent in case of
you had given them
writing. the partnership firm.
permission from the start,
Mutual agency exists
and you accept the results
among partners by law.
of their actions.
 EXTENT OF AGENT’S AUTHORITY
The term ‘authority’ in the context of agency relationship means
capacity of an agent to bind the principal. It’s types are –

3.Agent’s Authority in an
1). Actual or Real Authority 2. Agency by Implied
Emergency (Sec.189)
(sec . 186) Agreement

An agent has authority, in an

This is the authority which seems to be emergency, to do all such acts for the
An agent can bind the principal by all
possessed by the agent, keeping in mind purpose of protecting his principal
his acts performed within the scope
the nature of agency and relevant trade from loss as would be done by a man
of his express or implied authority.
practices. of ordinary intelligence, in his own
case under similar circumstances.
 DUTIES OF AGENT
1.Duty to Act according to Principal’s Directions or Customs (Sec. 211).
2.Duty to Carry out the Work with Reasonable Skill and Diligence
(Sec. 212).
3.Duty to Render Accounts (Sec. 213).
4.Duty to Communicate and obtain Instructions from Principal in Case
of Difficulty (Sec. 214).
5.Duty Not to Deal on his Own Account (Sec. 215).
6.Duty Not to Make Secret Profit (Sec. 216).
7. Duty to Pay Sums Received for the Principal (Sec. 218).
8. Duty to Protect and Preserve the Interest of the Principal on
Termination of Agency by Principal’s Death or Insanity (Sec. 209).
9. Duty Not to Delegate Authority (Sec. 190).
 RIGHTS OF AGENT
1.Right of Retainer (Sec. 217) : It allows an agent to keep the principal’s money or property
until their dues, like remuneration or expenses, are fully paid.
2.Right to Receive Remuneration (Sec. 219) : It ensures the agent is entitled to payment for
their services as agreed in the contract or, if unspecified, reasonable compensation for
their work.
3.Right of Lien (Sec.221) : It allows an agent to retain the principal’s goods or property in
their possession until their lawful dues, like remuneration or expenses, are paid.
4.Right to be indemnified: This section gives an agent the right to be indemnified against
consequences of all lawful acts done by him in exercise of the authority conferred upon
him.
5.Right to be Indemnified against Consequences of Acts Done in Good Faith (Sec. 223) : The
agent is entitled to this , though it may cause an injury to the rights of third persons.
6..Right of Compensation (Secs. 205 and 225) : It entitles an agent to claim damages if the
principal wrongfully revokes or terminates the agency without sufficient cause, as per
Sections 205 and 225 of the Indian Contract Act, 1872.
LIABILITY OF THE PRINCIPAL FOR THE ACTS OF THE
AGENT TO THE THIRD PARTY
1.Liability of the Named Principal :
Where an agent while dealing with the third parties discloses
the existence and the identity of his principal, the principal
is said to be named.
2.Liability of Unnamed Principal :
Where neither the existence nor the identity of the principal is
disclosed, the principal is said to be undisclosed principal.
3.Liability of Undisclosed or Concealed Principal.
Where neither the existence nor the identity of the principal is
disclosed, the principal is said to be undisclosed principal
 PERSONAL LIABILITY OF AGENT
An agent is presumed to be personally liable, in the
absence of a contract to the contrary, in the following
cases:
1.Where the agent expressly agrees.
2.Where the agent acts for a foreign principal .
3.Where the agent acts for an unnamed principal.
4.Where the agent exceeds his authority.
5.Where the agent acts for an undisclosed principal.
6.Where there is a trade usage or custom. Etc .
 TERMINATION OF AGENCY

I. By the Acts of the Parties II. By Operation of Law

By mutual agreement between On completion of business of agency.
the principal and the agent. On the expiry of the period of agency.
On death or insanity of the principal or
By revocation by the principal
agent.
except irrevocable agency.
On insolvency of the principal.
By renunciation by the agent On destruction of the subject matter of
after giving a reasonable notice agency.
to the principal. On destruction of the subject matter of
agency.
On dissolution of company.
THANK YOU